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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996. COMMISSION FILE NUMBER 1-12383
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ROCKWELL INTERNATIONAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 25-1797617
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2201 SEAL BEACH BOULEVARD,
SEAL BEACH, CALIFORNIA 90740-8250
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(412) 565-4090 (OFFICE OF THE SECRETARY)
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SECURITIES REGISTERED PURSUANT
TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
Common Stock, $1 Par Value New York and Pacific Stock Exchanges
(including the associated
Preferred Share Purchase
Rights)
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SECURITIES REGISTERED PURSUANT
TO SECTION 12(G) OF THE ACT:
Class A Common Stock, $1 Par Value
(including the associated Preferred Share Purchase Rights)
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes No X*
--- ---
* On December 6, 1996, registrant succeeded for financial reporting
purposes to the former Rockwell International Corporation, which had been
subject to such filing requirements for more than 90 days.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of registrant's voting stock held by
non-affiliates of registrant on December 9, 1996 was approximately $13.2
billion.
191,597,110 shares of registrant's Common Stock, par value $1 per share,
and 27,370,844 shares of registrant's Class A Common Stock, par value $1 per
share, were outstanding on December 9, 1996.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information contained in the Proxy Statement for the Annual Meeting
of Shareowners of registrant to be held on February 5, 1997 is incorporated by
reference into Part III hereof.
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PART I
ITEM 1. BUSINESS.
Rockwell International Corporation (the Company or Rockwell), a Delaware
corporation, is engaged in research, development and manufacture of many
diversified products. The Company was incorporated in 1996 and is the successor
to the former Rockwell International Corporation as the result of a tax-free
reorganization completed on December 6, 1996 (the Reorganization). The
predecessor corporation was incorporated in 1928. Pursuant to the
Reorganization, the Company divested its former Aerospace and Defense businesses
(the A&D Business) to The Boeing Company (Boeing) for approximately $3.2 billion
by means of a merger in which the Company's predecessor corporation became a
wholly-owned subsidiary of Boeing. Immediately prior to the merger,
substantially all of the Company's businesses and assets (other than the A&D
Business) were contributed to the Company, or to one or more wholly-owned
operating subsidiaries of the Company, and all outstanding shares of the Company
were distributed to shareowners of the predecessor corporation on a one-for-one
share basis. As used herein, the terms the "Company" or "Rockwell" include
subsidiaries and predecessors unless the context indicates otherwise.
For purposes hereof, whenever reference is made in any Item of this Annual
Report on Form 10-K to information under specific captions in Item 7,
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (the MD&A), or in Item 8, FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(the Financial Statements), or to information in the Proxy Statement for the
Annual Meeting of Shareowners of the Company to be held on February 5, 1997 (the
1997 Proxy Statement), such information shall be deemed to be incorporated
therein by such reference.
BUSINESS SEGMENTS
The Company's business segments are engaged in research, development, and
manufacture of diversified products as follows:
Electronics:
Automation--industrial automation equipment and systems, including
control logic, sensors, human-machine interface devices, motors, power
and mechanical devices, and software products.
Avionics & Communications--avionics products and systems and related
communications technologies primarily used in commercial and military
aircraft and defense electronic systems for command, control,
communications, and intelligence.
Semiconductor Systems--system-level semiconductor chipset solutions for
personal communication electronics markets, including chipsets for
facsimile and personal computer data modems, wireless communications
products such as global positioning systems ("GPS"), packet data,
cordless and cellular chipsets, and automated call distribution
equipment.
Automotive--components and systems for heavy- and medium-duty trucks,
buses, trailers and heavy-duty off-highway vehicles (Heavy Vehicle
Systems); and components and systems for light trucks and passenger cars
(Light Vehicle Systems).
Financial information with respect to the Company's business segments,
including their contributions to sales and operating earnings and their
identifiable assets for the three years ended September 30, 1996, is contained
under the caption RESULTS OF OPERATIONS in the MD&A on pages 12-14 hereof, and
in Note 19 of the NOTES TO FINANCIAL STATEMENTS in the Financial Statements on
pages 33-36 hereof.
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Electronics
The sales and operating earnings of the businesses that comprise the
Company's Electronics business segment for the three fiscal years ended
September 30, 1996 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C>
Sales:
Automation....................................... $4,165 $3,590 $2,085
Avionics & Communications........................ 1,475 1,468 1,419
Semiconductor Systems............................ 1,593 875 691
------ ------ ------
Total Electronics................................ $7,233 $5,933 $4,195
====== ====== ======
Operating Earnings:
Automation....................................... $ 537 $ 481 $ 265
Avionics & Communications........................ 163 178 182
Semiconductor Systems............................ 330 113 98
------ ------ ------
Total Electronics................................ $1,030 $ 772 $ 545
====== ====== ======
</TABLE>
Automation. The acquisition of Reliance Electric Company (Reliance) in the
second quarter of fiscal 1995 made Automation the Company's largest business.
The Company's automation products include programmable controllers,
human-machine interface devices, communications networks, programming and
application software, AC/DC drives and drive systems, sensing and motion control
devices, machine vision, computer numeric control systems, and data acquisition
products and global support services. The Reliance acquisition added standard
and engineered motors and mechanical power transmission equipment. The Company
is a leader in plant floor automation, focusing on helping customers control
processes and become more competitive through increased flexibility, improved
productivity and information flow.
Avionics & Communications. Rockwell's Avionics & Communications businesses
provide electronic equipment for flight control, cockpit display, navigation,
voice and data communication, cockpit management, radar, global positioning and
other systems for airlines, corporate aircraft, general aviation, government and
military applications, command, control and communications devices and systems
and products and systems for the land transportation market (including
electronic brake systems and integrated cab electronics).
Semiconductor Systems. The Company's Semiconductor Systems business
provides semiconductor solutions for fax, voice and data modems for facsimile
machines and personal computers. This business is making significant investments
in mixed-signal computing semiconductor process, device design and
communications algorithm core technologies. Applying these core technologies,
this business is expanding into related personal communications electronics
markets, such as entering the market for wireless communications, by supplying
chipsets for cellular and cordless phones, wireless modem communications devices
for laptop computers and modules for GPS receivers. In September 1996, the
Company acquired for $278 million Brooktree Corporation (Brooktree), a designer
and manufacturer of digital and mixed-signal integrated circuits for computer
graphics, multimedia, imaging, and communications applications. The Company took
a one-time special charge of $121 million in the fourth quarter of fiscal 1996
for purchased in-process research and development in connection with this
acquisition.
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Automotive
The sales and operating earnings of the businesses that comprise the
Company's Automotive business segment for the three fiscal years ended September
30, 1996 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C>
Sales:
Heavy Vehicle Systems............................ $1,822 $1,929 $1,744
Light Vehicle Systems............................ 1,318 1,192 900
------ ------ ------
Total Automotive................................. $3,140 $3,121 $2,644
====== ====== ======
Operating Earnings............................... $ 218 $ 212 $ 114
====== ====== ======
</TABLE>
Heavy Vehicle Systems. Automotive's Heavy Vehicle Systems business is a
major global supplier of drivetrain components and systems for heavy- and
medium-duty commercial trucks, buses, trailers and off-highway vehicles, and
government heavy-duty wheeled vehicles. Major components include front steer
axles, single and tandem rear drive axles, trailer axles, clutches,
transmissions, drivelines, brakes, automatic slack adjusters and anti-lock
braking systems. North American factory sales of heavy-duty trucks totaled
205,000 units in fiscal 1996, compared with 244,000 the prior year. Sales of
medium-duty trucks, used primarily for short hauls and local delivery, were
126,000 units in fiscal 1996, compared with 150,000 in fiscal 1995. Trailer
sales were 266,000 units, compared with 321,000 in the previous year.
Light Vehicle Systems. The Company's Light Vehicle Systems business is a
leading supplier of roof, door, access control, seat adjusting and suspension
systems and wheels for the world's passenger car and light truck industries. The
Company is emphasizing products that provide added value to its customers by
concentrating its resources on the systems and electronics product lines. For
example, Rockwell is moving from providing just individual components toward
more comprehensive systems with various power and electronic options.
COMPETITIVE POSTURE
The Company competes with many manufacturers which, depending on the
product involved, range from large diversified enterprises comparable in scope
and resources to the Company to smaller companies specializing in particular
products. Factors which affect the Company's competitive posture are its
research and development efforts, the quality of its products and services and
its marketing and pricing strategies.
The products of the Company's Electronics business segment are sold by its
own sales force and through distributors and agents. The Company's automotive
components primarily are sold directly to original equipment manufacturers, some
of which also are competitors in that they produce for their own use many of the
products manufactured by the Company. Management believes that the Company is
one of the largest independent manufacturers of automotive components and parts
in North America.
GOVERNMENT CONTRACTS
The Avionics & Communications business supplies certain military equipment
to the United States government. In addition to normal business risks, companies
engaged in supplying military equipment to the United States government are
subject to unusual risks, including dependence on Congressional appropriations
and administrative allotment of funds, changes in governmental procurement
legislation and regulations and other policies which may reflect military and
political developments, significant changes in contract scheduling, complexity
of designs and the rapidity with which they become obsolete, constant necessity
for design improvements, intense competition for available United States
government business necessitating increases in time and investment for design
and development, difficulty of forecasting costs and schedules when bidding on
developmental and highly sophisticated technical work and other factors
characteristic of the industry. Changes are customary over the life of United
States government contracts, particularly development contracts, and generally
result in adjustments of contract prices.
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Moreover, various claims (whether based on United States government or
Company audits and investigations or otherwise) have been or may be instituted
or asserted against the Company related to its United States government contract
work, including claims based on business practices and cost classifications.
Although such claims are usually resolved by detailed fact-finding and
negotiation, on those occasions when they are not so resolved, civil or criminal
legal or administrative proceedings may ensue. Depending on the circumstances
and the outcome, such proceedings could result in fines, the cancellation of or
suspension of payments under one or more United States government contracts,
suspension or debarment proceedings affecting potential further business with
the United States government, or alteration of the Company's procedures relating
to the performance or obtaining of United States government contracts.
Management of the Company believes there are no claims, audits or investigations
currently pending which will have a material adverse effect on either the
Company's business or its financial condition.
ACQUISITIONS AND DISPOSITIONS
The Company regularly considers the acquisition or development of new
businesses and reviews the prospects of its existing businesses to determine
whether any of them should be modified, sold or otherwise discontinued. As a
result of the Reorganization, the Company has an extremely low debt to total
capital ratio, which enhances its ability, among other things, to make
acquisitions.
In September 1996, the Company acquired Brooktree for $278 million. The
Company also acquired several other businesses in fiscal 1996, at a net cost of
$68 million. In January 1995, the Company completed its acquisition of Reliance,
a major manufacturer of industrial products and telecommunications equipment,
for $1,066 million, net of proceeds from the sale of Reliance's
telecommunications business.
In October 1996, the Company sold its Graphic Systems business to an
affiliate of Stonington Partners, Inc. for approximately $600 million. On
December 6, 1996, the Company completed the divestiture of the A&D Business to
Boeing. The assets and liabilities of the Graphic Systems business and the A&D
Business have been classified on the Company's balance sheet as net assets
(liabilities) of discontinued operations and the net income (loss) from
operations of the Graphic Systems business and the A&D Business has been
reflected on the Company's statement of consolidated income as income from
discontinued operations.
GEOGRAPHIC INFORMATION
The Company conducts operations in the United States and in 37 foreign
countries. Selected financial information by major geographic area for the three
years ended September 30, 1996 is contained in Note 19 of the NOTES TO FINANCIAL
STATEMENTS in the Financial Statements.
The Company's principal markets outside the United States are in Australia,
Brazil, Canada, China, France, Germany, India, Italy, Japan, Korea, the
Netherlands, Southeast Asia, Spain and the United Kingdom. In addition to normal
business risks, operations outside the United States are subject to other risks
including, among other factors, the political, economic and social environments,
governmental laws and regulations, and currency revaluations and fluctuations.
RESEARCH AND DEVELOPMENT
The Company's Science Center conducts a basic research program to support
the strategies of the operating businesses and continues to provide research
services to the A&D Business at agreed rates. At September 30, 1996, the Company
employed approximately 7,052 professional engineers and scientists and 3,068
supporting technical personnel (excluding employees of the Graphic Systems
business and the A&D Business).
EMPLOYEES
At October 31, 1996, the Company had 58,639 employees (excluding employees
of the Graphic Systems business and the A&D Business), of whom 18,011 were
employed outside the United States.
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RAW MATERIALS AND SUPPLIES
Raw materials essential to the conduct of all the Company's business
segments generally are available at competitive prices. Many items of equipment
and components used in the production of the Company's products in all the
Company's business segments are purchased from others. In addition, the Avionics
& Communications business in the Electronics business segment generally
subcontracts major portions of systems. Although the Company has a broad base of
suppliers and subcontractors, it is dependent upon the ability of its suppliers
and subcontractors to meet performance and quality specifications and delivery
schedules.
ENVIRONMENTAL PROTECTION REQUIREMENTS
Information with respect to the effect on the Company and its manufacturing
operations of compliance with environmental protection requirements and
resolution of environmental claims is contained under the caption ENVIRONMENTAL
ISSUES in the MD&A on pages 15-16 hereof. See also Item 3, LEGAL PROCEEDINGS, on
pages 7-9 hereof.
PATENTS, LICENSES AND TRADEMARKS
Numerous patents and patent applications are owned or licensed by the
Company and utilized in its activities and manufacturing operations. Various
claims of patent infringement have been made against the Company. Management
believes that none of these claims will have a material adverse effect on the
consolidated financial statements of the Company. While in the aggregate the
Company's patents and licenses are considered important in the operation of its
business, management does not consider them of such importance that loss or
termination of any one of them would materially affect the Company's business.
The Company's name, its registered trademarks "Rockwell" and "Rockwell
International" and its symbol are important to all of its business segments. In
addition, the Company owns a large number of other important trademarks
applicable to only certain of its products, such as "Collins" for navigation and
communication equipment, "Allen-Bradley" and "A-B" for electronic controls and
systems for industrial automation and "Reliance" for electric motors and
mechanical power transmission products.
SEASONALITY
None of the Company's business segments is seasonal.
ITEM 2. PROPERTIES.
At September 30, 1996, and excluding facilities of the Graphic Systems
business and the A&D Business, the Company operated 162 plants and research and
development facilities throughout the United States and in Europe, Brazil,
Canada, India, Mexico, Australia and the Far East. It also had approximately 400
sales offices, warehouses and service centers. These facilities had an aggregate
floor space of approximately 32.2 million square feet. Of this floor space,
approximately 76.7% was owned by the Company and approximately 23.3% was leased.
At September 30, 1996, and excluding facilities of the Graphic Systems business
and the A&D Business, the Company had 400,000 square feet of floor space that
were not in use, all of which was in owned facilities. There are no major
encumbrances (other than financing arrangements which in the aggregate are not
material) on any of the Company's plants or equipment. In the opinion of
management, the Company's properties have been well maintained, are in sound
operating condition and contain all equipment and facilities
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necessary to operate at present levels. A summary of floor space of these
facilities at September 30, 1996 is as follows:
<TABLE>
<CAPTION>
OWNED LEASED
LOCATION AND SEGMENTS FACILITIES FACILITIES TOTAL
--------------------- ---------- ---------- -----
(IN MILLIONS OF SQUARE FEET)
<S> <C> <C> <C>
United States:
Automation............................................. 9.7 3.0 12.7
Avionics & Communications.............................. 3.6 0.7 4.3
Semiconductor Systems.................................. 0.5 0.3 0.8
Automotive............................................. 4.4 0.2 4.6
Europe:
Automation............................................. 0.3 1.4 1.7
Avionics & Communications.............................. -- 0.1 0.1
Semiconductor Systems.................................. -- -- --
Automotive............................................. 3.2 0.3 3.5
South America:
Automation............................................. -- 0.2 0.2
Avionics & Communications.............................. -- -- --
Semiconductor Systems.................................. -- -- --
Automotive............................................. 0.9 -- 0.9
Canada and other areas:
Automation............................................. 0.3 0.7 1.0
Avionics & Communications.............................. -- -- --
Semiconductor Systems.................................. 0.1 0.1 0.2
Automotive............................................. 1.5 0.1 1.6
Corporate Offices (including certain research and
development facilities)................................ 0.2 0.4 0.6
----- --- ----
Total.......................................... 24.7 7.5 32.2
===== === ====
</TABLE>
ITEM 3. LEGAL PROCEEDINGS.
Rocky Flats Plant. On January 30, 1990, a civil action was brought in the
United States District Court for the District of Colorado against the Company
and another former operator of the Rocky Flats Plant (the Plant), Golden,
Colorado, operated from 1975 through December 31, 1989 by the Company for the
Department of Energy (DOE). The action alleges the improper production, handling
and disposal of radioactive and other hazardous substances, constituting, among
other things, violations of various environmental, health and safety laws and
regulations, and misrepresentation and concealment of the facts relating
thereto. The plaintiffs, who purportedly represent two classes, sought
compensatory damages of $250 million for diminution in value of real estate and
other economic loss; the creation of a fund of $150 million to finance medical
monitoring and surveillance services; exemplary damages of $300 million; CERCLA
response costs in an undetermined amount; attorneys' fees; an injunction; and
other proper relief. On February 13, 1991, the court granted certain of the
motions of the defendants to dismiss the case. The plaintiffs subsequently filed
a new complaint, and on November 26, 1991, the court granted in part a renewed
motion to dismiss. The remaining portion of the case is pending before the
court. On October 8, 1993, the court certified separate medical monitoring and
property value classes. Effective August 1, 1996, the DOE assumed control of the
defense of the contractor defendants, including the Company, in the action.
Beginning on that date, the costs of the Company's defense, which had previously
been reimbursed to the Company by the DOE, have been and are being paid directly
by the DOE. The Company believes that it is entitled under applicable law and
its contract with the DOE to be indemnified for all costs and any liability
associated with this action.
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On November 13, 1990, the Company was served with a summons and complaint
in another civil action, which the Company believes is totally without merit,
brought against the Company in the same court by James Stone, claiming to act in
the name of the United States, alleging violations of the U.S. False Claims Act
in connection with the Company's operation of the Plant (and seeking treble
damages and forfeitures) as well as a personal cause of action for alleged
wrongful termination of employment, seeking reinstatement with back pay and
other unspecified damages. On August 8, 1991, the court dismissed the personal
cause of action. On February 2, 1994, the court denied Rockwell's motion to
dismiss the complaint for lack of subject matter jurisdiction, and discovery is
proceeding. On December 6, 1995, the DOE notified the Company that it would no
longer reimburse costs incurred by the Company in defense of the action. On
November 19, 1996, the court granted the Department of Justice leave to
intervene in the case on the government's behalf. The Company believes it is
entitled under applicable law and its contract with the DOE to be indemnified
for all costs and any liability associated with this action.
On January 8, 1991, the Company filed suit in the United States Claims
Court against the DOE, seeking recovery of $6.5 million of award fees to which
the Company alleges it is entitled under the terms of its contract with the DOE
for management and operation of the Plant during the period October 1, 1988
through September 30, 1989. On July 17, 1996, the government filed an amended
answer and counterclaim against the Company alleging violations of the U.S.
False Claims Act previously asserted in the civil action described in the
preceding paragraph. The Company believes the government's counterclaim is
without merit.
Hanford Nuclear Reservation. On August 6, 1990 and August 9, 1990, civil
actions were filed in the United States District Court for the Eastern District
of Washington against the Company and the present and other former operators of
the DOE's Hanford Nuclear Reservation (Hanford), Hanford, Washington. The
Company operated part of Hanford for the DOE from 1977 through June 1987. Both
actions purport to be brought on behalf of various classes of persons and
numerous individual plaintiffs who resided, worked, owned or leased real
property, or operated businesses, at or near Hanford or downwind or downriver
from Hanford, at any time since 1944. The actions allege the improper handling
and disposal of radioactive and other hazardous substances and assert various
statutory and common law claims. The relief sought includes unspecified
compensatory and punitive damages for personal injuries and for economic losses,
and various injunctive and other equitable relief.
Other cases asserting similar claims (the follow-on claims) on behalf of
the same and similarly situated individuals and groups have been filed from time
to time since August 1990, and may continue to be filed from time to time in the
future. These actions and the follow-on claims have been (and any additional
follow-on claims that may be filed are expected to be) consolidated in the
United States District Court for the Eastern District of Washington under the
name In re Hanford Nuclear Reservation Litigation. Because the claims and
classes of claimants included in the actions described in the preceding
paragraph are so broadly defined, the follow-on claims filed as of December 19,
1996 have not altered, and possible future follow-on claims are not expected to
alter, in any material respect the scope of the litigation.
Effective October 1, 1994, the DOE assumed control of the defense of
certain of the contractor defendants (including the Company) in the In re
Hanford Nuclear Reservation Litigation. Beginning on that date, the costs of the
Company's defense, which had previously been reimbursed to the Company by the
DOE, have been and are being paid directly by the DOE. The Company believes it
is entitled under applicable law and its contracts with the DOE to be
indemnified for all costs and any liability associated with these actions.
Other. On June 24, 1996, judgment was entered against the Company in a
civil action in the Circuit Court of Logan County, Kentucky on a jury verdict
awarding $8 million in compensatory and $210 million in punitive damages for
property damage. The action had been brought August 12, 1993 by owners of flood
plain real property near Russellville, Kentucky allegedly damaged by PCBs
discharged from a plant owned and operated by the Company's Measurement & Flow
Control Division prior to its divestiture in March 1989. The Company believes
that the verdict is unsupported by the evidence and, on July 3, 1996, moved for
judgment in its favor notwithstanding the verdict, or in the alternative, for a
new trial.
Various other lawsuits, claims and proceedings have been or may be
instituted or asserted against the Company relating to the conduct of its
business, including those pertaining to product liability, environmental,
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safety and health, intellectual property, employment, and government contract
matters. Although the outcome of litigation cannot be predicted with certainty
and some lawsuits, claims or proceedings may be disposed of unfavorably to the
Company, management believes the disposition of matters which are pending or
asserted will not have a material adverse effect on the Company's financial
statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of the 1996 fiscal year.
ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY.
The name, age, positions and offices held with the Company and principal
occupations and employment during the past five years of each of the executive
officers of the Company as of December 19, 1996 are as follows:
<TABLE>
<CAPTION>
NAME, OFFICE AND POSITION, AND PRINCIPAL OCCUPATIONS AND EMPLOYMENT AGE
------------------------------------------------------------------- ---
<S> <C>
DONALD R. BEALL--Chairman of the Board and Chief Executive Officer of
Rockwell................................................................... 58
DON H. DAVIS, JR.--President and Chief Operating Officer of Rockwell since
July 1995; Executive Vice President and Chief Operating Officer of Rockwell
from January 1994 to July 1995; Senior Vice President and President,
Automation of Rockwell from June 1993 to January 1994; President of
Allen-Bradley prior thereto................................................ 57
W. MICHAEL BARNES--Senior Vice President, Finance & Planning and Chief
Financial Officer of Rockwell.............................................. 54
WILLIAM J. CALISE, JR.--Senior Vice President, General Counsel and Secretary
of Rockwell since November 1994; senior partner of Chadbourne & Parke
(law firm) prior thereto .................................................. 58
LEE H. CRAMER--Vice President and Treasurer of Rockwell...................... 51
WILLIAM D. FLETCHER--Senior Vice President, Technology & Business Development
of Rockwell since June 1996; Senior Vice President, International of
Rockwell from October 1995 to June 1996; President, Asia-Pacific Sales
Region of Allen-Bradley from March 1995 to October 1995; President of the
Asia-Pacific Region of Allen-Bradley from June 1993 to March 1995; Senior
Vice President, International Group and Motion Control Division of
Allen-Bradley from January 1992 to June 1993; Senior Vice President,
International Group of Allen-Bradley prior thereto......................... 57
JODIE K. GLORE--Senior Vice President of Rockwell and President & Chief
Operating Officer-Rockwell Automation since October 1995; President of
Allen-Bradley from January 1994 to October 1995; Senior Vice President,
Automation Group (formerly Industrial Computer and Communication Group) of
Allen-Bradley from January 1992 to January 1994; Vice President, Sales and
Marketing of Square D Company (electrical distribution and industrial
control products) prior thereto............................................ 49
LAWRENCE J. KOMATZ--Vice President and Controller of Rockwell................ 54
THOMAS A. MADDEN--Vice President, Corporate Development of Rockwell since
September 1996; Vice President--Finance & Administration, Light Vehicle
Systems of Rockwell from May 1996 to September 1996; Vice
President--Finance & Administration, Automotive Business of Rockwell from
October 1994 to May 1996; Assistant Controller of Rockwell prior thereto... 43
ROBERT H. MURPHY--Senior Vice President since December 1996; Senior Vice
President, Organization and Human Resources of Rockwell prior thereto...... 58
WILLIAM A. SANTE, II--General Auditor of Rockwell............................ 53
JOHN R. STOCKER--Vice President, Law of Rockwell since November 1994; Vice
President and Associate General Counsel of Rockwell prior thereto.......... 55
</TABLE>
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<TABLE>
<CAPTION>
NAME, OFFICE AND POSITION, AND PRINCIPAL OCCUPATIONS AND EMPLOYMENT AGE
------------------------------------------------------------------- ---
<S> <C>
JOEL R. STONE--Senior Vice President, Organization and Human Resources of
Rockwell since December 1996; Vice President of Compensation & Benefits
of Rockwell prior thereto.................................................. 52
CHARLES C. STOOPS, JR.--General Tax Counsel of Rockwell...................... 63
EARL S. WASHINGTON--Senior Vice President, Communications of Rockwell since
September 1995; Vice President, Advertising and Public Relations of
Rockwell from March 1994 to September 1995; Vice President, Business
Development of Rockwell from June 1993 to March 1994; Vice President of
Strategic Management for Rockwell's Defense Electronics businesses from
June 1990 to June 1993 and Vice President of Transportation Systems of
Rockwell's Defense Electronics businesses from June 1992 to June 1993...... 51
</TABLE>
There are no family relationships, as defined, between any of the above
executive officers. No officer of the Company was selected pursuant to any
arrangement or understanding between him and any person other than the Company.
All executive officers are elected annually.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The principal market on which the Company's Common Stock, par value $1 per
share, is traded is the New York Stock Exchange. The Company's Common Stock, par
value $1 per share, is also traded on the Pacific Stock Exchange. There is no
trading market for the Company's Class A Common Stock, par value $1 per share,
but a sale may be effected by selling the Common Stock into which Class A Common
Stock is convertible. On December 9, 1996, there were 61,184 shareowners of
record of the Company's Common Stock and 44,685 shareowners of record of the
Company's Class A Common Stock.
The following table sets forth the high and low trading price of the
Company's Common Stock on the New York Stock Exchange--Composite Transactions
during each quarter of the Company's fiscal years ended September 30, 1996 and
1995:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
FISCAL QUARTERS HIGH LOW HIGH LOW
--------------- ---- --- ---- ---
<S> <C> <C> <C> <C>
First..................................... 53 44 36 7/8 33 5/8
Second.................................... 63 1/4 51 1/2 39 7/8 35
Third..................................... 60 1/4 55 47 1/8 38 3/4
Fourth.................................... 57 47 1/2 48 43
</TABLE>
During fiscal year 1996 the Company repurchased, through daily open-market
purchases, 0.9 million shares of Common Stock. Shares repurchased under the
Company's stock repurchase program are to be used for employee stock option and
other benefit and compensation plans, conversion of the Company's convertible
securities and other corporate purposes.
The following table sets forth the aggregate quarterly dividends per common
share (comprised of the Common Stock and Class A Common Stock) during each of
the Company's five fiscal years ended September 30, 1996:
<TABLE>
<CAPTION>
DIVIDENDS PER
FISCAL YEAR COMMON SHARE
----------- -------------
<S> <C>
1996.......................................................... $1.16
1995.......................................................... 1.08
1994.......................................................... 1.02
1993.......................................................... 0.96
1992.......................................................... 0.92
</TABLE>
10
<PAGE> 11
ITEM 6. SELECTED FINANCIAL DATA.
