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 March 31, 1998
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.)
600 Anton Boulevard, Suite 700, P.O. Box 5090, Costa Mesa, CA 92628-5090
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code (714) 424-4565
(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
196,508,777 shares of registrant's Common Stock, $1.00 par value, were
outstanding on April 30, 1998.
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
INDEX
PART I. FINANCIAL INFORMATION:
Item 1. Consolidated Financial Statements:
Page
No.
Condensed Consolidated Balance Sheet--
March 31, 1998 and September 30, 1997.......... 2
Consolidated Statement of Income--Three Months
and Six Months Ended March 31, 1998 and 1997... 3
Consolidated Statement of Cash Flows--
Six Months Ended March 31, 1998 and 1997....... 4
Notes to Consolidated Financial Statements..... 5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations.................................. 10
Item 3. Quantitative and Qualitative Disclosures
About Market Risk.............................. 14
PART II. OTHER INFORMATION:
Item 2. Changes in Securities and Use of Proceeds...... 15
Item 4. Submission of Matters to a Vote of Security
Holders........................................ 15
Item 5. Other Information.............................. 15
Item 6. Exhibits and Reports on Form 8-K............... 16
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
ROCKWELL INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions)
(Unaudited)
<TABLE>
<CAPTION>
March 31 September 30
1998 1997
ASSETS
<S> <C> <C>
Current assets:
Cash........................................... $ 272 $ 283
Receivables (less allowance for doubtful
accounts: March 31, 1998, $66;
September 30, 1997, $62)..................... 1,274 1,319
Inventories.................................... 1,699 1,526
Deferred income taxes.......................... 249 254
Other current assets........................... 286 302
Total current assets................... 3,780 3,684
Net property...................................... 2,298 2,245
Intangible assets................................. 1,805 1,789
Other assets...................................... 240 253
TOTAL.................... $ 8,123 $ 7,971
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Short-term debt................................ $ 84 $ 66
Accounts payable............................... 774 840
Accrued compensation and benefits.............. 422 436
Accrued income taxes........................... 43 96
Other current liabilities...................... 530 532
Total current liabilities.............. 1,853 1,970
Long-term debt.................................... 907 156
Accrued retirement benefits....................... 775 795
Other liabilities................................. 231 239
Total liabilities............. 3,766 3,160
Shareowners' equity:
Common Stock (shares issued: 216.4)............ 216 216
Additional paid-in capital..................... 917 901
Retained earnings.............................. 4,447 4,409
Currency translation........................... (116) (103)
Common Stock in treasury, at cost (shares held:
March 31, 1998, 18.9;
September 30, 1997, 9.6)..................... (1,107) (612)
Total shareowners' equity..... 4,357 4,811
TOTAL.................... $ 8,123 $ 7,971
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenues:
Sales........................... $ 1,941 $ 1,899 $ 3,920 $ 3,752
Other income.................... 24 20 49 38
Total revenues................ 1,965 1,919 3,969 3,790
Costs and expenses:
Cost of sales................... 1,408 1,325 2,810 2,610
Selling, general, and
administrative................ 381 339 737 675
Purchased research and
development................... - - 103 -
Interest........................ 13 6 17 10
Total costs and expenses...... 1,802 1,670 3,667 3,295
Income from continuing operations
before income taxes............. 163 249 302 495
Provision for income taxes........ 54 94 104 186
INCOME FROM CONTINUING
OPERATIONS...................... 109 155 198 309
Income from discontinued
operations...................... - 34 - 59
NET INCOME ....................... $ 109 $ 189 $ 198 $ 368
Basic earnings per share:
Continuing operations.......... $ 0.55 $ 0.72 $ 0.98 $ 1.42
Discontinued operations........ - 0.15 - 0.27
Net income..................... $ 0.55 $ 0.87 $ 0.98 $ 1.69
Diluted earnings per share:
Continuing operations.......... $ 0.53 $ 0.71 $ 0.96 $ 1.40
Discontinued operations........ - 0.14 - 0.26
Net income..................... $ 0.53 $ 0.85 $ 0.96 $ 1.66
Cash dividends per share.......... $ 0.25 $ 0.29 $ 0.51 $ 0.58
Average outstanding shares
Basic.......................... 200.2 216.2 202.6 217.4
Diluted........................ 203.6 219.6 205.9 220.7
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
March 31
1998 1997
<S> <C> <C>
CONTINUING OPERATIONS:
Operating Activities
Income from continuing operations.................... $ 198 $ 309
Adjustments to income from continuing operations
to arrive at cash provided by operating activities:
Depreciation..................................... 196 178
