Exhibit 10.1

TRANSITION SERVICES AGREEMENT

dated as of July 2, 2023

by and

between

BorgWarner Inc.

and

PHINIA Inc.

TRANSITION SERVICES AGREEMENT

This Transition Services Agreement (the “Agreement”) is made as of July 2, 2023 (the “Effective Date”) by and between BorgWarner Inc., a Delaware corporation (“Parent”), and PHINIA Inc., a Delaware corporation (“SpinCo”) (each a “Party” to this Agreement, and together the “Parties”).

WHEREAS, Parent and SpinCo have entered into a Separation and Distribution Agreement, dated July 2, 2023 (the “Separation Agreement”), which governs the principal transactions required to effect the spin-off of the SpinCo Business (as defined in the Separation and Distribution Agreement) into PHINIA Inc., and provides for certain other agreements that will govern certain matters relating to such spin-off and the relationship of BorgWarner Inc., PHINIA Inc. and their respective subsidiaries following such spin-off.

WHEREAS, in connection with the transaction contemplated by the Separation Agreement, each Party desires that the other Party provide or cause certain of its Affiliates to provide, it and its Affiliates with certain transition services on the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Parties hereby agree as follows:

Article I
Definitions

Section 1.01      For the purpose of this Agreement, the terms listed in this Article I, when used in their capitalized form in this Agreement, shall have the meaning set forth below. Unless expressly provided otherwise herein, all capitalized terms not specifically defined in this Agreement have the meaning ascribed to them in the Separation Agreement.

Section 1.02      In this Agreement:

“Confidential Information” means all information of a confidential nature disclosed (by whatever means, directly or indirectly) by, or on behalf of, either Party to the other Party, whether before, on or after the Effective Date, including the terms of this Agreement, any information relating to Intellectual Property rights, products, software, operations, processes, technical methods, plans, documentation, market opportunities or business affairs (including all information of a financial nature) of the Disclosing Party, as well as any information relating to the Services, the Service Provider Materials and the Service Recipient Materials;

“Control” means, with respect to any entity, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such entity, whether through ownership of voting securities or other interests, by Contract or otherwise; provided, however, that, from and after the Distribution Date, (i) SpinCo and the other members of the SpinCo Group shall not be considered Affiliates of Parent or any of the other members of the Parent Group and (ii) Parent and the other members of the Parent Group shall not be considered Affiliates of SpinCo or any of the other members of the SpinCo Group;

“Dependencies” has the meaning specified in Section 4.02;

“Disclosing Party” has the meaning specified in Section 10.01;

“Dispute” has the meaning specified in Section 11.09(b);

“Dispute Notice” has the meaning specified in Section 11.09(b);

“Due Date” has the meaning specified in Section 3.06;

“Effective Date” has the meaning specified in Section 8.01;

“Excluded Services” has the meaning specified in Section 2.03;

“Extended Service Term” has the meaning specified in Section 8.03;

“Force Majeure Event” means the occurrence of an event or circumstance beyond the reasonable control of a Party; provided that (i) the non-performing Party is without fault in causing or failing to prevent such occurrence; and (ii) such event may not be avoided by the use of reasonable precautions, it being specified that the Force Majeure Events shall also comprise labor strikes of any nature and pandemic and epidemic diseases as well as any internet suspension, revolutions, riots and curfews;

“Forward Services” means the services to be provided by Parent and its Affiliates to SpinCo and its Affiliates;

“Indemnified Person” has the meaning specified in Section 7.03;

“Indemnifying Person” has the meaning specified in Section 7.03;

“Intellectual Property” means, collectively, (i) patents, patent applications and all issuances, divisions, continuations, continuations-in-part, reissues, extensions, reexaminations, and renewals thereof; (ii) all marks, names, trade dress, whether registered or unregistered, and all issuances, extensions, and renewals thereof, together with the goodwill of the business connected with the use of, and symbolized by the foregoing; (iii) copyright registrations and applications for registration, and all issuances, extensions, and renewals thereof, including any unregistered copyrights in and to all works based upon, derived from, or incorporating such copyrights; (iv) trade secrets and proprietary confidential information; (v) domain names; and (vi) any and all claims and causes of action with respect to any of the foregoing, whether accruing before, on, or after the date hereof, including all rights to and claims for damages, restitution, and injunctive and other legal and equitable relief for past, present, and future infringement, dilution, misappropriation, violation, misuse, breach, or default, with the right but no obligation to sue for such legal and equitable relief and to collect, or otherwise recover, any such damages;

“IT Separation Costs” has the meaning specified in Section 3.05;

“Law” means any law, ordinance, regulation, statute, code or other rule enacted or promulgated by any governmental authority, including any governmental order;

“Negotiation Period” has the meaning specified in Section 11.09(b);

“Non-Compliance” has the meaning specified in Section 7.04;

“Operational Change” has the meaning specified in Section 2.04;

“Party” and “Parties” has the meaning specified in the recitals;

“Permitted User” has the meaning specified in Section 10.02;

“Receiving Party” has the meaning specified in Section 10.01;

“Reverse Services” means the services to be provided by SpinCo and its Affiliates to Parent and its Affiliates;

“Sales Tax” has the meaning specified in Section 3.08;

“Security Policy” has the meaning specified in Section 9.01;

“Separation Agreement” has the meaning specified in the recitals;

“Services” means the Forward Services and the Reverse Services to be performed under this Agreement, as applicable, as set out in the Service Sheets in Appendix 1 and Appendix 2;

“Service Charges” means the cost for the Services as detailed in the Service Sheets plus five percent (5%) of such detailed cost;

“Service Level” has the meaning specified in Section 2.06;

“Service Provider” means (i) Parent, including its Affiliates, with respect to the Forward Services and (ii) SpinCo, including its Affiliates, with respect to the Reverse Services;

“Service Provider Materials” means all materials that are owned or licensable by the Service Provider and provided in connection with the provision of Services;

“Service Recipient” means (i) Parent, including its Affiliates, with respect to the Reverse Services and (ii) SpinCo, including its Affiliates, with respect to the Forward Services;

“Service Recipient Materials” means materials owned or licensable by the Service Recipient and provided in connection with the receipt of Services;

“Services Representative” has the meaning specified in Section 6.01;

“Service Sheets” has the meaning specified in Section 2.01;

“Service Term” has the meaning specified in Section 8.02;

“SpinCo” has the meaning specified in the recitals;

“Systems” means information technology or communications systems, including networks and interfaces;

“Term” has the meaning specified in Section 8.01;

“Third Party” means, in respect of a Party, any other entitiy who is not an Affiliate of that Party;

“Third Party Consents” has the meaning specified in Section 2.05;

“Third Party Supplier” has the meaning specified in Section 2.05; and

“Transaction” has the meaning specified in the recitals.

Section 1.03      In this Agreement:

(a)      (i) “include”, “includes” or “including” shall be deemed to be followed by “without limitation”; (ii) “hereof”, “herein”, “hereby”, “hereto” and “hereunder” shall refer to this Agreement as a whole and not to any particular provision of this Agreement; (iii) “extent” in the phrase “to the extent” shall mean the degree to which a subject or other item extends and shall not simply mean “if”; (iv) “USD” shall mean United States Dollars; (v) the singular includes the plural and vice versa; (vi) reference to a gender includes the other gender; (vii) “any” shall mean “any and all”; (viii) “or” is used in the inclusive sense of “and/or”; (ix) reference to any agreement, document or instrument means such agreement, document or instrument as amended, supplemented, modified and in effect from time to time in accordance with its terms; and (x) reference to any Law means such Law as amended from time to time and includes any successor legislation thereto and any regulations promulgated thereunder;

(b)      the table of contents, articles, titles and headings to Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. Except as otherwise indicated, all references in this Agreement to “Articles”, “Sections”, “Annexes” and “Appendices” are intended to refer to Articles and Sections of this Agreement and Appendixes and Appendices to this Agreement. Appendices and Annexes shall form part of this Agreement and any reference to this Agreement shall include the Appendices and Annexes, unless reference is specifically made to an Appendix or Annex or the front-end of this Agreement, respectively; and

(c)      in case of conflicts, the front-end of this Agreement shall prevail over its Appendices and Annexes, unless otherwise stipulated in the front-end of this Agreement.

Article II
Provision of Services

Section 2.01      On the terms and subject to the conditions herein, (a) Parent agrees to provide, or to cause one or more of its Affiliates to provide, to SpinCo (or its Affiliates) the Forward Services specified in Appendix 1 and (b) SpinCo agrees to provide, or to cause one or more of its Affiliates to provide, to Parent (or to its Affiliates) the Reverse Services specified in Appendix 2 (Appendix 1 and Appendix 2, collectively, the “Service Sheets”). Each Party, as Service Recipient, shall use the Services received by it solely in connection with the operation and conduct of the Parent Business or the SpinCo Business (as applicable) and shall ensure that the Services are not otherwise made available to any Third Party (except where the Service provided constitutes Third Party interaction), or used for any other purpose unless mutually agreed upon by the Parties in writing.

Section 2.02      During the period commencing on the Effective Date and ending three (3) months after the Effective Date, the Service Recipient may identify and request the Service Provider to provide additional transitional services, which are not set out in the Service Sheets, that: (a) were used and are reasonably necessary for the operation of the Parent Business or the SpinCo Business, as applicable; (b) were provided to or by (as applicable) Parent or its Affiliates before the Effective Date; and (c) are not Excluded Services (clauses (a) through (c) together, the “Omitted Services”). If the Service Provider is reasonably capable of providing any such Omitted Services requested by the Service Recipient, the Service Provider shall consider in good faith such request and the provision of such Omitted Services. The Service Provider shall have sole discretion in considering such request and if the Service Provider agrees to provide any such Omitted Services requested by the Service Recipient, each of the Parties shall use its commercially reasonable efforts to negotiate in good faith and execute, as appropriate, a new Service Sheet or an amendment to an existing Service Sheet, in either case with respect to such Omitted Services and addressing, among other things, the scope, start date, duration, and charges in respect thereof. Upon execution of such new or amended Service Sheet, the Service Provider shall provide the agreed-upon Omitted Services described in such new or amended Service Sheet, and such Omitted Services shall become a Service under this Agreement.

Section 2.03      Notwithstanding anything in this Agreement to the contrary, the Service Provider shall not be obligated to provide any services that are not contemplated in the Service Sheets (subject to Section 2.02), including the services listed in Appendix 3 (the “Excluded Services”) or any Service if the provision of such Service would, in its sole reasonable discretion: (a) violate, breach or otherwise result in a non-compliance with any applicable Law or with any of the Service Provider’s internal policy requirements which are established generally by the Service Provider; (b) require a third party consent that has not been obtained; or (c) violate, conflict with, result in the loss of any benefit under or increase the costs under any existing contract or agreement with a third party.

Section 2.04      The Service Provider may from time to time unilaterally and subject to the Service Level: (a) change operational aspects of the Services or the way in which they are provided, or substitute such Services with equivalent services; or (b) substitute, change, update or enhance the Systems or materials used to provide the Services, (in each case under (a) and (b), an “Operational Change”); provided that, prior to making any Operational Change, the Service Provider shall: (x) ensure that the Service Recipient is given reasonable advance notice of the planned Operational Change, except in case of an emergency or where the Service Recipient will not be materially affected by the Operational Change; (y) ensure that the Service Recipient’s business is not disrupted to a material extent as a result of the Operational Change; and (z) using commercially reasonable efforts, ensure that the Operational Change will not result in a substantial increase to the Service Charges, unless the Operational Change is made pursuant to a change request as mutually agreed upon between the Parties.

Section 2.05      The Service Provider may, directly or through one or more Affiliates, unilaterally decide to involve or replace Affiliates or Third Parties as sub-contractors or otherwise as suppliers of goods, licenses or services for the provision of all or any part of the Services hereunder (such Third Party, each a “Third Party Supplier”). The Service Recipient shall at all times comply with all obligations, including use restrictions and non-disclosure provisions, in any agreements between the Service Provider and a Third Party Supplier. The Parties acknowledge that the Service Provider may require the consent of a Third Party Supplier to be able to provide certain Services to the Service Recipient and the Service Recipient may require such consent of the Third Party Supplier to receive certain Services (“Third Party Consents”). To the extent not yet obtained at the Effective Date, the Service Provider shall endeavor to obtain such Third Party Consents and shall not be obliged to provide the relevant Services as long as any Third Party Consent for such Service has not been granted. To the extent that Third Party Consents are refused, only granted subject to conditions (including the condition of additional payments), revoked, terminated or expires during a relevant Service Term, the Parties shall use their best efforts to identify, agree and implement the commercially most favorable solution (in the aggregate) by which provision of the Services can be enabled, either by fulfilling the relevant condition or by implementing a work-around at the Service Recipient’s sole expense.

Section 2.06      Subject to Section 2.04, Section 2.05, Section 7.05 and Section 7.06, the Service Provider shall perform the Services in the scope and volumes, in the way and manner and with the quality and performance levels similar to the respective Services were provided by the Service Provider to the Service Recipient immediately prior to the Distribution Date, unless otherwise specified in the Service Sheet with respect to such Service (the “Service Level” for such Service).

Section 2.07      The Parties acknowledge that neither Party is a professional services provider with regard to the Services contemplated under this Agreement, and therefore should not expect the other Party to perform its obligations hereunder in the same manner and pursuant to the same standards as those applicable in the relevant industries practices.

Article III

SERVICE CHARGES

Section 3.01      In consideration of the Services provided by the Service Provider to the Service Recipient, the Service Recipient shall pay to the Service Provider the Service Charges set forth on the Service Sheets.

Section 3.02      Service Charges are subject to increase to account for increases in labor and other costs, with thirty (30) calendar days’ notice to the Service Recipient.

Section 3.03      Service Recipient shall bear any and all costs, expenses and other fees (excluding recoverable Sales Tax) that are invoiced to the Service Provider by any Third Party Supplier, to the extent such costs, expenses and other fees relate to Services provided by the Service Provider hereunder (the “Third Party Supplier Pass Through Costs”). If any Third Party Supplier Pass Through Costs increase or decrease at any time during the Term, the Service Provider shall, by written notice to the Service Recipient, increase or decrease (as applicable) the Service Charges to appropriately reflect such increase or decrease.

Section 3.04      At the end of each calendar month, the Service Provider shall invoice the (a) Service Charges, (b) Third Party Supplier Pass Through Costs, (c) any reasonable expenses related to travel (including long-distance and local transportation, accommodation and meal expenses and other incidental expenses) by Service Provider’s or its Affiliates’ personnel in connection with performing the Services and any reasonable other out-of-pocket, third party costs for assets or services procured to provide the Services to be made by the Service Recipient under this Agreement in USD to the Service Recipient for that month (provided that any such travel and out-of-pocket costs described in this Section 3.04(c) exceeding $20,000 in the aggregate in any one-month period shall be subject to the Service Recipient’s prior approval), and (d) applicable Sales Taxes (if any).

Section 3.05      Responsibility for the IT-related deliverables and corresponding specific, one-time costs in conjunction with the separation of SpinCo operations and the Parties’ exit from the Services (the “IT Separation Costs”) shall be set forth on Appendix 4. The Service Charges do not reflect the IT Separation Costs or any other one-time expenses or other payments (including contract or license transfer fees and termination fees) that will incur as a result of the exit of any Services by the Service Recipient. For such one-time expenses and other payments, including any IT Separation Costs borne by Service Provider but for which Service Recipient shall be responsible as set forth on Appendix 4, the Service Provider shall invoice the Service Recipient at the time of occurrence. Notwithstanding the foregoing, the Service Recipient shall not be responsible for any employee termination or severance costs that will incur as a result of the exit of any Services.

Section 3.06      The Service Recipient shall pay the Service Charges invoiced by the Service Provider in USD within thirty (30) calendar days after the date of the invoice (the “Due Date”) to the Service Provider’s bank account as notified to the Service Recipient from time to time. Any payment under this Section 3.06 shall be made in immediately available funds by electronic transfer on or prior to the Due Date.

Section 3.07      If the Service Recipient fails to pay all or part of any invoice on or before the Due Date, then without prejudice to its other rights and remedies, among which is the right to suspend in whole or in part the Services, the Service Provider may charge interest on such unpaid amount at a rate of the lesser of ten percent (10%) per annum or the maximum rate allowed by applicable Law.

Section 3.08      All amounts payable under this Agreement by the Service Recipient shall be exclusive of any sales, use, value added or other similar tax (“Sales Tax”) (if any) which shall be paid by the Service Recipient at the rate and in the manner prescribed by the applicable Sales Tax laws in addition to and on the conditions of the relevant Service Charge. The Service Provider shall provide the Service Recipient with an invoice in accordance with applicable Sales Tax law; Section 3.11 shall remain unaffected. The Parties shall cooperate with each other in good faith in order to enable each Party to comply with the formal requirements imposed on such Party under applicable Sales Tax laws. Such cooperation includes, without limitation, that the Parties provide each other with all available information that is reasonably required for the other Party to comply with any reporting obligations under applicable Sales Tax laws (for example, the filing of Sales Tax declarations and the request of Sales Tax refunds).

Section 3.09      All payments of Service Charges shall be made free and clear of any deduction or withholding of any kind (including taxes) other than any deduction or withholding required by applicable Laws. In case a payment of Service Charges under this Agreement is subject to any withholding or deduction prescribed by applicable Laws, then such amounts shall be borne by the Service Recipient, and any payment by the Service Recipient shall be grossed-up to ensure that the Service Provider receives the full Service Charge as specified in the Service Sheets without any deduction and withholding. Where a relief, waiver or reduction of the withholding tax is possible in accordance with Law, the Service Provider and the Service Recipient shall cooperate as far as reasonably practicable to achieve such tax exemption from the competent tax authorities. The Service Recipient shall provide the Service Provider with sufficient proof of the deduction or withholding made, in particular provide certificates or other documents in a manner as prescribed by Law. Section 3.11 shall remain unaffected by the provision of this Section 3.09.

Section 3.10      Any claims pursuant to Section 3.08 and Section 3.09 shall be time-barred upon expiration of a period of six (6) months after the respective assessment of the tax has become un-appealable and final or – if there has been no tax assessment insofar – the tax has been paid, but if and to the extent an assessment against the other Party is concerned, only at the earliest six (6) months after the former Party has notified the other Party in reasonable details about the existence of such claim.

Section 3.11      Invoices shall be sent, and payments shall be made, between the Parties, unless otherwise agreed in writing by the Parties.

Article IV
Obligations of the Service Recipient

Section 4.01      The Service Recipient shall, at its own expense, actively cooperate with and support the Service Provider to facilitate the provision of the Services and the implementation of any Operational Changes.

Section 4.02      Without limiting any other obligations of Service Recipient set forth in this Agreement, the Service Recipient undertakes, and shall cause its Affiliates, to:

(a)      provide the Service Provider with any resources (in particular, materials and premises), personnel, information and data that the Service Provider reasonably deems necessary to allow it to perform the Services and all the tasks and responsibilities set out in the Agreement and the Appendices;

(b)      provide the Service Provider with access to its personnel, premises, materials and Systems to the extent required for the provision of Services;

(c)      make decisions as to matters, as reasonably requested by the Service Provider, in good time;

(d)      upgrade, enhance or otherwise modify any computer hardware, software or network environment used in connection with any Services provided by the Service Provider, at the Service Recipient’s expense, such that the computer hardware, software or network environment are reasonably necessary to allow Service Provider to provide the Services;

(e)      at its own expense, actively cooperate with and support the Service Provider to facilitate the provision of the Services and the implementation of any Operational Changes; and

(f)       comply with the Service Provider’s internal policy requirements which are established generally by the Service Provider (rather than directed towards the arrangements contemplated by this Agreement) as communicated to the Service Recipient from time to time (sections (a) through (f) together, the “Dependencies”).

Article V
Intellectual Property Rights

Section 5.01      All Intellectual Property rights belonging to a Party on or prior to the Effective Date (whether developed by that Party or acquired by it from a third party) or developed or acquired by it independently from the performance of its obligations under this Agreement after the Effective Date shall remain vested in that Party. Any and all Intellectual Property rights developed in the course of the provision of the Services shall be solely owned by the Service Provider; provided that Intellectual Property rights resulting from a development that has been specifically commissioned and identified in writing and paid for by the Service Recipient shall be owned by the Service Recipient. Each Party grants to the other Party a non-exclusive, non-assignable, worldwide, royalty-free, non-transferable, and non-sublicensable (except to the Third Party Suppliers of the other Party acting as a Service Provider) license for the Term to use such Party’s Service Provider Materials and Service Recipient Materials (as applicable) solely as necessary for the other Party to use or provide the Services, as applicable, and to otherwise perform its obligations hereunder.