The following sets forth selected consolidated financial data of the
Company's businesses, excluding financial data pertaining to the A&D Business
and the Graphic Systems business and to certain indebtedness of the Company
retained by the A&D Business. The selected consolidated financial data have been
derived from the consolidated financial statements of the Company. The data
should be read in conjunction with the MD&A and the Financial Statements. The
income statement data for the five years ended September 30, 1996 and the
balance sheet data as of the same dates have been derived from the audited
consolidated financial statements of the Company.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
---------------------------------------------------
1996 1995 1994 1993 1992
------- ------ ------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales from continuing operations............... $10,373 $9,065 $7,029 $6,204 $5,856
Operating earnings............................. 1,248 953 667 593 479
Interest expense............................... 32 25 17 18 35
Income from continuing operations.............. 555 493 351 302 243
Earnings per share from continuing
operations................................... 2.55(1) 2.27 1.59 1.37 1.09
Cash dividends per share....................... 1.16 1.08 1.02 0.96 0.92
BALANCE SHEET DATA: (at end of period)
Total assets................................. $10,065 $9,229 $6,593 $6,298 $6,090
Long-term debt............................... 161 178 30 20 23
Shareowners' equity.......................... 4,256 3,782 3,356 2,956 2,778
</TABLE>
- ---------
(1) Includes 56 cents per share special charge for the write-off of purchased
research and development in connection with the acquisition of Brooktree.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
The sale of the A&D Business marks an important further step in the
transformation of Rockwell. The Company has shifted its strategic focus from
aerospace and defense to higher growth U.S. commercial and international
markets. Rockwell is now predominantly an electronics company, with 70 percent
of 1996 sales coming from its electronics businesses compared to 1984 when 63
percent of Rockwell's sales were aerospace and defense. Sales outside the United
States have grown to 43 percent of total sales in 1996 compared to 13 percent in
1984.
Over the past five years, the financial performance of Rockwell's
continuing businesses has been outstanding. Sales have grown at a 15 percent
average annual rate and operating earnings increased at a 27 percent average
annual rate. Earnings per share from continuing operations, excluding a one-time
acquisition-related charge in 1996 of 56 cents per share, have increased from
$1.09 per share in 1992 to $3.11 per share in 1996, an average annual increase
of 30 percent. Cash flow from these continuing businesses has been equally
impressive, with cash provided by operating activities increasing from $200
million in 1992 to $1.2 billion in 1996.
Rockwell's financial condition continues to be a strength that provides
substantial flexibility for its businesses to grow through internal investments
and acquisitions. The Company's debt to total capital ratio was a low 11 percent
at September 30, 1996, excluding the $2.165 billion of Rockwell debt assumed by
Boeing in its acquisition of the A&D Business. Year-end cash balances totaled
$700 million and further increased with the $600 million sale of the Graphic
Systems business in October, 1996.
Looking ahead, management has established long-term financial goals for
average annual sales growth of 8 percent and average annual earnings per share
growth of 15 percent. In addition, the Company was recapitalized in the
Reorganization, resulting in very low debt leverage, a major increase in
Rockwell's equity
11
<PAGE> 12
and a return on equity in the 14 percent range. The Company's plan is to
increase return on equity to 20 percent over the next three years.
RESULTS OF OPERATIONS
1996 Compared to 1995
Sales from Rockwell's continuing businesses in 1996 were up 14 percent to
$10.4 billion from $9.1 billion in 1995 led by significant increases in the
Automation, Semiconductor Systems and Automotive's Light Vehicle Systems
businesses. The composition of sales was as follows (in billions):
<TABLE>
<CAPTION>
1996 1995
----- ----
<S> <C> <C>
U.S. Commercial....................................................... $ 5.3 $4.5
International......................................................... 4.5 3.9
U.S. Government....................................................... .6 .7
----- ----
Total............................................................ $10.4 $9.1
===== ====
</TABLE>
Income from continuing operations in 1996, before a $121 million, or 56
cents per share, special charge, was $676 million, or $3.11 per share, a 37
percent increase over 1995's comparable income of $493 million, or $2.27 per
share. Including this charge, income from continuing operations in 1996 was $555
million, or $2.55 per share, an increase of 12 percent over 1995.
The 1996 one-time special charge was for the write-off of purchased
research and development in connection with the Company's acquisition of
Brooktree. In 1996 the Company also recorded a $77 million after-tax
restructuring charge related to a decision to exit several non-strategic product
lines and the costs associated with staff reductions in several businesses. This
charge was offset by favorable settlements of prior years' income tax and
insurance claims of $76 million after tax.
Continuing Operations
Sales and Earnings by Business Segment
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
---------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
SALES
Electronics
Automation............................. $ 4,165 $ 3,590 $ 2,085 $ 1,716 $ 1,471
Avionics & Communications.............. 1,475 1,468 1,419 1,407 1,503
Semiconductor Systems.................. 1,593 875 691 530 431
------- ------- ------- ------- -------
Total Electronics.................... 7,233 5,933 4,195 3,653 3,405
------- ------- ------- ------- -------
Automotive
Heavy Vehicle Systems.................. 1,822 1,929 1,744 1,455 1,373
Light Vehicle Systems.................. 1,318 1,192 900 893 896
------- ------- ------- ------- -------
Total Automotive..................... 3,140 3,121 2,644 2,348 2,269
------- ------- ------- ------- -------
Divested businesses....................... -- 11 190 203 182
------- ------- ------- ------- -------
Total sales.......................... $10,373 $ 9,065 $ 7,029 $ 6,204 $ 5,856
======= ======= ======= ======= =======
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
---------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
OPERATING EARNINGS
Electronics
Automation............................. $ 537 $ 481 $ 265 $ 193 $ 102
Avionics & Communications.............. 163 178 182 221 228
Semiconductor Systems.................. 330 113 98 57 26
------- ------- ------- ------- -------
Total Electronics.................... 1,030 772 545 471 356
Automotive................................ 218 212 114 135 107
Divested businesses....................... -- (31) 8 (13) 16
------- ------- ------- ------- -------
Operating earnings.......................... 1,248 953 667 593 479
Restructuring charge........................ (122) -- -- -- --
Purchased research and development.......... (121) -- -- -- --
General corporate--net...................... (77) (117) (82) (83) (54)
Interest expense............................ (32) (25) (17) (18) (35)
Provision for income taxes.................. (341) (318) (217) (190) (147)
------- ------- ------- ------- -------
Income from continuing operations...... $ 555 $ 493 $ 351 $ 302 $ 243
======= ======= ======= ======= =======
</TABLE>
The Company's Electronics businesses accounted for 70 percent of total 1996
sales and 83 percent of total operating earnings. Following is a discussion of
sales and earnings of Rockwell's continuing businesses.
Automation, Rockwell's largest business with 40 percent of total sales,
reported a 16 percent sales increase over 1995 with 7 percent due to stronger
worldwide markets and 9 percent due to the inclusion of Reliance sales for the
full year compared to nine months in 1995. Although growth in Automation's
served markets continued in 1996, the rate of growth in this industry slowed
from 1995's record levels. Automation's 1996 earnings increased 12 percent over
1995 due to higher sales and improved profit margins. Automation's earnings as a
percentage of sales increased each quarter during 1996, from 11.3 percent in the
first quarter to 14.3 percent in the fourth quarter.
Semiconductor Systems, Rockwell's fastest growing business, achieved an 82
percent increase in 1996 sales while earnings were triple 1995 earnings due to
strong customer demand for its very high speed personal computer modem chipsets.
For the year, Semiconductor Systems achieved an excellent 21 percent return on
sales compared to 13 percent in 1995. Semiconductor Systems operates in a
volatile industry, characterized by rapid technological advances and constantly
changing customer demand patterns. Participation in this industry requires
significant investments in research and development, frequent new product
introductions or enhancements, and aggressive pricing practices. Future sales
and earnings of this business are dependent on the continued successful
development of advanced technologies and timely introduction of new products.
While management does not see the Semiconductor Systems business sustaining the
dramatic sales and earnings growth rates achieved in 1996, it does expect
continued growth in 1997.
Avionics & Communications 1996 sales were up slightly from 1995 while
earnings were down 8 percent. Record sales and earnings by the business' General
Aviation division were more than offset by a charge resulting from the
bankruptcy of Fokker N.V. and higher commercial air transport research and
development expenditures. Strengthening in the commercial air transport market
during the second half of the fiscal year positions Avionics & Communications to
achieve strong sales and earnings improvements in 1997.
Automotive represents 30 percent of the Company's total sales. In 1996
Automotive's sales and earnings were slightly ahead of 1995 with a return on
sales of 7 percent compared to 6.8 percent in 1995. Within Automotive, earnings
of the Heavy Vehicle Systems business were up 7 percent with improved cost
performance in North America and gains on property sales more than offsetting a
significant sales and earnings decline in the Brazilian operations due to
depressed economic conditions. In the Light Vehicle Systems business, higher
volume related earnings were offset by new product launch costs in the roof and
seat systems operations. Sales for this business increased 11 percent in 1996.
13
<PAGE> 14
1995 Compared to 1994
Sales for 1995 increased $2 billion, or 29 percent, from 1994 sales. The
acquisition of Reliance in January 1995 contributed $1 billion to this sales
increase, while strong markets, new product introductions and increased market
share led to substantial sales increases by the Semiconductor Systems,
Automation, and Light and Heavy Vehicle Systems businesses. Avionics &
Communications 1995 sales were also up from 1994. International sales increased
29 percent over 1994.
Income from continuing operations for 1995 increased 40 percent over 1994.
Automation's 1995 earnings were up 82 percent over 1994, 45 percent due to
strong worldwide markets for Allen-Bradley products and 37 percent to the
inclusion of Reliance in 1995's results. Excluding Reliance, Automation posted
1995 sales increases of 19 percent in the United States, 36 percent in Canada,
38 percent in Asia-Pacific, 28 percent in Europe, and 26 percent in Latin
America.
Semiconductor Systems' earnings were 15 percent higher than 1994 due to
strong customer demand for its new high speed data modem chipsets which reached
full production during 1995's third quarter. In the fourth quarter,
Semiconductor Systems' earnings were more than three times higher than 1994's
fourth quarter earnings.
Avionics & Communications' 1995 earnings were approximately the same as
1994 as a result of significant investments in products to address the land
transportation electronics market being offset by strengthening commercial
avionics markets in the second half of 1995 and substantial completion of
development work on the Boeing 777 program.
Automotive's 1995 earnings were up 86 percent over 1994 due to sales
increases and improved operating performance in both its Heavy and Light Vehicle
Systems businesses, and lower Heavy Vehicle Systems product warranty costs.
Earnings of Heavy Vehicle Systems in 1995 more than doubled 1994's results,
while earnings of Light Vehicle Systems were up 32 percent over 1994.
Automotive's return on sales increased to 6.8 percent in 1995 compared to 4.3
percent in 1994.
INCOME TAXES
The Company's effective income tax rate from continuing operations in 1996
was 38 percent compared to 39.2 percent in 1995. A favorable $65 million
settlement of prior years' research and experimentation tax credit refund claim
reduced the current year's effective income tax rate by 7.2 percent. This
reduction was partially offset by a 4.7 percent increase in the effective income
tax rate due to the one-time write-off of purchased research and development,
which is not deductible for tax purposes.
At September 30, 1996, the Company had unrecognized tax benefits from
foreign net operating loss carryforwards of approximately $37 million. The
Company also had foreign tax credit carryforwards of approximately $52 million
and an unrecognized tax benefit from a capital loss carryforward of $45 million,
resulting from the sale of Reliance's telecommunications business. These tax
benefits generally expire between 1997 and 2001 and are available to reduce
future income taxes of the Company.
DISCONTINUED OPERATIONS
Discontinued operations consist of the A&D Business sold to Boeing and the
Graphic Systems business sold to an affiliate of Stonington Partners, Inc., as
well as the interest expense associated with the debt assumed by Boeing and
corporate expenses related to these businesses. The decrease in 1996 earnings
from discontinued operations primarily reflects a significant adverse contract
adjustment in the defense electronics business and losses in the commercial
printing press business.
FINANCIAL CONDITION
Bolstered by the excellent 1996 earnings performance of continuing
businesses, cash provided by operating activities rose to $1.2 billion compared
to $700 million in 1995. This is after funding the working
14
<PAGE> 15
capital needs of the businesses as well as record research and new product
development expenditures of $691 million.
The major use of cash in 1996 was $866 million for capital expenditures to
fund the growth of the Company's businesses. Substantially all the capital
expenditures were for facilities and equipment to support growth initiatives as
well as cost reduction and quality improvement programs. Nearly half of these
capital expenditures were spent by the Semiconductor Systems business. In July
1996, the Semiconductor Systems business announced that, due to current and
forecasted favorable pricing in the worldwide semiconductor silicon wafer
fabrication market, it delayed production start-up of a new facility currently
under construction in Colorado Springs, Colorado. The facility is now planned to
start production in 1998. For 1997 the Company's capital expenditures are
planned to be about $900 million with two-thirds being spent by the
Semiconductor Systems and Automation businesses.
The major use of cash in 1995 was the acquisition of Reliance for $1.1
billion (net of $475 million proceeds from the sale of its telecommunications
business). The largest acquisition in 1996 was Brooktree for $278 million.
Another use of the Company's cash is payment of dividends. In 1996 dividend
payments totaled a record $253 million, or 35 percent of net income.
RETIREMENT BENEFITS
The Company's retirement benefit payments over the next several years will
be significantly lower as a result of the sale of the A&D Business. Medical
payments for Rockwell retirees totaled $206 million in 1996, including $122
million for retirees of the A&D Business, for whom payment will in the future be
the responsibility of Boeing.
Rockwell's pension payments to retirees will be very low in 1997 since
Boeing has assumed the pension liabilities for substantially all of Rockwell's
U.S. employees who retired prior to January 1, 1996, as well as future pension
liabilities for the active employees of the A&D Business. Pension plan assets
substantially in excess of assumed pension liabilities were transferred to
Boeing. Rockwell's continuing pension plans remain overfunded and even though
current benefit payments are projected to be insignificant in the near future,
the Company intends to fund the plans on a regular basis.
ENVIRONMENTAL ISSUES
Federal, state and local requirements relating to the discharge of
substances into the environment, the disposal of hazardous wastes, and other
activities affecting the environment have had and will continue to have an
impact on the manufacturing operations of the Company. Thus far, compliance with
environmental requirements and resolution of environmental claims have been
accomplished without material effect on the Company's liquidity and capital
resources, competitive position, or financial statements.
The Company has been designated as a potentially responsible party at 31
Superfund sites, excluding sites as to which the Company's records disclose no
involvement or as to which the Company's potential liability has been finally
determined. Management estimates the total reasonably possible costs the Company
could incur for the remediation of Superfund sites at September 30, 1996 to be
about $52 million, of which $35 million has been accrued.
Various other lawsuits, claims, and proceedings have been asserted against
the Company alleging violations of federal, state and local environmental
protection requirements, or seeking remediation of alleged environmental
impairments, principally at previously disposed of properties. For these
matters, management has estimated the total reasonably possible costs the
Company could incur at September 30, 1996 to be about $140 million. The Company
has recorded environmental accruals for these matters of $112 million, of which
$50 million relate to Reliance.
A major portion of the $50 million accrual for Reliance's environmental
obligations is recoverable from Exxon Corporation, based on an agreement between
Exxon and Reliance whereby Exxon agreed to pay
15
<PAGE> 16
substantially all costs related to certain environmental matters. An offsetting
$19 million receivable from Exxon has been recorded at September 30, 1996. The
Company believes Reliance is entitled to indemnification from Exxon for an
additional $21 million of costs, but no receivable has been recorded since Exxon
is disputing its indemnification obligation.
Based on its assessment, management believes that the Company's
expenditures for environmental capital investment and remediation necessary to
comply with present regulations governing environmental protection and other
expenditures for the resolution of environmental claims will not have a material
adverse effect on the Company's liquidity and capital resources, competitive
position, or financial statements. Management cannot assess the possible effect
of compliance with future requirements.
CAUTIONARY STATEMENT
This Annual Report on Form 10-K contains statements relating to future
results of the Company (including certain projections and business trends) that
are "forward-looking statements" as defined in the Private Securities Litigation
Reform Act of 1995. Actual results may differ materially from those projected as
a result of certain risks and uncertainties, including but not limited to
changes in political and economic conditions; domestic and foreign government
spending, budgetary and trade policies; demand for and market acceptance of new
and existing products; successful development of advanced technologies; and
competitive product and pricing pressures, as well as other risks and
uncertainties, including but not limited to those described above in the
discussion of the Semiconductor Systems business under Results of Operations,
1996 Compared to 1995, on page 13 hereof and those detailed from time to time in
the filings of the Company with the Securities and Exchange Commission.
16
<PAGE> 17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
CONSOLIDATED BALANCE SHEET
(IN MILLIONS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------
ASSETS 1996 1995
------- ------
<S> <C> <C>
CURRENT ASSETS
Cash (includes time deposits and certificates of deposit:
1996, $432; 1995, $447)................................................. $ 715 $ 686
Receivables (less allowance for doubtful accounts:
1996, $98; 1995, $54)................................................... 1,661 1,547
Inventories............................................................... 1,780 1,596
Deferred income taxes..................................................... 306 222
Other current assets...................................................... 336 225
Net assets of Graphic Systems............................................. 560 569
------- ------
Total current assets............................................... 5,358 4,845
------- ------
PROPERTY
Land...................................................................... 101 87
Land and leasehold improvements........................................... 83 84
Buildings................................................................. 1,042 950
Machinery and equipment................................................... 2,881 2,586
Office and data processing equipment...................................... 663 592
Construction in progress.................................................. 486 274
------- ------
Total.............................................................. 5,256 4,573
Less accumulated depreciation............................................. 2,594 2,308
------- ------
Net property.............................................................. 2,662 2,265
------- ------
INTANGIBLE ASSETS......................................................... 1,809 1,861
------- ------
OTHER ASSETS.............................................................. 236 258
------- ------
TOTAL.............................................................. $10,065 $9,229
======= ======
</TABLE>
See notes to financial statements.
17
<PAGE> 18
CONSOLIDATED BALANCE SHEET
(IN MILLIONS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------
LIABILITIES AND SHAREOWNERS' EQUITY 1996 1995
------- ------
<S> <C> <C>
CURRENT LIABILITIES
Short-term debt........................................................... $ 350 $ 115
Accounts payable.......................................................... 1,220 1,081
Accrued compensation and benefits......................................... 508 454
Accrued income taxes...................................................... 154 113
Other current liabilities................................................. 740 565
Net liabilities of A&D Business........................................... 1,309 1,457
------- ------
Total current liabilities.......................................... 4,281 3,785
------- ------
LONG-TERM DEBT............................................................ 161 178
------- ------
ACCRUED RETIREMENT BENEFITS............................................... 1,096 1,129
------- ------
OTHER LIABILITIES......................................................... 271 355
------- ------
SHAREOWNERS' EQUITY
Common Stock (shares issued--209.5)....................................... 210 210
Class A Common Stock (shares issued: 1996, 27.9; 1995, 32.9).............. 28 33
Additional paid-in capital................................................ 199 187
Retained earnings......................................................... 4,466 4,158
Currency translation and pension adjustments.............................. (103) (99)
Common Stock in treasury, at cost (shares held:
1996, 18.9; 1995, 25.4)................................................. (544) (707)
------- ------
Total shareowners' equity................................................. 4,256 3,782
------- ------
TOTAL.............................................................. $10,065 $9,229
======= ======
</TABLE>
See notes to financial statements.
18
<PAGE> 19
STATEMENT OF CONSOLIDATED INCOME
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------
1996 1995 1994
------- ------ ------
<S> <C> <C> <C>
REVENUES
Sales............................................................ $10,373 $9,065 $7,029
Other income..................................................... 169 73 44
------- ------ ------
Total revenues................................................... 10,542 9,138 7,073
------- ------ ------
COSTS AND EXPENSES
Cost of sales.................................................... 7,877 6,991 5,455
Selling, general, and administrative............................. 1,494 1,311 1,033
Restructuring.................................................... 122 -- --
Purchased research and development............................... 121 -- --
Interest......................................................... 32 25 17
------- ------ ------
Total costs and expenses......................................... 9,646 8,327 6,505
------- ------ ------
Income from continuing operations before income taxes............ 896 811 568
Provision for income taxes....................................... 341 318 217
------- ------ ------
INCOME FROM CONTINUING OPERATIONS................................ 555 493 351
Income from discontinued operations.............................. 171 249 283
------- ------ ------
NET INCOME....................................................... $ 726 $ 742 $ 634
======= ====== ======
EARNINGS PER SHARE:
Continuing operations.......................................... $ 2.55 $ 2.27 $ 1.59
Discontinued operations........................................ .79 1.15 1.28
------- ------ ------
Net income..................................................... $ 3.34 $ 3.42 $ 2.87
======= ====== ======
AVERAGE SHARES OUTSTANDING....................................... 217.6 217.2 220.5
======= ====== ======
</TABLE>
See notes to financial statements.
19
<PAGE> 20
STATEMENT OF CONSOLIDATED CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
CONTINUING OPERATIONS:
OPERATING ACTIVITIES
Income from continuing operations.............................. $ 555 $ 493 $ 351
Adjustments to income from continuing operations to arrive at
cash provided by operating activities:
Depreciation................................................. 421 333 289
Amortization of intangible assets............................ 121 95 53
Deferred income taxes........................................ (124) (7) (27)
Pension expense, net of contributions........................ 98 68 53
Restructuring, net of expenditures........................... 111 -- --
Purchased research and development........................... 121 -- --
Changes in assets and liabilities, excluding effects of
acquisitions, divestitures, and foreign currency
adjustments:
Receivables............................................... (105) (162) (127)
Inventories............................................... (201) (141) (68)
Accounts payable.......................................... 114 154 146
Accrued income taxes...................................... 41 (96) 66
Other assets and liabilities.............................. 12 (27) 4
------- ------- -------
CASH PROVIDED BY OPERATING ACTIVITIES..................... 1,164 710 740
------- ------- -------
INVESTING ACTIVITIES
Property additions............................................. (866) (590) (470)
Acquisitions of businesses (net of cash acquired).............. (322) (1,158) (18)
Proceeds from the disposition of property and businesses....... 79 18 93
------- ------- -------
CASH USED FOR INVESTING ACTIVITIES........................ (1,109) (1,730) (395)
------- ------- -------
FINANCING ACTIVITIES
Increase (decrease) in short-term borrowings................... 232 (208) (68)
Payments of long-term debt..................................... (31) (44) (25)
Long-term borrowings........................................... -- 29 22
------- ------- -------
Net increase (decrease) in debt.............................. 201 (223) (71)
Purchase of treasury stock..................................... (48) (137) (155)
Dividends...................................................... (253) (235) (225)
Reissuance of common stock..................................... 42 50 38
------- ------- -------
CASH USED FOR FINANCING ACTIVITIES........................ (58) (545) (413)
------- ------- -------
CASH USED FOR CONTINUING OPERATIONS............................ (3) (1,565) (68)
------- ------- -------
DISCONTINUED OPERATIONS:
Operating activities......................................... 90 439 246
Investing activities......................................... (84) (104) (89)
Financing activities......................................... 26 1,295 (168)
------- ------- -------
CASH PROVIDED BY (USED FOR) DISCONTINUED OPERATIONS............ 32 1,630 (11)
------- ------- -------
INCREASE (DECREASE) IN CASH.................................... 29 65 (79)
------- ------- -------
CASH AT BEGINNING OF YEAR...................................... 686 621 700
------- ------- -------
CASH AT END OF YEAR............................................ $ 715 $ 686 $ 621
======= ======= =======
</TABLE>
See notes to financial statements.
20
<PAGE> 21
STATEMENT OF CONSOLIDATED SHAREOWNERS' EQUITY
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
COMMON STOCK (no shares issued during years)...................... $ 210 $ 210 $ 210
------ ------ ------
CLASS A COMMON STOCK
Beginning balance................................................. 33 37 42
Conversions into Common Stock..................................... (5) (4) (5)
------ ------ ------
Ending balance.................................................... 28 33 37
------ ------ ------
ADDITIONAL PAID-IN CAPITAL
Beginning balance................................................. 187 175 165
Exercise of stock options......................................... 12 12 10
------ ------ ------
Ending balance.................................................... 199 187 175
------ ------ ------
RETAINED EARNINGS
Beginning balance................................................. 4,158 3,762 3,472
Net income........................................................ 726 742 634
Dividends per common share (1996, $1.16; 1995, $1.08; 1994,
$1.02).......................................................... (253) (235) (225)
Treasury stock reissuances........................................ (165) (111) (119)
------ ------ ------
Ending balance.................................................... 4,466 4,158 3,762
------ ------ ------
CURRENCY TRANSLATION AND PENSION ADJUSTMENTS
Beginning balance................................................. (99) (97) (197)
Currency translation.............................................. (4) (2) 20
Pension adjustment................................................ -- -- 80
------ ------ ------
Ending balance.................................................... (103) (99) (97)
------ ------ ------
TREASURY STOCK
Beginning balance................................................. (707) (731) (736)
Purchases......................................................... (48) (137) (155)
Reissuances, principally Class A Common Stock conversions......... 211 161 160
------ ------ ------
Ending balance.................................................... (544) (707) (731)
------ ------ ------
TOTAL SHAREOWNERS' EQUITY......................................... $4,256 $3,782 $3,356
====== ====== ======
</TABLE>
See notes to financial statements.
21
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS
1. FINANCIAL STATEMENT PRESENTATION
During fiscal 1996, the Company entered into definitive agreements to sell
its Graphic Systems business to an affiliate of Stonington Partners, Inc. and to
merge the A&D Business with a subsidiary of Boeing. The Graphic Systems business
was sold in October 1996 for approximately $600 million. The merger of the
Company's A&D Business with Boeing was completed in December 1996. The Graphic
Systems business and the A&D Business are reflected in the financial statements
as discontinued operations for all periods presented (see Note 3).
The A&D Business was merged with a subsidiary of Boeing in a tax-free
transaction valued at approximately $3.2 billion, including the assumption by
Boeing of approximately $2.3 billion of liabilities, principally debt. Boeing
issued approximately $860 million of its stock in exchange for the Company's
shareowners' interest in the A&D Business.
Immediately prior to the merger, the Company transferred its Automation,
Avionics & Communications, Semiconductor Systems, and Automotive businesses to a
new company (New Rockwell), which has retained the Rockwell name, and is
reflected in the financial statements as the continuing operations of Rockwell
for all periods presented. Shares of New Rockwell were distributed to the
Company's shareowners on the effective date of the transaction on a one-for-one
share basis.
The financial statements have been prepared in accordance with generally
accepted accounting principles which require management to make estimates and
assumptions that affect the amounts reported in the financial statements. Actual
results could differ from those estimates. All significant intercompany accounts
and transactions have been eliminated. Certain prior year amounts have been
reclassified to conform with the current presentation.
Except as indicated, amounts reflected in the financial statements or
disclosed in the notes to financial statements relate to the Company's
continuing operations.
2. ACCOUNTING POLICIES
Inventories
Inventories are stated at the lower of cost (using LIFO, FIFO, or average
methods) or market (determined on the basis of estimated realizable values).
Property
Property is stated at cost. Depreciation of property is provided based on
estimated useful lives generally using accelerated and straight-line methods.
Significant renewals and betterments are capitalized and replaced units are
written off. Maintenance and repairs, as well as renewals of minor amount, are
charged to expense.
Intangible Assets
Goodwill represents the excess of the cost of purchased businesses over the
fair value of their net assets at the date of acquisition and is amortized by
the straight-line method over periods ranging from 10 to 40 years. Trademarks,
patents, product technology, and other intangibles are amortized on a
straight-line basis over their estimated useful lives, ranging from 5 to 40
years.
Management reviews periodically the realizability of goodwill and other
intangible assets based on an evaluation of remaining useful lives, cash flows,
and profitability projections and has determined that there is no impairment at
September 30, 1996.