Amortization of intangible assets................ 49 45
Deferred income taxes............................ (40) (25)
Pension expense, net of contributions............ 18 26
Purchased research and development............... 103 -
Changes in assets and liabilities, excluding
effects of acquisitions, divestitures, and
foreign currency adjustments:
Receivables.................................. 55 (25)
Inventories.................................. (136) (27)
Accounts payable............................. (63) (93)
Accrued income taxes......................... (47) (26)
Other assets and liabilities................. (71) 12
Cash Provided by Operating Activities..... 262 374
Investing Activities
Property additions................................... (265) (257)
Acquisition of businesses (net of cash acquired)..... (158) (23)
Proceeds from disposition of property and businesses. 16 565
Cash (Used for) Provided by
Investing Activities.................... (407) 285
Financing Activities
Increase (decrease) in short-term borrowings......... 24 (61)
Increase in long-term debt........................... 750 -
Payments of long-term debt........................... - (14)
Net increase (decrease) in debt...................... 774 (75)
Purchase of treasury stock........................... (595) (342)
Cash dividends....................................... (103) (126)
Reissuance of common stock........................... 58 33
Cash Provided by (Used for)
Financing Activities.................... 134 (510)
CASH (USED FOR) PROVIDED BY CONTINUING OPERATIONS.... (11) 149
Cash Used for Discontinued Operations................ - (151)
DECREASE IN CASH..................................... (11) (2)
CASH AT BEGINNING OF PERIOD.......................... 283 695
CASH AT END OF PERIOD................................ $ 272 $ 693
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. In the opinion of management of Rockwell International Corporation (the
company or Rockwell), the unaudited consolidated 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, 1997. The
results of operations for the three- and six-month periods ended March
31, 1998 are not necessarily indicative of the results for the full
year. Certain prior year amounts have been reclassified to conform with
the current presentation.
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.
The company adopted Statement of Financial Accounting Standards No. 128,
"Earnings per Share", in the first quarter of fiscal 1998. The adoption
of this standard had no effect on the company's financial statements.
During the second quarter of 1998, the company adopted American
Institute of Certified Public Accountants Statement of Position No.
98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use" (SOP 98-1). SOP 98-1 requires the cost of
purchased software and certain costs incurred in developing computer
software for internal use to be capitalized and amortized over future
periods. During the first six months of fiscal 1998, the company
capitalized $14 million of such costs that would have been charged to
expense under its previous accounting policy. The impact of adopting
SOP 98-1 on 1998's first quarter results was immaterial.
2. In December 1997, the company acquired the In-Flight Entertainment (IFE)
business of Hughes-Avicom International, Inc., a leading supplier of
airborne interactive IFE systems. The acquisition has been accounted
for as a purchase as of December 31, 1997, and the company has recorded
a charge of $103 million ($63 million after-tax) for purchased research
and development. The remaining assets acquired and liabilities assumed
have been recorded at estimated fair values determined by the company's
management based on information currently available. The results of the
IFE business have been included in the consolidated statement of income
since its date of acquisition.
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. Discontinued operations includes the Automotive business and the
Aerospace and Defense businesses (A&D Business). On September 30, 1997,
the company completed the spin-off of its Automotive business into a
separate company by distributing all of the issued and outstanding
shares of Meritor Automotive, Inc. (Meritor) to the company's
shareowners (the Spin-off). On December 6, 1996, the company completed
the merger of its former A&D Business with a subsidiary of The Boeing
Company (the Reorganization).
The following table summarizes the results of discontinued operations
for the three- and six-month periods ended March 31, 1997 (in millions):
Three Months Ended Six Months Ended
March 31, 1997 March 31, 1997
Revenues:
Automotive.................. $ 827 $1,594
A&D Business................ - 535
Total..................... $ 827 $2,129
Income before income taxes:
Automotive.................. $ 56 $ 100
A&D Business................ - -
Total..................... $ 56 $ 100
Net income:
Automotive.................. $ 34 $ 59
A&D Business................ - -
Total..................... $ 34 $ 59
The earnings of the A&D Business for the first two months of 1997 were
entirely offset by expenses relating to the Reorganization.
