<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 1996
------------------------------
Commission file number 1-12383
------------------------
Rockwell International Corporation
- - ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 25-1797617
- - ------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2201 Seal Beach Boulevard, Seal Beach, California 90740-8250
- - ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code (412) 565-4090
- - ------------------------------------------------------------------------------
(Office of the Corporate Secretary)
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 __X__ No _____
189,643,864 shares of registrant's Common Stock, $1.00 par value, and
27,061,080 shares of registrant's Class A Common Stock, $1.00 par value, were
outstanding on January 31, 1997.
<PAGE> 2
ROCKWELL INTERNATIONAL CORPORATION
INDEX
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
<TABLE>
<CAPTION>
Page
No.
<S> <C>
Condensed Consolidated Balance Sheet--
December 31, 1996 and September 30, 1996.......... 2
Statement of Consolidated Income--Three Months
Ended December 31, 1996 and 1995................... 3
Statement of Consolidated Cash Flows--
Three Months Ended December 31, 1996 and 1995...... 4
Notes to Financial Statements...................... 5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations.................................... 9
Other Financial Information...................... 11
Exhibit 11 - Computation of Earnings Per Share.............. 12
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings............................... 13
Item 4. Submission of Matters to a Vote of
Security Holders................................ 13
Item 5. Other Information............................... 14
Item 6. Exhibits and Reports on Form 8-K................ 14
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ROCKWELL INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
December 31 September 30
1996 1996
----------- ------------
ASSETS (In millions)
<S> <C> <C>
Current assets:
Cash......................................... $ 853 $ 715
Receivables (less allowance for doubtful
accounts: December 31, 1996, $110;
September 30, 1996, $98)................... 1,633 1,661
Inventories.................................. 1,795 1,780
Deferred income taxes........................ 325 306
Other current assets......................... 360 336
Net assets of Graphic Systems................ - 560
------- -------
Total current assets................. 4,966 5,358
Net property.................................... 2,638 2,662
Intangible assets............................... 1,803 1,809
Other assets.................................... 268 236
------- -------
TOTAL.................. $ 9,675 $10,065
======= =======
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Short-term debt.............................. $ 104 $ 350
Accounts payable............................. 1,027 1,220
Accrued compensation and benefits............ 450 508
Accrued income taxes......................... 233 154
Other current liabilities.................... 835 740
Net liabilities of A&D Business.............. - 1,309
------- -------
Total current liabilities............ 2,649 4,281
Long-term debt.................................. 163 161
Accrued retirement benefits..................... 1,104 1,096
Other liabilities............................... 282 271
------- -------
Total liabilities........... 4,198 5,809
------- -------
Shareowners' equity:
Common Stock
(shares issued: December 31, 1996, 191.8;
September 30, 1996, 209.5)............... 192 210
Class A Common Stock (shares issued:
December 31, 1996, 27.2;
September 30, 1996, 27.9)................. 27 28
Additional paid-in capital................... 855 199
Retained earnings............................ 4,564 4,466
Currency translation adjustments............. (101) (103)
Common Stock in treasury, at cost (shares held:
December 31, 1996, 1.0;
September 30, 1996, 18.9)................. (60) (544)
------- -------
Total shareowners' equity... 5,477 4,256
------- -------
TOTAL.................. $ 9,675 $10,065
======= =======
</TABLE>
See Notes to Financial Statements.
-2-
<PAGE> 4
ROCKWELL INTERNATIONAL CORPORATION
STATEMENT OF CONSOLIDATED INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31
-------------------
1996 1995
------- -------
(In millions)
<S> <C> <C>
Revenues:
Sales.............................................. $ 2,608 $ 2,385
Other income....................................... 20 29
------- -------
Total revenues................................... 2,628 2,414
------- -------
Costs and expenses:
Cost of sales...................................... 1,943 1,810
Selling, general, and administrative............... 390 350
Interest........................................... 5 6
------- ------
Total costs and expenses......................... 2,338 2,166
------- ------
Income from continuing operations
before income taxes................................ 290 248
Provision for income taxes....................... 111 96
------- -------
INCOME FROM CONTINUING OPERATIONS.................... 179 152
Income from discontinued operations.............. - 40
------- -------
NET INCOME........................................... $ 179 $ 192
======= =======
(In dollars)
Earnings per share:
Continuing operations........................... $ .82 $ .70
Discontinued operations......................... - .19
------- -------
Net income...................................... $ .82 $ .89
======= =======
(In millions)
Average outstanding shares........................... 218.7 217.0
======= =======
</TABLE>
See Notes to Financial Statements.
-3-
<PAGE> 5
ROCKWELL INTERNATIONAL CORPORATION
STATEMENT OF CONSOLIDATED CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31
------------------
1996 1995
------ ------
(In millions)
<S> <C> <C>
Continuing Operations:
Operating Activities
Income from continuing operations....................... $ 179 $ 152
Adjustments to income from continuing operations to
arrive at cash provided by operating activities:
Depreciation........................................ 120 89
Amortization of intangible assets................... 22 26
Deferred income taxes............................... 16 25
Pension expense, net of contributions............... 22 28
Changes in assets and liabilities, excluding effects
of acquisitions, divestitures and foreign currency
adjustments:
Receivables..................................... 24 (2)
Inventories..................................... (17) (67)
Accounts payable................................ (181) (162)
Accrued Income taxes............................ 54 83
Other assets and liabilities.................... (18) (135)
------- -------
Cash Provided by Operating Activities 221 37
------- -------
Investing Activities
Property additions...................................... (113) (126)
Acquisition of businesses (net of cash acquired)........ (14) -
Proceeds from disposition of property and businesses.... 559 8
------- -------
Cash Provided by (Used for) Investing
Activities................................. 432 (118)
------- -------
Financing Activities
(Decrease) increase in short-term borrowings............ (242) 41
Increase in long-term debt.............................. 2 -
Payments of long-term debt.............................. (1) (2)
------- -------
Net (decrease) increase in debt......................... (241) 39
Purchase of treasury stock.............................. (61) (18)
Dividends............................................... (63) (63)
Reissuance of common stock.............................. 14 9
------- -------
Cash Used for Financing Activities........... (351) (33)
------- -------
CASH PROVIDED BY (USED FOR) CONTINUING OPERATIONS....... 302 (114)
------- -------
Discontinued Operations:
Operating activities............................. (107) (32)
Investing activities............................. (9) (7)
Financing activities............................. (48) 21
------- -------
Cash Used for Discontinued Operations........ (164) (18)
------- -------
INCREASE (DECREASE) IN CASH............................. 138 (132)
CASH AT BEGINNING OF PERIOD............................. 715 686
------- -------
CASH AT END OF PERIOD................................... $ 853 $ 554
======= =======
</TABLE>
Income tax payments were $28 million and $25 million in the three months ended
December 31, 1996 and 1995, respectively.
See Notes to Financial Statements.
-4-
<PAGE> 6
ROCKWELL INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. In the opinion of the company the unaudited financial statements contain
all adjustments, consisting solely of adjustments of a normal recurring
nature, necessary to present fairly the financial position, results of
operations, and cash flows for the periods presented. These statements
should be read in conjunction with the company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1996. The results of operations for
the three-month period ended December 31, 1996 are not necessarily
indicative of the results for the full year.
It is the company's practice at the end of each interim reporting period to
make an estimate of the effective tax rate expected to be applicable for
the full fiscal year. The rate so determined is used in providing for
income taxes on a year-to-date basis.
2. On December 6, 1996, the company completed the merger of its Aerospace and
Defense businesses (A&D Business) with The Boeing Company (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. On the effective date of the
transaction, shares of New Rockwell were distributed to the company's
shareowners on a one-for-one basis, all shares of Common Stock held in
treasury were canceled, and the net liabilities of the A&D Business of
approximately $1.1 billion were recorded as an increase to shareowners'
equity.
The revenues of the A&D Business for the first two months of fiscal year
1997 were $535 million and revenues for the first quarter of fiscal year
1996 were $677 million. The earnings of the A&D Business for 1997 were
entirely offset by expenses related to the completion of the transaction.
In October 1996, the company completed the sale of its Graphic Systems
business to Stonington Partners, Inc. for approximately $600 million. The
revenues of the Graphic Systems business were $115 million for the three
months ended December 31, 1995.
-5-
<PAGE> 7
ROCKWELL INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. Inventories are summarized as follows (in millions):
<TABLE>
<CAPTION>
December 31 September 30
1996 1996
----------- ------------
<S> <C> <C>
Finished goods............................. $ 498 $ 491
Work in process............................ 875 880
Raw materials, parts, and supplies......... 483 466
------- -------
Total.................................... 1,856 1,837
Less allowance to adjust the carrying value
of certain inventories to a last-in,
first-out (LIFO) basis................... 61 57
------- -------
Inventories................................ $ 1,795 $ 1,780
======= =======
</TABLE>
4. Intangible assets are summarized as follows (in millions):
<TABLE>
<CAPTION>
December 31 September 30
1996 1996
----------- ------------
<S> <C> <C>
Goodwill.................................. $ 1,304 $ 1,289
Trademarks, patents, product technology,
and other intangibles................... 499 520
------- -------
Intangible assets....................... $ 1,803 $ 1,809
======= =======
</TABLE>
5. Short-term debt consisted of the following (in millions):
<TABLE>
<CAPTION>
December 31 September 30
1996 1996
----------- ------------
<S> <C> <C>
Commercial paper......................... $ - $ 210
Short-term foreign bank borrowings,...... 88 123
Current portion of long-term debt........ 16 17
------- -------
Short-term debt......................... $ 104 $ 350
======= =======
</TABLE>
6. Other current liabilities are summarized as follows (in millions):
<TABLE>
<CAPTION>
December 31 September 30
1996 1996
----------- ------------
<S> <C> <C>
Accrued product warranties................. $ 200 $ 215
Contract reserves and advance payments..... 143 131
Accrued taxes other than income taxes...... 65 73
Other...................................... 427 321
------- -------
Other current liabilities................ $ 835 $ 740
======= =======
</TABLE>
-6-
<PAGE> 8
ROCKWELL INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
7. Long-term debt consisted of the following (in millions):
<TABLE>
<CAPTION>
December 31 September 30
1996 1996
----------- ------------
<S> <C> <C>
6.8% notes, payable in 2003............... $ 139 $ 139
Other obligations, principally foreign.... 40 39
------- -------
Total................................... 179 178
Less current portion..................... 16 17
------- -------
Long-term debt......................... $ 163 $ 161
======= =======
</TABLE>
8. The company's financial instruments include cash, short- and long-term
debt, and foreign currency forward exchange contracts. At December 31,
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 outstanding foreign currency
forward exchange contracts aggregated $496 million at December 31, 1996 and
$919 million at September 30, 1996. The contracts outstanding at September
30, 1996 included contracts relating to the A&D and Graphic Systems
businesses. 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.
9. Accrued retirement benefits consisted of the following (in millions):
<TABLE>
<CAPTION>
December 31 September 30
1996 1996
----------- ------------
<S> <C> <C>
Accrued retirement medical costs......... $1,009 $1,008
Accrued pension costs.................... 172 165
------ ------
Total.................................. 1,181 1,173
Amount classified as current liability... 77 77
------ ------
Accrued retirement benefits............ $1,104 $1,096
====== ======
</TABLE>
-7-
<PAGE> 9
ROCKWELL INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
10. 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, employment and government contract 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.
-8-
<PAGE> 10
ROCKWELL INTERNATIONAL CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
1997 First Quarter Compared to 1996 First Quarter
The contributions to sales and earnings by business segment for the continuing
operations of the company for the first quarter of fiscal 1997 and 1996 are
presented below (in millions).
<TABLE>
<CAPTION>
Three Months Ended
December 31
-------------------
1996 1995
------ ------
<S> <C> <C>
Sales
Electronics
Automation $ 1,061 $ 980
Avionics & Communications 374 339
Semiconductor Systems 418 311
------- -------
Total Electronics 1,853 1,630
------- -------
Automotive
Heavy Vehicle Systems 412 431
Light Vehicle Systems 343 324
------- -------
Total Automotive 755 755
------- -------
Total $ 2,608 $ 2,385
======= =======
Operating Earnings
Electronics
Automation $ 131 $ 111
Avionics & Communications 59 41
Semiconductor Systems 81 80
------- -------
Total Electronics 271 232
Automotive 41 38
------- -------
Operating earnings 312 270
General corporate - net (17) (16)
Interest expense (5) (6)
Provision for income taxes (111) (96)
------- -------
Income from continuing operations $ 179 $ 152
======= =======
</TABLE>
-9-
<PAGE> 11
ROCKWELL INTERNATIONAL CORPORATION
RESULTS OF OPERATIONS (CONTINUED)
Sales for the 1997 first quarter were up nine percent from 1996's first
quarter. Current year first quarter increases were achieved by Automation,
Avionics & Communications, Semiconductor Systems, and Light Vehicle Systems;
while lower sales were recorded in the Heavy Vehicle Systems business. With the
sale of the A&D Business and the Graphic Systems business, Rockwell has emerged
as primarily a commercial electronics firm, with its Automation, Semiconductor
Systems and Avionics & Communications businesses accounting for 71% of sales.
Sales from Automotive account for the other 29%. International sales account
for approximately 43% of total sales.
Income from continuing operations for 1997's first quarter increased 18% over
1996's. Each of the four businesses posted first quarter earnings increases
with significant advances achieved by Automation and Avionics & Communications.
Electronics:
Electronics accounted for 87% of operating earnings in the first quarter of
1997. Avionics & Communications earnings increased 44% over last year's first
quarter as a result of higher sales, improved cost performance in defense
avionics, and the decision to exit several non-strategic product lines during
the prior year. Avionics & Communications margin increased from 12.1% in the
first quarter of 1996 to 15.8%, which the Company's management believes better
characterizes the earning power of this business. Automation earnings were up
18% over 1996's first quarter due to an eight percent increase in sales which
consisted primarily of higher margin products. Automation's first quarter
earnings as a percent of sales were 12.4% compared to 11.3% in last year's first
quarter. Semiconductor Systems profits were slightly ahead of last year's first
quarter with earnings on higher sales offsetting large investments in new
product development, particularly in new high-speed 56 kilobits-per-second
modem, wireless communications, and internet access products. Semiconductor
Systems earnings as a percent of sales were 19.4% compared to 25.7% in last
year's first quarter reflecting lower pricing for modem products and higher
costs related to new product development.
Automotive:
Automotive's earnings for the first quarter of 1997 were eight percent higher
than 1996's first quarter principally as a result of cost reduction programs in
the Heavy Vehicle Systems business and higher sales in the Light Vehicle
Systems business.
FINANCIAL CONDITION
The major source of cash for the first quarter of 1997 was from the sale of the
Graphic Systems business for approximately $600 million, consisting of $553
million in cash and $47 million in preferred stock. These proceeds are being
used to reduce short-term debt, fund the company's working capital needs and
repurchase Common Stock.
Following completion of the divestiture of the A&D Business, the company
initiated a $1 billion Common Stock repurchase program which is expected to be
substantially completed by the end of this fiscal year. Since the program was
announced, the company has purchased approximately one million shares of Common
Stock for approximately $60 million.
-10-
<PAGE> 12
ROCKWELL INTERNATIONAL CORPORATION
FINANCIAL CONDITION (CONTINUED)
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 Item 7, Management's Discussion and Analysis of Financial Condition
and Results of Operations of the company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1996. Management believes that at December 31,
1996 there has been no material change to this information. See also Item 1. of
Part II of this Quarterly Report on Form 10-Q.
Other Financial Information
(a) The composition of the company's sales by customer is as follows
(in millions):
<TABLE>
<CAPTION>
Three Months Ended
December 31
---------------------------
1996 1995
------ ------
<S> <C> <C>
U.S. Commercial $1,349 $1,237
International 1,124 1,018
U.S. Government 135 130
------ ------
Total $2,608 $2,385
====== ======
</TABLE>
-11-
<PAGE> 13
EXHIBIT 11
ROCKWELL INTERNATIONAL CORPORATION
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended
December 31
--------------------
1996 1995
-------- --------
(In millions, except
per share amounts)
<S> <C> <C>
Primary earnings per share:
Income from continuing operations................... $178.9 $152.0
Deduct dividend requirements on preferred stock..... - .1
------ ------
Total primary earnings from continuing operations... $178.9 $151.9
====== ======
Average number of common shares outstanding
during the period................................. 218.7 217.0
====== ======
Primary earnings per share from
continuing operations............................. $ .82 $ .70
Primary earnings per share from
discontinued operations........................... - .19
------ ------
Net primary earnings per share ..................... $ .82 $ .89
====== ======
Fully diluted earnings per share:
Income from continuing operations................... $178.9 $152.0
====== ======
Average number of common shares outstanding
during the period assuming full dilution:
Common stock................................... 218.7 217.0
Assumed issuance of stock under award plans
and conversion of preferred stock............ 3.2 3.3
------ ------
Total fully diluted shares.......................... 221.9 220.3
====== ======
Fully diluted earnings from continuing operations... $ .81 $ .69
Fully diluted earnings per share
from discontinued operations...................... - .18
------ ------
Net fully diluted earnings per share................ $ .81 $ .87
====== ======
</TABLE>
-12-
<PAGE> 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On September 27, 1995, Celeritas Technologies, Ltd. filed a suit against
the company in the United States District Court, Central District of
California, for patent infringement, misappropriation of trade secrets
and breach of contract relating to cellular telephone data transmission
technology utilized in certain modem products produced by Rockwell
Semiconductor Systems in 1995 and 1996. On December 20, 1996, a jury
verdict was entered against the company for $57 million on the
plaintiff's claims. On January 27, 1997, the court ruled that Rockwell's
infringement was willful, awarded Celeritas enhanced damages of $57
million and entered judgment against the company for $115 million plus
attorneys' fees. The company believes that the verdict and judgment are
in error and has filed a notice of appeal.
On August 7, 1996, the shareowner derivative suit filed on February 2,
1996 in the Superior Court of California for the County of Los Angeles
and disclosed in the company's quarterly report on Form 10-Q for the
period ended March 31, 1996 was dismissed voluntarily by the
plaintiffs. On August 22, 1996, a First Amended Consolidated Complaint
was filed in the shareowner derivative suit pending in the Superior
Court of California for the County of Orange and disclosed in the
company's quarterly report on Form 10-Q for the period ended December
31, 1995, adding the plaintiffs from the dismissed Los Angeles County
suit as party plaintiffs to the Orange County suit. The company and the
director defendants are defending the consolidated action, and the
parties are proceeding with discovery.
Item 4. Submission of Matters to a Vote of Security Holders
(a) A special meeting of shareowners of the former Rockwell
International Corporation ("Oldco") was held on December 4, 1996.
The Registrant is the successor to Oldco as the result of a
tax-free reorganization completed on December 6, 1996.
(b) At the special meeting, the shareowners:
(i) voted upon a proposal to approve (1) the contribution of
Oldco's Automation, Avionics & Communications, Semiconductor
Systems and Automotive businesses to Registrant or to one or
more wholly-owned subsidiaries of Oldco that became
wholly-owned operating subsidiaries of Registrant and (2) the
distribution of all outstanding shares of Registrant on a
share-for-share basis to holders of record of Oldco shares at
the close of business on December 6, 1996, pursuant to an
Agreement and Plan of Distribution described in Registrant's
Proxy Statement-Prospectus (the "Proxy Statement-Prospectus")
dated October 29, 1996 filed as part of Registrant's
Registration Statement on Form S-4 (Registration No.
333-14969). The proposal was approved by a vote of the
shareowners as follows:
-13-
<PAGE> 15
PART II. OTHER INFORMATION (CONTINUED)
Item 4. Submission of Matters to a Vote of Security Holders (Continued)
Affirmative Votes 326,322,985
Negative Votes 6,530,698
Abstentions 3,099,691
(ii) voted upon a proposal to approve and adopt the Agreement and
Plan of Merger dated as of July 31, 1996 described in the
Proxy Statement-Prospectus, pursuant to which The Boeing
Company acquired Oldco's A&D Business. The proposal was
approved by a vote of the shareowners as follows:
Affirmative Votes 327,248,839
Negative Votes 6,076,362
Abstentions 2,628,173
Item 5. Other Information
Government Contracts
For information on the company's United States government contracting
business, certain risks of that business and claims related thereto, see
the information set forth under the caption "Government Contracts" in
Item 1, Business, on pages 4-5 of the company's Annual Report on Form
10-K for the fiscal year ended September 30, 1996, which is incorporated
herein by reference.
Cautionary Statement
This Quarterly Report on Form 10-Q 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 detailed from
time to time in the company's Securities and Exchange Commission
filings.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 10a - Agreement and Plan of Merger dated as of July 31,
1996 among Rockwell International Corporation (now
named Boeing North American, Inc.), The Boeing
Company and Boeing NA, Inc., included as Appendix
III to the Registrant's Proxy Statement - Prospectus,
dated October 29, 1996, filed as part of
Registrant's registration statement on Form S-4
(Registration No. 333-14969), is hereby
incorporated by reference.
-14-
<PAGE> 16
PART II. OTHER INFORMATION (CONTINUED)
Item 6. Exhibits and Reports on Form 8-K (Continued)
Exhibit 10b - Agreement and Plan of Distribution dated as of
December 6, 1996, among Rockwell International
Corporation(now named Boeing North American, Inc.),
the Registrant (formerly named New Rockwell
International Corporation), Allen-Bradley Company,
Inc., Rockwell Collins, Inc., Rockwell Semiconductor
Systems, Inc., Rockwell Light Vehicle Systems, Inc.
and Rockwell Heavy Vehicle Systems, Inc.
Exhibit 10c - Post-Closing Covenants Agreement dated as of
December 6, 1996, among Rockwell International
Corporation (now named Boeing North American, Inc.),
The Boeing Company, Boeing NA, Inc. and the
Registrant (formerly named New Rockwell
International Corporation).
Exhibit 10d - Tax Allocation Agreement dated as of December 6,
1996, among Rockwell International Corporation (now
named Boeing North American, Inc.), the Registrant
(formerly named New Rockwell International
Corporation) and The Boeing Company.
Exhibit 10e - Form of Restricted Stock Agreement under the
Company's 1995 Long-Term Incentives Plan.
Exhibit 10f - Forms of Restricted Stock Agreement under the
Company's Directors Stock Plan.
Exhibit 11 - Computation of Earnings Per Share
Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges
for the Three Months Ended December 31, 1996.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K:
The Registrant filed a Current Report on Form 8-K dated December 9,
1996 in respect of the completion on December 6, 1996 of the
divestiture of its former A&D Business and the related
reorganization pursuant to which the Registrant succeeded to the
remaining businesses of its predecessor corporation.
-15-
<PAGE> 17
SIGNATURES
Pursuant to the requirements 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
----------------------------------
(Registrant)
Date February 12, 1997 By L. J. Komatz
------------------------ ------------------------------
L. J. Komatz
Vice President and Controller
(Principal Accounting Officer)
Date February 12, 1997 By W. J. Calise, Jr.
------------------------ ------------------------------
W. J. Calise, Jr.
Senior Vice President,
General Counsel and Secretary
-16-
<PAGE> 18
ROCKWELL INTERNATIONAL CORPORATION
INDEX OF EXHIBITS TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Exhibit 10b - Agreement and Plan of Distribution dated as of December 6, 18
1996, among Rockwell International Corporation (now named Boeing
North American, Inc.), the Registrant (formerly named New
Rockwell International Corporation), Allen-Bradley Company, Inc.,
Rockwell Collins, Inc., Rockwell Semiconductor Systems, Inc.,
Rockwell Light Vehicle Systems, Inc. and Rockwell Heavy Vehicle
Systems, Inc.
Exhibit 10c - Post-Closing Covenants Agreement dated as of December 6, 84
1996, among Rockwell International Corporation (now named Boeing
North American, Inc.), The Boeing Company, Boeing NA, Inc. and
the Registrant (formerly named New Rockwell International
Corporation).
Exhibit 10d - Tax Allocation Agreement dated as of December 6, 1996, 113
among Rockwell International Corporation (now named Boeing North
American, Inc.), the Registrant (formerly named New Rockwell
International Corporation) and The Boeing Company.
Exhibit 10e - Form of Restricted Stock Agreement under the Company's 1995 154
Long-Term Incentives Plan.
Exhibit 10f - Forms of Restricted Stock Agreement under the Company's 159
Directors Stock Plan.
Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges for the 167
Three Months Ended December 31, 1996
</TABLE>
-17-
<PAGE> 1
Exhibit 10(b)
CONFORMED COPY
- - -------------------------------------------------------------------------------
AGREEMENT AND PLAN OF DISTRIBUTION
dated as of December 6, 1996
among
ROCKWELL INTERNATIONAL CORPORATION,
NEW ROCKWELL INTERNATIONAL CORPORATION
ALLEN-BRADLEY COMPANY, INC.,
ROCKWELL COLLINS, INC.,
ROCKWELL SEMICONDUCTOR SYSTEMS, INC.,
ROCKWELL LIGHT VEHICLE SYSTEMS, INC.
and
ROCKWELL HEAVY VEHICLE SYSTEMS, INC.
- - -------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
ARTICLE I DEFINITIONS.......................... 2
1.1. Definitions.......................... 2
ARTICLE II CONTRIBUTION AND ASSUMPTION.......... 13
2.1. Contribution......................... 13
2.2. Assumption of Liabilities............ 17
2.3. Transfer and Assumption
Documentation..................... 20
2.4. Nonassignable Contracts.............. 20
2.5. Intercompany Arrangements............ 21
ARTICLE III RECAPITALIZATION OF NEWCO; MECHANICS
OF DISTRIBUTION...................... 22
3.1. Newco Capitalization................. 22
3.2. Recapitalization of Newco............ 22
3.3. Mechanics of Distribution............ 22
3.4. Timing of Distribution............... 23
ARTICLE IV OTHER AGREEMENTS..................... 23
4.1. Employment........................... 23
4.2. Cross-License of Intellectual
Property.......................... 25
4.3. Use of Names, Trademarks, etc........ 26
4.4. Further Assurances................... 29
4.5. Cooperation.......................... 29
ARTICLE V TAX MATTERS.......................... 30
5.1. Tax Allocation....................... 30
5.2. Tax Matters ......................... 30
5.3. Transfer Taxes....................... 30
ARTICLE VI MUTUAL RELEASE....................... 30
6.1. Mutual Release, etc.................. 30
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE VII ACCESS TO INFORMATION....................... 32
7.1. Provision of Corporate Records....... 32
7.2. Access to Information................ 32
7.3. Production of Witnesses.............. 34
7.4. Retention of Records................. 35
7.5. Confidentiality...................... 35
ARTICLE VIII EMPLOYEE BENEFIT PLANS...................... 36
8.1. Employee Benefits Generally.......... 36
8.2. Retirement Plans..................... 36
8.3. Savings Plans........................ 43
8.4. Deferred Compensation Plans and
Nonqualified Retirement and
Savings Plans..................... 44
8.5. Employee Stock Options............... 46
8.6. Long-Term Incentive Plan............. 46
8.7. Welfare Benefit Plans................ 47
8.8. Retiree Medical and Life Insurance... 49
8.9. Retention and Severance
Obligations....................... 50
8.10. Free-Standing Plans ................ 51
8.11. Employment, Consulting and Severance
Agreements ...................... 51
8.12. Welfare Plan Funding................ 52
8.13. Indemnification..................... 54
8.14. Cooperation ........................ 55
8.15. Amendment, Modification or
Termination of Benefits Plan..... 55
ARTICLE IX CONDITIONS.................................. 55
9.1. Conditions to Obligations of the
Company........................... 55
ARTICLE X MISCELLANEOUS AND GENERAL................... 56
10.1. Modification or Amendment........... 56
10.2. Waiver; Remedies.................... 56
10.3. Counterparts........................ 57
10.4. Governing Law....................... 57
10.5. Notices............................. 57
10.6. Entire Agreement.................... 58
10.7. Certain Obligations................. 58
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
10.8. Assignment........................... 58
10.9. Captions............................. 59
10.10. Specific Performance................. 59
10.11. Severability......................... 59
10.12. Third Party Beneficiaries............ 59
10.13. Schedules............................ 60
10.14. Consent to Jurisdiction.............. 60
</TABLE>
iii
<PAGE> 5
1
AGREEMENT AND PLAN OF DISTRIBUTION, dated as of December 6, 1996
(this "Agreement"), among ROCKWELL INTERNATIONAL CORPORATION, a Delaware
corporation (the "Company"), NEW ROCKWELL INTERNATIONAL CORPORATION, a Delaware
corporation ("Newco"), ALLEN-BRADLEY COMPANY, INC., a Wisconsin corporation
("A-B"), ROCKWELL COLLINS, INC., a Delaware corporation ("Collins"), ROCKWELL
SEMICONDUCTOR SYSTEMS, INC., a Delaware corporation ("RSS"), ROCKWELL LIGHT
VEHICLE SYSTEMS, INC., a Delaware corporation ("LVS"), and ROCKWELL HEAVY
VEHICLE SYSTEMS, INC., a Delaware corporation ("HVS"; and together with A-B,
Collins, RSS and LVS, the "Operating Subsidiaries").
W I T N E S S E T H :
WHEREAS, the Company, The Boeing Company, a Delaware corporation
("Acquiror"), and Boeing NA, Inc., a Delaware corporation and a wholly-owned
subsidiary of Acquiror ("Sub"), have entered into an Agreement and Plan of
Merger dated as of July 31, 1996 (the "Merger Agreement"), providing for the
Merger (as defined in the Merger Agreement) of Sub with and into the Company;
WHEREAS, immediately prior to the Conversion (as defined in the
recitals to the Merger Agreement), the Company's Board of Directors, subject to
the approval of the Company's stockholders, expects to distribute to the
holders of Common Stock, par value $1.00 per share, of the Company ("Company
Common Stock") and Class A Common Stock, par value $1.00 per share, of the
Company ("Company Class A Common Stock"), other than shares held in the
treasury of the Company, on a pro rata basis all of the issued and outstanding
shares of Common Stock, par value $1.00 per share, of Newco ("Newco Common
Stock") and Class A Common Stock, par value $1.00 per share, of Newco ("Newco
Class A Common Stock"), in each case with the associated Rights (as defined in
Section 1.1) (the "Distribution");
WHEREAS, immediately prior to the Distribution, the Company's Board
of Directors, subject to the approval of the Company's stockholders, expects to
cause (i) the Company to contribute certain assets to the Operating
Subsidiaries as a capital contribution or in exchange for shares of their
stock, (ii) the Company to contribute the stock of the Operating Subsidiaries
and certain other assets to Newco as a capital contribution and (iii) Newco and
the Operating Subsidiaries to assume certain liabilities of the Company,
<PAGE> 6
2
all as more specifically provided herein (the transactions described in clauses
(i), (ii) and (iii) are referred to collectively as the "Contribution");
WHEREAS, the purpose of the Distribution is to make possible the
Merger by divesting the Company of the businesses and operations to be
conducted by Newco and the Operating Subsidiaries, which Acquiror is unwilling
to acquire;
WHEREAS, it is the intention of the parties to this Agreement that
the Contribution and Distribution will qualify as transactions described in
Sections 351 and Section 355 of the Internal Revenue Code of 1986, as amended
(the "Code") and/or a "reorganization" within the meaning of Section
368(a)(1)(D) of the Code; and
WHEREAS, this Agreement sets forth or provides for certain agreements
by and among the Company, Newco and the Operating Subsidiaries in consideration
of the separation of the ownership of the Company and Newco;
NOW, THEREFORE, in consideration of the premises, and of the
respective covenants and agreements set forth herein, the parties hereto hereby
agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. Capitalized terms used in this Agreement and not
otherwise defined herein shall have the meanings assigned to such terms in the
Merger Agreement. As used in this Agreement, the following terms shall have the
following respective meanings:
"A-B Business" shall mean the business heretofore and currently
engaged in by the Company and its Subsidiaries and their respective
predecessors of designing, building, selling, installing, modifying, repairing,
servicing and supporting automation products and systems, including, without
limitation, 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 products,
computer numeric control systems, data acquisition products, standard and
engineered motors, mechanical power
<PAGE> 7
3
transmission equipment, and support services for all of the foregoing, and
activities related thereto, and shall include any former or discontinued
operations primarily related to the A-B Business as previously conducted.
"Accrued Interest" shall mean all accrued and unpaid interest on the
Company Debt to the Closing Date other than accretion on commercial paper to
the extent such accretion is included in Company Debt.
"Additional Retained Facilities" shall mean the Company's Seal Beach,
California world headquarters, the Company's Systems Development Center, the
Company's Information Systems Center and the Company's Government Affairs,
Marketing and International Offices located in Washington, D.C. (Arlington, VA)
and related international and field offices listed on Schedule 2.1(b)(i)(D).
"Aerospace Business" shall mean the business heretofore and currently
engaged in by the Company and its Subsidiaries and their respective
predecessors of designing, building, selling, installing, modifying, repairing,
servicing and supporting spacecraft, liquid-fueled rocket engines, military and
civilian aircraft, tactical weapons, unmanned missiles, applied energy
technologies (including, without limitation, solar, kinetic and laser), and
parts, components and materials for the foregoing, contract work for the
National Aeronautics and Space Administration and the Company's interest in
United Space Alliance, LLC, and activities related thereto, and shall include
any former or discontinued operations primarily related to the Aerospace
Business as previously conducted, including, without limitation, the former or
discontinued operations listed on Schedule 1.1(a)(i); provided, however, that
Aerospace Business does not include any part of the Collins Business, any
Contributed A&D Assets or any Divested Business of the Aerospace Business,
including, without limitation, the Divested Businesses listed on Schedule
1.1(a)(ii).
"Affiliate" shall mean, with respect to any specified Person, a
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person; provided, however, that for purposes of this Agreement and the
Post-Closing Covenants Agreement, from and after the Time of Contribution, no
member of either Group shall be deemed to be an Affiliate of any member of the
other Group.
<PAGE> 8
4
"Assets" shall mean any and all assets, properties and rights,
whether tangible or intangible, whether real, personal or mixed, whether fixed,
contingent or otherwise, and wherever located, including, without limitation,
the following:
(i) real property interests (including leases), land, plants,
buildings and improvements;
(ii) machinery, equipment, tooling, vehicles, furniture and fixtures,
leasehold improvements, repair parts, tools, plant, laboratory and office
equipment and other tangible personal property, together with any rights
or claims arising out of the breach of any express or implied warranty by
the manufacturers or sellers of any of such assets or any component part
thereof;
(iii) inventories, including raw materials, work-
in-process, finished goods, parts, accessories and supplies;
(iv) cash, bank accounts, notes, loans and accounts receivable
(whether current or not current), interests as beneficiary under letters
of credit, advances and performance and surety bonds;
(v) certificates of deposit, banker's acceptances, shares of stock,
bonds, debentures, evidences of indebtedness, certificates of interest or
participation in profit-sharing agreements, collateral-trust certificates,
preorganization certificates or subscriptions, transferable shares,
investment contracts, voting-trust certificates, puts, calls, straddles,
options, swaps, collars, caps and other securities or hedging arrangements
of any kind;
(vi) financial, accounting and operating data and records including,
without limitation, books, records, notes, sales and sales promotional
data, advertising materials, credit information, cost and pricing
information, customer and supplier lists, reference catalogs, payroll and
personnel records, minute books, stock ledgers, stock transfer records and
other similar property, rights and information;
(vii) patents, patent applications, trademarks, trademark
applications and registrations, trade names,
<PAGE> 9
5
service marks, service names, copyrights and copyright applications and
registrations, commercial and technical information including engineering,
production and other designs, drawings, specifications, formulae,
technology, computer and electronic data processing programs and software,
inventions, processes, trade secrets, know-how, confidential information
and other proprietary property, rights and interests;
(viii) agreements, leases, contracts, sale orders, purchase orders,
open bids and other commitments and all rights therein;
(ix) prepaid expenses, deposits and retentions held by third parties;
(x) claims, causes of action, choses in action, rights under
insurance policies, rights under express or implied warranties, rights of
recovery, rights of set-off, rights of subrogation and all other rights
of any kind;
(xi) licenses, franchises, permits, authorizations and approvals; and
(xii) goodwill and going concern value.