22
<PAGE> 23
Environmental Matters
The Company records accruals for environmental issues in the accounting
period in which its responsibility is established and the cost can be reasonably
estimated. At environmental sites in which more than one potentially responsible
party has been identified, the Company records a liability for its allocable
share of costs related to its involvement with the site as well as an allocable
share of costs related to insolvent parties or unidentified shares. At
environmental sites in which the Company is the only responsible party, the
Company records a liability for the total estimated costs of remediation before
consideration of recovery from insurers or other third parties. If recovery from
a third party is determined to be probable, the Company records a receivable for
the estimated recovery.
Earnings Per Share
Earnings per common share are based on the weighted average number of
common shares outstanding during each year. The computation does not include a
negligible dilutive effect of stock options.
New Accounting Standards
The company has adopted Statement of Financial Accounting Standards (SFAS)
No. 121, "Accounting for the Impairment of Long-Lived Assets and For Long-Lived
Assets to Be Disposed Of." The adoption of this standard did not have a material
effect on the financial statements.
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock Based Compensation," which is effective for fiscal
year 1997. Under SFAS No. 123, companies can elect, but are not required, to
recognize compensation expense for all stock-based awards, using a fair value
methodology. The Company expects to implement in fiscal year 1997 the disclosure
only provisions, as permitted by SFAS No. 123.
In October 1996, the American Institute of Certified Public Accountants
issued Statement of Position No. 96-1, "Environmental Remediation Liabilities,"
which is effective for fiscal year 1998. The Company does not expect adoption of
this statement to have a material effect on the financial statements.
3. DISCONTINUED OPERATIONS
Discontinued operations includes the Graphic Systems business and the A&D
Business (see Note 1). The assets and liabilities of the A&D Business have been
classified on the balance sheet as net liabilities of the A&D Business and
consist of the following (in millions):
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------
1996 1995
------ ------
<S> <C> <C>
Receivables................................................................ $ 738 $ 799
Inventories................................................................ 327 251
Net property............................................................... 540 583
Prepaid pension costs...................................................... 1,261 1,158
Other assets............................................................... 238 253
------ ------
Total assets of A&D Business.......................................... 3,104 3,044
------ ------
Short-term debt............................................................ 565 539
Accounts payable and accrued liabilities................................... 782 833
Long-term debt............................................................. 1,597 1,597
Accrued retirement benefits................................................ 1,469 1,532
------ ------
Total liabilities of A&D Business..................................... 4,413 4,501
------ ------
Net liabilities of A&D Business....................................... $1,309 $1,457
====== ======
</TABLE>
Pursuant to the merger agreement, in addition to the A&D Business, Boeing
acquired certain Rockwell corporate property and United States pension plan
assets and assumed pension obligations related to certain
23
<PAGE> 24
former employees of the continuing businesses (see Note 15). Boeing also assumed
$2,165 million of the short- and long-term domestic borrowings of the Company
(see Notes 8 and 10). Accordingly, these amounts have been presented on the
balance sheet as net liabilities of the A&D Business. The net liabilities of the
A&D Business at the date of this transaction have been recorded as an increase
to additional paid-in capital in fiscal year 1997.
The assets and liabilities of the Graphic Systems business have been
classified on the balance sheet as net assets of Graphic Systems and consist of
the following (in millions):
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------
1996 1995
------- ------
<S> <C> <C>
Receivables............................................................... $ 169 $ 142
Inventories............................................................... 157 224
Other current assets...................................................... 50 44
Net property.............................................................. 140 178
Customer finance receivables.............................................. 174 203
Other assets.............................................................. 164 180
------- ------
Total assets of Graphic Systems......................................... 854 971
Accounts payable and accrued liabilities.................................. 294 402
------- ------
Net assets of Graphic Systems........................................... $ 560 $ 569
======= ======
</TABLE>
The net income (loss) from operations of the A&D Business and the Graphic
Systems business has been reflected on the statement of income as income from
discontinued operations. Summarized results of discontinued operations are as
follows (in millions):
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------
1996 1995 1994
---------------- ---------------- ----------------
GRAPHIC GRAPHIC GRAPHIC
A&D SYSTEMS A&D SYSTEMS A&D SYSTEMS
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Revenues................................. $3,089 $ 712 $3,244 $ 717 $3,458 $ 674
Income before income taxes............... 311 8 353 62 425 28
Income taxes............................. 133 15 141 25 159 11
Net income (loss)........................ 178 (7) 212 37 266 17
</TABLE>
The net loss for Graphic Systems for the year ended September 30, 1996
includes net income from operations of $3 million offset by a provision for loss
on the sale of $10 million.
The Graphic Systems business and the A&D Business utilized certain services
which are provided for all of the Company's businesses on a centralized basis,
including payroll administration, data processing, and telecommunications
services. These businesses were also allocated costs of centrally administered
programs, including employee medical claims and property and casualty insurance.
These costs were charged to businesses based on actual usage of these services
and programs and were $107 million, $150 million, and $180 million in 1996,
1995, and 1994, respectively.
These businesses also received other services provided by the Company,
including financial, legal, tax, corporate communications, and human resources.
The costs of these services are allowable overhead costs on government contracts
and, accordingly, have been included in the results of operations of the A&D
Business. These costs have been allocated to the A&D Business using a variety of
factors, including sales, assets, inventory, and payroll and were $35 million,
$32 million, and $40 million in 1996, 1995, and 1994, respectively. Management
believes that the methods of allocating costs to these businesses are
reasonable.
Interest expense of $159 million, $142 million, and $75 million in 1996,
1995, and 1994, respectively, has been allocated to the A&D Business based on
the actual interest expense associated with the borrowings assumed by Boeing.
24
<PAGE> 25
4. RESTRUCTURING
During 1996, the Company recorded restructuring charges of $122 million
before tax ($77 million after tax, or 35 cents per share). The restructuring
charges relate to a decision to exit non-strategic product lines involving
certain truck communications and intelligent transportation products, as well as
the costs associated with staff reductions in several businesses.
The provision includes asset impairments of $71 million, severance and
other employee costs of $35 million, and contractual commitments and other costs
of $16 million. As of September 30, 1996, the Company had expended $11 million
related to these actions, which are expected to be completed by the end of 1997.
5. ACQUISITION OF BUSINESSES
In September 1996, the Company acquired Brooktree, a designer and
manufacturer of digital and mixed-signal integrated circuits for computer
graphics, multimedia, imaging, and communications applications, for $278
million. The acquisition was accounted for as a purchase as of September 30,
1996 and the price allocation included a write-off of $121 million for purchased
research and development. The Company also acquired several other businesses in
1996 at a net cost of $68 million. Pro forma information is not presented as the
results of operations of Brooktree and the other acquisitions are not material
in relation to the Company's income from continuing operations.
In January 1995, the Company completed its acquisition of Reliance, a major
manufacturer of industrial products and telecommunications equipment, for $1,066
million, net of proceeds from the sale of Reliance's telecommunications
business. The acquisition of Reliance was accounted for as a purchase as of
December 31, 1994 and the results of operations, exclusive of the divested
telecommunications business, have been included in the statement of income since
that date.
The following unaudited pro forma information has been prepared assuming
Reliance had been acquired as of the beginning of the years presented. The pro
forma information is presented for informational purposes and is not necessarily
indicative of what would have occurred if the acquisition had been made as of
those dates. The pro forma information is not intended to be a projection of
future results.
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
------------------
PRO FORMA INFORMATION (UNAUDITED) (IN MILLIONS, EXCEPT PER SHARE) 1995 1994
------- ------
<S> <C> <C>
Revenues.................................................................. $ 9,467 $8,311
Net income................................................................ 742 600
Earnings per share........................................................ 3.42 2.72
</TABLE>
6. INVENTORIES
Inventories are summarized as follows (in millions):
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------
1996 1995
------- ------
<S> <C> <C>
Finished goods............................................................ $ 491 $ 456
Work in process........................................................... 880 749
Raw materials, parts, and supplies........................................ 466 445
------- ------
Total..................................................................... 1,837 1,650
Less allowance to adjust the carrying value of certain inventories (1996,
$737; 1995, $801) to a LIFO basis....................................... 57 54
------- ------
Inventories............................................................... $ 1,780 $1,596
======= ======
</TABLE>
25
<PAGE> 26
7. INTANGIBLE ASSETS
Intangible assets are summarized as follows (in millions):
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------
1996 1995
------- ------
<S> <C> <C>
Goodwill, less accumulated amortization (1996, $238; 1995, $200).......... $ 1,289 $1,328
Trademarks, patents, product technology, and other intangibles, less
accumulated amortization (1996, $371; 1995, $350)....................... 520 533
------- ------
Intangible assets......................................................... $ 1,809 $1,861
======= ======
</TABLE>
8. SHORT-TERM DEBT
Short-term debt consisted of the following (in millions):
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------
1996 1995
------- ------
<S> <C> <C>
Commercial paper.......................................................... $ 210 $ --
Short-term foreign bank borrowings........................................ 123 97
Current portion of long-term debt......................................... 17 18
------- ------
Short-term debt........................................................... $ 350 $ 115
======= ======
</TABLE>
Short-term debt of $565 million and $539 million at September 30, 1996 and
1995, respectively, has been included in net liabilities of the A&D Business as
Boeing assumed $565 million of short-term borrowings in connection with the
Reorganization (see Note 1).
Weighted average interest rates on the remaining short-term borrowings:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------
1996 1995
------- ------
<S> <C> <C>
Commercial paper.......................................................... 5.4% --
Short-term foreign bank borrowings........................................ 4.1% 4.6%
</TABLE>
At September 30, 1996, the Company had $1.5 billion of unsecured credit
facilities with various banks to support commercial paper borrowings. There were
no significant commitment fees or compensating balance requirements under these
facilities. Short-term credit facilities available to foreign subsidiaries
amounted to $505 million at September 30, 1996 and consisted of arrangements for
which there are no significant commitment fees.
9. OTHER CURRENT LIABILITIES
Other current liabilities are summarized as follows (in millions):
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------
1996 1995
------- ------
<S> <C> <C>
Accrued product warranties................................................ $ 215 $ 184
Contract reserves and advance payments.................................... 131 117
Accrued taxes other than income taxes..................................... 73 67
Other..................................................................... 321 197
------- ------
Other current liabilities................................................. $ 740 $ 565
======= ======
</TABLE>
26
<PAGE> 27
10. LONG-TERM DEBT
Long-term debt consisted of the following (in millions):
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------
1996 1995
------- ------
<S> <C> <C>
6.8% notes, payable in 2003............................................... $ 139 $ 138
Other obligations, principally foreign.................................... 39 58
------- ------
Total..................................................................... 178 196
Less current portion...................................................... 17 18
------- ------
Long-term debt............................................................ $ 161 $ 178
======= ======
</TABLE>
Long-term debt obligations of $1,597 million at September 30, 1996 and 1995
are included in net liabilities of the A&D Business as Boeing assumed
responsibility for these obligations in connection with the Reorganization (see
Note 1).
At September 30, 1996, aggregate maturities of long-term debt during the
five years ending September 30, 2001 were as follows (in millions): 1997, $17;
1998, $4; 1999, $3; 2000, $3; and 2001, $1.
11. FINANCIAL INSTRUMENTS
The Company's financial instruments include cash, short- and long-term
debt, and foreign currency forward exchange contracts. At September 30, 1996,
the carrying values of the Company's financial instruments approximated their
fair values based on current market prices and rates.
It is the policy of the Company not to enter into derivative financial
instruments for speculative purposes. The Company does enter into foreign
currency forward exchange contracts to protect itself from adverse currency rate
fluctuations on foreign currency commitments entered into in the ordinary course
of business. These commitments are generally for terms of less than one year.
The foreign currency forward exchange contracts are executed with creditworthy
banks and are denominated in currencies of major industrial countries. The
notional amount of all of the Company's outstanding foreign currency forward
exchange contracts aggregated $919 million and $681 million at September 30,
1996 and 1995, respectively. The Company does not anticipate any material
adverse effect on its results of operations or financial position relating to
these foreign currency forward exchange contracts.
12. CAPITAL STOCK
At September 30, 1996, the authorized stock of the Company consisted of 600
million shares of Common Stock and 200 million shares of Class A Common Stock,
each with a $1 par value, and 12 million shares of preferred stock without par
value. The Class A Common Stock was substantially identical to the Common Stock
except that each share of Class A Common Stock entitled the holder to ten votes
on all matters on which holders of Common Stock were entitled to vote, was not
transferable except in certain limited circumstances, and was convertible at any
time into Common Stock on a share-for-share basis. At September 30, 1996, 26
million shares of common stock were reserved for various employee incentive
plans.
In 1996, 117,821 shares of Series A and Series B preferred stock were
converted into common stock. The remaining 9,892 shares were redeemed by the
Company at prices of $100.00 per share for the Series A stock and $36.00 per
share for the Series B stock.
Changes in outstanding common shares are summarized as follows (in
millions):
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Beginning balance...................................................... 217.0 218.6 221.0
Treasury stock purchases............................................... (.9) (3.5) (4.1)
Other, principally stock option exercises.............................. 2.4 1.9 1.7
----- ----- -----
Ending balance......................................................... 218.5 217.0 218.6
===== ===== =====
</TABLE>
27
<PAGE> 28
Outstanding common stock at September 30, 1996 consisted of 190.6 million
shares of Common Stock and 27.9 million shares of Class A Common Stock.
As a result of the Reorganization, the Company is authorized to issue
1,000,000,000 shares of Common Stock and 100,000,000 shares of Class A Common
Stock, each with a $1 par value, and 25,000,000 shares of Preferred Stock
without par value. Shareowners of the Company received one share of New Rockwell
Common Stock and Class A Common Stock for each share held of Rockwell Common
Stock and Class A Common Stock, respectively, in connection with the
Reorganization. The terms of the New Rockwell Common Stock and Class A Common
Stock are substantially the same as those of the Rockwell Common Stock and Class
A Common Stock. Associated with each share of New Rockwell Common Stock and
Class A Common Stock is a Preferred Share Purchase Right (Right) pursuant to
which the holder of each such share of Common Stock and Class A Common Stock
may, in certain takeover-related circumstances, become entitled to purchase from
the Company 1/100 of a share of Series A Junior Participating Preferred Stock at
a price of $250. The terms and conditions of the Rights are set forth in a
Rights Agreement dated as of November 30, 1996 between the Company and
ChaseMellon Shareholder Services, L.L.C., as Rights Agent. The New Rockwell
Class A Common Stock will be automatically converted into New Rockwell Common
Stock on February 23, 1997.
13. EMPLOYEE STOCK OPTIONS
Options to purchase common stock of the Company have been granted under
various incentive plans to directors, officers and other key employees at
prices equal to or above the fair market value of such stock on the dates the
options were granted. The plans provide that the option price for certain
options granted under the plans may be paid in cash, the Company's common
stock, or a combination thereof. The options have vesting periods which range
from 1 to 3 years.
Information relative to employee stock options is as follows (shares in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Number of shares under option:
Outstanding at beginning of year................................ 10,363 10,336 9,676
Granted......................................................... 1,840 1,776 2,157
Exercised....................................................... (1,295) (1,713) (1,401)
Expired......................................................... (37) (36) (96)
------- ------- -------
Outstanding at end of year...................................... 10,871 10,363 10,336
======= ======= =======
Exercisable at end of year...................................... 8,594 8,601 8,222
======= ======= =======
The ranges of exercise prices per share for options outstanding at
September 30:
High.......................................................... $ 60.88 $ 46.75 $ 41.88
Low.......................................................... $ 16.75 $ 16.75 $ 16.75
</TABLE>
Options outstanding and exercisable at September 30, 1996 included 175,890
related to Class A Common Stock. Shares available for future grant or payment
under various incentive plans were 14.7 million at September 30, 1996.
Outstanding options expire at various dates from December 2, 1997 to July 10,
2006. None of the incentive plans presently permits options to be granted after
July 10, 2006.
In connection with the Reorganization, stock options of Rockwell were
converted into stock options of New Rockwell. The number of options and exercise
price of each option were adjusted to preserve the aggregate intrinsic value of
the options.
14. RETIREMENT MEDICAL PLANS
The Company has retirement medical plans which cover most of its United
States employees and provide for the payment of medical costs of eligible
employees and dependents upon retirement.
28
<PAGE> 29
Retirement medical expense for continuing operations consisted of the
following (in millions):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Service cost--benefits attributed to service during the year.......... $ 10 $ 9 $ 9
Interest accrued on accumulated retirement medical obligation......... 75 72 64
Amortization of plan amendments and net actuarial gains............... (18) (22) (21)
---- ---- ----
Retirement medical expense............................................ $ 67 $ 59 $ 52
==== ==== ====
</TABLE>
The Company's retirement medical obligation at September 30, 1996 and 1995
consisted of the following (in millions):
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Accumulated retirement medical obligation:
Retirees............................................................... $ 796 $ 753
Employees eligible to retire........................................... 88 99
Employees not eligible to retire....................................... 150 179
------ ------
Total............................................................... 1,034 1,031
Unamortized amounts:
Plan amendments........................................................ 83 98
Net actuarial losses................................................... (109) (106)
------ ------
Recorded liability....................................................... $1,008 $1,023
====== ======
Assumptions used (June 30 measurement date):
Discount rate.......................................................... 7.75% 7.5%
Health care cost trend rates........................................... 8.0%* 8.5%*
</TABLE>
* Decreasing to 5.5% after 2015
Retirement medical liabilities related to current and former employees of
the A&D Business of $1,453 million and $1,516 million are included in net
liabilities of the A&D Business at September 30, 1996 and 1995, respectively, as
Boeing assumed such liabilities in connection with the Reorganization.
Changing the health care cost trend rates by one percentage point would
change the accumulated retirement medical obligation at September 30, 1996 by
approximately $79 million and would change retirement medical expense by
approximately $8 million.
15. RETIREMENT PENSION PLANS
The Company has pension plans which cover most of its employees and provide
for monthly pension payments to eligible employees upon retirement. Pension
benefits for salaried employees generally are based on years of credited service
and average earnings. Pension benefits for hourly employees generally are based
on specified benefit amounts and years of service.
Net pension expense for continuing operations consisted of the following
(in millions):
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Service cost--benefits earned during the year...................... $ 80 $ 65 $ 60
Interest accrued on projected benefit obligation................... 284 269 238
Assumed return on plan assets...................................... (278) (261) (240)
Initial net asset amortization..................................... (23) (23) (23)
Prior service cost amortization.................................... 15 20 12
Net actuarial loss amortization.................................... 35 16 36
----- ----- -----
Net pension expense................................................ $ 113 $ 86 $ 83
===== ===== =====
</TABLE>
Pension plan assets are primarily equity securities, United States
Government obligations, and fixed income investments whose values are subject to
fluctuations of the securities market. The actual return on
29
<PAGE> 30
plan assets allocated to continuing operations was $627 million, $511 million,
and $52 million in 1996, 1995, and 1994, respectively. Differences between these
actual returns and the related assumed returns on plan assets are deferred and
considered in the determination of net pension income or expense in future
periods.
Pension plan obligations attributable to United States active employees of
continuing businesses as of January 1, 1996 and a proportionate share of pension
plan assets were transferred prior to the Reorganization from the Company's
United States pension plan to a newly-established New Rockwell pension plan.
Pension plan assets and obligations related to employees of the A&D Business and
all retirees of the Company's United States pension plan prior to January 1,
1996 have been classified as net liabilities of the A&D Business as the
remainder of the Company's United States pension plan was retained by the A&D
Business pursuant to the merger agreement with Boeing.
The following table reconciles the funded status of the assets and
liabilities attributable to the New Rockwell pension plan and the Company's
other overfunded pension plans to amounts recorded in the balance sheet (in
millions):
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Accumulated benefit obligation, principally vested......................... $1,516 $1,304
Effects of projected compensation increases................................ 282 271
------ ------
Projected benefit obligation............................................... 1,798 1,575
Fair value of plan assets.................................................. 1,869 1,522
------ ------
Plan assets in excess of (less than) projected benefit obligation.......... 71 (53)
Items not yet recognized in the balance sheet:
Net actuarial losses..................................................... 33 245
Prior service cost....................................................... 50 51
Remaining initial net asset.............................................. (68) (80)
------ ------
Prepaid pension costs at September 30...................................... $ 86 $ 163
====== ======
</TABLE>
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Assumptions used (June 30 measurement date):
Discount rate........................................................... 7.75% 7.5 %
Compensation increase rate.............................................. 4.5 % 4.5 %
Long-term rate of return on plan assets................................. 9.0 % 9.0 %
</TABLE>
The Company also sponsors certain defined contribution savings plans for
eligible employees. Expense related to these plans was $44 million, $35 million,
and $34 million for 1996, 1995, and 1994, respectively.
30
<PAGE> 31
16. INCOME TAXES
The components of the provision for income taxes are as follows (in
millions):
<TABLE>
<CAPTION>
1996 1995 1994
----- ---- ----
<S> <C> <C> <C>
Current:
United States...................................................... $ 364 $202 $138
Research and experimentation credit................................ (65) -- --
Foreign............................................................ 102 81 77
State and local.................................................... 64 42 29
----- ---- ----
Total current........................................................ 465 325 244
----- ---- ----
Deferred:
United States...................................................... (96) (15) (13)
Foreign............................................................ (13) 14 (4)
State and local.................................................... (15) (6) (10)
----- ---- ----
Total deferred....................................................... (124) (7) (27)
----- ---- ----
Provision for income taxes........................................... $ 341 $318 $217
===== ==== ====
</TABLE>
In July 1996, the Company reached an agreement with the Internal Revenue
Service concerning its research and experimentation tax credit refund claim for
the years 1981 though 1991. The settlement, pursuant to which the Company will
receive approximately $65 million, is subject to the approval of the Joint
Congressional Committee on Taxation.
Net deferred income tax benefits included in the balance sheet at September
30, 1996 and 1995 consist of the tax effects of temporary differences related to
the following (in millions):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Accrued compensation and benefits............................................. $105 $ 80
Accrued product warranties.................................................... 83 79
Inventory..................................................................... 38 (1)
Other--net.................................................................... 80 64
---- ----
Current deferred income taxes................................................. $306 $222
==== ====
</TABLE>
Net deferred income taxes included in Other Liabilities in the balance
sheet at September 30, 1996 and 1995 consist of the tax effects of temporary
differences related to the following (in millions):
<TABLE>
<CAPTION>
1996 1995
----- -----
<S> <C> <C>
Retirement benefits......................................................... $(315) $(340)
Property.................................................................... 201 221
Intangible assets........................................................... 126 116
Loss carryforwards.......................................................... (101) (46)
Foreign tax credit carryforwards............................................ (52) (57)
Other--net.................................................................. 9 121
----- -----
Subtotal.................................................................... (132) 15
Valuation allowance......................................................... 134 96
----- -----
Long-term deferred income taxes............................................. $ 2 $ 111
===== =====
</TABLE>
Management believes it is more likely than not that current and long-term
tax assets will be realized through the reduction of future taxable income.
Significant factors considered by management in its determination of the
probability of the realization of the deferred tax assets included: (a) the
historical operating results of the Company ($1.5 billion of United States
income from continuing operations before income taxes over the past three
years), (b) expectations of future earnings, and (c) the extended period of time
over which the retirement medical liability will be paid. The valuation
allowance represents the amount
31
<PAGE> 32
of tax benefits related to net operating loss, capital loss and foreign tax
credit carryforwards that have not yet been recognized. The carryforward period
for net operating losses expires between 1997 and 2004. The carryforward period
for foreign tax credits expires between 1997 and 2001. The tax benefit of a
capital loss carryforward resulting from the sale of Reliance's
telecommunications business was recorded during 1996 and is substantially offset
by a valuation allowance.
The consolidated effective tax rate was different from the United States
statutory rate for the reasons set forth below:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Statutory tax rate.................................................... 35.0% 35.0% 35.0%
State and local income taxes.......................................... 3.6 3.1 2.7
Foreign income taxes.................................................. 1.2 2.8 3.7
Non-deductible goodwill............................................... 1.4 2.1 .9
Utilization of foreign loss carryforwards............................. (.9 ) (2.0) (1.9)
Purchased research and development.................................... 4.7 -- --
Research and experimentation settlement............................... (7.2) -- --
Other................................................................. .2 (1.8) (2.2)
---- ---- ----
Effective tax rate.................................................... 38.0% 39.2% 38.2%
==== ==== ====
</TABLE>
The income tax provisions were calculated based upon the following
components of income from continuing operations before income taxes (in
millions):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
United States income.................................................. $545 $545 $374
Foreign income........................................................ 351 266 194
---- ---- ----
Total................................................................. $896 $811 $568
==== ==== ====
</TABLE>
No provision has been made for United States, state, or additional foreign
income taxes related to approximately $532 million of undistributed earnings of
foreign subsidiaries which have been or are intended to be permanently
reinvested.
The Company's United States income tax returns for the years 1989 through
1991 are currently under examination. Pursuant to the merger agreement with
Boeing, the Company has retained all tax liabilities and the right to all tax
refunds related to operations of the A&D Business for periods prior to the
merger. Management believes that adequate provision for income taxes has been
made for all years through 1996.
17. SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
STATEMENT OF CASH FLOWS INFORMATION (IN MILLIONS):
Interest payments on all borrowings................................. $198 $154 $ 98
Income taxes paid................................................... 604 448 299
STATEMENT OF INCOME INFORMATION (IN MILLIONS):
Maintenance and repairs............................................. $243 $182 $165
Research and development............................................ 691 608 571
Rental expense...................................................... 129 112 92
</TABLE>
Minimum future rental commitments under operating leases having
noncancelable lease terms in excess of one year aggregated $235 million as of
September 30, 1996 and are payable as follows (in millions): 1997, $65; 1998
$51; 1999, $38; 2000, $23; 2001, $15; and after 2001, $43.
32
<PAGE> 33
18. CONTINGENT LIABILITIES
Claims have been asserted against the Company for utilizing the
intellectual property rights of others in certain of the Company's products. The
resolution of these matters may result in the negotiation of a license
agreement, a settlement or the legal resolution of such claims. The Company
accrues the estimated cost of disposition of these matters. Management believes
that the resolution of these matters will not have a material adverse effect on
the Company's financial statements.
Various other lawsuits, claims and proceedings have been or may be
instituted or asserted against the Company relating to the conduct of its
business, including those pertaining to product liability, safety and health,
environmental, and employment matters. The Company has agreed to indemnify
Boeing and the A&D Business for certain government contract and environmental
matters related to operations of the A&D Business for periods prior to the
merger. Although the outcome of litigation cannot be predicted with certainty
and some lawsuits, claims, or proceedings may be disposed of unfavorably to the
Company, management believes the disposition of matters which are pending or
asserted will not have a material adverse effect on the Company's financial
statements.
19. BUSINESS SEGMENT INFORMATION
The Company's business segments are engaged in research, development, and
manufacture of diversified products as follows:
ELECTRONICS:
Automation--industrial automation equipment and systems, including
control logic, sensors, human-machine interface devices, motors, power
and mechanical devices, and software products.
Avionics & Communications--avionics products and systems and related
communications technologies primarily used in commercial and military
aircraft and defense electronic systems for command, control,
communications, and intelligence.
Semiconductor Systems--system-level semiconductor chipset solutions for
personal communication electronics markets, including chipsets for
facsimile and personal computer data modems, wireless communications
products such as global positioning systems, packet data, cordless and
cellular chipsets, and automated call distribution equipment.
AUTOMOTIVE--components and systems for heavy- and medium-duty trucks,
buses, trailers and heavy-duty off-highway vehicles (Heavy Vehicle Systems); and
components and systems for light trucks and passenger cars (Light Vehicle
Systems).
Divested businesses include the sales, operating results, and gains or
losses on the disposition of significant businesses and product lines. Divested
businesses include the Semiconductor Systems Local Area Networking product line
in 1995 and the Automotive Plastics business in 1994.