Article VI
Governance

Section 6.01      During the Term, the Parties shall each appoint an individual (the “Services Representative”) who shall: (1) have the overall responsibility for managing and coordinating the provision and receipt of the Services; (2) be the primary contact for the other Party under this Agreement; (3) meet regularly with the other Party’s Services Representative; and (4) have the authority to make decisions with respect to actions to be taken with regard to the Services in the ordinary course of day-to-day management of this Agreement, it being understood that the exercise of contractual rights and the assumption of contractual obligations shall be reserved to duly authorized representative(s) of the respective Party and no act or omission by the Services Representative shall be deemed as exercise of rights or assumption of obligations.

Section 6.02      The Parties’ Services Representatives shall meet on a monthly basis, to generally review and discuss: (a) the provision of Services, including any anticipated Operational Changes and maintenance schedules; (b) performance objectives for applicable Services; (3) and Services Charges, expenses and payments under Section 3.05 and other payments that shall be due from the prior calendar month. If the Parties mutually agree, the Parties may offset the Service Charges and other payments due to the other, as specified in Section 3.04.

Article VII
NO Warranties; LIMITATION OF Liability

Section 7.01      No warranties. The Service Provider does not provide any guarantee or warranty, express or implied, with respect to the Services, including, without limitation, a warranty for merchantability and fitness for a particular purpose or for compliance of the Services with regulatory requirements.

Section 7.02      LIMITATION OF LIABILITY. NO PARTY SHALL BE LIABLE TO OR OTHERWISE RESPONSIBLE TO ANY OTHER PARTY HERETO OR ANY AFFILIATE OF ANY OTHER PARTY HERETO FOR ANY INCIDENTAL, SPECIAL, CONSEQUENTIAL, INDIRECT, EXEMPLARY OR PUNITIVE DAMAGES THAT ARISE OUT OF OR RELATE TO THIS AGREEMENT OR THE PERFORMANCE OR BREACH HEREOF, WHETHER SUCH DAMAGES OR OTHER RELIEF ARE SOUGHT BASED ON BREACH OF CONTRACT, NEGLIGENCE, STRICT LIABILITY OR ANY OTHER LEGAL OR EQUITABLE THEORY AND WHETHER OR NOT THE PARTY WAS AWARE OR ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THE SERVICE PROVIDER SHALL NOT BE RESPONSIBLE FOR ANY FAILURE OF ANY THIRD PARTY SUPPLIER TO MEET ITS OBLIGATIONS.

SUBJECT TO APPLICABLE LAW AND ANY RIGHTS AND REMEDIES PROVIDED UNDER THE SEPARATION AGREEMENT OR ANY OTHER ANCILLARY AGREEMENT AND WITHOUT LIMITING THE FOREGOING, SERVICE PROVIDER’S SOLE LIABILITY, AND SERVICE RECIPIENT’S SOLE AND EXCLUSIVE REMEDY, IN CONNECTION WITH ANY CLAIM UNDER THIS AGREEMENT SHALL BE RECOVERY OF ANY FEES PAID BY SERVICE RECIPIENT FOR THE SERVICES PROVIDED HEREUNDER, SUBJECT TO THE CAP STATED BELOW. WITHOUT LIMITING THE FOREGOING, IN NO CIRCUMSTANCES WILL SERVICE RECIPIENT BE ENTITLED TO SPECIFIC PERFORMANCE OR OTHER EQUITABLE RELIEF IN CONNECTION WITH ANY BREACH OR ALLEGED BREACH HEREUNDER OR OTHER CLAIM ARISING HEREUNDER. EXCEPT TO THE EXTENT LIABILITY RESULTS FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SERVICE PROVIDER OR ITS WILLFUL AND INTENTIONAL REFUSAL OR FAILURE TO PROVIDE THE SERVICES (EXCEPT WHERE SUCH WILLFUL AND INTENTIONAL FAILURE OR REFUSAL TO PROVIDE THE SERVICES IS OTHERWISE EXCUSED UNDER THIS AGREEMENT), IN NO EVENT WILL THE TOTAL, CUMULATIVE, AGGREGATE LIABILITY OF SERVICE PROVIDER, WHETHER BASED UPON AN ACTION OR CLAIM IN CONTRACT, TORT (INCLUDING NEGLIGENCE), WARRANTY, MISREPRESENTATION, EQUITY OR OTHERWISE, EXCEED FIFTY PERCENT (50%) OF THE AMOUNTS PAID BY SERVICE RECIPIENT TO SERVICE PROVIDER FOR THE SERVICES PROVIDED THAT ARE THE SUBJECT OF SUCH CLAIM DURING THE TWELVE (12) MONTHS PRECEDING THE DATE THAT SUCH CLAIM FIRST AROSE.

Section 7.03      Indemnification. Each Party (the “Indemnifying Person”) shall defend, indemnify and hold harmless the other Party and its Affiliates (the “Indemnified Persons”), against any and all losses owing to third parties with respect to third-party claims arising from or relating to (a) in the case of Service Provider as Indemnifying Person, any willful and intentional refusal or failure to provide the Services (except to the extent such refusal or failure to provide the Services is otherwise excused under this Agreement), or (b) the Indemnifying Person’s or its Affiliate’s willful misconduct, gross negligence or fraud. If the Indemnified Persons receives notice or knowledge of a claim as described in this Section 7.03, it shall promptly notify the Indemnifying Person in writing and give the Indemnifying Person all necessary information and assistance, and the exclusive authority to evaluate and settle such claim; provided, however, the Indemnifying Person may not settle such claim in a manner that would have a material adverse impact on the business of the Indemnified Persons without receiving the Indemnified Persons’ prior written consent.

Section 7.04      Non-Compliance. In the event that the Service Provider fails to perform any of its obligations under this Agreement (“Non-Compliance”), the Service Provider shall, without undue delay after receipt of a notice from the Service Recipient, use commercially reasonable efforts to discontinue the Non-Compliance or to remedy the Non-Compliance; provided that the Service Provider has not been excused pursuant to Section 7.05. The remedies provided in relation to Non-Compliance shall be exclusive and the Service Recipient shall not be entitled to claim for any further remedies relating to any Non-Compliance. Any claims for failure or delay by the Service Provider under or in connection with this Agreement, irrespective of which nature, amount or legal basis, are hereby expressly waived and excluded, in particular, without limitation, post-performance or claims for reimbursement of expenses incurred as a result of a substitute performance, claims due to a disruption of the contractual basis, claims under pre-contractual fault, and/or the right to reduce the Services Fees or to terminate or rescind this Agreement. The right to terminate pursuant to Article VIII and/or to claim, subject to Article VII, damages for breach of contract shall, remain unaffected.

Section 7.05      Excused Obligations.

(a)      Any failure or delay by the Service Provider to perform an obligation under this Agreement as a consequence of the following shall release the Service Provider from the affected obligation and the Service Provider shall have no liability whatsoever for the failure or delay by the Service Provider to perform such obligation: (i) any failure of the Service Recipient to satisfy a Dependency or to perform any other obligation under this Agreement; (ii) the Service Recipient or a Third Party Supplier of the Service Provider having obstructed, hampered, impeded or otherwise adversely affected (whether by act or omission) the performance of the Services; or (iii) any matter constituting a Force Majeure Event.

(b)      If performance is excused under Section 7.05(a), then the Service Provider shall: (i) notify the Service Recipient of its failure to satisfy the Dependency, or other act or omission, and all events or circumstances causing or contributing to the failure or mal-performance, as soon as and to the extent reasonably practicable after it becomes aware of them; (ii) continue to perform those of its obligations under this Agreement which are unaffected by such events; and (iii) use reasonable efforts (it being understood that the Service Provider shall not be obliged to incur additional cost, unless the Service Recipient has agreed to indemnify the Service Provider for such cost before incurred) to minimize and mitigate the likely impact of the failure or mal-performance on the Service Recipient.

Section 7.06      Maintenance Shutdown. The Service Provider shall have the right to shut down temporarily for maintenance or similar purposes the operation of any facilities, equipment or systems used for providing any Service whenever, in the Service Provider’s reasonable judgment, such action is necessary or advisable for general maintenance or emergency purposes; provided that the Service Provider will use its commercially reasonable efforts to schedule non-emergency maintenance impacting the Services so as not to materially disrupt the operation of the Service Recipient’s business and the Service Provider will use commercially reasonable efforts to give the Service Recipient advance notice of any planned shutdown. With respect to the Services dependent on the operation of such facilities, equipment or systems, the Service Provider shall be released from its obligations hereunder to provide such Services during the period that such facilities, equipment or systems are shut down. The Service Recipient acknowledges that certain Services may be subject to network, supply, transportation logistics or other delays outside of the Service Provider’s direct control and that the Services may be affected by such network, supply, transportation logistics or other delays in the same manner.

Article VIII
Term AND TERMINATION

Section 8.01      Term of Agreement. This Agreement shall be conditional on the Distribution and enter into force on the Distribution Date (the “Effective Date”). This Agreement shall commence on the Effective Date and expire when the last Service Term or Extended Service Term has ended (the “Term”), unless terminated earlier or extended by mutual agreement between the Parties.

Section 8.02      Service Term. Each Service shall commence on the Effective Date (unless a later date is specified in the Service Sheet) and have the duration as specified in the relevant Service Sheet, unless terminated earlier, but shall not exceed twelve (12) months following the Effective Date (the “Service Term”) unless extended pursuant to Section 8.03.

Section 8.03      Service Term Extensions. Service Recipient or Service Provider may request upon at least forty-five (45) calendar days’ prior written notice (in advance of the expiration of the then-current term of a Service) to extend the term of any Service Term on a Service-by-Service basis. Upon such request, the Parties shall negotiate in good faith on an extension of the Service Term for individual Services, subject to (a) the requesting Party solely bearing the cost of any Third Party Consents required to extend such Service and, (b) unless otherwise specified on the Service Sheet for such Service, an increase in Service Charges and Third Party Supplier Pass Through Costs of twenty-five percent (25%) for each month such Service is extended beyond the initial Service Term (an “Extended Service Term”) and shall amend the Service Term in the respective Service Sheet if and once they have reached mutual consent on such extension; provided that such Extended Service Term shall not exceed the shorter of (x) six (6) months and (y) half the length of the original Service Term. If the Service Recipient desires to extend the provision of Services beyond the Extended Service Term, the Parties may negotiate in good faith on such extensions, but the Service Provider shall not be obligated to grant such extensions.

Section 8.04      Termination of Individual Services by Service Recipient for Convenience. Service Recipient may, at any time after the Effective Date, terminate any individual Service provided under this Agreement on a Service-by-Service basis upon sixty (60) days’ prior notice (unless a longer notice period is specified for the applicable Service category in the Services Sheets) to Service Provider identifying the particular Service to be terminated and the effective date of termination, which date shall not be later than the end of the applicable Service Term or earlier than sixty (60) days after Service Provider’s receipt of such notice of termination (or such longer notice period as set forth in the Service Sheets), unless Service Provider otherwise agrees in writing. Notwithstanding the foregoing, Service Recipient shall not be able to terminate any individual Service if any non-terminated Services are dependent upon the provision of the Services that Service Recipient is seeking to terminate, unless all such interdependent Services are simultaneously terminated. Service Recipient shall be responsible for all wind-down costs (excluding any employee termination and severance costs of affected personnel), and third-party breakage or termination fees as a result of its early termination of a Service or this Agreement; provided, that, Service Provider shall provide notice of any such costs within fifteen (15) days or receipt of notice of early termination and Service Recipient has not withdrawn its termination notice within five (5) days of receipt of such notice from Service Provider.

Section 8.05      Termination for Cause.

(a)      If either Party materially breaches any of its obligations under this Agreement and such Party does not cure such breach within thirty (30) days after receiving notice thereof from the non-breaching Party, the non-breaching Party may terminate this Agreement, in whole or in part (with respect to the Services to which the breach relates), immediately by providing notice of termination to the Party in breach. Notwithstanding the foregoing, if Service Recipient fails to pay any undisputed amounts for Services provided hereunder when due, and Service Recipient fails to cure its failure to pay such undisputed amounts within fifteen (15) days of receipt of notice thereof from Service Provider, Service Provider may terminate this Agreement, in whole, including the provision of Services pursuant hereto, immediately by providing notice of termination to Service Recipient; provided that Service Provider may not terminate this Agreement or the provision of any Services pursuant hereto for Service Recipient’s failure to pay any amount that is disputed by Service Recipient in good faith. Further, this Agreement may be terminated, effective immediately upon notice, by Service Provider, on the one hand, or by Service Recipient, on the other hand, if the other Party files, or has filed against it, a petition for voluntary or involuntary bankruptcy or pursuant to any other insolvency law or makes or seeks to make a general assignment for the benefit of its creditors or applies for or consents to the appointment of a trustee, receiver or custodian for it or a substantial part of its property.

(b)      Parent may terminate this Agreement in whole by delivering written notice thereof to SpinCo not less than one (1) calendar month prior to the proposed effective date of such termination, such proposed effective date of termination always to be the end of a calendar month, if SpinCo undergoes a change of control, meaning that a Third Party acquires Control over SpinCo or SpinCo has transferred or assigned this Agreement or any rights or obligations thereunder other than in accordance with Section 11.02.

(c)      Where any Force Majeure Event subsists for sixty (60) or more consecutive calendar days, each Party shall be entitled to forthwith terminate the Service Sheet impacted by the Force Majeure Event by giving written notice to the other Party.

Section 8.06      The rights to terminate this Agreement set forth in this Article VIII shall not prejudice any other right or remedy of either Party (including statutory rights) in respect of the breach concerned (if any) or any other breach, to the extent not excluded under other terms of this Agreement.

Section 8.07      Consequences of Termination.

(a)      Upon expiry or termination of this Agreement in whole or in part (with respect to any terminated Services), (i) the Service Recipient shall immediately cease to use the Services affected by such termination or expiry and, (ii) except to the extent required for the performance of its remaining obligations under this Agreement, the Service Provider and the Service Recipient shall at the Service Recipient’s costs: return or deliver to the Service Provider or the Service Recipient, as applicable, all records and documents, including any Service Provider Materials or Service Recipient Materials, as applicable; and expunge all data from any Systems in its possession or control or that of any of its Affiliates containing Confidential Information of the Service Provider or the Service Recipient, as applicable, or, at the Service Provider’s or the Service Recipient’s direction, shall destroy it, and certify that the destruction has taken place. The Service Provider or the Service Recipient returning, expunging or destroying the Confidential Information may retain (A) a copy of the Confidential Information for the purposes of fulfilling, and so long as required by, retention obligations as imposed by any Law or its internal compliance procedures, and (B) copies of any computer records and files containing any Confidential Information that have been created pursuant to automatic archiving and back-up procedures.

(b)      Upon termination or expiry of the Agreement, the Service Recipient shall pay to the Service Provider all the amounts remaining due (and in case of partial termination the amounts remaining due with respect to the Services terminated), whether invoiced or not. Termination of this Agreement shall not release either Party from any other liability which at the time of termination has already accrued to the other Party, nor affect in any way the survival of any other right, duty or obligation of the Parties which is expressly stated elsewhere in this Agreement to survive termination.

Article IX
Data

Section 9.01      If the Service Recipient is given access to any of the Service Provider’s Systems or physical facilities in connection with the receipt of the Services, the Service Recipient shall cause the compliance with all of the Service Provider’s Systems security policies, procedures, technical standards and requirements (“Security Policy”). The Service Recipient will use commercially reasonable efforts to ensure that no security or audit measures employed by the Service Provider will be tampered with, compromised or circumvented, it being understood and agreed that if despite use of such commercially reasonable efforts the Service Recipient fails to comply with the Security Policy, then the Service Provider may suspend the Service Recipient’s access to the affected Systems to the extent necessary to preserve the security of the Systems until such time as such non-compliance is cured. The Service Recipient shall ensure that only those Systems of the Service Provider are accessed and used for which the right to access and use has been granted, and that such Systems are only accessed and used to the extent reasonably necessary in connection with the receipt of the Services. The Service Recipient shall ensure that only such personnel that is specifically authorized to have access to the Systems or physical facilities of the Service Provider gain such access, and to prevent unauthorized access, use, destruction, alteration or loss of information or other property contained therein, including notifying its personnel of the restrictions set forth in this Agreement. The Service Recipient shall promptly notify the Service Provider under the circumstances, but in no event later than the earlier of: (a) when required by Law; or (b) two (2) business days after discovering any unauthorized access or acquisition or suspected unauthorized acquisition of the Service Provider non-public information, or security incident which could result in the misuse or reasonable belief of misuse of identification numbers and passwords by a Service Recipient accessing the Service Provider’s computer systems.

Section 9.02      The Data Protection Agreement in Section 9.02 shall govern processing of personal data under the Agreement and made a part of this Agreement for all purposes as if fully set forth herein.

Section 9.03      The Service Provider shall have no obligation to check, modify or correct the data processed through materials and it shall be the sole responsibility of the Service Recipient to ensure that data as well as the results of the processing carried out through the materials are accurate.

Article X
Confidentiality

Section 10.01    Each Party (“Receiving Party”) undertakes to the other Party (“Disclosing Party”) to treat as confidential all Confidential Information received under or in connection with this Agreement, which the Receiving Party receives, from or through the Disclosing Party either directly or from any other Person which concerns the business, operations, customers or users of the Disclosing Party.

Section 10.02    The Receiving Party may only use the Confidential Information for the purposes of, and in accordance with, the Agreement. The Receiving Party may only provide its employees, directors, subcontractors, professional advisers and Affiliates (“Permitted Users”) with access to the Confidential Information on a strict “need-to-know” basis. The Receiving Party shall ensure that each of its Permitted Users is bound to hold all Confidential Information in confidence to the standard required under the Agreement. Where a Permitted User is not an employee or director of the Receiving Party (and is not under a professional duty to protect confidentiality) the Receiving Party shall ensure that the Permitted User shall, prior receiving the Confidential Information, enter into a written confidentiality undertaking with the Receiving Party on substantially equivalent terms to the Agreement, copy of which shall be provided to the Disclosing Party upon request.

Section 10.03    This Section shall not apply to any information which: (a) is already known to the Receiving Party at the time of disclosure and is not subject to a confidentiality obligation (other than any information that is transferred to Service Recipient as a transferred asset under the Separation Agreement) or thereafter is independently developed by the Receiving Party without breach of this Agreement; (b) is already in the public domain at the time of disclosure, or thereafter becomes publicly known other than as the result of a breach by the Receiving Party of its obligations under this Agreement; or (c) is received from a third party without breach of this Agreement or a confidentiality obligation to the Disclosing Party known to the Receiving Party.

Section 10.04    Each Permitted User may disclose Confidential Information where that Permitted User (or, where the Permitted User is an individual, his or her employer) is required to do so by Law or by any competent court or by any competent regulatory authority. In these circumstances the Recipient shall to the extent permitted by law give the Disclosing Party prompt advance written notice of the disclosure (where lawful and practical to do so) so that the Disclosing Party has sufficient opportunity (where possible) to prevent or control the manner of disclosure by appropriate legal means.

Section 10.05    On termination or expiry of the Agreement, this Article shall remain in full force and effect for three (3) years as from the expiry or the termination of the Agreement and, unless otherwise stated in the Agreement, each Party agrees that it must continue to keep the other Party’s Confidential Information confidential in accordance with this Article X.

Article XI
General

Section 11.01    Relationship of the Parties. Nothing contained in this Agreement shall be construed as creating a partnership, joint venture, agency, trust or other association of any kind among or between the Parties, each Party being individually responsible only for its obligations as set forth in this Agreement. Service Provider and its Affiliates shall provide the Services hereunder in the capacity of an independent contractor and not as an employee, agent or joint venture counterparty of Service Recipient. Without limiting the foregoing, Service Recipient shall not have any power or authority to bind Service Provider to any contract, undertaking or other engagement with any third party.

Section 11.02    Assignment. Neither Party may assign, delegate or otherwise transfer, in whole or in part, directly or indirectly, by operation of law or otherwise (including by merger, contribution, spin-off or otherwise) any of its rights, interests or obligations hereunder, without the prior written consent of the other Party; provided, that Parent may, without the prior written consent of SpinCo, assign its rights under this Agreement, in whole or in part, to one or more of its Affiliates or to any acquiror or successor to any business or assets used in the provision of the Services; provided, further, that no such assignment shall relieve Parent of its obligations hereunder. Any purported assignment, delegation or transfer in violation of this Section 11.02 shall be null and void.

Section 11.03    Expenses.

(a)       Except as otherwise provided in this Agreement or the Ancillary Agreements, the Parties shall bear their respective direct and indirect costs and expenses incurred in connection with the negotiation, preparation, execution and performance of this Agreement and the transactions contemplated hereby.

(b)      Unless otherwise indicated, all dollar amounts stated in this Agreement are stated in U.S. currency, and all payments required under this Agreement shall be paid in U.S. currency by wire transfer of immediately available funds.

Section 11.04    Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, by email transmission (so long as confirmation of transmission is electronically or mechanically generated), or by registered or certified mail (postage prepaid, return receipt requested) to the respective Persons at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 11.04):

with a copy, which shall not constitute notice, to:

Exhibit 10.2

TAX MATTERS AGREEMENT

by and between

BORGWARNER INC.

and

PHINIA INC.