"Collins Business" shall mean the business heretofore and currently
engaged in by the Company and its Subsidiaries and their respective
predecessors of designing, building, selling, installing, modifying, repairing,
servicing and supporting avionics, communication and navigation products and
systems and parts, components and materials for the foregoing, including
without limitation: electronic equipment for flight control, cockpit display,
navigation, voice and data communication, cockpit management, radar, global
positioning and other systems for airlines, corporate aircraft, government and
military applications; call center products and systems; mobile communication
and information systems to the land transportation market (including the
Company's Automatic Vehicle Locating System and Vision Sensor Initiatives
Programs) and flat panel displays and other optical components, and activities
related thereto, and shall include the Collins Avionics and Communications
Division, Collins Commercial Avionics, the Communication Systems Division and
any former or discontinued operations primarily related to the Collins Business
as previously conducted;
<PAGE> 10
6
provided, however, that Collins Business does not include Collins International
Service Company located at 3200 East Renner Road, Richardson, Texas, Rockwell
Australia Limited and its Subsidiaries or any business thereof (which shall
constitute part of the Defense Business); provided, further, however, that the
Collins Business shall include the Tullamarine Service Center.
"Communication Systems Division" shall mean the business heretofore
and currently engaged in by the Company and its Subsidiaries and their
respective predecessors of designing, building, selling, installing, modifying,
repairing, servicing and supporting information message handling and
communication systems and products that support command, control and
communications for land, sea and air applications, including without
limitation: integrated command and control systems for military and civilian
agencies; fixed and airborne VLF communications; multispectrum tactical HF
through satellite communications for fixed and transportable applications;
satellite communications through the EHF band; airborne communication systems
including platform integration; avionics and special mission systems
integration and aircraft modification; medical information systems; global
private networks; satellite-based air traffic management and worldwide service
and support for operations and maintenance, construction and EF&I (engineer,
furnish and install), and activities related thereto, and shall include any
former or discontinued operations primarily related to the Communication
Systems Division as previously conducted; provided, however, that the
Communication Systems Division does not include Collins International Service
Company located at 3200 East Renner Road, Richardson, Texas, Rockwell Australia
Limited and its Subsidiaries or any business thereof (which shall constitute
part of the Defense Business).
"Company Debt" shall mean indebtedness of the Company in an aggregate
principal amount of $2,165,000,000, consisting of:
(i) Old Company Notes in the aggregate principal amount of
$1,600,000,000, as the same may be amended pursuant to the Consent
Solicitation;
(ii) commercial paper or other short-term borrowings in the aggregate
principal amount of $565,000,000 (with respect to commercial paper issued
at a discount, the accreted value at the Closing Date
<PAGE> 11
7
shall be deemed to be the principal amount thereof), less the aggregate
principal amount of any outstanding Rockwell Australia Debt (as defined
below), or any indebtedness issued in replacement thereof or in exchange
therefor; and
(iii) bank borrowings of Rockwell Australia Limited in the aggregate
principal amount of not more than a United States dollar equivalent of
$30,000,000 (the "Rockwell Australia Debt") (it being understood that it
is the current intention of the Company to repay the Rockwell Australia
Debt prior to the Time of Contribution);
provided that no short-term debt other than commercial paper shall constitute
"Company Debt" unless it is prepayable in full at any time without premium or
penalty and no commercial paper shall constitute "Company Debt" unless it
matures or is payable or prepayable in full within 60 days after the Effective
Time without premium or penalty.
For purposes of calculating the United States dollar equivalent of any Rockwell
Australia Debt, the New York foreign exchange selling rate applicable to
Australian dollars as published in The Wall Street Journal, Eastern Edition,
for the second business day preceding the Closing Date shall be used.
"Company Group" shall mean the Company and its Subsidiaries, other
than Newco and its Subsidiaries (determined after giving effect to the
transfers contemplated by Article II of this Agreement).
"Contributed A&D Assets" shall have the meaning set forth in Section
2.1(a)(vii).
"DOE" shall mean the United States Department of Energy or any
predecessor Governmental Entity.
"Defense Business" shall mean the business heretofore and currently
engaged in by the Company and its Subsidiaries (including, without limitation,
Collins International Service Company and Rockwell Australia Limited but
excluding the Tullamarine Service Center) and their respective predecessors of
designing, building, selling, installing, modifying, repairing, servicing and
supporting the following for defense markets: aircraft electronic upgrades and
modifications, tactical weapons, space defense
<PAGE> 12
8
sensors and electronics, navigation and guidance systems for strategic
missiles, tactical weapons, ships and submarines, naval combat systems for
ships and submarines, proprietary programs, and parts, components and materials
for the foregoing, and activities related thereto, and shall include any former
or discontinued operations primarily related to the Defense Business as
previously conducted, including, without limitation, the former or discontinued
operations listed on Schedule 1.1(b)(i); provided, however, that the Defense
Business does not include any part of the Collins Business (including the
Company's Automatic Vehicle Locating System and Vision Sensor Initiatives
Programs heretofore conducted by the Autonetics & Missile Systems Division of
the Company), any Contributed A&D Assets or any Divested Business of the
Defense Business, including, without limitation, the Divested Businesses listed
on Schedule 1.1(b)(ii).
"Divested Business" shall mean any corporation, division or other
business unit (including any Assets and Liabilities comprising the same) that
has been sold, conveyed, assigned, transferred or otherwise divested, in whole
or in part, by the Company or any of its Subsidiaries to any third party prior
to the Time of Contribution, but shall not include any corporation, division,
other business unit, product line or contract the operations or production of
which has been discontinued, completed or otherwise terminated by the Company
or any of its Subsidiaries, but not sold, conveyed, assigned, transferred or
otherwise divested to a third party.
"Environmental Law" shall mean any Federal, state, local or foreign
statute, law, regulation, rule or common law of, or any judgment, injunction,
order or decree of or settlement agreement with, any Governmental Entity,
relating to (x) the protection of the environment or (y) the use, storage,
treatment, generation, transportation, processing, handling, release or
disposal of Hazardous Substances, in each case as in effect on the date hereof
or in the future.
"Environmental Liabilities" shall mean all Liabilities relating to or
arising out of any Environmental Law or contract or agreement relating to
environmental, health or safety matters (including removal, remediation or
cleanup costs, investigatory costs, governmental response costs and
administrative oversight costs, environmental monitoring costs, natural
resources damages, property damages, personal injury damages, costs of medical
<PAGE> 13
9
monitoring, costs of compliance with any settlement, judgment or other
determination of Liability and indemnity, contribution or similar obligations)
irrespective of whether such Liabilities are asserted, in the first instance,
to be the responsibility of a Governmental Entity or any other Person.
"Group" shall mean the Company Group or the Newco Group.
"HVS Business" shall mean the business heretofore and currently
engaged in by the Company and its Subsidiaries and their respective
predecessors of designing, building, selling, installing, modifying, repairing,
servicing and supporting drivetrain components and systems for heavy- and
medium-duty commercial trucks, trailers, buses, off-highway commercial vehicles
and government heavy-duty wheeled vehicles, and activities related thereto, and
shall include any former or discontinued operations primarily related to the
HVS Business as previously conducted.
"Information" shall mean all records, books, contracts, instruments,
computer data and other data and information.
"Liabilities" shall mean any and all debts, liabilities, commitments
and obligations, whether fixed, contingent or absolute, matured or unmatured,
liquidated or unliquidated, accrued or not accrued, known or unknown, whenever
or however arising and whether or not the same would be required by generally
accepted accounting principles to be reflected in financial statements or
disclosed in the notes thereto.
"Litigation Matters" shall mean actual, threatened or future
litigations, investigations, proceedings (including arbitration proceedings),
claims or other legal matters that have been or may be asserted by or against,
or otherwise affect, the Company and/or Newco (or members of either Group).
"LVS Business" shall mean the business heretofore and currently
engaged in by the Company and its Subsidiaries and their respective
predecessors of designing, building, selling, installing, modifying, repairing,
servicing and supporting sunroof, door access control and seat adjusting
systems, suspensions and wheels, anti-squeeze windows, electronic controls and
automobile global positioning
<PAGE> 14
10
systems for passenger car and light truck industries, and activities related
thereto, and shall include any former or discontinued operations primarily
related to the LVS Business as previously conducted.
"Newco Group" shall mean Newco and its Subsidiaries, including the
Operating Subsidiaries (determined after giving effect to the transfers
contemplated by Article II of this Agreement).
"Paydown Amount" shall be the excess, if any, of $2.165 billion over
the aggregate principal amount of the Company Debt at the Effective Time
(calculated as set forth in the definition of Company Debt).
"Person" shall mean an individual, a partnership, a joint venture, a
corporation, a limited liability entity, a trust, an unincorporated
organization or other entity or a government or any department or agency
thereof.
"Preexisting Environmental Conditions" shall mean conditions of the
environment (including ambient air, the ocean, natural resources (including
flora and fauna), soil, surface water, groundwater (including potable water,
navigable water and wetlands), the land surface or subsurface strata or as
otherwise defined in any Environmental Law) existing at the Time of
Contribution relating to or arising from the presence, use, treatment, or
Release or threatened Release of any Hazardous Substance but does not include
any Special Liabilities. For purposes of the definition of the term
"Preexisting Environmental Condition", the term "Hazardous Substance" shall
include any waste, substance, material, pollutant or contaminant now, or in the
future, listed, defined, designated or classified as hazardous, toxic or
radioactive, or otherwise regulated, now or in the future, under any
Environmental Law, and any waste, material or substance contaminated by, or
alleged to be contaminated by, any Hazardous Substance.
"Privileged Information" shall mean, with respect to either Group,
Information regarding a member of such Group, or any of its operations,
employees, Assets or Liabilities (whether in documents or stored in any other
form or known to its employees or agents) that is or may be protected from
disclosure pursuant to the attorney-client privilege, the work product doctrine
or other applicable privileges, that a member of the other Group may come into
<PAGE> 15
11
possession of or obtain access to pursuant to this Agreement or
otherwise.
"Release" shall have the same meaning given such term in the
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), 42 U.S.C. ss. 9601(22).
"Representatives" shall mean directors, officers, employees, agents,
consultants, advisors, accountants, attorneys and representatives.
"Retained Facilities" shall mean the Company's facilities identified
on Schedule 2.1(b)(i)(A) and all buildings, improvements and fixtures at such
facilities.
"Right" shall mean a preferred share purchase right issued pursuant
to the Rights Agreement dated as of November 30, 1996 between Newco and
ChaseMellon Shareholder Services, L.L.C., as Rights Agent.
"Science Center" shall mean the Company's Science Center located at
1049 Camino Dos Rios, Thousand Oaks, California and other related facilities
located at Suite 400, 444 High Street, Palo Alto, California and Building 241,
3370 Miraloma Avenue, Anaheim, California.
"Semiconductor Systems Business" shall mean the business heretofore
and currently engaged in by the Company and its Subsidiaries and their
respective predecessors of designing, building, selling, installing, modifying,
repairing, servicing and supporting semiconductors for fax, voice and data
modems for fax machines, personal computers and other uses, chipsets for
cellular and cordless phones, wireless modem devices for laptop computers and
modules for global positioning system receivers, and activities related
thereto, and shall include any former or discontinued operations primarily
related to the Semiconductor Systems Business as previously conducted.
"Special Liabilities" shall mean any Liabilities of the Company or
any of its Subsidiaries (including any Environmental Liability) arising out of
or relating to (i) the Rocky Flats Plant, Golden, Colorado, (ii) the Hanford
Nuclear Reservation, Hanford, Washington, (iii) the INEL complex in Idaho, (iv)
the Company's or any of its Subsidiaries decontamination and decommissioning
work at various atomic or nuclear facilities throughout the United
<PAGE> 16
12
States (excluding, for purposes of the definition of Special Liabilities only,
Santa Susana and Canoga Park, California) and (v) the Company's work relating
to Interatom (Internationale Atomreaktorbau GmbH), and any Liabilities of the
Company or any of its Subsidiaries (including any Environmental Liabilities),
arising out of or relating to any products manufactured or any services
provided by the Company or any of its Subsidiaries which involved the use,
storage, treatment, generation, transportation, processing, handling, release
or disposal of radioactive, fissionable or fusionable materials or any waste
products or by-products of any process involving radioactive, fissionable or
fusionable materials (other than activities of the Company and its Subsidiaries
at Santa Susana and Canoga Park, California).
"Tax" or "Taxes" shall have the meaning assigned to such term in the
Tax Allocation Agreement.
"Time of Contribution" shall mean the time immediately prior to the
Time of Distribution as of which the Contribution is effective.
"Time of Distribution" shall mean the time as of which the
Distribution is effective.
"Transfer Agent" shall mean ChaseMellon Shareholder Services, L.L.C.,
P.O. Box 444, Pittsburgh, Pennsylvania 15230-0444 or 120 Broadway, 33rd Floor,
New York, New York 10271, telephone (800) 204-7800, the transfer agent for the
Company Common Stock and Company Class A Common Stock.
ARTICLE II
CONTRIBUTION AND ASSUMPTION
2.1. Contribution.
(a) Subject to Section 2.1(b) and effective as of the Time of
Contribution, the Company hereby contributes, grants, conveys, assigns,
transfers and delivers to Newco and the Operating Subsidiaries all the
Company's right, title and interest in and to any and all Assets of the
<PAGE> 17
13
Company (collectively, the "Contributed Assets"), allocated as follows or as
Newco shall otherwise direct:
(i) all Assets of the Company that are used primarily or that are
held primarily for use in the A-B Business (other than the capital stock
of A-B) and all of the issued and outstanding shares of capital stock of
Reliance Electric Company, a Delaware corporation, are contributed to A-B
as a capital contribution;
(ii) all Assets of the Company that are used primarily or that are
held primarily for use in the Collins Business are contributed to Collins
in exchange for 1,000 shares of the Common Stock, par value $1.00 per
share, of Collins, constituting all of the outstanding shares of Collins;
(iii) all Assets of the Company that are used primarily or that are
held primarily for use in the Semiconductor Systems Business and all of
the issued and outstanding shares of capital stock of Brooktree
Corporation, a California corporation, are contributed to RSS in exchange
for 1,000 shares of the Common Stock, par value $1.00 per share, of RSS,
constituting all of the outstanding shares of RSS;
(iv) all Assets of the Company that are used primarily or that are
held primarily for use in the LVS Business are contributed to LVS in
exchange for 1,000 shares of the Common Stock, par value $1.00 per share,
of LVS, constituting all of the outstanding shares of LVS;
(v) all Assets of the Company that are used primarily or that are
held primarily for use in the HVS Business are contributed to HVS in
exchange for 1,000 shares of the Common Stock, par value $1.00 per share,
of HVS, constituting all of the outstanding shares of HVS;
(vi) [intentionally omitted];
(vii) the Company's properties at El Segundo, California, Lakewood,
California, and Building 37 at Canoga Park, California more specifically
identified on Schedule 2.1(a)(vii) (collectively, the "Contributed A&D
Assets") are contributed to A-B as a capital contribution;
<PAGE> 18
14
(viii) the Science Center (other than physical assets related to
extrinsic silicon detectors and MEMS gyros located at Building 241, 3370
Miraloma Avenue, Anaheim, California, which shall constitute Retained
Assets) is contributed to Newco as a capital contribution;
(ix) all issued and outstanding shares of Atomics
International, Inc., Narland Corporation and Rockwell Aerospace &
Electronics, Inc. are contributed to Newco as a capital contribution;
(x) the Health Care Claims (as defined in the Post-Closing Covenants
Agreement) are contributed to Newco as a capital contribution; and
(xi) immediately following the contributions referred to in clauses
(i) through (x) above, all of the issued and outstanding shares of Common
Stock of A-B, Collins, RSS, LVS, HVS and all other Assets of the Company
(other than the Retained Assets) not otherwise specifically contributed to
an Operating Subsidiary pursuant to this Section 2.1(a), including (x) all
cash and cash equivalents of the Company and its Subsidiaries (other than
as listed on Schedule 2.1(b)(i)(C) and other than cash (including for this
purpose cash held by Rockwell Australia Limited in an amount not to exceed
the aggregate outstanding principal amount of the Rockwell Australia Debt)
in an amount equal to the excess, if any, of (A) the sum of (1) $4,320,000
and (2) the Accrued Interest over (B) the Paydown Amount), and (y) the
Company's rights under Article II of the Merger Agreement, the last
sentence of Section 3.1 of the Merger Agreement, Section 4.2(j) of the
Merger Agreement, Section 4.2(d)(iii) of the Merger Agreement, the second
sentence of Section 5.9(a) of the Merger Agreement, Section 5.13(a) of the
Merger Agreement, Section 5.18 of the Merger Agreement and Section 8.17 of
the Merger Agreement, are contributed to Newco as a capital contribution.
If any Assets that are used primarily or that are held primarily for
use in the A-B Business, the Collins Business, the Semiconductor Systems
Business, the LVS Business or the HVS Business are held in a Subsidiary of the
Company that would not be owned directly or indirectly by A-B, Collins, RSS,
LVS or HVS, respectively, as a result of
<PAGE> 19
15
the foregoing allocation, then, notwithstanding the foregoing allocation, the
Company shall cause each such Subsidiary to contribute such Assets to the
appropriate Operating Subsidiary or a Subsidiary thereof or as Newco otherwise
directs.
(b) Notwithstanding Section 2.1(a), the Company hereby retains and
does not contribute to Newco or the Operating Subsidiaries all the Company's
right, title and interest in and to the following Assets (collectively, the
"Retained Assets"):
(i) all the Company's right, title and interest (including minority
interests) in and to (A) all Assets of the Company or any of its
Subsidiaries that are used primarily in or that are held primarily for use
in or that are otherwise necessary for the operation, as presently
conducted, of (1) the Aerospace Business and the Defense Business,
including, without limitation, in the Company's Autonetics and Missile
Systems Division, the Company's North American Aircraft Division, the
Company's North American Aircraft Modification Division, the Company's
Rocketdyne Division, the Company's Space Systems Division and the
Company's Airborne Laser Program (excluding the Communication Systems
Division, but including Collins International Service Company and Rockwell
Australia Limited), and including, without limitation, the Retained
Facilities, and (2) the Additional Retained Facilities (other than
miscellaneous furnishings, artwork, computers and other equipment and
personal property used by Company employees who will become Newco Group
Continuing Employees following the Time of Contribution), (B) an undivided
one-half interest in the helicopters and corporate jet aircraft included
on Schedule 2.1(b)(i)(B), and (C) whether or not included within the
Assets set forth in clause (A) above, all Assets (including, without
limitation, capital stock and partnership interests) reflected on the June
30 Balance Sheet, as such Assets may have been added to, sold in the
ordinary course of business or otherwise changed since such date;
provided, however, that cash or cash equivalents (other than as listed on
Schedule 2.1(b)(i)(C) and cash (including for this purpose cash held by
Rockwell Australia Limited in an amount not to exceed the aggregate
outstanding principal amount of the Rockwell Australia Debt) in an amount
equal to the excess, if any, of (D) the sum of
<PAGE> 20
16
(1)$4,320,000 and (2) the Accrued Interest over (E) the Paydown Amount),
the Contributed A&D Assets, the assets associated with services to be
provided by Newco pursuant to Schedule 3.4 of the Post-Closing Covenants
Agreement and the assets associated with the headquarters functions
described in the Retained Business Audited Financial Statements shall not
constitute Retained Assets;
(ii) all issued and outstanding shares of capital stock of the
Subsidiaries of the Company identified on Schedule 2.1(b)(ii) (the
"Retained Subsidiaries");
(iii) all rights in and use of the names "Autonetics",
"North American Aviation" and "Rocketdyne" and all derivatives thereof;
(iv) all rights of the Company under the Reorganization Agreements
(including the Merger Agreement), except as otherwise specifically
provided therein and except that the Company's rights under Section
2.1(a)(xi)(y) of this Agreement shall not constitute Retained Assets; and
(v) the Environmental Coverage Claims.
If any Assets that are used primarily or that are held primarily for use in or
that are otherwise necessary for the operation, as presently conducted, of the
Aerospace Business, the Defense Business or the Additional Retained Facilities
(other than miscellaneous furnishings, artwork, computers and other equipment
and personal property used by Company employees who will become Newco Group
Continuing Employees following the Time of Contribution and other than the
assets excluded from the definition of Retained Assets by the proviso to
Section 2.1(b)(i)) are held in a Subsidiary of the Company that is not a
Retained Subsidiary, then the Company shall cause each such Subsidiary to
contribute such Assets to the appropriate Retained Subsidiary.
2.2. Assumption of Liabilities.
(a) Subject to Section 2.2(b) and effective as of the Time of
Contribution, Newco and the Operating Subsidiaries, in partial consideration
for the Contribution, hereby unconditionally assume and undertake to pay,
satisfy and discharge when due in accordance with their terms the
<PAGE> 21
17
following Liabilities of the Company and any of its Subsidiaries (collectively,
the "Assumed Liabilities"), allocated as follows or as Newco shall otherwise
direct:
(i) all Liabilities relating primarily to or arising
primarily from the A-B Business are assumed by A-B and Newco;
(ii) all Liabilities relating primarily to or arising primarily from
the Collins Business are assumed by Collins and Newco;
(iii) all Liabilities relating primarily to or arising primarily from
the Semiconductor Systems Business are assumed by RSS and Newco;
(iv) all Liabilities relating primarily to or arising
primarily from the LVS Business are assumed by LVS and Newco;
(v) all Liabilities relating primarily to or arising
primarily from the HVS Business are assumed by HVS and Newco;
(vi) [intentionally omitted];
(vii) all Special Liabilities are assumed by Newco;
(viii) all Liabilities (including without limitation indemnification
obligations) relating primarily to or arising primarily from (A) the
reports, registration statements and other documents filed by the Company
with the SEC prior to the Time of Contribution (including the Company's
consolidated financial statements for periods prior to the Time of
Contribution included or incorporated by reference therein) and (B) any
breach or alleged breach by any director of the Company of his fiduciary
duties to the Company and its stockholders occurring at or prior to the
Time of Contribution, in each case referred to in the foregoing clauses
(A) and (B) notwithstanding the fact that such Liabilities may relate
primarily to or arise primarily from the Aerospace Business, the Defense
Business or the Additional Retained Facilities, are assumed by Newco, but
excluding any matter for which the Company would be required to provide
indemnification pursuant to Section 2.2(ii) of the Post-Closing Covenants
Agreement;
<PAGE> 22
18
(ix) all Liabilities relating primarily to or arising primarily from
any Divested Business of the Aerospace Business or the Defense Business,
including, without limitation, the Divested Businesses listed on Schedules
1.1(a)(ii) and 1.1(b)(ii), are assumed by Newco;
(x) all Liabilities relating primarily to or arising primarily from
Atomics International, Inc., Narland Corporation and Rockwell Aerospace &
Electronics, Inc. are assumed by Newco;
(xi) all Liabilities relating to the Contributed A&D Assets are
assumed by Newco;
(xii) all Liabilities in respect of indebtedness for borrowed money
(including any guarantees in respect of indebtedness for borrowed money of
any third party of the Company and any of its Subsidiaries) other than the
Company Debt are assumed by Newco;
(xiii) all Liabilities that are contemplated by the Reorganization
Agreements as Liabilities to be retained by any member of the Newco Group,
and any agreements, obligations and Liabilities of the Newco Group under
the Reorganization Agreements (including any Liabilities of the Company
described in Sections 4.1(p) and 5.13 of the Merger Agreement) are assumed
by Newco; and
(xiv) all other Liabilities, other than the Retained Liabilities, are
assumed by Newco.
The Liabilities referred to in clauses (i) - (xiii) above are referred to
collectively as the "Newco Liabilities". If any Liabilities relating primarily
to or arising primarily from the A-B Business, the Collins Business, the
Semiconductor Systems Business, the LVS Business or the HVS Business are
obligations of a Subsidiary of the Company other than A-B, Collins, RSS, LVS or
HVS, or a direct or indirect Subsidiary thereof, as a result of the allocation
of Assets of the Company set forth in Section 2.1, then, notwithstanding the
foregoing allocation or the allocation of Assets of the Company set forth in
Section 2.1, the appropriate Operating Subsidiary or a Subsidiary thereof shall
assume each such Liability.
<PAGE> 23
19
(b) Notwithstanding Section 2.2(a), the Company hereby retains, and
Newco and the Operating Subsidiaries do not assume and will have no liability
with respect to, the following Liabilities (collectively, the "Retained
Liabilities"):
(i) the Company Debt, together with the Accrued Interest;
(ii) all Liabilities (A) relating primarily to or arising primarily
from the Aerospace Business or the Defense Business as conducted at any
time prior to, on or after the Time of Contribution or any other Retained
Assets or (B) associated with the current and former operations of the
Additional Retained Facilities; provided, however, that the Retained
Liabilities shall not include any Newco Liabilities; and
(iii) all Liabilities that are contemplated by the Reorganization
Agreements (including the Schedules thereto) (other than the Merger
Agreement) as Liabilities to be retained by any member of the Company
Group, and any agreements, obligations and Liabilities of the Company
Group under the Reorganization Agreements (other than the Merger
Agreement), except as otherwise specifically provided herein or therein
and except for obligations which are required or contemplated to be
performed prior to the Effective Time.
If any Liabilities relating primarily to or arising primarily from the
Aerospace Business, the Defense Business or the Additional Retained Facilities
are obligations of a Subsidiary of the Company other than a Retained Subsidiary
as a result of the allocation of Assets of the Company set forth in Section
2.1, then, notwithstanding the foregoing allocation or the allocation of Assets
of the Company set forth in Section 2.1, the Company shall, or shall cause the
appropriate Retained Subsidiary to, assume each such Liability.
2.3. Transfer and Assumption Documentation. In furtherance of the
contribution, grant, conveyance, assignment, transfer and delivery of the
Contributed Assets and the assumption of the Assumed Liabilities set forth in
this Article II, at the Time of Contribution or as promptly as practicable
thereafter (i) the Company shall execute and deliver, and cause its
Subsidiaries to execute and deliver,
<PAGE> 24
20
such deeds, bills of sale, stock powers, certificates of title, assignments of
leases and contracts and other instruments of contribution, grant, conveyance,
assignment, transfer and delivery necessary to evidence such contribution,
grant, conveyance, assignment, transfer and delivery and (ii) Newco or the
appropriate member of the Newco Group shall execute and deliver such
instruments of assumption as and to the extent necessary to evidence such
assumption.
2.4 Nonassignable Contracts. Anything contained herein to the
contrary notwithstanding, this Agreement shall not constitute an agreement to
assign any lease, license agreement, contract, agreement, sales order, purchase
order, open bid or other commitment or Asset if an assignment or attempted
assignment of the same without the consent of the other party or parties
thereto would constitute a breach thereof or in any way impair the rights of
the Newco Group or the Company Group thereunder. The Company shall, prior to
the Time of Contribution, use reasonable best efforts (it being understood that
such efforts shall not include any requirement of the Company Group to expend
money or offer or grant any financial accommodation) as requested by Newco, and
Newco shall cooperate in all reasonable respects with the Company, to obtain
all consents and waivers and to resolve all impracticalities of assignments or
transfers necessary to convey to Newco and the Operating Subsidiaries the
Contributed Assets. If any such consent is not obtained or if an attempted
assignment would be ineffective or would impair either Group's rights under any
such lease, license agreement, contract, agreement, sales order, purchase
order, open bid or other commitment or Asset so that Newco or the Operating
Subsidiaries would not receive all such rights, then (x) the Company shall use
reasonable best efforts (it being understood that such efforts shall not
include any requirement of the Company Group to expend money or offer or grant
any financial accommodation) to provide or cause to be provided to Newco or the
appropriate Operating Subsidiary, to the extent permitted by law, the benefits
of any such lease, license agreement, contract, agreement, sales order,
purchase order, open bid or other commitment or Asset and the Company shall
promptly pay or cause to be paid to Newco or the appropriate Operating
Subsidiary when received all moneys received by the Company Group with respect
to any such lease, license agreement, contract, agreement, sales order,
purchase order, open bid or other commitment or Asset and (y) in consideration
thereof Newco or the appropriate Operating Subsidiary shall pay, perform and
discharge on
<PAGE> 25
21
behalf of the Company Group all of the Company Group's debts, liabilities,
obligations and commitments thereunder in a timely manner and in accordance
with the terms thereof. In addition, the Company shall take such other actions
(at Newco's expense) as may reasonably be requested by Newco in order to place
Newco, insofar as reasonably possible, in the same position as if such lease,
license agreement, contract, agreement, sales order, purchase order, open bid
or other commitment or Asset had been transferred as contemplated hereby and so
all the benefits and burdens relating thereto, including possession, use, risk
of loss, potential for gain and dominion, control and command, shall inure to
the Newco Group. If and when such consents and approvals are obtained, the
transfer of the applicable Asset shall be effected in accordance with the terms
of this Agreement.
2.5. Intercompany Arrangements. All agreements, contracts,
arrangements and commitments between the Retained Business or any operating
unit thereof, on the one hand, and the Company or any operating unit thereof
(other than the Retained Business or any operating unit thereof), on the other
hand, entered into prior to the Closing Date for the purchase or sale of goods
or services ("Intercompany Arrangements") including, without limitation,
Rockwell Internal Customer Agreements, shall remain in effect on and after the
Closing Date (subject to amendment as provided in the Transition Agreement).
All amounts under such Intercompany Arrangements which are unbilled and have
not been charged to the related prime contract as of the Closing Date shall be
billed and payable on and after the Closing Date in accordance with the terms
thereof. At or before the Closing, the Company shall cause all intercompany
indebtedness (which shall include payables and receivables but which shall not
include unbilled amounts under Intercompany Arrangements) between the Retained
Business or any operating unit thereof, on the one hand, and the Company or any
operating unit thereof (other than the Retained Business or any operating unit
thereof), on the other hand, to be settled or otherwise eliminated.
ARTICLE III
RECAPITALIZATION OF NEWCO; MECHANICS OF DISTRIBUTION
3.1. Newco Capitalization. The current equity capitalization of Newco
consists of 1,000 issued and outstanding shares of Newco Common Stock (the
"Existing
<PAGE> 26
22
Newco Common Stock"), all of which is outstanding and owned beneficially and of
record by the Company.
3.2. Recapitalization of Newco. Immediately prior to the Time of
Distribution, the Company shall cause Newco to amend its Certificate of
Incorporation to, among other things, (i) increase the authorized number of
shares of capital stock of Newco to 1,125,000,000 shares, consisting of
25,000,000 shares of Preferred Stock, without par value, 1,000,000,000 shares
of Newco Common Stock and 100,000,000 shares of Newco Class A Common Stock, and
(ii) exchange the Existing Newco Common Stock owned by the Company for a total
number of shares of Newco Common Stock and Newco Class A Common Stock, in each
case with the associated Rights, equal to the total number of shares of Company
Common Stock and Company Class A Common Stock, respectively (other than Company
Common Stock and Company Class A Common Stock held in the treasury of the
Company), outstanding as of the Record Date (as defined below).
3.3. Mechanics of Distribution. The Distribution shall be effected by
the distribution to each holder of record of Company Common Stock and Company
Class A Common Stock, as of the record date designated for the Distribution by
or pursuant to the authorization of the Board of Directors of the Company (the
"Record Date"), of certificates representing one share of Newco Common Stock
and one associated Right for each share of Company Common Stock and one share
of Newco Class A Common Stock and one associated Right for each share of
Company Class A Common Stock held by such holder.
3.4. Timing of Distribution. The Board of Directors of the Company
shall formally declare the Distribution and shall authorize the Company to pay
it immediately prior to the Effective Time, subject to the satisfaction or
waiver of the conditions set forth in Article IX, by delivery of certificates
for Newco Common Stock and Newco Class A Common Stock to the Transfer Agent for
delivery to the holders entitled thereto. The Distribution shall be deemed to
be effective upon notification by the Company to the Transfer Agent that the
Distribution has been declared and that the Transfer Agent is authorized to
proceed with the distribution of Newco Common Stock and Newco Class A Common
Stock.
<PAGE> 27
23
ARTICLE IV
OTHER AGREEMENTS
4.1. Employment. Newco or one of its Subsidiaries shall offer
employment or continued employment from the Time of Contribution (or such later
time as Newco Inactive Employees (as defined herein) first become eligible to
return to employment, it being understood that each Newco Inactive Employee
will continue to be eligible to receive from the Newco Group the same
compensation and benefits payable during the period prior to such Newco
Inactive Employee's return to employment that such Newco Inactive Employee is
entitled to receive during such Newco Inactive Employee's absence from
employment immediately prior to the Time of Contribution) to all employees of
the Company and its Subsidiaries (including employees not actively at work at
the Time of Contribution due to leave of absence, disability leave, military
leave or layoff with recall rights ("Newco Inactive Employees")), except those
to whom Acquiror or the Company Group has an obligation to offer employment or
continued employment pursuant to Section 5.12(a) of the Merger Agreement
(collectively "Company Group Continuing Employees"), on terms that are
substantially the same as the terms on which they were employed by the Company
or a Subsidiary of the Company immediately prior to the Time of Contribution;
provided, however, that nothing contained in this Section 4.1 is intended to
confer upon any employee who so continues to be employed or who accepts such an
offer of employment by Newco or any of its Subsidiaries ("Newco Group
Continuing Employees") any right to continued employment after the Time of
Contribution. The Company hereby consents to Newco or one of its Subsidiaries
making such offers. Newco shall recognize the service with the Company and its
Subsidiaries through the Time of Contribution of each Newco Group Continuing
Employee and, where applicable, each former employee of the businesses which,
at the Time of Contribution, comprise the Newco Group (a "Newco Group Former
Employee"), and shall credit, as of the Time of Contribution, such service with
Newco (i) for all plan purposes under any employee benefit plan, arrangement or
policy of the Newco Group in effect as of the Time of Contribution in which
they are then participating and (ii) for eligibility and vesting purposes only
under any employee benefit plan, arrangement or policy for which they become
eligible on or following the Time of Contribution; provided, however, that,
except as otherwise required by law or by the terms of any collective
bargaining agreement,
<PAGE> 28
24
service will be recognized under clause (i) or (ii) only to the extent such
service was recognized under the Company's comparable plan or program prior to
the Time of Contribution. Newco shall, or shall cause the applicable member of
the Newco Group to, assume or maintain (as applicable) as of the Time of
Contribution and perform the obligations of each of the Company and its
Subsidiaries under the collective bargaining agreements relating to Newco Group
Continuing Employees and Newco Group Former Employees and any and all
collateral agreements related thereto, including those affecting all terms and
conditions of employment, and to be bound by such agreements. The Company
shall, or shall cause the applicable member of the Company Group to, assume or
maintain (as applicable) as of the Time of Contribution and perform the
obligations of each of the Company and its Subsidiaries under the collective
bargaining agreements relating to Company Group Continuing Employees and former
employees of the businesses which, at the Time of Contribution, comprise the
Company Group ("Company Group Former Employees"), and any and all collateral
agreements related thereto, including those affecting all terms and conditions
of employment, and to be bound by such agreements.
4.2. Cross-License of Intellectual Property. (a) Effective as of the
Time of Distribution, the Company on behalf of itself and its Subsidiaries, in
consideration for the rights granted by Newco and its Subsidiaries pursuant to
Section 4.2(b), hereby grants to the Newco Group a royalty-free, world-wide,
irrevocable, non-exclusive license, under all intellectual property rights
(including, without limitation, patents, patent applications, trade secrets,
copyrights or other similar industrial property rights, except for trademarks,
trade names, service marks, trade dress or any other form of trade identity)
which are owned by the Company Group as Retained Assets immediately after the
Time of Contribution or under which the Company Group has a right to license as
Retained Assets immediately after the Time of Contribution, and which are used
in the conduct of the businesses of the Company other than the Aerospace
Business or the Defense Business (whether or not such rights are also used in
the conduct of the Aerospace Business or the Defense Business) at the Time of
Contribution to make, have made, use, import, sell or otherwise dispose of
products, or to practice any process in connection therewith, in the businesses
of the Newco Group as conducted by the Company at the Time of Contribution;
said non-exclusive license being transferable only in
<PAGE> 29
25
connection with the sale of all or any part of the Newco Group's business to
which such intellectual property rights relate. To the extent that the Newco
Group does not have copies of any information or materials relating to such
intellectual property rights, the Company shall upon reasonable request supply
to the Newco Group copies of any such information or materials relating to such
intellectual property rights. The Company makes no representations or
warranties of any kind with respect to the validity, scope or enforceability of
any such intellectual property rights licensed hereunder and the Company has no
obligation to file or prosecute any patent applications or maintain any patents
in force in connection therewith. The Company will, at no cost to Newco,
promptly execute or cause a member of the Company Group promptly to execute
such further documents as Newco may reasonably request as necessary or
desirable to carry out the terms of this Section 4.2(a).