33
<PAGE> 34
The following tables summarize segment information (in millions):
SALES AND EARNINGS BY BUSINESS SEGMENT
<TABLE>
<CAPTION>
SALES
-----------------------------
YEAR ENDED SEPTEMBER 30,
-----------------------------
BUSINESS SEGMENT 1996 1995 1994
- ---------------- ------ ------ ------
<S> <C> <C> <C>
Electronics:
Automation.................................................... $ 4,165 $3,590 $2,085
Avionics & Communications..................................... 1,475 1,468 1,419
Semiconductor Systems......................................... 1,593 875 691
------- ------ ------
Total Electronics.......................................... 7,233 5,933 4,195
------- ------ ------
Automotive:
Heavy Vehicle Systems......................................... 1,822 1,929 1,744
Light Vehicle Systems......................................... 1,318 1,192 900
------- ------ ------
Total Automotive........................................... 3,140 3,121 2,644
------- ------ ------
Divested businesses............................................. -- 11 190
------- ------ ------
Total sales..................................................... $10,373 $9,065 $7,029
======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
EARNINGS
--------------------------
YEAR ENDED SEPTEMBER 30,
--------------------------
BUSINESS SEGMENT 1996 1995 1994
- ---------------- ------ ----- -----
<S> <C> <C> <C>
Electronics:
Automation...................................................... $ 537 $ 481 $ 265
Avionics & Communications....................................... 163 178 182
Semiconductor Systems........................................... 330 113 98
------ ----- -----
Total Electronics............................................ 1,030 772 545
Automotive........................................................ 218 212 114
Divested businesses............................................... -- (31) 8
------ ----- -----
Operating earnings................................................ 1,248 953 667
Restructuring charge.............................................. (122) -- --
Purchased research and development................................ (121) -- --
General corporate-net............................................. (77) (117) (82)
Interest expense.................................................. (32) (25) (17)
Provision for income taxes........................................ (341) (318) (217)
------ ----- -----
Income from continuing operations................................. $ 555 $ 493 $ 351
====== ===== =====
</TABLE>
Restructuring charge relates to the business segments as follows (in
millions): Automation, $11; Avionics & Communications, $60; Automotive, $36; and
General corporate-net, $15. Purchased research and development relates to the
acquisition of Brooktree, a Semiconductor Systems business.
34
<PAGE> 35
ASSET INFORMATION BY BUSINESS SEGMENT
<TABLE>
<CAPTION>
PROVISION FOR
DEPRECIATION AND
IDENTIFIABLE ASSETS AMORTIZATION
----------------------------- ------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
----------------------------- ------------------------
BUSINESS SEGMENT 1996 1995 1994 1996 1995 1994
- ---------------- ------- ------ ------ ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Electronics:
Automation.......................... $ 4,237 $4,254 $1,799 $234 $192 $121
Avionics & Communications........... 965 918 827 52 48 50
Semiconductor Systems............... 1,411 730 586 144 72 53
------- ------ ------ ---- ---- ----
Total Electronics................... 6,613 5,902 3,212 430 312 224
Automotive............................ 1,604 1,595 1,473 102 97 93
------- ------ ------ ---- ---- ----
Business segment totals............... 8,217 7,497 4,685 532 409 317
Corporate............................. 1,288 1,156 1,224 10 14 16
Divested businesses................... -- 7 30 -- 5 9
Net assets of Graphic Systems......... 560 569 654 -- -- --
------- ------ ------ ---- ---- ----
Total................................. $10,065 $9,229 $6,593 $542 $428 $342
======= ====== ====== ==== ==== ====
</TABLE>
Automation's assets include $1,184 million and $1,234 million of intangible
assets and goodwill related to the acquisition of Reliance at September 30, 1996
and 1995, respectively. Automation's provision for depreciation and amortization
includes $36 million and $27 million for the years ended September 30, 1996 and
1995, respectively, related to the amortization of Reliance intangible assets
and goodwill.
Corporate identifiable assets include cash and net deferred income tax
assets.
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES
-------------------------
YEAR ENDED SEPTEMBER 30,
-------------------------
BUSINESS SEGMENT 1996 1995 1994
- ---------------- ---- ---- ----
<S> <C> <C> <C>
Electronics:
Automation.......................................................... $229 $237 $120
Avionics & Communications........................................... 60 49 51
Semiconductor Systems............................................... 414 175 151
---- ---- ----
Total Electronics................................................... 703 461 322
Automotive............................................................ 152 119 102
---- ---- ----
Business segment totals............................................... 855 580 424
Corporate............................................................. 11 9 36
Divested businesses................................................... -- 1 10
---- ---- ----
Total................................................................. $866 $590 $470
==== ==== ====
</TABLE>
35
<PAGE> 36
SALES, EARNINGS AND ASSETS BY GEOGRAPHIC AREA
<TABLE>
<CAPTION>
SALES EARNINGS
----------------------------- --------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
----------------------------- --------------------------
1996 1995 1994 1996 1995 1994
------- ------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
United States...................... $ 7,841 $6,645 $4,977 $ 941 $ 726 $ 466
Canada............................. 628 592 454 75 70 85
Europe............................. 2,050 1,863 1,473 164 141 80
Asia-Pacific....................... 509 396 286 20 19 3
Latin America...................... 421 428 352 48 28 25
Divested businesses................ -- 11 190 -- (31) 8
Eliminations....................... (1,076) (870) (703) -- -- --
------- ------ ------ ------ ----- -----
Total.............................. $10,373 $9,065 $7,029 1,248 953 667
======= ====== ======
Restructuring charge............... (122) -- --
Purchased research and
development...................... (121) -- --
General corporate--net............. (77) (117) (82)
Interest expense................... (32) (25) (17)
Provision for income taxes......... (341) (318) (217)
------ ----- -----
Income from continuing
operations....................... $ 555 $ 493 $ 351
====== ===== =====
</TABLE>
United States sales include export sales to customers and international
subsidiaries of $1,947 million in 1996, $1,513 million in 1995, and $1,152
million in 1994. The 1996 export sales were to the following geographic areas:
Canada, $426 million; Europe, $557 million; Asia-Pacific, $870 million; and
Latin America, $94 million.
<TABLE>
<CAPTION>
IDENTIFIABLE ASSETS
---------------------------------------------------------------
SEGMENTS CORPORATE
---------------------------- ----------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
---------------------------- ----------------------------
GEOGRAPHIC AREA 1996 1995 1994 1996 1995 1994
- --------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
United States...................... $6,204 $5,641 $3,177 $ 651 $ 513 $ 641
Canada............................. 260 227 190 349 429 399
Europe............................. 1,143 1,103 921 147 141 151
Asia-Pacific....................... 314 267 185 60 62 32
Latin America...................... 296 259 212 81 11 1
Divested businesses................ -- 7 30 -- -- --
Net assets of Graphic Systems...... 560 569 654 -- -- --
------ ------ ------ ------ ------ ------
Total.............................. $8,777 $8,073 $5,369 $1,288 $1,156 $1,224
====== ====== ====== ====== ====== ======
</TABLE>
36
<PAGE> 37
20. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
1996 FISCAL QUARTERS
---------------------------------------
FIRST SECOND THIRD FOURTH 1996
------ ------ ------ ------ -------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Sales........................................ $2,385 $2,631 $2,696 $2,661 $10,373
Cost of sales................................ 1,810 2,009 2,047 2,011 7,877
Income from continuing operations before
special charge............................. 152 160 172 192 676
Income from continuing operations............ 152 160 172 71 555
Net income................................... 192 214 223 97 726
Earnings per share:
Continuing operations before special
charge.................................. $ .70 $ .74 $ .79 $ .88 $ 3.11
------ ------ ------ ------ -------
Continuing operations...................... $ .70 $ .74 $ .79 $ .32 $ 2.55
Discontinued operations.................... .19 .24 .23 .13 .79
------ ------ ------ ------ -------
Net income.............................. $ .89 $ .98 $ 1.02 $ .45 $ 3.34
====== ====== ====== ====== =======
</TABLE>
The fourth quarter and full year income from continuing operations includes
a $121 million, or 56 cents per share, write-off of purchased research and
development in connection with the acquisition of Brooktree.
<TABLE>
<CAPTION>
1995 FISCAL QUARTERS
---------------------------------------
FIRST SECOND THIRD FOURTH 1995
------ ------ ------ ------ -------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Sales........................................ $1,747 $2,348 $2,476 $2,494 $ 9,065
Cost of sales................................ 1,366 1,793 1,897 1,935 6,991
Income from continuing operations............ 93 133 152 115 493
Net income................................... 165 191 197 189 742
Earnings per share:
Continuing operations...................... $ .43 $ .61 $ .70 $ .53 $ 2.27
Discontinued operations.................... .33 .27 .20 .35 1.15
------ ------ ------ ------ -------
Net income.............................. $ .76 $ .88 $ .90 $ .88 $ 3.42
====== ====== ====== ====== =======
</TABLE>
37
<PAGE> 38
INDEPENDENT AUDITORS' REPORT
TO THE DIRECTORS AND SHAREOWNERS OF
ROCKWELL INTERNATIONAL CORPORATION:
We have audited the accompanying consolidated balance sheet of Rockwell
International Corporation and subsidiaries as of September 30, 1996 and 1995,
and the related consolidated statements of income, shareowners' equity, and cash
flows for each of the three years in the period ended September 30, 1996. Our
audit also included the financial statement schedule listed at Item 14(a)(2).
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Rockwell International
Corporation and subsidiaries at September 30, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended September 30, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedule when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
November 6, 1996 (December 6, 1996 as to the sale of the Aerospace and Defense
business to The Boeing Company described in Note 1)
38
<PAGE> 39
See also the table under the caption Continuing Operations, Sales and
Earnings by Business Segment in the MD&A on pages 12-13 hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
See the information under the captions ELECTION OF DIRECTORS and
INFORMATION AS TO NOMINEES FOR DIRECTORS AND CONTINUING DIRECTORS on pages 3-7
of the 1997 Proxy Statement. No nominee for director was selected pursuant to
any arrangement or understanding between the nominee and any person other than
the Company pursuant to which such person is or was to be selected as a director
or nominee. See also the information with respect to executive officers of the
Company under Item 4a of Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION.
See the information under the captions EXECUTIVE COMPENSATION, OPTION
GRANTS, AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END VALUES on pages 11-13
and RETIREMENT PLANS on pages 19-20 of the 1997 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
See the information under the captions VOTING SECURITIES and OWNERSHIP BY
MANAGEMENT OF EQUITY SECURITIES on pages 3 and 10, respectively, of the 1997
Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
See the information under the caption CERTAIN TRANSACTIONS AND OTHER
RELATIONSHIPS on page 9 of the 1997 Proxy Statement.
39
<PAGE> 40
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Financial Statements, Financial Statement Schedules and Exhibits.
(1) Financial Statements (all financial statements listed below are
those of the Company and its consolidated subsidiaries).
Consolidated Balance Sheet, September 30, 1996 and 1995.
Statement of Consolidated Income, years ended September 30, 1996,
1995 and 1994.
Statement of Consolidated Cash Flows, years ended September 30,
1996, 1995 and 1994.
Statement of Consolidated Shareowners' Equity, years ended September
30, 1996, 1995 and 1994.
Notes to Financial Statements.
Independent Auditors' Report.
Sales and Earnings by Business Segment, years ended September 30,
1992 through 1996.
(2) Financial Statement Schedule for the years ended September 30, 1996,
1995 and 1994.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Schedule II--Valuation and Qualifying Accounts...................... S-1
</TABLE>
Schedules not filed herewith are omitted because of the absence of
conditions under which they are required or because the information
called for is shown in the financial statements or notes thereto.
(3) Exhibits.
<TABLE>
<S> <C>
3-a-1 Restated Certificate of Incorporation of the Company, as amended.
3-b-1 By-Laws of the Company.
4-a-1 Rights Agreement between the Company and ChaseMellon Shareholder
Services, L.L.C., as rights agent, dated as of November 30, 1996,
filed as Exhibit 4-c to Registration Statement No. 333-17031, is
hereby incorporated by reference.
4-b-1 Indenture dated as of April 1, 1993 between Reliance and Bankers Trust
Company, as Trustee, pursuant to which the 6.8% Notes of Reliance due
April 15, 2003 have been issued, filed as Exhibit 4.7 to Registration
Statement No. 33-60066, is hereby incorporated by reference.
4-b-2 First Supplemental Indenture dated April 14, 1993 to the Indenture
listed as Exhibit 4-b-1 above, filed as Exhibit 4.1 to Current Report
on Form 8-K of Reliance dated April 19, 1993, is hereby incorporated
by reference.
4-b-3 Form of the 6.8% Notes of Reliance due April 15, 2003, filed as
Exhibit 4-8 to Registration Statement No. 33-60066, is hereby
incorporated by reference.
*10-a-1 Copy of the Company's 1979 Stock Plan for Key Employees, as amended,
filed as Exhibit 4-d-1 to Registration Statement No. 33-11946, is
hereby incorporated by reference.
</TABLE>
- ---------
* Management contract or compensatory plan or arrangement.
40
<PAGE> 41
<TABLE>
<S> <C>
*10-a-2 Forms of Stock Option and Stock Appreciation Rights Agreements under
the Company's 1979 Stock Plan for Key Employees, as amended, for
options and stock appreciation rights granted after December 1, 1987,
filed as Exhibit 10-b-7 to the Company's Annual Report on Form 10-K
for the year ended September 30, 1987, are hereby incorporated by
reference.
*10-a-3 Copy of resolution of the Board of Directors of the Company, adopted
May 7, 1980, adjusting the number of shares subject to outstanding
options and stock appreciation rights under the Company's 1979 Stock
Option Plan for Key Employees (now the 1979 Stock Plan for Key
Employees, as amended) and the number of shares transferable under the
Company's Incentive Compensation Plan, filed as Exhibit 10-d-2 to the
Company's Annual Report on Form 10-K for the year ended September 30,
1987, is hereby incorporated by reference.
*10-a-4 Copy of resolution of the Board of Directors of the Company, adopted
May 4, 1983, adjusting the number of shares subject to outstanding
options and stock appreciation rights under the Company's 1979 Stock
Plan for Key Employees, as amended, filed as Exhibit 4-e-5 to
Registration Statement No. 33-11946, is hereby incorporated by
reference.
*10-a-5 Copy of resolution of the Board of Directors of the Company, adopted
February 11, 1987, adjusting the number of shares subject to
outstanding options and stock appreciation rights under the Company's
1979 Stock Plan for Key Employees, as amended, filed as Exhibit 4-e-6
to Registration Statement No. 33-11946, is hereby incorporated by
reference.
*10-b-1 Copy of the Company's 1988 Long-Term Incentives Plan, as amended
through November 30, 1994, filed as Exhibit 10-d-1 to the Company's
Annual Report on Form 10-K for the year ended September 30, 1994, is
hereby incorporated by reference.
*10-b-2 Forms of Stock Option Agreements under the Company's 1988 Long-Term
Incentives Plan for options granted prior to May 1, 1992, filed as
Exhibit 10-d-2 to the Company's Annual Report on Form 10-K for the
year ended September 30, 1988, are hereby incorporated by reference.
*10-b-3 Forms of Stock Option and Stock Appreciation Rights Agreements under
the Company's 1988 Long-Term Incentives Plan for options and stock
appreciation rights granted prior to May 1, 1992, filed as Exhibit
10-d-3 to the Company's Annual Report on Form 10-K for the year ended
September 30, 1988, are hereby incorporated by reference.
*10-b-4 Form of Stock Option Agreement under the Company's 1988 Long-Term
Incentives Plan for options granted after May 1, 1992 and prior to
March 1, 1993, filed as Exhibit 28-a-1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1992, is hereby
incorporated by reference.
*10-b-5 Forms of Stock Option Agreement under the Company's 1988 Long-Term
Incentives Plan for options granted after March 1, 1993 and prior to
November 1, 1993, filed as Exhibit 28-a to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1993, are hereby
incorporated by reference.
*10-b-6 Forms of Stock Option Agreement under the Company's 1988 Long-Term
Incentives Plan for options granted after November 1, 1993 and prior
to December 1, 1994, filed as Exhibit 10-d-6 to the Company's Annual
Report on Form 10-K for the year ended September 30, 1993, are hereby
incorporated by reference.
</TABLE>
- ---------
* Management contract or compensatory plan or arrangement.
41
<PAGE> 42
<TABLE>
<S> <C>
*10-b-7 Forms of Stock Option Agreement under the Company's 1988 Long-Term
Incentives Plan for options granted after December 1, 1994, filed as
Exhibit 10-d-7 to the Company's Annual Report on Form 10-K for the
year ended September 30, 1994, are hereby incorporated by reference.
*10-c-1 Copy of the Company's 1995 Long-Term Incentives Plan, filed as Exhibit
10-e-1 to the Company's Annual Report on Form 10-K for the year ended
September 30, 1994, is hereby incorporated by reference.
*10-c-2 Forms of Stock Option Agreement under the Company's 1995 Long-Term
Incentives Plan, filed as Exhibit 10-e-2 to the Company's Annual
Report on Form 10-K for the year ended September 30, 1994, are hereby
incorporated by reference.
*10-c-3 Copy of resolution of the Board of Directors of the Company, adopted
September 11, 1996, amending the Company's 1995 Long-Term Incentives
Plan, filed as Exhibit 10-c-2 to Registration Statement No. 333-14969,
is hereby incorporated by reference.
*10-d-1 Copy of the Company's Directors Stock Plan, as amended, filed as
Exhibit B to the Company's Proxy Statement for its 1996 Annual Meeting
of Shareowners, is hereby incorporated by reference.
*10-d-2 Form of Stock Option Agreement under the Company's Directors Stock
Plan, filed as Exhibit 10-d to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1996, is hereby incorporated by
reference.
*10-d-3 Copy of Restricted Stock Agreement dated February 7, 1996 between the
Company and William H. Gray, III, filed as Exhibit 10-a to the
Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1996, is hereby incorporated by reference.
*10-d-4 Copy of Restricted Stock Agreement dated February 7, 1996 between the
Company and J. Clayburn La Force, Jr., filed as Exhibit 10-b to the
Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1996, is hereby incorporated by reference.
*10-d-5 Copy of Restricted Stock Agreement dated February 7, 1996 between the
Company and William T. McCormick, Jr., filed as Exhibit 10-c to the
Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1996, is hereby incorporated by reference.
*10-e-1 Copy of resolution of the Board of Directors of the Company, adopted
November 6, 1996, amending the Company's 1988 Long-Term Incentives
Plan and 1995 Long-Term Incentives Plan, filed as Exhibit 4-g-1 to
Registration Statement No. 333-17055, is hereby incorporated by
reference.
*10-e-2 Copy of resolution of the Board of Directors of the Company, adopted
November 6, 1996, adjusting outstanding awards under the Company's (i)
1979 Stock Plan for Key Employees, (ii) 1988 Long-Term Incentives
Plan, (iii) 1995 Long-Term Incentives Plan and (iv) Directors Stock
Plan, filed as Exhibit 4-g-2 to Registration Statement No. 333-17055,
is hereby incorporated by reference.
*10-f-1 Copy of the Company's Incentive Compensation Plan, as amended through
December 6, 1995, filed as Exhibit 10-f-1 to Registration Statement
No. 333-14969, is hereby incorporated by reference.
*10-g-1 Copy of the Company's Deferred Compensation Plan, as amended effective
as of October 1, 1992, filed as Exhibit 10-g-1 to the Company's Annual
Report on Form 10-K for the year ended September 30, 1993, is hereby
incorporated by reference.
</TABLE>
- ---------
* Management contract or compensatory plan or arrangement.
42
<PAGE> 43
<TABLE>
<S> <C>
*10-h-1 Copy of resolution of the Board of Directors of the Company, adopted
November 6, 1996, authorizing the assignment of certain compensation
and employee benefit plans to New Rockwell International Corporation,
including the Company's (i) 1979 Stock Plan for Key Employees, (ii)
1988 Long-Term Incentives Plan, (iii) 1995 Long-Term Incentives Plan,
(iv) Directors Stock Plan, (v) Incentive Compensation Plan, (vi)
Deferred Compensation Plan and (vii) Annual Incentive Compensation
Plan for Senior Executive Officers, filed as Exhibit 4-g-3 to
Registration Statement No. 333-17055, is hereby incorporated by
reference.
*10-h-2 Copy of resolution of the Board of Directors of New Rockwell
International Corporation, adopted December 4, 1996, assuming and
adopting the Company's (i) 1979 Stock Plan for Key Employees, (ii)
1988 Long-Term Incentives Plan, (iii) 1995 Long-Term Incentives Plan,
(iv) Directors Stock Plan, (v) Incentive Compensation Plan, (vi)
Deferred Compensation Plan and (vii) Annual Incentive Compensation
Plan for Senior Executive Officers.
*10-i-1 Copy of resolutions of the Board of Directors of the Company, adopted
November 3, 1993, providing for the Company's Deferred Compensation
Policy for Non-Employee Directors, filed as Exhibit 10-h-1 to the
Company's Annual Report on Form 10-K for the year ended September 30,
1994, is hereby incorporated by reference.
*10-i-2 Copy of resolutions of the Compensation Committee of the Board of
Directors of the Company, adopted July 6, 1994, modifying the
Company's Deferred Compensation Policy for Non-Employee Directors,
filed as Exhibit 10-h-2 to the Company's Annual Report on Form 10-K
for the year ended September 30, 1994, is hereby incorporated by
reference.
*10-i-3 Copy of resolutions of the Board of Directors of New Rockwell
International Corporation, adopted December 4, 1996, providing for its
Deferred Compensation Policy for Non-Employee Directors.
*10-j-1 Copy of resolutions of the Board of Directors of the Company, adopted
November 2, 1994, providing for the Company's Retirement Policy for
Non-Employee Directors, filed as Exhibit 10-j-1 to the Company's
Annual Report on Form 10-K for the year ended September 30, 1994, is
hereby incorporated by reference.
*10-j-2 Copy of resolutions of the Board of Directors of the Company, adopted
December 6, 1995, rescinding the Company's Retirement Policy for
Non-Employee Directors (except to the extent applicable to Directors
then age 67 or older and former Directors then retired), filed as
Exhibit 10-j-2 to the Company's Annual Report on Form 10-K for the
year ended September 30, 1995, is hereby incorporated by reference.
*10-j-3 Copy of resolution of the Board of Directors of New Rockwell
International Corporation, adopted December 4, 1996, assuming and
adopting the Company's Retirement Policy for Non-Employee Directors
(applicable to Directors of the Company who were age 67 or older on
December 6, 1995 and former Directors then retired).
*10-k-1 Copy of the Company's Annual Incentive Compensation Plan for Senior
Executive Officers, filed as Exhibit A to the Company's Proxy
Statement for its 1996 Annual Meeting of Shareowners, is hereby
incorporated by reference.
</TABLE>
- ---------
* Management contract or compensatory plan or arrangement.
43
<PAGE> 44
<TABLE>
<S> <C>
*10-l-1 Restricted Stock Agreement dated December 6, 1995 between the Company
and Don H. Davis, Jr., filed as Exhibit 10-l-1 to the Company's Annual
Report on Form 10-K for the year ended September 30, 1995, is hereby
incorporated by reference.
*10-m-1 Copy of letter dated February 1, 1995 from the Company to Judith L.
Estrin, filed as Exhibit 10 to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1995, is hereby incorporated by
reference.
11 Computation of Earnings Per Share for the Five Years Ended September
30, 1996.
21 List of Subsidiaries of the Company.
23 Independent Auditors' Consent.
24 Powers of Attorney authorizing certain persons to sign this Annual
Report on Form 10-K on behalf of certain directors and officers of the
Company.
27 Financial Data Schedule for this Annual Report on Form 10-K.
</TABLE>
- ---------
* Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the last quarter of the period
covered by this Report.
44
<PAGE> 45
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
ROCKWELL INTERNATIONAL CORPORATION
By /s/ WILLIAM J. CALISE, JR.
-------------------------------
WILLIAM J. CALISE, JR.
SENIOR VICE PRESIDENT, GENERAL COUNSEL
AND SECRETARY
Dated: December 19, 1996
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW ON THE 19TH DAY OF DECEMBER 1996 BY THE FOLLOWING
PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED.
<TABLE>
<S> <C>
DONALD R. BEALL*
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER) AND DIRECTOR
DON H. DAVIS, JR.*
DIRECTOR
LEW ALLEN, JR.*
DIRECTOR
RICHARD M. BRESSLER*
DIRECTOR
JOHN J. CREEDON*
DIRECTOR
JUDITH L. ESTRIN*
DIRECTOR
WILLIAM H. GRAY, III*
DIRECTOR
JAMES CLAYBURN LA FORCE, JR.*
DIRECTOR
WILLIAM T. MCCORMICK, JR.*
DIRECTOR
JOHN D. NICHOLS*
DIRECTOR
BRUCE M. ROCKWELL*
DIRECTOR
WILLIAM S. SNEATH*
DIRECTOR
JOSEPH F. TOOT, JR.*
DIRECTOR
W. MICHAEL BARNES*
SENIOR VICE PRESIDENT, FINANCE & PLANNING AND
CHIEF FINANCIAL OFFICER (PRINCIPAL FINANCIAL
OFFICER)
LAWRENCE J. KOMATZ*
VICE PRESIDENT AND CONTROLLER (PRINCIPAL ACCOUNTING
OFFICER)
</TABLE>
*By /s/ WILLIAM J. CALISE, JR.,
----------------------------------------------
WILLIAM J. CALISE, JR., ATTORNEY-IN-FACT**
** BY AUTHORITY OF POWERS OF ATTORNEY FILED HEREWITH.
45
<PAGE> 46
SCHEDULE II
ROCKWELL INTERNATIONAL CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED BALANCE AT
BEGINNING COSTS AND TO OTHER END OF
DESCRIPTION OF YEAR(A) EXPENSES ACCOUNTS(B) DEDUCTIONS YEAR(A)
- ----------- ---------- ---------- ----------- ---------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Year ended September 30, 1996:
Allowance for doubtful accounts.... $ 78.3 $ 55.9 $ 0.1 $ 13.2(c) $125.1
(4.0)(d)
Year ended September 30, 1995:
Allowance for doubtful accounts.... $ 46.2 $ 15.5 $ 0.1 $ 5.3(c) $ 78.3
(21.8)(d)
Year ended September 30, 1994:
Allowance for doubtful accounts.... $ 35.3 $ 13.6 $ 1.1 $ 7.0(c) $ 46.2
(3.2)(d)
</TABLE>
- ---------------
(a) Includes allowances for commercial and other long-term receivables.
(b) Collection of accounts previously written off.
(c) Uncollectible accounts written off.
(d) Consists principally of amounts relating to businesses acquired, businesses
sold and foreign currency translation adjustments.
S-1
<PAGE> 1
EXHIBIT 3-a-1
RESTATED
CERTIFICATE OF INCORPORATION
OF
ROCKWELL INTERNATIONAL CORPORATION
(As Amended December 6, 1996)
FIRST: The name of the Corporation is
ROCKWELL INTERNATIONAL CORPORATION
SECOND: The Corporation's registered office in the State of Delaware is located
at 1209 Orange Street, in the City of Wilmington, County of New Castle. The
name and address of its registered agent is The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801.
THIRD: The nature of the business, or objects or purposes to be transacted,
promoted or carried on, are: To engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of Delaware.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have the authority to issue is 1,125,000,000, of which
25,000,000 shares without par value are to be of a class designated Preferred
Stock, 1,000,000,000 shares of the par value of $1 each are to be of a class
designated Common Stock, and 100,000,000 shares of the par value of $1 each are
to be of a class designated Class A Common Stock, subject, however, to the
provisions of paragraph 3.4 below.
In this Article Fourth, any reference to a section or paragraph, without
further attribution, within a provision relating to a particular class of stock
is intended to refer solely to the specified section or paragraph of the other
provisions relating to the same class of stock.