Dated as of July 2, 2023

TABLE OF CONTENTS

Page

Schedules

Schedule A -      Specified Matters

Schedule B -      Intended Tax Treatment

Schedule C -      Identified Transactions

Schedule D -      Gain Recognition Agreements

Schedule E -      Active Business

TAX MATTERS AGREEMENT

This TAX MATTERS AGREEMENT (including the schedules hereto, this “Agreement”), is entered into as of July 2, 2023 between BorgWarner Inc., a Delaware corporation (“Parent”), and PHINIA Inc., a Delaware corporation (“SpinCo” and, together with Parent, the “Parties”).

RECITALS

WHEREAS, the board of directors of Parent has determined that it is appropriate, desirable and in the best interests of Parent and its stockholders to separate the Parent Business from the SpinCo Business in the manner described in the Separation and Distribution Agreement, dated as of July 2, 2023, between the Parties (such agreement, the “Separation Agreement” and such separation the “Separation”) and, following the Separation, to undertake the Distribution;

WHEREAS, SpinCo has been incorporated for these purposes and has not engaged in activities except those incidental to its formation and in preparation for the Distribution;

WHEREAS, Parent has effected or will effect certain restructuring transactions for purposes of aggregating the SpinCo Business in the Parent Group prior to the Distribution (collectively, the “Restructuring”);

WHEREAS, Parent will contribute SpinCo Assets to SpinCo in exchange for SpinCo Common Stock and the assumption of SpinCo Liabilities (the “External Contribution”);

WHEREAS, Parent intends to effect the Spin-Off Transaction in a transaction that qualifies as tax-free for U.S. federal income tax purposes under Sections 368(a)(1)(D), 355 and 361 of the Code;

WHEREAS, certain members of the Parent Group, on the one hand, and certain members of the SpinCo Group, on the other hand, file certain Tax Returns on a consolidated, combined or unitary basis for certain federal, state, local and Non-U.S. Tax purposes; and

WHEREAS, the Parties desire to (a) provide for the payment of Tax Liabilities and entitlement to refunds thereof, allocate responsibility for, and cooperation in, the filing of Tax Returns, and provide for certain other matters relating to Taxes and (b) set forth certain covenants and indemnities relating to the preservation of the Intended Tax Treatment of the Transactions.

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, the Parties, intending to be legally bound, hereby agree as follows:

Article I – DEFINITIONS

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

“Accounting Firm” shall have the meaning set forth in Section 9.1.

“Active Business” shall mean, as shown on Schedule E, the active conduct (as defined in Section 355(b)(2) of the Code and the Treasury Regulations thereunder) by SpinCo and its “separate affiliated group” (as defined in Section 355(b)(3)(B) of the Code) and any SpinCo Group member that is a party to a transaction intended to qualify under Section 355 of the Code and such Affiliate’s “separate affiliated group” of the SpinCo Business, in each case, as conducted immediately prior to the Distribution or any other relevant distribution.

“Adjustment” shall mean an adjustment of any item of income, gain, loss, deduction, credit or any other item affecting Taxes of a taxpayer.

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

“Agreement” shall have the meaning set forth in the preamble hereto.

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

“Capital Stock” shall mean classes or series of capital stock of a Person, including (i) common stock, (ii) all options, warrants and other rights to acquire such capital stock and (iii) all instruments properly treated as stock in such Person for U.S. federal income tax purposes.

“Chosen Court Claim” shall have the meaning set forth in Section 9.5.

“Chosen Courts” shall have the meaning set forth in Section 9.5.

“Code” shall mean the U.S. Internal Revenue Code of 1986 (as amended).

“Controlling Party” shall mean, with respect to a Tax Contest, the Party entitled to control such Tax Contest pursuant to Section 6.2, Section 6.3 or Section 6.4.

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

“Dispute” shall have the meaning set forth in Section 9.2.

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

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

“Distribution Taxes” shall mean any Taxes incurred solely as a result of the failure of any of the Transactions to qualify for the Intended Tax Treatment of such Transaction.

“Due Date” shall mean (a) with respect to a Tax Return, the date (taking into account all valid extensions) on which such Tax Return is required to be filed under applicable Tax Law or, in the case of a Joint Return for a U.S. jurisdiction filed by Parent pursuant to Section 2.1(a), such earlier date on which such Tax Return is filed as determined by Parent and (b) with respect to a payment of Taxes, the date on which such payment is required to be made, which shall in any case be no later than the payment date required to avoid the incurrence of interest, penalties and additions to Tax.

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

“External Contribution” shall have the meaning set forth in the recitals hereto

“Final Determination” shall mean the final resolution of any Tax Liability, which resolution may be for a specific issue or adjustment or for a Tax Period, (a) by IRS Form 870 or 870-AD (or any successor forms thereto), on the date of acceptance by or on behalf of the taxpayer, or by a comparable form under the Laws of a state, local or non-U.S. taxing jurisdiction, except that a Form 870 or 870-AD or comparable form shall not constitute a Final Determination to the extent that it reserves (whether by its terms or by operation of Law) the right of the taxpayer to file a claim for Refund or the right of the Taxing Authority to assert a further deficiency in respect of such issue or adjustment or for such Tax Period (as the case may be); (b) by a decision, judgment, decree or other order by a court of competent jurisdiction, which has become final and unappealable; (c) by a closing agreement or accepted offer in compromise under Section 7121 or Section 7122 of the Code, or a comparable agreement under the Laws of a state, local or non-U.S. taxing jurisdiction; (d) by any allowance of a Refund, but only after the expiration of all periods during which such Refund may be recovered (including by way of offset) by the jurisdiction imposing such Tax; (e) by a final settlement resulting from a competent authority proceeding or determination; or (f) by any other final disposition, including by reason of the expiration of the applicable statute of limitations or by mutual agreement of the parties.

“Gain Recognition Agreement” shall mean any agreement to recognize gain that is described in Treasury Regulations Section 1.367(a)-8(i) which is entered into in connection with the Transactions and (ii) to which any member of the Parent Group or the SpinCo Group is a party.

“Group” shall mean either the Parent Group or the SpinCo Group, as the context requires.

“Indemnifying Party” shall have the meaning set forth in Section 5.2.

“Indemnitee” shall have the meaning set forth in Section 5.2.

“Informational Tax Returns” shall have the meaning set forth in Section 3.6.

“Intended Tax Treatment” shall mean (x) the qualification of (i) the External Contribution (and Parent’s receipt or deemed receipt of the SpinCo Common Stock in connection therewith) and the Distribution, taken together, as a reorganization described in Sections 368(a)(1)(D) and 355(a) of the Code, with each of Parent and SpinCo being a party to the reorganization, in which no income or gain is recognized by Parent, SpinCo, the Parent Group, the SpinCo Group or the holders of Parent Common Stock pursuant to Sections 355, 357, 361 and 1032 of the Code, other than in respect of intercompany items or excess loss accounts taken into account pursuant to the Treasury Regulations promulgated pursuant to Section 1502 of the Code, and (ii) the Distribution as a transaction in which the stock distributed thereby is “qualified property” for purposes of Section 361(c) of the Code (and neither Section 355(d) nor Section 355(e) of the Code causes such stock to be treated as other than “qualified property” for such purposes), and (y) the qualification of each of the transactions undertaken pursuant to the Restructuring identified on Schedule B for the tax treatment specified for such transaction therein under applicable Tax Law. The term “Intended Tax Treatment” will, as applicable, also include the qualification of each transaction described in clauses (x) and (y) under comparable provisions of state or local Tax Law, or, in the case of clause (y), Non-U.S. Tax Law.

“IRS” shall mean the United States Internal Revenue Service or any successor thereto, including its agents, representatives, and attorneys.

“Joint Return” shall mean any Tax Return that includes, by election or otherwise, one or more members of the Parent Group together with one or members of the SpinCo Group (including, for the avoidance of doubt, the following Tax Returns (and any related claims or elections) for UK Tax purposes: a joint amended return pursuant to the Corporation Tax (Simplified Arrangements for Group Relief) Regulations 1999, an interest restriction return for the purposes of the corporate interest restriction in Part 10 and Schedule 7A to the Taxation (International and Other Provisions) Act 2010, and a group allowance allocation statement for the purposes of the loss restriction in Part 7ZA of the Corporation Tax Act 2010, in each case to the extent that the return or statement covers one or more members of the Parent Group together with one or members of the SpinCo Group).

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

“Negotiation Period” shall have the meaning set forth in Section 9.1.

“Non-Controlling Party” shall mean, with respect to a Tax Contest, the Party that is not entitled to (or elects not to) control such Tax Contest pursuant to Section 6.2, Section 6.3 or Section 6.4.

“Non-U.S. Tax” shall mean any Tax imposed by any non-U.S. country or any possession of the United States, or by any political subdivision of any non-U.S. country or possession of the United States.

“Notified Action” shall have the meaning set forth in Section 4.3(a).

“Parent” shall have the meaning set forth in the preamble hereto.

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

“Parent Common Stock” shall have the meaning set forth in the Separation Agreement.

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

“Parent Separate Return” shall mean any Tax Return of or including any member of the Parent Group (including any consolidated, combined, or unitary return) that does not include any member of the SpinCo Group.

“Parties” shall have the meaning set forth in the preamble hereto.

“Past Practices” shall have the meaning set forth in Section 3.4.

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

“Post-Distribution Period” shall mean any Tax Period (or portion thereof) beginning after the Distribution Date, including, for the avoidance of doubt, the portion of any Straddle Period with respect to the Distribution Date beginning after the Distribution Date.

“Post-Distribution Ruling” shall have the meaning set forth in Section 4.2(c).

“Pre-Distribution Period” shall mean any Tax Period (or portion thereof) ending on or before the Distribution Date, including, for the avoidance of doubt, the portion of any Straddle Period with respect to the Distribution Date ending at the end of the day on the Distribution Date.

“Preparing Party” shall have the meaning set forth in Section 3.3.

“Privilege” shall mean any privilege that may be asserted under applicable Law, including any privilege arising under or relating to the attorney-client relationship (including the attorney-client and work product privileges), the accountant-client privilege and any privilege relating to internal evaluation processes.

“Prohibited Acts” shall mean any act or failure to act by SpinCo described in Section 4.2(a) or Section 4.2(b) (regardless of whether the conditions set forth in Section 4.2(c) are satisfied).

“Proposed Acquisition Transaction” shall mean a transaction or series of transactions (or any agreement, understanding or arrangement within the meaning of Section 355(e) of the Code and Treasury Regulations Section 1.355-7, or any other regulations promulgated thereunder, to enter into a transaction or series of transactions), whether such transaction is supported by SpinCo management or stockholders, is a hostile acquisition, or otherwise, as a result of which SpinCo (or any successor thereto) would merge or consolidate with any other Person or as a result of which one or more Persons would (directly or indirectly) acquire, or have the right to acquire, from SpinCo (or any successor thereto) and/or one or more holders of SpinCo Capital Stock, respectively, any amount of stock of SpinCo, that would, when combined with any other direct or indirect changes in ownership of the stock of SpinCo pertinent for purposes of Section 355(e) of the Code and the Treasury Regulations promulgated thereunder, comprise 40% or more of (i) the value of all outstanding shares of SpinCo as of the date of such transaction, or in the case of a series of transactions, the date of the last transaction of such series, or (ii) the total combined voting power of all outstanding shares of voting stock of SpinCo as of the date of such transaction, or in the case of a series of transactions, the date of the last transaction of such series. Notwithstanding the foregoing, a Proposed Acquisition Transaction shall not include (i) the adoption by SpinCo of a customary stockholder rights plan or (ii) issuances by SpinCo that satisfy Safe Harbor VIII (relating to acquisitions in connection with a person’s performance of services) or Safe Harbor IX (relating to acquisitions by a retirement plan of an employer) of Treasury Regulations Section 1.355-7(d). For purposes of determining whether a transaction constitutes an indirect acquisition, any recapitalization resulting in a shift of voting power or any redemption of shares of stock shall be treated as an indirect acquisition of shares of stock by the non-exchanging stockholders. This definition and the application thereof are intended to monitor compliance with Section 355(e) of the Code and the Treasury Regulations promulgated thereunder and shall be interpreted and applied accordingly. Any clarification of, or change in, the statute or regulations promulgated under Section 355(e) of the Code shall be incorporated in this definition and its interpretation.

“Refund” shall mean any refund, reimbursement, offset, credit or other similar benefit in respect of Taxes (including any overpayment of Taxes that can be refunded or, alternatively, applied against other Taxes payable), including any interest paid on or with respect to such refund of Taxes; provided, however, that the amount of any refund of Taxes shall be net of any costs and expenses (including Taxes imposed by any Taxing Authority) related to, or attributable to, the receipt of or accrual of such refund (including any Taxes imposed by way of withholding or offset).

“Relevant Items” shall have the meaning set forth in Section 2.6.

“Representation Letters” shall mean the representation letters of officers of Parent and/or SpinCo provided to Ernst & Young LLP in connection with any Tax Opinion issued in connection with the Transactions.

“Responsible Party” shall mean, with respect to any Tax Return, the Party having responsibility for preparing and filing such Tax Return pursuant to this Agreement.

“Restricted Period” shall mean the period beginning on the Distribution Date and ending on the two (2)-year anniversary of the day after the Distribution Date.

“Restructuring” shall have the meaning set forth in the recitals hereto.

“Reviewing Party” shall have the meaning set forth in Section 3.3.

“Section 4.2(b)(v) Acquisition Transaction” shall have the meaning set forth in Section 4.2(b)(v).

“Separate Return” shall mean a Parent Separate Return or a SpinCo Separate Return, as the case may be.

“Separation” shall have the meaning set forth in the recitals hereto.

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

“Spin-Off Transaction” shall mean the External Contribution and the Distribution, , taken together.

“SpinCo” shall have the meaning set forth in the preamble hereto.

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

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

“SpinCo Capital Stock” means the Capital Stock of SpinCo, including the SpinCo Common Stock.

“SpinCo Common Stock” shall have the meaning set forth in the Separation Agreement.

“SpinCo Disqualifying Action” shall mean (a) any action (or the failure to take any action) by any member of the SpinCo Group after the Distribution (including entering into any agreement, understanding or arrangement or any negotiations with respect to any transaction or series of transactions), (b) any event (or series of events) after the Distribution involving the SpinCo Capital Stock or any stock or assets of any member of the SpinCo Group or (c) any breach by any member of the SpinCo Group after the Distribution of any representation, warranty or covenant made by them in this Agreement, that, in each case, would adversely affect, jeopardize or prevent the Intended Tax Treatment; provided, however, that the term “SpinCo Disqualifying Action” shall not include any action required by the Separation Agreement or any Ancillary Agreement (other than this Agreement) or that is undertaken pursuant to the Separation or the Distribution.

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

“SpinCo Separate Return” shall mean any Tax Return of or including any member of the SpinCo Group (including any consolidated, combined, or unitary return) that does not include any member of the Parent Group.

“State Tax” shall mean any Tax imposed by any State of the United States or by any political subdivision of any such State.

“Straddle Period” shall mean any Tax Period beginning on or before the Distribution Date and ending after the Distribution Date.

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

“Tax” or “Taxes” shall mean (i) all taxes, charges, fees, duties, levies, imposts, rates or other assessments or charges of any kind imposed by any Taxing Authority, including income, gross income, gross receipts, profits, employment, estimated, excise, severance, stamp, occupation, premium, windfall profits, environmental, custom duties, property, sales, use, license, lease, capital stock, transfer, import, export, franchise, registration, payroll, withholding, social security, workers’ compensation, unemployment, disability, ad valorem, service, value-added, alternative or add-on minimum, estimated, unclaimed property or escheat, or other taxes, whether disputed or not, and including any fee, assessment, duty, or other charge in the nature of or in lieu of any tax, and including any interest, penalties, charges or additions to tax or additional amounts in respect of the foregoing, (ii) liability for the payment of any amount of the type described in clause (i) arising as a result of being (or having been) a member of any consolidated, combined, unitary or similar group or being (or having been) included or required to be included in any Tax Return related thereto and (iii) liability for the payment of any amount of the type described in clause (i) or (ii) as a result of any express or implied obligation to indemnify or otherwise assume or succeed to the liability of any other Person. For the avoidance of doubt, Tax includes any increase in Tax as a result of a Final Determination.

“Tax Advisor” shall mean a U.S. Tax counsel or other Tax advisor of recognized national standing acceptable to Parent, in its sole and absolute discretion.

“Tax Advisor Dispute” shall have the meaning set forth in Section 9.1.

“Tax Advisor Dispute Notice” shall have the meaning set forth in Section 9.1.

“Tax Attribute” shall mean net operating losses, capital losses, research and experimentation credit carryovers, investment tax credit carryovers, earnings and profits, foreign tax credit carryovers, overall foreign losses, overall domestic losses, previously taxed earnings and profits, separate limitation losses and any other losses, deductions, credits or other comparable items that could affect a Tax Liability for a past, current or future Tax Period, other than the basis or adjusted basis of any property or any depreciation, amortization or other deductions or offsets attributable thereto.

“Tax Benefit” shall mean any reduction in Taxes paid or payable actually realized by a Person as a result of any loss, deduction, Refund, credit, offset or other Tax Item.

“Tax Contest” shall have the meaning set forth in Section 6.1.

“Tax Item” shall mean any item of income, gain, loss, deduction, or credit.

“Tax Law” shall mean the law of any Taxing Authority or political subdivision thereof relating to any Tax.

“Tax Liability” shall mean any liability or obligation for Taxes.

“Tax Materials” shall have the meaning set forth in Section 4.1(a).

“Tax Matter” shall have the meaning set forth in Section 7.1(a).

“Tax Opinion” shall mean any written opinion or memorandum of any law or accounting firm, regarding certain tax consequences of certain transactions executed as part of the Transactions.

“Tax Period” shall mean, with respect to any Tax, the period for which the Tax is reported or required to be reported as provided under the Code or other applicable Tax Law.

“Tax Records” shall have the meaning set forth in Section 8.1.

“Tax Related Costs and Expenses” shall mean, with respect to Taxes, all out-of-pocket accounting, legal and other professional fees, and court costs incurred in connection with such Taxes, as well as any other out-of-pocket costs incurred in connection with such Taxes.

“Tax Related Losses” shall mean (i) Tax Related Costs and Expenses and (ii) with respect to Taxes, all costs, expenses and damages associated with stockholder litigation or controversies and any amount paid by Parent (or any of its Affiliates) or SpinCo (or any of its Affiliates) in respect of the liability of stockholders, whether paid to stockholders or to the IRS or any other Taxing Authority, in each case, resulting from the failure of any of the Transactions to qualify for the Intended Tax Treatment or the defense against any challenge by the IRS or any other Taxing Authority to the Intended Tax Treatment of any Transaction, even if such Transaction ultimately is determined to so qualify.

“Tax Return” shall mean any return, report, certificate, form or similar statement or document (including any related supporting information or schedule attached thereto and any information return, amended tax return, claim for refund or other adjustment or declaration of estimated tax) supplied to or filed with, or required to be supplied to or filed with, a Taxing Authority, or any bill for or notice related to ad valorem or other similar Taxes received from a Taxing Authority, in each case, 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” shall mean any governmental authority or any subdivision, agency, commission or entity thereof or any quasi-governmental or private body having jurisdiction over the assessment, determination, collection or imposition of any Tax (including the IRS).

“Transaction Related Tax Contest” shall mean any Tax Contest in which the IRS, another Taxing Authority or any other party asserts a position that could reasonably be expected to (a) adversely affect, jeopardize or prevent (i) the Intended Tax Treatment of the Spin-Off Transaction or (ii) the Intended Tax Treatment of any other Transaction as set forth in a Tax Opinion (or, if not set forth in a Tax Opinion, as set forth in Schedule B) or (b) otherwise affect the amount of Taxes imposed with respect to any of the Transactions, as determined in each case by Parent.

“Transaction Taxes” shall mean all Taxes (including Taxes imposed on any member of the Parent Group under Sections 951 or 951A of the Code) imposed on or with respect to the Transactions other than any Taxes resulting from the failure of any of the Transactions to qualify for the Intended Tax Treatment, as determined by Parent.

“Transactions” shall mean the Separation (including the Restructuring and the External Contribution), the Distribution and any related transactions.

“Treasury Regulations” shall mean the regulations promulgated from time to time under the Code as in effect for the relevant Tax Period.