(b) Effective as of the Time of Distribution, Newco on behalf of
itself and its Subsidiaries, in consideration for the rights granted by the
Company and its Subsidiaries pursuant to Section 4.2(a), hereby grants to the
Company Group a royalty-free, world-wide, irrevocable, non-exclusive license,
under all intellectual property rights (including, without limitation, patents,
patent applications, trade secrets, copyrights or other similar industrial
property rights, except for trademarks, trade names, service marks, trade dress
or any other form of trade identity), which are owned by the Newco Group as
Contributed Assets immediately after the Time of Contribution or under which
the Newco Group has a right to license as Contributed Assets immediately after
the Time of Contribution, and which are used in the conduct of the Aerospace
Business or the Defense Business (whether or not such rights are also used in
the conduct of the other businesses of the Company) at the Time of Contribution
to make, have made, use, import, sell or otherwise dispose of products, or to
practice any process in connection therewith, in the Aerospace Business and the
Defense Business as conducted by the Company at the Time of Contribution; said
non-exclusive license being transferable only in connection with the sale of
all or any part of the Company Group's business to which such intellectual
property rights relate. To the extent that the Company Group does not have
copies of any information or materials relating to such intellectual property
rights, Newco shall upon reasonable request supply to the Company Group copies
of any such information or materials relating to such intellectual property
rights. Newco makes no
<PAGE> 30
26
representations or warranties of any kind with respect to the validity, scope
or enforceability of any such intellectual property rights licensed hereunder
and Newco has no obligation to file or prosecute any patent applications or
maintain any patents in force in connection therewith. Newco will, at no cost
to the Company, promptly execute or cause a member of the Newco Group promptly
to execute such further documents as the Company may reasonably request as
necessary or desirable to carry out the terms of this Section 4.2(b).
(c) No provision in the Reorganization Agreements shall be construed
to permit any transfer of intellectual property relating to the Airborne Laser
Program from any member of the Company Group to Acquiror or any other
Subsidiary of Acquiror prior to award of a Government Contract for the Airborne
Laser Program.
4.3. Use of Names, Trademarks, etc. (a) From and after the Effective
Time, Newco shall have all rights in and, except as provided in Section 4.3(b),
use of the names "Rockwell", "Rockwell International", and "Collins" and all
other names, marks, scripts, type fonts, forms, styles, logos, designs,
devices, trade dress, symbols and other forms of trade identity constituting
Contributed Assets, and all derivatives thereof. From and after the Effective
Time, the Company shall have all rights in and, except as provided in Section
4.3(c), use of the names "Autonetics", "North American Aviation" and
"Rocketdyne" and all other names, marks, scripts, type fonts, forms, styles,
logos, designs, devices, trade dress, symbols and other forms of trade identity
constituting Retained Assets, and all derivatives thereof. Prior to or promptly
after the Effective Time, the Company shall change the name of any Subsidiary
or other Person under its control to eliminate therefrom the names "Rockwell",
"Rockwell International" and "Collins" and all derivatives thereof, and Newco
shall change the name of any Subsidiary or other Person under its control to
eliminate therefrom the names "Autonetics", "North American Aviation" and
"Rocketdyne" and all derivatives thereof.
(b) From and after the Effective Time, except as permitted in this
Section 4.3(b), the Company Group shall not use or have any rights to the names
"Rockwell", "Rockwell International" and "Collins" or any derivatives thereof
or any trademark, trade name, service mark or logo of the Newco Group
constituting a Contributed Asset, including the trademarks, trade names and
service marks
<PAGE> 31
27
"Rockwell", "Rockwell International" and "Collins", or any corporate symbol
related thereto or any thereof or any name or mark which includes the words
"Rockwell", "Rockwell International" or "Collins" or any other Contributed
Asset or any derivative thereof or name or mark confusingly similar thereto or
special script, type font, form, style, logo, design, device, trade dress, or
symbol used or possessed by the Company before the Effective Time or Newco
after the Effective Time which contains the trademark, trade name or service
mark "Rockwell", "Rockwell International" or "Collins" or any other Contributed
Asset or any derivative thereof or name or mark confusingly similar thereto and
the Company Group will not hold itself out as having any affiliation with the
Newco Group. However, the Company Group may utilize without obligation to pay
royalties to Newco the trademarks or trade names "Rockwell", "Rockwell
International" or "Collins" or any corporate symbol related thereto or any
thereof in connection with stationery, supplies, labels, catalogs, vehicles,
signs, finished goods inventory and work-in-process constituting Retained
Assets as of the Time of Contribution, subject to the terms and conditions of
this Section 4.3:
(i) All documents constituting Retained Assets as of the Time of
Contribution within the following categories may be used for the duration
of the periods following the Effective Time indicated below or until the
supply is exhausted, whichever is the first to occur:
Maximum Period of
Permitted Use
Following the
Category of Documents Effective Time
--------------------- -----------------
A. Stationery 4 months
B. Invoices, purchase orders,
debit and credit memos and
other similar documents of a
transactional nature 4 months
C. Business cards 3 months
D. Other outside forms such as
packing lists, labels,
packing materials and
cartons, etc. 4 months
E. Forms for internal use only 12 months
F. Product literature 12 months;
<PAGE> 32
28
provided, however, that no document within any of the above categories A,
B or F may be used by the Company Group for any purpose within the stated
period unless such document clearly and prominently displays a statement,
the form of which is approved by Newco, to the effect that the Aerospace
Business or the Defense Business, as the case may be, is no longer
affiliated with Newco.
(ii) All vehicles constituting Retained Assets as of the Time of
Contribution may continue to be used without re-marking (except as to
legally required permit numbers, license numbers, etc.) for a period not
to exceed six months following the Effective Time or the date of
disposition of the vehicle, whichever is the first to occur. The Company
shall cause all markings on such vehicles to be removed or permanently
obscured prior to disposition of such vehicles.
(iii) Within three months following the Effective Time, the Company
shall cause to be removed from display at all facilities constituting
Retained Assets as of the Time of Contribution all demountable displays
which contain the trademarks or trade names "Rockwell", "Rockwell
International" or "Collins" or any corporate symbol related thereto or any
thereof constituting Contributed Assets and the Company shall remove, or
shall cause the removal of all signs displaying any such trademark, trade
name or corporate symbol constituting Contributed Assets at all such
facilities no later than six months following the Effective Time.
(iv) Products in finished goods inventory and work-in-process
constituting Retained Assets as of the Time of Contribution may be
disposed of by the Company Group following the Effective Time without
re-marking.
(c) From and after the Effective Time, the Newco Group will not hold
itself out as having an affiliation with the Company Group. However, the Newco
Group shall have rights to use trademarks or trade names or corporate symbols
related thereto or any thereof constituting Retained Assets of the Company
Group in connection with stationery, supplies, labels, catalogs, vehicles,
signs and finished goods inventory constituting Contributed Assets as of the
<PAGE> 33
29
Time of Contribution on the same terms and subject to the same conditions as
are set forth in Section 4.3(b).
4.4. Further Assurances. Each of the parties hereto, at its own cost
and expense, promptly shall execute such documents and other instruments and
take such further actions as may be reasonably required or desirable to carry
out the provisions hereof and to consummate the transactions contemplated
hereby.
4.5. Cooperation. The parties shall cooperate with each other in all
reasonable respects to ensure the transfer to Newco or to one of the Operating
Subsidiaries of the Contributed Assets, the Assumed Liabilities and the
businesses related thereto, and the retention by the Company of the Retained
Business, including, without limitation, (i) allocating rights and obligations
under contracts, agreements and other arrangements, if any, of the Company that
relate to both the Retained Business and the businesses contributed to Newco or
the Operating Subsidiaries and (ii) determining whether to enter into any
service or other sharing agreements on a mutually acceptable arms-length basis
that may be necessary to assure a smooth and orderly transition.
ARTICLE V
TAX MATTERS
5.1. Tax Allocation. Prior to the Time of Distribution, Newco,
Acquiror and the Company shall enter into a Tax Allocation Agreement in
substantially the form attached as Annex B to the Merger Agreement.
5.2. Tax Matters. Notwithstanding anything to the contrary in this
Agreement, liabilities of the parties for Taxes are subject to the terms of the
Tax Allocation Agreement. All obligations of Newco under the Tax Allocation
Agreement shall be treated as Assumed Liabilities and not as Retained
Liabilities under this Agreement and all obligations of the Company under the
Tax Allocation Agreement shall be treated as Retained Liabilities and not as
Assumed Liabilities under this Agreement. The Contribution and Distribution are
intended to qualify as transactions described in Sections 351 and 355 of the
Code and/or a "reorganization" within the meaning of Section 368(a)(1)(D) of
the Code and the Merger is intended
<PAGE> 34
30
to qualify as a "reorganization" within the meaning of Section
368(a)(1)(B) of the Code.
5.3. Transfer Taxes. Newco (or, if actually paid prior to the
Effective Time, the Company) shall pay or cause to be paid any Transfer Taxes
(as defined in the Tax Allocation Agreement) imposed in connection with or as a
result of the Contribution or the Distribution.
ARTICLE VI
MUTUAL RELEASE
6.1. Mutual Release, etc. Effective as of the Time of Distribution
and except as otherwise specifically set forth in the Reorganization Agreements
or the Transition Agreement, each of Newco, on the one hand, and the Company,
on the other hand, on its own behalf and on behalf of each of its respective
Subsidiaries, releases and forever discharges the other and its Subsidiaries,
and its and their respective officers, directors, agents, Affiliates, record
and beneficial security holders (including, without limitation, trustees and
beneficiaries of trusts holding such securities), advisors and Representatives
(in their respective capacities as such) and their respective heirs, executors,
administrators, successors and assigns, of and from all debts, demands,
actions, causes of action, suits, accounts, covenants, contracts, agreements,
damages, claims and Liabilities whatsoever of every name and nature, both in
law and in equity, which the releasing party has or ever had, which arise out
of or relate to events, circumstances or actions taken by such other party
occurring or failing to occur or any conditions existing on or prior to the
Time of Distribution; provided, however, that the foregoing general release
shall not apply to (i) any Liabilities (including Liabilities with respect to
indemnification) under the Transition Agreement or assumed, transferred,
assigned, allocated or arising under any of the Reorganization Agreements and
shall not affect any party's right to enforce the Reorganization Agreements or
the Transition Agreement in accordance with their terms, (ii) any Liability
arising from or relating to Intercompany Arrangements to the extent such
Liabilities are not required pursuant to Section 2.5 to be settled or otherwise
eliminated at or before the Closing, (iii) any Liability the release of which
would result in the release of any Person other than a Person released pursuant
to this Section 6.1 (provided that the parties agree not to
<PAGE> 35
31
bring suit or permit any of their Subsidiaries to bring suit against any Person
with respect to any Liability to the extent such Person would be released with
respect to such Liabilities by this Section 6.1 but for the proviso to this
clause (iii)) or (iv) any matter set forth on Schedule 6.1. Each party
understands and agrees that, except as otherwise specifically provided in the
Reorganization Agreements, neither Group is, in the Reorganization Agreements
or otherwise, representing or warranting in any way as to the Assets, business
or Liabilities transferred, assumed or retained as contemplated hereby or as to
any consents or approvals required in connection with the consummation of the
transactions contemplated by the Reorganization Agreements, it being agreed and
understood that each party shall take or keep all of its Assets "as is" and
that it shall bear the economic and legal risk that conveyance of such Assets
shall prove to be insufficient or that the title to any Assets shall be other
than good and marketable and free from encumbrances of any nature whatsoever.
ARTICLE VII
ACCESS TO INFORMATION
7.1. Provision of Corporate Records. Prior to or as promptly as
practicable after the Time of Contribution the Company shall deliver to Newco
all minute books and other records of meetings of the Board of Directors,
committees of the Board of Directors, stockholders and security owners of the
Company and its predecessors, all stockholder and security owner records of the
Company and its predecessors, all corporate books and records of the Newco
Group in its possession and the relevant portions (or copies thereof) of all
corporate books and records of the Company Group relating directly and
primarily to the Contributed Assets or the Assumed Liabilities, including, in
each case, all active agreements, active litigation files and government
filings. From and after the Time of Contribution, all such books, records and
copies shall be the property of Newco. Prior to or as promptly as practicable
after the Time of Contribution, Newco shall deliver to the Company all
corporate books and records of the Retained Subsidiaries in Newco's possession
and the relevant portions (or copies thereof) of all corporate books and
records of the Newco Group relating directly and primarily to the Retained
Assets, the Aerospace Business, the Defense Business, the Additional Retained
Facilities
<PAGE> 36
32
(except to the extent relating primarily to the business of the Newco Companies)
or the Retained Liabilities, including, in each case, all active agreements,
active litigation files and government filings. From and after the Time of
Contribution, all such books, records and copies shall be the property of the
Company.
7.2. Access to Information. From and after the Time of Contribution,
each of the Company and Newco shall afford to the other and to the other's
Representatives reasonable access and duplicating rights (at the requesting
party's expense) during normal business hours and upon reasonable advance
notice to all Information within the possession or control of any member of the
Company Group or the Newco Group, as the case may be, relating to the business,
Assets or Liabilities as they existed prior to the Time of Contribution or
relating to or arising in connection with the relationship between the
constituent elements of the Groups on or prior to the Time of Contribution,
insofar as such access is reasonably required for a reasonable purpose, subject
to the provisions below regarding Privileged Information. Without limiting the
foregoing, Information may be requested under this Section 7.2 for audit,
accounting, claims, litigation and Tax purposes, as well as for purposes of
fulfilling disclosure and reporting obligations. In furtherance of the
foregoing:
(a) Each party hereto acknowledges that (i) each of the Company and
Newco (and the members of the Company Group and the Newco Group,
respectively) has or may obtain Privileged Information; (ii) there are a
number of Litigation Matters affecting each or all of the Company, Newco
and the Operating Subsidiaries; (iii) the Company, Newco and the Operating
Subsidiaries have a common legal interest in Litigation Matters, in the
Privileged Information, and in the preservation of the confidential status
of the Privileged Information, in each case relating to the business of
the Company Group or the Newco Group as it existed prior to the Time of
Contribution or relating to or arising in connection with the relationship
between the constituent elements of the Groups on or prior to the Time of
Contribution; and (iv) both the Company and Newco intend that the
transactions contemplated by the Reorganization Agreements and any
transfer of Privileged Information in connection therewith shall not
operate as a waiver of any potentially applicable privilege.
<PAGE> 37
33
(b) Each of the Company and Newco agrees, on behalf of itself and
each member of the Group of which it is a member, not to disclose or
otherwise waive any privilege attaching to any Privileged Information
relating to the business of the Newco Group or the Company Group as it
existed prior to the Time of Contribution, respectively, or relating to or
arising in connection with the relationship between the Groups on or prior
to the Time of Contribution, without providing prompt written notice to
and obtaining the prior written consent of the other, which consent shall
not be unreasonably withheld and shall not be withheld if the other party
certifies that such disclosure is to be made in response to a likely
threat of suspension or debarment or similar action; provided, however,
that the Company and Newco may make such disclosure or waiver with respect
to Privileged Information if such Privileged Information relates solely to
the business of the Company Group as it existed prior to the Time of
Contribution in the case of the Company or the business of the Newco Group
as it existed prior to the Time of Contribution in the case of Newco. In
the event of a disagreement between any member of the Company Group and
any member of the Newco Group concerning the reasonableness of withholding
such consent, no disclosure shall be made prior to a final, nonappealable
resolution of such disagreement by a court of competent jurisdiction.
(c) Upon any member of the Company Group or any member of the Newco
Group receiving any subpoena or other compulsory disclosure notice from a
court, other governmental agency or otherwise which requests disclosure of
Privileged Information, in each case relating to the business of the Newco
Group or the Company Group, respectively, as it existed prior to the Time
of Contribution or relating to or arising in connection with the
relationship between the constituent elements of the Groups on or prior to
the Time of Contribution, the recipient of the notice shall promptly
provide to the other Group (following the notice provisions set forth
herein) a copy of such notice, the intended response, and all materials or
information relating to the other Group that might be disclosed. In the
event of a disagreement as to the intended response or disclosure, unless
and until the disagreement is resolved as provided in subsection (b), the
parties shall cooperate to assert all defenses to
<PAGE> 38
34
disclosure claimed by either Group, at the cost and expense of the Group
claiming such defense to disclosure, and shall not disclose any disputed
documents or information until all legal defenses and claims of privilege
have been finally determined.
7.3. Production of Witnesses. Subject to Section 7.2, after the Time
of Contribution, each of the Company and Newco shall, and shall cause each
member of the Company Group and the Newco Group, respectively, to, make
available to Newco or any member of the Newco Group or to the Company or any
member of the Company Group, as the case may be, upon written request, such
Group's directors, officers, employees and agents as witnesses to the extent
that any such Person may reasonably be required in connection with any
Litigation Matters, administrative or other proceedings in which the requesting
party may from time to time be involved and relating to the business of the
Newco Group or the Company Group as it existed prior to the Time of
Contribution or relating to or in connection with the relationship between the
constituent elements of the Groups on or prior to the Time of Contribution,
provided that the same shall not unreasonably interfere with the conduct of
business by the Group of which the request is made. The Group requesting such
assistance shall reimburse the other Group for all reasonable out-of-pocket
expenses incurred by the other Group in complying with any such request.
7.4. Retention of Records. Except as provided in the Reorganization
Agreements or as otherwise agreed in writing, if any Information relating to
the business, Assets or Liabilities of a member of a Group as they existed
prior to the Time of Contribution is retained by a member of the other Group,
each of the Company and Newco shall, and shall cause the members of the Group
of which it is a member to, retain all such Information in such Group's
possession or under its control until such Information is at least ten years
old except that if, prior to the expiration of such period, any member of
either Group wishes to destroy or dispose of any such Information that is at
least three years old, prior to destroying or disposing of any of such
Information, (1) Newco or the Company, on behalf of the member of its Group
that is proposing to dispose of or destroy any such Information, shall provide
no less than 30 days' prior written notice to the other party, specifying the
Information proposed to be destroyed or disposed of, and (2) if, prior to the
scheduled date for such destruction or disposal, the other party requests in
writing that any of
<PAGE> 39
35
the Information proposed to be destroyed or disposed of be delivered to such
other party, the party whose Group is proposing to dispose of or destroy such
Information promptly shall arrange for the delivery of the requested
Information to a location specified by, and at the expense of, the requesting
party.
7.5. Confidentiality. Subject to Section 7.2, which shall govern
Privileged Information, from and after the Time of Contribution, each of the
Company and Newco shall hold, and shall use reasonable efforts to cause its
Affiliates and Representatives to hold, in strict confidence all Information
concerning the other party's Group obtained by it prior to the Time of
Contribution or furnished to it by such other party's Group pursuant to the
Reorganization Agreements and shall not release or disclose such Information to
any other Person, except its Affiliates and Representatives, who shall be bound
by the provisions of this Section 7.5, and each party shall be responsible for
a breach of this Section 7.5 by any of its Affiliates or Representatives;
provided, however, that any member of the Company Group or the Newco Group may
disclose such Information to the extent that (a) disclosure is compelled by
judicial or administrative process or, in the opinion of such Person's counsel,
by other requirements of law, or (b) such Person can show that such Information
was (i) available to such Person on a nonconfidential basis (other than from a
member of the other party's Group) prior to its disclosure by such Person, (ii)
in the public domain through no fault of such Person or (iii) lawfully acquired
by such Person from another source after the time that it was furnished to such
Person by the other party's Group, and not acquired from such source subject to
any confidentiality obligation on the part of such source, or on the part of
the acquiror, known to the acquiror. Notwithstanding the foregoing, each of the
Company and Newco shall be deemed to have satisfied its obligations under this
Section 7.5 with respect to any Information (other than Privileged Information)
if it exercises the same care with regard to such Information as it takes to
preserve confidentiality for its own similar Information.
<PAGE> 40
36
ARTICLE VIII
EMPLOYEE BENEFIT PLANS
8.1. Employee Benefits Generally. All obligations of the Newco Group
under this Article VIII with respect to employee benefit plans, arrangements or
policies for the benefit of employees and former employees (and their
beneficiaries) of the Company and its Subsidiaries in place immediately prior
to the Time of Contribution shall be treated as Assumed Liabilities and not as
Retained Liabilities under this Agreement. All obligations of the Company Group
under this Article VIII with respect to the employee benefit plans,
arrangements or policies for the benefit of employees and former employees (and
their beneficiaries) of the Company and its Subsidiaries in place immediately
prior to the Time of Contribution shall be treated as Retained Liabilities and
not as Assumed Liabilities under this Agreement.
8.2. Retirement Plans.
(a) Rockwell Retirement Plan for Eligible Employees.
(i) Prior to the Time of Contribution, the Company shall have
established a new group trust under the Rockwell Retirement Plan, which
shall be exempt from taxation under Section 501(a) of the Code (the "Newco
Group Trust") and the purpose of which shall be to hold, as provided
below, certain assets of the Rockwell Retirement Plan and assets
attributable to the liabilities under the defined benefit pension plans
set forth in Schedule 8.2(b) hereto (the "Reliance Retirement Plans").
Prior to the Time of Contribution, an amount of assets equal to the sum of
(A) the accumulated benefit obligation ("ABO") (as determined in the
following sentence) of the current and former employees of the Company and
its Subsidiaries who are expected to be, as of the Time of the
Contribution, Newco Group Transferred Participants (as defined in Section
8.2(a)(ii) hereof) and (B) $200,000,000 shall have been transferred from
the Rockwell Group Trust to the Newco Group Trust in the amounts, form and
manner described in Section 8.2(c) below. Such ABO shall have been
determined as of December 31, 1995 in accordance with the Statement of
Financial Accounting Standards No. 87 ("FAS 87") utilizing a discount rate
of 7% and
<PAGE> 41
37
actuarial assumptions (other than such discount rate) specified in the
actuarial valuation for the Rockwell Retirement Plan prepared as of
January 1, 1996 (the "January 1, 1996 Actuarial Valuation"). Such ABO
shall have been determined by an enrolled actuary appointed by Newco (the
"Newco Actuary") and shall be binding and conclusive upon Newco, the
Company and Acquiror other than as provided in Sections 8.2(a)(iv) and
8.2(a)(v) hereof.
(ii) Prior to the Time of Contribution, the Company or Newco shall
have established a defined benefit pension plan which shall be qualified
under Section 401(a) of the Code (the "Newco Retirement Plan") effective
as of the Time of Contribution covering (A) Newco Group Continuing
Employees and (B) former employees of the Company and its Subsidiaries who
terminated employment on or after January 1, 1996 (other than Company
Group Former Employees) (such Newco Group Continuing Employees and such
former employees are hereinafter referred to as "Newco Group Transferred
Participants"). The Newco Retirement Plan shall contain provisions
comparable in all material respects to and no less favorable in the
aggregate than those of the Rockwell Retirement Plan immediately prior to
the time of adoption of the Newco Retirement Plan. As soon as practicable
following the establishment of the Newco Retirement Plan, but in no event
later than 30 days prior to the Time of Contribution, the Company and
Newco shall have filed with the IRS proper notice on IRS Forms 5310-A
regarding the transfer of assets and liabilities from the Rockwell
Retirement Plan to the Newco Retirement Plan.
(iii) Effective as of the Time of Contribution, Newco shall sponsor
the Newco Retirement Plan and assume the Newco Group Trust. Effective as
of the Time of Contribution, the Company shall continue to sponsor the
Rockwell Retirement Plan and Rockwell Group Trust, and shall change the
name of the Rockwell Retirement Plan and Rockwell Group Trust to eliminate
any reference to "Rockwell". The Company and Newco shall take such further
actions as may be necessary or appropriate to (A) establish Newco as the
sponsor of the Newco Retirement Plan and provide for the assumption of the
Newco Group Trust by Newco and (B) provide for the continued sponsorship
of the
<PAGE> 42
38
Rockwell Retirement Plan and the Rockwell Group Trust by the Company. As
soon as practicable following the latest of (A) the Time of Contribution,
(B) the expiration of the applicable waiting period without receiving an
adverse response from the appropriate government agencies and (C) receipt
by the Company of an opinion of Newco's counsel, in a form reasonably
satisfactory to the Company, that the form of the Newco Retirement Plan
meets the requirements of Section 401(a) of the Code, the Rockwell
Retirement Plan shall transfer to the Newco Retirement Plan (1) all
accrued benefits and other liabilities attributable to Newco Group
Transferred Participants (collectively, the "Transferred Benefits") and
(2) the assets attributable thereto (the "Transferred Amount") in the
amounts, form and manner described in this Section 8.2(a) and Section
8.2(c) below. Following the transfers of the Transferred Amount and the
Transferred Benefits from the Rockwell Retirement Plan and Rockwell Group
Trust to the Newco Retirement Plan and Newco Group Trust as provided
herein, the Company Group shall have no further liability whatsoever
(either under this Agreement or otherwise) with respect to the Newco Group
Transferred Participants for benefits under the Rockwell Retirement Plan
and, except as otherwise provided in Section 8.2(a)(vi), the Newco Group
shall have no further liability whatsoever (either under this Agreement or
otherwise) with respect to the participants under the Rockwell Retirement
Plan. The Rockwell Retirement Plan shall retain liability for the Newco
Group Former Employees who were participants in the Rockwell Retirement
Plan and who terminated employment with the Company or any of its
Subsidiaries prior to January 1, 1996.
(iv) Within 150 days following the Time of Contribution, Newco shall
cause the Newco Actuary to prepare and deliver to Newco an actuarial
valuation (the "Actuarial Valuation") which shall: (A) certify the ABO for
Newco Group Transferred Participants and the ABO for all other
participants in the Rockwell Retirement Plan and the Newco Retirement Plan
as of the Time of Contribution, each of which ABO shall be determined in
accordance with FAS 87, utilizing a discount rate of 8% and actuarial
assumptions (other than such discount rate) specified in the January 1,
1996 Actuarial Valuation; (B) set forth the fair market value of the
assets for the Rockwell Retirement Plan
<PAGE> 43
39
and the Newco Retirement Plan as of the Time of Contribution and (C) set
forth the calculation of the Transferred Amount (equal to the product of
(A) multiplied by (B) as defined in Section 8.2(a)(v)), which amount shall
be calculated in accordance with Section 414(l) of the Code, the Treasury
Regulations thereunder and this Section 8.2(a)(iv). Newco shall deliver to
the Company the Actuarial Valuation. Within 60 days of receipt of the
Actuarial Valuation, the Company shall (A) cause an enrolled actuary
selected by the Company (the "Company Actuary") to confirm the accuracy
(based upon the assumptions referred to in clause (A) of this Section
8.2(a)(iv)) of the Actuarial Valuation (including the underlying data used
by the Newco Actuary to prepare such Actuarial Valuation) and (B) provide
to Newco a written statement of whether the Company Actuary has confirmed
the accuracy of such Actuarial Valuation. In the event that the Company
Actuary disputes the accuracy of the Actuarial Valuation within such
60-day period, Newco and the Company shall, within 30 days following the
end of the 60-day period described in the preceding sentence, make all
reasonable efforts to cause the Newco Actuary and the Company Actuary to
resolve the dispute or, if such dispute cannot be resolved, select an
actuarial firm of national repute (the "Third Actuary") to determine the
amounts referred to in clauses (A), (B) and (C) of the first sentence of
this Section 8.2(a)(iv), which determination shall be final and binding
upon Newco, the Company and the Acquiror. In the event that Newco and the
Company are unable to select a Third Actuary within such 30-day period, an
arbitrator shall appoint such Third Actuary, which determination shall be
final and binding upon Newco, the Company and the Acquiror. Such
arbitrator shall be appointed in accordance with the rules of the New
York, New York office of the American Arbitration Association. The Company
shall pay the cost of the Company Actuary, Newco shall pay the cost of the
Newco Actuary and, to the extent necessary, the cost of the Third Actuary
and arbitrator shall be shared equally by the Company and Newco. The use
of a Third Actuary and arbitrator and the allocation of the costs thereof
shall be referred to as the "Actuarial Dispute Resolution Process".
(v) As soon as practicable following the satisfaction of the
conditions set forth in Section 8.2(a)(iv), an amount determined in
accordance with
<PAGE> 44
40
this Section 8.2(a)(v) shall be transferred from the Rockwell Retirement
Plan to the Newco Retirement Plan (or from the Newco Retirement Plan to
the Rockwell Retirement Plan, as the case may be). For purposes of this
Section 8.2(a)(v), (A) is the fraction, the numerator of which is the ABO
for the Newco Group Transferred Participants as of the Time of
Contribution, and the denominator of which is the total ABO for all
participants covered under the Rockwell Retirement Plan and Newco
Retirement Plan as of the Time of Contribution, (B) is the total combined
fair market value of the assets of the Rockwell Retirement Plan and Newco
Retirement Plan as of the Time of Contribution, (C) is the fair market
value of the assets in the Newco Retirement Plan as of the Time of
Contribution and (D) is an amount equal to the product of (A) multiplied
by (B). For all purposes of this Section 8.2(a)(v), the amount of ABO
shall be determined in accordance with Section 8.2(a)(iv). If (D) is
greater than (C), then an amount equal to the excess of (D) over (C) shall
be transferred from the Rockwell Retirement Plan to the Newco Retirement
Plan. If (D) is less than (C), then an amount equal to the excess of (C)
over (D) shall be transferred from the Newco Retirement Plan to the
Rockwell Retirement Plan. Any amount to be transferred pursuant to this
Section 8.2(a)(v) shall bear interest from the Time of Contribution to the
date of payment (calculated based on actual days elapsed in a 365-day
year) at a rate of 8% per annum and, to the extent applicable, shall be
decreased by the amount of any benefit payments and normal expenses of
administration not attributable to participants in the plan from which the
amount is transferable.
(vi) Newco shall reimburse the Company, on an annual plan-year basis,
for any additional amounts paid to or in respect of Newco Group Former
Employees who are not Newco Group Transferred Participants and their
beneficiaries under the Rockwell Retirement Plan as a result of any
increase in the benefits provided to such Newco Group Former Employees and
their beneficiaries over the benefits payable to such persons at the Time
of Contribution which increase is implemented by the Company upon the
written request of Newco. Such increase for each year shall be the
aggregate amount actually paid under the Rockwell Retirement Plan to or in
respect of the Newco Group Former Employees who are
<PAGE> 45
41
not Newco Group Transferred Participants and their beneficiaries during
such plan year over the aggregate amount payable to such persons under the
Rockwell Retirement Plan as in effect at the Time of Contribution. The
determination of the amount to be reimbursed to the Company by Newco shall
be made by the Company Actuary and shall be subject to review by the Newco
Actuary. If the Company Actuary and the Newco Actuary shall disagree as to
the amount to be reimbursed, the Company and Newco shall use the Actuarial
Dispute Resolution Process to determine the amount of reimbursement.
(b) Reliance Retirement Plans.
(i) Prior to the Time of Contribution, the assets attributable to the
liabilities under the Reliance Retirement Plans shall have been
transferred from the Rockwell Group Trust to the Newco Group Trust. The
assets transferred from the Rockwell Group Trust to the Newco Group Trust
to fund the liabilities under the Reliance Retirement Plans shall have
been determined in the manner set forth in Section 8.2(c).
(ii) Effective as of the Time of Contribution, Newco shall cause the
appropriate member or members of the Newco Group to continue sponsorship
of the Reliance Retirement Plans. Prior to, on and after the Time of
Contribution, the Company and Newco and the appropriate member of the
Newco Group each shall have taken and shall take such actions as may be
necessary or appropriate to establish the appropriate member of the Newco
Group to continue the sponsorship of the Reliance Retirement Plans.
(c) Selection of Assets.
(i) The assets that shall have been transferred from the Rockwell
Group Trust to the Newco Group Trust pursuant to Sections 8.2(a)(i) and
8.2(b) shall have been selected as hereinafter set forth in this Section
8.2(c)(i). First, assets invested in insurance and annuity contracts that
were attributable specifically to the subplans and groups of Newco Group
Transferred Participants or participants in the Reliance Retirement Plans
(the "Earmarked Investments") shall have been transferred to the Newco
Group Trust. Second, the remaining assets transferred from the
<PAGE> 46
42
Rockwell Group Trust to the Newco Group Trust shall have been comprised
of assets invested by each such investment manager set forth on
Schedule 8.2(c) (each, an "Investment Manager"). The amount of assets
managed by each Investment Manager that shall have been allocated to the
Newco Group Trust from the Rockwell Group Trust shall be an amount equal to
the product of (A) multiplied by (B), where (A) equals a fraction, the
numerator of which is the fair market value of the assets managed by such
individual Investment Manager as of the close of business on the day
immediately preceding the date of transfer and the denominator of which is
the aggregate fair market value of the assets as of the close of business
on the day immediately preceding the date of transfer managed by all of the
Investment Managers, and where (B) equals the amount of assets transferred
to the Newco Group Trust pursuant to Section 8.2(a)(i) and 8.2(b) minus the
amount of Earmarked Assets. The selection of specific assets managed by
each Investment Manager transferred to the Newco Group Trust or liquidated
to fund such transfer, in the amount determined in accordance with the
immediately preceding sentence, shall have been made on a pro rata basis
among the assets managed by such Investment Manager. Notwithstanding the
foregoing, if the total fair market value of the assets managed by the
Investment Managers as of the close of business on the day immediately
preceding the date of the transfer was less than the amount set forth in
clause (B) of the preceding sentence, then the remaining assets that shall
have been transferred to the Newco Group Trust shall have been determined
on a basis mutually agreed upon by the Company and Newco.
(ii) The assets to be transferred from the Rockwell Group Trust to
the Newco Group Trust or from the Newco Group Trust to the Rockwell Group
Trust, as the case may be, pursuant to Section 8.2(a)(v) shall be in cash
and marketable securities as mutually agreed upon by the Company and
Newco.
(d) The Company and Newco shall use and shall have used their
reasonable best efforts to effectuate the actions contemplated under this
Section 8.2 on a timely basis as provided herein.
<PAGE> 47
43
8.3. Savings Plans.
(a) Rockwell International Corporation Savings Plan. Effective as of
the Time of Contribution, Newco shall assume sponsorship of the Rockwell
International Corporation Savings Plan (the "Rockwell Savings Plan") and trust
related thereto and shall cause each Company Group Continuing Employee to have
a fully nonforfeitable right to such Continuing Employee's account balances, if
any, under the Rockwell Savings Plan. The account balances of each Company
Group Continuing Employee shall be maintained under the Rockwell Savings Plan
until distributed in accordance with the terms of the Rockwell Savings Plan and
applicable law.
(b) Rockwell Hourly Savings Plans. Effective as of the Time of
Contribution, Newco shall, or shall cause one or more of its Subsidiaries to,
assume sponsorship of the Rockwell Retirement Savings Plan for Certain
Employees (the "Rockwell Hourly Savings Plan") and the trust related thereto
and shall cause each Company Group Continuing Employee to have a fully
nonforfeitable right to such Company Group Continuing Employee's account
balances, if any, under the Rockwell Hourly Savings Plan. The account balances
of each Company Group Continuing Employee shall be maintained under the
Rockwell Hourly Savings Plan until distributed in accordance with the terms of
the Rockwell Hourly Savings Plan and applicable law.