COMMON STOCK AND CLASS A COMMON STOCK
The Common Stock and Class A Common Stock shall have the following
voting powers, designations, preferences and relative, participating,
optional and other special rights, and qualifications, limitations or
restrictions thereof:
<PAGE> 2
1. Dividends.
1.1. Whenever the full dividends upon any outstanding Preferred Stock
for all past dividend periods shall have been paid and the full
dividends thereon for the then current respective dividend periods
shall have been paid, or declared and a sum sufficient for the
respective payments thereof set apart, the holders of shares of the
Common Stock and Class A Common Stock shall be entitled to receive
such dividends and distributions, payable in cash or otherwise, as may
be declared thereon by the Board of Directors from time to time out of
assets or funds of the Corporation legally available therefor,
provided that all such dividends or distributions shall be paid or
made in equal amounts, share for share, to the holders of the Common
Stock and Class A Common Stock as if a single class, except that (a)
in the event that any dividend shall be declared in shares of Common
Stock or Class A Common Stock, such dividend shall be declared at the
same rate per share on Common Stock and Class A Common Stock, but the
dividend payable on shares of Common Stock shall be payable in shares
of Common Stock, and the dividend payable on shares of Class A Common
Stock shall be payable in shares of Class A Common Stock; and (b) any
dividend described in paragraph 1.2 below may be paid as therein
described. If the Corporation shall in any manner split, subdivide or
combine the outstanding shares of Common Stock or Class A Common
Stock, the outstanding shares of the other such class of stock shall
be split, subdivided or combined in the same manner proportionately
and on the same basis per share. Following the distribution of shares
of Class A Common Stock to the holders of shares of Class A Common
Stock, par value $1 per share, of Rockwell International Corporation,
a Delaware corporation ("Oldco Class A Common Stock"), on the record
date fixed for determining the holders thereof entitled to receive the
distribution (such record date being herein referred to as the
"Distribution Record Date"), the Corporation shall not issue any
shares of Class A Common Stock except (x) pursuant to this paragraph
1.1; (y) upon exercise of employee stock options (whether or not
outstanding or exercisable on the Distribution Record Date); and (z)
in connection with any contribution made by the Corporation to any
employee benefit or stock ownership plan of the Corporation.
1.2. In the event the Corporation shall distribute to the holders of
the shares of Common Stock and Class A Common Stock the common stock
or substantially equivalent equity securities of any subsidiary of the
Corporation, the Board of Directors shall have power, but shall not be
obligated, to capitalize or recapitalize such subsidiary with classes
of common equity having the powers, designations, preferences, and
relative, participating, optional, or other special rights and
qualifications, limitations, and restrictions thereof, corresponding,
respectively, insofar as practicable, to those of the Common Stock and
the Class A Common Stock,
2
<PAGE> 3
and the Board of Directors of the Corporation shall have the power, but
shall not be obligated, to distribute to the holders of shares of the
Common Stock, the shares of the subsidiary with rights corresponding to
those of the Common Stock, and to distribute to the holders of shares
of the Class A Common Stock, the shares of the subsidiary with rights
corresponding to those of the Class A Common Stock; provided, that
holders of shares of Common Stock and holders of shares of Class A
Common Stock shall respectively receive the same number of shares of
such subsidiary per share of Common Stock and per share of Class A
Common Stock held.
2. Rights on Liquidation. In the event of any liquidation, dissolution
or winding-up of the Corporation, whether voluntary or involuntary,
after the payment or setting apart for payment to the holders of any
outstanding Preferred Stock of the full preferential amounts to which
such holders are entitled as herein provided or referred to, all of
the remaining assets of the Corporation shall belong to and be
distributable in equal amounts per share to the holders of the Common
Stock and the holders of Class A Common Stock, as if such classes
constituted a single class. For purposes of this paragraph 2, a
consolidation or merger of the Corporation with any other corporation,
or the sale, transfer or lease of all or substantially all its assets
shall not constitute or be deemed a liquidation, dissolution or
winding-up of the Corporation.
3. Conversion of Class A Common Stock.
3.1. The holders of Class A Common Stock shall have the right, at
their option, to convert any or all such shares into shares of Common
Stock of the Corporation on the following terms and conditions:
(i) Each share of Class A Common Stock shall be convertible,
at any time, at the office of any transfer agent for shares
of Common Stock of the Corporation, and at such other place
or places, if any, as the Board of Directors may determine,
into one fully paid and nonassessable share of Common Stock
of the Corporation upon surrender at such office or other
place of the certificate or certificates representing the
shares of Class A Common Stock so to be converted. In no
event, upon conversion of any shares of Class A Common Stock
into shares of Common Stock, shall any allowance or
adjustment be made in respect of dividends on the Class A
Common Stock or the Common Stock.
(ii) Shares of Class A Common Stock shall be deemed to have
been converted and the person converting the same shall
become a holder of shares of Common Stock for the purpose of
receiving dividends and for all other
3
<PAGE> 4
purposes whatsoever as of the date when the certificate or
certificates for the shares of Class A Common Stock to be
converted are surrendered to the Corporation as provided in
paragraph 3.1(v).
(iii) A number of shares of Common Stock sufficient to
provide, upon the basis hereinbefore set forth, for the
conversion of all shares of the Class A Common Stock
outstanding shall at all times be reserved by the Corporation
for the exercise of the conversion rights of the holders of
shares of the Class A Common Stock.
(iv) If the Corporation shall, at any time, be consolidated
or merged with, or shall sell its property as an entirety or
substantially as an entirety to, any other corporation or
corporations, or in the event of any recapitalization or
reclassification of its shares, proper provisions shall be
made as a part of the terms of each such consolidation,
merger, sale, recapitalization or reclassification so that
the holder of any shares of the Class A Common Stock
outstanding immediately prior to such consolidation, merger,
sale, recapitalization or reclassification shall thereafter
be entitled to and only entitled to conversion rights upon
the terms and with respect to such securities of the
consolidated, merged or purchasing corporation, or with
respect to such securities issued upon such recapitalization
or reclassification, as such holder would have been entitled
to receive upon such consolidation, merger, sale,
recapitalization or reclassification if such holder had
exercised the conversion privilege immediately prior thereto.
The provisions of this paragraph 3.1(iv) shall similarly
apply to successive consolidations, mergers, sales,
recapitalizations or reclassifications.
(v) Before any holder of Class A Common Stock shall be
entitled to convert the same into Common Stock, he shall
surrender his certificate or certificates for such Class A
Common Stock to the Corporation at the office of a transfer
agent for the Common Stock, or at such other place or places,
if any, as the Board of Directors may determine, duly
endorsed or accompanied if appropriate by duly executed
instruments of transfer and shall give written notice to the
Corporation at said office or place that he elects so to
convert the shares of Class A Common Stock represented by the
certificate or certificates so surrendered. Unless the Common
Stock is to be issued in the name of the registered owner of
the certificates surrendered, the holder shall state in
writing the name or names in which he wishes the certificate
or certificates for Common Stock to be issued, and shall
furnish all requisite stock transfer
4
<PAGE> 5
and stock issuance tax stamps, or funds therefor. The
Corporation shall as soon as practicable after such deposit of
certificates for Class A Common Stock, accompanied by the
written notice above prescribed, issue and deliver, at the
office or place at which such certificates were deposited, to
the person for whose account Class A Common Stock was so
surrendered, or to his nominee or nominees, certificates for
the number of full shares of Common Stock to which he shall be
entitled as aforesaid.
3.2. All outstanding shares of Class A Common Stock shall
automatically, without any act or deed on the part of the Corporation
or any other person, be converted into shares of Common Stock on a
share-for-share basis (i) at any time after the Distribution when the
total number of shares of Class A Common Stock outstanding and
reserved for issuance upon exercise of employee stock options is less
than 10,000,000; (ii) on February 23, 1997, the tenth anniversary of
the record date for the initial issuance of Oldco Class A Common Stock
unless prior thereto the Board of Directors shall have extended the
date for such conversion on one or more occasions but in no event to a
date later than February 23, 2002; (iii) if at any time the Board of
Directors, in its sole discretion, determines that there has been a
material adverse change in the liquidity, marketability, or market
value of the outstanding Common Stock due to a delisting of the
Common Stock from a national securities exchange or a national
over-the-counter listing or due to requirements under applicable state
securities laws in any such case attributable to the existence of the
Class A Common Stock; or (iv) if the Board of Directors, in its sole
discretion, elects to effect a conversion in connection with its
approval of any sale or lease of all or substantially all of the
Corporation's assets or any merger, consolidation, liquidation or
dissolution of the Corporation. In the event of any such automatic
conversion, each stock certificate theretofore representing Class A
Common Stock will thereafter represent the same number of shares of
Common Stock.
3.3. The provisions of this paragraph 3 shall be in addition to the
provisions of paragraphs 5.1(i)(A)(3), 5.1(ii) and 5.1(iv), which
require automatic conversion of Class A Common Stock in the
circumstances provided therein.
3.4. Shares of the Class A Common Stock converted into Common Stock as
provided in paragraph 3.1 or paragraph 5 shall resume the status of
authorized but unissued shares of Class A Common Stock. Upon any
automatic conversion of Class A Common Stock into Common Stock
pursuant to paragraph 3.2, the Class A Common Stock shall no longer be
authorized for issuance.
5
<PAGE> 6
4. Voting.
4.1. Except as otherwise provided by the laws of the State of Delaware
or by this Article Fourth, each share of Common Stock shall entitle
the holder thereof to one vote.
4.2. Except as otherwise provided by the laws of the State of Delaware
or by this Article Fourth, each share of Class A Common Stock shall
entitle the holder thereof to ten votes. Except as otherwise provided
herein or required by law, holders of Common Stock and Class A Common
Stock shall at all times vote on all matters (including the election
of directors) together as one class and together with the holders of
any other series or class of stock of the Corporation accorded such
class voting right.
4.3. The affirmative vote of the holders of a majority of the
outstanding shares of Common Stock and of Class A Common Stock, each
voting separately as a class, shall be required to:
(i) authorize additional shares of Class A Common Stock;
(ii) modify or eliminate the last sentence of paragraph 1.1,
above; or
(iii) adopt any other amendment hereof that alters or
changes the designations or powers or the preferences,
qualifications, limitations, restrictions or the relative or
special rights of either the Common Stock or the Class A
Common Stock so as to affect holders of shares of such class
adversely.
5. Limitations on Transfer and Issuance of Class A Common Stock.
5.1. (i) No person holding any share of Class A Common Stock may
transfer, and the Corporation shall not register the transfer of such
share of Class A Common Stock or any interest therein, whether by
sale, assignment, gift, bequest, appointment or otherwise, except to
a "Permitted Transferee" of such person. The term "Permitted
Transferee" shall mean only,
(A) In the case of a holder of Class A Common Stock
(a "Holder") who is a natural person and the holder
of record and beneficial owner of shares subject to
a proposed transfer, "Permitted Transferee" means:
(1) The Holder, the spouse of such Holder, any
lineal descendant of a grandparent of such Holder,
or any spouse of such lineal descendant (herein
collectively referred to as "such Holder's Family
Members"); (2) The trustee of a trust solely for
6
<PAGE> 7
the benefit of such Holder or such Holder's Family
Members, provided that such trust may also grant a
general or special power of appointment to one or
more of such Holder's Family Members and may permit
trust assets to be used to pay taxes, legacies and
other obligations of the trust or of the estates of
one or more of such Holder's Family Members payable
by reason of the death of any of such Family Members;
(3) A corporation if all of the outstanding capital
stock of such corporation is beneficially owned by,
or a partnership if all of the partners are and all
of the partnership interests are beneficially owned
by, the Holder and his Permitted Transferees
determined under this paragraph 5.1(i)(A), provided
that if by reason of any change in the ownership of
such stock or partners or partnership interests, such
corporation or partnership would no longer qualify as
a Permitted Transferee of such Holder or his
Permitted Transferees, all shares of Class A Common
Stock then held by such corporation or partnership
shall immediately and automatically, without further
act or deed on the part of the Corporation or any
other person, be converted into shares of Common
Stock on a share-for-share basis, and stock
certificates formerly representing such shares of
Class A Common Stock shall thereupon and thereafter
be deemed to represent the like number of shares of
Common Stock; (4) An organization established by the
Holder or such Holder's Family Members, contributions
to which are deductible for federal income, estate or
gift tax purposes; or (5) The executor, administrator
or personal representative of the estate of such
Holder or the guardian or conservator of such Holder
adjudged disabled by a court of competent
jurisdiction, acting in his capacity as such.
(B) In the case of a Holder holding the shares
subject to a proposed transfer as trustee pursuant
to a trust (other than a trust described in
paragraph 5.1(i)(C) below), "Permitted Transferee"
means (1) the person who established such trust and
(2) any Permitted Transferee of such person
determined pursuant to paragraph 5.1(i)(A) above.
(C) In the case of a Holder holding shares subject
to a proposed transfer as trustee pursuant to a
trust which was irrevocable on the Distribution
Record Date, "Permitted Transferee" means (1) any
person to whom or for whose benefit principal may be
distributed either during or at the end of the term
of such trust whether by power of appointment
7
<PAGE> 8
or otherwise (excluding beneficiaries of any employee
benefit plan) and (2) any Permitted Transferee of any
such person determined pursuant to paragraph
5.1(i)(A) above.
(D) In the case of a Holder which is a partnership
or corporation, with respect to shares of Class A
Common Stock beneficial ownership of which was
acquired pursuant to the Distribution or thereafter
pursuant to a dividend paid in shares of Class A
Common Stock or a split, subdivision or combination
of shares of Class A Common Stock, "Permitted
Transferee" means (1) any partner of such
partnership, or shareowner of such corporation,
receiving such shares pro rata to his interest in
such partnership or stock ownership in such
corporation on the Distribution Record Date pursuant
to a liquidating distribution or a dividend or (2)
any Permitted Transferee of any partner or
shareowner to the extent that he is a Permitted
Transferee pursuant to the foregoing clause (1)
determined under paragraph 5.1(i)(A) above.
(E) In the case of a Holder which is a corporation
or partnership, with respect to shares of Class A
Common Stock other than as described in paragraph
5.1(i)(D), "Permitted Transferee" means (1) any
person who transferred to such corporation or
partnership the shares that are the subject of the
proposed transfer and (2) any Permitted Transferee
of any such person determined under paragraph
5.1(i)(A) above.
(F) In the case of a Holder which is an employee
benefit or stock ownership plan for the benefit of
employees of the Corporation or any of its
subsidiaries, "Permitted Transferee" shall include
any beneficiary of such plan to whom shares of stock
of the Corporation may be distributed, but only as
to shares so distributable.
(G) In the case of a Holder who is the executor,
administrator or personal representative of the
estate of a deceased Holder, guardian or conservator
of the estate of a disabled Holder or who is a
trustee of the estate of a bankrupt or insolvent
Holder, and provided such deceased, disabled,
bankrupt or insolvent Holder, as the case may be,
was the record and beneficial owner of the shares
subject to a proposed transfer, "Permitted
Transferee" means a Permitted Transferee of such
deceased, disabled, bankrupt or insolvent Holder as
8
<PAGE> 9
determined pursuant to paragraph 5.1(i)(A), (D) or
(E) above, as the case may be.
(ii) Notwithstanding anything to the contrary set forth
herein, any holder of Class A Common Stock may pledge his
shares of Class A Common Stock to a pledgee pursuant to a
bona fide pledge of such shares as collateral security for
indebtedness due to the pledgee, provided that such shares
may not be transferred to or registered in the name of the
pledgee unless such pledgee is a Permitted Transferee. In the
event of foreclosure or other similar action by the pledgee,
such pledged shares of Class A Common Stock shall
automatically, without any act or deed on the part of the
Corporation or any other person, be converted into shares of
Common Stock on a share-for-share basis, unless within five
business days after such foreclosure or similar event such
pledged shares are returned to the pledgor or transferred to
a Permitted Transferee of the pledgor.
(iii) For purposes of this paragraph 5.1:
(A) The relationship of any person that is derived
by or through legal adoption shall be considered a
natural one.
(B) Each joint owner of shares of Class A Common
Stock shall be considered a Holder of such shares.
(C) A minor for whom shares of Class A Common Stock
are held pursuant to a Uniform Gifts to Minors Act
or similar law shall be considered a Holder of such
shares.
(D) Unless otherwise specified, the term "person"
means both natural persons and legal entities.
(iv) Any purported transfer of Class A Common Stock other
than to a Permitted Transferee shall automatically, without
any further act or deed on the part of the Corporation or any
other person, result in the conversion of such shares into
shares of Common Stock on a share-for-share basis, effective
on the date of such purported transfer. The Corporation may,
as a condition to transfer or registration of transfer of
shares of Class A Common Stock to a purported Permitted
Transferee, require that the record holder establish to the
satisfaction of the Corporation, by filing with the transfer
agent an appropriate affidavit or certificate or such other
proof as the Corporation shall deem necessary, that such
transferee is a Permitted Transferee.
9
<PAGE> 10
5.2. Anything in this Article Fourth to the contrary notwithstanding,
no share of Class A Common Stock may be held of record but not
beneficially by a broker or dealer in securities, a bank or voting
trustee or a nominee of any such, or otherwise held of record but not
beneficially by a nominee of the beneficial owner of such share other
than by an employee benefit or stock ownership plan of the Corporation
(any such form of holding being referred to herein as holding in
"street" or nominee name) and the Corporation shall issue a share of
Common Stock for each share of Class A Common Stock that would
otherwise be issuable to such nominee in any instance in which the
Corporation reasonably believes that the proposed record holder
intends to hold any such share in "street" or nominee name for the
beneficial owner thereof; provided, however, that if any person
establishes to the satisfaction of the Corporation in accordance with
this paragraph 5.2 that he is the beneficial owner of any such share
of Class A Common Stock, the Corporation shall issue such share in the
name of such beneficial owner. Any such beneficial owner who desires
to have shares of Class A Common Stock issued in his name under the
circumstances described in this paragraph 5.2 shall file an affidavit
or certificate with the Secretary of the Corporation setting forth the
name and address of such beneficial owner and certifying that he is
the beneficial owner of shares of Oldco Class A Common Stock held in
"street" or nominee name in respect of which the shares of Class A
Common Stock are to be issued. Any such affidavit or certificate shall
be deemed filed only if it is satisfactory in form to the Corporation
and received within 30 days after the Distribution Record Date. If
such affidavit or certificate shall not establish to the satisfaction
of the Corporation the facts stated therein, then the Corporation
shall issue to such beneficial owner Common Stock as provided in this
paragraph 5.2.
5.3. The Corporation shall note on the certificates representing the
shares of Class A Common Stock that there are restrictions on transfer
and registration of transfer imposed by paragraphs 5.1 and 5.2.
5.4. (i) For purposes of this paragraph 5, "beneficial ownership"
shall mean possession of the power to vote or to direct the
vote and to dispose of or to direct the disposition of the
share of Class A Common Stock in question, and a "beneficial
owner" of a share of Class A Common Stock shall be the person
having beneficial ownership thereof.
(ii) The Board of Directors may, from time to time, establish
practices and procedures and promulgate rules and
regulations, in addition to those set forth in this Article
Fourth, and amend or revoke any such, regarding
10
<PAGE> 11
the evidence necessary to establish entitlement of any
transferee or purported transferee of Class A Common Stock to
be registered as such. Should the transferee or purported
transferee of any share wish to contest any decision of the
Corporation on the question whether the transferee or
purported transferee has established entitlement to be
registered as a transferee of Class A Common Stock, then the
Board of Directors shall in its sole discretion make the final
determination.
6. Other Matters. In case the Corporation shall at any time issue to
the holders of its shares of Common Stock as such options or rights to
subscribe for shares of Common Stock (including shares held in the
Corporation's treasury) or any other security (whether of the
Corporation or otherwise), the Corporation shall issue such options or
rights to the holders of the Class A Common Stock in the respective
amounts equal to the amounts that such holders would have been
entitled to receive had their respective shares of Class A Common
Stock been converted into Common Stock on the day prior to the date
for the determination of the holders of Common Stock entitled to
receive such options or rights.
PREFERRED STOCK
The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized to provide for the
issuance of shares of Preferred Stock in series and, by filing a
certificate pursuant to the applicable law of the State of Delaware
(hereinafter referred to as a "Preferred Stock Designation"), to
establish from time to time the number of shares to be included in
each such series, and to fix the designation, powers, preferences and
rights of the shares of each such series and the qualifications,
limitations and restrictions thereof. The authority of the Board of
Directors with respect to each series shall include, but not be
limited to, determination of the following:
(a) the designation of the series, which may be by
distinguishing number, letter or title;
(b) the number of shares of the series, which number the
Board of Directors may thereafter (except where otherwise
provided in the Preferred Stock Designation) increase or
decrease (but not below the number of shares thereof then
outstanding);
(c) whether dividends, if any, shall be cumulative or
noncumulative and the dividend rate of the series;
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(d) the dates at which dividends, if any, shall be payable;
(e) the redemption rights and price or prices, if any, for
shares of the series;
(f) the terms and amount of any sinking fund provided for
the purchase or redemption of shares of the series;
(g) the amounts payable on shares of the series in the event
of any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation;
(h) whether the shares of the series shall be convertible
into shares of any other class or series, or any other
security, of the Corporation or any other corporation, and,
if so, the specification of such other class or series or
such other security, the conversion price or prices or rate
or rates, any adjustments thereof, the date or dates as of
which such shares shall be convertible and all other terms
and conditions upon which such conversion may be made;
(i) restrictions on the issuance of shares of the same
series or of any other class or series; and
(j) the voting rights, if any, of the holders of shares of
the series.
Except as may be provided in this Certificate of Incorporation or in a
Preferred Stock Designation, the Common Stock and the Class A Common
Stock shall have the exclusive right to vote for the election of
directors and for all other purposes, and holders of Preferred Stock
shall not be entitled to receive notice of any meeting of shareowners
at which they are not entitled to vote. The number of authorized
shares of Preferred Stock may be increased or decreased (but not below
the number of shares thereof then outstanding) by the affirmative vote
of the holders of a majority of the outstanding Common Stock and Class
A Common Stock, without a vote of the holders of the Preferred Stock,
or of any series thereof, unless a vote of any such holders is
required pursuant to any Preferred Stock Designation.
The Corporation shall be entitled to treat the person in whose name
any share of its stock is registered as the owner thereof for all
purposes and shall not be bound to recognize any equitable or other
claim to, or interest in, such share on the part of any other person,
whether or not the Corporation shall have notice thereof, except as
expressly provided by applicable law.
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SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
1. Designation and Amount. A series of Preferred Stock, without par
value, is hereby created and shall be designated as "Series A Junior
Participating Preferred Stock" (the "Series A Preferred Stock") and
the number of shares constituting the Series A Preferred Stock shall
be 2,500,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease shall
reduce the number of shares of Series A Preferred Stock to a number
less than the number of shares then outstanding plus the number of
shares reserved for issuance upon the exercise of outstanding options,
rights or warrants or upon the conversion of any outstanding
securities issued by the Corporation convertible into Series A
Preferred Stock.
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2. Dividends and Distributions.
2.1. Subject to the rights of the holders of any shares of any series
of Preferred Stock (or any similar stock) ranking prior and superior
to the Series A Preferred Stock with respect to dividends, the holders
of shares of Series A Preferred Stock, in preference to the holders of
Common Stock or Class A Common Stock, and of any other junior stock of
the Corporation, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for
the purpose, quarterly dividends payable in cash on the second Monday
of March, June, September and December in each year (each such date
being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the
first issuance of a share or fraction of a share of Series A Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to
the greater of (a) $1 or (b) subject to the provision for adjustment
hereinafter set forth, 100 times the aggregate per share amount of all
cash dividends, and 100 times the aggregate per share amount (payable
in kind) of all non-cash dividends or other distributions, other than
a dividend payable in shares of Common Stock or Class A Common Stock
or a subdivision of the outstanding shares of Common Stock or Class A
Common Stock (by reclassification or otherwise), declared on the
Common Stock or Class A Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first
Quarterly Dividend Payment Date, since the first issuance of any share
or fraction of a share of Series A Preferred Stock. In the event the
Corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares
of Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of
shares of Common Stock then in each such case the amount to which
holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which
is the number of shares of Common Stock that were outstanding
immediately prior to such event.
2.2. The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph 2.1 immediately
after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided
that, in the event no dividend or distribution shall have been
declared on the Common Stock during the period between any Quarterly
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<PAGE> 15
Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $1 per share on the Series A Preferred
Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
2.3. Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment
Date next preceding the date of issue of such shares, unless the date
of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of shares
of Series A Preferred Stock entitled to receive a quarterly dividend
and before such Quarterly Dividend Payment Date, in either of which
events such dividends shall begin to accrue and be cumulative from
such Quarterly Dividend Payment Date. Accrued but unpaid dividends
shall not bear interest. Dividends paid on the shares of Series A
Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Series A Preferred Stock
entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the
date fixed for the payment thereof.
3. Voting Rights. The holders of shares of Series A Preferred Stock
shall have the following voting rights:
3.1. Subject to the provision for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the
shareowners of the Corporation. In the event the Corporation shall at
any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the number of votes per share to which
holders of shares of Series A Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the number of shares
of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
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<PAGE> 16
3.2. Except as otherwise provided herein, in any other Preferred Stock
Designation creating a series of Preferred Stock or any similar stock,
or by law, the holders of shares of Series A Preferred Stock and the
holders of shares of Common Stock and Class A Common Stock and any
other capital stock of the Corporation having general voting rights
shall vote together as one class on all matters submitted to a vote of
shareowners of the Corporation.
3.3. Except as set forth herein, or as otherwise provided by law,
holders of Series A Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock and Class A
Common Stock as set forth herein) for taking any corporate action.
4. Certain Restrictions.
4.1. Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in paragraph 2 are
in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A
Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(a) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding
up) to the Series A Preferred Stock;
(b) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except
dividends paid ratably on the Series A Preferred Stock and
all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(c) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A
Preferred Stock, provided that the Corporation may at any
time redeem, purchase or otherwise acquire shares of any such
junior stock in exchange for shares of any stock of the
Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A
Preferred Stock; or
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<PAGE> 17
(d) redeem or purchase or otherwise acquire for consideration
any shares of Series A Preferred Stock, or any shares of
stock ranking on a parity with the Series A Preferred Stock,
except in accordance with a purchase offer made in writing or
by publication (as determined by the Board of Directors) to
all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the
respective series or classes.
4.2. The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
subparagraph (a) of paragraph 4.1, purchase or otherwise acquire such
shares at such time and in such manner.
5. Reacquired Shares. Any shares of Series A Preferred Stock purchased
or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a
new series of Preferred Stock subject to the conditions and
restrictions on issuance set forth herein, in the Certificate of
Incorporation, or in any other Preferred Stock Designation creating a
series of Preferred Stock or any similar stock or as otherwise
required by law.
6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be
made (i) to the holders of shares of stock ranking junior (either as
to dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock unless, prior thereto, the holders of shares
of Series A Preferred Stock shall have received $100 per share, plus
an amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment,
provided that the holders of shares of Series A Preferred Stock shall
be entitled to receive an aggregate amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 100 times the
aggregate amount to be distributed per share to holders of shares of
Common Stock, or (ii) to the holders of shares of stock ranking on a
parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except distributions
made ratably on the Series A Preferred Stock and all such parity stock
in proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding up.
In the event the Corpora-
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<PAGE> 18
tion shall at any time declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock
(by reclassification or otherwise than by payment of a dividend in
shares of Common Stock) into a greater or lesser number of shares of
Common Stock, then in each such case the aggregate amount to which
holders of shares of Series A Preferred Stock were entitled immediately
prior to such event under the proviso in clause (i) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number
of shares of Common Stock that were outstanding immediately prior to
such event.
7. Consolidation, Merger, etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into
other stock or securities, cash and/or any other property, then in any
such case each share of Series A Preferred Stock shall at the same
time be similarly exchanged or changed into an amount per share,
subject to the provision for adjustment hereinafter set forth, equal
to 100 times the aggregate amount of stock, securities, cash and/or
any other property (payable in kind), as the case may be, into which
or for which each share of Common Stock is changed or exchanged. In
the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise
than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such
case the amount set forth in the preceding sentence with respect to
the exchange or change of shares of Series A Preferred Stock shall be
adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to such event.
8. No Redemption. The shares of Series A Preferred Stock shall not
be redeemable.