“Unqualified Tax Opinion” shall mean an unqualified “will” opinion of a Tax Advisor, and on which Parent may rely, to the effect that a transaction will not affect the Intended Tax Treatment or otherwise cause any Transaction to fail to qualify for the Intended Tax Treatment; provided that any tax opinion obtained in connection with a proposed acquisition of SpinCo Capital Stock entered into during the Restricted Period shall not qualify as an Unqualified Tax Opinion unless such tax opinion concludes that such proposed acquisition will not be treated as “part of a plan (or series of related transactions),” within the meaning of Section 355(e) of the Code and the Treasury Regulations promulgated thereunder, that includes the Distribution; provided, further, that any such opinion must assume that the External Contribution and the Distribution, taken together, would have qualified for the Intended Tax Treatment if the transaction in question did not occur.

Article II – PAYMENTS AND TAX REFUNDS

2.1           Responsibility for SpinCo Group Taxes and Certain Parent Group Taxes. Except as otherwise expressly provided in this Agreement (including Schedule A):

(a)           Parent shall be responsible for all Taxes reported, or required to be reported, on any Joint Return; provided, however, that to the extent any such Joint Return includes any Tax Item attributable to any member of the SpinCo Group or the SpinCo Business in respect of any Post-Distribution Period, SpinCo Group shall be allocated all Taxes attributable to such Tax Items in accordance with Section 2.3.

(b)           Responsibility for Taxes related to Separate Returns.

(i)           Parent shall be responsible for all Taxes reported, or required to be reported, on (x) a Parent Separate Return and (y) a SpinCo Separate Return with respect to a Pre-Distribution Period.

(ii)          SpinCo shall be responsible for all Taxes reported, or required to be reported, on a SpinCo Separate Return with respect to a Post-Distribution Period.

(iii)         Where a SpinCo Separate Return relates to a Straddle Period, the responsibility for Taxes between Parent and SpinCo will be determined in accordance with Section 2.3.

(c)           Taxes Not Reported on Tax Returns.

(i)           Parent shall be responsible for any Tax attributable to any member of the Parent Group that is not required to be reported on a Tax Return, as determined by Parent in its sole and absolute discretion.

(ii)          Any Tax attributable to any member of the SpinCo Group that is not required to be reported on a Tax Return shall be, as determined by Parent in its sole and absolute discretion in accordance with Section 2.3, the responsibility of, (x) if with respect to a Pre-Distribution Period, Parent and, (y) if with respect to a Post-Distribution Period, SpinCo.

(d)           Parent shall be responsible for all Taxes (i) imposed under Treasury Regulations Section 1.1502-6 or under any comparable or similar provision of state, local or non-U.S. Law on any member of the SpinCo Group solely as a result of such company being a member of a consolidated, combined, affiliated or unitary group with, or as a successor to, any member of the Parent Group during any Tax Period; and (ii) imposed on any member of the SpinCo Group for any Pre-Distribution Period as a result of any express or implied obligation to indemnify any other Person, or any successor or transferee liability, except to the extent such Taxes are otherwise not the responsibility of Parent pursuant to clauses (a) through (c) of this Section 2.1, as determined by Parent in its sole and absolute discretion.

2.2           Transaction Taxes and Distribution Taxes. Notwithstanding anything to the contrary in Section 2.1, and except as otherwise provided herein (including Schedule A):

(a)           Parent shall be responsible for any Transaction Taxes; and

(b)           SpinCo shall be responsible for any Distribution Taxes and Tax Related Losses for which SpinCo has an indemnification obligation pursuant to Section 5.1(b)(v).

2.3           Allocation of Taxes.

(a)           If any member of the SpinCo Group is permitted but not required under applicable U.S. federal, state, local or Non-U.S. Tax Law to treat the Distribution Date as the last day of a Tax Period with respect to any member of the SpinCo Group, then the Parties and their Affiliates shall treat such day as the last day of the applicable Tax Period under such applicable Law, and shall file any elections necessary or appropriate for such treatment; provided that, for the avoidance of doubt, this Section 2.3 shall not be construed to require Parent to change its taxable year or treat the Distribution Date as the last day of a Tax Period of any member of the Parent Group.

(b)           Any Tax Item arising from transactions occurring, or actions taken, on the Distribution Date but after the Distribution outside the ordinary course of business by, or with respect to, any member of the SpinCo Group shall be deemed subject to the “next day rule” of Treasury Regulations Section 1.1502-76(b)(1)(ii)(B) and under any comparable or similar provision under state, local or non-U.S. Laws or regulations; provided that, if there is no comparable or similar provision under state, local or non-U.S. Laws or regulations or such treatment is not permitted by any comparable or similar provision under state, local or non-U.S. Laws or regulations, then the transaction or action will be deemed subject to the “next day rule” of Treasury Regulations Section 1.1502-76(b)(1)(ii)(B)) for the purposes of this Agreement and as such shall for purposes of this Agreement be treated (and consistently reported by the Parties and their Affiliates) as occurring in a Post-Distribution Period of the SpinCo Group and the responsibility of SpinCo (or a member of the SpinCo Group), as appropriate.

(c)           Any Taxes for a Straddle Period with respect to the SpinCo Group (or entities in which any member of the SpinCo Group has an ownership interest) shall, for purposes of this Agreement, be allocated between the portion of the period ending on and including the Distribution Date and the portion of the period beginning after the Distribution Date by means of a closing of the books and records of the SpinCo Group as of the close of business on the Distribution Date; provided that (i) Parent may elect to allocate Tax Items (other than any extraordinary Tax Items) ratably in the month in which the Distribution occurs (and if Parent so elects, SpinCo shall so elect) as described in Treasury Regulations Section 1.1502-76(b)(2)(iii) and corresponding provisions of state, local, and non-U.S. Law; (ii) whenever it is necessary to determine the liability for Taxes of a United States shareholder (within the meaning of Section 951(b) of the Code) of a controlled foreign corporation (within the meaning of Section 957 of the Code) attributable to amounts included in the income of such United States shareholder under Sections 951 or 951A of the Code for the taxable year or period of such controlled foreign corporation that begins on or before and ends after the Distribution Date, the determination of liability for any such Taxes shall be made by assuming that the taxable year or period of the controlled foreign corporation consisted of two (2) taxable years or periods, one which ended at the close of the Distribution Date and the other of which began at the beginning of the day following the Distribution Date and relevant items of income, gain, deduction, loss or credit of the controlled foreign corporation shall be allocated between such two (2) taxable years or periods on a closing of the books basis by assuming that the books of the controlled foreign corporation were closed at the close of the Distribution Date; provided, however, that Subpart F income (within the meaning of Section 952 of the Code) of the controlled foreign corporation shall be determined without regard to Section 952(c) of the Code; and (iii) subject to clauses (i) and (ii), exemptions, allowances or deductions that are calculated on an annual basis, and not on a closing of the books method (including depreciation and amortization deductions) and, at Parent’s election, Taxes that are imposed on a periodic basis or otherwise measured by the level of any item, shall be allocated between the period ending on and including the Distribution Date and the period beginning after the Distribution Date based on the number of days for the portion of the Straddle Period ending on and including the Distribution Date, on the one hand, and the number of days for the portion of the Straddle Period beginning after the Distribution Date, on the other hand. The foregoing provisions in this Section 2.3(c) shall be applied as determined by Parent.

2.4           Allocation of Employment Taxes. Liability for Taxes and any related Tax Benefits related to any equity compensation awards shall be determined pursuant to the EMA.

2.5           Tax Benefits.

(a)           Parent shall be entitled to all Tax Benefits (including, in the case of any refund received, any interest thereon actually received) attributable to Taxes the liability for which is allocated to Parent pursuant to this Agreement. SpinCo shall be entitled to all Tax Benefits (including, in the case of any refund received, any interest thereon actually received) attributable to Taxes the liability for which is allocated to SpinCo pursuant to this Agreement. For purposes of the foregoing, a Tax Benefit relating to a correlative adjustment as a result of a competent authority proceeding shall be deemed to be attributable to the liability for Taxes that gave rise to the correlative adjustment.

(b)           A Party receiving (or realizing) a Tax Benefit to which another Party is entitled hereunder (a “Tax Benefit Recipient”) shall pay over the amount of such Tax Benefit (including interest received from the relevant Taxing Authority, but net of any Taxes imposed with respect to such Tax Benefit and any other reasonable costs associated therewith) within thirty (30) days of receipt thereof (or from the due date for payment of any Tax reduced thereby); provided, however, that the other Party, upon the request of such Tax Benefit Recipient, shall repay the amount paid to the other Party (plus any penalties, interest or other charges imposed by the relevant Taxing Authority) in the event that, as a result of a subsequent Final Determination, a Tax Benefit that gave rise to such payment is subsequently disallowed. Notwithstanding anything in Section 2.5(b) to the contrary, any Tax Benefit of less than $100,000 treated as received pursuant to this Section 2.5(b) by any member of the Parent Group, on the one hand, or SpinCo or any member of the SpinCo Group, on the other hand, and that is allocable to the other Party pursuant to this Section 2.5, may be aggregated with other Tax Benefit received in the same calendar quarter and paid over to the other Party within 30 days after the end of such calendar quarter.

2.6           The Determination of Taxes and Tax Benefits. The amount of any Taxes and any Tax Benefits (including any Refunds attributable to Taxes) for which Parent or SpinCo, respectively, is responsible pursuant to this Agreement, or the amount of any Tax Benefit, in each case, attributable to one or more items of income, gain, loss, deduction or credit (or equivalent items in the case of non-income Taxes) (the “Relevant Items”) shall be based on the increase or decrease in the amount of cash Taxes for which such Party is liable when measured by including such Relevant Items in a computation of Tax compared to excluding such Relevant Items from the computation of Tax, in each case as determined by Parent, which may include making simplifying assumptions concerning the computation of Tax, including that the relevant Party be deemed to recognize all other items of income, gain, loss, deduction or credit (or equivalent items) before recognizing such Relevant Items; provided that, if there is no increase or decrease in the amount of cash Taxes for which a Party is liable in the taxable period when first measured, the Parties shall thereafter remeasure the amount of payment obligations to one another at the end of each subsequent taxable period to reflect any increase or decrease in the amount of cash Taxes recognized in such subsequent taxable period; provided, further, that notwithstanding anything in this Section 2.6 to the contrary, Parent shall not be responsible for any non-U.S. Taxes of the SpinCo Group to the extent SpinCo has Tax Attributes attributable to the Parent Business that are available to offset such Tax, as determined by Parent.

2.7           Prior Agreements. Except as set forth in this Agreement and in consideration of the mutual indemnities and other obligations of this Agreement, any and all prior Tax sharing or allocation agreements or practices between any member of the Parent Group and any member of the SpinCo Group shall be terminated with respect to the SpinCo Group and the Parent Group as of the Distribution Date and no member of either the SpinCo Group or the Parent Group shall have any continuing rights or obligations under any such agreement. This Agreement shall be the sole Tax sharing agreement between the members of the SpinCo Group on the one hand, and the members of the Parent Group, on the other hand

Article III – PREPARATION AND FILING OF TAX RETURNS

3.1           Joint Returns. Parent shall prepare and file when due (taking into account any applicable extensions), or shall cause to be prepared and filed, all such Joint Returns, including any amendments to such Joint Returns.

3.2           SpinCo Separate Returns. SpinCo shall prepare and file when due (taking into account any applicable extensions), or shall cause to be prepared and filed, all SpinCo Separate Returns, including any amendments to such SpinCo Separate Returns.

3.3           Right to Review Tax Returns. To the extent that the positions taken on any Tax Return would reasonably be expected to materially adversely affect the Tax position of the Party other than the Party that is required to prepare and file any such Tax Return pursuant to Section 3.1 or Section 3.2 (the “Reviewing Party”), or, in the case of Tax Returns related to Pre-Distribution Periods required to be prepared and filed by SpinCo, the Party required to prepare and file such Tax Return (the “Preparing Party”) shall prepare the portions of such Tax Return that relates to the business of the Reviewing Party (the Parent Business or the SpinCo Business, as the case may be) and shall provide a draft of such portion of such Tax Return to the Reviewing Party for its review and comment at least 30 days prior to the Due Date for such Tax Return (taking into account any applicable extensions). The Preparing Party shall consider in good faith any comments received at least 14 days prior to the Due Date for such Tax Return (taking into account any applicable extensions) to the extent that the relate to items that would reasonably be expected to materially adversely affect the Tax position of the Reviewing Party, as determined by Parent.

3.4           Special Rules Relating to the Preparation of Tax Returns.

(a)           General Rule. SpinCo shall prepare, or cause to be prepared, any Tax Return for which it is responsible under this Section 3 in accordance with past practices, accounting methods, elections or conventions (“Past Practices”) used by the members of the Parent Group prior to the Distribution Date with respect to such Tax Return, and to the extent any items, methods or positions are not covered by Past Practices, as directed by Parent.

(b)           SpinCo Separate Returns. With respect to any SpinCo Separate Return for which SpinCo is responsible pursuant to this Agreement, SpinCo and the other members of the SpinCo Group shall include such Tax Items in such SpinCo Separate Return in a manner that is consistent with the inclusion of such Tax Items in any related Tax Return for which Parent is responsible to the extent such Tax Items are allocated in accordance with this Agreement.

(c)           Election to File Combined Tax Returns. Parent shall have the sole discretion to file any Combined Tax Return if the filing of such Tax Return is elective under Applicable Tax Law.

(d)           Preparation of Transfer Tax Returns. The company required under Applicable Tax Law to file any Tax Returns in respect of Transfer Taxes shall prepare and file (or cause to be prepared and filed) such Tax Returns. If required by Applicable Tax Law, Parent and SpinCo shall, and shall cause their respective Affiliates to, cooperate in preparing and filing, and join the execution of, any such Tax Returns.

3.5           Reporting of Separation.

(a)           The Tax treatment of any step in or portion of the Transactions shall be reported on each applicable Tax Return consistently with the Intended Tax Treatment, taking into account the jurisdiction in which such Tax Returns are filed.

(b)           If Parent determines that a protective election under Section 336(e) of the Code shall be made with respect to the Distribution, then SpinCo shall take any such action that is necessary to effect such election, including any corresponding election with respect to any of its Subsidiaries, as determined by Parent. If such a protective election is made, this Agreement shall be amended in such a manner as is determined by Parent to compensate Parent for any Tax Benefits realized by SpinCo as a result of such election.

3.6           Transfer Pricing and Similar Reports. SpinCo shall prepare and file when due (taking into account any applicable extensions), or shall cause to be prepared and filed, all country-by-country notifications and reports and all transfer pricing documentation (including master file and local files) and other similar Tax documentation required to be filed (“Informational Tax Returns”) with respect to the SpinCo Group following the Distribution Date. SpinCo shall prepare, or cause to be prepared, any Informational Tax Return for which it is responsible under this Section 3.6 in accordance with Past Practices used by the members of the Parent Group prior to the Distribution Date with respect to such Informational Tax Return, and to the extent any items, methods or positions are not covered by Past Practices, as directed by Parent.

3.7           Payment of Taxes.

(a)           With respect to any Tax Return required to be filed pursuant to this Agreement, the Responsible Party shall remit or cause to be remitted to the applicable Taxing Authority in a timely manner any Taxes due in respect of any such Tax Return.

(b)           In the case of any Tax Return for which the Party that is not the Responsible Party is obligated pursuant to this Agreement to pay all or a portion of the Taxes reported as due on such Tax Return, the Responsible Party shall notify the other Party, in writing, of its obligation to pay such Taxes and, in reasonably sufficient detail, its calculation of the amount due by such other Party and the Party receiving such notice shall pay such amount to the Responsible Party upon the later of 30 business days prior to the Due Date for such payment and 30 business days after the receipt of such notice; provided that, if any amount due to the Responsible Party cannot be calculated with accuracy prior to the applicable Due Date, the Responsible Party’s notice shall set forth, and the Party that is not the Responsible Party shall pay, a reasonable estimate of such amount to the Responsible Party at such time. If the amount determined to be the amount due exceeds the estimated amount, then the Party that is not the Responsible Party shall pay the Responsible Party such excess within 30 business days of receipt of written notice from the Responsible Party setting forth in reasonably sufficient detail the calculation of such final determination. If the estimated amount exceeds the amount determined to be the amount due, then the Responsible Party shall provide the Party that is not the Responsible Party (i) written notice setting forth in reasonably sufficient detail the calculation of such final determination and (ii) payment of such excess amount, in each case within 15 business days of its prompt final determination.

(c)           With respect to any estimated Taxes, the Party that is or will be the Responsible Party with respect to any Tax Return that will reflect (or otherwise give credit for) such estimated Taxes shall remit or cause to be remitted to the applicable Taxing Authority in a timely manner any estimated Taxes due. In the case of any estimated Taxes for which the Party that is not the Responsible Party is obligated pursuant to this Agreement to pay all or a portion of the Taxes that will be reported as due on any Tax Return that will reflect (or otherwise give credit for) such estimated Taxes, the Responsible Party shall notify the other Party, in writing, of its obligation to pay such estimated Taxes and, in reasonably sufficient detail, its calculation of the amount due by such other Party and the Party receiving such notice shall pay such amount to the Responsible Party upon the later of 30 business days prior to the Due Date for such payment and 30 business days after the receipt of such notice.

3.8           Amended Returns and Carrybacks.

(a)           SpinCo shall not, and shall not permit any member of the SpinCo Group to, file or allow to be filed any request for an Adjustment or any amended Tax Return for any Pre-Distribution Period without the prior written consent of Parent, such consent to be exercised in Parent’s sole and absolute discretion; provided that, if requested by Parent in its sole and absolute discretion, SpinCo shall file, or cause to be filed, a request for an Adjustment or an amended Tax Return, and shall, to the extent permitted by applicable Law, amend any financial account or statement to the extent necessary to effectuate such Adjustment or amended Tax Return, to claim a Refund to which Parent is entitled pursuant to this Agreement. Parent shall be entitled to determine whether to file or allow to be filed any request for an Adjustment or any amended Joint Return.

(b)           SpinCo shall not, and shall cause each member of the SpinCo Group not to, without the prior written consent of Parent, make any affirmative election to carry back any Tax Attribute from a Post-Distribution Period to a Pre-Distribution Period, including by filing a claim for a refund or making any other filing with any Taxing Authority with respect to such carryback, such consent to be exercised in Parent’s sole and absolute discretion. To the extent requested in writing by Parent, in Parent’s sole and absolute discretion, SpinCo shall, and shall cause each member of the SpinCo Group to, make any available requested elections to waive the right to carry back any Tax Attribute from a Post-Distribution Period to a Pre-Distribution Period.

(c)           Receipt of consent by SpinCo or a member of the SpinCo Group from Parent pursuant to the provisions of this Section 3.8 shall not limit or modify SpinCo’s continuing indemnification obligation pursuant to Article V.

3.9           Apportionment of Earnings & Profits and Tax Attributes. Parent shall advise SpinCo in writing of the amount (if any) of any Tax Attributes which Parent determines shall be allocated or apportioned to the SpinCo Group under applicable Law. SpinCo and all members of the SpinCo Group shall prepare all Tax Returns in accordance with such written notice. SpinCo shall not dispute Parent’s determination of Tax Attributes. Parent shall provide (or otherwise make available) to SpinCo documentation maintained or prepared by Parent to support such Tax Attributes, provided that, for the avoidance of doubt, Parent shall not be required, to comply with this Section 3.9, to create or cause to be created any books and records or reports or other documents based thereon (including “earnings & profits studies,” “basis studies” or similar determinations) that it does not maintain or prepare in the ordinary course of business.

3.10         Gain Recognition Agreements. SpinCo will not take any action (including the sale or disposition of any stock, securities, or other assets), or permit its Affiliates to take any such action, and SpinCo will not fail to take any action, or permit its Affiliates to fail to take any action, that would cause Parent or any of its Affiliates or SpinCo or any of its Affiliates to recognize gain under any Gain Recognition Agreement, including those listed on Schedule D.

Article IV – INTENDED TAX TREATMENT OF THE DISTRIBUTION

4.1           Representations and Warranties.

(a)           SpinCo hereby represents and warrants that (i) it has examined the Tax Opinion, the Representation Letters and any other materials delivered or deliverable in connection with the issuance of the rendering of the Tax Opinion, in each case, as they exist as of the date hereof (collectively, the “Tax Materials”) and (ii) the facts presented and representations made therein, to the extent descriptive of or otherwise relating to SpinCo or any member of the SpinCo Group or the SpinCo Business, were or will be, at the time presented or represented and from such time until and including the Distribution Date, true, correct and complete in all material respects. SpinCo hereby confirms and agrees to comply, and to cause the other members of the SpinCo Group to comply, with any and all covenants and agreements in the Tax Materials applicable to SpinCo or any member of the SpinCo Group or the SpinCo Business.

(b)           SpinCo represents and warrants that it knows of no fact (after due inquiry) that may cause the Tax treatment of any of the Transactions to be other than the Intended Tax Treatment.

(c)           SpinCo represents and warrants that it has no plan or intent to take any action that is inconsistent with any statements or representations made in the Tax Materials.