(c) Plant Savings Plans. Effective as of the Time of Contribution,
Newco shall, or shall cause one or more of its Subsidiaries to, assume
sponsorship of the Asheville Employees Retirement Savings Plan Truck Axle
Division, the Rockwell International Corporation Gordonsville, Tennessee
Employees Savings Plan, the Rockwell International Corporation Retirement Plan
for Hourly Employees, Gordonsville, Tennessee and the York Employees Retirement
Savings Plan Truck Axle Division and the respective trusts related thereto.
(d) Rockwell Savings Plan for Certain Eligible Employees. If the
Rockwell Savings Plan for Certain Eligible Employees has not been merged into
and with the Rockwell International Corporation Savings Plan as of the Time of
Contribution, then effective as of the Time of Contribution, the Company shall,
or shall cause a member of the Company Group to, assume sponsorship of the
Rockwell Savings Plan for Certain Eligible Employees and the trust related
thereto and shall cause each Newco Group Continuing
<PAGE> 48
44
Employee to have a fully nonforfeitable right to such Newco Group Continuing
Employee's account balances, if any, under the Rockwell Savings Plan for
Certain Eligible Employees. The account balances of each Newco Group Continuing
Employee shall be maintained under the Rockwell Savings Plan for Certain
Eligible Employees until distributed in accordance with the terms thereof and
applicable law.
8.4. Deferred Compensation Plans and Nonqualified Retirement and
Savings Plans.
(a) Deferred Compensation Plans. Effective as of the Time of
Contribution, Newco shall assume liability for and shall pay when due all
benefits accrued as of the Time of Contribution (including, in the case of
Company Group Continuing Employees and, if any, Company Group Former Employees,
such individuals' vested and nonvested benefits which are accrued as of the
Time of Contribution) by, and attributable to, all employees and former
employees of the Company and its Subsidiaries and all present and former
non-employee directors of the Company under the Rockwell International
Corporation Deferred Compensation Plan as amended and restated effective
July 1, 1995, the Rockwell International Corporation Annual Incentive
Compensation Plan for Senior Executive Officers effective as of October 1, 1995
and the Rockwell International Corporation Deferred Compensation Policy for
Non-Employee Directors (the "Deferred Compensation Plans"), and shall perform,
pay and discharge fully all of the Company's and its Subsidiaries' duties,
liabilities or obligations thereunder with respect to such employees, former
employees and present and former non-employee directors of the Company and its
Subsidiaries. Effective as of the Time of Contribution, Newco shall cause each
Company Group Continuing Employee and Company Group Former Employee to have a
fully nonforfeitable right to such individual's entire account balance, if any,
under the Deferred Compensation Plans.
(b) Nonqualified Retirement Plans. Effective as of the Time of
Contribution, Newco shall assume liability for and shall pay when due all
benefits accrued as of the Time of Contribution by, and attributable to,
employees and former employees of the Company and its Subsidiaries (other than
Company Group Continuing Employees and Company Group Former Employees) under
the Rockwell International Corporation Supplemental Retirement Plan for Highly
Compensated Employees, the Rockwell International Corporation Excess Benefit
Retirement Plan and the Rockwell
<PAGE> 49
45
International Corporation Excess Benefit Plan (the "Nonqualified Retirement
Plans"), and shall perform, pay and discharge fully all of the Company's and
its Subsidiaries' duties, liabilities or obligations thereunder with respect to
such employees and former employees. Effective as of the Time of Contribution,
the Company shall assume liability for and shall pay when due all benefits
accrued as of the Time of Contribution by, and attributable to, Company Group
Continuing Employees and Company Group Former Employees (including such
individual's vested and nonvested benefits which are accrued as of the Time of
Contribution) under the Nonqualified Retirement Plans and shall perform, pay
and discharge fully all of the Company's and its Subsidiaries' duties,
liabilities or obligations with respect thereto.
(c) Nonqualified Savings Plans. Effective as of the Time of
Contribution, Newco shall assume liability for and shall pay when due all
benefits accrued as of the Time of Contribution (including, in the case of
Company Group Continuing Employees and, if any, Company Group Former Employees,
such individuals' vested and nonvested benefits which are accrued as of the
Time of Contribution) by, and attributable to, all employees and former
employees of the Company and its Subsidiaries under the Rockwell International
Corporation Supplemental Savings Plan for Highly Compensated Employees and the
Rockwell International Corporation Excess Benefit Savings Plan (the
"Nonqualified Savings Plans"), and shall perform, pay and discharge fully all
of the Company's and its Subsidiaries' duties, liabilities or obligations
thereunder with respect thereto. Effective as of the Time of Contribution,
Newco shall cause each Company Group Continuing Employee and Company Group
Former Employee to have a fully nonforfeitable right to such individual's
entire account balance, if any, under the Nonqualified Savings Plans.
8.5. Employee Stock Options. Effective as of the Time of
Contribution, Newco shall assume the Company Stock Plans. The Board of
Directors of the Company shall amend the Company Stock Plans, make adjustments
and take actions (and Newco shall take such actions as are reasonably required
to implement the same) with respect to options to acquire shares of Company
Common Stock or Company Class A Common Stock, as the case may be, pursuant to
any Company Stock Plan ("Company Options") which are outstanding immediately
prior to the Time of Distribution to provide that, pursuant to the equitable
adjustment provisions of the
<PAGE> 50
46
applicable Company Stock Plan under which such Company Options were granted,
effective as of the Time of Distribution such Company Options will be converted
into and represent the right to acquire shares of Newco Common Stock and Newco
Class A Common Stock, in each case with the associated Rights, with such other
amendments and adjustments as are reasonable and appropriate, including such
amendments as are reasonable and appropriate to ensure that any optionholder
who becomes a Company Group Continuing Employee or a Company Group Former
Employee as of the Time of Contribution will not forfeit any such converted
options on such date under the termination of employment provisions of such
plans as a result of not becoming a Newco Group Continuing Employee or a Newco
Group Former Employee, and will be entitled to vesting and exercisability
rights comparable to those that such optionholder has immediately prior to the
Time of Contribution to the extent that such optionholder remains in continuous
employment with any member of the Company Group.
8.6. Long-Term Incentive Plan. Effective as of the Time of
Contribution, (i) the Company shall retain liability for all amounts due under
the Rockwell International Business Unit Long-Term Incentive Plan (the "LTIP")
with respect to the Company Group Continuing Employees and Company Group Former
Employees and (ii) Newco shall assume liability for all amounts due under the
LTIP with respect to the Newco Group Continuing Employees and Newco Group
Former Employees. The amounts payable under clause (i) of the preceding
sentence shall be determined by the Company on the basis that (x) the target
award for each uncompleted cycle will be prorated to reflect the portion of
such cycle completed as of the Time of Contribution and (y) where payment is
based, in whole or in part, on the trading price of the Company Common Stock,
such price shall be the average closing price per share of Company Common Stock
reported on the NYSE for each full trading day during the months of August and
September immediately preceding the Time of Contribution. The amount due each
participant under the LTIP who is a Company Group Continuing Employee shall be
paid by the Company within 90 days following the Time of Contribution. Newco
shall promptly reimburse the Company, upon written request from the Company
therefor, for any amount paid by the Company under the LTIP as a result of this
Section 8.6 the expense of which is not reimbursed by the United States of
America under applicable Government Contracts, provided, however, that Newco
shall have the opportunity to participate in any negotiations with the
<PAGE> 51
47
applicable Governmental Entity with respect to such reimbursement or to
designate counsel or a representative reasonably satisfactory to the Company to
so participate on Newco's behalf unless such participation by Newco (or its
counsel or representative) is barred by such agency, in which case, the Company
shall consult with Newco and keep Newco apprised of any developments with
respect to such negotiations. The Company shall not establish, or cause to be
established, any new performance cycles under the LTIP with respect to Company
Group Continuing Employees and Company Group Former Employees prior to the Time
of Contribution.
8.7. Welfare Benefit Plans.
(a) Effective as of the Time of Contribution, the Company shall, or
shall cause a member of the Company Group to, maintain each "employee welfare
benefit plan", as defined in Section 3(1) of ERISA, and each other employee
welfare benefit or fringe benefit arrangement (collectively, "Company Group
Welfare Benefit Plans") sponsored or maintained by the Company or any of its
Subsidiaries immediately prior to the Time of Contribution for the benefit of
Company Group Continuing Employees and Company Group Former Employees
(including but not limited to those plans set forth on Schedule 8.7(a)). The
Company shall credit the dollar amount of all expenses incurred by Company
Group Continuing Employees and Company Group Former Employees and their
respective eligible dependents during the applicable plan year in which occurs
the Time of Contribution for purposes of satisfying such plan year's deductible
and co-payment limitations and shall credit service with the Company and its
Subsidiaries earned prior to the Time of Contribution under the relevant
welfare benefit plans of the Company Group. The Company shall credit each
Company Group Continuing Employee with the unused vacation days and any
personal and sickness days accrued in accordance with the vacation and
personnel policies and labor agreements of the Company and its Subsidiaries
applicable to such employees in effect as of the Time of Contribution.
(b) Effective as of the Time of Contribution, Newco shall, or shall
cause a member of the Newco Group to, establish or maintain "employee welfare
benefit plans", as defined in Section 3(1) of ERISA, and other employee welfare
benefit or fringe benefit arrangements (collectively, "Newco Group Welfare
Benefit Plans") which are comparable in the
<PAGE> 52
48
aggregate to the "employee welfare benefit plans" and other employee benefit
welfare or fringe benefit arrangements which had been maintained by the Company
and its Subsidiaries immediately prior to the Time of Contribution for the
benefit of Newco Group Continuing Employees and Newco Group Former Employees.
Newco shall credit the dollar amount of all expenses incurred by Newco Group
Continuing Employees and Newco Group Former Employees and their respective
eligible dependents during the applicable plan year in which occurs the Time of
Contribution for purposes of satisfying such plan year's deductible and
co-payment limitations and shall credit service with the Company and its
Subsidiaries earned prior to the Time of Contribution under the relevant
welfare benefit plans of the Newco Group. Newco shall credit each Newco Group
Continuing Employee with the unused vacation days and any personal and sickness
days accrued in accordance with the vacation and personnel policies and labor
agreements of the Company and its Subsidiaries applicable to such employees in
effect as of the Time of Contribution.
(c) As of the Time of Contribution, the Company shall retain and
continue to be responsible for all welfare benefit programs (including, but not
limited to, medical, dental, life, travel accident, short- and long-term
disability, hospitalization and other insurance benefits) under which claims
have been incurred for expenses prior to the Time of Contribution by Company
Group Continuing Employees, Company Group Former Employees and their dependents
and such reimbursement for such medical and dental expenses associated with
such claims (including claims submitted on behalf of disabled employees and
their dependents) shall be determined in accordance with the terms of the
welfare benefit programs of the Company Group as in effect immediately prior to
the Time of Contribution. As of the Time of Contribution, Newco shall assume
and be responsible for all welfare benefit programs (including, but not limited
to, medical, dental, life, travel accident, short- and long-term disability,
hospitalization and other insurance benefits) under which claims have been
incurred for expenses incurred prior to the Time of Contribution by Newco Group
Continuing Employees, Newco Group Former Employees and their dependents and
such reimbursement for such medical and dental expenses associated with such
claims (including claims submitted on behalf of disabled employees and their
dependents) shall be determined in accordance with the terms of the welfare
benefit programs of the Company
<PAGE> 53
49
Group as in effect immediately prior to the Time of Contribution.
8.8. Retiree Health and Life Insurance.
(a) The Company and the Company Group, or where appropriate, the
Company Group Welfare Benefit Plans, shall retain liability for all retiree
health benefits and retiree life insurance which were payable prior to the Time
of Contribution and/or are payable on or after the Time of Contribution to
(i) all eligible Company Group Continuing Employees (and their beneficiaries)
and (ii) all eligible Company Group Former Employees (and their beneficiaries).
The Company shall credit the dollar amount of all expenses incurred by Company
Group Continuing Employees and Company Group Former Employees and their
respective eligible dependents during the applicable plan year in which occurs
the Time of Contribution for purposes of satisfying such plan year's deductible
and co-payment limitations and shall credit service with the Company and its
Subsidiaries earned prior to the Time of Contribution under the relevant retiree
welfare benefit plans of the Company Group.
(b) Newco and the Newco Group, or where appropriate, the Newco Group
Welfare Benefit Plans, shall assume liability for all retiree health benefits
and retiree life insurance benefits which were payable prior to the Time of
Contribution and/or are payable on or after the Time of Contribution to
(i) all eligible Newco Group Continuing Employees (and their beneficiaries) and
(ii) all eligible Newco Group Former Employees (and their beneficiaries). Newco
shall credit the dollar amount of all expenses incurred by Newco Group
Continuing Employees and Newco Group Former Employees and their respective
eligible dependents during the applicable plan year in which occurs the Time
of Contribution for purposes of satisfying such plan year's deductible and
co-payment limitations and shall credit service with the Company and its
Subsidiaries earned prior to the Time of Contribution under the relevant retiree
welfare benefit plans of the Newco Group.
(c) As of the Time of Contribution, the Company shall retain and
continue to be responsible for all retiree welfare benefit programs (including,
but not limited to, medical, dental, life, travel accident, short- and
long-term disability, hospitalization and other insurance benefits) under which
claims have been incurred for expenses prior to the Time of Contribution by
Company Group Continuing
<PAGE> 54
50
Employees, Company Group Former Employees and their dependents and such
reimbursement for such medical and dental expenses associated with such claims
(including claims submitted on behalf of disabled employees and their
dependents) shall be determined in accordance with the terms of the welfare
benefit programs of the Company and its Subsidiaries as in effect immediately
prior to the Time of Contribution. As of the Time of Contribution, Newco shall
assume and be responsible for all retiree welfare benefit programs (including,
but not limited to, medical, dental, life, travel accident, short- and
long-term disability, hospitalization and other insurance benefits) under which
claims have been incurred for expenses incurred prior to the Time of
Contribution by Newco Group Continuing Employees, Newco Group Former Employees
and their dependents and such reimbursement for such medical and dental
expenses associated with such claims (including claims submitted on behalf of
disabled employees and their dependents) shall be determined in accordance with
the term of the retiree welfare benefit programs of the Company and its
Subsidiaries as in effect immediately prior to the Time of Contribution.
8.9. Retention and Severance Obligations. The Company and Newco agree
that the transactions contemplated by this Agreement shall not constitute a
severance of employment of any Company Group Continuing Employee and Newco
Group Continuing Employee prior to or as a result of the consummation of the
transactions contemplated hereby, and that such employees will have continuous
and uninterrupted employment with the Company Group or Newco Group, as
applicable, before and immediately after the Time of Contribution. Without
limiting the generality of Section 8.9, effective as of the Time of
Contribution, the Company shall retain liability for and shall pay when due all
amounts which may become payable under the Rockwell Retention and Severance
Arrangement.
8.10. Free-Standing Plans. Effective as of the Time of Contribution,
Newco shall assume, or shall cause the Newco Group to assume, all liabilities
and obligations under each employee benefit plan, arrangement or policy which,
prior to the Time of Contribution, is exclusively for the benefit of Newco
Group Continuing Employees, Newco Group Former Employees, and their eligible
beneficiaries (the "Newco Group Free-Standing Plans"). Effective as of the Time
of Contribution, the Company shall retain, or shall cause the Company Group to
retain, all liabilities and obligations under each employee benefit plan,
arrangement or
<PAGE> 55
51
policy which, prior to the Time of Contribution, is exclusively for the benefit
of Company Group Continuing Employees, Company Group Former Employees, and
their eligible beneficiaries (the "Company Group Free-Standing Plans"). The
Company and Newco shall take, or cause to be taken, all such action as may be
necessary or appropriate to establish the Newco Group as successor to the
Company or its Subsidiaries as to all rights, assets, duties, liabilities and
obligations under, or with respect to, the Newco Group Free-Standing Plans and
to establish the Company Group as successor to the Company or its Subsidiaries
as to all rights, assets, duties, liabilities and obligations with respect to
the Company Group Free-Standing Plans.
8.11. Employment, Consulting and Severance Agreements. Effective as
of the Time of Contribution, Newco shall assume, or cause the Newco Group to
assume, all liabilities and obligations attributable to Newco Group Continuing
Employees and Newco Group Former Employees under their respective employment,
consulting and severance agreements with the Company or its Subsidiaries, as
the same are in effect immediately prior to the Time of Contribution. Effective
as of the Time of Contribution, the Company shall retain, or cause the Company
Group to retain, all liabilities and obligations attributable to Company Group
Continuing Employees and Company Group Former Employees under their respective
employment, consulting and severance agreements with the Company or its
Subsidiaries, as the same are in effect immediately prior to the Time of
Contribution.
8.12. Welfare Plan Funding.
(a) Non-Collectively Bargained Voluntary Employees' Beneficiary
Association. Prior to the Time of Contribution, Newco shall have established a
voluntary employees' beneficiary association (the "Newco VEBA") under Section
501(c)(9) of the Code covering Newco Group Continuing Employees and Newco Group
Former Employees who are covered under the Trust for Employee Welfare Benefit
Programs of Rockwell International Corporation (the "Rockwell VEBA"). The Newco
VEBA shall contain provisions comparable in all material respects to and no
less favorable in the aggregate to its participants than those of the Rockwell
VEBA. Prior to the Time of Contribution, the Rockwell VEBA shall have
transferred to the Newco VEBA assets attributable to the Newco Group Continuing
Employees and Newco Group Former Employees covered under the Rockwell VEBA. The
amount of assets transferred from the Rockwell
<PAGE> 56
52
VEBA to the Newco VEBA pursuant to this Section 8.12(a) shall have been based
upon the value of the assets in the applicable employee group insurance plan as
of the date of the transfer multiplied by the ratio that the costs allocated
for the Newco Group Continuing Employees and Newco Group Former Employees bear
to the total costs allocated under the Rockwell VEBA for the Company's
government accounting fiscal year in which such transfer occurs to the date of
the transfer. The Company and Newco agree to adjust the initial asset
allocation set forth in the preceding sentence, based upon actual claims cost
experience at such time as the actual experience is known pursuant to the
Company's practices existing on the date hereof. Effective as of the Time of
Contribution, Newco shall continue to sponsor the Newco VEBA. Effective as of
the Time of Contribution, the Company shall continue to sponsor the Rockwell
VEBA and shall change the name of the Rockwell VEBA to eliminate any reference
to "Rockwell".
(b) Collectively Bargained Voluntary Employees' Beneficiary
Association. Prior to the Time of Contribution, Newco shall have established a
voluntary employees' beneficiary association (the "Newco Collectively Bargained
VEBA") under Section 501(c)(9) covering Newco Group Continuing Employees and
Newco Group Former Employees who are covered under the Agreement of Trust for
Certain Collectively Bargained Welfare Benefit Plans of Rockwell International
Corporation (the "Rockwell Collectively Bargained VEBA"). The Newco
Collectively Bargained VEBA shall contain provisions comparable in all material
respects to and no less favorable in the aggregate to its participants than
those of the Rockwell Collectively Bargained VEBA. Prior to the Time of
Contribution, the Rockwell Collectively Bargained VEBA shall have transferred
to the Newco Collectively Bargained VEBA assets attributable to the Newco Group
Continuing Employees and Newco Group Former Employees covered under the
Rockwell Collectively Bargained VEBA. The amount of assets transferred from the
Rockwell Collectively Bargained VEBA to the Newco Collectively Bargained VEBA
pursuant to this Section 8.12(b) shall have been based upon the value of the
assets in the Rockwell Collectively Bargained VEBA as of the date of the
transfer multiplied by the ratio that the costs allocated for the Newco Group
Continuing Employees and Newco Group Former Employees bear to the total costs
allocated under the applicable employee group insurance plan for the Company's
government accounting fiscal year in which such transfer occurs to the date of
the transfer. Effective as of the
<PAGE> 57
53
Time of Contribution, Newco shall continue to sponsor the Newco Collectively
Bargained VEBA. Effective as of the Time of Contribution, the Company shall
continue to sponsor the Rockwell Collectively Bargained VEBA and shall change
the name of the Rockwell Collectively Bargained VEBA to eliminate any reference
to "Rockwell".
(c) Continued Life Insurance Reserve Fund. Prior to the Time of
Contribution, Newco shall have established a continued life insurance reserve
fund (the "Newco CLIR Fund") covering Newco Group Continuing Employees and
Newco Group Former Employees who are covered under the Continued Life Insurance
Reserve Fund (the "Rockwell CLIR Fund"). The Newco CLIR Fund shall contain
provisions comparable in all material respects to and no less favorable in the
aggregate to its participants than those of the Rockwell CLIR Fund. Prior to
the Time of Contribution, the Rockwell CLIR Fund shall have transferred to the
Newco CLIR Fund assets attributable to the Newco Group Continuing Employees and
Newco Group Former Employees covered under the Rockwell CLIR Fund. The amount
of assets transferred from the Rockwell CLIR Fund to the Newco CLIR Fund
pursuant to this Section 8.12(c) shall have been based upon the proportionate
values of the assets in the Rockwell CLIR Fund attributable to Newco Group
Continuing Employees and Newco Group Former Employees as of the most recent
actuarial valuation for the Rockwell CLIR Fund prepared by the Newco Actuary,
subject to review by the Company Actuary. In the event of a dispute between the
Newco Actuary and the Company Actuary, the Actuarial Dispute Resolution Process
shall be used to determine the amount of assets to be transferred. Effective as
of the Time of Contribution, Newco shall continue to sponsor the Newco CLIR
Fund. Effective as of the Time of Contribution, the Company shall continue to
sponsor the Rockwell CLIR Fund and shall change the name of the Rockwell CLIR
Fund to eliminate any reference to "Rockwell".
(d) Additional Action. Prior to, on and after the Time of
Contribution, the Company and Newco each shall take and shall have taken such
further actions as may be necessary or appropriate to (i) establish Newco as
the sponsor of the Newco VEBA, Newco Collectively Bargained VEBA and Newco CLIR
Fund, (ii) provide for the continued sponsorship by the Company of the Rockwell
VEBA, Rockwell Collectively Bargained VEBA and Rockwell CLIR Fund and
(iii) cause the transfers described in this Section 8.12 to be made in
accordance with applicable law and the terms of any applicable collective
bargaining agreement.
<PAGE> 58
54
8.13. Indemnification. Except as otherwise provided in this Article
VIII, Newco shall indemnify, defend and hold harmless the Company Group from
and against, and pay or reimburse the Company Group for, any claims made by any
Newco Group Continuing Employee or Newco Group Former Employee for severance or
other separation benefits, any claims based on breach of contract and any other
claims arising out of or in connection with the employment or the failure to
offer employment to, or the termination of employment of, any Newco Group
Continuing Employee or Newco Group Former Employee. The Company shall
indemnify, defend and hold harmless the Newco Group from and against, and pay
or reimburse the Newco Group for, any claims made by any Company Group
Continuing Employee or Company Group Former Employee for severance or other
separation benefits, any claims based on breach of contract and any other
claims arising out of or in connection with the employment or the failure to
offer employment to, or the termination of employment of, any Company Group
Continuing Employee or Company Group Former Employee. Newco shall indemnify,
defend and hold harmless the Company Group from and against, and pay or
reimburse the Company Group for, all liabilities resulting from any failure to
file a determination letter request with the IRS within the remedial amendment
period prescribed under Section 401(b) of the Code with respect to compliance
with the Tax Reform Act of 1986 for any Company Pension Plan that is intended
to be tax-qualified under Section 401(a) of the Code.
8.14. Cooperation. Without limiting the generality of Article VII
hereof, the Company Group and Newco Group agree to promptly furnish each other
with such information concerning employees and employee benefit plans,
arrangements or policies as is necessary and appropriate to effect the
transactions contemplated by this Article VIII.
8.15. Amendment, Modification or Termination of Benefit Plans. From
and after the Time of Contribution, (i) the Company Group expressly reserves
the right, in accordance with applicable law and the terms of any applicable
collective bargaining agreement, to amend, modify or terminate any Benefit Plan
it sponsors or maintains for Company Group Continuing Employees and Company
Group Former Employees and (ii) the Newco Group expressly reserves the right,
in accordance with applicable law and the terms of any applicable collective
bargaining agreement, to amend, modify or terminate any Benefit Plan it
sponsors or
<PAGE> 59
55
maintains for Newco Group Continuing Employees or Newco Group Former Employees.
ARTICLE IX
CONDITIONS
9.1. Conditions to Obligations of the Company. The obligations of the
Company to consummate the Distribution hereunder shall be subject to the
fulfillment of each of the following conditions:
(a) All of the transactions contemplated by Article II shall have
been consummated.
(b) The recapitalization of Newco in accordance with Section 3.2
shall have been consummated.
(c) Each condition to the Closing of the Merger Agreement set
forth in Article VI thereof, other than (i) the condition set forth in
Sections 6.1(f) thereof as to the consummation of the Contribution and the
Distribution and (ii) the condition to the Acquiror's obligations set forth in
Section 6.3(d) thereof as to the satisfaction of conditions contained in this
Agreement, shall have been fulfilled or waived by the party for whose benefit
such condition exists.
(d) The Board of Directors of the Company shall be reasonably
satisfied that, after giving effect to the Contribution, (i) the Company will
not be insolvent and will not have unreasonably small capital with which to
engage in its businesses and (ii) the Company's surplus would be sufficient to
permit, without violation of Section 170 of the DGCL, the Distribution.
(e) Acquiror, the Company and Newco shall each have received, in form
and substance reasonably satisfactory to each, the advance agreements and
approvals of Governmental Entities concerning the matters described on
Schedule 9.1(e).
<PAGE> 60
56
ARTICLE X
MISCELLANEOUS AND GENERAL
10.1. Modification or Amendment. The parties hereto may modify or
amend this Agreement only by written agreement executed and delivered by duly
authorized officers of the respective parties.
10.2. Waiver; Remedies. The conditions to the Company's obligation to
consummate the Distribution are for the sole benefit of the Company and may be
waived in writing by the Company in whole or in part to the extent permitted by
applicable law. No delay on the part of any party hereto in exercising any
right, power or privilege hereunder will operate as a waiver thereof, nor will
any waiver on the part of any party hereto of any right, power or privilege
hereunder operate as a waiver of any other right, power or privilege hereunder,
nor will any single or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder. Unless otherwise provided, the
rights and remedies herein provided are cumulative and are not exclusive of any
rights or remedies which the parties may otherwise have at law or in equity.
10.3. Counterparts. For the convenience of the parties, this
Agreement may be executed in any number of separate counterparts, each such
counterpart being deemed to be an original instrument, and all such
counterparts shall together constitute the same agreement.
10.4. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York
applicable to contracts made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.
10.5. Notices. Any notice, request, instruction or other
communication to be given hereunder by any party to any other party shall be in
writing and shall be deemed to have been duly given (i) on the date of delivery
if delivered personally, or by telecopy or telefacsimile, upon confirmation of
receipt, (ii) on the first business day following the date of dispatch if
delivered by Federal Express or other nationally reputable next-day courier
service, or (iii) on the third business day following the date of mailing if
delivered by registered or certified
<PAGE> 61
57
mail, return receipt requested, postage prepaid. All notices hereunder shall be
delivered as set forth below, or pursuant to such other instructions as may be
designated in writing by the party to receive such notice:
(a) If to Newco or the Operating Subsidiaries:
New Rockwell International Corporation
2201 Seal Beach Boulevard
Seal Beach, California 90740-8250
Attention: William J. Calise, Jr., Esq.
Senior Vice President, General
Counsel and Secretary
Telecopy: (310) 797-5687
with copies to:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Peter R. Kolyer, Esq.
Telecopy: (212) 541-5369
and
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Eric S. Robinson, Esq.
Telecopy: (212) 403-2000
(b) If to the Company:
Boeing NA, Inc.
c/o The Boeing Company
P.O. Box 3707
M/S 13-08
Seattle, Washington 98124-2207
Attention: Theodore J. Collins, Esq.
Vice President & General Counsel
Telecopy: (206) 544-4900
and
<PAGE> 62
58
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Allen Finkelson, Esq.
Telecopy: (212) 474-3700
10.6. Entire Agreement. The Reorganization Agreements (including the
Annexes and Schedules thereto), the Transition Agreement and the
Confidentiality Agreement constitute the entire agreement, and supersede all
other prior agreements, understandings, representations and warranties, both
written and oral, among the parties, with respect to the subject matter hereof
and thereof.
10.7. Certain Obligations. Whenever this Agreement requires any of
the Subsidiaries of any party to take any action, this Agreement will be deemed
to include an undertaking on the part of such party to cause such Subsidiary to
take such action.
10.8. Assignment. No party to this Agreement shall convey, assign or
otherwise transfer any of its rights or obligations under this Agreement
without the express written consent of the other parties hereto in their sole
and absolute discretion, except that any party hereto may assign any of its
rights hereunder to a successor to all or any part of its business. Except as
aforesaid, any such conveyance, assignment or transfer without the express
written consent of the other parties shall be void ab initio. No assignment of
this Agreement shall relieve the assigning party of its obligations hereunder.
10.9. Captions. The Article, Section and paragraph captions herein
are for convenience of reference only, do not constitute part of this Agreement
and shall not be deemed to limit or otherwise affect any of the provisions
hereof.
10.10. Specific Performance. In the event of any actual or threatened
default in, or breach of, any of the terms, conditions and provisions of this
Agreement, the party or parties who are or are to be thereby aggrieved shall
have the right of specific performance and injunctive relief giving effect to
its or their rights under this Agreement, in addition to any and all other
rights and remedies at law or in equity, and all such rights and
<PAGE> 63
59
remedies shall be cumulative. The parties agree that the remedies at law for
any breach or threatened breach, including monetary damages, are inadequate
compensation for any loss and that any defense in any action for specific
performance that a remedy at law would be adequate is waived.
10.11. Severability. If any provision of this Agreement or the
application thereof to any person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby, so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon any such determination, the parties shall negotiate
in good faith in an effort to agree upon a suitable and equitable substitute
provision to effect the original intent of the parties.
10.12. Third Party Beneficiaries. Acquiror shall be a third party
beneficiary of this Agreement. Nothing contained in this Agreement is intended
to confer upon any Person or entity other than the parties hereto and their
respective successors and permitted assigns (other than Acquiror), any benefit,
right or remedies under or by reason of this Agreement, except that the
provisions of Sections 6.1 and 8.13 hereof shall inure to the benefit of the
persons referred to therein.
10.13. Schedules. All Schedules attached hereto or referred to herein
are hereby incorporated in and made a part of this Agreement as if set forth in
full herein. Matters reflected on the Schedules are not necessarily limited to
matters required by this Agreement to be reflected on such Schedules. Such
additional matters are set forth for informational purposes only and do not
necessarily include other matters of a similar nature. Capitalized terms used
in any Schedule but not otherwise defined therein shall have the respective
meanings assigned to such terms in this Agreement.
10.14. Consent to Jurisdiction. Each of the parties hereto
irrevocably submits to the exclusive jurisdiction of (i) the Superior Court of
the State of
<PAGE> 64
60
California, San Francisco County and (ii) the United States District Court for
the Northern District of California for the purposes of any suit, action or
other proceeding arising out of this Agreement or any transaction contemplated
hereby (and agrees not to commence any action, suit or proceeding relating
hereto except in such courts). Each of the parties hereto further agrees that
service of any process, summons, notice or document hand delivered or sent by
registered mail to such party's respective address set forth in Section 10.5
will be effective service of process for any action, suit or proceeding in
California with respect to any matters to which it has submitted to
jurisdiction as set forth in the immediately preceding sentence. Each of the
parties hereto irrevocably and unconditionally waives any objection to the
laying of venue of any action, suit or proceeding arising out of this Agreement
or the transactions contemplated hereby in (i) the Superior Court of the State
of California, San Francisco County or (ii) the United States District Court
for the Northern District of California, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.
<PAGE> 65
61
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first hereinabove written.
ROCKWELL INTERNATIONAL CORPORATION
By: /s/ WILLIAM J. CALISE, JR.
--------------------------------
Name: William J. Calise, Jr.
Title: Senior Vice President
NEW ROCKWELL INTERNATIONAL CORPORATION
By: /s/ WILLIAM J. CALISE, JR.
--------------------------------
Name: William J. Calise, Jr.
Title: Senior Vice President
ALLEN-BRADLEY COMPANY, INC.
By: /s/ WILLIAM J. CALISE, JR.
--------------------------------
Name: William J. Calise, Jr.
Title: Vice President
ROCKWELL COLLINS, INC.
By: /s/ WILLIAM J. CALISE, JR.
--------------------------------
Name: William J. Calise, Jr.
Title: Vice President
ROCKWELL SEMICONDUCTOR SYSTEMS, INC.
By: /s/ WILLIAM J. CALISE, JR.
--------------------------------
Name: William J. Calise, Jr.
Title: Vice President
<PAGE> 66
62
ROCKWELL LIGHT VEHICLE SYSTEMS, INC.
By: /s/ WILLIAM J. CALISE, JR.
--------------------------------
Name: William J. Calise, Jr.
Title: Vice President
ROCKWELL HEAVY VEHICLE SYSTEMS, INC.
By: /s/ WILLIAM J. CALISE, JR.
--------------------------------
Name: William J. Calise, Jr.
Title: Vice President
<PAGE> 1
Exhibit 10(c)
CONFORMED COPY
- - -------------------------------------------------------------------------------
POST-CLOSING COVENANTS AGREEMENT
dated as of December 6, 1996,
among
ROCKWELL INTERNATIONAL CORPORATION,
THE BOEING COMPANY
BOEING NA, INC.
and
NEW ROCKWELL INTERNATIONAL CORPORATION
- - -------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS
1.1. Definitions ......................................... 2
ARTICLE II
INDEMNIFICATION
2.1. Indemnification by Newco ........................... 3
2.2. Indemnification by the Company ..................... 6
2.3. Procedures Relating to Indemnification ............. 7
2.4. Certain Limitations ................................ 12
2.5. Limitation on Newco's Indemnification
Obligation under Section 2.1(a)(iv) ................ 13
2.6. Exclusivity of Tax Allocation Agreement ............ 14
ARTICLE III
OTHER AGREEMENTS
3.1. Transfer Taxes ..................................... 15
3.2. Conduct of Environmental Insurance Coverage
Claims ......................................... 15
3.3. Agreements with Respect to Acquiror Common
Stock Received by Newco Savings Plans ........... 17
3.4. Transitional Arrangements .......................... 18
3.5. Insurance .......................................... 18
3.6. DOE Contracts ...................................... 19
3.7. Reorganization Expenses ............................ 19
3.8. Conduct of Health Care Claims Audit ................ 19
3.9. Guaranty of Acquiror ............................... 21
3.10. Payments Adjustments to Contribution ............... 21
</TABLE>
i
<PAGE> 3
ARTICLE IV
MISCELLANEOUS AND GENERAL
4.1. Modification or Amendment .......................... 22
4.2. Waiver; Remedies ................................... 22
4.3. Counterparts ....................................... 22
4.4. Governing Law ...................................... 22
4.5. Notices ............................................ 22
4.6. Entire Agreement ................................... 23
4.7. Certain Obligations ................................ 23
4.8. Assignment ......................................... 23
4.9. Captions ............................................ 24
4.10. Severability ....................................... 24
4.11. No Third Party Beneficiaries ....................... 24
4.12. Consent to Jurisdiction ............................ 24
ii
<PAGE> 4
1
POST-CLOSING COVENANTS AGREEMENT dated as of December 6, 1996 (this
"Agreement"), among ROCKWELL INTERNATIONAL CORPORATION, a Delaware corporation
(the "Company"), THE BOEING COMPANY, a Delaware corporation ("Acquiror"),
BOEING NA, INC., a Delaware corporation and a wholly-owned subsidiary of
Acquiror ("Sub"), and NEW ROCKWELL INTERNATIONAL CORPORATION, a Delaware
corporation ("Newco").