9. Rank. The Series A Preferred Stock shall rank, with respect to
the payment of dividends and the distribution of assets, junior to all
series of any other class of the Corporation's Preferred Stock.
10. Amendment. The Certificate of Incorporation of the Corporation
shall not be amended in any manner which would materially alter or
change the powers, preferences or special
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<PAGE> 19
rights of the Series A Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of at least two-thirds of
the outstanding shares of Series A Preferred Stock, voting together as
a single class.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: The private property of the shareowners of the Corporation shall not be
subject to the payment of corporate debts to any extent whatever.
SEVENTH: Subject to the rights of the holders of any series of Preferred Stock
to elect additional directors under specified circumstances, the number of
directors of the Corporation shall be fixed from time to time exclusively by
the Board of Directors pursuant to a resolution adopted by a majority of the
whole Board. A director need not be a shareowner. The election of directors of
the Corporation need not be by ballot unless the by-laws so require.
The directors, other than those who may be elected by the holders of any series
of Preferred Stock or any other series or class of stock, as provided herein or
in any Preferred Stock Designation, shall be divided into three classes, as
nearly equal in number as possible. One class of directors shall be initially
elected for a term expiring at the annual meeting of shareowners to be held in
1997, another class shall be initially elected for a term expiring at the
annual meeting of shareowners to be held in 1998, and another class shall be
initially elected for a term expiring at the annual meeting of shareowners to
be held in 1999. Members of each class shall hold office until their successors
are elected and shall have qualified. At each annual meeting of the shareowners
of the Corporation, commencing with the 1997 annual meeting, the successors of
the class of directors whose term expires at that meeting shall be elected by a
plurality vote of all votes cast at such meeting to hold office for a term
expiring at the annual meeting of shareowners held in the third year following
the year of their election.
Subject to the rights of the holders of any series of Preferred Stock, and
unless the Board of Directors otherwise determines, newly created directorships
resulting from any increase in the authorized number of directors or any
vacancies on the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause may be filled
only by a majority vote of the directors then in office, though less than a
quorum, and directors so chosen shall hold office for a term expiring at the
annual meeting of shareowners at which the term of office of the class to which
they have been elected expires and until such director's successor shall have
been duly elected and qualified. No decrease in the number of authorized
directors con-
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<PAGE> 20
stituting the whole Board of Directors shall shorten the term of any incumbent
director.
Subject to the rights of the holders of any series of Preferred Stock or any
other series or class of stock, as provided herein or in any Preferred Stock
Designation, to elect additional directors under specific circumstances, any
director may be removed from office at any time, but only for cause and only by
the affirmative vote of the holders of at least 80 percent of the voting power
of the then outstanding capital stock of the Corporation (the "Capital Stock")
entitled to vote generally in the election of directors (the "Voting Stock"),
voting together as a single class.
No director of the Corporation shall be liable to the Corporation or its
shareowners for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to
the Corporation or its shareowners, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation Law, or (iv) for
any transaction from which the director derived an improper personal benefit.
This paragraph shall not eliminate or limit the liability of a director for any
act or omission occurring prior to the effective date of its adoption. No
repeal or modification of this paragraph, directly or by adoption of an
inconsistent provision of this Certificate of Incorporation, by the shareowners
of the Corporation shall be effective with respect to any cause of action,
suit, claim or other matter that, but for this paragraph, would accrue or arise
prior to such repeal or modification.
EIGHTH: Unless otherwise determined by the Board of Directors, no holder of
stock of the Corporation shall, as such holder, have any right to purchase or
subscribe for any stock of any class which the Corporation may issue or sell,
whether or not exchangeable for any stock of the Corporation of any class or
classes and whether out of unissued shares authorized by the Certificate of
Incorporation of the Corporation as originally filed or by any amendment
thereof or out of shares of stock of the Corporation acquired by it after the
issue thereof.
NINTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its shareowners or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or shareowner thereof, or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of
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section 279 of Title 8 of the Delaware Code order a meeting of the creditors or
class of creditors, and/or of the shareowners or class of shareowners of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the shareowners or class of
shareowners of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the shareowners or class of shareowners, of this Corporation, as the case
may be, and also on this Corporation.
TENTH:
1. Amendment of Certificate of Incorporation. From time to time any of the
provisions of the Certificate of Incorporation may be amended, altered or
repealed, and other provisions authorized by the statutes of the State of
Delaware at the time in force may be added or inserted in the manner at the
time prescribed by said statutes, and all rights at any time conferred upon the
shareowners of the Corporation by its Certificate of Incorporation are granted
subject to the provisions of this Article Tenth. Notwithstanding anything
contained in this Certificate of Incorporation to the contrary, the affirmative
vote of the holders of at least 80% of the voting power of the then outstanding
Voting Stock, voting together as a single class, shall be required to amend or
repeal Article Seventh, this Article Tenth or Article Twelfth or adopt any
provision inconsistent with any of the foregoing articles.
2. By-laws. The Board of Directors is expressly authorized to make, alter,
amend and repeal the by-laws of the Corporation, in any manner not inconsistent
with the laws of the State of Delaware or of the Certificate of Incorporation
of the Corporation, subject to the power of the holders of the Capital Stock to
alter or repeal the by-laws made by the Board of Directors; provided, that any
such amendment or repeal by shareowners shall require the affirmative vote of
the holders of at least 80% of the voting power of the then outstanding Voting
Stock, voting together as a single class.
ELEVENTH: The shareowner vote required to approve Business Combinations (as
hereinafter defined) shall be as set forth in this Article Eleventh.
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1. Higher Vote for Business Combinations. In addition to any
affirmative vote required by law, this Certificate of Incorporation or
the by-laws of the Corporation, and except as otherwise expressly
provided in Section 2 of this Article Eleventh, a Business Combination
shall not be consummated without the affirmative vote of the holders
of at least 80% of the combined voting power of the then outstanding
shares of the Voting Stock, voting together as a single class. Such
affirmative vote shall be required notwithstanding the fact that no
vote may be required, or that a lesser percentage or separate class
vote may be specified, by law or in any agreement with any national
securities exchange or otherwise.
2. When Higher Vote Is Not Required. The provisions of Section 1
of this Article Eleventh shall not be applicable to a Business
Combination if the conditions specified in either of the following
paragraphs A or B are met.
A. Approval by Continuing Directors. The Business Combination
shall have been approved by at least two-thirds of the
Continuing Directors (as hereinafter defined), whether such
approval is made prior to or subsequent to the date on which
the Interested Shareowner (as hereinafter defined) became an
Interested Shareowner (the "Determination Date").
B. Price and Procedure Requirements. Each of the seven
conditions specified in the following subparagraphs (i)
through (vii) shall have been met:
(i) The aggregate amount of the cash and the Fair
Market Value (as hereinafter defined) as of the date
of the consummation of the Business Combination (the
"Consummation Date") of any consideration other than
cash to be received per share by holders of Common
Stock in such Business Combination shall be an
amount at least equal to the higher amount
determined under clauses (a) and (b) below (the
requirements of this paragraph B (i) shall be
applicable with respect to all shares of Common
Stock outstanding, whether or not the Interested
Shareowner has previously acquired any shares of the
Common Stock): (a) the highest per share price
(including any brokerage commissions, transfer taxes
and soliciting dealers' fees) paid by or on behalf
of the Interested Shareowner for any shares of
Common Stock acquired beneficially by it (1) within
the two-year period immediately prior to the first
public announcement of the proposal of the Business
Combination (the "Announcement Date") or (2) in the
transaction in which it became an Interested
Shareowner, whichever is higher, plus interest
compounded annually from the Determination
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Date through the Consummation Date at the prime rate
of interest of Morgan Guaranty Trust Company of New
York (or other major bank headquartered in New York
City selected by at least two-thirds of the
Continuing Directors) from time to time in effect in
New York City, less the aggregate amount of any cash
dividends paid, and the Fair Market Value of any
dividends paid in other than cash, per share of
Common Stock from the Determination Date through the
Consummation Date in an amount up to but not
exceeding the amount of such interest payable per
share of Common Stock; and (b) the Fair Market Value
per share of Common Stock on the Announcement Date or
on the Determination Date, whichever is higher.
(ii) The aggregate amount of the cash and the Fair
Market Value as of the Consummation Date of any
consideration other than cash to be received per
share by holders of shares of any class or series of
outstanding Capital Stock, other than the Common
Stock, in such Business Combination shall be an
amount at least equal to the highest amount
determined under clauses (a), (b) and (c) below (the
requirements of this paragraph B(ii) shall be
applicable with respect to all shares of every class
or series of outstanding Capital Stock, other than
the Common Stock, whether or not the Interested
Shareowner has previously acquired any shares of a
particular class or series of Capital Stock):
(a) the highest per share price (including
any brokerage commissions, transfer taxes
and soliciting dealers' fees) paid by or on
behalf of the Interested Shareowner for any
shares of such class or series of Capital
Stock acquired beneficially by it (1)
within the two-year period immediately
prior to the Announcement Date or (2) in
the transaction in which it became an
Interested Shareowner, whichever is higher,
plus interest compounded annually from the
Determination Date through the Consummation
Date at the prime rate of interest of
Morgan Guaranty Trust Company of New York
(or other major bank headquartered in New
York City selected by at least two-thirds
of the Continuing Directors) from time to
time in effect in New York City, less the
aggregate amount of any cash dividends
paid, and the Fair Market Value of any
dividends paid in other than cash, per
share of such class or series of Capital
Stock from the Determination
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Date through the Consummation Date in an
amount up to but not exceeding the amount of
such interest payable per share of such
class or series of Capital Stock; and
(b) the Fair Market Value per share of such
class or series of Capital Stock on the
Announcement Date or on the Determination
Date, whichever is higher; and
(c) the highest preferential amount per
share to which the holders of shares of
such class or series of Capital Stock would
be entitled in the event of any voluntary
or involuntary liquidation, dissolution or
winding up of the affairs of the
Corporation, regardless of whether the
Business Combination to be consummated
constitutes such an event.
(iii) The consideration to be received by holders of
a particular class or series of outstanding Capital
Stock (including Common Stock) shall be in cash or
in the same form as previously has been paid by or
on behalf of the Interested Shareowner in its direct
or indirect acquisition of beneficial ownership of
shares of such class or series of Capital Stock. If
the consideration so paid for shares of any class or
series of Capital Stock varied as to form, the form
of consideration for such class or series of Capital
Stock shall be either cash or the form used to
acquire beneficial ownership of the largest number
of shares of such class or series of Capital Stock
previously acquired by the Interested Shareowner.
(iv) After such Interested Shareowner has become an
Interested Shareowner and prior to the consummation
of such Business Combination, such Interested
Shareowner shall not have become the beneficial
owner of any additional shares of Capital Stock
except as part of the transaction that results in
such Interested Shareowner becoming an Interested
Shareowner and except in a transaction that, after
giving effect thereto, would not result in any
increase in the Interested Shareowner's percentage
beneficial ownership of any class or series of
Capital Stock; and, except as approved by at least
two-thirds of the Continuing Directors: (a) there
shall have been no failure to declare and pay at the
regular date therefor any full quarterly dividends
(whether or not cumulative) payable in accordance
with the terms of any outstanding Capital Stock; (b)
there shall have been no
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reduction in the annual rate of dividends paid on the
Common Stock (except as necessary to reflect any
stock split, stock dividend or subdivision of the
Common Stock); and (c) there shall have been an
increase in the annual rate of dividends paid on the
Common Stock as necessary to reflect any
reclassification (including any reverse stock split),
recapitalization, reorganization or any similar
transaction which has the effect of reducing the
number of outstanding shares of Common Stock.
(v) After such Interested Shareowner has become an
Interested Shareowner, such Interested Shareowner
shall not have received the benefit, directly or
indirectly (except proportionately as a shareowner
of the Corporation), of any loans, advances,
guarantees, pledges or other financial assistance or
any tax credits or other tax advantages provided by
the Corporation, whether in anticipation of or in
connection with such Business Combination or
otherwise.
(vi) A proxy or information statement describing the
proposed Business Combination and complying with the
requirements of the Securities Exchange Act of 1934
and the rules and regulations thereunder (or any
subsequent provisions replacing such Act, rules or
regulations) shall be mailed to all shareowners of
the Corporation at least 30 days prior to the
consummation of such Business Combination (whether
or not such proxy or information statement is
required to be mailed pursuant to such Act or
subsequent provisions). The proxy or information
statement shall contain on the first page thereof,
in a prominent place, any statement as to the
advisability of the Business Combination that the
Continuing Directors, or any of them, may choose to
make and, if deemed advisable by at least two-thirds
of the Continuing Directors, the opinion of an
investment banking firm selected for and on behalf
of the Corporation by at least two-thirds of the
Continuing Directors as to the fairness of the terms
of the Business Combination from a financial point
of view to the holders of the outstanding shares of
Capital Stock other than the Interested Shareowner
and its Affiliates or Associates (as hereinafter
defined).
(vii) Such Interested Shareowner shall not have made
any material change in the Corporation's business or
equity capital structure without the
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approval of at least two-thirds of the Continuing
Directors.
Any Business Combination to which Section 1 of this Article
Eleventh shall not apply by reason of this Section 2 shall
require only such affirmative vote as is required by law, any
other provision of this Certificate of Incorporation, the
by-laws of the Corporation or any agreement with any national
securities exchange.
3. Certain Definitions. For the purposes of this Article Eleventh:
A. A "Business Combination" shall mean:
(i) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with (i) any Interested
Shareowner or (ii) any other corporation (whether or not
itself an Interested Shareowner) which is, or after such
merger or consolidation would be, an Affiliate or Associate
of an Interested Shareowner; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of
transactions) to or with any Interested Shareowner or any
Affiliate or Associate of any Interested Shareowner involving
any assets or securities of the Corporation, any Subsidiary
or any Interested Shareowner or any Affiliate or Associate of
any Interested Shareowner having an aggregate Fair Market
Value of $25,000,000 or more; or
(iii) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation proposed by or
on behalf of an Interested Shareowner or any Affiliate or
Associate of any Interested Shareowner; or
(iv) any reclassification of securities (including any
reverse stock split), or recapitalization of the Corporation,
or any merger or consolidation of the Corporation with any of
its Subsidiaries or any other transaction (whether or not
with or into or otherwise involving an Interested Shareowner)
that has the effect, directly or indirectly, of increasing
the proportionate share of any class or series of Capital
Stock, or any securities convertible into Capital Stock or
into equity securities of any Subsidiary, that is
beneficially owned by any Interested Shareowner or any
Affiliate or Associate of any Interested Shareowner; or
(v) any agreement, contract, arrangement or other
understanding providing for any one or more of the actions
specified in clauses (i) through (iv) above.
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B. A "person" shall mean any individual, firm, corporation or other
entity and shall include any group composed of any person and any
other person with whom such person or any Affiliate or Associate of
such person has any agreement, arrangement or understanding, directly
or indirectly, for the purpose of acquiring, holding, voting or
disposing of Capital Stock.
C. "Interested Shareowner" shall mean any person (other than the
Corporation or any Subsidiary and other than any profit-sharing,
employee stock ownership or other employee benefit plan of the
Corporation or any Subsidiary or any trustee of or fiduciary with
respect to any such plan when acting in such capacity) who or which:
(i) is the beneficial owner of Voting Stock having 10% or
more of the votes entitled to be cast by the holders of all
then outstanding shares of Voting Stock; or
(ii) is an Affiliate or Associate of the Corporation and at
any time within the two-year period immediately prior to the
date in question was the beneficial owner of Voting Stock
having 10% or more of the votes entitled to be cast by the
holders of all then outstanding shares of Voting Stock; or
(iii) is an assignee of or has otherwise succeeded to any
shares of Voting Stock which were at any time within the
two-year period immediately prior to the date in question
beneficially owned by any Interested Shareowner, if such
assignment or succession shall have occurred in the course of
a transaction or series of transactions not involving a
public offering within the meaning of the Securities Act of
1933.
D. A person shall be a "beneficial owner" of any Capital Stock:
(i) which such person or any Affiliate or Associate of such
person beneficially owns, directly or indirectly; or
(ii) which such person or any Affiliate or Associate of such
person has, directly or indirectly, (a) the right to acquire
(whether such right is exercisable immediately or only after
the passage of time), pursuant to any agreement, arrangement
or understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise, or (b)
the right to vote pursuant to any agreement, arrangement or
understanding; or
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(iii) which are beneficially owned, directly or indirectly,
by any other person with which such person or any Affiliate
or Associate of such person has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting
or disposing of any shares of Capital Stock.
E. For the purposes of determining whether a person is an Interested
Shareowner pursuant to paragraph C of this Section 3, the number of
shares of Capital Stock deemed to be outstanding shall include shares
deemed owned by the Interested Shareowner through application of
paragraph D of this Section 3 but shall not include any other shares
of Capital Stock that may be issuable pursuant to any agreement,
arrangement or understanding, or upon exercise of conversion rights,
warrants or options, or otherwise.
F. "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in effect on
October 28, 1996 (the term "registrant" in such Rule 12b-2 meaning in
this case the Corporation).
G. "Subsidiary" means any corporation of which a majority of any class
of equity security is beneficially owned by the Corporation; provided,
however, that for the purposes of the definition of Interested
Shareowner set forth in paragraph C of this Section 3, the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is beneficially owned by the Corporation.
H. "Continuing Director" means any member of the Board of Directors of
the Corporation (the "Board") who is not an Affiliate or Associate or
representative of the Interested Shareowner and was a member of the
Board prior to the time that the Interested Shareowner became an
Interested Shareowner, and any successor of a Continuing Director who
is not an Affiliate or Associate or representative of the Interested
Shareowner and is recommended or elected to succeed a Continuing
Director by at least two-thirds of Continuing Directors then members
of the Board.
I. "Fair Market Value" means: (i) in the case of cash, the amount of
such cash; (ii) in the case of stock, the highest closing sale price
during the 30-day period immediately preceding the date in question of
a share of such stock on the Composite Tape for New York Stock
Exchange-Listed Stocks, or, if such stock is not quoted on the
Composite Tape, on the New York Stock Exchange, or, if such stock is
not listed on such Exchange, on the principal United States securities
exchange registered under the Securities Exchange Act of 1934 on which
such stock is listed, or, if such stock is not listed on any such
exchange, the highest closing bid
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quotation with respect to a share of such stock during the 30-day
period immediately preceding the date in question on the National
Association of Securities Dealers, Inc., Automated Quotations System or
any system then in use, or if no such quotations are available, the
fair market value on the date in question of a share of such stock as
determined in good faith by at least two-thirds of the Continuing
Directors; and (iii) in the case of property other than cash or stock,
the fair market value of such property on the date in question as
determined in good faith by at least two-thirds of the Continuing
Directors.
J. In the event of any Business Combination in which the Corporation
survives, the phrase "consideration other than cash to be received" as
used in paragraphs B(i) and (ii) of Section 2 of this Article Eleventh
shall include the shares of Common Stock and/or the shares of any
other class or series of Capital Stock retained by the holders of such
shares.
4. Powers of Continuing Directors. Any determination as to compliance
with this Article Eleventh, including without limitation (A) whether a
person is an Interested Shareowner, (B) the number of shares of
Capital Stock or other securities beneficially owned by any person,
(C) whether a person is an Affiliate or Associate of another, (D)
whether the requirements of paragraph B of Section 2 have been met
with respect to any Business Combination, and (E) whether the assets
that are the subject of any Business Combination have, or the
consideration to be received for the issuance or transfer of
securities by the Corporation or any Subsidiary in any Business
Combination has, an aggregate Fair Market Value of $25,000,000 or more
shall be made only upon action by not less than two-thirds of the
Continuing Directors of the Corporation; and the good faith
determination of at least two-thirds of the Continuing Directors on
such matters shall be conclusive and binding for all the purposes of
this Article Eleventh.
5. No Effect on Fiduciary Obligations. Nothing contained in this
Article Eleventh shall be construed to relieve the Board of Directors
or any Interested Shareowner from any fiduciary obligation imposed by
law.
6. Amendment, Repeal, etc. Notwithstanding any other provisions of
this Certificate of Incorporation or the by-laws of the Corporation
(and notwithstanding the fact that a lesser percentage or separate
class vote may be specified by law, this Certificate of Incorporation
or the by-laws of the Corporation), the affirmative vote of the
holders of at least 80% of the voting power of the then outstanding
shares of Voting Stock, voting together as a single class, shall be
required to amend or repeal, or adopt any provisions
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inconsistent with, this Article Eleventh; provided, however, that the
preceding provisions of this Section 6 shall not apply to any amendment
to this Article Eleventh, and such amendment shall require only such
affirmative vote as is required by law and any other provisions of this
Certificate of Incorporation or the by-laws of the Corporation, if such
amendment shall have been approved by at least two-thirds of the
members of the Board who are persons who would be eligible to serve as
Continuing Directors.
TWELFTH: Any action required or permitted to be taken by the shareowners shall
be taken only at an annual or special meeting of such shareowners and not by
consent in writing. Special meetings of the shareowners for any purpose or
purposes shall be called only by the Board of Directors pursuant to a
resolution adopted by a majority of the whole Board.
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EXHIBIT 3-b-1
BY-LAWS
OF
ROCKWELL INTERNATIONAL CORPORATION
(AS AMENDED EFFECTIVE DECEMBER 6, 1996)
ARTICLE I.
OFFICES
SECTION 1. REGISTERED OFFICE IN DELAWARE; RESIDENT AGENT. The
address of the Corporation's registered office in the State of Delaware and the
name and address of its resident agent in charge thereof are as filed with the
Secretary of State of the State of Delaware.
SECTION 2. OTHER OFFICES. The Corporation may also have an
office or offices at such other place or places either within or without the
State of Delaware as the Board of Directors may from time to time determine or
the business of the Corporation requires.
ARTICLE II.
MEETINGS OF SHAREOWNERS
SECTION 1. PLACE OF MEETINGS. All meetings of the shareowners
of the Corporation shall be held at such place, within or without the State of
Delaware, as may from time to time be designated by resolution passed by the
Board of Directors.
SECTION 2. ANNUAL MEETING. An annual meeting of the
shareowners for the election of directors and for the transaction of such other
proper business, notice of which was given in the notice of meeting, shall be
held on a date and at a time as may from time to time be designated by
resolution passed by the Board of Directors.
SECTION 3. SPECIAL MEETINGS. A special meeting of the
shareowners for any purpose or purposes shall be called only by the Board of
Directors pursuant to a resolution adopted by a majority of the whole Board.
SECTION 4. NOTICE OF MEETINGS. Except as otherwise provided
by law, written notice of each meeting of the shareowners, whether annual or
special, shall be mailed, postage prepaid, not less than ten nor more than
sixty days before the date of the meeting, to each shareowner entitled to vote
at such meeting, at the shareowner's address as it appears on the records
<PAGE> 2
of the Corporation. Every such notice shall state the place, date and
hour of the meeting and, in the case of a special meeting, the purpose
or purposes for which the meeting is called. Notice of any adjourned
meeting of the shareowners shall not be required to be given, except
when expressly required by law.
SECTION 5. LIST OF SHAREOWNERS. The Secretary shall, from
information obtained from the transfer agent, prepare and make, at least ten
days before every meeting of shareowners, a complete list of the shareowners
entitled to vote at the meeting, arranged in alphabetical order, and showing
the address of each shareowner and the number of shares registered in the name
of each shareowner. Such list shall be open to the examination of any
shareowner, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any shareowner who is present. The stock ledger shall be the only
evidence as to who are the shareowners entitled to examine the stock ledger,
the list referred to in this section or the books of the Corporation, or to
vote in person or by proxy at any meeting of shareowners.
SECTION 6. QUORUM. At each meeting of the shareowners, the
holders of a majority of the issued and outstanding stock of the Corporation
present either in person or by proxy shall constitute a quorum for the
transaction of business except where otherwise provided by law or by the
Certificate of Incorporation or by these by-laws for a specified action. Except
as otherwise provided by law, in the absence of a quorum, a majority in
interest of the shareowners of the Corporation present in person or by proxy
and entitled to vote shall have the power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until shareowners
holding the requisite amount of stock shall be present or represented. At any
such adjourned meeting at which a quorum may be present, any business may be
transacted which might have been transacted at a meeting as originally called,
and only those shareowners entitled to vote at the meeting as originally called
shall be entitled to vote at any adjournment or adjournments thereof. The
absence from any meeting of the number of shareowners required by law or by the
Certificate of Incorporation or by these by-laws for action upon any given
matter shall not prevent action at such meeting upon any other matter or
matters which may properly come before the meeting, if the number of
shareowners required in respect of such other matter or matters shall be
present.
SECTION 7. ORGANIZATION. At every meeting of the shareowners
the Chairman of the Board, or, in his absence, the
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President, or in the absence of the Chairman and the President, a
director or an officer of the Corporation designated by the Board shall
act as Chairman. The Secretary, or, in his absence, an Assistant
Secretary, shall act as Secretary at all meetings of the shareowners. In
the absence from any such meeting of the Secretary and the Assistant
Secretaries, the Chairman may appoint any person to act as Secretary of
the meeting.
SECTION 8. NOTICE OF SHAREOWNER BUSINESS AND NOMINATIONS.
(A) Annual Meetings of Shareowners. (1) Nominations of
persons for election to the Board of Directors of the Corporation and the
proposal of business to be considered by the shareowners may be made at an
annual meeting of shareowners (a) pursuant to the Corporation's notice of
meeting, (b) by or at the direction of the Board of Directors or (c) by any
shareowner of the Corporation who was a shareowner of record at the time of
giving of notice provided for in this by-law, who is entitled to vote at the
meeting and who complies with the notice procedures set forth in this by-law.
(2) For nominations or other business to be properly brought before an
annual meeting by a shareowner pursuant to clause (c) of paragraph (A)(1) of
this by-law, the shareowner must have given timely notice thereof in writing to
the Secretary of the Corporation and such other business must otherwise be a
proper matter for shareowner action. To be timely, a shareowner's notice shall
be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 60th day nor earlier
than the close of business on the 90th day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is more than 30 days before or more than 60 days
after such anniversary date, notice by the shareowner to be timely must be so
delivered not earlier than the close of business on the 90th day prior to such
annual meeting and not later than the close of business on the later of the 60th
day prior to such annual meeting or the 10th day following the day on which
public announcement of the date of such meeting is first made by the
Corporation. In no event shall the public announcement of an adjournment of an
annual meeting commence a new time period for the giving of a shareowner's
notice as described above. Such shareowner's notice shall set forth (a) as to
each person whom the shareowner proposes to nominate for election or reelection
as a
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director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors in an election
contest, or is otherwise required, in each case pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule
14a-11 thereunder (including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected); (b) as to
any other business that the shareowner proposes to bring before the meeting, a
brief description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such shareowner and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the shareowner giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is made
(i) the name and address of such shareowner, as they appear on the Corporation's
books, and of such beneficial owner and (ii) the class and number of shares of
the Corporation which are owned beneficially and of record by such shareowner
and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph (A)(2) of
this by-law to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the Corporation is increased and there is
no public announcement by the Corporation naming all of the nominees for
director or specifying the size of the increased Board of Directors at least 70
days prior to the first anniversary of the preceding year's annual meeting, a
shareowner's notice required by this by-law shall also be considered timely, but
only with respect to nominees for any new positions created by such increase, if
it shall be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 10th day following the
day on which such public announcement is first made by the Corporation.
(B) Special Meetings of Shareowners. Only such business shall
be conducted at a special meeting of shareowners as
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shall have been brought before the meeting pursuant to the Corporation's notice
of meeting. Nominations of persons for election to the Board of Directors may be
made at a special meeting of shareowners at which directors are to be elected
pursuant to the Corporation's notice of meeting (a) by or at the direction of
the Board of Directors or (b) provided that the Board of Directors has
determined that directors shall be elected at such meeting, by any shareowner of
the Corporation who is a shareowner of record at the time of giving of notice
provided for in this by-law, who shall be entitled to vote at the meeting and
who complies with the notice procedures set forth in this by-law. In the event
the Corporation calls a special meeting of shareowners for the purpose of
electing one or more directors to the Board of Directors, any such shareowner
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the Corporation's notice of meeting, if the
shareowner's notice required by paragraph (A)(2) of this by-law shall be
delivered to the Secretary at the principal executive offices of the Corporation
not earlier than the close of business on the 90th day prior to such special
meeting and not later than the close of business on the later of the 60th day
prior to such special meeting or the 10th day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting. In no
event shall the public announcement of an adjournment of a special meeting
commence a new time period for the giving of a shareowner's notice as described
above.