4.2           Restrictions Relating to the Distribution.

(a)           SpinCo shall not, and shall not permit any member of the SpinCo Group to, take or fail to take: (i) any action where such action or failure to act would be inconsistent with or cause to be untrue any statement, information, covenant or representation in the Tax Materials or (ii) any action that constitutes a SpinCo Disqualifying Action.

(b)           During the Restricted Period, SpinCo:

(i)           shall (and shall cause each SpinCo Group member whose Active Business is identified on Schedule E to) continue and cause to be continued and not approve or allow, or enter into any agreement, understanding or arrangement with respect to, the discontinuance, cessation, or sale or other transfer (to an Affiliate or otherwise) of, or a material change in or sale of the material assets of, any Active Business, other than sales in the ordinary course of business;

(ii)          shall not voluntarily dissolve or liquidate or partially liquidate itself, approve or allow any liquidation, or partial liquidation of any of its Affiliates (including any action that is a liquidation for U.S. federal income tax purposes), or enter into any agreement, understanding or arrangement with respect to the foregoing, other than, in the case of any of its Affiliates, into any other Affiliate that is a member of the SpinCo “separate affiliated group” as defined in Section 355(b)(3)(B) of the Code;

(iii)         shall not (1) enter into any Proposed Acquisition Transaction or, to the extent SpinCo has the right or ability to prevent or prohibit any Proposed Acquisition Transaction, permit any Proposed Acquisition Transaction to occur, (2) redeem or otherwise repurchase (directly or through an Affiliate) any stock, or rights to acquire stock, except to the extent such repurchases satisfy Section 4.05(1)(b) of Revenue Procedure 96-30 (as in effect prior to the amendment of such Revenue Procedure by Revenue Procedure 2003-48), (3) amend its certificate of incorporation (or other organizational documents), issue a new class of non-voting stock, or take any other action, whether through a stockholder vote or otherwise, affecting the relative voting rights of its Capital Stock (including through the conversion of any Capital Stock into another class of Capital Stock), (4) (A) merge or consolidate with any other Person or (B) allow any of its Affiliates to merge or consolidate with any other Person other than any other Affiliate that is a member of the SpinCo “separate affiliated group” as defined in Section 355(b)(3)(B) of the Code or (5) take any other action or actions (including any action or transaction that would be reasonably likely to be inconsistent with any representation made in the Tax Materials) that in the aggregate would, when combined with any other direct or indirect changes in ownership of SpinCo Capital Stock pertinent for purposes of Section 355(e) of the Code, have the effect of causing or permitting one or more Persons (whether or not acting in concert) to acquire directly or indirectly stock representing a 40% or greater interest in SpinCo or would reasonably be expected to result in a failure to preserve, achieve or maintain the Intended Tax Treatment, or enter into any agreement, understanding or arrangement with respect to any of the foregoing;

(iv)         shall not and shall not permit any member of the SpinCo Group, to sell, transfer or otherwise dispose of (including in any transaction treated for U.S. federal income tax purposes as a sale, transfer or disposition) assets (including any shares of Capital Stock of a Subsidiary) that, in the aggregate, constitute more than 20% of the consolidated gross assets of SpinCo or the SpinCo Group, or enter into (or permit any member of the SpinCo Group to enter into) any agreement, understanding or arrangement with respect to the foregoing. The foregoing sentence shall not apply to (1) sales, transfers or dispositions of assets in the ordinary course of business or to members of the SpinCo “separate affiliated group” as defined in Section 355(b)(3)(B) of the Code, (2) any cash paid to acquire assets from an unrelated Person in an arm’s-length transaction, (3) any assets transferred to a Person that is disregarded as an entity separate from the transferor for U.S. federal income tax purposes or (4) any mandatory or optional repayment (or pre-payment) of any indebtedness of SpinCo or any member of the SpinCo Group. The percentages of gross assets or consolidated gross assets of SpinCo or the SpinCo Group, as the case may be, sold, transferred or otherwise disposed of, shall be based on the fair market value of the gross assets of SpinCo and the members of the SpinCo Group as of the Distribution Date. For purposes of this Section 4.2(b)(iv) a merger of SpinCo or one of its Subsidiaries with and into any Person that is not a wholly owned Subsidiary of SpinCo shall constitute a disposition of all of the assets of SpinCo or such Subsidiary;

(v)          shall, if any member of the SpinCo Group proposes to enter into any transaction or series of transactions that is not a Proposed Acquisition Transaction but would be a Proposed Acquisition Transaction if the percentage reflected in the definition of Proposed Acquisition Transaction were 30% instead of 40% (a “Section 4.2(b)(v) Acquisition Transaction”) or, to the extent SpinCo has the right or ability to prevent or prohibit any Section 4.2(b)(v) Acquisition Transaction, proposes to permit any Section 4.2(b)(v) Acquisition Transaction to occur, in each case, provide Parent, no later than 10 business days following the signing of any written agreement with respect to the Section 4.2(b)(v) Acquisition Transaction, a written description of such transaction (including the type and amount of stock of SpinCo to be issued in such transaction) and a certificate of the board of directors of SpinCo to the effect that the Section 4.2(b)(v) Acquisition Transaction is not a Proposed Acquisition Transaction;

(vi)         shall not cause or permit (A) any member of the SpinCo Group identified on Schedule C as either a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(b) of the Code) in any Transaction other than the Distribution to take any action or enter into any transaction described in Section 4.2(b)(ii), in clauses (2), (3), (4) or (5) of Section 4.2(b)(iii) or in Section 4.2(b)(iv) (in each case, substituting references therein to “SpinCo”, the “SpinCo Group” and “SpinCo Capital Stock” with references to the relevant corporation, the relevant corporation and its Subsidiaries and the Capital Stock of such corporation, respectively) or (B) any member of the SpinCo Group otherwise identified on Schedule C to entering into a transaction or take an action identified on Schedule C; and

(vii)        shall not take (or fail to take), or permit any other member of the SpinCo Group to take (or fail to take), any action, the commission (or omission) of which could reasonably be expected to result in a Tax treatment inconsistent with the Intended Tax Treatment.

(c)           Notwithstanding the restrictions imposed by Section 4.2(b), SpinCo or a member of the SpinCo Group may take any of the actions or transactions described therein if (i) SpinCo shall have requested that Parent obtain a private letter ruling (including a supplemental ruling, if applicable) from the IRS (a “Post-Distribution Ruling”) in accordance with Section 4.3(b) to the effect that such transaction will not affect the Intended Tax Treatment, and Parent shall have received such a Post-Distribution Ruling and shall have notified SpinCo in writing that Parent has determined that such Post-Distribution Ruling is in form and substance satisfactory to Parent in its sole and absolute discretion or (ii) both (A) SpinCo obtains an Unqualified Tax Opinion with respect thereto and (B) Parent notifies SpinCo in writing that Parent has determined that such Unqualified Tax Opinion is in form and substance satisfactory to Parent. Parent’s evaluation of a Post-Distribution Ruling or an Unqualified Tax Opinion may consider, among other factors, the appropriateness of any underlying assumptions, representations and covenants made in connection with such ruling or opinion as well as any other factors, circumstances, considerations or concerns that Parent determines are relevant. SpinCo shall bear all costs and expenses of securing any such Post-Distribution Ruling or Unqualified Tax Opinion and shall, as set forth in Section 4.3(b), reimburse Parent for all reasonable out-of-pocket expenses that Parent or any of its Affiliates may incur in good faith in seeking to obtain or evaluate any such Post-Distribution Ruling or Unqualified Tax Opinion. None of the obtaining of a Post-Distribution Ruling, the delivery of an Unqualified Tax Opinion or Parent’s waiver of SpinCo’s obligation to deliver a Post-Distribution Ruling or an Unqualified Tax Opinion shall limit or modify SpinCo’s continuing indemnification obligation pursuant to Article V.

4.3           Additional Procedures Regarding Post-Distribution Rulings and Unqualified Tax Opinions.

(a)           If SpinCo determines that it desires to take one of the actions described in Section 4.2(b) (a “Notified Action”), then SpinCo shall notify Parent of this fact in writing.

(b)           Post-Distribution Rulings or Unqualified Tax Opinions at SpinCo’s Request. Unless Parent shall have waived the requirement to obtain such Post-Distribution Ruling or Unqualified Tax Opinion, upon the reasonable request of SpinCo pursuant to Section 4.2(c)(i), Parent shall use commercially reasonable efforts in cooperating with SpinCo and in seeking to obtain, as expeditiously as possible, at Parent’s election at its sole discretion either a Post-Distribution Ruling from the IRS (and/or any other applicable Taxing Authority) or an Unqualified Tax Opinion for the purpose of permitting SpinCo to take the Notified Action, subject in all respects to the provisions of Section 4.2. Notwithstanding the foregoing, Parent shall not be required to file or cooperate in the filing of any request for a Post-Distribution Ruling under this Section 4.3(b) unless (i) Parent elects to seek to obtain a Post-Distribution Ruling (and not an Unqualified Tax Opinion) pursuant to the first sentence of this Section 4.3(b) and (ii) SpinCo represents that (A) it has reviewed such request for a Post-Distribution Ruling, and (B) all statements, information and representations relating to any member of the SpinCo Group contained in such request for a Post-Distribution Ruling are (subject to any qualifications therein) true, correct and complete. SpinCo shall reimburse Parent for all reasonable costs and expenses, including out-of-pocket expenses and expenses relating to the utilization of Parent personnel, incurred by the Parent Group in obtaining a Post-Distribution Ruling or Unqualified Tax Opinion requested by SpinCo within 30 business days after receiving an invoice from Parent therefor.

(c)           Post-Distribution Rulings or Unqualified Tax Opinions at Parent’s Request. Parent shall have the right to obtain a Post-Distribution Ruling or an Unqualified Tax Opinion at any time in its sole and absolute discretion. If Parent determines to obtain a Post-Distribution Ruling or an Unqualified Tax Opinion, SpinCo shall (and shall cause each Affiliate of SpinCo to) cooperate with Parent and take any and all actions reasonably requested by Parent in connection with obtaining the Post-Distribution Ruling or Unqualified Tax Opinion (including by making any representation or covenant or providing any materials or information requested by the IRS, any other applicable Taxing Authority or a Tax Advisor. Parent shall reimburse SpinCo for all reasonable costs and expenses, including out-of-pocket expenses and expenses relating to the utilization of SpinCo personnel, incurred by the Parent Group in connection with such cooperation within 30 business days after receiving an invoice from SpinCo therefor.

(d)           Parent shall have sole and exclusive control over the process of obtaining any Post-Distribution Ruling, and only Parent shall be permitted to apply for a Post-Distribution Ruling. In connection with obtaining a Post-Distribution Ruling, Parent shall (A) keep SpinCo informed in a timely manner of all material actions taken or proposed to be taken by Parent in connection therewith; (B) (1) reasonably in advance of the submission of any request for any Post-Distribution Ruling provide SpinCo with a draft copy thereof, (2) reasonably consider SpinCo comments on such draft copy, and (3) provide SpinCo with a final copy of such Post-Distribution Ruling; and (C) provide SpinCo with notice reasonably in advance of, and SpinCo shall have the right to attend, any formally scheduled meetings with the IRS or other applicable Taxing Authority (subject to the approval of the IRS or such Taxing Authority) that relate to such Post-Distribution Ruling. Neither SpinCo nor any Affiliate of SpinCo directly or indirectly controlled by SpinCo shall seek any guidance from the IRS or any other Taxing Authority (whether written, oral or otherwise) at any time concerning the Transactions (including the impact of any transaction on the Transactions).

(e)           Any Post-Distribution Ruling or Unqualified Tax Opinion obtained in accordance with Section 4.2(c) and Section 4.3 shall be deemed included in the definition of Tax Materials from and after the obtaining thereof for all purposes of this Agreement.

Article V – INDEMNITY OBLIGATIONS

5.1           Indemnity Obligations.

(a)           Parent shall indemnify and hold harmless SpinCo from and against, and will reimburse SpinCo for, (i) all liability for Taxes allocated to Parent pursuant to Article II, (ii) all Tax Related Costs and Expenses allocated to Parent pursuant to Section 6.6, (iii) all Taxes, Tax Related Costs and Expenses and Tax Related Losses (without duplication) to the extent arising out of, based upon, or relating or attributable to any breach of or inaccuracy in, or failure to perform, as applicable, any representation, covenant or obligation of any member of the Parent Group pursuant to this Agreement and (iv) the amount of any Tax Benefit received by any member of the Parent Group that is allocated to SpinCo pursuant to Section 2.5(a).

(b)           Without regard to whether a Post-Distribution Ruling or an Unqualified Tax Opinion may have been provided or whether any action is permitted or consented to hereunder and notwithstanding anything to the contrary in this Agreement, SpinCo shall indemnify and hold harmless Parent from and against, and will reimburse Parent for, (i) all liability for Taxes allocated to SpinCo pursuant to Article II, (ii) all Tax Related Costs and Expenses allocated to SpinCo pursuant to Section 6.6, (iii) all liability for Taxes, Tax Related Costs and Expenses and Tax Related Losses (without duplication) arising out of, based upon, or relating or attributable to any breach of or inaccuracy in, or failure to perform, as applicable, any representation, covenant or obligation of any member of the SpinCo Group pursuant to this Agreement, (iv) the amount of any Tax Refund received by any member of the SpinCo Group that is allocated to Parent pursuant to Section 2.5(a) and (v) any Distribution Taxes and Tax Related Losses attributable to a Prohibited Act, or otherwise attributable to a SpinCo Disqualifying Action (regardless of whether the conditions set forth in Section 4.2(c) are satisfied). To the extent that any Tax, Tax Related Costs and Expenses or Tax Related Loss is subject to indemnity pursuant to both Section 5.1(a) and Section 5.1(b), responsibility for such Tax, Tax Related Costs and Expenses or Tax Related Loss shall be shared by Parent and SpinCo according to relative fault as determined by Parent. The amount of any liability for Taxes that are indemnifiable pursuant to this Section 5.1(b)(iii) and (v) shall be determined by Parent without regard to any Tax Attributes of the Parent Group or the Parent Business.

5.2           Indemnification Payments.

(a)           Except as otherwise provided in this Agreement, if either Party (the “Indemnitee”) is required to pay to a Taxing Authority a Tax or to another Person a payment in respect of a Tax, Tax Related Costs and Expenses or Tax Related Loss that the other Party (the “Indemnifying Party”) is liable for under this Agreement, including as the result of a Final Determination, the Indemnitee shall notify the Indemnifying Party, in writing, of its obligation to pay such Tax, Tax Related Costs and Expenses or Tax Related Loss and, in reasonably sufficient detail, its calculation of the amount due by such Indemnifying Party to the Indemnitee. The Indemnifying Party shall pay such amount, including any Tax Related Costs and Expenses or Tax Related Losses, to the Indemnitee no later than the later of (i) 30 business days prior to the Due Date for such payment to the applicable Taxing Authority or (ii) 30 business days after the receipt of notice from the other Party.

(b)           If, as a result of any change or redetermination, any amount previously allocated to and borne by one Party pursuant to the provisions of Article II is thereafter allocated to the other Party, then no later than 30 business days after such change or redetermination, such other Party shall pay to such Party the amount previously borne by such Party which is allocated to such other Party as a result of such change or redetermination.

(c)           If a Party incurs a Tax Liability as a result of its receipt of a payment pursuant to this Agreement or the Separation Agreement, such payment shall be appropriately adjusted so that the amount of such payment, reduced by the amount of all Taxes payable with respect to the receipt thereof (but taking into account all correlative Tax Benefits resulting from the payment of such Taxes), shall equal the amount of the payment which the Party receiving such payment would otherwise be entitled to receive.

5.3           Payment Mechanics.

(a)           All payments under this Agreement shall be made by Parent directly to SpinCo and by SpinCo directly to Parent; provided, however, that if the Parties mutually agree with respect to any such indemnification payment, any member of the Parent Group, on the one hand, may make such indemnification payment to any member of the SpinCo Group, on the other hand, and vice versa. All indemnification payments shall be treated in the manner described in Section 5.4.

(b)           In the case of any payment of Taxes made by a Responsible Party or Indemnitee pursuant to this Agreement for which such Responsible Party or Indemnitee, as the case may be, has received a payment from the other Party, such Responsible Party or Indemnitee shall provide to the other Party a copy of any official government receipt received with respect to the payment of such Taxes to the applicable Taxing Authority (or, if no such official governmental receipts are available, executed bank payment forms or other reasonable evidence of payment).

(c)           It is intended that the provisions of this Agreement shall not result in a duplicative payment of any amount required to be paid under the Separation Agreement or any other Ancillary Agreement, and this Agreement shall be construed accordingly.

5.4           Treatment of Payments. The Parties agree that any payment made among the Parties pursuant to this Agreement, pursuant to Article VI of the Separation Agreement or pursuant to indemnification obligations under Section 2 or Section 5 of the EMA shall be treated, to the extent permitted by Law, for all U.S. income tax purposes as either (a) a non-taxable contribution by Parent to SpinCo or (b) a distribution by SpinCo to Parent, and with respect to any payment made among the Parties pursuant to this Agreement after the Distribution, such payment shall be treated as having been made immediately prior to the Distribution.

Article VI – TAX CONTESTS

6.1           Notice. Each Party shall notify the other Party in writing (a) within 30 days after receipt by such Party or any member of its Group of a written communication from any Taxing Authority with respect to any pending or threatened audit, claim, dispute, suit, action, proposed assessment or other proceeding (a “Tax Contest”) concerning any Taxes for which the other Party may be liable pursuant to this Agreement, or (ii) at least 10 days prior to any deadline to respond to any such communication from any Taxing Authority with respect to such a Tax Contest, whichever is earlier, and thereafter shall promptly forward or make available to such Party copies of notices and communications relating to such Tax Contest.

6.2           Separate Returns.

(a)           In the case of any Tax Contest with respect to any Separate Return other than a Separate Return in respect of a Straddle Period, the Party having the liability for the Tax pursuant to Article II shall have the sole responsibility and right to control the prosecution of such Tax Contest, including the exclusive right to communicate with agents of the applicable Taxing Authority and to control, resolve, settle or agree to any deficiency, claim or adjustment proposed, asserted or assessed in connection with or as a result of such Tax Contest.

(b)           In the case of any Tax Contest with respect to any Separate Return in respect of a Straddle Period, Parent shall have the responsibility and right to control the prosecution of such Tax Contest; provided that, Parent may elect that SpinCo be responsible for the conduct of such Tax Contest (or portion thereof), but, in such case, SpinCo may not take any position in such Tax Contest inconsistent with any position taken by Parent on a relevant U.S. federal Tax Return or Joint Return unless and until there has been a Final Determination that such latter position is not correct; provided, further, the other Party shall have the right to participate, at its own expense, and the controlling Party shall not have the right to resolve, settle or agree to any deficiency, claim or adjustment proposed, asserted or assessed in connection with or as a result of such Tax Contest without the consent of the other Party, not to be unreasonably withheld, delayed or conditioned.

6.3           Joint Return. In the case of any Tax Contest with respect to any Joint Return, Parent shall have the responsibility and right to control the prosecution of such Tax Contest, including the exclusive right to communicate with agents of the applicable Taxing Authority and to control, resolve, settle or agree to any deficiency, claim or adjustment proposed, asserted, or assessed in connection with or as a result of such Tax Contest. Notwithstanding the foregoing, (a) to the extent a portion of any such Tax Contest controlled by Parent relates to a Tax liability allocated to SpinCo pursuant to Schedule A, SpinCo shall have the right to be notified of any material written communication asserting a Tax liability for which the SpinCo Group could reasonably be expected to be liable hereunder, as determined by Parent, provided that Parent shall have the right to resolve, settle or agree to any deficiency, claim or adjustment proposed, asserted or assessed in connection with or as a result of such portion of the Tax Contest in its sole and absolute discretion, (b) to the extent a portion of any such Tax Contest controlled by SpinCo relates to a Tax liability allocated to Parent, Parent shall have the right to be notified of any material written communication asserting a Tax liability for which the Parent Group could reasonably be expected to be liable hereunder, as determined by Parent, Parent shall have the right to participate in such portion of such Tax Contest, and SpinCo shall not resolve, settle or agree to any deficiency, claim or adjustment proposed, asserted or assessed in connection with or as a result of such portion of the Tax Contest without the prior written consent of Parent, such consent to be exercised in Parent’s sole and absolute discretion and (c) to the extent a portion of any such Tax Contest controlled by Parent with respect to a Joint Return with respect to Non-U.S. Taxes relates to a matter which was customarily controlled by a member of the SpinCo Group, as determined by Parent, then Parent may elect that SpinCo shall be responsible for conduct of such portion of such Tax Contest and, notwithstanding anything to the contrary in Section 6.6, any expenses related thereto, including expenses relating to supporting transfer pricing analysis.