W I T N E S S E T H :
WHEREAS, the Company, Acquiror and Sub have entered into an Agreement
and Plan of Merger dated as of July 31, 1996 (the "Merger Agreement"),
providing for the Merger (as defined in the Merger Agreement) of Sub with and
into the Company;
WHEREAS, the Board of Directors of the Company has approved an
agreement and plan of distribution in the form attached as Annex A to the
Merger Agreement (the "Distribution Agreement"), which will be entered into
prior to the Effective Time (as defined in the Merger Agreement), pursuant to
which (a) all the assets of the Company, other than the Retained Assets (as
defined in the Distribution Agreement), will be contributed to Newco and/or to
one or more of the Operating Subsidiaries (as defined in the Distribution
Agreement) and all of the liabilities of the Company, other than the Retained
Liabilities (as defined in the Distribution Agreement), will be assumed by
Newco and/or by one or more of the Operating Subsidiaries, all as provided in
the Distribution Agreement (the "Contribution"), and (b) all of the issued and
outstanding shares of Common Stock, par value $1.00 per share, of Newco ("Newco
Common Stock") and Class A Common Stock, par value $1.00 per share, of Newco
("Newco Class A Common Stock"), in each case with the associated Rights, will
be distributed on a pro rata basis to the Company's stockholders as provided in
the Distribution Agreement (the "Distribution");
WHEREAS, the execution and delivery of this Agreement by the parties
hereto is a condition to the obligations of the parties to the Merger Agreement
to consummate the Merger;
WHEREAS, the execution and delivery of this Agreement by the parties
hereto is a condition to the
<PAGE> 5
2
obligations of the parties to the Distribution Agreement to
consummate the Distribution; and
WHEREAS, the parties to this Agreement have determined that it is
necessary and desirable to set forth certain agreements that will govern
certain matters that may arise following the Contribution, the Distribution and
the Merger.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements set forth herein, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. Capitalized terms used in this Agreement and not
otherwise defined herein shall have the meanings assigned to such terms in the
Merger Agreement or the Distribution Agreement, as the case may be. As used in
this Agreement, the following terms shall have the following respective
meanings:
"Acquiror Indemnitees" shall mean Acquiror, each Affiliate of
Acquiror, including any of its direct or indirect Subsidiaries (including,
after the Effective Time, the Retained Companies), and each of their respective
Representatives and each of the heirs, executors, successors and assigns of any
of the foregoing.
"Environmental Law" shall have the meaning ascribed thereto in the
Distribution Agreement.
"Environmental Proceeding" means any judicial, administrative or
regulatory proceeding (including, without limitation, any investigation or
inquiry) by or before any Governmental Entity that has been instituted or
commenced against an Acquiror Indemnitee by a party other than an Acquiror
Indemnitee based on a violation of, or to enforce compliance with, any
Environmental Law.
"Filings" shall mean the Registration Statements, the Proxy
Statement-Prospectus, the Form 8-A and any other document filed or required to
be filed with the SEC in connection with the transactions contemplated by the
<PAGE> 6
3
Reorganization Agreements, or any preliminary or final form thereof or any
amendment or supplement thereto.
"Indemnifiable Losses" shall mean, subject to Section 2.4, all
losses, liabilities, damages, deficiencies, obligations, fines, expenses,
claims, demands, actions, suits, proceedings, judgments or settlements, whether
or not resulting from Third Party Claims (as defined in Section 2.3(a)),
including interest and penalties recovered by a third party with respect
thereto and out-of-pocket expenses and reasonable attorneys' and accountants'
fees and expenses incurred in the investigation or defense of any of the same
or in asserting, preserving or enforcing any of the Indemnitee's rights
hereunder, suffered by an Indemnitee.
"Indemnitee" shall mean any of the Acquiror Indemnitees or the Newco
Indemnitees who or which may seek indemnification under this Agreement.
"Newco Indemnitees" shall mean Newco, each Affiliate of Newco,
including any of its direct or indirect Subsidiaries, and each of their
respective Representatives and each of the heirs, executors, successors and
assigns of any of the foregoing.
ARTICLE II
INDEMNIFICATION
2.1. Indemnification by Newco. (a) Except as otherwise specifically
provided in any Reorganization Agreement and subject to the provisions of this
Article II, Newco shall indemnify, defend and hold harmless the Acquiror
Indemnitees from and against, and pay or reimburse the Acquiror Indemnitees
for, all Indemnifiable Losses, as incurred:
(i) relating to or arising from the Contributed Assets or the
Assumed Liabilities, including without limitation the Special Liabilities
(including the failure by Newco or any member of the Newco Group to pay,
perform or otherwise discharge such Assumed Liabilities in accordance with
their terms), whether such Indemnifiable Losses relate to or arise from
events, occurrences, actions, omissions, facts or circumstances occurring,
existing or asserted before, at or after the Effective Time;
<PAGE> 7
4
(ii) arising from or based upon any untrue statement or alleged
untrue statement of a material fact contained in any of the Filings or in
the Consent Statement, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading; but only in each case with respect to
information provided by the Company relating to the Newco Group or the
Company contained in or omitted from the Filings or the Consent Statement;
(iii) relating to or arising from the breach by any member of
the Newco Group of any agreement or covenant contained in a Reorganization
Agreement which does not by its express terms expire at the Effective Time
or which is not by its express terms required to be performed prior to the
Effective Time;
(iv) relating to or arising from any breach of or inaccuracy in
any representation or warranty of the Company contained in the Merger
Agreement;
(v) relating to or arising from any Preexisting Environmental
Condition relating to the Aerospace Business, the Defense Business or the
Additional Retained Facilities;
(vi) relating to or arising from any actual or alleged criminal
violation of any law, rule or regulation of any Governmental Entity by the
Company or any of its Subsidiaries or any director, officer, employee or
agent of the Company or any of its Subsidiaries ("Criminal Matters")
occurring or alleged to have occurred prior to the Time of Contribution;
(vii) relating to or arising from any breach of any covenant or
agreement of the Company contained in the Merger Agreement assumed by
Newco pursuant to the Distribution Agreement;
(viii) relating to or arising from any claim that the execution,
delivery or performance by the Company of each Reorganization Agreement to
which it is or will be a party or the consummation of the transactions
contemplated thereby results in a violation or breach of, or constitutes a
default or impermissible transfer under, or gives rise to any
<PAGE> 8
5
right of termination, first refusal or consent under or gives rise to any
right of amendment, cancellation or acceleration of any material benefit
under, any Designated Contract listed on Schedule 2.1(a)(viii);
(ix) relating to or arising from fines and penalties and
reasonable attorneys' and accountants' fees and expenses in connection
with any of the alleged safety violations or alleged improper storage
and/or disposal of hazardous waste claims referred to in item 5(a) of
Section 4.1(n) of the Company Disclosure Schedule pertaining to the
explosion at Santa Susana, California in 1994; or
(x) incurred in connection with the enforcement by the Acquiror
Indemnitees of their rights to be indemnified, defended and held harmless
under this Agreement.
(b) RAN Contract. The Retained Assets include a Contract (Contract
R1000) (the "RAN Contract") between Rockwell Australia Limited and the
Australian Submarine Corporation. Newco shall indemnify, defend and hold
harmless the Acquiror Indemnitees for 80% of any decrease in the profit before
tax realized by Rockwell Australia Limited on the RAN Contract below 40.0
million Australian dollars (A$40,000,000) as well as 80% of any loss in respect
of the RAN Contract. Likewise, the Company shall pay to Newco 80% of any
increase in the profit before tax realized by Rockwell Australia Limited on the
RAN Contract above 40.0 million Australian dollars (A$40,000,000). The
determination of profit before tax or loss for purposes of this Section 2.1(b)
shall be based upon the next quarterly Estimate at Completion ("EAC") for the
RAN Contract prepared after expiration of three (3) years from the Effective
Time. The determination of Rockwell Australia Limited's profit before tax or
loss shall be determined by the Company using the same accounting methods,
policies, practices, procedures, classifications, judgments, estimation
methodologies and accounting standards as were utilized in the preparation of
the Retained Business Audited Financial Statements. All payments made pursuant
to this Section 2.1(b) shall be computed on a tax-effected basis to take into
account the benefit of any reduction, or detriment of any increase, in Taxes
payable by Rockwell Australia Limited attributable to the decrease in the
profit before tax (including any loss) or increase in the profit before tax
realized by Rockwell Australia Limited below or above
<PAGE> 9
6
A$40,000,000. All determinations of the amount (and timing) of any such benefit
or detriment shall be determined using principles analogous to those contained
in Section 6.6 of the Tax Allocation Agreement, and all payments made pursuant
to this Section 2.1(b) shall be governed by Section 2.3 of this Agreement and
by Section 6.6(a) of the Tax Allocation Agreement. The obligations of Newco and
the Company to pay the amounts set forth in this Section 2.1(b) shall be
determined without regard to the acts or omissions of the Company or any
Subsidiary with respect to performance of the RAN Contract prior to, at or
after the Effective Time. The Company will provide Newco with copies of all
quarterly EAC's in respect of the RAN Contract and access to such books and
records (including but not limited to accountants' work papers) and personnel
familiar with the RAN Contract and the accounting therefor as Newco shall
reasonably request. To the extent Newco disputes the EAC, the designees of the
chief financial officers of Acquiror and Newco shall attempt a good faith
resolution of such dispute. To the extent not so resolved within 90 days
following Newco's receipt of the determination of such profit or loss, such
dispute will be referred for resolution to the chief financial officers of
Acquiror and Newco, and failing their resolution of such dispute within 90 days
after such referral, to the chief executive officers of Acquiror and Newco. To
the extent the dispute is not so resolved within 90 days following such
referral, Acquiror and Newco will submit such dispute to mediation using the
procedures of the Center for Public Resources, before commencing litigation to
resolve such dispute.
2.2. Indemnification by the Company. Except as otherwise specifically
provided in any Reorganization Agreement and subject to the provisions of this
Article II, the Company shall indemnify, defend and hold harmless the Newco
Indemnitees from and against, and pay or reimburse the Newco Indemnitees for,
all Indemnifiable Losses, as incurred:
(i) relating to or arising from the Retained Assets or the
Retained Liabilities (including the failure by the Company or any member
of the Company Group to pay, perform or otherwise discharge such Retained
Liabilities in accordance with their terms), whether such Indemnifiable
Losses relate to or arise from events, occurrences, actions, omissions,
facts or circumstances occurring, existing or asserted before, at or after
the Effective Time;
<PAGE> 10
7
(ii) arising from or based upon any untrue statement or alleged
untrue statement of a material fact contained in any of the Filings or in
the Consent Statement, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading; but only in each case with respect to
information provided by Acquiror relating to Acquiror or any of its
Subsidiaries other than the Company Group contained in or omitted from the
Filings or the Consent Statement;
(iii) relating to or arising from the breach by Acquiror or any
member of the Company Group of any agreement or covenant contained in a
Reorganization Agreement (other than, in the case of the Company Group, an
agreement or covenant contained in the Merger Agreement assumed by Newco
pursuant to the Distribution Agreement) which does not by its express
terms expire at the Effective Time or which is not by its express terms
required to be performed prior to the Effective Time; or
(iv) incurred in connection with the enforcement by the Newco
Indemnitees of their rights to be indemnified, defended and held harmless
under this Agreement.
2.3. Procedures Relating to Indemnification. (a) In order for an
Indemnitee to be entitled to any indemnification provided for under this
Agreement in respect of, arising out of or involving a claim made by any Person
who is not an Indemnitee against the Indemnitee (a "Third Party Claim"), such
Indemnitee must notify the party who may become obligated to provide
indemnification hereunder (the "indemnifying party") in writing, and in
reasonable detail, of the Third Party Claim reasonably promptly, and in any
event within 20 business days after receipt by such Indemnitee of written
notice of the Third Party Claim; provided, however, that failure to give such
notification shall not affect the indemnification provided hereunder except to
the extent the indemnifying party shall have been actually prejudiced as a
result of such failure (except that the indemnifying party shall not be liable
for any expenses incurred during the period in which the Indemnitee failed to
give such notice); and provided further, however, that with respect to any
matter for which Newco is the indemnifying
<PAGE> 11
8
party, Newco shall be deemed to have received notice with respect to all
matters by or against any member of the Company Group that were concluded or
initiated prior to, or otherwise pending at, the Time of Contribution. After
any required notification (if applicable), the Indemnitee shall deliver to the
indemnifying party, promptly after the Indemnitee's receipt thereof, copies of
all notices and documents (including court papers) received by the Indemnitee
relating to the Third Party Claim.
(b) If a Third Party Claim is made against an Indemnitee, the
indemnifying party will be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof (at the expense of the
indemnifying party) with counsel selected by the indemnifying party and
reasonably satisfactory to the Indemnitee; provided, however, that in case of a
claim made by any person against an Indemnitee relating to a Special Liability
(a "Special Liability Claim"), Newco (at Newco's expense) shall assume the
defense thereof with counsel selected by Newco. Should the indemnifying party
so elect (or, in the case of a Special Liability Claim, be obligated) to assume
the defense of a Third Party Claim, the indemnifying party will not be liable
to the Indemnitee for any legal expenses subsequently incurred (or, in the case
of a Special Liability Claim, incurred) by the Indemnitee in connection with
the defense thereof (unless, in case of a Special Liability Claim, Newco
breaches its obligation to assume the defense thereof). If the indemnifying
party assumes (or, in the case of a Special Liability Claim, is obligated to
assume) such defense, the Indemnitee shall have the right to participate in the
defense thereof and to employ counsel, at its own expense, separate from the
counsel employed by the indemnifying party, it being understood that the
indemnifying party shall control such defense. The indemnifying party shall be
liable for the fees and expenses of counsel employed by the Indemnitee for any
period during which the indemnifying party has not assumed (or, in the case of
a Special Liability Claim, is in breach of its obligation to assume) the
defense thereof (other than during any period in which the Indemnitee shall
have failed to give notice of the Third Party Claim as provided above). If the
indemnifying party chooses (or, in the case of a Special Liability Claim, is
obligated) to defend or prosecute a Third Party Claim, all the parties hereto
shall cooperate in the defense or prosecution thereof, which cooperation shall
include the retention in accordance with the Distribution Agreement and
(upon the
<PAGE> 12
9
indemnifying party's request) the provision to the indemnifying party of
records and information which are reasonably relevant to such Third Party
Claim, and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder. If
the indemnifying party chooses (or, in the case of a Special Liability Claim,
is obligated) to defend or prosecute any Third Party Claim, the Indemnitee will
agree to any settlement, compromise or discharge of such Third Party Claim
which the indemnifying party may recommend and which by its terms obligates the
indemnifying party to pay the full amount of liability in connection with such
Third Party Claim; provided, however, that, without the Indemnitee's consent,
the indemnifying party shall not consent to entry of any judgment or enter into
any settlement (w) that provides for injunctive or other nonmonetary relief
affecting the Indemnitee, (x) that does not include as an unconditional term
thereof the giving by each claimant or plaintiff to such Indemnitee of a
release from all liability with respect to such claim, (y) in the case of a
Criminal Matter or (z) that involves an allegation of conduct which could
result in the suspension or debarment of the Indemnitee from contracting with
the United States Government. Whether or not the indemnifying party shall have
assumed the defense of a Third Party Claim, the Indemnitee shall not admit any
liability with respect to, or settle, compromise or discharge, such Third Party
Claim without the indemnifying party's prior written consent (which consent
shall not be unreasonably withheld). Notwithstanding the foregoing, Newco shall
be solely responsible for, and shall pay directly, the fees and expenses of its
counsel in connection with any Special Liability Claim and shall reimburse the
Company on a monthly basis for any support or other services provided at
Newco's request in respect of any Special Liability Claim in an amount equal to
the Company's costs thereof determined in accordance with the cost accounting
standards applicable to Government Contracts.
(c) In order for an Indemnitee to be entitled to any indemnification
provided for under this Agreement in respect of a claim that does not involve a
Third Party Claim, the Indemnitee shall deliver notice of such claim with
reasonable promptness to the indemnifying party. The failure by any Indemnitee
so to notify the indemnifying party shall not relieve the indemnifying party
from any liability which it may have to such Indemnitee under this Agreement,
except to the extent that the indemnifying party
<PAGE> 13
10
shall have been actually prejudiced by such failure. Any notice pursuant to
this Section 2.3(c) shall contain a statement, in prominent and conspicuous
type, that if the indemnifying party does not dispute its liability to the
Indemnitee with respect to the claim made in such notice by notice to the
Indemnitee prior to the expiration of a 30-calendar-day period following the
indemnifying party's receipt of the second notice of such claim, the claim
shall be conclusively deemed a liability of the indemnifying party. If the
Indemnitee has provided the indemnifying party two such notices not less than
30 days apart and the indemnifying party does not notify the Indemnitee prior
to the expiration of a 30-calendar-day period following its receipt of the
second such notice that the indemnifying party disputes its liability to the
Indemnitee under this Agreement, such claim specified by the Indemnitee in such
notice shall be conclusively deemed a liability of the indemnifying party under
this Agreement and the indemnifying party shall pay the amount of such
liability to the Indemnitee on demand or, in the case of any notice in which
the amount of the claim (or any portion thereof) is estimated, on such later
date when the amount of such claim (or such portion thereof) becomes finally
determined. If the indemnifying party has timely disputed its liability with
respect to such claim, as provided above, the indemnifying party and the
Indemnitee shall proceed in good faith to negotiate a resolution of such
dispute and, if not resolved through negotiations, such dispute shall be
resolved by litigation in an appropriate court of competent jurisdiction.
(d) Unless the Company or the appropriate Retained Subsidiary shall
have made a good faith determination that a particular Indemnifiable Loss
relating to or arising from a Preexisting Environmental Condition is not
eligible for treatment as an allowable overhead cost or other allowable cost
(in which case, the Company or the appropriate Retained Subsidiary may request
Newco to indemnify, defend and hold it harmless without complying with the
following additional procedures), Newco shall have no obligation to indemnify,
defend or hold harmless any Acquiror Indemnitee hereunder in respect of an
Indemnifiable Loss arising from or relating to a Preexisting Environmental
Condition unless (i) the Company or the appropriate Retained Subsidiary has
submitted a claim for such Indemnifiable Loss as an allowable overhead cost or
other allowable cost in connection with relevant Government Contracts and used
its reasonable best efforts to obtain a favorable determination
<PAGE> 14
11
of such claim, (ii) such claim has been disallowed based on an act or omission
by the Company or any of its Subsidiaries prior to the Effective Time,
(iii) the Company or the appropriate Retained Subsidiary has given Newco timely
notice of such disallowance and (iv) Newco has been permitted, at its own
expense, to direct and control the appeal of such disallowance until finally
determined pursuant to one or more final and nonappealable orders, decrees or
judgments or by one or more settlement agreements approved by Newco and the
Company, such approval not to be unreasonably withheld by the Company.
Notwithstanding anything in this Agreement to the contrary,
Indemnifiable Losses relating to or arising from Preexisting Environmental
Conditions shall be limited to costs and expenses of containing, removing,
responding to, remediating, cleaning-up and abating Preexisting Environmental
Conditions, natural resource damage claims, penalties and fines, and any
administrative oversight costs incurred by any Governmental Entity actually
paid by an Acquiror Indemnitee following the Time of Contribution relating to
or arising from the presence, use, treatment, Release or threatened Release of
any Hazardous Substance on or originating from a facility of the Retained
Business prior to the Time of Contribution, provided that any such containment,
removal, response, remediation, clean-up or abatement shall be (i) required by
an enforcement order or decree entered by a Governmental Entity as a result of
an Environmental Proceeding; (ii) necessary to comply with an Environmental Law
in response to an Environmental Proceeding or threatened Environmental
Proceeding; or (iii) in response to a condition which in the Company's
reasonable judgment is likely to result in an Environmental Proceeding if no
responsive action is taken. The costs and expenses for which Newco shall be
obligated to indemnify, defend and hold harmless the Acquiror Indemnitees shall
be limited to those costs and expenses which are necessary to achieve
compliance with the minimum requirements of Environmental Law based upon a
reasonable low cost approach under the circumstances. Without prejudice to the
rights and obligations of the parties under Section 2.3(a), (b) or (c), the
Company shall provide Newco with all information reasonably requested by Newco
to allow Newco to evaluate all proposed responsive actions in connection with
any Preexisting Environmental Condition. Newco shall have no obligation to
indemnify, defend or hold harmless an Acquiror Indemnitee in respect of any
Preexisting Environmental Condition for (i) any cost or expense incurred in
connection with the normal, day-to-day
<PAGE> 15
12
operation, including maintenance, of the facilities of the Retained Business
(except for groundwater monitoring costs or other maintenance expenses related
to any investigation or remediation), and including any discharges pursuant to,
and any closure or post-closure obligations under any permit or authorization
granted by a Governmental Entity unless such post-closure obligation is related
to or gives rise to an obligation to investigate, monitor or remediate under
Environmental Law, or (ii) any cost or expense relating to or arising from any
change in use of a facility of the Retained Business or acts or omissions of
any Acquiror Indemnitee or other person who is not a member of the Newco Group
after the Time of Contribution which increase the scope of any required
containment, removal, response, remediation, clean-up or abatement or otherwise
increase the liability of Newco hereunder.
(e) Unless the Company or the appropriate Retained Subsidiary shall
have made a good faith determination that a particular Indemnifiable Loss
relating to or arising from a Criminal Matter is not eligible for treatment as
an allowable overhead cost or other allowable cost (in which case, the Company
or the appropriate Retained Subsidiary may request Newco to indemnify, defend
and hold it harmless without complying with the following additional
procedures), Newco shall have no obligation to indemnify, defend or hold
harmless any Acquiror Indemnitee hereunder in respect of an Indemnifiable Loss
arising from or relating to a Criminal Matter unless (i) the Company or the
appropriate Retained Subsidiary has submitted a claim for such Indemnifiable
Loss as an allowable overhead cost or other allowable cost in connection with
relevant Government Contracts and used its reasonable best efforts to obtain a
favorable determination of such claim, (ii) such claim has been disallowed
based on an act or omission by the Company or its Subsidiaries prior to the
Effective Time, (iii) the Company or the appropriate Retained Subsidiary has
given Newco prompt notice of such disallowance and (iv) Newco has been
permitted, at its own expense, to direct and control the appeal of such
disallowance until finally determined pursuant to one or more final and
nonappealable orders, decrees or judgments or by one or more settlement
agreements approved by Newco and the Company, such approval not to be
unreasonably withheld by the Company. Newco's obligation to indemnify Acquiror
Indemnitees for Criminal Matters pursuant to Section 2.1(a)(vi) shall be
limited to amounts paid for fines or penalties and reasonable attorneys' and
accountants' fees and expenses that are not allowable or
<PAGE> 16
13
that are not allowed as an overhead cost or other allowable cost in connection
with a Government Contract. Any Criminal Matter for which indemnification may
be sought pursuant to Section 2.1(a)(vi) shall be a Third Party Claim for
purposes of this Agreement.
2.4. Certain Limitations. (a) The amount of any Indemnifiable Losses
or other liability for which indemnification is provided under this Agreement
shall be net of any amounts actually recovered by the Indemnitee from third
parties (including, without limitation, amounts actually recovered under
insurance policies) with respect to such Indemnifiable Losses or other
liability. Any indemnifying party hereunder shall be subrogated to the rights
of the Indemnitee upon payment in full of the amount of the relevant
Indemnifiable Loss. An insurer who would otherwise be obligated to pay any
claim shall not be relieved of the responsibility with respect thereto or,
solely by virtue of the indemnification provisions hereof, have any subrogation
rights with respect thereto. If any Indemnitee recovers an amount from a third
party in respect of an Indemnifiable Loss for which indemnification is provided
in this Agreement after the full amount of such Indemnifiable Loss has been
paid by an indemnifying party or after an indemnifying party has made a partial
payment of such Indemnifiable Loss and the amount received from the third party
exceeds the remaining unpaid balance of such Indemnifiable Loss, then the
Indemnitee shall promptly remit to the indemnifying party the excess (if any)
of (A) the sum of the amount theretofore paid by the indemnifying party in
respect of such Indemnifiable Loss plus the amount received from the third
party in respect thereof, less (B) the full amount of such Indemnifiable Loss
or other liability.
(b) The amount of any Indemnifiable Losses or other Liability for
which indemnification is provided under this Agreement or any other amounts
payable or reimbursable by one party to another under this Agreement shall be
increased or decreased to take account of any net Tax (as defined in the Tax
Allocation Agreement) cost or any net Tax benefit in a manner analogous to that
described in Section 6.6 of the Tax Allocation Agreement.
2.5. Limitation on Newco's Indemnification Obligation under
Section 2.1(a)(iv). (a) Newco shall not have any liability under Section
2.1(a)(iv) unless the aggregate of all Indemnifiable Losses for which Newco
would, but for this Section 2.5, be liable under Section 2.1(a)(iv)
<PAGE> 17
14
exceeds on a cumulative pre-tax basis an amount equal to $20,000,000 (the
"Basket Amount"); provided, however, that (i) if Indemnifiable Losses for which
Newco would, but for this Section 2.5, be liable under Section 2.1(a)(iv) as a
result of the breach of or the inaccuracy in any representation or warranty
which arises from a particular state of facts or event exceed $5,000,000 on a
pre-tax basis, Newco shall be liable under Section 2.1(a)(iv) for the entire
amount of such Indemnifiable Losses, and such Indemnifiable Losses shall not be
taken into account in calculating whether Newco's cumulative liability under
Section 2.1(a)(iv) had exceeded the Basket Amount or the Threshold Amount (as
defined below), and (ii) if the aggregate of all Indemnifiable Losses for which
Newco would, but for this Section 2.5, be liable under Section 2.1(a)(iv)
exceeds on a cumulative pre-tax basis the Basket Amount, Newco's liability
under Section 2.1(a)(iv) shall be equal to $10,000,000 (the "Threshold Amount")
plus any Indemnifiable Losses under Section 2.1(a)(iv) in excess of
$20,000,000.
(b) Newco shall not have any liability under Section 2.1(a)(iv) with
respect to the breach of or inaccuracy in any representation or warranty which
arises from a particular state of facts or event if the Indemnifiable Losses
resulting therefrom are less than $250,000 on a pre-tax basis, and such
Indemnifiable Losses shall not be taken into account in calculating whether
Newco's cumulative liability under Section 2.1(a)(iv) had exceeded the Basket
Amount or the Threshold Amount.
(c) No Indemnifiable Losses actually paid by Newco pursuant to any
provision other than Section 2.1(a)(iv) and no Indemnifiable Losses relating
to or arising from a Preexisting Environmental Condition or a Criminal Matter
for which Newco is not yet obligated to provide indemnity pursuant to
Section 2.1(a)(v) or Section 2.1(a)(vi) shall be deemed to be an Indemnifiable
Loss relating to or arising from a breach of or inaccuracy in a representation
or warranty of the Company contained in the Merger Agreement for purposes of
determining whether the aggregate amount of Indemnifiable Losses relating to or
arising from breaches of or inaccuracies in such representations or warranties
exceeds the Basket Amount or the Threshold Amount. Newco shall not have any
liability under Section 2.1(a)(iv) with respect to the breach of or inaccuracy
in any representation or warranty unless notice of any such breach or inaccuracy
is given pursuant to Section 2.3 prior to the expiration of the survival period
<PAGE> 18
15
provided in the Merger Agreement for the relevant representation or warranty.
2.6 Exclusivity of Tax Allocation Agreement. Notwithstanding anything
in this Agreement to the contrary, the Tax Allocation Agreement shall be the
exclusive agreement among the parties with respect to all Tax matters,
including indemnification in respect of Tax matters.
ARTICLE III
OTHER AGREEMENTS
3.1. Transfer Taxes. Newco and Acquiror shall comply with
Section 2.2(h) of the Merger Agreement.
3.2. Conduct of Environmental Insurance Coverage Claims. (a) Pursuant
to the Distribution Agreement, the Company will retain as part of the Retained
Assets the Environmental Coverage Claims (as defined below) to the extent that
they have not been resolved prior to the time of Contribution. As used herein,
"Environmental Coverage Claims" shall mean all existing and future claims, as
the same may be amended from time to time, by the Company against any and all
insurance companies that have provided (or that the Company or Newco alleges
have provided) to the Company, its predecessors or its or their affiliates,
insurance coverage in respect of environmental matters as the same may relate
to the businesses of the Company, its predecessors or its or their affiliates
as now or previously owned or operated (including without limitation any
discontinued or divested operations, including Divested Businesses) at any time
prior to the Effective Time, including without limitation the claims asserted
in the action against Aetna Casualty et al. filed in the Superior Court of
California for Los Angeles County and any other claims that may be asserted by
or on behalf of the Company against any provider or alleged provider of
insurance coverage for such environmental matters for any period prior to the
Effective Time. The Company agrees to use diligent efforts to prosecute the
Environmental Coverage Claims in accordance with this Section 3.2 until the
same are finally determined pursuant to one or more final and nonappealable
orders, decrees or judgments by a court of competent jurisdiction or by one or
more settlement agreements approved by Newco in its sole discretion. The
Company agrees (i) that Newco and such legal counsel as Newco may
<PAGE> 19
16
from time to time designate shall have the exclusive right to control and to
direct the prosecution of all Environmental Coverage Claims (it being
understood and agreed that in connection with the prosecution or settlement of
any Environmental Coverage Claims, Newco may in its sole discretion agree on
behalf of the Company to surrender, cancel or otherwise limit any related
insurance policies or coverages thereunder in whole or in part or as to any
particular business, property, period or event), (ii) to make available such
personnel, records and other resources in its possession or reasonably
accessible to it as shall be reasonably required by Newco or its counsel to
support the prosecution of the Environmental Coverage Claims, and (iii) except
as may otherwise be required by law or judicial process, not to make any
admission in respect of the Environmental Coverage Claims or take any action in
respect thereof without the prior written consent of Newco. The Company shall
pay to Newco any and all amounts received by it in respect of the Environmental
Coverage Claims as and when the same are received, provided that the Company
shall be entitled to retain that portion of the amount, if any, received in
respect of the Environmental Coverage Claims as the Company shall be required
to pay and/or credit to the United States Government in accordance with the
agreement to be entered into between the Company and the appropriate United
States Government contracting officer referred to in Section 3.2(b).
(b) If, at the Time of Contribution, the Company has reached an
agreement with the appropriate government contracting officer on the amount
required to be paid to the United States Government in respect of the
Environmental Coverage Claims but such amount has not been paid and/or credited
in full by the Company, then Newco shall remit the unpaid balance to the
Company on or before the date that payment is required to be made and/or
credited by the Company to the United States Government. The Company agrees
that if, at the Time of Contribution, the Company has not entered into such an
agreement with the appropriate government contracting officer, Newco and such
legal counsel as Newco may from time to time designate shall have the exclusive
right to control and to direct the negotiation of such agreement. The Company
shall enter into any such agreement with the appropriate United States
Government contracting officer which Newco may recommend, provided that Newco
pays to the Company on or before the date that payment is required to be made
and/or credited by the Company to the United States Government an amount equal
to the excess, if
<PAGE> 20
17
any, of the amount that the Company is required to pay and/or credit to the
United States Government over the amount received by the Company after the
Effective Time in respect of the Environmental Coverage Claims that has not
previously been remitted to Newco.
(c) Newco shall be solely responsible for and shall pay directly the
fees and expenses (including legal fees and expenses) of pursuing the
Environmental Coverage Claims and shall reimburse the Company periodically for
any support or other services provided at Newco's request in respect of the
Environmental Coverage Claims in an amount equal to the Company's costs thereof
determined in accordance with cost accounting standards applicable to
Government Contracts.
(d) Taxes on amounts received and Tax benefits and Tax costs in
respect of amounts paid and/or credited with respect to the Environmental
Coverage Claims and the related agreement with the United States Government
shall be allocated between the Company and Newco in the manner set forth in
Section 5.5 of the Tax Allocation Agreement.
3.3. Agreements with Respect to Acquiror Common Stock Received by
Newco Savings Plans. (a) Acquiror and the Newco Savings Plan and any other
savings plan sponsored or maintained by Newco or any of its Affiliates (the
"Savings Plans") shall cooperate with each other in supplying such information
as may be necessary for any of such parties to complete and file any
information reporting forms presently or hereafter required by the SEC or any
commissioner or other authority administering the "blue sky" or securities laws
of any jurisdiction where the shares of Acquiror Common Stock received by the
Savings Plans in the Merger (the "Shares") are proposed to be sold which are
required to be filed as a condition to the availability of an exemption from
registration or qualification of an offer or sale of the Shares under the
Securities Act, or any such "blue sky" or securities laws.
(b) Until the earlier of two years from the Effective Time or the
sale by the Savings Plans of all Shares, Acquiror shall file in a timely manner
all reports contemplated by Rule 144 (c)(1) under the Securities Act as
satisfying the condition that adequate public information with respect to
Acquiror is available.
<PAGE> 21
18
(c) The provisions of this Section 3.3 shall not be applicable if
Newco or the Company has obtained a "No-Action" letter or other written advice
from the staff of the SEC that the Savings Plans may sell the Shares publicly
at any time after the Effective Time without limitation in terms of the volume
of Shares that may be sold, the manner in which the Shares may be sold and the
information that must be publicly available with respect to Acquiror in order
to permit such sale and without any requirement that the Savings Plans file any
notice of sale of Shares or intention to sell Shares with the SEC other than
any filings required pursuant to Section 13(d) of the Exchange Act in respect
of the beneficial ownership by the Savings Plans of Acquiror Common Stock.
Newco agrees to use its reasonable best efforts to obtain such "No-Action"
letter or other written advice.
3.4. Transitional Arrangements. Concurrently herewith Newco, the
Company and Acquiror will enter into an agreement with respect to certain
transitional arrangements (the "Transition Agreement") in conformity with the
Outline of Terms set forth as Schedule 3.4 and such other transitional
arrangements as shall be mutually agreed upon.
3.5. Insurance. (a) Except as otherwise specifically provided in any
Reorganization Agreement or the Transition Agreement, with respect to any loss,
liability or damage with respect to the Retained Assets arising out of events
occurring prior to the Time of Contribution (other than any loss, liability or
damage arising out of or relating to any Environmental Coverage Claims) for
which Newco or any of its Subsidiaries would be entitled to assert a claim for
recovery under any third-party "occurrence basis" policy of insurance
maintained prior to the Time of Contribution ("Occurrence Basis Insurance") in
accordance with the terms thereof, at the request of Acquiror, Newco will use
reasonable efforts in asserting, or to assist Acquiror in asserting, claims
under such Occurrence Basis Insurance with respect to such loss, liability or
damage; provided that (i) all of Newco's costs and expenses incurred in
connection with the foregoing are promptly paid by Acquiror, (ii) Newco and its
Subsidiaries may, at any time, without liability or obligation to Acquiror,
amend, buy-out, extinguish liability under or otherwise modify any Occurrence
Basis Insurance (and such claims shall be subject to any such amendments,
buy-outs, extinguishments and modifications) and (iii) such claims shall be
subject to (and recovery thereon shall be reduced by the amount of) any
<PAGE> 22
19
applicable deductibles, retentions, self-insurance provisions or any payment or
reimbursement obligations of Newco or any of its Subsidiaries or Affiliates in
respect thereof.
(b) Except as otherwise specifically provided in any Reorganization
Agreement or the Transition Agreement, with respect to any loss, liability or
damage with respect to the Contributed Assets arising out of events occurring
prior to the Time of Contribution (other than any loss, liability or damage
arising out of or relating to any Environmental Coverage Claims) for which the
Company or any of the Retained Subsidiaries would be entitled to assert a claim
for recovery under any Occurrence Basis Insurance in accordance with the terms
thereof, at the request of Newco, Acquiror will use reasonable efforts in
asserting, or to assist Newco in asserting, claims under such Occurrence Basis
Insurance with respect to such loss, liability or damage; provided that (i) all
of Acquiror's costs and expenses incurred in connection with the foregoing are
promptly paid by Newco, (ii) Acquiror and its Subsidiaries may, at any time,
without liability or obligation to Newco, amend, buy-out, extinguish liability
under or otherwise modify any Occurrence Basis Insurance (and such claims shall
be subject to any such amendments, buy-outs, extinguishments and modifications)
and (iii) such claims shall be subject to (and recovery thereon shall be
reduced by the amount of) any applicable deductibles, retentions,
self-insurance provisions or any payment or reimbursement obligations of
Acquiror or any of its Subsidiaries or Affiliates in respect thereof.