(C) General. (1) Only such persons who are nominated in
accordance with the procedures set forth in this by-law shall be eligible to
serve as directors and only such business shall be conducted at a meeting of
shareowners as shall have been brought before the meeting in accordance with
the procedures set forth in this by-law. Except as otherwise provided by law,
the Certificate of Incorporation or these by-laws, the Chairman of the meeting
shall have the power and duty to determine whether a nomination or any business
proposed to be brought before the meeting was made or proposed, as the case may
be, in accordance with the procedures set forth in this by-law and, if any
proposed nomination or business is not in compliance with this by-law, to
declare that such defective proposal or nomination shall be disregarded.
(2) For purposes of this by-law, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this by-law, a shareowner
shall also comply with all applicable requirements of the Exchange Act and the
rules and regulations thereunder with respect to the matters set forth in this
by-law.
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Nothing in this by-law shall be deemed to affect any rights (i) of shareowners
to request inclusion of proposals in the Corporation's proxy statement pursuant
to Rule 14a-8 under the Exchange Act or (ii) of the holders of any series of
Preferred Stock to elect directors under specified circumstances.
SECTION 9. BUSINESS AND ORDER OF BUSINESS. At each meeting of
the shareowners such business may be transacted as may properly be brought
before such meeting, except as otherwise provided by law or in these by-laws.
The order of business at all meetings of the shareowners shall be as determined
by the Chairman, unless otherwise determined by a majority in interest of the
shareowners present in person or by proxy at such meeting and entitled to vote
thereat.
SECTION 10. VOTING. Except as otherwise provided by law, the
Certificate of Incorporation or these by-laws, each shareowner shall at every
meeting of the shareowners be entitled to one vote for each share of stock held
by such shareowner. Any vote on stock may be given by the shareowner entitled
thereto in person or by proxy appointed by an instrument in writing, subscribed
(or transmitted by electronic means and authenticated as provided by law) by
such shareowner or by the shareowner's attorney thereunto authorized, and
delivered to the Secretary; provided, however, that no proxy shall be voted
after three years from its date unless the proxy provides for a longer period.
Except as otherwise provided by law, the Certificate of Incorporation or these
by-laws, at all meetings of the shareowners, all matters shall be decided by
the vote (which need not be by ballot) of a majority in interest of the
shareowners present in person or by proxy and entitled to vote thereat, a
quorum being present.
ARTICLE III.
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The property, affairs and
business of the Corporation shall be managed by or under the direction of its
Board of Directors.
SECTION 2. NUMBER, QUALIFICATIONS, AND TERM OF OFFICE.
Subject to the rights of the holders of any series of Preferred Stock to elect
additional directors under specified circumstances, the number of directors of
the Corporation shall be fixed from time to time exclusively by the Board of
Directors pursuant to a resolution adopted by a majority of the whole Board. A
director need not be a shareowner.
The directors, other than those who may be elected by the holders of any series
of Preferred Stock or any other series or class of stock, as provided herein or
in any Preferred Stock Designation,
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shall be divided into three classes, as nearly equal in number as possible. One
class of directors shall be initially elected for a term expiring at the annual
meeting of shareowners to be held in 1997, another class shall be initially
elected for a term expiring at the annual meeting of shareowners to be held in
1998, and another class shall be initially elected for a term expiring at the
annual meeting of shareowners to be held in 1999. Members of each class shall
hold office until their successors are elected and shall have qualified. At each
annual meeting of the shareowners of the Corporation, commencing with the 1997
annual meeting, the successors of the class of directors whose term expires at
that meeting shall be elected by a plurality vote of all votes cast at such
meeting to hold office for a term expiring at the annual meeting of shareowners
held in the third year following the year of their election.
SECTION 3. ELECTION OF DIRECTORS. At each meeting of the
shareowners for the election of directors, at which a quorum is present, the
directors shall be the persons receiving the greatest number of votes cast by
the holders of stock entitled to vote for such directors.
SECTION 4. QUORUM AND MANNER OF ACTING. A majority of the
members of the Board of Directors shall constitute a quorum for the transaction
of business at any meeting, and the act of a majority of the directors present
at any meeting at which a quorum is present shall be the act of the Board of
Directors unless otherwise provided by law, the Certificate of Incorporation or
these by-laws. In the absence of a quorum, a majority of the directors present
may adjourn any meeting from time to time until a quorum shall be obtained.
Notice of any adjourned meeting need not be given. The directors shall act only
as a board and the individual directors shall have no power as such.
SECTION 5. PLACE OF MEETINGS. The Board of Directors may hold
its meetings at such place or places within or without the State of Delaware as
the Board may from time to time determine or as shall be specified or fixed in
the respective notices or waivers of notice thereof.
SECTION 6. FIRST MEETING. Promptly after each annual election
of directors, the Board of Directors shall meet for the purpose of
organization, the election of officers and the transaction of other business,
at the same place as that at which the annual meeting of shareowners was held
or as otherwise determined by the Board. Notice of such meeting need not be
given. Such meeting may be held at any other time or place which shall be
specified in a notice given as hereinafter provided for special meetings of the
Board of Directors.
SECTION 7. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at such places and at such times
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as the Board shall from time to time determine. If any day fixed for a regular
meeting shall be a legal holiday at the place where the meeting is to be held,
then the meeting which would otherwise be held on that day shall be held at the
same hour on the next succeeding business day not a legal holiday. Notice of
regular meetings need not be given.
SECTION 8. SPECIAL MEETINGS; NOTICE. Special meetings of the
Board of Directors shall be held whenever called by the Chairman of the Board
and shall be called by the Chairman of the Board or the Secretary at the
written request of three directors. Notice of each such meeting stating the
time and place of the meeting shall be given to each director by mail,
telephone, other electronic transmission or personally. If by mail, such notice
shall be given not less than five days before the meeting; and if by telephone,
other electronic transmission or personally, not less than two days before the
meeting. A notice mailed at least two weeks before the meeting need not state
the purpose thereof except as otherwise provided in these by-laws. In all other
cases the notice shall state the principal purpose or purposes of the meeting.
Notice of any meeting of the Board need not be given to a director, however, if
waived by the director in writing before or after such meeting or if the
director shall be present at the meeting.
SECTION 9. ORGANIZATION. At each meeting of the Board of
Directors, the Chairman of the Board, or, in his absence, the President, or, in
the absence of the Chairman and the President, a director or an officer of the
Corporation designated by the Board shall act as Chairman. The Secretary, or,
in the Secretary's absence, any person appointed by the Chairman, shall act as
Secretary of the meeting.
SECTION 10. ORDER OF BUSINESS. At all meetings of the Board
of Directors, business shall be transacted in the order determined by the
Board.
SECTION 11. RESIGNATIONS. Any director of the Corporation may
resign at any time by giving written notice to the Chairman of the Board, the
President or the Secretary of the Corporation. The resignation of any director
shall take effect at the time specified therein, and unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
SECTION 12. COMPENSATION. Each director shall be paid such
compensation, if any, as shall be fixed by the Board of Directors.
SECTION 13. INDEMNIFICATION OF DIRECTORS AND OFFICERS. (A)
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened,
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pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Corporation) by reason of the fact that such person is or was a director,
officer, employee or agent of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent (except in
each of the foregoing situations to the extent any agreement, arrangement or
understanding of agency contains provisions that supersede or abrogate
indemnification under this section) of another corporation or of any
partnership, joint venture, trust, employee benefit plan or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
(B) The Corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent
(except in each of the foregoing situations to the extent any agreement,
arrangement or understanding of agency contains provisions that supersede or
abrogate indemnification under this section) of another corporation or of any
partnership, joint venture, trust, employee benefit plan or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred
by such person in connection with the defense or settlement of such action or
suit if such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the Corporation and
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery of Delaware or such
other court shall deem proper.
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(C) To the extent that a director, officer, employee or agent
of the Corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (A) and (B), or in
defense of any claim, issue or matter therein, such person shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred
by or on behalf of such person in connection therewith. If any such person is
not wholly successful in any such action, suit or proceeding but is successful,
on the merits or otherwise, as to one or more but less than all claims, issues
or matters therein, the Corporation shall indemnify such person against all
expenses (including attorneys' fees) actually and reasonably incurred by or on
behalf of such person in connection with each claim, issue or matter that is
successfully resolved. For purposes of this subsection and without limitation,
the termination of any claim, issue or matter by dismissal, with or without
prejudice, shall be deemed to be a successful result as to such claim, issue or
matter.
(D) Notwithstanding any other provision of this section, to
the extent any person is a witness in, but not a party to, any action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that such person is or was a director, officer, employee or agent
of the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent (except in each of the foregoing
situations to the extent any agreement, arrangement or understanding of agency
contains provisions that supersede or abrogate indemnification under this
section) of another corporation or of any partnership, joint venture, trust,
employee benefit plan or other enterprise, such person shall be indemnified
against all expenses (including attorneys' fees) actually and reasonably
incurred by or on behalf of such person in connection therewith.
(E) Indemnification under subsections (A) and (B) (unless
ordered by a court) shall be made only as authorized in the specific case upon
a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because such person has met the applicable
standard of conduct set forth in subsections (A) and (B). Such determination
shall be made (1) if a Change of Control (as hereinafter defined) shall not
have occurred, (a) by the Board of Directors by a majority vote of the
Disinterested Directors (as hereinafter defined), even though less than a
quorum or (b) if there are no Disinterested Directors or, even if there are
Disinterested Directors, a majority of such Disinterested Directors so directs,
by (i) Independent Counsel (as hereinafter defined) in a written opinion to the
Board of Directors, a copy of which shall be delivered to the claimant, or (ii)
the shareowners of the Corporation; or (2) if a Change of Control shall have
occurred, by Independent Counsel selected by the claimant in a
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written opinion to the Board of Directors, a copy of which shall be delivered to
the claimant, unless the claimant shall request that such determination be made
by or at the direction of the Board of Directors, in which case it shall be made
in accordance with clause (1) of this sentence. Any claimant shall be entitled
to be indemnified against the expenses (including attorneys' fees) actually and
reasonably incurred by such claimant in cooperating with the person or entity
making the determination of entitlement to indemnification (irrespective of the
determination as to the claimant's entitlement to indemnification) and, to the
extent successful, in connection with any litigation or arbitration with respect
to such claim or the enforcement thereof.
(F) If a Change of Control shall not have occurred, or if a
Change of Control shall have occurred and a director, officer, employee or
agent requests pursuant to clause (2) of the second sentence in subsection (E)
that the determination whether the claimant is entitled to indemnification be
made by or at the direction of the Board of Directors, the claimant shall be
conclusively presumed to have been determined pursuant to subsection (E) to be
entitled to indemnification if (1)(a) within fifteen days after the next
regularly scheduled meeting of the Board of Directors following receipt by the
Corporation of the request therefor, the Board of Directors shall not have
resolved by majority vote of the Disinterested Directors to submit such
determination to (i) Independent Counsel for its determination or (ii) the
shareowners for their determination at the next annual meeting, or any special
meeting that may be held earlier, after such receipt, and (b) within sixty days
after receipt by the Corporation of the request therefor (or within ninety days
after such receipt if the Board of Directors in good faith determines that
additional time is required by it for the determination and, prior to
expiration of such sixty-day period, notifies the claimant thereof), the Board
of Directors shall not have made the determination by a majority vote of the
Disinterested Directors, or (2) after a resolution of the Board of Directors,
timely made pursuant to clause (1)(a)(ii) above, to submit the determination to
the shareowners, the shareowners meeting at which the determination is to be
made shall not have been held on or before the date prescribed (or on or before
a later date, not to exceed sixty days beyond the original date, to which such
meeting may have been postponed or adjourned on good cause by the Board of
Directors acting in good faith); provided, however, that this sentence shall
not apply if the claimant has misstated or failed to state a material fact in
connection with his or her request for indemnification. Such presumed
determination that a claimant is entitled to indemnification shall be deemed to
have been made (I) at the end of the sixty-day or ninety-day period (as the
case may be) referred to in clause (1)(b) of the immediately preceding sentence
or (II) if the Board of Directors has resolved on a timely basis to submit the
determination to the shareowners, on the last date within the period prescribed
by law for holding such
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shareowners meeting (or a postponement or adjournment thereof as permitted
above).
(G) Expenses (including attorneys' fees) incurred in
defending a civil, criminal, administrative or investigative action, suit or
proceeding shall be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding to a director or officer, promptly after
receipt of a request therefor stating in reasonable detail the expenses
incurred, and to an employee or agent as authorized by the Board of Directors;
provided that in each case the Corporation shall have received an undertaking
by or on behalf of the director, officer, employee or agent to repay such
amount if it shall ultimately be determined that such person is not entitled to
be indemnified by the Corporation as authorized in this section.
(H) The Board of Directors shall establish reasonable
procedures for the submission of claims for indemnification pursuant to this
section, determination of the entitlement of any person thereto and review of
any such determination. Such procedures shall be set forth in an appendix to
these by-laws and shall be deemed for all purposes to be a part hereof.
(I) For purposes of this section,
(1) "Change of Control" means a change of control of
the Corporation at any time after the distribution of the shares of capital
stock of the Corporation to the holders of capital stock of Rockwell
International Corporation of a nature that would be required to be reported in a
proxy statement pursuant to Section 14(a) of the Exchange Act or in a Form 8-K
pursuant to Section 13 of the Exchange Act (or in any similar form or schedule
under either of those provisions or any successor provision), whether or not the
Corporation is then subject to such reporting requirement; provided, however,
that, without limitation, a Change of Control shall be deemed to have occurred
if (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 20% or more of the combined voting power of the
Corporation's then outstanding securities without the prior approval of at least
two-thirds of the members of the Board of Directors in office immediately prior
to such person attaining such percentage interest; (ii) the Corporation is a
party to a merger, consolidation, sale of assets or other reorganization, or a
proxy contest, as a consequence of which members of the Board of Directors in
office immediately prior to such transaction or event constitute less than a
majority of the Board of Directors immediately thereafter; or (iii) during any
period of two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors (including for this purpose any new director
whose election or nomination for election by the
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Corporation's shareowners was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning of such
period) cease for any reason to constitute at least a majority of the Board of
Directors.
(2) "Disinterested Director" means a director of the
Corporation who is not and was not a party to an action, suit or proceeding
in respect of which indemnification is sought by a director, officer, employee
or agent.
(3) "Independent Counsel" means a law firm, or a member
of a law firm, that (i) is experienced in matters of corporation law; (ii)
neither presently is, nor in the past five years has been, retained to represent
the Corporation, the director, officer, employee or agent claiming
indemnification or any other party to the action, suit, or proceeding giving
rise to a claim for indemnification under this section, in any matter material
to the Corporation, the claimant or any such other party; and (iii) would not,
under applicable standards of professional conduct then prevailing, have a
conflict of interest in representing either the Corporation or such director,
officer, employee or agent in an action to determine the Corporation's or such
person's rights under this section.
(J) The Indemnification and advancement of expenses herein
provided, or granted pursuant hereto, shall not be deemed exclusive of any
other rights to which any of those indemnified or eligible for advancement of
expenses may be entitled under any agreement, vote of shareowners or
Disinterested Directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person. Notwithstanding any amendment,
alteration or repeal of this section or any of its provisions, or of any of the
procedures established by the Board of Directors pursuant to subsection (H)
hereof, any person who is or was a director, officer, employee or agent of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of any
partnership, joint venture, employee benefit plan or other enterprise shall be
entitled to indemnification in accordance with the provisions hereof and
thereof with respect to any action taken or omitted prior to such amendment,
alteration or repeal except to the extent otherwise required by law.
(K) No indemnification shall be payable pursuant to this
section with respect to any action against the Corporation commenced by an
officer, director, employee or agent unless the Board of Directors shall have
authorized the commencement thereof or unless and to the extent that this
section or the procedures established pursuant to subsection (H) shall
specifically provide
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for indemnification of expenses relating to the enforcement of rights under this
section and such procedures.
ARTICLE IV.
COMMITTEES
SECTION 1. APPOINTMENT AND POWERS. The Board of Directors
may, by resolution passed by a majority of the whole Board, designate one or
more committees, each committee to consist of two or more directors of the
Corporation, which, to the extent provided in said resolution or in these
by-laws and not inconsistent with Section 141 of the Delaware General
Corporation Law, as amended, shall have and may exercise the powers of the
Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it. Such committee or committees shall have such name
or names as may be determined from time to time by resolution adopted by the
Board of Directors.
SECTION 2. TERM OF OFFICE AND VACANCIES. Each member of a
committee shall continue in office until a director to succeed him or her shall
have been elected and shall have qualified, or until he or she ceases to be a
director or until he or she shall have resigned or shall have been removed in
the manner hereinafter provided. Any vacancy in a committee shall be filled by
the vote of a majority of the whole Board of Directors at any regular or
special meeting thereof.
SECTION 3. ALTERNATES. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee.
SECTION 4. ORGANIZATION. Unless otherwise provided by the
Board of Directors, each committee shall appoint a chairman. Each committee
shall keep a record of its acts and proceedings and report the same from time
to time to the Board of Directors.
SECTION 5. RESIGNATIONS. Any regular or alternate member of a
committee may resign at any time by giving written notice to the Chairman of
the Board, the President or the Secretary of the Corporation. Such resignation
shall take effect at the time of the receipt of such notice or at any later
time specified therein, and, unless otherwise specified therein, the acceptance
of such resignation shall not be necessary to make it effective.
SECTION 6. REMOVAL. Any regular or alternate member of a
committee may be removed with or without cause at any time by
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resolution passed by a majority of the whole Board of Directors at any regular
or special meeting.
SECTION 7. MEETINGS. Regular meetings of each committee, of
which no notice shall be necessary, shall be held on such days and at such
places as the chairman of the committee shall determine or as shall be fixed by
a resolution passed by a majority of all the members of such committee. Special
meetings of each committee will be called by the Secretary at the request of
any two members of such committee, or in such other manner as may be determined
by the committee. Notice of each special meeting of a committee shall be mailed
to each member thereof at least two days before the meeting or shall be given
personally or by telephone or other electronic transmission at least one day
before the meeting. Every such notice shall state the time and place, but need
not state the purposes of the meeting. No notice of any meeting of a committee
shall be required to be given to any alternate.
SECTION 8. QUORUM AND MANNER OF ACTING. Unless otherwise
provided by resolution of the Board of Directors, a majority of a committee
(including alternates when acting in lieu of regular members of such committee)
shall constitute a quorum for the transaction of business and the act of a
majority of those present at a meeting at which a quorum is present shall be
the act of such committee. The members of each committee shall act only as a
committee and the individual members shall have no power as such.
SECTION 9. COMPENSATION. Each regular or alternate member
of a committee shall be paid such compensation, if any, as shall be fixed by
the Board of Directors.
ARTICLE V.
OFFICERS
SECTION 1. OFFICERS. The officers of the Corporation shall be
a Chairman of the Board of Directors and a President, each of whom shall be
chosen from the members of the Board of Directors, one or more Vice Presidents
(one or more of whom may be Executive Vice Presidents, Senior Vice Presidents
or otherwise as may be designated by the Board), a Secretary and a Treasurer,
all of whom shall be elected by the Board of Directors. Any two or more offices
may be held by the same person. The Board of Directors may also from time to
time elect such other officers as it deems necessary.
SECTION 2. TERM OF OFFICE. Each officer shall hold office
until his or her successor shall have been duly elected and qualified in his or
her stead, or until
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his or her death or until he or she shall have resigned or shall have been
removed in the manner hereinafter provided.
SECTION 3. ADDITIONAL OFFICERS; AGENTS. The Chairman of the
Board or the President may from time to time appoint and remove such additional
officers and agents as may be deemed necessary. Such persons shall hold office
for such period, have such authority, and perform such duties as in these
by-laws provided or as the Chairman of the Board or the President may from time
to time prescribe. The Board of Directors or the Chairman of the Board or the
President may from time to time authorize any officer to appoint and remove
agents and employees and to prescribe their powers and duties.
SECTION 4. SALARIES. Unless otherwise provided by
resolution passed by a majority of the whole Board, the salaries of all
officers elected by the Board of Directors shall be fixed by the Board of
Directors.
SECTION 5. REMOVAL. Except where otherwise expressly provided
in a contract authorized by the Board of Directors, any officer may be removed,
either with or without cause, by the vote of a majority of the Board at any
regular or special meeting or, except in the case of an officer elected by the
Board, by any superior officer upon whom the power of removal may be conferred
by the Board or by these by-laws.
SECTION 6. RESIGNATIONS. Any officer elected by the Board of
Directors may resign at any time by giving written notice to the Chairman of
the Board, the President or the Secretary. Any other officer may resign at any
time by giving written notice to the Chairman of the Board or the President.
Any such resignation shall take effect at the date of receipt of such notice or
at any later time specified therein, and unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
SECTION 7. VACANCIES. A vacancy in any office because of
death, resignation, removal, or otherwise, shall be filled for the unexpired
portion of the term in the manner provided in these by-laws for regular
election or appointment to such office.
SECTION 8. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman
of the Board of Directors shall be chief executive officer of the Corporation
and, subject to the control of the Board of Directors, shall have general and
overall charge of the business and affairs of the Corporation and of its
officers. He shall keep the Board of Directors appropriately informed on the
business and affairs of the Corporation. He shall preside at all meetings of
the shareowners and of the Board of Directors and shall enforce the observance
of the rules of order for the
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meetings of the Board and the shareowners and the by-laws of the Corporation.
SECTION 9. PRESIDENT. The President shall be the chief
operating officer of the Corporation and, subject to the control of the
Chairman of the Board, shall direct and be responsible for the operation of the
business and affairs of the Corporation. The President shall keep the Chairman
of the Board and the Board of Directors appropriately informed on the business
and affairs of the Corporation. In the case of the absence or disability of the
Chairman of the Board, the President shall perform all the duties and functions
and exercise all the powers of, and be subject to all the restrictions upon,
the Chairman of the Board.
SECTION 10. EXECUTIVE VICE PRESIDENTS. One or more Executive
Vice Presidents shall, subject to the control of the Chairman of the Board and
the President, have lead accountability for components or functions of the
Corporation as and to the extent designated by the Chairman of the Board and
the President. Each Executive Vice President shall keep the Chairman of the
Board and President appropriately informed on the business and affairs of the
designated components or functions of the Corporation.
SECTION 11. VICE PRESIDENTS. The Vice Presidents shall
perform such duties as may from time to time be assigned to them or any of them
by the Chairman of the Board or the President.
SECTION 12. SECRETARY. The Secretary shall keep or cause to
be kept in books provided for the purpose the minutes of the meetings of the
shareowners, of the Board of Directors and of any committee constituted
pursuant to Article IV of these by-laws. The Secretary shall be custodian of
the corporate seal and see that it is affixed to all documents as required and
attest the same. The Secretary shall perform all duties incident to the office
of Secretary and such other duties as from time to time may be assigned to him
or her.
SECTION 13. ASSISTANT SECRETARIES. At the request of the
Secretary, or in his or her absence or disability, the Assistant Secretary
designated by him or her shall perform all the duties of the Secretary and,
when so acting, shall have all the powers of, and be subject to all the
restrictions upon, the Secretary. The Assistant Secretaries shall perform such
other duties as from time to time may be assigned to them.
SECTION 14. TREASURER. The Treasurer shall have charge of and
be responsible for the receipt, disbursement and safekeeping of all funds and
securities of the Corporation. The Treasurer shall deposit all such funds in
the name of the Corporation in such banks, trust companies or other
depositories as shall be selected in accordance with the provisions of these
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by-laws. From time to time and whenever requested to do so, the Treasurer shall
render statements of the condition of the finances of the Corporation to the
Board of Directors. The Treasurer shall perform all the duties incident to the
office of Treasurer and such other duties as from time to time may be assigned
to him or her.
SECTION 15. ASSISTANT TREASURERS. At the request of the
Treasurer, or in his or her absence or disability, the Assistant Treasurer
designated by him or her shall perform all the duties of the Treasurer and,
when so acting, shall have all the powers of, and be subject to all the
restrictions upon, the Treasurer. The Assistant Treasurers shall perform such
other duties as from time to time may be assigned to them.
SECTION 16. CERTAIN AGREEMENTS. The Board of Directors shall
have power to authorize or direct the proper officers of the Corporation, on
behalf of the Corporation, to enter into valid and binding agreements in
respect of employment, incentive or deferred compensation, stock options, and
similar or related matters, notwithstanding the fact that a person with whom
the Corporation so contracts may be a member of its Board of Directors. Any
such agreement may validly and lawfully bind the Corporation for a term of more
than one year, in accordance with its terms, notwithstanding the fact that one
of the elements of any such agreement may involve the employment by the
Corporation of an officer, as such, for such term.
ARTICLE VI.
AUTHORIZATIONS
SECTION 1. CONTRACTS. The Board of Directors, except as in
these by-laws otherwise provided, may authorize any officer, employee or agent
of the Corporation to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Corporation, and such authority
may be general or confined to specific instances.
SECTION 2. LOANS. No loan shall be contracted on behalf of
the Corporation and no negotiable paper shall be issued in its name, unless
authorized by the Board of Directors.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other
orders for the payment of money, notes or other evidences of indebtedness
issued in the name of the Corporation shall be signed by such officer or
officers, employee or employees, of the Corporation as shall from time to time
be determined in accordance with authorization of the Board of Directors.
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SECTION 4. DEPOSITS. All funds of the Corporation shall be
deposited from time to time to the credit of the Corporation in such banks,
trust companies or other depositories as the Board of Directors may from time
to time designate, or as may be designated by any officer or officers of the
Corporation to whom such power may be delegated by the Board, and for the
purpose of such deposit the officers and employees who have been authorized to
do so in accordance with the determinations of the Board may endorse, assign
and deliver checks, drafts, and other orders for the payment of money which are
payable to the order of the Corporation.
SECTION 5. PROXIES. Except as otherwise provided in these
by-laws or in the Certificate of Incorporation, and unless otherwise provided
by resolution of the Board of Directors, the Chairman of the Board, the
President or any other officer may from time to time appoint an attorney or
attorneys or agent or agents of the Corporation, in the name and on behalf of
the Corporation to cast the votes which the Corporation may be entitled to cast
as a shareowner or otherwise in any other corporation any of whose stock or
other securities may be held by the Corporation, at meetings of the holders of
the stock or other securities of such other corporations, or to consent in
writing to any action by such other corporation, and may instruct the person or
persons so appointed as to the manner of casting such vote or giving such
consent, and may execute or cause to be executed in the name and on behalf of
the Corporation and under its corporate seal, or otherwise, all such written
proxies or other instruments as he may deem necessary or proper in the
premises.
ARTICLE VII.
SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES OF STOCK. Certificates for shares of
the stock of the Corporation shall be in such form as shall be approved by the
Board of Directors. They shall be numbered in the order of their issue, by
class and series, and shall be signed by the Chairman of the Board, the
President or a Vice President, and the Treasurer or an Assistant Treasurer, or
the Secretary or an Assistant Secretary, of the Corporation. If such
certificate is countersigned (1) by a transfer agent other than the Corporation
or its employee, or (2) by a registrar other than the Corporation or its
employee, any other signature on the certificate may be a facsimile. In case
any officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent, or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if such person were such
officer, transfer agent, or registrar at the date of issue.
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SECTION 2. RECORD OWNERSHIP. A record of the name and address
of the holder of each certificate, the number of shares represented thereby and
the date of issuance thereof shall be made on the Corporation's books. The
Corporation shall be entitled to treat the holder of record of any share of
stock as the holder in fact thereof and accordingly shall not be bound to
recognize any equitable or other claim to or interest in such share on the part
of any other person, whether or not it shall have express or other notice
thereof, except as required by law.