6.4           Transaction Related Tax Contests. Notwithstanding anything to the contrary in Section 6.2 or Section 6.3, in the case of any Transaction Related Tax Contest, Parent shall have the sole and absolute responsibility and right to control the prosecution of such Tax Contest, including the exclusive right to communicate with agents of the applicable Taxing Authority and to control, resolve, settle or agree to any deficiency, claim or adjustment proposed, asserted, or assessed in connection with or as a result of such Tax Contest. Notwithstanding anything to the contrary in Section 6.5, the final determination of the positions taken, including with respect to settlement or other disposition, in any Transaction Related Tax Contest (taking into account the proviso to the first sentence of this Section 6.4) shall be made by Parent and shall be final and not subject to the dispute resolution provisions of Section 9.1 or Section 9.2 of this Agreement or Section 11.02, Section 11.03 or Section 11.05 of the Separation Agreement.

6.5           Tax Contest Rights.

(a)           Unless waived by the Parties in writing, in connection with any potential adjustment in a Tax Contest as a result of which adjustment the Non-Controlling Party may reasonably be expected to become liable to make any indemnification payment to the Controlling Party under this Agreement: (i) the Controlling Party shall keep the Non-Controlling Party informed in a timely manner of all material actions taken or proposed to be taken by the Controlling Party with respect to such potential adjustment in such Tax Contest; (ii) the Controlling Party shall timely provide the Non-Controlling Party with copies of any correspondence or filings submitted to any Taxing Authority or judicial authority in connection with such potential adjustment in such Tax Contest; and (iii) the Controlling Party shall defend such Tax Contest diligently and in good faith. The failure of the Controlling Party to take any action specified in the preceding sentence with respect to the Non-Controlling Party shall not relieve the Non-Controlling Party of any liability and/or obligation which it may have to the Controlling Party under this Agreement, and in no event shall such failure relieve the Non-Controlling Party from any other liability or obligation which it may have to the Controlling Party.

(b)           Consistent Treatment. Unless and until there has been a Final Determination to the contrary, each Party agrees not to take any position on any Tax Return, in connection with any Tax Contest or otherwise that is inconsistent with (i) the treatment of payments between the Parent Group and the SpinCo Group as set forth in Section 5.4, (ii) the Tax Materials or (iii) the Intended Tax Treatment.

6.6           Costs and Expenses. Except to the extent provided otherwise in this Agreement, the Party to which the Tax liability related to a Tax Contest is (or would be) allocated, as determined by Parent, shall be responsible for all Tax Related Costs and Expenses incurred in connection with such Tax Contest, regardless of which Party is responsible for the conduct of such Tax Contest; provided that in the event such Tax liability is allocated to both Parties, such Tax Related Costs and Expenses shall be allocated to the Parties in such manner as the Parent determines.

Article VII – COOPERATION

7.1           General.

(a)           Each Party shall fully cooperate, and shall cause all members of such Party’s Group to fully cooperate, with all reasonable requests in writing from the other Party, or from an agent, representative or advisor to such Party, in connection with the preparation and filing of any Tax Return, claims for Refunds, the conduct of any Tax Contest (including, for the avoidance of doubt, providing assistance to respond to information requests from any Taxing Authority), and calculations of amounts required to be paid pursuant to this Agreement, in each case, related or attributable to or arising in connection with Taxes of either Party or any member of either Party’s Group covered by this Agreement or otherwise relating to the SpinCo Business for any Pre-Distribution Period and the establishment of any reserve required in connection with any financial reporting (a “Tax Matter”). Such cooperation shall include making available, upon reasonable notice, all information and documents in their possession relating to the other Party and its respective Affiliates as provided in this Article VII and Article VIII. Each Party shall make its employees, advisors and facilities available, subject to Section 6.7 without charge, on a reasonable and mutually convenient basis in connection with the foregoing matters in a manner that does not interfere with the ordinary business operations of such Party. The Parties shall use commercially reasonable efforts to provide any information or documentation requested by the other Party in a manner that permits the other Party (or its Affiliates) to comply with Tax Return filing deadlines or other applicable timing requirements.

(b)           Any information or documents provided under this Section 7.1 shall be kept confidential by the Party receiving the information or documents, except as may otherwise be necessary in connection with the filing of Tax Returns or in connection with any Tax Contest. Notwithstanding any other provision of this Agreement or any other agreement, (i) no Party or any of its Affiliates shall be required to provide another Party or any Affiliate thereof or any other Person access to or copies of any information or procedures (including the proceedings of any Tax Contest) other than information or procedures that reasonably relate to the Taxes (including any Taxes for which the first Party is liable under this Agreement), business or assets of the first Party or any of its Affiliates or are necessary to prepare Tax Returns for which the first Party is responsible for preparing the applicable Tax Return in accordance with the terms of this Agreement, (ii) in no event shall any Party or its Affiliates be required to provide another Party, any of its Affiliates or any other Person access to or copies of any information if such action could reasonably be expected to result in the waiver of any Privilege, and (iii) for the avoidance of doubt, Section 7.08 of the Separation Agreement shall apply with respect to matters of Privilege. In addition, in the event that a Party determines that the provision of any information to another Party or any of its Affiliates could be commercially detrimental, violate any Law or agreement or waive any Privilege, the first Party shall use reasonable best efforts to permit compliance with its obligations under this Section 7.1 in a manner that avoids any such harm or consequence.

7.2           Return Information. SpinCo and Parent acknowledge that time is of the essence in relation to any request for information, assistance or cooperation made by Parent or SpinCo pursuant to Section 7.1 or this Section 7.2. Each Party shall provide to the other Parties information and documents relating to its Group reasonably required by the other Parties to prepare Tax Returns. Any information or documents a Party responsible for preparing a Tax Return in accordance with the terms of this Agreement requires to prepare such Tax Returns shall be provided in such form as such Party reasonably requests and in sufficient time for such Party to prepare such Tax Returns on a timely basis.

Article VIII – RETENTION OF RECORDS; ACCESS

8.1           Retention of Records. Until the later of (i) 60 days after the expiration of any applicable statutes of limitation (including any waivers or extensions thereof) and (ii) seven (7) years after the Distribution Date, the Parties shall retain records, documents, accounting data and other information (including computer data) necessary for the preparation and filing of all Tax Returns (collectively, “Tax Records”) in respect of Taxes of any member of either the Parent Group or the SpinCo Group for any Pre-Distribution Period or Post-Distribution Period or for any Tax Contests relating to such Tax Returns. Each Party will notify the other in writing of any waivers or extensions of the applicable statute of limitations that may affect the period for which the Tax Records must be retained.

8.2           Access to Tax Records. The Parties and their respective Affiliates shall make available to each other for inspection and copying during normal business hours upon reasonable notice all Tax Records (including, for the avoidance of doubt, any pertinent underlying data accessed or stored on any computer program or information technology system) in their possession and shall permit the other Party and its Affiliates, authorized agents and representatives and any representative of a Taxing Authority or other Tax auditor direct access, during normal business hours upon reasonable notice to any computer program or information technology system used to access or store any Tax Records, in each case to the extent reasonably required by the other Party in connection with the preparation of Tax Returns or financial accounting statements, audits, litigation or the resolution of items pursuant to this Agreement. The Party seeking access to the records of the other Party shall bear all costs and expenses associated with such access, including any professional fees.

Article IX – DISPUTE RESOLUTION

9.1           Tax Disputes. Subject to Section 9.3, Section 9.4 and Section 9.5, this Section 9.1 shall govern the resolution of any dispute between the Parties as to any matter covered by this Agreement that primarily relates to the interpretation of Tax Law, as determined by Parent (a “Tax Advisor Dispute”). The Party raising the Tax Advisor Dispute shall give written notice of the Tax Advisor Dispute (a “Tax Advisor Dispute Notice”), and the tax directors of the Parties (or such other individuals designated by the respective general counsels) and/or the executive officers designated by the Parties shall negotiate for a reasonable period of time to settle such Tax Advisor Dispute; provided that, such reasonable period shall not, unless otherwise agreed by the Parties in writing, exceed 30 days (the “Negotiation Period”) from the time of receipt of the Tax Advisor Dispute Notice; provided, further, that (x) the Parties shall not assert the defenses of statute of limitations, laches or any other defense, in each such case based on the passage of time during the Negotiation Period, and (y) any contractual time period or deadline under this Agreement relating to such Tax Advisor Dispute occurring after the Tax Advisor Dispute Notice is received shall not be deemed to have passed until the procedures described in this Section 9.1 have been resolved. If the Tax Advisor Dispute has not been resolved for any reason after the Negotiation Period, Parent shall, in its sole and absolute discretion, appoint a nationally recognized independent public accounting firm (the “Accounting Firm”) to resolve such dispute. In this regard, the Accounting Firm shall make determinations with respect to the Tax Advisor Dispute based solely on representations made by Parent, SpinCo and their respective representatives, and not by independent review, and shall function only as an expert and not as an arbitrator and shall be required to make a determination in favor of one Party only. The Parties shall require the Accounting Firm to resolve all Tax Advisor Disputes no later than 30 days after the submission of such Tax Advisor Dispute to the Accounting Firm, but in no event later than the Due Date of Taxes or the filing of the applicable Tax Return, if applicable, and agree that all decisions by the Accounting Firm with respect thereto shall be final and conclusive and binding on the Parties. The Accounting Firm shall resolve all Tax Advisor Dispute in a manner consistent with this Agreement and, to the extent not inconsistent with this Agreement, in a manner consistent with the Past Practices of Parent and its Subsidiaries, except as otherwise required by applicable Law. The Parties shall require the Accounting Firm to render all determinations in writing and to set forth, in reasonable detail, the basis for such determination. The fees and expenses of the Accounting Firm shall be borne equally by the Parties, and the parties agree to waive any objection to the naming of the Accounting Firm or the determination of the Accounting Firm based on actual or alleged conflicts of interest.

9.2           Legal Disputes. Subject to Section 9.1, Section 9.3, Section 9.4 and Section 9.5, in the event of any claim, controversy, demand or request for relief of any kind arising out of, in connection with, or in relation to the interpretation, performance, nonperformance, validity or breach of this Agreement or otherwise arising out of or related to this Agreement (a “Dispute”), then the Party raising the Dispute shall give written notice of the Dispute, and the Parties shall work together in good faith to resolve any such Dispute within 30 days of such notice. If any Dispute is not so resolved, then a senior executive of each Party shall, in good faith, attempt to resolve any such Dispute within the following 30 days of the referral of the matter to the senior executives. If no resolution is reached with respect to any such Dispute, the Dispute shall be resolved in accordance with the procedures contained in Section 11.03, Section 11.04 and Section 11.05 of the Separation Agreement.

9.3           Injunctive Relief. Nothing in this Article IX shall prevent Parent from seeking injunctive relief to enforce the procedures provided for in Section 9.1 if any delay resulting from the efforts to resolve the Tax Advisor Dispute through the Accounting Firm could result in serious and irreparable injury to Parent. Notwithstanding anything to the contrary in this Agreement or the Separation Agreement (or any Ancillary Agreement), Parent and SpinCo are the only members of their respective Groups entitled to commence a dispute resolution procedure under this Agreement, and each of Parent and SpinCo will cause its respective Group members not to commence any dispute resolution procedure other than through Parent or SpinCo, as applicable, as provided in this Article IX.

9.4           Specific Performance. Notwithstanding anything to the contrary in this Agreement or the Separation Agreement (or any Ancillary Agreement), in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of Section 4.1(a), Section 4.2(a) or Section 4.2(b) by SpinCo, Parent shall have the right, without first pursuing the procedures provided for in Section 9.1 and Section 9.2, to specific performance, declaratory relief and injunctive or other equitable relief (on a permanent, emergency, temporary, preliminary or interim basis) of its rights under this Agreement, in addition to any and all other rights and remedies at Law or in equity, and all such rights and remedies shall be cumulative. SpinCo shall not oppose the granting of such relief on the basis that money damages are an adequate remedy. SpinCo agrees that the remedies at Law for any breach or threatened breach hereof, including monetary damages, are inadequate compensation for any loss, and waives any defense in any action by Parent for specific performance that a remedy at Law would be adequate. SpinCo also waives any requirements that Parent secure or post any bond or similar security with respect to such remedy.

9.5           Venue for Injunctive Relief and Specific Performance Claims by Parent. Notwithstanding anything to the contrary in this Agreement or the Separation Agreement (or any Ancillary Agreement), Parent may bring any claim for specific performance, declaratory relief and injunctive or other equitable relief (on a permanent, emergency, temporary, preliminary or interim basis) under Section 9.3 or Section 9.4 of this Agreement (a “Chosen Court Claim”) either (a) pursuant to the procedures contained in Section 11.03, Section 11.04 and Section 11.05 of the Separation Agreement or (b) at Parent’s sole and absolute discretion, in the Delaware Court of Chancery (or, if the Delaware Court of Chancery shall be unavailable, any Delaware State court or the federal court sitting in the State of Delaware) (the “Chosen Courts”). SpinCo irrevocably consents and agrees to the jurisdiction, forum and venue of the Chosen Courts for a Chosen Court Claim, and agrees that it shall not assert, and shall hereby waive, any claim or right or defense that it is not subject to the jurisdiction of the Chosen Courts, that the venue is improper, that the forum is inconvenient, that the Chosen Court Claim should instead be arbitrated by agreement of Parent or operation of law, or any similar objection, claim or argument.

Article X – MISCELLANEOUS PROVISIONS

10.1         Conflicting Agreements. In the event and to the extent that there shall be a conflict between the provisions of this Agreement and the provisions of the Separation Agreement, this Agreement shall control with respect to the subject matter hereof.

10.2         Specified Matters. Notwithstanding anything to the contrary in this Agreement, the matters specified in Schedule A shall in addition be subject to the provisions of Schedule A, which shall govern in the event of any conflict between the provisions of Schedule A and any provision in this Agreement.

10.3         Interest on Late Payments. With respect to any payment between the Parties pursuant to this Agreement not made by the due date set forth in this Agreement for such payment, the outstanding amount will accrue interest at a rate per annum equal to the rate in effect for underpayments under Section 6621 of the Code from such due date to and including the payment date.

10.4         Counterparts. This Agreement may be executed in one or more counterparts, all of which counterparts shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each Party and delivered to the other Party. This Agreement may be executed by facsimile or PDF signature and scanned and exchanged by electronic mail, and such facsimile or PDF signature or scanned and exchanged copies shall constitute an original for all purposes.

10.5         Successors. This Agreement shall be binding on and inure to the benefit 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 to this Agreement.

10.6         Third Party Beneficiaries. The provisions of this Agreement are solely for the benefit of the Parties hereto and are not intended to confer upon any Person except the Parties hereto any rights or remedies hereunder. There are no third-party beneficiaries of this Agreement, and this Agreement shall not provide any third person with any remedy, claim, liability, reimbursement, cause of action or other right in excess of those existing without reference to this Agreement.

10.7         Governing Law. This Agreement and any disputes relating to, arising out of or resulting from this Agreement, including to its execution, performance, or enforcement, shall be governed by, and construed and enforced in accordance with, the Laws of the State of Delaware, regardless of the Laws that might otherwise govern under applicable principles of conflicts of Laws thereof or of any jurisdiction.

10.8         Assignability. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of Law or otherwise by either Party without the prior written consent of the other Party. Any purported assignment without such consent shall be void. Subject to the preceding sentences, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and assigns. Notwithstanding the foregoing, if any Party to this Agreement (or any of its successors or permitted assigns) (a) shall enter into a consolidation or merger transaction in which such Party is not the surviving entity and the surviving entity acquires or assumes all or substantially all of such Party’s assets or (b) shall transfer all or substantially all of such Party’s assets to any Person, then, in each such case, the assigning Party (or its successors or permitted assigns, as applicable) shall ensure that the assignee or successor-in-interest expressly assumes in writing all of the obligations of the assigning Party under this Agreement, and the assigning Party shall not be required to seek consent, but shall provide written notice and evidence of such assignment, assumption or succession to the non-assigning Party. No assignment permitted by this Section 10.8 shall release the assigning Party from liability for the full performance of its obligations under this Agreement.

10.9         Further Assurances. Subject to the provisions hereof, the Parties hereto shall make, execute, acknowledge and deliver, or cause to be made, executed, acknowledged and delivered, such other instruments and documents, and take or do, or cause to be taken or done, all such other actions and all things reasonably necessary, proper or advisable under applicable Laws and agreements to effectuate the provisions and purposes of this Agreement and to consummate and make effective the transactions contemplated hereby.

10.10       Survival. Notwithstanding anything to the contrary in this Agreement, all representations, covenants and obligations contained in this Agreement shall survive until the expiration of the applicable statute of limitations with respect to any such matter (including extensions thereof).

10.11       Severability. If any provision of this Agreement or the application thereof to any Person or circumstance is determined by an arbitrator or court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances, or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to either Party. Upon any such determination, any such provision, to the extent determined to be invalid, void or unenforceable, shall be deemed replaced by a provision that such arbitrator or court determines is valid and enforceable and that comes closest to expressing the intention of the invalid, void or unenforceable provision.

10.12       Amendments. No provisions of this Agreement shall be deemed waived, amended, supplemented or modified by any Party, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of each Party. Any decision by any Party to waive or to not waive any provision of this Agreement is in such Party’s sole and absolute discretion.

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

10.14       Waivers of Default. No failure or delay of any Party (or the applicable member of its Group) in exercising any right or remedy under this Agreement 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, or any course of conduct, preclude any other or further exercise thereof or the exercise of any other right or power. Waiver by any Party of any default by the other Party of any provision of this Agreement shall not be deemed a waiver by the waiving Party of any subsequent or other default.

10.15       Continuity of Service and Performance. Unless otherwise agreed in writing, the Parties shall continue to provide services and honor all other commitments under this Agreement, each other Ancillary Agreement and the Separation Agreement during the course of dispute resolution pursuant to the provisions of Article IX with respect to all matters not subject to such dispute resolution.

10.16       Notices. All notices or other communications under this Agreement shall be in writing and shall be deemed to be duly given (a) when delivered in person, (b) on the date received, if sent by a nationally recognized delivery or courier service, (c) upon written confirmation of receipt after transmittal by electronic mail or (d) upon the earlier of confirmed receipt or the fifth business day following the date of mailing if sent by registered or certified mail, return receipt requested, postage prepaid and addressed as follows:

If to Parent, to:

BorgWarner Inc.

3850 Hamlin Road

Auburn Hills, MI 48326

and with a copy to:

Foley & Lardner LLP

777 East Wisconsin Avenue

Milwaukee, WI 53202

If to SpinCo, to:

PHINIA Inc.

3000 University Drive

Auburn Hills, MI 48326

Either Party may, by notice to the other Party, change the address and identity of the Person to which such notices and copies of such notices are to be given. Each Party agrees that nothing in this Agreement shall affect any other Party’s right to serve process in any other manner permitted by Law (including pursuant to the rules for foreign service of process authorized by the Hague Convention).

10.17       Interpretation. 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 gender as the context requires. The terms “hereof,” “herein,” “herewith” and words of similar import, unless otherwise stated, shall be construed to refer to this Agreement as a whole (including all of the schedules hereto) and not to any particular provision of this Agreement. Article, Section or schedule references are to the articles, sections and schedules of or to this Agreement unless otherwise specified. Any capitalized terms used in this Agreement but not otherwise defined therein shall have the meaning as defined in the Separation Agreement. Any definition of or reference to any agreement, instrument or other document herein (including any reference herein to this Agreement) shall, unless otherwise stated, be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth therein, including in Section 10.12). The word “including” and words of similar import when used in this Agreement shall mean “including, without limitation,” unless the context otherwise requires or unless otherwise specified. The word “or” shall not be exclusive. The word “extent” in the phrase “to the extent” shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply “if.” All references to “$” or dollar amounts are to the lawful currency of the United States of America. References herein to any Law shall be deemed to refer to such law as amended, reenacted, supplemented or superseded in whole or in part and in effect from time to time and also to all rules and regulations promulgated thereunder. Any determination contemplated by this Agreement to be made by Parent shall be made by Parent in its sole and absolute discretion. Except as expressly set forth in this Agreement, the Parties (or their respective Group members) shall make, or cause to be made, any payment that is required to be made pursuant to this Agreement as promptly as practicable and without regard to any local currency constraints or similar restrictions. In the event that 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 either Party by virtue of the authorship of any provisions hereof.

10.18       Effectiveness. This Agreement shall become effective only upon the Distribution Date.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed on the date first written above by their respective duly authorized officers.

Exhibit 10.3

EMPLOYEE MATTERS AGREEMENT

THIS EMPLOYEE MATTERS AGREEMENT (“Employee Matters Agreement”) is executed effective as of July 2, 2023, by and between BorgWarner Inc., a Delaware corporation (“Parent”), and PHINIA Inc., a Delaware corporation (“SpinCo”) (collectively, the “Parties”).

WHEREAS, the Parties have entered into a Separation and Distribution Agreement dated July 2, 2023 (the “Separation Agreement”); and

WHEREAS, the Parties desire to set forth in writing the terms and conditions governing employee matters related to the Separation Transactions as set forth in this Employee Matters Agreement, which shall supplement the provisions of the Separation Agreement.