3.6. DOE Contracts. As soon as practicable following the Effective
Time, Newco and the Company shall take such actions as shall be consistent with
the advance agreements referred to in Section 9.1(e) of the Distribution
Agreement.
3.7. Reorganization Expenses. Except as otherwise expressly provided
in the Reorganization Agreements (including but not limited to the last
sentence of Section 2.2(b) of the Merger Agreement and Sections 2.2(h), 4.1(p),
4.2(j) and 5.13 of the Merger Agreement and Section 5.3 of the Distribution
Agreement), Acquiror and Newco (and not the Company) shall be responsible for
and agree to pay all reorganization expenses of the Company directly related
to the Contribution, the Distribution and the Merger in accordance with
Schedule 3.7
<PAGE> 23
20
hereto, provided that the Company may, prior to the Effective Time, pay any
such expenses that are otherwise the responsibility of Newco.
3.8. Conduct of Health Care Claims Audit. (a) Pursuant to the
Distribution Agreement, Newco will receive as part of the Contributed Assets
the Health Care Claims (as defined below). As used herein, "Health Care Claims"
shall mean all existing and future claims arising out of audits of health care
claims paid by the Company for any period prior to the Effective Time made by
the Company (or if after the Effective Time, Newco) against any and all health
care administrators ("Health Care Administrators") that have provided to the
Company, its predecessors or its or their affiliates, health care
administration services in respect of the employees of the Company, its
predecessors or its or their affiliates as now or previously owned or operated
(including without limitation any discontinued or divested operations,
including Divested Businesses) at any time prior to the Effective Time,
including, without limitation, the claims asserted in the pending audits of
Metropolitan Insurance Company for the years 1993-1994 and Value Rx Pharmacy
Program, Inc. for the years 1993-1995 and any other claims that may be asserted
by or on behalf of the Company (or if after the Effective Time, Newco) against
any Health Care Administrator for any period prior to the Effective Time. Newco
agrees to use diligent efforts to prosecute the Health Care Claims in
accordance with this Section 3.8 until the same are finally settled by Newco in
its sole discretion. The Company agrees (i) that Newco shall have the
exclusive right to control and to direct the audit of the Health Care
Administrators and the negotiation of all settlements of the Health Care
Claims, (ii) to make available such personnel, records and other resources in
its possession or reasonably accessible to it as shall be reasonably required
by Newco to support the prosecution of the Health Care Claims and (iii) not to
make any admission or settlement in respect of the Health Care Claims or take
any action in respect thereof without the prior written consent of Newco. Newco
shall pay to the Company as and when the same are received by Newco an
equitable allocation of the net proceeds from settlement of the Health Care
Claims.
(b) Newco shall be solely responsible for and shall pay directly the
fees and expenses (including legal fees and expenses) of pursuing the Health
Care Claims and
<PAGE> 24
21
shall reimburse the Company periodically for any support or other services
provided at Newco's request in respect of the Health Care Claims in an amount
equal to the Company's costs thereof determined in accordance with cost
accounting standards applicable to Government Contracts.
(c) Taxes on amounts received and Tax benefits and Tax costs in
respect of amounts paid and/or credited with respect to the Health Care Claims
and the related agreement with the United States Government shall be allocated
between the Company and Newco in the manner set forth in Section 5.5 of the Tax
Allocation Agreement.
3.9. Guaranty of Acquiror. Acquiror, for itself and its successors in
interest and assigns, hereby unconditionally and irrevocably guarantees to
Newco and its successors in interest and assigns the full and faithful
performance and observation by the Company under the Reorganization Agreements
(other than the Merger Agreement) and the Transition Agreement of all
covenants, conditions and agreements (other than any indemnification
obligations of the Company in respect of Retained Assets or Retained
Liabilities) in the Reorganization Agreements (other than the Merger Agreement)
and the Transition Agreement to be performed and observed by the Company after
the Effective Time without requiring any notice of nonpayment, nonperformance
or nonobservance or proof of notice or demand whereby to charge Acquiror
therefor, all of which Acquiror hereby expressly waives. This is a continuing
guaranty and shall remain in effect notwithstanding any bankruptcy,
reorganization or insolvency of the Company, or any successor in interest or
assignee thereof, or any disaffirmance or abandonment by a trustee thereof.
Acquiror hereby waives notice of acceptance of this Guaranty. Acquiror hereby
agrees to indemnify, defend and hold harmless Newco for all Indemnifiable
Losses, as incurred, relating to or arising from any breach or inaccuracy in
the representations and warranties contained in Sections 4.2(j) and 4.2(d)(iii)
of the Merger Agreement. Effective as of the Effective Time, Acquiror will
execute and deliver guarantees of the Company's performance and obligations
under the Designated Contracts set forth in Schedule 2.1(a)(viii) to the
counterparties on such Contracts.
3.10. Payments Adjustments to Contribution. It is the intention of
the parties to this Agreement that payments and asset transfers made by the
parties to each
<PAGE> 25
22
other after the Effective Time pursuant to the Reorganization Agreements are to
be treated as relating back to the Contribution as an adjustment to the assets
and liabilities contributed thereunder, and the parties shall take positions
consistent with such intention with any Taxing Authority (as defined in the Tax
Allocation Agreement), unless with respect to any payment any party receives an
opinion of counsel to the effect that there is no substantial authority for
such a position.
ARTICLE IV
MISCELLANEOUS AND GENERAL
4.1. Modification or Amendment. The parties hereto may modify or
amend this Agreement only by written agreement executed and delivered by duly
authorized officers of the respective parties.
4.2. Waiver; Remedies. No delay on the part of any party hereto in
exercising any right, power or privilege hereunder will operate as a waiver
thereof, nor will any waiver on the part of any party hereto of any right,
power or privilege hereunder operate as a waiver of any other right, power or
privilege hereunder, nor will any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder. No waiver will
be effective hereunder unless it is in writing. Unless otherwise provided, the
rights and remedies herein provided are cumulative and are not exclusive of any
rights or remedies which the parties may otherwise have at law or in equity.
4.3. Counterparts. For the convenience of the parties, this Agreement
may be executed in any number of separate counterparts, each such counterpart
being deemed to be an original instrument, and all such counterparts shall
together constitute the same agreement.
4.4. Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York applicable to
contracts made and to be performed entirely within such State, without regard
to the conflicts of law principles of such State.
4.5. Notices. Any notice, request, instruction or other communication
to be given hereunder by any party to
<PAGE> 26
23
any other shall be in writing and shall be deemed to have been duly given (i)
on the date of delivery if delivered personally, or by telecopy or
telefacsimile, upon confirmation of receipt, (ii) on the first business day
following the date of dispatch if delivered by Federal Express or other
nationally reputable next-day courier service, or (iii) on the third business
day following the date of mailing if delivered by registered or certified mail,
return receipt requested, postage prepaid. All notices hereunder shall be
delivered as set forth below, or pursuant to such other instructions as may be
designated in writing by the party to receive such notice:
(a) If to Newco:
NEW ROCKWELL INTERNATIONAL CORPORATION
2201 Seal Beach Boulevard
Seal Beach, California 90740-8250
Attention: William J. Calise, Jr., Esq.
Senior Vice President,
General Counsel and Secretary
Telecopy: (310) 797-5687
(b) if to Acquiror, the Company or Sub:
BOEING NA, INC.
c/o The Boeing Company
P.O. Box 3707
M/S 13-08
Seattle, WA 98124-2207
Attention: Theodore J. Collins, Esq.
Vice President & General Counsel
Telecopy: (206) 544-4900
4.6. Entire Agreement. The Reorganization Agreements (including the
Annexes and Schedules thereto), the Transition Agreement and the
Confidentiality Agreement constitute the entire agreement, and supersede all
other prior agreements, understandings, representations and warranties, both
written and oral, among the parties, with respect to the subject matter hereof
and thereof.
4.7. Certain Obligations. Whenever this Agreement requires any of the
Subsidiaries of any party to take any action, this Agreement will be deemed to
include an undertaking on the part of such party to cause such Subsidiary to
take such action.
<PAGE> 27
24
4.8. Assignment. No party to this Agreement shall convey, assign or
otherwise transfer any of its rights or obligations under this Agreement
without the express written consent of the other parties hereto in their sole
and absolute discretion, except that any party hereto may assign any of its
rights hereunder to a successor to all or any part of its business. Except as
aforesaid, any such conveyance, assignment or transfer without the express
written consent of the other parties shall be void ab initio. No assignment of
this Agreement shall relieve the assigning party of its obligations hereunder.
4.9. Captions. The Article, Section and paragraph captions herein are
for convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
4.10. Severability. If any provision of this Agreement or the
application thereof to any person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby, so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon any such determination, the parties shall negotiate
in good faith in an effort to agree upon a suitable and equitable substitute
provision to effect the original intent of the parties.
4.11. No Third Party Beneficiaries. Nothing contained in this
Agreement is intended to confer upon any person or entity other than the
parties hereto and their respective successors and permitted assigns, any
benefit, right or remedies under or by reason of this Agreement, except that
the provisions of Article II hereof shall inure to the benefit of Indemnitees
and the provisions of Section 3.3 shall inure to the benefit of the Savings
Plans.
4.12. Consent to Jurisdiction. Each of the Company, Acquiror and
Newco irrevocably submits to the exclusive jurisdiction of (i) the Superior
Court of the State of California, San Francisco County and (ii) the United
States District Court for the Northern District of California for the purposes
of any suit, action or other proceeding
<PAGE> 28
25
arising out of this Agreement or any transaction contemplated hereby (and
agrees not to commence any action, suit or proceeding relating hereto except in
such courts). Each of the Company, Acquiror and Newco further agrees that
service of any process, summons, notice or document hand delivered or sent by
registered mail to such party's respective address set forth in Section 4.5
will be effective service of process for any action, suit or proceeding in
California with respect to any matters to which it has submitted to
jurisdiction as set forth in the immediately preceding sentence. Each of the
Company, Acquiror and Newco irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding arising out
of this Agreement or the transactions contemplated hereby in (i) the Superior
Court of the State of California, San Francisco County or (ii) the United
States District Court for the Northern District of California, and hereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.
<PAGE> 29
26
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto on the date
first hereinabove written.
ROCKWELL INTERNATIONAL CORPORATION
By: /s/ WILLIAM J. CALISE, JR.
--------------------------------
Name: William J. Calise, Jr.
Title: Senior Vice President
THE BOEING COMPANY
By: /s/ PHILIP M. CONDIT
--------------------------------
Name: Philip M. Condit
Title: President and Chief
Executive Officer
NEW ROCKWELL INTERNATIONAL CORPORATION
By: /s/ WILLIAM J. CALISE, JR.
--------------------------------
Name: William J. Calise, Jr.
Title: Senior Vice President
BOEING NA, INC.
By: /s/ BOYD E. GIVAN
-------------------------------
Name: Boyd E. Givan
Title: Director
<PAGE> 1
Exhibit 10(d)
CONFORMED COPY
- - -------------------------------------------------------------------------------
TAX ALLOCATION AGREEMENT
dated as of December 6, 1996,
by and among
ROCKWELL INTERNATIONAL CORPORATION,
NEW ROCKWELL INTERNATIONAL CORPORATION
and
THE BOEING COMPANY
- - -------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
DEFINITIONS..................................................... 2
1.1. Definitions.......................................... 2
ARTICLE II
FILING OF TAX RETURNS........................................... 9
2.1. Preparation of Tax Returns........................... 9
2.2. Pre-Merger Tax Returns............................... 10
2.3. Post-Merger Tax Returns.............................. 10
ARTICLE III
PAYMENT OF TAXES................................................ 11
3.1. Allocation of Tax Liabilities........................ 11
3.2. Tax Refunds, Carrybacks and California Tax
Credits.............................................. 12
ARTICLE IV
ALLOCATION AND CALCULATION OF TAXES............................. 13
4.1. Straddle Period Taxes................................ 13
4.2. Share of Allowable Taxes............................. 14
4.3. Calculations and Determinations...................... 14
4.4. Principles of Determination.......................... 15
4.5. Change in Law........................................ 15
ARTICLE V
NEWCO OPTIONS; COMPENSATION PAYMENTS; CERTAIN CONTRACTS;
GUNSHIP CLAIMS; ENVIRONMENTAL COVERAGE CLAIMS; HEALTH CARE
CLAIMS; B-1B CONTRACTS; FOREIGN SUBSIDIARIES;
CONSENT SOLICITATION............................................ 16
5.1. Tax Deductions Arising in Respect of Newco
Options.............................................. 16
5.2. Compensation Payments................................ 18
5.3. Percentage Completion Contracts...................... 19
5.4. Gunship Claims....................................... 20
5.5. Environmental Coverage Claims and Health
Care Claims.......................................... 20
5.6. B-1B Contracts....................................... 21
5.7. Research and Experimentation Credit.................. 21
5.8. Foreign Subsidiaries................................. 22
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
5.9. Consent Solicitation; Repayment of Short-
Term Debt........................................... 22
ARTICLE VI
TAX INDEMNIFICATION; TAX CONTESTS.............................. 23
6.1. Indemnification..................................... 23
6.2. Notice of Indemnity................................. 26
6.3. Tax Contests........................................ 26
6.4. Timing Adjustments.................................. 27
6.5. Certain Post-Distribution Transactions.............. 28
6.6. Payments Net of Taxes............................... 30
ARTICLE VII
COOPERATION AND EXCHANGE OF INFORMATION........................ 31
7.1. Preparation of Returns.............................. 31
7.2. Cooperation and Exchange of Information............. 31
7.3. Record Retention.................................... 32
7.4. Notification of Certain Dispositions................ 33
ARTICLE VIII
MISCELLANEOUS.................................................. 33
8.1. Entire Agreement.................................... 33
8.2. Modification or Amendment........................... 33
8.3. Notices............................................. 33
8.4. No Third Party Beneficiaries........................ 34
8.5. Assignment.......................................... 35
8.6. Term................................................ 35
8.7. Captions............................................ 35
8.8. Severability........................................ 35
8.9. Specific Performance................................ 35
8.10. Counterparts........................................ 36
8.11. Governing Law....................................... 36
8.12. Agent............................................... 36
</TABLE>
ii
<PAGE> 4
1
TAX ALLOCATION AGREEMENT
This TAX ALLOCATION AGREEMENT (this "Agreement"), dated as of
December 6, 1996, among ROCKWELL INTERNATIONAL CORPORATION, a Delaware
corporation (the "Company"), NEW ROCKWELL INTERNATIONAL CORPORATION, a Delaware
corporation and a wholly owned subsidiary of the Company ("Newco"), and THE
BOEING COMPANY, a Delaware corporation ("Acquiror").
W I T N E S S E T H:
WHEREAS, the Company, Acquiror and Boeing NA, Inc., a wholly owned
subsidiary of Acquiror ("Sub"), have entered into an Agreement and Plan of
Merger dated as of July 31, 1996 (the "Merger Agreement"), providing for the
Merger (as defined in the Merger Agreement) of Sub with and into the Company;
WHEREAS, the Board of Directors of the Company has approved an
agreement and plan of distribution in the form attached as Annex A to the
Merger Agreement (the "Distribution Agreement");
WHEREAS, the execution and delivery of this Agreement by the parties
hereto is a condition to the obligations of the parties to the Merger Agreement
to consummate the Merger;
WHEREAS, the execution and delivery of this Agreement by the parties
hereto is a condition to the obligations of the parties to the Distribution
Agreement to consummate the Distribution (as defined in the Distribution
Agreement);
WHEREAS, Acquiror and the Company, on behalf of each of them and the
Company Group (as defined herein) and Newco, on behalf of itself and the Newco
Group (as defined herein), wish to provide for the allocation between the
Company Group and the Newco Group of all responsibilities, liabilities and
benefits relating to or affecting Taxes (as hereinafter defined) paid or
payable by either of them for all taxable periods, whether beginning before, on
or after the Distribution Date (as hereinafter defined) and to provide for
certain other matters; and
<PAGE> 5
2
NOW, THEREFORE, in consideration of the premises and of the
respective covenants and agreements set forth herein, the parties hereto hereby
agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. Capitalized terms used in this Agreement and not
otherwise defined herein shall have the meanings assigned to such terms in the
Merger Agreement or the Distribution Agreement, as the case may be. As used in
this Agreement, the following terms shall have the following respective
meanings:
"Acquiror Tax Opinion" means the opinion received by Acquiror from
Cravath, Swaine & Moore pursuant to Section 6.3(c) of the Merger Agreement.
"Acquiror's Tax Representation Letter" means the representation
letter delivered by Acquiror substantially in the form of Annex D to the Merger
Agreement.
"Actually Realized" or "Actually Realizes" means, for purposes of
determining the timing of any Taxes (or related Tax cost or benefit) relating
to any payment, transaction, occurrence or event (including any Tax Refund),
the time at which the amount of Taxes payable by such person is increased above
or reduced below, as the case may be, the amount of Taxes that such person
would be required to pay but for such payment, transaction, occurrence or
event.
"Affiliated Group" means the affiliated group of which the Company is
the common parent.
"Allowable Tax" means any Tax of the Company Group which is an
allowable cost under the Federal Acquisition Regulation, 48 C.F.R. Chapter 1,
and associated regulations and agreements between the Company and any U.S.
governmental entity, which agreements are described on Schedule 1.
"B-1B Contracts" means the B-1B Full Scale Development Contract
(No. F33657-81-C-0208) and the B-1B Production Contract (No. F33657-81-C-0201).
"Business Acquisition Agreement" means the Business Acquisition
Agreement dated November 22, 1996 among
<PAGE> 6
3
Rockwell Australia Limited, ACN 004 471 078 Pty Ltd and New Rockwell
Australia Pty Limited, as amended by Amending Agreement dated December 4, 1996.
"California Tax Credits" means any California Tax credits for
manufacturing and research property resulting from qualified costs paid or
incurred on or before the Distribution Date by any member of the Company Group
or the Newco Group.
"California Tax Deficiency" means any Tax Deficiency with respect to
California Taxes.
"Code" means the Internal Revenue Code of 1986, as amended, and shall
include corresponding provisions of any subsequently enacted Federal Tax laws.
"Combined Taxes" means all Taxes due with respect to any combined,
consolidated or unitary state, local or foreign corporate Tax liability for all
Pre-Merger Taxable Periods and Straddle Periods with respect to Joint Tax
Returns.
"Company Employees and Former Employees" means individuals who were
employees of the Company Group on or before the Distribution Date and who do
not become employees of the Newco Group between the Distribution Date and the
date of the event giving rise to a deduction in respect of any Newco Options
held by such individuals or Compensation Payments made to such individuals or
who become employees of the Newco Group on or after the Distribution Date but
are employees of the Company Group when any such Newco Options are exercised or
Compensation Payments are made.
"Company Group" means, solely for purposes of this Agreement and not
for purposes of any other Reorganization Agreement, the Company and its
affiliates, other than Newco and its affiliates (determined after giving effect
to the transfers contemplated by Article II of the Distribution Agreement) and,
for Post-Tax Indemnification Periods, shall include Acquiror and its
affiliates.
"Company Tax Item" means a Tax Item that is attributable to the
Company Group and is not a Newco Tax Item.
"Company Tax Opinions" means the opinions received by the Company
from Chadbourne & Parke LLP and Wachtell,
<PAGE> 7
4
Lipton, Rosen & Katz pursuant to Section 6.2(c) of the Merger Agreement.
"Compensation Payments" means all payments made by any member of the
Newco Group under Sections 8.4 and 8.6 of the Distribution Agreement, to the
extent that such payments relate to benefits accrued as of the Time of
Contribution (as defined in the Distribution Agreement).
"Contract Profitability" as of the Distribution Date shall mean
(i) in the case of any long-term contract a portion of which is accounted for on
the "percentage completion method" of accounting and a portion of which is
accounted for on the "completed contract method" of accounting, in each case
for Federal Income Tax purposes, the excess of (A) the aggregate amount of
taxable income that would have been reportable for Federal Income Tax purposes
for all Tax Indemnification Periods with respect to such contract if the
contract had been accounted for in its entirety on the percentage completion
method of accounting for Federal Income Tax purposes over (B) the actual amount
of taxable income reportable for Federal Income Tax purposes for all Tax
Indemnification Periods with respect to such contract, and (ii) in the case of
any other long-term contract accounted for on the completed contract or
percentage of completion method of accounting for Federal Income Tax purposes,
the deferred contract profitability with respect to such contract as of the
Distribution Date as calculated for financial accounting purposes.
"Debt Refinancing" has the meaning set forth in Section 5.9.
"Distribution Date" means the later of (i) the date on which the
Distribution occurs or is deemed to occur for Federal Income Tax purposes and
(ii) the date on which the Merger occurs or is deemed to occur for Federal
Income Tax purposes. Solely for purposes of this Agreement, the Distribution or
the Merger, as the case may be, shall be deemed effective as of the close of
business on the Distribution Date.
"Environmental Coverage Claims" shall have the meaning ascribed
thereto in the Post-Closing Covenants Agreement.
"Group" means either the Company Group or the Newco Group, as the
context provides.
<PAGE> 8
5
"Health Care Claims" shall have the meaning ascribed thereto in
Section 3.8 of the Post-Closing Covenants Agreement.
"Income Tax Benefit" means for any taxable period the excess of
(i) the hypothetical Income Tax liability of the taxpayer for the taxable period
calculated as if the Timing Difference or Reverse Timing Difference, as the case
may be, had not occurred but with all other facts unchanged, over (ii) the
actual Income Tax liability of the taxpayer for the taxable period, calculated
taking into account the Timing Difference or Reverse Timing Difference, as the
case may be (treating an Income Tax Refund as a negative Income Tax liability
for purposes of such calculation).
"Income Tax Detriment" means for any taxable period the excess of
(A) the actual Income Tax liability of the taxpayer for the taxable period,
calculated taking into account the Timing Difference or Reverse Timing
Difference, as the case may be, over (B) the hypothetical Income Tax liability
of the taxpayer for the taxable period, calculated as if the Timing Difference
or Reverse Timing Difference, as the case may be, had not occurred but with all
other facts unchanged (treating an Income Tax Refund as a negative Income Tax
liability for purposes of such calculation).
"Income Taxes" means any Tax based upon, measured by, or calculated
with respect to (i) net income or profits (including, but not limited to, any
capital gains, minimum Tax and any Tax on items of Tax preference, but not
including sales, use, real property gains, real or personal property, gross or
net receipts, transfer or similar Taxes) or (ii) multiple bases (including, but
not limited to, corporate franchise, doing business or occupation Taxes) if one
or more of the bases upon which such Tax may be based upon, measured by, or
calculated with respect to, is described in clause (i) above.
"Indemnitee" has the meaning set forth in Section 6.2.
"Indemnitor" has the meaning set forth in Section 6.2.
"Indemnity Issue" has the meaning set forth in Section 6.2.
"IRS" means the Internal Revenue Service.
<PAGE> 9
6
"Joint Tax Return" means any Tax Return that includes a member of the
Company Group and a member of the Newco Group.
"Newco Group" means Newco and its affiliates, determined immediately
after the Distribution and the Merger.
"Newco Options" means those options to purchase Newco Common Stock or
Newco Class A Common Stock, as the case may be, resulting from the conversion
of Company Options in accordance with the Distribution Agreement.
"Newco Tax Item" means a Tax Item solely attributable to the Newco
Group.
"Newco's Tax Representation Letter" means the representation letter
delivered by Newco and the Company substantially in the form of Annex E to the
Merger Agreement.
"Other Individuals" means individuals other than Company Employees
and Former Employees.
"Other Taxes" has the meaning set forth in Section 3.1(c).
"Post-Merger Taxable Period" means a taxable period beginning after
the Distribution Date.
"Post-Tax Indemnification Period" means any Post-Merger Taxable
Period and that portion of any Straddle Period that begins on the day after the
Distribution Date.
"Pre-Merger Taxable Period" means a taxable period ending on or
before the Distribution Date.
"Prior Arrangement" means the Company's existing finance policy for
allocation of Taxes (including disclosed practices) a copy of which finance
policy (in effect as of the date hereof) is attached hereto as Schedule 2 and
the advance agreements between the Company and any U.S. governmental entity a
copy of which is attached hereto as Schedule 1.
"Responsible Party" has the meaning set forth in Section 6.3.
<PAGE> 10
7
"Reverse Timing Difference" means an increase in income, gain or
recapture, or a decrease in deduction, loss or credit, as calculated for Income
Tax purposes, of the taxpayer for the Tax Indemnification Period coupled with
an increase in deduction, loss or credit, or a decrease in income, gain or
recapture, of the taxpayer for any Post-Tax Indemnification Period.
"Rockwell Australia" has the meaning set forth in Section 5.8(a).
"Straddle Period" means a taxable period that includes but does not
end on the Distribution Date.
"Tax" or "Taxes" means all forms of taxation, whenever created or
imposed, and whether of the United States or elsewhere, and whether imposed by
a local, municipal, governmental, state, foreign, federal or other body, and
without limiting the generality of the foregoing, shall include income, sales,
use, ad valorem, gross receipts, license, value added, franchise, transfer,
recording, withholding, payroll, wage withholding, employment, excise,
occupation, unemployment insurance, social security, business license, business
organization, stamp, environmental, premium and property taxes, together with
any related interest (including the actual interest that would have accrued if
there were no netting of Taxes), penalties and additions to any such tax, or
additional amounts imposed by any Taxing Authority (domestic or foreign) upon
the Company Group, the Newco Group, the Acquiror or any of their respective
members or divisions or branches or affiliates.
"Tax Audit Proceeding" means any audit or other examination, judicial
or administrative proceeding relating to liability for or refunds or
adjustments with respect to Taxes.
"Tax Deficiency" means a net increase in Taxes payable as a result of
a Tax Audit Proceeding or an amendment of a Tax Return or an event having a
similar effect.
"Tax Indemnification Period" means any Pre-Merger Taxable Period and
that portion of any Straddle Period that ends on the Distribution Date.
<PAGE> 11
8
"Tax Item" means any item of income, gain, loss, deduction, credit,
provisions for reserves, recapture of credits or any other item which is taken
into account in determining taxable income or is otherwise taken into account
in determining Taxes paid or payable, including an adjustment under Section 481
of the Code resulting from a change in accounting method.
"Tax Opinions" means the Acquiror Tax Opinion and the Company Tax
Opinions.
"Tax Records" has the meaning set forth in Section 7.3.
"Tax Refund" means a refund of Taxes (including a reduction in Taxes
as a result of any credit or any offset against Taxes or Tax Items) reduced
(but not below zero) by any net increase in Taxes Actually Realized by the
recipient (or its affiliate) thereof as a result of the receipt thereof;
provided, however, that for purposes of determining any net increase in Taxes
resulting from the refund of 1994 Australian Taxes of Rockwell Australia, any
reduction of foreign tax credits for U.S. Tax purposes attributable to the
receipt of such refund shall not be taken into account.
"Tax Return" means any return, filing, questionnaire, information
return or other document required to be filed, including requests for
extensions of time, filings made with respect to estimated tax payments, claims
for refund and amended returns that may be filed, for any period with any
Taxing Authority (whether domestic or foreign) in connection with any Tax or
Taxes (whether or not a payment is required to be made with respect to such
filing).
"Taxing Authority" means any governmental or quasi-governmental body
exercising any Taxing authority or Tax regulatory authority.
"Timing Difference" means an increase in income, gain or recapture,
or a decrease in deduction, loss or credit, as calculated for Income Tax
purposes, of the taxpayer for any Post-Tax Indemnification Period coupled with
an increase in deduction, loss or credit, or a decrease in income, gain or
recapture, of the taxpayer for the Tax Indemnification Period.
<PAGE> 12
9
"Transfer Taxes" means all transfer, documentary, sales, use,
registration, value-added and other similar Taxes (including all applicable
real estate transfer Taxes and real property transfer gains Taxes) and related
amounts (including any penalties, interest and additions to Tax) arising as a
result of or otherwise incurred in connection with any of the transactions
contemplated by the Reorganization Agreements.
ARTICLE II
FILING OF TAX RETURNS
2.1. Preparation of Tax Returns.
(a) Consistent with Agreements. Each of the parties to this Agreement
agrees to, and to cause each of its relevant affiliates to, report the
Contribution and Distribution as transactions described in Sections 351 and 355
of the Code and/or a "reorganization" under Section 368(a)(1)(D) of the Code
and the Merger as a "reorganization" under Section 368(a)(1)(B) of the Code on
all Tax Returns and other filings, to take no position inconsistent therewith
or with the consummation of such transactions as set forth in the Merger
Agreement, the Distribution Agreement, the Acquiror's Tax Representation
Letter, Newco's Tax Representation Letter and the Tax Opinions (in the absence
of a controlling change in law or circumstance), and to file or cause to be
filed all such Tax Returns on a timely basis (including extensions).
(b) Consistent with Past Practice. All Tax Returns described in
Section 2.2 hereof filed after the date of this Agreement, in the absence of a
controlling change in law or circumstances, shall be prepared on a basis
consistent with the elections, accounting methods, conventions and principles
of taxation used for the most recent taxable periods for which Tax Returns
involving similar Tax Items have been filed and in a manner that does not
unreasonably accelerate deductions or defer income between Tax Indemnification
Periods and Post-Tax Indemnification Periods to the extent that a failure to do
so would result in an increase in Tax payable by, or a reduction in Tax
attributes of, a member of the Company Group in a Post-Tax Indemnification
Period. Subject to the provisions of this Agreement, all decisions relating to
the preparation of Tax Returns shall be made in the sole
<PAGE> 13
10
discretion of the party responsible under this Agreement for such preparation.
(c) Newco Obligations. Newco agrees to cooperate in good faith with
the Company to determine the appropriate amount of Tax Items attributable to
the Company Group to be reflected on any Tax Returns for Pre-Merger Taxable
Periods or Straddle Periods to be prepared and filed by Newco in accordance
with Section 2.2. Newco further agrees to provide the Company with a copy of
each such Tax Return at least three weeks before it is filed and to follow the
procedures in Section 4.3 relating to the calculation of Taxes and to not file
any such Tax Returns without the prior written consent of the Company, which
consent shall not be unreasonably withheld. If such consent is withheld, the
Company shall so notify Newco at least two weeks prior to the due date for
filing such Tax Returns. Newco will promptly provide the Company with copies of
all such Tax Returns after filing.
2.2. Pre-Merger Tax Returns.
(a) Consolidated Federal Tax Returns. The Affiliated Group
consolidated Federal Tax Returns (including amendments thereto) required to be
filed or actually filed for any Pre-Merger Taxable Period after the date hereof
shall be prepared and filed or caused to be prepared and filed by Newco, and
the Company hereby irrevocably designates, and agrees to cause each of its
affiliates to so designate, Newco as its agent to take any and all actions
necessary or incidental to the preparation and filing of such Tax Returns.
(b) Other Pre-Merger Taxable Period and Straddle Period Tax Returns.
All Tax Returns (including amendments thereto) other than those described in
Section 2.2(a) which include a member of the Newco Group or the Company Group
that are required to be filed or are actually filed for any Pre-Merger Taxable
Period or Straddle Period shall be prepared and filed or caused to be prepared
and filed by Newco. The Company hereby irrevocably designates and agrees to
cause each of its affiliates to designate Newco as its agent to take any and
all actions necessary or incidental to the preparation and filing of such other
Tax Returns.
2.3. Post-Merger Tax Returns. All Tax Returns for all Post-Merger
Taxable Periods shall be the responsibility of the Newco Group if such Tax
Returns relate
<PAGE> 14
11
to a member or members of the Newco Group or their respective assets or
businesses, and shall be the responsibility of the Company Group if such Tax
Returns relate to a member or members of the Company Group or their respective
assets or businesses.
ARTICLE III
PAYMENT OF TAXES
3.1. Allocation of Tax Liabilities.
(a) Consolidated Federal Tax Liabilities. Except as otherwise
provided in this Agreement, Newco shall pay or cause to be paid, on a timely
basis, all Taxes due with respect to the consolidated Federal Tax liability for
all Pre-Merger Taxable Periods of the Affiliated Group. The Company and
Acquiror on behalf of the Company Group hereby assume and agree to pay directly
to or at the direction of Newco, at least two days prior to the date payment
(including estimated payment) thereof is due, the Company Group's allocable
share of those Federal Taxes which are Allowable Taxes for all Pre-Merger
Taxable Periods which have not been paid on or before the Distribution Date.
(b) Combined, Consolidated and Unitary Corporate Taxes. Except as
otherwise provided in this Agreement, Newco or a member of the Newco Group
shall pay or caused to be paid, on a timely basis, all Combined Taxes. The
Company and Acquiror on behalf of the Company Group hereby assume and agree to
pay directly to or at the direction of Newco, at least two days prior to the
date payment (including estimated payment) thereof is due, (i) the Company
Group's allocable share of those Combined Taxes which are Allowable Taxes for
all Pre-Merger Taxable Periods and the portion of any Straddle Period ending on
the Distribution Date which have not been paid on or before the Distribution
Date and (ii) the Company Group's allocable share of those Combined Taxes for
the portion of any Straddle Period commencing on the day after the Distribution
Date which have not been paid on or before the Distribution Date.
(c) Other Taxes. Except as otherwise provided in this Agreement,
Newco shall pay or caused to be paid all Taxes of the Company Group and the
Newco Group other than those described in Sections 3.1(a) and 3.1(b) ("Other
Taxes") for all Pre-Merger Taxable Periods and Straddle
<PAGE> 15
12
Periods. The Company and Acquiror on behalf of the Company Group hereby assume
and agree to pay directly to or at the direction of Newco, at least two days
prior to the date payment (including estimated payment) thereof is due, (i) the
Company Group's allocable share of those Other Taxes which are Allowable Taxes
for all Pre-Merger Taxable Periods and the portion of any Straddle Period
ending on the Distribution Date and which have not been paid on or before the
Distribution Date and (ii) the Company Group's allocable share of those Other
Taxes for the portion of any Straddle Period commencing on the day after the
Distribution Date which have not been paid on or before the Distribution Date.
(d) Post-Merger Taxes. Except as provided otherwise in this
Agreement, all Taxes for all Post-Merger Taxable Periods shall be paid or
caused to be paid by the party responsible under this Agreement for filing the
Tax Return pursuant to which such Taxes are due or, if no such Tax Returns are
due, by the party liable for such Taxes.
3.2. Tax Refunds, Carrybacks and California Tax Credits.
(a) Retention and Payment of Tax Refunds. Except as otherwise
provided in this Agreement, Newco shall be entitled to retain, and to receive
within ten days after Actually Realized by the Company Group, the portion of
all Tax Refunds (including without limitation Tax Refunds of Australian Taxes)
of Taxes for which the Newco Group is liable pursuant to Section 3.1 or
Section 6.1(a), and the Company shall be entitled to retain, and to receive
within ten days after Actually Realized by the Newco Group, the portion of all
Tax Refunds of Taxes for which the Company Group is liable pursuant to Section
3.1 or Section 6.1(b). Notwithstanding the foregoing, all Tax Refunds (i) of
Allowable Taxes or (ii) resulting from the carryback of any Company Tax Item
arising in a Post-Tax Indemnification Period to a Tax Indemnification Period
(determined in a manner analogous to the determination of an Income Tax Benefit)
shall be for the account and benefit of the Company Group.
(b) Carrybacks. Except as otherwise provided in this Agreement, any
Tax Refund (other than a Refund of Allowable Taxes) resulting from the
carryback of any Newco Tax Item arising in a Post-Tax Indemnification Period to
a Tax Indemnification Period (determined in a manner analogous to the
determination of an Income Tax Benefit) shall be for
<PAGE> 16
13
the account of Newco, and the Company shall pay over to Newco any such Tax
Refund within ten days after it is Actually Realized by the Company.
(c) Refund Claims. Newco shall be permitted to file at Newco's sole
expense, and the Company shall reasonably cooperate with Newco in connection
with, any claims for Tax Refund to which Newco is entitled pursuant to this
Section 3.2 or any other provision of this Agreement. Newco shall reimburse the
Company for any reasonable out-of-pocket costs and expenses incurred by any
member of the Company Group in connection with such cooperation. The Company
shall be permitted to file at the Company's sole expense, and Newco shall
reasonably cooperate with the Company in connection with, any claims for Tax
Refund to which the Company is entitled pursuant to this Section 3.2 or any
other provision of this Agreement. The Company shall reimburse Newco for any
reasonable out-of-pocket costs and expenses incurred by any member of the Newco
Group in connection with such cooperation.