SECTION 3. TRANSFER OF STOCK. Shares of stock shall be
transferable on the books of the Corporation by the person named in the
certificate for such stock in person or by such person's attorney or other duly
constituted representative upon surrender of such certificate with an
assignment endorsed thereon or attached thereto duly executed and with such
guarantee of signature as the Corporation may reasonably require.
SECTION 4. LOST, DESTROYED AND MUTILATED CERTIFICATES. The
Corporation may issue a new certificate of stock in the place of any
certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the Corporation may require the owner of the lost, stolen or
destroyed certificate, or such person's legal representative, to give the
Corporation a bond sufficient to indemnify it against any claim that may be
made against it on account of the alleged loss, theft or destruction of any
such certificate or the issuance of such new certificate.
SECTION 5. TRANSFER AGENT AND REGISTRAR; REGULATIONS. The
Corporation shall, if and whenever the Board of Directors shall so determine,
maintain one or more transfer offices or agencies, each in charge of a transfer
agent designated by the Board of Directors, where the shares of the stock of
the Corporation shall be directly transferable, and also one or more registry
offices, each in charge of a registrar designated by the Board of Directors,
where such shares of stock shall be registered, and no certificate for shares
of the stock of the Corporation, in respect of which a registrar and transfer
agent shall have been designated, shall be valid unless countersigned by such
transfer agent and registered by such registrar. The Board of Directors may
also make such additional rules and regulations as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation.
SECTION 6. FIXING RECORD DATE. For the purpose of determining
the shareowners entitled to notice of or to vote at any meeting of shareowners
or any adjournment thereof, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
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purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than sixty nor less than ten days before
the date of such meeting, nor more than sixty days prior to any other action.
If no record date is fixed (1) the record date for determining shareowners
entitled to notice of or to vote at a meeting of shareowners shall be at the
close of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held and (2) the record date for determining
shareowners for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto. A
determination of shareowners of record entitled to notice of or to vote at a
meeting of shareowners shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the
adjourned meeting.
SECTION 7. EXAMINATION OF BOOKS BY SHAREOWNERS. The Board of
Directors shall, subject to the laws of the State of Delaware, have power to
determine from time to time, whether and to what extent and under what
conditions and regulations the accounts and books of the Corporation, or any of
them, shall be open to the inspection of the shareowners; and no shareowner
shall have any right to inspect any book or document of the Corporation, except
as conferred by the laws of the State of Delaware, unless and until authorized
so to do by resolution of the Board of Directors or of the shareowners of the
Corporation.
ARTICLE VIII.
NOTICE
SECTION 1. MANNER OF GIVING WRITTEN NOTICE. Any notice in
writing required by law or by these by-laws to be given to any person may be
delivered personally, may be transmitted by electronic means or may be given by
depositing the same in the post office or letter box in a postpaid envelope
addressed to such person at such address as appears on the books of the
Corporation. Notice by mail shall be deemed to be given at the time when the
same shall be mailed, and notice by other means shall be deemed given when
actually delivered (and in the case of notice transmitted by electronic means,
when authenticated if and as required by law).
SECTION 2. WAIVER OF NOTICE. Whenever any notice is required
to be given to any person, a waiver thereof by such person in writing or
transmitted by electronic means (and authenticated if and as required by law),
whether before or after the time stated therein, shall be deemed equivalent
thereto.
21
<PAGE> 22
ARTICLE IX.
SEAL
The corporate seal shall have inscribed thereon the name of
the Corporation, the year of its organization and the words "Corporate Seal"
and "Delaware".
ARTICLE X.
FISCAL YEAR
The fiscal year of the Corporation shall begin on the first
day of October in each year.
22
<PAGE> 23
APPENDIX
PROCEDURES FOR SUBMISSION AND
DETERMINATION OF CLAIMS FOR INDEMNIFICATION
PURSUANT TO ARTICLE III, SECTION 13 OF THE BY-LAWS.
SECTION 1. PURPOSE. The Procedures for Submission and
Determination of Claims for Indemnification Pursuant to Article III, Section 13
of the by-laws (the "Procedures") are to implement the provisions of Article
III, Section 13 of the by-laws of the Corporation (the "by-laws") in compliance
with the requirement of subsection (H) thereof.
SECTION 2. DEFINITIONS. For purposes of these Procedures:
(A) All terms that are defined in Article III, Section 13 of
the by-laws shall have the meanings ascribed to them therein when used in these
Procedures unless otherwise defined herein.
(B) "Expenses" include all reasonable attorneys' fees, court
costs, transcript costs, fees of experts, witness fees, travel expenses,
duplicating costs, printing and binding costs, telephone charges, postage,
delivery service fees, and all other disbursements or expenses of the types
customarily incurred in connection with prosecuting, defending, preparing to
prosecute or defend, investigating, or being or preparing to be a witness in, a
Proceeding; and shall also include such retainers as counsel may reasonably
require in advance of undertaking the representation of an indemnitee in a
Proceeding.
(C) "Indemnitee" includes any person who was or is, or is
threatened to be made, a witness in or a party to any Proceeding by reason of
the fact that such person is or was a director, officer, employee or agent of
the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent (except in each of the foregoing
situations to the extent any agreement, arrangement or understanding of agency
contains provisions that supersede or abrogate indemnification under Article
III, Section 13 of the by-laws) of another corporation or of any partnership,
joint venture, trust, employee benefit plan or other enterprise.
(D) "Proceeding" includes any action, suit, arbitration,
alternative dispute resolution mechanism, investigation, administrative hearing
or any other proceeding, whether civil, criminal, administrative or
investigative, except one initiated by an Indemnitee unless the Board of
Directors shall have authorized the commencement thereof.
<PAGE> 24
SECTION 3. SUBMISSION AND DETERMINATION OF CLAIMS.
(A) To obtain indemnification or advancement of Expenses
under Article III, Section 13 of the by-laws, an Indemnitee shall submit to the
Secretary of the Corporation a written request therefor, including therein or
therewith such documentation and information as is reasonably available to the
Indemnitee and is reasonably necessary to permit a determination as to whether
and what extent the Indemnitee is entitled to indemnification or advancement of
Expenses, as the case may be. The Secretary shall, promptly upon receipt of a
request for indemnification, advise the Board of Directors thereof in writing
if a determination in accordance with Article III, Section 13(E) of the by-laws
is required.
(B) Upon written request by an Indemnitee for indemnification
pursuant to Section 3(A) hereof, a determination with respect to the
Indemnitee's entitlement thereto in the specific case, if required by the
by-laws, shall be made in accordance with Article III, Section 13(E) of the
by-laws, and, if it is so determined that the Indemnitee is entitled to
indemnification, payment to the Indemnitee shall be made within ten days after
such determination. The Indemnitee shall cooperate with the person, persons or
entity making such determination, with respect to the Indemnitee's entitlement
to indemnification, including providing to such person, persons or entity upon
reasonable advance request any documentation or information which is not
privileged or otherwise protected from disclosure and which is reasonably
available to the Indemnitee and reasonably necessary to such determination.
(C) If entitlement to indemnification is to be made by
Independent Counsel pursuant to Article III, Section 13(E) of the by-laws, the
Independent Counsel shall be selected as provided in this Section 3(C). If a
Change of Control shall not have occurred, the Independent Counsel shall be
selected by the Board of Directors, and the Corporation shall give written
notice to the Indemnitee advising the Indemnitee of the identity of the
Independent Counsel so selected. If a Change of Control shall have occurred,
the Independent Counsel shall be selected by the Indemnitee (unless the
Indemnitee shall request that such selection be made by the Board of Directors,
in which event the immediately preceding sentence shall apply), and the
Indemnitee shall give written notice to the Corporation advising it of the
identity of the Independent Counsel so selected. In either event, the
Indemnitee or the Corporation, as the case may be, may, within seven days after
such written notice of selection shall have been given, deliver to the
Corporation or to the Indemnitee, as the case may be, a written objection to
such selection. Such objection may be asserted only on the ground that the
Independent Counsel so selected does not meet the requirements of "Independent
Counsel" as defined in Article III, Section 13 of the by-laws, and
2
<PAGE> 25
the objection shall set forth with particularity the factual basis of such
assertion. If such written objection is made, the Independent Counsel so
selected may not serve as Independent Counsel unless and until a court has
determined that such objection is without merit. If, within twenty days after
the next regularly scheduled Board of Directors meeting following submission by
the Indemnitee of a written request for indemnification pursuant to Section 3(A)
hereof, no Independent Counsel shall have been selected and not objected to,
either the Corporation or the Indemnitee may petition the Court of Chancery of
the State of Delaware or other court of competent jurisdiction for resolution of
any objection which shall have been made by the Corporation or the Indemnitee to
the other's selection of Independent Counsel and/or for the appointment as
Independent Counsel of a person selected by the Court or by such other person as
the Court shall designate, and the person with respect to whom an objection is
favorably resolved or the person so appointed shall act as Independent Counsel
under Article III, Section 13(E) of the by-laws. The Corporation shall pay any
and all reasonable fees and expenses (including without limitation any advance
retainers reasonably required by counsel) of Independent Counsel incurred by
such Independent Counsel in connection with acting pursuant to Article III,
Section 13(E) of the by-laws, and the Corporation shall pay all reasonable fees
and expenses (including without limitation any advance retainers reasonably
required by counsel) incident to the procedures of Article III, Section 13(E) of
the by-laws and this Section 3(C), regardless of the manner in which Independent
Counsel was selected or appointed. Upon the delivery of its opinion pursuant to
Article III, Section 13 of the by-laws or, if earlier, the due commencement of
any judicial proceeding or arbitration pursuant to Section 4(A)(3) of these
Procedures, Independent Counsel shall be discharged and relieved of any further
responsibility in such capacity (subject to the applicable standards of
professional conduct then prevailing).
(D) If a Change of Control shall have occurred, in making a
determination with respect to entitlement to indemnification under the by-laws,
the person, persons or entity making such determination shall presume that an
Indemnitee is entitled to indemnification under the by-laws if the Indemnitee
has submitted a request for indemnification in accordance with Section 3(A)
hereof, and the Corporation shall have the burden of proof to overcome that
presumption in connection with the making by any person, persons or entity of
any determination contrary to that presumption.
SECTION 4. REVIEW AND ENFORCEMENT OF DETERMINATION.
(A) In the event that (1) advancement of Expenses is not
timely made pursuant to Article III, Section 13(G) of the by-laws, (2) payment
of indemnification is not made pursuant to Article III, Section 13(C) or (D) of
the by-laws within ten days after receipt by the Corporation of written request
therefor, (3)
3
<PAGE> 26
a determination is made pursuant to Article III, Section 13(E) of the by-laws
that an Indemnitee is not entitled to indemnification under the by-laws, (4) the
determination of entitlement to indemnification is to be made by Independent
Counsel pursuant to Article III, Section 13(E) of the by-laws and such
determination shall not have been made and delivered in a written opinion within
ninety days after receipt by the Corporation of the written request for
indemnification, or (5) payment of indemnification is not made within ten days
after a determination has been made pursuant to Article III, Section 13(E) of
the by-laws that an Indemnitee is entitled to indemnification or within ten days
after such determination is deemed to have been made pursuant to Article III,
Section 13(F) of the by-laws, the Indemnitee shall be entitled to an
adjudication in an appropriate court of the State of Delaware, or in any other
court of competent jurisdiction, of the Indemnitee's entitlement to such
indemnification or advancement of Expenses. Alternatively, the Indemnitee, at
his or her option, may seek an award in arbitration to be conducted by a single
arbitrator pursuant to the rules of the American Arbitration Association. The
Indemnitee shall commence such proceeding seeking an adjudication or an award in
arbitration within one year following the date on which the Indemnitee first has
the right to commence such proceeding pursuant to this Section 4(A). The
Corporation shall not oppose the Indemnitee's right to seek any such
adjudication or award in arbitration.
(B) In the event that a determination shall have been made
pursuant to Article III, Section 13(E) of the by-laws that an Indemnitee is not
entitled to indemnification, any judicial proceeding or arbitration commenced
pursuant to this Section 4 shall be conducted in all respects as a de novo
trial, or arbitration, on the merits and the Indemnitee shall not be prejudiced
by reason of that adverse determination. If a Change of Control shall have
occurred, the Corporation shall have the burden of proving in any judicial
proceeding or arbitration commenced pursuant to this Section 4 that the
Indemnitee is not entitled to indemnification or advancement of Expenses, as
the case may be.
(C) If a determination shall have been made or deemed to have
been made pursuant to Article III, Section 13(E) or (F) of the by-laws that an
Indemnitee is entitled to indemnification, the Corporation shall be bound by
such determination in any judicial proceeding or arbitration commenced pursuant
to this Section 4, absent (1) a misstatement or omission of a material fact in
connection with the Indemnitee's request for indemnification, or (2) a
prohibition of such indemnification under applicable law.
(D) The Corporation shall be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to this Section 4 that
the procedures and presumptions of these Procedures are not valid, binding and
enforceable, and shall
4
<PAGE> 27
stipulate in any such judicial proceeding or arbitration that the Corporation is
bound by all the provisions of these Procedures.
(E) In the event that an Indemnitee, pursuant to this Section
4, seeks to enforce the Indemnitee's rights under, or to recover damages for
breach of, Article III, Section 13 of the by-laws or these Procedures in a
judicial proceeding or arbitration, the Indemnitee shall be entitled to recover
from the Corporation, and shall be indemnified by the Corporation against, any
and all expenses (of the types described in the definition of Expenses in
Section 2 of these Procedures) actually and reasonably incurred in such
judicial proceeding or arbitration, but only if the Indemnitee prevails
therein. If it shall be determined in such judicial proceeding or arbitration
that the Indemnitee is entitled to receive part but not all of the
indemnification or advancement of Expenses sought, the expenses incurred by the
Indemnitee in connection with such judicial proceeding or arbitration shall be
appropriately prorated.
SECTION 5. AMENDMENTS. These Procedures may be amended at any
time and from time to time in the same manner as any by-law of the Corporation
in accordance with the Certificate of Incorporation; provided, however, that
notwithstanding any amendment, alteration or repeal of these Procedures or any
provision hereof, any Indemnitee shall be entitled to utilize these Procedures
with respect to any claim for indemnification arising out of any action taken
or omitted prior to such amendment, alteration or repeal except to the extent
otherwise required by law.
5
<PAGE> 1
EXHIBIT 10-h-2
NEW ROCKWELL INTERNATIONAL CORPORATION
RESOLUTIONS ADOPTED BY THE BOARD OF DIRECTORS
ON DECEMBER 4, 1996
o APPROVAL OF ASSUMPTION AND ADOPTION OF COMPENSATION AND BENEFIT PLANS
---------------------------------------------------------------------
RESOLVED, that, this Corporation's proposed succession to, and assumption
of, sponsorship, effective as of the Time of Contribution (as defined in
the Merger Agreement), of those compensation and benefit plans listed
below which were sponsored by Rockwell immediately prior to the Time of
Contribution, together with any and all sub-plans, agreements,
undertakings or other liabilities thereunder, including but not limited to
any liabilities in respect of outstanding stock options, stock
appreciation rights or restricted stock, in connection with the
Contribution (as defined in the Merger Agreement), be, and they hereby
are, authorized and approved:
Rockwell International Corporation Supplemental Savings Plan for Highly
Compensated Employees
Rockwell Retirement Savings Plan Excess Benefit Savings Plan
1979 Stock Plan for Key Employees
1988 Long-Term Incentives Plan
1995 Long-Term Incentives Plan
Directors Stock Plan
Incentive Compensation Plan
Deferred Compensation Plan
Annual Incentive Compensation Plan for Senior Executive Officers
Deferred Compensation Policy for Non-Employee Directors of Rockwell
International Corporation
<PAGE> 1
EXHIBIT 10-i-3
NEW ROCKWELL INTERNATIONAL CORPORATION
RESOLUTIONS ADOPTED BY THE BOARD OF DIRECTORS
ON DECEMBER 4, 1996
RESOLVED, that any Director of this Corporation may elect to defer all
or any part of the retainer fees paid in cash which such Director will be
entitled to receive from this Corporation for board, committee or other service
beginning January 1 of the following year by delivering to the Secretary of
this Corporation a written notice, specifying the percentage of such future
fees paid in cash to be deferred and the time when, or period during which,
such deferred fees shall be paid to him or her or, in the event of his or her
death, to his or her estate or beneficiary; that any such election shall
continue in effect for successive periods of one calendar year each so long as
the Director continues as a member of this Board of Directors unless and until
such Director shall elect to terminate such deferral with respect to future
fees by delivering a written notice to that effect to the Secretary of this
Corporation, with such termination to be effective as to fees paid on or after
the January 1 next following the date of receipt by the Secretary of this
Corporation of such Director's written notice of termination of deferral; that
there shall be credited to the total amount deferred by each Director at the
end of each calendar quarter an additional amount equal to the amount then
deferred and owing multiplied by one-fourth of the annual rate for quarterly
compounding that is 120% of the "applicable Federal long-term rate" determined
by the Secretary of the Treasury pursuant to Section 1274(d) of the Internal
Revenue Code, as amended, or any successor provision, for the last month in
such calendar quarter, such additional amount to be paid at the same time and
in the same proportion as the payments of the fees so deferred; that this Board
of Directors may terminate any such deferral at any time and may change the
period of payment of any deferred amounts or cause any deferred amounts to be
paid in a lump sum regardless of a Director's instructions with respect
thereto; that no deferred fees or additional amounts credited thereon may be
assigned or otherwise transferred; and that deferral pursuant to this
resolution shall be available in addition to or as an alternative to the
election available pursuant to Section 9 of this Corporation's Directors Stock
Plan; provided, however, that the total of the portions of a Director's
retainer fees paid in cash deferred under that Section and under this
resolution shall in no event exceed the total amount of such fees to which such
Director may be entitled for any calendar year.
<PAGE> 1
EXHIBIT 10-j-3
NEW ROCKWELL INTERNATIONAL CORPORATION
RESOLUTIONS ADOPTED BY THE BOARD OF DIRECTORS
ON DECEMBER 4, 1996
RESOLVED, that the proposed assumption and adoption by this
Corporation of the Directors Retirement Policy (the "Policy") of Rockwell, as
set forth in the first one of the resolutions heretofore adopted by Rockwell's
Board of Directors on November 2, 1994 entitled "Directors Retirement Policy",
as modified by the sixth one of the resolutions heretofore adopted by
Rockwell's Board of Directors on December 6, 1995 entitled "Amendment of
Directors Stock Plan", together with any and all agreements, undertakings or
other liabilities pursuant thereto, in connection with and effective upon
consummation of the Contribution, be and it hereby is approved; and that the
Policy shall be continued for the benefit of each Director of this Corporation
immediately after the consummation of the Contribution who immediately prior to
the consummation of the Contribution and on December 6, 1995 was a Director of
Rockwell and who was at least age 67 on December 6, 1995; provided, that, for
purposes of the Policy as so continued, a Director's number of years of Board
service shall include his or her service for Rockwell, its predecessors and
this Corporation.
<PAGE> 1
EXHIBIT 11
ROCKWELL INTERNATIONAL CORPORATION
COMPUTATION OF EARNINGS PER SHARE
FOR THE FIVE YEARS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
--------------------------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE:
Income from continuing operations before change in
accounting....................................... $555.0 $493.0 $351.0 $302.0 $243.0
Deduct dividend requirements on preferred stock.... 0.2 0.2 0.3 0.3 0.3
------ ------ ------ ------ ------
Total primary earnings from continuing
operations before change in accounting... $554.8 $492.8 $350.7 $301.7 $242.7
====== ====== ====== ====== ======
Average number of common shares outstanding during
the year......................................... 217.6 217.2 220.5 219.8 223.6
====== ====== ====== ====== ======
Primary earnings per share from continuing
operations before change in accounting........... $ 2.55 $ 2.27 $ 1.59 $ 1.37 $ 1.09
Primary earnings per share from discontinued
operations before change in accounting........... 0.79 1.15 1.28 1.18 1.07
Cumulative effect of change in accounting for
retirement medical benefits...................... -- -- -- -- (6.78)*
------ ------ ------ ------ ------
Net primary earnings (loss) per share.............. $ 3.34 $ 3.42 $ 2.87 $ 2.55 $(4.62)
====== ====== ====== ====== ======
FULLY DILUTED EARNINGS PER SHARE:
Income from continuing operations before change in
accounting....................................... $555.0 $493.0 $351.0 $302.0 $243.0
====== ====== ====== ====== ======
Average number of common shares outstanding during
the year:
Common stock..................................... 217.6 217.2 220.5 219.8 223.6
Assumed issuance of stock under award plans and
conversion of preferred stock and convertible
debentures.................................... 3.5 3.9 4.0 4.5 2.5
------ ------ ------ ------ ------
Total shares, assuming full dilution........ 221.1 221.1 224.5 224.3 226.1
====== ====== ====== ====== ======
Fully diluted earnings per share from continuing
operations before change in accounting........... $ 2.51 $ 2.23 $ 1.56 $ 1.35 $ 1.08
Fully diluted earnings per share from discontinued
operations before change in accounting........... 0.77 1.13 1.26 1.16 1.06
Cumulative effect of change in accounting for
retirement medical benefits...................... -- -- -- -- (6.70)*
------ ------ ------ ------ ------
Net fully diluted earnings (loss) per share........ $ 3.28 $ 3.36 $ 2.82 $ 2.51 $(4.56)
====== ====== ====== ====== ======
</TABLE>
- ---------------
* The per share amounts pertaining to the cumulative effect of change in
accounting in 1992 were computed using average outstanding shares for the
second quarter, which approximate full year 1992 average outstanding shares.
<PAGE> 1
EXHIBIT 21
ROCKWELL INTERNATIONAL CORPORATION
LIST OF SUBSIDIARIES OF THE COMPANY
AS OF DECEMBER 19, 1996
<TABLE>
<CAPTION>
PERCENTAGE OF VOTING
SECURITIES OWNED BY
-------------------------
NAME AND JURISDICTION REGISTRANT SUBSIDIARY
--------------------- ---------- ----------
<S> <C> <C>
Allen-Bradley Company, Inc. (Wisconsin)................................ 100%
Reliance Electric Company (Delaware)................................. 100%
Rockwell Collins, Inc. (Delaware)...................................... 100%
Rockwell Heavy Vehicle Systems, Inc. (Delaware)........................ 100%
Rockwell Light Vehicle Systems, Inc. (Delaware)........................ 100%
Rockwell Semiconductor Systems, Inc. (Delaware)........................ 100%
Rockwell International Finance Corporation (Delaware)................ 100%
</TABLE>
Listed above are certain consolidated subsidiaries included in the
consolidated financial statements of the Company. Unlisted subsidiaries,
considered in the aggregate, do not constitute a significant subsidiary.
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
333-17031, 333-17055 and 333-17405 on Form S-8 of New Rockwell International
Corporation of our report dated November 6, 1996 (December 6, 1996 as to the
sale of the Aerospace and Defense business to The Boeing Company described in
Note 1), appearing in the Annual Report on Form 10-K of Rockwell International
Corporation for the year ended September 30, 1996, and to the reference to us
under the heading "Experts" in the Prospectuses, which are part of the
Registration Statements.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
December 19, 1996
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
I, the undersigned Director and/or Officer of New Rockwell International
Corporation (to be renamed Rockwell International Corporation), a Delaware
corporation (the Company), hereby constitute WILLIAM J. CALISE, JR., EDWARD T.
MOEN, II and PETER R. KOLYER, and each of them singly, my true and lawful
attorneys with full power to them and each of them to sign for me, and in my
name and in the capacity or capacities indicated below, (1) the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 1996 and any
amendments thereto; (2) Registration Statements and any and all amendments
(including post-effective amendments) and supplements thereto for the purpose of
registering under the Securities Act of 1933, as amended, debt securities of the
Company in an aggregate principal amount of up to $1,000,000,000; and (3) a
Registration Statement and any and all amendments (including post-effective
amendments) and supplements thereto for the purpose of registering under the
Securities Act of 1933, as amended, securities to be sold pursuant to the
Allen-Bradley Company Savings and Investment Plan for Represented Hourly
Employees; and (4) any and all amendments (including supplements and
post-effective amendments) to (a) the Registration Statement on Form S-8
registering securities to be sold under the Company's 1995 Long-Term Incentives
Plan, 1988 Long-Term Incentives Plan and 1979 Stock Plan for Key Employees
(Registration No. 333-17055); and (b) the Registration Statement on Form S-8
registering securities to be sold pursuant to the Company's Savings Plan, as
amended, the Company's Retirement Savings Plan for Certain Employees, as
amended, the Allen-Bradley Company Savings and Investment Plan for Salaried
Employees, as amended, the Allen-Bradley Company Savings and Investment Plan for
Hourly Employees, as amended, and the Reliance Electric Company Savings and
Investment Plan, as amended (Registration No. 333-17031).
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/S/ DONALD R. BEALL Chairman of the Board and December 4, 1996
- ----------------------------------- Chief Executive Officer
(Donald R. Beall) (principal executive officer)
and Director
/S/ DON H. DAVIS, JR. Director December 4, 1996
- -----------------------------------
(Don H. Davis, Jr.)
/S/ LEW ALLEN, JR. Director December 4, 1996
- -----------------------------------
(Lew Allen, Jr.)
/S/ RICHARD M. BRESSLER Director December 4, 1996
- -----------------------------------
(Richard M. Bressler)
/S/ JOHN J. CREEDON Director December 4, 1996
- -----------------------------------
(John J. Creedon)
/S/ JUDITH L. ESTRIN Director December 4, 1996
- -----------------------------------
(Judith L. Estrin)
/S/ WILLIAM H. GRAY, III Director December 4, 1996
- -----------------------------------
(William H. Gray, III)
/S/ JAMES CLAYBURN LA FORCE, JR. Director December 4, 1996
- -----------------------------------
(James Clayburn La Force, Jr.)
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/S/ WILLIAM T. MCCORMICK, JR. Director December 4, 1996
- -----------------------------------
(William T. McCormick, Jr.)
/S/ JOHN D. NICHOLS Director December 4, 1996
- -----------------------------------
(John D. Nichols)
/S/ BRUCE M. ROCKWELL Director December 4, 1996
- -----------------------------------
(Bruce M. Rockwell)
/S/ WILLIAM S. SNEATH Director December 4, 1996
- -----------------------------------
(William S. Sneath)
/S/ JOSEPH F. TOOT, JR. Director December 4, 1996
- -----------------------------------
(Joseph F. Toot, Jr.)
/S/ W. M. BARNES Senior Vice President, December 4, 1996
- ----------------------------------- Finance & Planning and
(W. M. Barnes) Chief Financial Officer
(principal financial officer)
/S/ LAWRENCE J. KOMATZ Vice President and Controller December 4, 1996
- ----------------------------------- (principal accounting officer)
(Lawrence J. Komatz)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 30, 1996 CONSOLIDATED BALANCE SHEET, STATEMENT OF CONSOLIDATED INCOME
FOR THE YEAR ENDED SEPTEMBER 30, 1996 AND NOTES TO FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 715
<SECURITIES> 432
<RECEIVABLES> 1,661
<ALLOWANCES> 98
<INVENTORY> 1,780
<CURRENT-ASSETS> 5,358
<PP&E> 2,662
<DEPRECIATION> 2,594
<TOTAL-ASSETS> 10,065
<CURRENT-LIABILITIES> 4,281
<BONDS> 161
0
0
<COMMON> 238
<OTHER-SE> 4,018
<TOTAL-LIABILITY-AND-EQUITY> 10,065
<SALES> 10,373
<TOTAL-REVENUES> 10,542
<CGS> 7,877
<TOTAL-COSTS> 9,646
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32
<INCOME-PRETAX> 896
<INCOME-TAX> 341
<INCOME-CONTINUING> 555
<DISCONTINUED> 171
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 726
<EPS-PRIMARY> 3.34
<EPS-DILUTED> 3.28
</TABLE>