NOW, THEREFORE, in consideration of the promises and mutual covenants set forth in the Separation Agreement and herein, and other good and valuable consideration, and contingent upon the Distribution, the Parties hereby agree as follows:

Section 1.           Definitions

For purposes of this Employee Matters Agreement, the following terms shall have the following meanings. All capitalized terms used but not defined herein shall have the meanings assigned to them in the Separation Agreement unless otherwise indicated.

“Allocated Plan” means each Parent Plan identified in Appendix A for which sponsorship is transferred to a member of the SpinCo Group in accordance with the terms of this Employee Matters Agreement.

“Assets” for purposes of this Employee Matters Agreement has the meaning assigned to it in the Separation Agreement, except that such meaning is applicable only with respect to those Parent Plans or Business Plans that are funded by a trust that is exempt from tax under Section 501(a) of the U.S. Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”).

“Automatic Transfer Regulations” as defined in Section 3(b)(i).

“Business Plan” means each (i) “employee benefit plan,” as defined in Section 3(3) of ERISA (whether or not subject to ERISA), (ii) other plan, program, fund, scheme or agreement, whether written or unwritten, providing for compensation, bonuses, profit-sharing, equity compensation or other forms of incentive or deferred compensation, insurance (including self-insured arrangements), health, medical or other welfare benefits, or post-employment or retirement benefits (including severance or other compensation, pension, health, medical, life insurance or other welfare benefits), and (iii) Employee Agreement, in each case that is sponsored, maintained, or administered or contributed to by one or more members of the SpinCo Group or with respect to which a SpinCo Group member has any Liability. Effective upon the applicable Split Date, the Business Plans shall include the Allocated Plans and the Mirror Plans for which Liabilities (and Assets, where applicable) are transferred or allocated to the SpinCo Group and shall exclude the Business Plans listed in Appendix B for which sponsorship is transferred to a member of the Parent Group (the “Retained Plans”) and the Parent Plans retained by Parent Group, each in accordance with the terms of this Employee Matters Agreement.

“COBRA” means the continuation coverage requirements under Section 4980B of the Internal Revenue Code and Part 6 of Subtitle B of Title I of ERISA.

“Continuation Period” means the period from the Distribution Date through the later of (i) any continuation period required by applicable Law and (ii) a period of 12 months following the Distribution Date.

“Deferred Plans” means the BorgWarner Inc. Retirement Savings Excess Benefit Plan and the BorgWarner Inc. 2004 Deferred Compensation Plan.

“Defined Contribution Arrangement” means, in respect of the Employees, any defined contribution schemes as defined in IAS 19.

“Defined Contribution Assets” means any assets relating to Defined Contribution Arrangements.

“Employee” means each employee of (i) a SpinCo Group member as of the Distribution Date, (ii) a Parent Group member that (x) is providing services primarily for the benefit of the SpinCo Business on the Distribution Date or (y) has been providing services primarily for the benefit of the SpinCo Business prior to entering into pre-retirement but continues to be in an employment relationship as of the Distribution Date, (x) and (y) as determined by Parent, including with regard to (i) and (ii) any employee who is on a leave of absence (including due to short-term or long-term disability) (and their Plan Payees, as applicable), or (iii) another Parent Group member as of the Distribution Date who is employed outside of the United States and would have become a SpinCo employee on the Distribution Date, as determined by Parent, but for a delay in transferring the employee from the employee’s employing entity. For purposes of Section 5(c), Section 5(d), Section 5(f), and Section 12(d), “Employee” also includes any employee hired by a SpinCo Group member after the Distribution Date.

“Employee Agreement” means each (i) employment, retention, termination, severance, change in control, and other similar agreement between an Employee and a member of either the Parent Group or the SpinCo Group, and (ii) separation or other individual agreement between a Former Employee or a Legacy Former Employee and a member of either the Parent Group or the SpinCo Group that provides for post-separation benefits or compensation. For purposes of this definition, the term “SpinCo Group” shall have the meaning assigned to it in the Separation Agreement and shall also include any Former SpinCo Business.

“Employment Liabilities” means any and all Liabilities (contingent, known or unknown, asserted, unasserted, or otherwise) relating to, arising out of, or resulting from: (i) the employment of, or services provided by, an Employee, Former Employee, or Legacy Former Employee, including termination of employment, or termination of services provided by, an Employee, Former Employee, Legacy Former Employee (ii) any Business Plan (including any Mirror Plan or Allocated Plan), and/or (iii) Health and Other Welfare Liabilities described in Section 5(c), in each case whether arising before, on, or after the applicable Split Date, and including any claims for benefits, fiduciary breach, or any type of equitable or non-monetary remedies, and obligations for related taxes and penalties. Such Liabilities are Employment Liabilities regardless of when such Liabilities, or any actual or alleged act, error, or omission giving rise to Liabilities, arose or accrued, including before, on, or after the applicable Split Date, with respect to each participant in such Business Plan. Notwithstanding the foregoing, employment tax Liabilities with respect to Legacy Former Employees for periods prior to the applicable Split Date shall remain the obligation of Parent.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations issued thereunder.

“Former Employee” means each former employee (and their Plan Payees, as applicable) of Parent or any of its current or former Affiliates (including current or former members of the SpinCo Group) who when last employed by Parent or a current or former Parent Affiliate, was providing services primarily for the benefit of the SpinCo Business or Former SpinCo Business as determined by Parent. For purposes of Section 5(c), Section 5(d), Section 5(f), and Section 12(d), “Former Employee” also includes any employee hired by a SpinCo Group member after the Distribution Date who becomes a former employee of a SpinCo Group member after the Distribution Date.

“Former Non-U.S. Employees” means all Former Employees who are not Former U.S. Employees.

“Former U.S. Employees” means all Former Employees who, when last employed by Parent or a current or former Parent Affiliate, were employed in the United States.

“Legacy Former Employee” means each former employee (and their Plan Payees, as applicable) of Parent or any of its current or former Affiliates who is not a Former Employee (as determined by Parent) with respect to whom Liabilities are being transferred to a member of the SpinCo Group. As soon as practicable following the Distribution, Parent will determine all Legacy Former Employees as of the Distribution Date and provide SpinCo with a list of the relevant Legacy Former Employees.

“Legacy Former Non-U.S. Employees” means all Legacy Former Employees who are not Legacy Former U.S. Employees.

“Legacy Former U.S. Employees” means all Legacy Former Employees who, when last employed by Parent or a current or former Parent Affiliate, were employed in the United States.

“Liability Split Date” means the applicable date set forth in Appendix D or Appendix E for assumption of Health and Other Welfare Liabilities by SpinCo.

“Local Transfer Agreement” means any agreement entered into for the purpose of effecting the Separation Transactions in accordance with the Laws or customs of an applicable jurisdiction, other than Separation Agreement or any Master Ancillary Agreement.

“Maintained Health and Welfare Plans,” means the Parent Plans identified on Appendix D.

“Master Ancillary Agreements” means the TMA, the Cross License Agreement, the Intellectual Property Assignment Agreements, the Trademark License Agreement and the TSA.

“Mirror Plan” means each Business Plan sponsored by a member of the SpinCo Group to which Liabilities (and Assets, where applicable) are transferred from a Parent Plan on the Split Date.

“Non-Transferred Employees” has the meaning given in Section 3(a). Non-Transferred Employees shall not be considered Employees unless provided otherwise in this Agreement.

“Non-U.S. Employees” means all Employees who are not U.S. Employees.

“Non-U.S. Retirement Benefit Arrangement” means, in respect of the Non-U.S. Employees, all plans, schemes, arrangements or individual commitments (whether externally funded or unfunded and whether or not such plans, schemes, arrangements or commitments are tax-qualified under applicable law) for the provision of or contribution towards Retirement Benefits.

“Non-U.S. Retirement Benefits Funding Assets” has the meaning given in Section 5(e)(iv) of this Agreement.

“Non-U.S. Retirement Benefit Liabilities” means any and all liabilities and obligations, as at the Distribution Date, to and in respect of the Non-U.S. Employees under any Non-U.S. Retirement Benefit Arrangement that are classified as a defined benefit plan under US-GAAP.

“Objecting Employee” has the meaning given in Section 3(b)(iii). Objecting Employees shall not be considered Employees unless provided otherwise in this Agreement.

“Other Long-Term Employee Benefits” means (i) any termination benefits and (ii) any other long-term employee benefits such as, e.g., jubilee, old-age part time benefits or other long-service benefits.

“Parent Health and Welfare Plans” means the Parent Plans identified in Appendix E.

“Parent Post-Distribution Stock Price” means the per share price of the Parent’s common stock immediately after the Distribution, which shall be equal to the volume weighted average price of the Parent’s common stock over the ten (10) trading days immediately following the Distribution Date.

“Parent Plan” means each (i) “employee benefit plan,” as defined in Section 3(3) of ERISA (whether or not subject to ERISA), (ii) other plan, program, fund, scheme or agreement, whether written or unwritten, providing for compensation, bonuses, profit-sharing, equity compensation or other forms of incentive or deferred compensation, insurance (including self-insured arrangements), health, medical or other welfare benefits, or post-employment or retirement insurance or other welfare benefits), and (iii) Employee Agreement, in each case that is sponsored, maintained, administered or contributed to by Parent or any Affiliate (other than a member of the SpinCo Group) or with respect to which Parent or any Affiliate (other than a member of the SpinCo Group) has any Liability. Effective upon the applicable Split Date, Parent Plans shall include the Retained Plans and shall exclude the Allocated Plans and Mirror Plans for which Liabilities (and Assets, where applicable) are transferred to the SpinCo Group, each in accordance with the terms of this Employee Matters Agreement.

“Plan Payee” means, as to each individual who participates in a Business Plan or a Parent Plan, such individual’s dependents, beneficiaries, alternate payees, and alternative recipients, as applicable, under each such Business Plan or Parent Plan. For the avoidance of doubt, to the extent an individual is both a Plan Payee and a current or former employee of Parent or any of its Affiliates, references to “Plan Payee” shall be deemed to refer to such individual only in his or her capacity as such a dependent, beneficiary, alternate payee, or alternative recipient, as applicable.

“Retained Employees” has the meaning given in Section 3(a). Retained Employees shall not be considered Employees unless provided otherwise in this Agreement.

“Service Provider” has the meaning given in Section 8(a)(i).

“SpinCo Post-Distribution Stock Price” means the per share price of SpinCo’s common stock immediately after the Distribution, which shall be equal to the volume weighted average price of SpinCo’s common stock over the ten (10) trading days immediately following the Distribution Date.

“Split Date” means with respect to each Split Plan, Allocated Plan and Retained Plan: (i) the date upon which certain Parent Plan Liabilities (and Assets, where applicable) that are attributable to Employees, Former Employees and Legacy Former Employees will be allocated and transferred, as described herein, to a Mirror Plan or member of the SpinCo Group, (ii) the date upon which the sponsorship of (and responsibility for) the Allocated Plan will be transferred to a member of the SpinCo Group, or (iii) the date upon which sponsorship of (and responsibility for) the Retained Plan will be transferred to a member of the Parent Group. The Split Date for the Parent Plans listed in Appendix C, the Retained Plans listed in Appendix B, and the Allocated Plans listed in Appendix A shall be the applicable date listed in the relevant Appendix.

“Split Plans” means those Parent Plans for which Liabilities (and Assets, where applicable) will be allocated between Parent and SpinCo in accordance with this Agreement. The Split Plans are the plans identified in Appendix C and the Maintained Health and Welfare Plans.

“Successor Retirement Benefit Arrangement” has the meaning given in Section 5(e)(ii).

“Transition Services Period” means the period following the Distribution Date as provided in the Transition Services Agreement, or such other period mutually agreed upon by the Parties with respect to a specific administrative service.

“U.S. Employees” means all Employees employed in the United States.

Section 2.           Assumption of Certain Obligations and Liabilities.

(a)           Ancillary Agreements: In the event of conflict or inconsistency between the provisions of this Agreement and any Local Transfer Agreement (including any provision of a Local Transfer Agreement providing for dispute resolution mechanism inconsistent with those provided herein), on the other hand, the provisions of this Agreement shall prevail and remain in full force and effect, unless otherwise provided in Appendix 2a or required by non-waivable applicable Law. Each Party hereto shall, and shall cause each of its members to, implement the provisions of and the transactions contemplated by each Local Transfer Agreement in accordance with the preceding sentence.

(b)           General Liability Allocation. Except as otherwise expressly set forth in this Agreement, including without limitation in Section 5(e)(i), to the fullest extent permitted by applicable Law, SpinCo shall, or shall cause one or more of the SpinCo Group members to, assume or retain, as the case may be, any and all Employment Liabilities, and Parent shall, and shall cause each other member of the Parent Group to, transfer, assign, and convey, each effective as of the following dates: (i) in the case of Employment Liabilities other than those related to the Mirror Plans or Allocated Plans, the Distribution Date, and (ii) in the case of Employment Liabilities related to the Mirror Plans and the Allocated Plans, the applicable Split Date.

If applicable Law does not permit the assumption or retention, or the transfer, assignment, or conveyance, of a certain Employment Liability or as provided in Appendix 2b, then solely with respect to that Employment Liability, then SpinCo shall indemnify, defend and hold harmless the Parent Indemnitees against any and all losses related to such Employment Liability.

(c)           Bonuses. With respect to the fiscal year in which the Distribution Date occurs and each fiscal year thereafter, SpinCo shall be solely responsible for paying (or causing to be paid) annual cash incentive bonuses for the full fiscal year to all Employees (and, if applicable, Former Employees) unless otherwise provided in Appendix 2c. For the fiscal year in which the Distribution Date occurs, (i) SpinCo shall maintain a bonus plan for the benefit of Employees (and, if applicable, Former Employees) with substantially the same terms and conditions as the annual bonus plan applicable to such Employees (and, if applicable, Former Employees) immediately prior to the Distribution Date, except that SpinCo may adjust the performance goals to the extent necessary or appropriate to maintain the intended incentive opportunity, and (ii) SpinCo shall pay (or cause to be paid) the bonuses due to each Employee (and, if applicable, each Former Employee) under such bonus plan (taking into account any adjustments made pursuant to clause (i)) during the next following fiscal year consistent with past practice under the comparable Parent Plan.

(d)           Individual Employee Agreements. SpinCo, to the extent permitted by applicable Law and consistent with the principles set out in Section 2(b), shall, or shall cause another member of the SpinCo Group to, assume or retain exclusive responsibility for all Employee Agreements with Employees, Former Employees and Legacy Former Employees, which are or shall become Business Plans on and after the Split Date.

(e)           Vacation and Paid Time-Off. Effective as of the Distribution Date, SpinCo, to the extent permitted by law and consistent with the principles set out in Section 2(b), shall, or shall cause another member of the SpinCo Group to, assume or retain all obligations of the Parent Group members for the accrued, unused vacation and other paid time off or leave benefits for Employees, Former Employees and Legacy Former Employees unless otherwise provided in Appendix 2e.

(f)            Litigation. If a member of the Parent Group is a party to an Action brought by or on behalf of an Employee, Non-Transferred Employee, Former Employee or Legacy Former Employee (including a class thereof), or related to a Business Plan (including an Allocated Plan or Mirror Plan), then SpinCo shall indemnify, defend and hold harmless the Parent Indemnitees from and against any and all Liabilities of the Parent Indemnitees to the extent relating to, arising out of or resulting from such Action and manage any such Action (including without limitation any SpinCo Directed Actions) pursuant to the terms of the Separation Agreement; provided, however that SpinCo shall not have any indemnification obligations with respect to any Parent Retained Liabilities. If SpinCo or another member of the SpinCo Group is a party to an Action brought by an employee who is not an Employee, Former Employee, or Legacy Former Employee, and such Action relates to a Parent Plan, then Parent shall indemnify, defend and hold harmless the SpinCo Indemnitees from and against any and all Liabilities of the SpinCo Indemnitees to the extent relating to, arising out of or resulting from such Action and manage any such Action (including without limitation any Parent Directed Actions) pursuant to the terms of the Separation Agreement; provided, however that Parent shall not have any indemnification obligations with respect to any SpinCo Liabilities.

(g)           Workers’ Compensation. For the avoidance of doubt, SpinCo shall, or shall cause another member of the SpinCo Group to, establish a workers’ compensation program covering all members of SpinCo Group, effective as of the Distribution Date, and shall cease to have access to any Parent Group workers’ compensation programs for any injuries from and after the Distribution Date. Parent Group workers’ compensation programs shall cover any injuries occurring before the Distribution Date for Employees, Former Employees and Legacy Former Employees, provided that such Employees, Former Employees and Legacy Former Employees, and such injuries, are otherwise eligible for coverage under the Parent Group’s workers’ compensation programs.

Section 3.           Employment.

(a)           Continuation of Employment. Except for the Employees retained by Parent set out in Appendix 3a (the “Retained Employees”, and together with the Objecting Employees, the “Non-Transferred Employees”), SpinCo shall, or shall cause another member of the SpinCo Group to, employ each Employee employed immediately prior to the Distribution Date; provided that, notwithstanding anything to the contrary in this Agreement, the transfer to SpinCo or another member of the SpinCo Group of the employment of Employees who are on short-term disability leave with Parent or any Parent affiliate as of the Distribution Date (the “Delayed Transfer Employees”) shall be delayed until the end of such leave, at which point such Delayed Transfer Employees will be transferred to SpinCo or another member of the SpinCo Group. Notwithstanding such delayed transfer, SpinCo shall be responsible for Liabilities associated with such Delayed Transfer Employees from the Distribution Date to the extent otherwise provided in this Agreement.

(b)           Transfer of Employment.

(i)            Automatic Transfer of Employment: In those jurisdictions where the transfers of employment relationships of Employees to SpinCo or to another member of the SpinCo Group constitute transfers of an undertaking pursuant to the applicable local automatic transfer regulations (“Automatic Transfer Regulations”), Parent and SpinCo agree that they will comply with the requirements of the Automatic Transfer Regulations affecting the automatic transfer of employees on the sale, transfer or continuation of a business and/or the provision of services and that they will work to provide an orderly transition for those employees who will automatically transfer pursuant to Automatic Transfer Regulations.

(ii)           Offer and Acceptance Employee Transfers: For those jurisdictions, where Employees will be transferred to SpinCo or to another member of the SpinCo Group via an offer and acceptance prior to the Distribution Date, SpinCo is obliged to make, or shall cause another member of the SpinCo to make, subject to the applicable Law, an employment offer to the Employees as soon as reasonably practicable, effective no later than the Distribution Date and consistent with the employment terms following the Distribution Date and the terms of this Agreement.

(iii)          Refusal or Objection of Transfer to SpinCo: If the Employee does not accept the offer of SpinCo or any other member of SpinCo Group to transfer their employment relationship or objects to the transfer of their employment relationship to SpinCo or another member of the SpinCo group (the “Objecting Employees”), SpinCo undertakes to inform Parent without undue delay of any receipts of refusals or objections of the Objecting Employees to the transfer of their respective employment relationship to SpinCo or any member of the SpinCo group.

(c)           No Guarantee of Employment. Notwithstanding any other provision of this Employee Matters Agreement or the Separation Agreement, and subject to applicable Law, no SpinCo Group member shall be obligated to continue to employ any Employee for any specific period of time.

(d)           Employee Representative Agreements. Effective as of the Distribution Date, SpinCo shall, or shall cause another SpinCo Group member to, assume or remain a party to all collective bargaining, works council or other similar employee representative agreements (the employee representative party to such agreements, collectively, “Appropriate Representatives”), or honor the obligations thereunder, that apply to any Employees and either (i) require assumption by Law, or (ii) state that such agreement or obligation applies to successors (collectively, “Employee Representative Agreements”). If there are Employee Representative Agreements that continue to cover employees of the SpinCo Group and employees of the Parent Group, the Parties will work together in good faith and in accordance with applicable Law to open and manage negotiations with the applicable Appropriate Representative with a goal of establishing separate agreements to be in place by the Distribution Date, where possible on reasonable terms that are acceptable to both SpinCo and Parent.

Section 4.           Employment Terms Following the Distribution Date.

(a)           Terms and Conditions of Employment. Consistent with applicable Law and this Agreement, during the applicable Continuation Period, SpinCo shall, or shall cause another SpinCo Group member to, provide each Employee employed immediately prior to the Distribution Date with the following:

(i)            salary or wages, cash incentive compensation opportunities, cash bonus opportunities (excluding any transaction-related, retention or similar opportunities) and welfare and retirement benefits that are at least substantially similar, in the aggregate, to those provided to such Employee immediately prior to Distribution Date; and

(ii)           to the extent required by applicable Law, a Parent Plan or a Business Plan, other material terms and conditions of employment as were provided to such Employee immediately prior to the Distribution Date.