Any claim for a Tax Refund to which Newco is entitled under this
Agreement shall be subject to the Company Group's consent (such consent not to
be unreasonably withheld), to be exercised in a manner analogous to that set
forth in Section 2.1(c). Any claim for a Tax Refund to which the Company Group
is entitled under this Agreement shall be subject to the Newco Group's consent
(such consent not to be unreasonably withheld), to be exercised in a manner
analogous to that set forth in Section 2.1(c).
(d) California Tax Credits. Notwithstanding anything to the contrary
in this Agreement, Newco shall be entitled to receive, within ten days after
Actually Realized by the Company Group, any Tax Refund attributable to any
California Tax Credits.
ARTICLE IV
ALLOCATION AND CALCULATION OF TAXES
4.1. Straddle Period Taxes. In the case of any Straddle Period:
(i) the periodic Taxes of the Company Group and the Newco Group
that are not based on income or receipts (e.g., property Taxes) for the portion
of any Straddle
<PAGE> 17
14
Period ending on the Distribution Date shall be computed based on the ratio of
the number of days in such portion of the Straddle Period and the number of
days in the entire taxable period;
(ii) Taxes of the Company Group and the Newco Group for the
portion of any Straddle Period ending on the Distribution Date (other than
Taxes described in Section 4.1(i) above) shall be computed as if such taxable
period ended as of the close of business on the Distribution Date, and, in the
case of any Taxes of the Company Group and the Newco Group attributable to the
ownership by any member of the Company Group and the Newco Group of any equity
interest in any partnership or other "flowthrough" entity, as if a taxable
period of such partnership or other "flowthrough" entity ended as of the close
of business on the Distribution Date; and
(iii) with respect to any Joint Tax Return for a Straddle
Period, the allocation of Tax liability between the Company Group, on the one
hand, and the Newco Group, on the other hand, shall be determined in a manner
analogous to that set forth in Treasury Regulation Section 1.1552-1(a)(2).
4.2. Share of Allowable Taxes. The Company Group's and the Newco
Group's allocable share of Tax liability which is attributable to Allowable
Taxes for all Pre-Merger Taxable Periods and the portion of any Straddle Period
ending on the Distribution Date shall be determined in accordance with the
Prior Arrangement.
4.3. Calculations and Determinations. All calculations and
determinations required to be made pursuant to this Agreement shall be made in
good faith by Newco on a basis consistent with prior years and in a manner that
does not unreasonably accelerate deductions or defer income between Tax
Indemnification Periods and Post-Tax Indemnification Periods, and such
calculations and determinations shall be subject to the written approval of the
Company, which approval shall not be unreasonably withheld. Whenever Newco is
required to make any of the calculations or determinations referred to in the
prior sentence, Newco shall provide the Company with (i) preliminary drafts of
any material calculations (including calculations of the amount for which the
Company Group will be liable under this Agreement) or determinations as early
as practicable, and final copies of such
<PAGE> 18
15
calculations (including calculations of the amount for which the Company Group
will be liable under this Agreement) or determinations no later than nine weeks
prior to the date on which applicable Tax Returns are to be filed, and such
other information as the Company shall reasonably request and (ii) if requested
by the Company, access (during reasonable business hours and upon reasonable
advance notice) to copies of the relevant portions of any Tax Returns, reports
or other statements. If the Company's written approval of such calculations and
determinations is withheld, the Company shall so notify Newco no later than six
weeks prior to the date on which the applicable Tax Returns are to be filed.
4.4. Principles of Determination. In implementing this Agreement,
except as otherwise specifically provided, the parties shall make any
adjustments that are necessary to ensure that, with respect to Taxes for
Straddle Periods or Pre-Merger Taxable Periods, payments and reimbursements
between the parties reflect the principles that the Company is to bear
responsibility for Taxes for the Company Group (and any affiliates) that
(i) are attributable to the portion of any Straddle Period after the
Distribution Date (calculated by treating the day after the Distribution Date
as the first day of a taxable period) or (ii) are Allowable Taxes for any
Pre-Merger Taxable Period or for any Straddle Period, and that Newco is to bear
responsibility for all other Taxes for Straddle Periods and Pre-Merger Taxable
Periods.
4.5. Change in Law. Notwithstanding the agreement with respect to
reporting of Tax Items attributable to Newco Options, Compensation Payments,
Environmental Coverage Claims and Health Care Claims set forth in
Sections 5.1(a), 5.2(a) and 5.5(a) of this Agreement, respectively, neither the
Company Group nor the Newco Group shall have any obligation to report any such
Tax Items as set forth in such Sections in the event that either such party
determines that there is no substantial authority to support reporting such Tax
Items on a Tax Return filed by such party as a result of a change in or
amendment to any law or regulation, or any change in the official interpretation
thereof, effective or occurring after the date of this Agreement, and such Group
provides prompt notice to the other Group of any such determination.
<PAGE> 19
16
ARTICLE V
NEWCO OPTIONS; COMPENSATION PAYMENTS; CERTAIN CONTRACTS;
GUNSHIP CLAIMS; ENVIRONMENTAL COVERAGE CLAIMS; HEALTH CARE
CLAIMS; B-1B CONTRACTS; FOREIGN SUBSIDIARIES;
CONSENT SOLICITATION.
5.1. Tax Deductions Arising in Respect of Newco Options.
(a) Tax Deductions. Notwithstanding anything to the contrary in this
Agreement, unless the IRS issues a contrary private letter ruling to the
Company or Newco, or Newco and the Company otherwise agree in writing, (x) the
Company Group (and not the Newco Group) shall claim the post-Distribution Date
Tax deductions in respect of Newco Options held by Company Group Employees and
Former Employees (e.g., due to an option cash-out, an exercise of non-incentive
stock options or a disqualifying disposition) and shall pay to Newco the amount
of any Tax Refund (such Tax Refund not to include, or be tax-effected for any
Tax Refund of the Company's allocable share of Allowable Taxes) arising in
respect of such deductions within ten days after such Tax Refund is Actually
Realized by the Company Group (including the time estimated Tax payments are
due), and (y) the Newco Group shall claim any post-Distribution Date Tax
deductions in respect of Newco Options held by any Other Individuals.
Notwithstanding anything to the contrary contained herein, to the extent that
any Tax deductions of the Company Group in respect of Newco Options held by
Company Group Employees and Former Employees are carried back from a Post-Tax
Indemnification Period to a Tax Indemnification Period, the Company shall pay
to Newco any resulting Tax Refunds to the extent required pursuant to this
Section 5.1(a), but the Company shall have no obligation to pay to Newco any
additional amounts under any other provision of this Agreement (other than
Section 6.6(a)) with respect to such Tax Refunds.
(b) Notices, Withholding, Reporting. Newco shall promptly notify the
Company of any post-Distribution Date event giving rise to income to any
Company Employees and Former Employees in connection with the Newco Options
and, if required by law, the Company shall withhold applicable Taxes and
satisfy applicable Tax reporting obligations in connection therewith. Newco
shall within 10 days of demand thereof reimburse the Company for all reasonable
out-of-
<PAGE> 20
17
pocket expenses incurred in connection with the Newco Options, including with
respect to incremental Tax reporting obligations and any incremental employment
Tax obligations; provided that the Company shall use reasonable efforts to
collect any such amounts required to be paid by Company Employees and Former
Employees.
(c) Tax Audit Adjustments. Notwithstanding the provisions of
Section 5.1(a), in the event a Tax Audit Proceeding shall determine (by
settlement or otherwise), or the parties otherwise determine pursuant to Section
4.5, that all or a portion of the Tax deductions in respect of Newco Options
held by Company Employees and Former Employees was not available to the Company
Group, Newco shall pay to the Company the amount of the resulting Tax Deficiency
(such Tax Refund not to include, or be tax-effected for, any Tax Refund of the
Company's allocable share of Allowable Taxes) within 10 days after the Company
Group has notified the Newco Group that such Tax Deficiency has been Actually
Realized. In the event a Tax Audit Proceeding shall determine (by settlement or
otherwise), or the parties otherwise determine pursuant to Section 4.5, that all
or a portion of the Tax deductions in respect of Newco Options held by Other
Individuals should have been claimed by the Company Group, the Company shall
claim such Tax deductions (by an amended Tax Return or otherwise) and shall pay
to Newco the amount of any Tax Refund (such Tax Refund not to include, or be
tax-effected for, any Tax Refund of the Company's allocable share of Allowable
Taxes) arising in respect of such Tax deduction, in each case within 10 days
after such Tax Refund is Actually Realized by the Company Group (including at
the time estimated Tax payments are due). In the event that any Tax Audit
Proceeding shall determine (by settlement or otherwise) that the Company Group
realized taxable income directly or indirectly as a result of the exercise or
settlement (including payment by Newco in cash or stock) of the Newco Options or
the disqualifying disposition of any stock received upon exercise thereof
(determined in a manner analogous to the determination of an Income Tax
Detriment), Newco shall pay to the Company the amount of any resulting Tax
Deficiency (such Tax Refund not to include, or be tax-effected for, any Tax
Refund of the Company's allocable share of Allowable Taxes) within 10 days after
the Company Group has notified the Newco Group that such Tax Deficiency has been
Actually Realized.
<PAGE> 21
18
(d) IRS Ruling Request. At Newco's request and sole expense, Newco
and the Company shall jointly seek a private letter ruling from the IRS
regarding the proper party to claim the post-Distribution Date Tax deductions
in respect of Newco Options.
5.2. Compensation Payments.
(a) Tax Deductions. Notwithstanding anything to the contrary in this
Agreement, unless Newco and the Company otherwise agree in writing, (x) the
Company Group (and not the Newco Group) shall claim the post-Distribution Date
Tax deductions in respect of Compensation Payments paid to Company Group
Employees and Former Employees and shall pay to Newco the amount of any Tax
Refund (such Tax Refund not to include, or be tax-effected for, any Tax Refund
of the Company's allocable share of Allowable Taxes) arising in respect of such
Tax deductions within ten days after such Tax Refund is Actually Realized by
the Company Group (including the time estimated Tax payments are due) and
(y) the Newco Group shall claim any post-Distribution Date Tax deductions in
respect of Compensation Payments paid to Other Individuals. Notwithstanding
anything to the contrary contained herein, to the extent that any Tax deductions
of the Company Group in respect of Compensation Payments are carried back from a
Post-Tax Indemnification period to a Tax Indemnification Period, the Company
shall pay to Newco any resulting Tax Refunds to the extent required pursuant to
this Section 5.2(a), but the Company shall have no obligation to pay to Newco
any additional amounts under any other provision of this Agreement (other than
Section 6.6(a)) with respect to such Tax Refunds.
(b) Notices, Withholding, Reporting. The Company shall withhold
applicable Taxes and satisfy applicable Tax reporting obligations in connection
with the Compensation Payments made to Company Group Employees and Former
Employees. Newco shall within 10 days of demand thereof reimburse the Company
for all reasonable out-of-pocket expenses incurred in connection with the
Compensation Payments, including with respect to incremental Tax reporting
obligations and any incremental employment Tax obligations resulting from such
Compensation Payments; provided that the Company shall use reasonable efforts
to collect any such amounts required to be paid by Company Employees and Former
Employees.
<PAGE> 22
19
(c) Tax Audit Adjustments. Notwithstanding the provisions of
Section 5.2(a), in the event a Tax Audit Proceeding shall determine (by
settlement or otherwise), or the parties otherwise determine pursuant to
Section 4.5, that all or a portion of the Tax deductions in respect of
Compensation Payments paid to Company Employees and Former Employees was not
available to the Company Group, Newco shall pay to the Company the amount of the
resulting Tax Deficiency (such Tax Refund not to include, or be tax-effected
for, any Tax Refund of the Company's allocable share of Allowable Taxes) within
10 days after the Company Group has notified the Newco Group that such Tax
Deficiency has been Actually Realized. In the event a Tax Audit Proceeding shall
determine (by settlement or otherwise), or the parties otherwise determine
pursuant to Section 4.5, that all or a portion of the Tax deductions in respect
of Compensation Payments paid to Other Individuals should have been claimed by
the Company Group, the Company shall claim such Tax deductions (by an amended
Tax Return or otherwise) and shall pay to Newco the amount of any Tax Refund
(such Tax Refund not to include, or be tax-effected for, any Tax Refund of the
Company's allocable share of Allowable Taxes) arising in respect of such
deductions, in each case within 10 days after such Tax Refund is Actually
Realized by the Company Group (including at the time estimated Tax payments are
due). In the event that any Tax Audit Proceeding shall determine (by settlement
or otherwise) that the Company Group realized taxable income directly or
indirectly as a result of the payment of any Compensation Payments (determined
in a manner analogous to the determination of an Income Tax Detriment), Newco
shall pay to the Company the amount of any resulting Tax Deficiency (such Tax
Refund not to include, or be tax-effected for, any Tax Refund of the Company's
allocable share of Allowable Taxes) within 10 days after the Company Group has
notified the Newco Group that such Tax Deficiency has been Actually Realized.
5.3. Percentage Completion Contracts.
(a) Adjustment to Contract Profitability. Newco and the Company shall
each bear one-half of any interest cost due to, and be entitled to receive
one-half of any interest refunded by, the IRS in respect of Tax Indemnification
Periods resulting from adjustments required subsequent to the Distribution Date
with respect to long-term contracts held by the Company pursuant to the
look-back method of Treasury Regulation Section 1.460-6 or any comparable
provision of State, local or foreign Tax law.
<PAGE> 23
20
The Company shall pay to Newco its share of any such refunded interest within
10 days after such refund is Actually Realized by the Company, and Newco shall
pay to the Company its share of any such interest due within 10 days after the
Company Group has notified the Newco Group that such interest cost has been
Actually Realized by the Company Group.
5.4. Gunship Claims.
(a) Gunship Claims Income Tax Paid. Newco hereby represents that
prior to the date hereof the Company has reflected in taxable income on its
U.S. Federal Income Tax Returns $181 million of income relating to the Gunship
Claims.
(b) Tax Item Timing Adjustments. If the Newco Group so requests, the
Company Group shall consent to Newco pursuing a claim for a Tax Refund, at
Newco's sole expense, in respect of Federal Income Taxes paid by the Company
prior to the date hereof with respect to income relating to the Gunship Claims.
Any such refund claim shall be governed by Section 3.2. Notwithstanding any
other provision in this Agreement, Newco shall pay to the Company the amount of
any increase in Taxes for the Post-Tax Indemnification Period attributable to
the receipt of any resulting Tax Refund within 10 days after the Company Group
has notified the Newco Group that such increase has been Actually Realized.
5.5. Environmental Coverage Claims and Health Care Claims.
(a) Tax Return Reporting. Newco and the Company shall each report its
proportionate share of Tax Items attributable to the Environmental Coverage
Claims and Health Care Claims, based on the allocation of the proceeds of the
Environmental Coverage Claims and Health Care Claims (in the case of income
Items), and the manner in which costs are shared (in the case of deduction
Items), pursuant to Sections 3.2 and 3.8, respectively, of the Post-Closing
Covenants Agreement.
(b) Tax Audit Adjustments. (i) In the event a Tax Audit Proceeding
shall determine (by settlement or otherwise), or the parties otherwise
determine pursuant to Section 4.5, that the Company Group should have reported
Tax Items in respect of the Environmental Coverage Claims or the Health Care
Claims that were reported by the Newco Group
<PAGE> 24
21
pursuant to Section 5.5(a), Newco shall pay to the Company the amount of any
resulting Tax Deficiency (and shall have the right to receive or retain any
resulting Tax Refund) within ten days after the Company has notified Newco that
it has Actually Realized such Tax Deficiency or after the Company Group has
Actually Realized such Tax Refund, as the case may be.
(ii) In the event a Tax Audit Proceeding shall determine (by
settlement or otherwise), or the parties otherwise determine pursuant to
Section 4.5, that the Newco Group should have reported Tax Items in respect of
the Environmental Coverage Claims or the Health Care Claims that were reported
by the Company Group pursuant to Section 5.5(a), the Company shall pay to the
Newco Group the amount of any resulting Tax Deficiency (and shall have the
right to receive or retain any resulting Tax Refund) within ten days after
Newco has notified the Company that it has Actually Realized such Tax
Deficiency or after the Newco Group has Actually Realized such Tax Refund, as
the case may be.
(c) For purposes of determining when a party has Actually Realized a
Tax Deficiency under Section 5.5(b), in the event and to the extent Taxes
payable by that the Company or Newco, as the case may be, are not increased as
a result of including Tax Items in the nature of income attributable to the
Environmental Coverage Claims or the Health Care Claims because such Tax Items
are offset by losses, credits or other Tax Items of such party, such party
shall be deemed to have paid Taxes with respect to such offset Tax Items at the
highest applicable marginal rates.
5.6. B-1B Contracts.
(a) Tax Return Reporting. The Company Group shall report on its
Post-Tax Indemnification Period Income Tax Returns all Tax Items arising in
respect of the B-1B Contracts that are not reflected on the Company's Income
Tax Returns for any Tax Indemnification Period, shall pay all Taxes with
respect to such Tax Items and shall be entitled to all Tax Refunds attributable
to such Tax Items.
5.7. Research and Experimentation Credit. The Company Group hereby
consents to Newco pursuing its claim for Tax Refund in respect of Tax Returns
filed for the Tax Indemnification Period relating to the research and
experimentation tax credit.
<PAGE> 25
22
5.8. Foreign Subsidiaries.
(a) Distribution of Australian Subsidiary. Prior to the Distribution,
Rockwell Australia Limited ("Rockwell Australia") will be distributed to the
Company in a transaction intended to qualify as a transaction pursuant to
Section 355 of the Code. In the event that such transaction does not so qualify
and the Company Group sells or otherwise disposes of the stock of Rockwell
Australia, the Company shall pay to Newco, within 10 days after such Tax Refund
is Actually Realized by the Company, the amount of any Company Group Tax Refund
arising because such transaction failed to so qualify.
(b) Foreign Tax Credits, Subpart F Income and PFIC Income. In the
event that, during the period beginning on the Distribution Date and ending on
September 30, 1997, the Company Group engages in any transaction outside of the
ordinary course of business and such transaction (i) affects the foreign tax
credit computation with respect to any amount taken into income by the Company
Group with respect to Rockwell Australia and its subsidiaries for the Tax
Indemnification Period, (ii) increases the amount includible in the Company
Group's income pursuant to Section 951 et seq of the Code that is attributable
to the Company's ownership interest in Rockwell Australia and its subsidiaries
for the Tax Indemnification Period or (iii) increases the Company Group's Tax
pursuant to Section 1291 et seq of the Code that is attributable to the
Company's ownership interest in Rockwell Australia and its subsidiaries for the
Tax Indemnification Period, the Company shall pay to Newco any resulting
additional net Tax cost to the Newco Group for the Tax Indemnification Period
within ten days after notification by Newco that the Company Group has Actually
Realized such net Tax cost.
(c) In connection with the transactions contemplated under the
Business Acquisition Agreement, the Company Group will cooperate with Newco,
provide such information as Newco reasonably requests and take all actions as
reasonably requested by Newco to minimize the Taxes payable by the Company
Group or the Newco Group attributable to any action taken in connection with
such transactions including, but not limited to, consenting to the filing by
Newco for rollover relief.
5.9. Consent Solicitation; Repayment of Short-Term Debt.
<PAGE> 26
23
(a) Any net Income Tax cost attributable to cancellation of
indebtedness income ("CODI"), or net Income Tax benefit attributable to bond
retirement premium ("BRP") (determined in each case in a manner analogous to
the determination of an Income Tax Detriment and Income Tax Benefit,
respectively), recognized by the Company Group as a result of the transactions
described in Sections 3.1 and 5.18 of the Merger Agreement and/or a tender
offer by Acquiror for the outstanding notes of the Company (collectively, the
"Debt Refinancing") shall be for the account of Acquiror.
(b) The Company Group shall report any CODI or BRP resulting from the
Debt Refinancing as occurring in a Post-Tax Indemnification Period in
accordance with Treasury Regulation Section 1.1502-76(b)(ii)(B), unless the
relevant Taxing Authority will not accept a Tax Return on such basis.
ARTICLE VI
TAX INDEMNIFICATION; TAX CONTESTS
6.1. Indemnification.
(a) Newco Indemnification. Except as otherwise provided in Article V
or Section 6.1(b), Newco and the Newco Group shall be liable for and shall
indemnify, defend and hold harmless the members of the Company Group and
Acquiror and each of their respective affiliates and Representatives from and
against (A) all Taxes of the Company Group and the Newco Group for Pre-Merger
Taxable Periods other than the Company Group's allocable share of Allowable
Taxes for such Pre-Merger Taxable Periods, (B) all Taxes of the Company Group
and the Newco Group for the portion of any Straddle Period ending on the
Distribution Date other than the Company Group's allocable share of Allowable
Taxes for such portion of any such Straddle Period, (C) all Taxes of the Newco
Group for the portion of any Straddle Period beginning on the day after the
Distribution Date (calculated by treating the day after the Distribution Date
as the first day of a taxable period), (D) all Taxes of the Newco Group for
Post-Merger Taxable Periods, (E) all liability (as a result of Treasury
Regulation Section 1.1502-6(a) or otherwise) for Income Taxes of any person
(other than a member of the Company Group or the Newco Group) which is or has
ever been affiliated with any member of the Company Group or the Newco Group or
with which any member of the
<PAGE> 27
24
Company Group or the Newco Group joins or has ever joined (or is or has ever
been required to join) in filing any consolidated, combined or unitary Tax
Return for any Pre-Merger Taxable Period or Straddle Period, (F) the amount of
any California Tax Deficiency resulting from the receipt by the Company Group
of any Tax Refund attributable to any California Tax Credits, and the amount of
any other net Tax cost attributable to the California Tax Credits or any refund
thereof, (G) all Taxes for which Newco is liable pursuant to Article V or
Section 6.5, (H) any Transfer Taxes imposed in connection with or as a result
of the Contribution and/or the Distribution, and one-half of any Transfer Taxes
imposed in connection with or as a result of the Merger, (I) 50% of any Income
Taxes payable by the Company Group in any Post-Tax Indemnification Period with
respect to any long-term contract accounted for Federal income Tax purposes
pursuant to the "completed contract method" and/or the "percentage completion
method" of accounting to the extent attributable to Contract Profitability with
respect to such contract as of the Distribution Date, but only to the extent
such Contract Profitability exceeds $22 million in the aggregate, (J) all Taxes
for any taxable period (whether beginning before, on or after the Distribution
Date) that would not have been payable but for the breach by any member of the
Newco Group of any representation, warranty or obligation under this Agreement,
(K) all Taxes for any taxable period (whether beginning before, on or after the
Distribution Date) that would not have been payable but for the inaccuracy of
the representations and warranties contained in clauses (ix) or (xii) of
Section 4.1(l) or clause (xi) of Section 4.1(m) of the Merger Agreement or the
breach of the covenant contained in Section 5.1(n) of the Merger Agreement,
(L) all liability for Taxes resulting from the Contribution, Distribution and/or
Merger (including the transactions described in the last sentence of each of
Sections 2.1(a), 2.1(b), 2.2(a) and 2.2(b) of the Distribution Agreement), (but
not including any Taxes attributable to collateral consequences of such
transactions, such as a reassessment of Company property for property Tax
purposes resulting from the change in control incident to the Merger),
(M) all Taxes that would not have been imposed but for any reduction in the Tax
attributes (including without limitation, Tax loss carryovers and Tax basis in
stock) of any member of the Company Group that occurs as a result of the
transactions (other than the transfer of the stock of Rockwell Australia to the
Company referred to in Section 5.8(a)) contemplated under the Business
Acquisition Agreement (the "Rockwell Australia
<PAGE> 28
25
Reorganization") (such additional Taxes to be computed taking into account any
Tax benefit resulting from the Rockwell Australia Reorganization actually
realized by any member of the Company Group at or before the time such
additional Taxes are imposed, provided, however, that if any Tax benefit
resulting from the Rockwell Australia Reorganization is actually realized by
any member of the Company Group after the time such Taxes are imposed, the
Company Group shall reimburse Newco for the amount of any such reduction in
Taxes as a result therefrom, but not in excess of the amount previously paid by
the Newco Group pursuant to this Section 6.1(a)(M)), (N) all liability for
Taxes incurred by any member of the Company Group that would not have been
imposed except as a result of any action taken pursuant to Section 5.8(c), and
(O) all liability for any reasonable legal, accounting, appraisal, consulting
or similar fees and expenses relating to the foregoing. Notwithstanding the
foregoing, Newco shall not indemnify, defend or hold harmless any member of the
Company Group from any liability for Taxes, other than Taxes resulting from the
failure of the Contribution or Distribution to qualify as transactions
described in Sections 351 or 355 of the Code and/or as a "reorganization" under
Section 368(a)(1)(D) of the Code and the Merger as a "reorganization" pursuant
to Section 368(a)(1)(B) of the Code, resulting from any action taken by any
member of the Company Group on the Distribution Date after the Effective Time
(other than actions relating to the Debt Refinancing or in the ordinary course
of business) (a "Buyer Tax Act").
For purposes of clause (I) of the second preceding sentence, Newco's
indemnity obligation shall arise only at such time as the Company Group
Actually Realizes a Tax cost with respect to Contract Profitability in excess
of $22,000,000, which shall be deemed to occur only after the Company Group has
Actually Realized income items attributable to Contract Profitability with
respect to long-term contracts in existence on the Distribution Date in an
aggregate amount of $22,000,000.
(b) Company and Acquiror Indemnification. (i) Company
Indemnification. Except as otherwise provided in Article V or Section 6.1(a),
the Company shall be liable for and shall indemnify, defend and hold harmless
the Newco Group from and against (A) all Taxes of the Company Group for
Post-Merger Taxable Periods, (B) the Company Group's allocable share of
Allowable Taxes for Pre-Merger Taxable Periods and the portion of any Straddle
Period ending on the
<PAGE> 29
26
Distribution Date, (C) all Taxes of the Company Group for the portion of any
Straddle Period beginning on the day after the Distribution Date (calculated by
treating the day after the Distribution Date as the first day of a taxable
period), (D) all Taxes resulting from a Buyer Tax Act, (E) all Taxes for which
the Company is liable pursuant to Article V or Section 6.5, (F) all Taxes for
any taxable period (whether beginning before, on or after the Distribution
Date) that would not have been paid but for the breach by any member of the
Company Group of any representation, warranty or obligation under this
Agreement and (G) all liability for any reasonable legal, accounting,
appraisal, consulting or similar fees and expenses relating to the foregoing.
(ii) Acquiror Indemnification. Acquiror shall indemnify defend and
hold harmless Newco for one-half of any Transfer Taxes imposed in connection
with or as a result of the Merger.
(c) Payments. Subject to Section 6.6(b), any indemnity payment
required to be made pursuant to this Section 6.1 shall be paid within thirty
days after the indemnified party makes written demand upon the indemnifying
party, but in no case earlier than five business days prior to the date on
which the relevant Taxes are required to be paid (or would be required to be
paid if no such Taxes are due) to the relevant Taxing Authority (including
estimated Tax payments).
6.2. Notice of Indemnity. Whenever a party hereto (hereinafter an
"Indemnitee") becomes aware of the existence of an issue raised by any Taxing
Authority which could reasonably be expected to result in a determination that
would increase the liability for any Tax of the other party hereto or any
member of its Group for any Post-Tax Indemnification Period (in the case of the
Company Group) or for any Tax Indemnification Period (in the case of the Newco
Group) or require a payment hereunder to the other party (hereinafter an
"Indemnity Issue"), the Indemnitee shall in good faith promptly give notice to
such other party (hereinafter the "Indemnitor") of such Indemnity Issue. The
failure of any Indemnitee to give such notice shall not relieve any Indemnitor
of its obligations under this Agreement except to the extent such Indemnitor or
its affiliate is actually materially prejudiced by such failure to give notice.
<PAGE> 30
27
6.3. Tax Contests. The Indemnitor and its representatives, at the
Indemnitor's expense, shall be entitled to participate (A) in all conferences,
meetings or proceedings with any Taxing Authority, the subject matter of which
is or includes an Indemnity Issue and (B) in all appearances before any court,
the subject matter of which is or includes an Indemnity Issue. The party who
has responsibility for filing the Tax Return under this Agreement (the
"Responsible Party") with respect to which there could be an increase in
liability for any Tax or with respect to which a payment could be required
hereunder shall have the right to decide as between the parties hereto how such
matter is to be dealt with and finally resolved with the appropriate Taxing
Authority and shall control all audits and similar proceedings. If no Tax
Return is or was required to be filed in respect of an Indemnity Issue, the
Indemnitor shall be treated as the Responsible Party with respect thereto. The
Responsible Party agrees to cooperate in the settlement of any Indemnity Issue
with the other party and to take such other party's interests into account. If
the Indemnitor is not the Responsible Party, such cooperation may include
permitting the Indemnitor, at the Indemnitor's sole expense, to litigate or
otherwise resolve any Indemnity Issue. If Newco is the Responsible Party and if
either (x) the Taxes at issue in the aggregate may equal or exceed $50,000
(computed taking into account reasonably anticipated future year Tax costs on a
present value basis) or (y) the Indemnity Issue relates to the qualification of
the Contribution or the Distribution as transactions described in
Sections 351 and 355 of the Code and/or a "reorganization" within the meaning of
Section 368(a)(1)(D) of the Code or the Merger as a "reorganization" within the
meaning of Section 368(a)(1)(B) of the Code, (i) Newco shall not settle any such
Indemnity Issue without the prior written consent of the Acquiror, which consent
shall not be unreasonably withheld, (ii) the Acquiror, and counsel of its own
choosing, shall have the right to participate fully, at its own expense, in all
aspects of the defense of such Indemnity Issue, (iii) Newco shall inform the
Acquiror, reasonably promptly in advance, of the date, time and place of all
administrative and judicial meetings, conferences, hearings and other
proceedings relating to such Indemnity Issue, (iv) the Acquiror shall, at its
own expense, be entitled to have its representatives (including counsel,
accountants and consultants) attend and participate in any such administrative
and judicial meetings, conferences, hearings and other proceedings relating to
such Indemnity Issue, (v) Newco shall provide to the Acquiror all
<PAGE> 31
28
information, document requests and responses, proposed notices of deficiency,
notices of deficiency, revenue agent's reports, protests, petitions and any
other documents relating to such Indemnity Issue promptly upon receipt from, or
in advance of submission to (as the case may be), the relevant Taxing Authority
or courts and (vi) Newco shall not file or submit any protests, briefs,
responses, petitions or other documents relating to such Indemnity Issue with
such relevant Taxing Authority or courts without the prior written consent of
the Acquiror, which consent shall not be unreasonably withheld. Notwithstanding
any other provision of this Agreement, if Newco has materially satisfied its
obligations under this Agreement and if the Company fails to permit Newco to
control any Indemnity Issue relating to the qualification of the Contribution
and Distribution as transactions described in Sections 351 and 355 of the Code
and/or a "reorganization" within the meaning of Section 368(a)(1)(D) of the
Code or the qualification of the Merger as a "reorganization" within the
meaning of Section 368(a)(1)(B) of the Code, then Newco shall not be liable for
and shall not indemnify the Company Group for any Tax Deficiency resulting from
an adverse determination of such Indemnity Issue.
6.4. Timing Adjustments.
(a) Timing Differences. If a Tax Audit Proceeding or an amendment of
a Tax Return results in a Timing Difference, and such Timing Difference results
in a decrease in an indemnity obligation Newco has or would otherwise have
under Section 6.1 and/or an increase in the amount of a Tax Refund to which
Newco is entitled to under Section 3.2, then in each Post-Tax Indemnification
Period in which the Company Group Actually Realizes an Income Tax Detriment,
Newco shall pay to the Company an amount equal to such Income Tax Detriment;
provided, however, that the aggregate payments which Newco shall be required to
make under this Section 6.4(a) with respect to any Timing Difference shall not
exceed the aggregate amount of the Income Tax Benefits realized by the Newco
Group for all taxable periods and the Company Group for all Tax Indemnification
Periods as a result of such Timing Difference. Newco shall make all such
payments within ten days after the Company notifies Newco that the relevant
Income Tax Detriment has been Actually Realized.
(b) Reverse Timing Differences. If a Tax Audit proceeding or an
amendment of a Tax Return results in a
<PAGE> 32
29
Reverse Timing Difference, and such Reverse Timing Difference results in an
increase in an indemnity obligation of Newco under Section 6.1 and/or a
decrease in the amount of a Tax Refund to which Newco is or would otherwise be
entitled to under Section 3.2, then in each Post-Tax Indemnification Period in
which the Company Group Actually Realizes an Income Tax Benefit, the Company
shall pay to Newco within ten days after the Company has Actually Realized such
Income Tax Benefit an amount equal to such Income Tax Benefit; provided,
however, that the aggregate payments which the Company shall be required to
make under this Section 6.4(b) which respect to any Reverse Timing Difference
shall not exceed the aggregate amount of the Income Tax Detriments realized by
the Company Group and the Newco Group for all Tax Indemnification Periods as a
result of such Reverse Timing Difference.
6.5. Certain Post-Distribution Transactions.
(a) Consistent with Agreements. Newco shall, and shall cause each
Newco Group member to, comply with and take no action inconsistent with Newco's
Tax Representation Letter. Acquiror shall, and shall cause each member of the
Company Group to, comply with and take no action inconsistent with Acquiror's
Tax Representation Letter. The Newco Group, Acquiror and the Company Group
shall use their respective best efforts to have the Contribution and the
Distribution qualify as transactions described in Sections 351 and 355 of the
Code and/or a "reorganization" within the meaning of Section 368(a)(1)(D) of
the Code and to have the Merger qualify as a "reorganization" within the
meaning of Section 368(a)(1)(B) of the Code. The parties hereto intend that the
sole remedy for breach of the covenants contained in this Section 6.5(a) shall
be as set forth in Section 6.5(b) hereof.
(b) Tax-Free Reorganization Treatment. Acquiror and the Company agree
to indemnify and hold the Newco Group harmless from and against any Taxes
resulting from any Action (as hereinafter defined) which causes either the
Contribution and the Distribution to fail to qualify as transactions described
in Sections 351 and 355 of the Code and/or a "reorganization" within the
meaning of Section 368(a)(1)(D) of the Code or the Merger to qualify as a
"reorganization" within the meaning of Section 368(a)(1)(B) of the Code. An
"Action" shall mean any of the actions set forth on Schedule 6.5 hereof, taken
by Acquiror or the Company or any of their respective affiliates (other than
<PAGE> 33
30
the members of the Newco Group) within the two-year period following the
Distribution Date. Notwithstanding the foregoing, an Action shall not include
any transaction or action disclosed or described in Newco's Tax Representation
Letter or the Acquiror's Tax Representation Letter, or required or otherwise
contemplated by any Reorganization Agreement (or any agreement or document
included as an exhibit thereto), or of which the Company or Newco has actual
knowledge as of the Distribution Date. An Action shall not include any action
on the part of any member of the Newco Group, or any of their respective
shareholders, officers, directors or agents. Newco agrees to indemnify and hold
the Acquiror and the Company Group harmless from and against any Tax liability
resulting from or otherwise attributable to the Contribution and Distribution
failing to qualify under Sections 351 and 355 of the Code and/or a
"reorganization" under Section 368(a)(1)(D) of the Code or the Merger failing
to qualify as a "reorganization" under Section 368(a)(1)(B) of the Code, except
to the extent such Tax liability results from an Action. For purposes of this
Section 6.5(b), the amount of any Taxes resulting from an Action shall equal
the difference between (i) the Taxes actually paid with respect to the
Contribution, Distribution and the Merger and (ii) the greater of (x) the
amount of Taxes that would have been payable with respect to the Contribution
and Distribution if such transactions had qualified under Sections 351 and 355
of the Code and/or a "reorganization" under Section 368(a)(1)(D) of the Code
and the Merger if such transaction had qualified as a "reorganization" under
Section 368(a)(1)(B) and (y) the amount of Taxes that would have been payable
with respect to the Contribution, Distribution and the Merger in the absence of
such Action.