(b)           Vacation and Paid Time Off. SpinCo shall, or shall cause another member of the SpinCo Group to, provide vacation, paid time off, and leave benefits to Employees during the Continuation Period (or such longer period required by applicable Law) that are at least as favorable (and take into account the same service) as those provided to Employees under the applicable vacation, paid time off, or leave program immediately prior to the Distribution Date.

(c)           Severance Benefits. SpinCo shall, or shall cause another member of the SpinCo Group to, provide severance benefits to any Employee who was employed immediately prior to the Distribution Date, but who is laid off or terminated by a SpinCo Group member during the 12-month period immediately following the Distribution Date in an amount that is equal to the greater of (i) the severance benefits, if any, to which the Employee would have been entitled under the circumstances pursuant to the terms of any Parent Plan or Business Plan that is a severance or layoff plan as would have applied to such Employee if such termination occurred immediately prior to the Distribution Date, or (ii) the severance benefits, if any, provided under the severance arrangements of a SpinCo Group member applicable to similarly-situated employees and in connection with comparable terminations of employment, in each case to be calculated on the basis of the Employee’s compensation and service at the time of the layoff or other termination. In addition, SpinCo shall consider such eligible laid off or terminated Employee for a pro rata bonus under the terms of any bonus plan of the applicable SpinCo Group member in which the employee participates to the extent such Employee would have been eligible for a pro rata bonus under similar circumstances pursuant to the terms of any Parent Plan or Business Plan.

(d)           Credit for Service. SpinCo shall, and shall cause the other SpinCo Group members to, credit Employees for all service earned on and prior to the Distribution Date with the Parent Group and the SpinCo Group, in addition to service earned with the SpinCo Group on and after the Distribution Date for all purposes, including under the Business Plans (including the Mirror Plans and Allocated Plans) and other similar plans and programs sponsored by a SpinCo Group member; provided, however, that in no event shall SpinCo be required to credit service for Employees in a manner that results in a duplication of service under a plan with respect to a period, thus leading to a duplication of benefits. The SpinCo Group shall not amend any provision of a Business Plan (including a Mirror Plan or an Allocated Plan) as to any participant as of the applicable Split Date in any manner that would reduce the credit for service for such individual that is provided under this Section 4(d), to the extent this leads to a reduction of benefits, or if more generous, under the applicable plan or applicable Law.

Section 5.           Parent Plans.

(a)           U.S. Defined Benefit Pension Plans. As of the Distribution Date, the Parent Group shall retain (or assume to the extent necessary) sponsorship of each Parent Plan that is a tax-qualified defined benefit pension plan (a “Parent Pension Plan”), and, from and after the Distribution Date, all Assets and Liabilities thereunder shall be Assets and Liabilities of the Parent Group. No member of SpinCo Group shall assume any Assets or Liabilities relating to the Parent Pension Plans or, notwithstanding anything to the contrary in this Agreement, shall have any obligation to establish a tax-qualified defined benefit plan in the United States.

(b)           U.S. Defined Contribution Plans. Effective as of January 1, 2024, (i) (A) Parent shall transfer from the BorgWarner Inc. Retirement Savings Plan (the “BW RSP”) to a tax-qualified defined contribution plan sponsored by SpinCo or another member of the SpinCo Group (the “RSP Mirror Plan”) all Assets and Liabilities under the BW RSP with respect to Employees, Former Employees and Legacy Former Employees and (B) the RSP Mirror Plan shall assume all such Assets and Liabilities from the BW RSP, (ii) (A) Parent shall transfer from the Deferred Plans to comparable plans sponsored by SpinCo or another member of the SpinCo Group (the “Mirror Deferred Compensation Plans”) all Liabilities under the Deferred Plans with respect to Employees and Former Employees and (B) the Mirror Deferred Compensation Plans shall assume all such Liabilities from the Deferred Compensation Plans, and (iii) SpinCo shall assume, and shall cause any other SpinCo Group member that sponsors the RSP Mirror Plan or a Mirror Deferred Compensation Plan to assume, all responsibility for funding and paying (or causing to be paid) the transferred Liabilities described in this Section 5(b) for any such plan that SpinCo or such other member sponsors. For the avoidance of doubt, the Assets and Liabilities to be transferred with respect to the BW RSP shall include the allocable portion (in proportion to the aggregate account balances transferred to the RSP Mirror Plan) of the forfeiture account and revenue account accumulation held in the BW RSP as of January 1, 2024 (net of any applicable estimated unpaid plan expenses for the most recently completed plan year), and promissory notes evidencing plan loans, and neither the transfers described in this Section 5(b), nor the Distribution Date, shall be treated as a “separation from service” as defined under Treasury Regulation s. 1.409A-1(h) for purposes of the Deferred Plans and the Mirror Deferred Compensation Plans or as a “severance from employment” within the meaning of Treasury Regulation s. 1.401(k)-1(d)(2) for purposes of the RSP. After the transfer of Assets and Liabilities has occurred with respect to the BW RSP and the RSP Mirror Plan as contemplated by this paragraph, if on further review it is determined and agreed upon by the Parties that an incorrect amount of assets was transferred, there shall be a corresponding adjustment to correct any such mistake.

The Liabilities transferred in accordance with this Section 5(b) shall cease to be Liabilities of the BW RSP (and the BW RSP Assets transferred in accordance with this Section 5(b), if any, shall cease to be Assets of the BW RSP), the Deferred Plans and the Parent Group (excluding the SpinCo Group) as of January 1, 2024. From and after January 1, 2024, the RSP Mirror Plan, the Mirror Deferred Compensation Plans and the members of the SpinCo Group that sponsor such plans, as applicable, shall be responsible for all obligations and Liabilities (including, for the avoidance of doubt, the obligation to defend claims related to benefits and/or benefits eligibility) with respect to, or in any way related to, the Liabilities transferred under this Section 5(b), whether accrued before, on or after January 1, 2024.

The plan documents for the RSP Mirror Plan and the Mirror Deferred Compensation Plans adopted on January 1, 2024 shall reflect the service crediting requirements described in Section 4(d).

SpinCo and the other members of the SpinCo Group that sponsor such plans shall be solely and exclusively responsible for, and SpinCo shall indemnify and defend the Parent Group against, any and all claims related to (x) the establishment of, or transfer of Liabilities (and Assets, where applicable) to, the RSP Mirror Plan or the Mirror Deferred Compensation Plans, and/or the members of the SpinCo Group, and/or (y) any amendments to, or termination of, the RSP Mirror Plan or the Mirror Deferred Compensation Plans. For the avoidance of doubt, SpinCo and the other members of the SpinCo Group that sponsor such plans shall be solely and exclusively responsible for all Liabilities arising from clause (x) or (y).

Employees, Former Employees, and Legacy Former Employees who otherwise meet the eligibility requirements of the BW RSP and the Deferred Plans shall be eligible to participate in the BW RSP and the Deferred Plans through December 31, 2023, unless otherwise mutually agreed by the Parties or as otherwise required by applicable Law; provided that SpinCo shall continue to reimburse Parent promptly for the full cost of any benefits provided under such BW RSP and the Deferred Plans (including expenses) and pay Parent for all administrative and other expenses associated with such continued participation in the BW RSP and the Deferred Plans.

(c)           U.S. Health and Other Welfare Benefits.

(i)            Continued Participation in Parent Health and Welfare Plans. Employees who otherwise meet the eligibility requirements of the Parent Health and Welfare Plans shall be eligible to participate in the Parent Health and Welfare Plans for active employees through December 31, 2023, unless otherwise mutually agreed by the Parties or as otherwise required by applicable Law; provided that SpinCo shall continue to reimburse Parent promptly for the full cost of such benefits (including expenses), as described in this Section 5(c) and Section 12(d) and pay Parent for all administrative and other expenses associated with such continued participation in the Parent Health and Welfare Plans as provided in the TSA.

(ii)           SpinCo Group U.S. Health and Welfare Plans. By January 1, 2024, SpinCo shall, or shall cause the applicable member of the SpinCo Group to, establish SpinCo Group U.S. health and welfare plans (the “SpinCo Group U.S. Health and Welfare Plans”). Except as specifically provided herein, it is anticipated that U.S. Employees shall cease active participation in the Parent Health and Welfare Plans as of January 1, 2024 (the “Plan Transition Date”) and commence such participation in the SpinCo Group U.S. Health and Welfare Plans on the Plan Transition Date. SpinCo shall use commercially reasonable efforts to cause the SpinCo Group U.S. Health and Welfare Plans, as applicable, to: (a) with respect to initial enrollment as of the Plan Transition Date, waive (1) all limitations as to preexisting conditions, exclusions, and service conditions with respect to participation and coverage requirements applicable to any U.S. Employee, or any covered dependents thereof, other than limitations that were in effect with respect to such U.S. Employee, or covered dependent under the applicable Parent Health and Welfare Plan as of immediately prior to the Plan Transition Date, and (2) any waiting period limitation or evidence of insurability requirement applicable to such U.S. Employee, or any covered dependents thereof, other than limitations or requirements that were in effect with respect to such U.S. Employee, or covered dependent under the applicable Parent Health and Welfare Plan as of immediately prior to the Plan Transition Date; and (b) take into account (x) with respect to aggregate annual, lifetime, or similar maximum benefits available under the SpinCo Group U.S. Health and Welfare Plans, such U.S. Employee’s, or any covered dependents’ prior claim experience under the Parent Health and Welfare Plan; and (y) any eligible expenses incurred by such U.S. Employee and his or her covered dependents during the portion of the plan year of the applicable Parent Health and Welfare Plan ending as of the Plan Transition Date to be taken into account under such SpinCo Group U.S. Health and Welfare Plan for purposes of satisfying all deductible, coinsurance, and maximum out-of-pocket requirements applicable to such U.S. Employee and his or her covered dependents for the applicable plan year to the same extent as such expenses were taken into account by Parent for similar purposes prior to the Plan Transition Date as if such amounts had been paid in accordance with such SpinCo Group U.S. Health and Welfare Plan.

(iii)          Allocation of Health and Welfare Assets and Liabilities. Effective as of the Distribution Date, except as otherwise specifically provided herein, Parent Group shall retain all Liabilities relating to Incurred Claims (as defined below) under the Parent Health and Welfare Plans, and shall also retain Assets (including, without limitation, Medicare reimbursements, pharmaceutical rebates, and similar items) associated with such Incurred Claims. The SpinCo Group shall be responsible for all Liabilities relating to Incurred Claims under any SpinCo Group U.S. Health and Welfare Plan and shall also retain Assets (including, without limitation, Medicare reimbursements, pharmaceutical rebates, and similar items) associated with such Incurred Claims. “Incurred Claims” shall mean a Liability related to services or benefits provided under a health and welfare benefit plan, and shall be deemed to be incurred: (a) with respect to medical, dental, vision, and prescription drug benefits, upon the rendering of services giving rise to such Liability; (b) with respect to death benefits, life insurance, accidental death and dismemberment insurance, and business travel accident insurance, upon the occurrence of the event giving rise to such Liability; (c) with respect to disability benefits, upon the date of disability, as determined by the disability benefit insurance carrier or claim administrator, giving rise to such Liability; (d) with respect to a period of continuous hospitalization, upon the date of admission to the hospital; and (e) with respect to tuition reimbursement or adoption assistance, upon completion of the requirements for such reimbursement or assistance, whichever is applicable.

Notwithstanding anything to the contrary in the preceding paragraphs, except to the extent otherwise required by law or agreed by the Parties, any Employee, Former Employee or Legacy Former Employee (or their respective covered dependents) who incurs a qualifying event under COBRA, or is receiving long-term disability benefits as a result of an Incurred Claim occurring, on or after the Distribution Date and before January 1, 2024 shall continue to participate in and receive benefits under (to the extent otherwise eligible for continued participation and benefits under) any applicable Parent Health and Welfare Plans; provided that SpinCo or a member of SpinCo Group shall reimburse Parent promptly an amount equal to the premiums, as determined by Parent, with respect to such continued participation between the Distribution Date and January 1, 2024 and pay Parent for all administrative and other expenses associated with such continued participation.

(d)           Parent FSA Plans. U.S. Employees shall remain eligible to participate in health care and dependent care flexible spending account arrangements under the Parent Health and Welfare Plans (collectively, the “Parent FSA Plans”) through December 31, 2023 (and thereafter for any amounts rolled over in accordance with the terms of the Parent FSA Plans or to the extent of any grace period or claims run-out period). SpinCo shall, or shall cause another member of the SpinCo Group to, establish a cafeteria plan (within the meaning of Section 125 of the Internal Revenue Code) with health care and dependent care flexible spending account arrangements (the “SpinCo Cafeteria Plan”) effective January 1, 2024.

(e)           Non-U.S. Retirement Benefits and Other Long-Term Employee Benefits of Non-U.S. Employees.

(i)            Transfer of Non-U.S. Retirement Benefit Liabilities: As an exception to Section 2(b), the Retirement Benefit Liabilities pertaining to the Non-U.S. Employees and Legacy Former Non-U.S. Employees shall be transferred to SpinCo or other members of the SpinCo Group to the extent such transfer is required by applicable Law or set out in Appendix 5 (e) (i) (“Transferring Non-U.S. Retirement Benefit Liabilities”).

(ii)           Successor Non-U.S. Retirement Benefit Arrangements: In respect to the Non-U.S. Retirement Benefit Arrangements, SpinCo shall be obliged to establish a successor plan for the benefit of the Non-U.S. Employees to the extent required by applicable Law or set out in Appendix 5 (e) (ii) (“Successor Retirement Benefit Arrangement”) and shall be required to maintain this Successor Retirement Benefit Arrangement during the Continuation Period.

(iii)          Non-U.S. Defined Contribution Arrangements: With regard to any Non-U.S. Defined Contribution Arrangement, such Successor Retirement Benefit Arrangement shall also include the possibility to transfer all assets corresponding to Non-U.S. Defined Contribution Arrangements to the Successor Retirement Benefit Arrangement with discharging effect for the Non-US Defined Contribution Arrangement of Parent or the members of the Parent Group to the extent required by applicable Law or as provided in Appendix 5 (e) (ii).

(iv)          Non-U.S. Retirement Benefit Funding Assets: To the extent that there are assets to fund the Transferring Non-U.S. Retirement Benefit Liabilities (“Non-U.S. Retirement Benefits Funding Assets”), Parent and SpinCo shall make the declarations required for the transfer and undertake reasonable efforts to achieve a transfer of such Non-U.S. Retirement Benefits Funding Assets.

(v)           Transfer of Other Long-Term Employee Benefits of Non-U.S. Employees: If and to the extent applicable, the foregoing provisions of this Section 5(e) shall apply mutatis mutandis to Other Long-Term Employee Benefits of Non-U.S. Employees unless provided otherwise in this Agreement.

(f)            Participation in Parent Plans. Effective as of the applicable Split Date, all Employees, Former Employees, and Legacy Former Employees will cease participation in and benefit accrual under the Parent Plan from which Liabilities (and Assets, where applicable) are transferred to the SpinCo Group as of such Split Date, except to the extent (if at all) as required by applicable Law or as otherwise explicitly set forth in this Section 5 or Appendix 5f. To the extent that any Employees, Former Employees and Legacy Former Employees continue to participate in a Parent Plan in accordance with this Agreement, SpinCo shall, or shall cause another member of the SpinCo Group to, reimburse Parent promptly as described in Section 12 (d). Parent shall, and shall cause the other members of the Parent Group to, take all necessary actions to effect such cessation of participation by Employees, Former Employees, and Legacy Former Employees under the Parent Plans, and SpinCo shall promptly reimburse Parent for costs as described in Section 12(d).

(g)           Follow-on Transfers. With respect to the Parent Plans that are Split Plans identified in Appendix C as being subject to this Section 5(g), if a participant in any such plan subsequently transfers between the Parent Group and the SpinCo Group before the Distribution Date, then the Liabilities (and, if applicable, Assets) for such participant’s benefits under such plans shall be transferred to and from each Parent Plan as needed to ensure that each such participant’s benefit is allocated to the individual’s employer or most recent former employer (in each case, or an Affiliate thereof). Effective upon the reallocation of the Liabilities (and Assets, where applicable) for such benefits pursuant to this Section 5(g), the legal entity to whom such benefits are transferred shall assume all responsibility for funding and paying (or causing to be paid) the transferred Liabilities described in this Section 5(g). For the avoidance of doubt, with respect to the Parent Plans that are Split Plans identified in Appendix C as being subject to this Section 5(g), if a participant in any such plan subsequently transfers between the Parent Group and the SpinCo Group after the Distribution Date, then the Liabilities (and, if applicable, Assets) for the participant’s benefits shall not transfer as described in this Section 5(g).

Section 6.           Business Plans. The members of the SpinCo Group shall retain all Liabilities (and Assets, where applicable) with respect to the Business Plans (and no member of the Parent Group that is not in the SpinCo Group shall have any obligations with respect thereto). Without limiting the generality of the foregoing, a SpinCo Group member shall be designated by SpinCo as plan sponsor of each Business Plan from and after the Split Date.

Section 7.           Non-U.S. Employees.

(a)           Terms and Conditions of Employment. In the case of the Non-U.S. Employees employed by a member of the SpinCo Group immediately prior to the Distribution Date, SpinCo shall, and shall cause the other members of the SpinCo Group to, in addition to meeting the requirements specified in Section 4 through Section 6, comply with any additional obligations arising under applicable Laws governing the terms and conditions of their employment or severance of employment in connection with the transfer of the SpinCo Business or otherwise.

(b)           Severance Indemnity. In the event (i) the members of the SpinCo Group do not provide Non-U.S. Employees employed by a SpinCo Group member immediately prior to the Distribution Date with (A) similar in-kind benefits to those provided immediately prior to the Distribution Date, or (B) a benefit plan consistent with applicable Law or the SpinCo Group’s obligations in this Employee Matters Agreement, or (ii) any member of the SpinCo Group amends or otherwise modifies on or after the Distribution Date any such benefit plan, any Non-U.S. Business Plan in which any Non-U.S. Employee was covered or eligible for coverage immediately prior to the Distribution Date, or any other term or condition of employment applicable to Non-U.S. Employees immediately prior to the Distribution Date, in each case in a manner that results in any obligation, contingent or otherwise, of any Parent Group member to pay any severance, termination indemnity, or other similar benefit (including such benefits required under applicable Law) to such person, SpinCo shall, or shall cause another member of the SpinCo Group to, reimburse and otherwise hold harmless the Parent Group for all such severance, termination indemnity and other similar benefits and any additional Liability incurred by the Parent Group in connection therewith.

Section 8.           Equity Compensation Awards

(a)           Restricted Stock and Restricted Stock Units.

(i)            Restricted Stock and Restricted Stock Units Held by SpinCo Group Employees and Service Providers. Parent and SpinCo shall take or cause to be taken any and all action as shall be necessary or appropriate, including approval of the provisions of this Section 8(a)(i) by SpinCo’s Board of Directors and Parent’s Board of Directors or Compensation Committee pursuant to the terms of Parent’s 2018 Stock Incentive Plan or successor equity plan (the “Parent Equity Plan”), the SpinCo 2023 Stock Incentive Plan (the “SpinCo Equity Plan”) and this Employee Matters Agreement, so that each restricted stock award and restricted stock unit award (including, for the avoidance of doubt, any restricted stock and restricted stock units attributable to the reinvestment or deemed reinvestment of associated dividends or dividend equivalents (“Related Dividend Equivalents”)) relating to Parent’s common stock granted under the Parent Equity Plan (each, a “Parent RSU Award”) held at the close of business on the Distribution Date by any Employee or any current individual independent contractor, consultant or other individual service provider who is or was providing services primarily for the benefit of the SpinCo Business as determined by Parent (collectively, “Service Providers”) shall be replaced with a substitute restricted stock or restricted stock unit (including, for the avoidance of doubt, any Related Dividend Equivalents) award relating to SpinCo’s common stock that is granted under the SpinCo Equity Plan (“Substitute SpinCo RSU Award”). The number of SpinCo shares of restricted stock or restricted stock units subject to the Substitute SpinCo RSU Award will be equal to the number of shares of Parent restricted stock or Parent restricted stock units subject to the Parent RSU Award (including, for the avoidance of doubt, any Related Dividend Equivalents) held by the participant at the close of business on the Distribution Date multiplied by a fraction, (i) the numerator of which is equal to the sum of (x) the Parent Post-Distribution Stock Price plus (y) the quotient of the SpinCo Post-Distribution Stock Price divided by the number of shares of Parent’s common stock a holder of Parent’s common stock must hold to receive one share of SpinCo common stock in the Distribution, and (ii) the denominator of which is the SpinCo Post-Distribution Stock Price (the “SpinCo Conversion Ratio”). Each Substitute SpinCo RSU Award shall vest and be payable based on the holder’s service with the SpinCo Group. Each Substitute SpinCo RSU Award shall have the same terms and conditions as the corresponding Parent RSU Award, except as provided herein.