6.6. Payments Net of Taxes. (a) Gross-Up and Characterization. The
amount of any payment under this Agreement or under Section 2.1(b) of the
Post-Closing Covenants Agreement shall be (i) increased to take account of any
net Tax cost incurred by the recipient thereof as a result of the receipt or
accrual of payments hereunder (grossed-up for such increase) and (ii) reduced
to take account of any net Tax benefit realized by the recipient arising from
the incurrence or payment of any such payment, other than any such net Tax
benefit that the recipient is specifically entitled to retain pursuant to this
Agreement. In computing the amount of any such Tax cost or Tax benefit, the
recipient shall be deemed to recognize all other items of income, gain, loss,
deduction or credit before
<PAGE> 34
31
recognizing any item arising from the receipt or accrual of any payment
hereunder. Except as provided in Section 6.6(b), or unless the parties
otherwise agree to an alternative method for determining the present value of
any such anticipated Tax benefit or Tax cost, any payment hereunder shall
initially be made without regard to this Section and shall be increased or
reduced to reflect any such net Tax cost (including gross-up) or net Tax
benefit only after the recipient has Actually Realized such cost or benefit. It
is the intention of the parties that payments made pursuant to this Agreement
are to be treated as relating back to the Contribution as an adjustment to the
assets and liabilities contributed thereunder, and the parties shall not take
any position inconsistent with such intention before any Taxing Authority,
except to the extent that a final determination (as defined in Section 1313 of
the Code) with respect to the recipient party causes any such payment not to be
so treated.
(b) Time for Payment. Notwithstanding any other provision of this
Agreement, to simplify the administration of this Agreement, the payment of any
amount less than $25,000 required to be made pursuant to this Agreement by one
party hereto to another party hereto need not be made to such other party prior
to thirty days following the later of (i) the close of the calendar quarter
during which such payment obligation arose and (ii) the day during such
calendar quarter when the aggregate amount of all such less than $25,000
payment obligations arising during such calendar quarter exceeds $150,000.
Unless otherwise specified by the recipient for items exceeding $100,000, any
such payment may be made on a net Tax basis (i.e., reduced to take account of
any net Tax benefit to be realized by the recipient (computed at an effective
Tax rate to be agreed upon from time-to-time by the parties)) to the extent
such recipient is entitled to a corresponding deduction.
(c) Right to Offset. Any party making a payment under this Agreement
shall have the right to reduce any such payment by any amounts owed to it by
the other party to this Agreement.
<PAGE> 35
32
ARTICLE VII
COOPERATION AND EXCHANGE OF INFORMATION
7.1. Preparation of Returns. The Company shall, and shall cause each
appropriate member of the Company Group to, prepare and submit to Newco, at the
Company's expense, (i) no later than 120 days prior to the due date (taking
into account any extensions), but in no case earlier than 60 days after the
close of the relevant taxable period, for any Affiliated Group consolidated
Federal Tax Returns or any state, local or foreign combined or unitary
corporate Joint Tax Returns, all information that Newco shall reasonably
request, in such form as Newco shall have reasonably requested, to enable Newco
to file such Tax Returns and (ii) no later than 120 days prior to the due date
(taking into account any extensions), but in no case earlier than 60 days after
the close of the relevant taxable period, for any other Tax Return for
Pre-Merger Taxable Periods and Straddle Periods which Newco is responsible for
filing, all information that Newco shall reasonably request, in such form as
Newco shall have reasonably requested, to enable Newco to file such Tax
Returns.
7.2. Cooperation and Exchange of Information. Each party hereto, on
behalf of itself and its affiliates, agrees to provide the other party hereto
with such cooperation and information as such other party shall reasonably
request in connection with the preparation or filing of any Tax Return or claim
for Tax Refund not inconsistent with this Agreement or in conducting any audit
or other proceeding in respect to Taxes or to carry out the provisions of this
Agreement. To the extent necessary to carry out the purposes of this Agreement
and subject to the other provisions of this Agreement, such cooperation and
information shall include without limitation the non-exclusive designation of
an officer of Newco as an officer of the Company and Acquiror and each of their
affiliates for the purpose of signing Tax Returns, cashing refund checks,
pursuing refund claims, dealing with Taxing Authorities and defending audits as
well as promptly forwarding copies of appropriate notices and forms or other
communications received from or sent to any Taxing Authority which relate to
the Company Group for the Tax Indemnification Period and providing copies of
all relevant Tax Returns for the Tax Indemnification Period, together with
accompanying schedules and related workpapers, documents relating to rulings or
other determinations by
<PAGE> 36
33
Taxing Authorities, including without limitation, foreign Taxing Authorities,
and records concerning the ownership and Tax basis of property, which either
party may possess. Subject to the rights of the Company Group under the other
provisions of this Agreement, such officer shall have the authority to execute
powers of attorney (including Form 2848) on behalf of each member of the
Company Group with respect to Tax Returns and Taxes for the Tax Indemnification
Period. Each party to this Agreement shall make, or shall cause its affiliates
to make, their employees and facilities available on a mutually convenient
basis to provide an explanation of any documents or information provided
hereunder.
7.3. Record Retention. The Company and Newco agree to retain all Tax
Returns, related schedules and workpapers, and all material records and other
documents as required under Section 6001 of the Code and the regulations
promulgated thereunder relating thereto ("Tax Records") existing on the date
hereof or created through the Distribution Date, for 10 years from the
Distribution Date and (ii) allow the other parties to this Agreement and their
Representatives (and Representatives of any of its affiliates), at times and
dates reasonably acceptable to the retaining party, to inspect, review and make
copies of such records, and have access to such employees, as the Company and
Newco may reasonably deem necessary or appropriate from time to time, such
activities to be conducted during normal business hours and without disruption
to either of its businesses. At the end of the 10-year period described in
clause (i), the Company or Newco, as the case may be, shall transfer such
records (or cause such records to be transferred) to the other party (at such
other party's sole expense), unless such other party notifies the Company or
Newco, as the case may be, within 90 days prior to the expiration of the
10-year period, that such other party does not desire to receive such Tax
Records, in which case the Company or Newco, as the case may be, may destroy or
otherwise dispose of such undesired documents.
7.4. Notification of Certain Dispositions. Acquiror shall give Newco
at least 30 days prior written notice in the event that any time prior to
October 1, 2002 Rockwell Australia disposes of all or any portion of the
ownership interest in, or all or a substantial portion of the assets of, A.C.N.
004 471 078 Pty. Ltd. Such notice shall describe any such disposition in
sufficient detail to enable Newco (i) to comply with the requirements of
<PAGE> 37
34
Section 367 of the Code and applicable regulations thereunder and (ii) to enter
into a revised gain recognition agreement under Section 367 of the Code and the
applicable regulations if such disposition occurs in a transaction in which no
gain or loss is required to be recognized under U.S. income tax principles or
gain is recognized solely by reason of Section 357(c) of the Code.
ARTICLE VIII
MISCELLANEOUS
8.1. Entire Agreement. This Tax Allocation Agreement constitutes the
entire agreement, and supersedes all other prior agreements, understandings,
representations and warranties, both written and oral, among the parties, with
respect to the subject matter hereof and thereof.
8.2. Modification or Amendment. The parties hereto may modify or
amend this Agreement only by written agreement executed and delivered by duly
authorized officers of the respective parties. Anything in this Agreement or
any other Reorganization Agreement to the contrary notwithstanding, in the
event and to the extent that there shall be a conflict between the provisions
of this Agreement and any other Reorganization Agreement, the provisions of
this Agreement shall control.
8.3. Notices. Any notice, request, instruction or other communication
to be given hereunder by any party to any other party shall be in writing and
shall be deemed to have been duly given (i) on the date of delivery if
delivered personally, or by telecopy or telefacsimile, upon confirmation of
receipt, (ii) on the first business day following the date of dispatch if
delivered by Federal Express or other nationally reputable next-day courier
service, or (iii) on the third business day following the date of mailing if
delivered by registered or certified mail, return receipt requested, postage
prepaid. All notices hereunder shall be delivered as set forth below, or
<PAGE> 38
35
pursuant to such other instructions as may be designated in writing by the
party to receive such notice:
(a) If to Newco:
NEW ROCKWELL INTERNATIONAL CORPORATION
2201 Seal Beach Boulevard
Seal Beach, California 90740-8250
Attention: William J. Calise, Jr., Esq.
Senior Vice President, General Counsel
and Secretary
Telecopy: (310) 797-5687
with copies to:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Peter R. Kolyer, Esq.
Telecopy: (212) 541-5369
(b) if to Acquiror or the Company:
The Boeing Company
P.O. Box 3707
M/S 13-08
Seattle, Washington 98124-2207
Attention: Theodore J. Collins
Vice President & General Counsel
Telecopy: (206) 544-4900
with copies to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Allen Finkelson, Esq.
Telecopy: (212) 474-3700
8.4. No Third Party Beneficiaries. Except as otherwise expressly
provided herein, nothing contained in this Agreement is intended to confer upon
any person or entity other than the parties hereto and their respective
successors and permitted assigns, any benefit, right or remedies under or by
reason of this Agreement.
<PAGE> 39
36
8.5. Assignment. No party to this Agreement shall convey, assign or
otherwise transfer any of its rights or obligations under this Agreement
without the express written consent of the other parties hereto in their sole
and absolute discretion. Any such conveyance, assignment or transfer without
the express written consent of the other parties shall be void ab initio. No
assignment of this Agreement shall relieve the assigning party of its
obligations hereunder.
8.6. Term. This Agreement shall commence on the date of execution
indicated below and shall continue in effect until otherwise agreed to in
writing by Newco and the Company, or their successors.
8.7. Captions. The Article, Section and paragraph captions herein are
for convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
8.8. Severability. If any provision of this Agreement or the
application thereof to any person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby, so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon any such determination, the parties shall negotiate
in good faith in an effort to agree upon a suitable and equitable substitute
provision to effect the original intent of the parties.
8.9. Specific Performance. In the event of any actual or threatened
default in, or breach of, any of the terms, conditions and provisions of this
Agreement, the party or parties who are or are to be thereby aggrieved shall
have the right of specific performance and injunctive relief giving effect to
its or their rights under this Agreement, in addition to any and all other
rights and remedies at law or in equity, and all such rights and remedies shall
be cumulative. The parties agree that the remedies at law for any breach or
threatened breach, including monetary damages, are inadequate compensation for
<PAGE> 40
37
any loss and that any defense in any action for specific performance that a
remedy at law would be adequate is waived.
8.10. Counterparts. For the convenience of the parties, this
Agreement may be executed in any number of separate counterparts, each such
counterpart being deemed to be an original instrument, and all such
counterparts shall together constitute the same agreement.
8.11. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York
applicable to contracts made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.
8.12. Agent. Any consent rights of members of the Newco Group under
this Agreement shall be exercised by Newco on behalf of the Newco Group, and
any notices given by the Company Group to Newco shall be deemed to be given to
each member of the Newco Group. Any consent rights of the Company Group under
this Agreement shall be exercised by Acquiror on behalf of the Company Group,
and any notices given by Newco to Acquiror shall be deemed to be given to each
member of the Company Group.
<PAGE> 41
38
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto on the date
first hereinabove written.
ROCKWELL INTERNATIONAL CORPORATION
By: /s/ WILLIAM J. CALISE, JR.
----------------------------------
Name: William J. Calise
Title: Senior Vice President
NEW ROCKWELL INTERNATIONAL CORPORATION
By: /s/ WILLIAM J. CALISE, JR.
----------------------------------
Name: William J. Calise
Title: Senior Vice President
THE BOEING COMPANY
By: /s/ PHILIP M. CONDIT
----------------------------------
Name: Philip M. Condit
Title: President and Chief
Executive Officer
<PAGE> 1
Exhibit 10(e)
ROCKWELL INTERNATIONAL CORPORATION
1995 LONG-TERM INCENTIVES PLAN
RESTRICTED STOCK AGREEMENT
To:
In accordance with Section 7 of the 1995 Long-Term Incentives Plan, as
amended (the Plan), of Rockwell International Corporation (Rockwell), _______
shares (Restricted Shares) of Common Stock of Rockwell have been granted to you
today as restricted stock upon the terms and conditions of this Restricted
Stock Agreement, subject in all respects to the provisions of the Plan, as it
may be amended. Capitalized terms used in this Agreement and not otherwise
defined herein shall have the respective meanings ascribed to them in the Plan.
1. Restricted Period; Earning of Restricted Shares
(a) The Restricted Period applicable to the Restricted Shares shall
end on the January 1 immediately following your attainment of age 62 or such
later age (not more than age 67) to which the Committee shall from time to
time have requested, prior to your attainment of age 62 (or such later age
as to which it shall have previously requested), that you remain in service
as an Employee.
(b) If (i) you shall continue as an Employee throughout the Restricted
Period; or (ii) you shall die or suffer a disability that shall continue for
a continuous period of at least six months prior to your attainment of age
62 (or the later age prescribed pursuant to paragraph (a) of this Section);
(iii) you shall retire after December 8, 1997 under a retirement plan of the
Corporation at or after attaining age 62 or accumulating 85 points (or
fulfilling such other criteria as may be required for an unreduced early
retirement benefit) for purposes of the applicable retirement plan; or (iv)
a "Change of Control" (as defined for purposes of Article III, Section
13(I)(1) of Rockwell's By-Laws) shall have occurred and the Board of
Directors shall not have determined prior thereto that the restrictions on
the Restricted Shares should continue notwithstanding the occurrence
thereof; then you shall be deemed to have fully earned all the Restricted
Shares subject to this Agreement.
(c) If you cease to be an Employee prior to satisfaction of any of the
conditions set forth in paragraph (b) of this Section, you shall be deemed
not to have earned any of the Restricted Shares and shall have no further
rights with respect to the Restricted Shares, or any Dividends (as
hereinafter defined) thereon, or any other proceeds thereof.
2. Retention of Certificates for Restricted Shares and Dividends
Certificates for the Restricted Shares and any dividends or distributions
thereon or in respect thereof (Dividends), whether in cash or otherwise
(including but not limited to additional shares of Common Stock or other
securities of Rockwell or securities of another entity, any such shares or
other securities being collectively referred to
<PAGE> 2
2
herein as Stock Dividends), shall be delivered to and held by Rockwell, or
shall be registered in book entry form subject to Rockwell's instructions,
until you shall have earned the Restricted Shares in accordance with the
provisions of Section 1. To facilitate implementation of the provisions of
this Agreement, you undertake to sign and deposit with Rockwell's Office of
the Secretary (i) a Stock Transfer Power in the form of ATTACHMENT 1 hereto
with respect to the Restricted Shares and any Stock Dividends thereon; (ii)
a Dividend Order in the form of ATTACHMENT 2 hereto with respect to
dividends (whether payable in cash or as Stock Dividends) or other
distributions on the Restricted Shares; and (iii) such other documents
appropriate to effectuate the purpose and intent of this Restricted Stock
Agreement as Rockwell may reasonably request from time to time.
3. Voting Rights
Notwithstanding the retention by Rockwell of certificates (or the right to
give instructions with respect to shares held in book entry form) for the
Restricted Shares and any Stock Dividends, you shall be entitled to vote the
Restricted Shares and any Stock Dividends held by Rockwell (or subject to
its instructions) in accordance with Section 2, unless and until such shares
have been forfeited in accordance with Section 5.
4. Delivery of Earned Restricted Shares
As promptly as practicable after you shall have been deemed to have earned
the Restricted Shares in accordance with Section 1, Rockwell shall deliver
to you (or in the event of your death, to your estate or any person who
acquires your interest in the Restricted Shares by bequest or inheritance)
the Restricted Shares, together with any Dividends then held by Rockwell (or
subject to its instructions) and interest on the amount of Dividends paid in
cash as provided in Section 7(b) of the Plan.
5. Forfeiture of Unearned Restricted Shares and Dividends
Notwithstanding any other provision of this Agreement, if at any time it
shall become impossible for you to earn any of the Restricted Shares in
accordance with this Agreement, all the Restricted Shares, together with any
Dividends, then being held by Rockwell (or subject to its instructions) in
accordance with Section 2 shall be forfeited, and you shall have no further
rights of any kind or nature with respect thereto. Upon any such forfeiture,
the Restricted Shares, together with any Dividends, shall be transferred to
Rockwell.
6. Adjustments
If there shall be any change in or affecting Shares on account of any
merger, consolidation, reorganization, recapitalization, reclassification,
stock dividend, stock split or combination, or other distribution to holders
of Shares (other than a cash dividend), there shall be made or taken such
amendments to this Agreement or the Restricted Shares as the Board of
Directors may deem appropriate under the circumstances.
<PAGE> 3
3
7. Transferability
This grant is not transferable by you otherwise than by will or by the laws
of descent and distribution, and the Restricted Shares, and any Dividends
shall be deliverable, during your lifetime, only to you.
8. Withholding
Rockwell shall have the right, in connection with the delivery of the
Restricted Shares and any Dividends (and interest thereon) subject to this
Agreement, (i) to deduct from any payment otherwise due by Rockwell to you
or any other person receiving delivery of the Restricted Shares and any
Dividends (and interest thereon) an amount equal to any taxes required to be
withheld by law with respect to such delivery, (ii) to require you or any
other person receiving such delivery to pay to it an amount sufficient to
provide for any such taxes so required to be withheld or (iii) to sell such
number of the Restricted Shares and any Stock Dividends as may be necessary
so that the net proceeds of such sale shall be an amount sufficient to
provide for any such taxes so required to be withheld.
9. Applicable Law
This Agreement and Rockwell's obligation to deliver Restricted Shares and
any Stock Dividends hereunder shall be governed by and construed and
enforced in accordance with the laws of Delaware and the Federal law of the
United States.
ROCKWELL INTERNATIONAL CORPORATION
By
-----------------------------------------
Attachment 1 - Stock Transfer Power
Dated: December , 1996
Agreed to this ____ day of December, 1996
-------------------------------------
Address:
Social Security No.:
<PAGE> 4
ATTACHMENT 1
STOCK TRANSFER POWER SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, I, ______________, hereby sell, assign and
transfer unto Rockwell International Corporation (Rockwell) (i) the _______
shares (the Shares) of the Common Stock of Rockwell standing in my name on
the books of Rockwell evidenced by book entry dated December 9, 1996,
granted to me on that date as Restricted Shares pursuant to Rockwell's 1995
Long-Term Incentives Plan, as amended, and (ii) any additional shares of
Rockwell's Common Stock, other securities issued by Rockwell or securities
of another entity (Stock Dividends) distributed, paid or payable on or in
respect of the Shares and Stock Dividends during the period the Shares and
Stock Dividends are held by Rockwell pursuant to a certain Restricted Stock
Agreement dated December 9, 1996, with respect to the Shares; and I do
hereby irrevocably constitute and appoint ______________________________,
attorney with full power of substitution in the premises to transfer the
Shares on the books of Rockwell.
Dated: December ___, 1996
------------------------------
(Signature)
WITNESS:
----------------------------
<PAGE> 5
ATTACHMENT 2
Send To:
-----------------------------------------------------------
-----------------------------------------------------------
D I V I D E N D O R D E R
Date:
-------------------
Until this order shall be revoked in writing by the undersigned with the
written consent of the Secretary or an Assistant Secretary of Rockwell
International Corporation, please comply with the following instructions with
respect to the payment of all dividends or other distributions on all shares of
Common Stock of Rockwell International Corporation:
REGISTERED AS FOLLOWS:
---------------------------------------
c/o Office of the Secretary, Room 1402
625 Liberty Avenue
Pittsburgh, PA 15222
Tax Identification No.:
Account Key:
DIVIDEND CHECKS and all rights, stock dividends, notices and other
communications (other than proxy statements and proxies) pertaining to the
above account are to be payable to and mailed as follows:
Office of the Secretary, Room 1402
625 Liberty Avenue
Pittsburgh, PA 15222
All proxy statements, proxies and related materials pertaining to the above
account are to be mailed to the undersigned at the following address:
THIS ORDER MUST BE SIGNED BY ALL REGISTERED OWNERS:
- - ----------------------------- --------------------------------
SIGNATURE(S) GUARANTEED:
ROCKWELL INTERNATIONAL CORPORATION
By:
-----------------------------------
Assistant Secretary
<PAGE> 1
Exhibit 10(f)
ROCKWELL INTERNATIONAL CORPORATION
RESTRICTED STOCK AGREEMENT
To:
In accordance with Sections 6 and 9 of the Directors Stock Plan, as
amended, of Rockwell International Corporation (the Corporation) and your
election pursuant thereto dated December 5, 1996, _____ shares of Common Stock
of the Corporation have been granted to you today as restricted stock in lieu
of the retainer fees payable to you on January 2, 1997 in respect of your
service on the Board of Directors (the Board) of the Corporation and the Board
Committees on which you serve, valued at the closing price on the New York
Stock Exchange -- Composite Transactions (Closing Price) on January 2, 1997 and
additional such shares shall be granted to you as restricted stock as follows:
(i) On February 5, 1997, ____ shares in respect of your continuing service on
the Board of Directors; and
(ii) On April 1, 1997, July 1, 1997, and October 1, 1997, in lieu of the
retainer fees otherwise payable to you on those respective dates in
respect of your service on the Board and Committees thereof on which you
serve, the number of shares whose value (based on the Closing Price on
those respective dates) equals the amount of retainer fees then otherwise
payable to you.
In this Restricted Stock Agreement, the shares granted today and to be granted
on the respective future dates set forth above, are collectively called
Restricted Shares.
The Restricted Shares have been or will be granted to you upon the
following terms and conditions:
1. Earning of Restricted Shares
(a) If (i) you shall continue as a director of the Corporation until
you retire from the Board of Directors (the Board) of the Corporation
under the Board's retirement policy; or (ii) you shall resign from the
Board or cease to be a director of the Corporation by reason of the
antitrust laws, compliance with the Corporation's conflict of interest
policies, death or disability, then you shall be deemed to have fully
earned all the Restricted Shares subject to this Restricted Stock
Agreement.
(b) If you resign from the Board or cease to be a director of the
Corporation for any other reason, you shall be deemed not to have earned
any of the Restricted Shares and shall have no further rights with respect
thereto unless the Board of Directors shall determine, in its sole
discretion, that you have resigned from the Board or ceased to be a
director by reason of circumstances that the Board determines not to be
adverse to the best interests of the Corporation.
<PAGE> 2
2
2. Retention of Certificates for Restricted Shares
Certificates for the Restricted Shares and any dividends or distributions
thereon or in respect thereof that may be paid in additional shares of
Common Stock, other securities of the Corporation or securities of another
entity (Stock Dividends) shall be delivered to and held by the Corporation,
or shall be registered in book entry form subject to the Corporation's
instructions, until you shall have earned the Restricted Shares in
accordance with the provisions of paragraph 1. To facilitate implementation
of the provisions of this Restricted Stock Agreement, you undertake to sign
and deposit with the Corporation's Office of the Secretary (a) a Stock
Transfer Power in the form of Attachment 1 hereto with respect to the
Restricted Shares and any Stock Dividends thereon and (b) such other
documents appropriate to effectuate the purpose and intent of this
Restricted Stock Agreement as the Corporation may reasonably request from
time to time.
3. Dividends and Voting Rights
Notwithstanding the retention by the Corporation of certificates (or the
right to give instructions with respect to shares held in book entry form)
for the Restricted Shares and any Stock Dividends, you shall be entitled to
receive any dividends that may be paid in cash on, and to vote, the
Restricted Shares and any Stock Dividends held by the Corporation (or
subject to its instructions) in accordance with paragraph 2, unless and
until such shares have been forfeited in accordance with paragraph 5.
4. Delivery of Earned Restricted Shares
As promptly as practicable after you shall have been deemed to have earned
the Restricted Shares in accordance with paragraph 1, the Corporation shall
deliver to you (or in the event of your death, to your estate or any person
who acquires your interest in the Restricted Shares by bequest or
inheritance) the Restricted Shares, together with any Stock Dividends then
held by the Corporation (or subject to its instructions).
5. Forfeiture of Unearned Restricted Shares
Notwithstanding any other provision of this Restricted Stock Agreement, if
at any time it shall become impossible for you to earn any of the Restricted
Shares in accordance with this Restricted Stock Agreement, all the
Restricted Shares, together with any Stock Dividends, then being held by the
Corporation (or subject to its instructions) in accordance with paragraph 2
shall be forfeited, and you shall have no further rights of any kind or
nature with respect thereto. Upon any such forfeiture, the Restricted
Shares, together with any Stock Dividends, shall be transferred to Rockwell.
6. Transferability
This grant is not transferable by you otherwise than by will or by the laws
of descent and distribution, and the Restricted Shares and any Stock
Dividends shall be deliverable, during your lifetime, only to you.
<PAGE> 3
3
7. Investment Intent
By your acceptance of this Restricted Stock Agreement, you confirm that you
are acquiring the Restricted Shares for investment and not with a view to
their resale in a distribution within the meaning of the Securities Act of
1933.
8. Withholding
The Corporation shall have the right, in connection with the delivery of the
Restricted Shares and any Stock Dividends subject to this Restricted Stock
Agreement, (i) to deduct from any payment otherwise due by the Corporation
to you or any other person receiving delivery of the Restricted Shares and
any Stock Dividends an amount equal to any taxes required to be withheld by
law with respect to such delivery, (ii) to require you or any other person
receiving such delivery to pay to it an amount sufficient to provide for any
such taxes so required to be withheld or (iii) to sell such number of the
Restricted Shares and any Stock Dividends as may be necessary so that the
net proceeds of such sale shall be an amount sufficient to provide for any
such taxes so required to be withheld.
9. Applicable Law
This Restricted Stock Agreement and the Corporation's obligation to deliver
Restricted Shares and any Stock Dividends hereunder shall be governed by and
construed and enforced in accordance with the laws of Delaware and the
Federal law of the United States.
ROCKWELL INTERNATIONAL CORPORATION
By:_______________________________________
W. J. Calise, Jr.
Senior Vice President, General Counsel
and Secretary
Attachment 1 - Stock Transfer Power
Dated: January 2, 1997
Agreed to as of the 2nd day of January, 1997
--------------------------------------
Address:
Social Security No.:
<PAGE> 4
Attachment 1
STOCK TRANSFER POWER SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, I, ________________________ hereby sell, assign and
transfer unto Rockwell International Corporation (i) the ____ shares (the
Granted Shares) of the Common Stock of Rockwell International Corporation (the
Corporation) standing in my name on the books of the Corporation evidenced by
book entry dated January 2, 1997, granted to me on that date as Restricted
Shares pursuant to the Corporation's Directors Stock Plan, as amended; (ii) the
additional shares (together with the Granted Shares, the Shares) of the Common
Stock of the Corporation to be granted to me on February 5, 1997, April 1,
1997, July 1, 1997 and October 1, 1997 as Restricted Shares pursuant to the
Corporation's Directors Stock Plan, as amended, and to be registered in my name
on the books of the Corporation and evidenced by book entries dated those
respective dates; and (iii) any additional shares of the Corporation's Common
Stock, other securities issued by the Corporation or securities of another
entity (Stock Dividends) distributed, paid or payable on or in respect of the
Shares and Stock Dividends during the period the Shares and Stock Dividends are
held by the Corporation pursuant to a certain Restricted Stock Agreement dated
January 2, 1997, with respect to the Shares; and I do hereby irrevocably
constitute and appoint ______________________________, attorney with full power
of substitution in the premises to transfer the Shares on the books of the
Corporation.
Dated: January __, 1997
------------------------------
(Signature)
WITNESS:
- - ----------------------------
<PAGE> 5
ROCKWELL INTERNATIONAL CORPORATION
RESTRICTED STOCK AGREEMENT
To:
In accordance with Section 6 of the Directors Stock Plan, as amended, of
Rockwell International Corporation (the Corporation) and your election pursuant
thereto dated December 5, 1996, ____ shares (Restricted Shares) of Common Stock
of the Corporation have been granted to you today as restricted stock in
respect of your continuing service as a director of the Corporation.
These Restricted Shares have been granted to you today upon the following
terms and conditions:
1. Earning of Restricted Shares
(a) If (i) you shall continue as a director of the Corporation until
you retire from the Board of Directors (the Board) of the Corporation under
the Board's retirement policy; or (ii) you shall resign from the Board or
cease to be a director of the Corporation by reason of the antitrust laws,
compliance with the Corporation's conflict of interest policies, death or
disability, then you shall be deemed to have fully earned all the Restricted
Shares subject to this Restricted Stock Agreement.
(b) If you resign from the Board or cease to be a director of the
Corporation for any other reason, you shall be deemed not to have earned any
of the Restricted Shares and shall have no further rights with respect
thereto unless the Board of Directors shall determine, in its sole
discretion, that you have resigned from the Board or ceased to be a director
by reason of circumstances that the Board determines not to be adverse to
the best interests of the Corporation.
2. Retention of Certificates for Restricted Shares
Certificates for the Restricted Shares and any dividends or distributions
thereon or in respect thereof that may be paid in additional shares of
Common Stock, other securities of the Corporation or securities of another
entity (Stock Dividends) shall be delivered to and held by the Corporation,
or shall be registered in book entry form subject to the Corporation's
instructions, until you shall have earned the Restricted Shares in
accordance with the provisions of paragraph 1. To facilitate implementation
of the provisions of this Restricted Stock Agreement, you undertake to sign
and deposit with the Corporation's Office of the Secretary (a) a Stock
Transfer Power in the form of Attachment 1 hereto with respect to the
Restricted Shares and any Stock Dividends thereon and (b) such other
documents appropriate to effectuate the purpose and intent of this
Restricted Stock Agreement as the Corporation may reasonably request from
time to time.
<PAGE> 6
2
3. Dividends and Voting Rights
Notwithstanding the retention by the Corporation of certificates (or the
right to give instructions with respect to shares held in book entry form)
for the Restricted Shares and any Stock Dividends, you shall be entitled to
receive any dividends that may be paid in cash on, and to vote, the
Restricted Shares and any Stock Dividends held by the Corporation (or
subject to its instructions) in accordance with paragraph 2, unless and
until such shares have been forfeited in accordance with paragraph 5.
4. Delivery of Earned Restricted Shares
As promptly as practicable after you shall have been deemed to have earned
the Restricted Shares in accordance with paragraph 1, the Corporation shall
deliver to you (or in the event of your death, to your estate or any person
who acquires your interest in the Restricted Shares by bequest or
inheritance) the Restricted Shares, together with any Stock Dividends then
held by the Corporation (or subject to its instructions).
5. Forfeiture of Unearned Restricted Shares
Notwithstanding any other provision of this Restricted Stock Agreement, if
at any time it shall become impossible for you to earn any of the Restricted
Shares in accordance with this Restricted Stock Agreement, all the
Restricted Shares, together with any Stock Dividends, then being held by the
Corporation (or subject to its instructions) in accordance with paragraph 2
shall be forfeited, and you shall have no further rights of any kind or
nature with respect thereto. Upon any such forfeiture, the Restricted
Shares, together with any Stock Dividends, shall be transferred to Rockwell.
6. Transferability
This grant is not transferable by you otherwise than by will or by the laws
of descent and distribution, and the Restricted Shares and any Stock
Dividends shall be deliverable, during your lifetime, only to you.
7. Investment Intent
By your acceptance of this Restricted Stock Agreement, you confirm that you
are acquiring the Restricted Shares for investment and not with a view to
their resale in a distribution within the meaning of the Securities Act of
1933.
8. Withholding
The Corporation shall have the right, in connection with the delivery of the
Restricted Shares and any Stock Dividends subject to this Restricted Stock
Agreement, (i) to deduct from any payment otherwise due by the Corporation
to you or any other person receiving delivery of the Restricted Shares and
any Stock Dividends an amount equal to any taxes required to be withheld by
<PAGE> 7
3
law with respect to such delivery, (ii) to require you or any other person
receiving such delivery to pay to it an amount sufficient to provide for any
such taxes so required to be withheld or (iii) to sell such number of the
Restricted Shares and any Stock Dividends as may be necessary so that the
net proceeds of such sale shall be an amount sufficient to provide for any
such taxes so required to be withheld.
9. Applicable Law
This Restricted Stock Agreement and the Corporation's obligation to deliver
Restricted Shares and any Stock Dividends hereunder shall be governed by and
construed and enforced in accordance with the laws of Delaware and the
Federal law of the United States.
ROCKWELL INTERNATIONAL CORPORATION
By:_______________________________________
W. J. Calise, Jr.
Senior Vice President, General Counsel
and Secretary
Attachment 1 - Stock Transfer Power
Dated: February 5, 1997
Agreed to this 5th day of February, 1997
----------------------------------------------
Address:
Social Security No.:
<PAGE> 8
Attachment 1
STOCK TRANSFER POWER SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, I _____________________, hereby sell, assign and
transfer unto Rockwell International Corporation (i) the ____ shares (the
Shares) of the Common Stock of Rockwell International Corporation (the
Corporation) standing in my name on the books of the Corporation evidenced by
book entry dated February 5, 1997, granted to me on that date as Restricted
Shares pursuant to the Corporation's Directors Stock Plan, as amended, and (ii)
any additional shares of the Corporation's Common Stock, other securities
issued by the Corporation or securities of another entity (Stock Dividends)
distributed, paid or payable on or in respect of the Shares and Stock Dividends
during the period the Shares and Stock Dividends are held by the Corporation
pursuant to a certain Restricted Stock Agreement dated February 5, 1997, with
respect to the Shares; and I do hereby irrevocably constitute and appoint
______________________________, attorney with full power of substitution in the
premises to transfer the Shares on the books of the Corporation.
Dated: February 5, 1997
------------------------------
(Signature)
WITNESS:
- - ----------------------------
<PAGE> 1
Exhibit 12
ROCKWELL INTERNATIONAL CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
THREE MONTHS ENDED DECEMBER 31, 1996
(In millions, except ratio)
<TABLE>
<S> <C>
EARNINGS AVAILABLE FOR FIXED CHARGES:
Income from continuing operations before income taxes....... $ 290
Adjustments:
Undistributed income of affiliates....................... (3)
Minority interest in loss of subsidiaries................ 3
------
290
------
Add fixed charges included in earnings:
Interest expense......................................... 5
Interest element of rentals.............................. 15
------
20
------
Total earnings available for fixed charges.................. $ 310
======
FIXED CHARGES:
Fixed charges included in earnings.......................... $ 20
Capitalized interest........................................ 3
------
Total fixed charges...................................... $ 23
======
RATIO OF EARNINGS TO FIXED CHARGES (1)......................... 13
======
</TABLE>
(1) In computing the ratio of earnings to fixed charges, earnings are defined
as income from continuing operations before income taxes adjusted for
minority interest in income or loss of subsidiaries, undistributed earnings
of affiliates, and fixed charges exclusive of capitalized interest. Fixed
charges consist of interest on borrowings and that portion of rentals
deemed representative of the interest factor.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER
31, 1996 CONSOLIDATED BALANCE SHEET, STATEMENT OF CONSOLIDATED INCOME FOR THE
THREE MONTHS ENDED DECEMBER 31, 1996 AND NOTES TO FINANCIAL STATEMENTS AND IS
QUALIFIED IN IT ENTIRETY BT REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> DEC-31-1996
<CASH> 853
<SECURITIES> 0
<RECEIVABLES> 1,633
<ALLOWANCES> 110
<INVENTORY> 1,795
<CURRENT-ASSETS> 4,966
<PP&E> 2,638
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,675
<CURRENT-LIABILITIES> 2,649
<BONDS> 163
0
0
<COMMON> 219
<OTHER-SE> 5,258
<TOTAL-LIABILITY-AND-EQUITY> 9,675
<SALES> 2,608
<TOTAL-REVENUES> 2,628
<CGS> 1,947
<TOTAL-COSTS> 2,338
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5
<INCOME-PRETAX> 290
<INCOME-TAX> 111
<INCOME-CONTINUING> 179
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 179
<EPS-PRIMARY> .82
<EPS-DILUTED> .81
</TABLE>