4. Inventories are summarized as follows (in millions):
March 31 September 30
1998 1997
Finished goods............................. $ 471 $ 414
Work in process............................ 774 702
Raw materials, parts, and supplies......... 451 404
Total.................................... 1,696 1,520
Adjustment to the carrying value of
certain inventories to a LIFO basis...... 3 6
Inventories.............................. $ 1,699 $ 1,526
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5. Intangible assets, net of accumulated amortization, are summarized as
follows (in millions):
March 31 September 30
1998 1997
Goodwill.................................. $ 1,224 $ 1,249
Trademarks, patents, product technology,
and other intangibles................... 581 540
Intangible assets....................... $ 1,805 $ 1,789
6. Short-term debt consisted of the following (in millions):
March 31 September 30
1998 1997
Short-term foreign bank borrowings....... $ 83 $ 64
Current portion of long-term debt........ 1 2
Short-term debt......................... $ 84 $ 66
At March 31, 1998, the company had $1.5 billion of unsecured credit
facilities with various banks which are used primarily to support
commercial paper borrowings. There were no significant commitment fees
or compensating balance requirements under these facilities.
Short-term credit facilities available to foreign subsidiaries amounted
to $315 million at March 31, 1998 and consisted of arrangements for
which there are no significant commitment fees.
7. Other current liabilities are summarized as follows (in millions):
March 31 September 30
1998 1997
Contract reserves and advance payments..... $ 148 $ 146
Accrued product warranties................. 122 113
Accrued taxes other than income taxes...... 52 46
Other...................................... 208 227
Other current liabilities................ $ 530 $ 532
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
8. Long-term debt consisted of the following (in millions):
March 31 September 30
1998 1997
6.8% notes, payable in 2003............... $ 150 $ 150
6.15% notes, payable in 2008.............. 350 -
6.70% debentures, payable in 2028......... 250 -
5.20% debentures, payable in 2098......... 200 -
Other obligations......................... 18 20
Less unamortized discount................. (60) (12)
Total................................... 908 158
Less current portion...................... 1 2
Long-term debt.......................... $ 907 $ 156
In January 1998, the company issued $800 million of aggregate principal
amount of long-term notes and debentures in a public offering consisting
of the 6.15% 10-year notes issued at par, the 6.70% 30-year debentures
issued at par, and the 5.20% 100-year debentures issued at a discount.
This debt offering yielded approximately $750 million of proceeds.
9. Accrued retirement benefits consisted of the following (in millions):
March 31 September 30
1998 1997
Accrued retirement medical costs........... $ 680 $ 684
Accrued pension costs...................... 149 166
Total.................................... 829 850
Amount classified as current liability..... 54 55
Accrued retirement benefits.............. $ 775 $ 795
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED 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 resolution of such claims
through arbitration or litigation. The company accrues the estimated
cost of the ultimate resolution of these matters. Management believes
that the resolution of these matters will not have a material adverse
effect on the company's consolidated financial statements.
Various other lawsuits, claims and proceedings have been or may be
instituted or asserted against the company relating to the conduct of
its business, including those pertaining to product liability, safety
and health, environmental, and employment matters. Pursuant to the
Reorganization, Rockwell has agreed to indemnify The Boeing Company for
certain government contract and environmental matters related to
operations of the A&D Business for periods prior to the Reorganization.
In connection with the Spin-off, Meritor has agreed to indemnify the
company for substantially all contingent liabilities related to the
Automotive business. 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 consolidated financial
statements.
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
The contributions to sales and earnings by business segment and the
composition of sales of the company for the second quarter and the first six
months of fiscal 1998 and 1997 are presented below (in millions).
Three Months Ended Six Months Ended
March 31 March 31
1998 1997 1998 1997
Sales
Automation $ 1,130 $ 1,114 $ 2,269 $ 2,175
Avionics & Communications 496 416 922 790
Semiconductor Systems 315 369 729 787
Total sales $ 1,941 $ 1,899 $ 3,920 $ 3,752
Operating earnings (loss)
Automation $ 147 $ 149 $ 291 $ 280
Avionics & Communications 77 57 151 116
Semiconductor Systems (27) 71 16 152
Purchased research and
development - - (103) -
Operating earnings 197 277 355 548
General corporate - net (21) (22) (36) (43)
Interest expense (13) (6) (17) (10)
Provision for income taxes (54) (94) (104) (186)
INCOME FROM CONTINUING OPERATIONS 109 155 198 309
Income from discontinued
operations - 34 - 59
NET INCOME $ 109 $ 189 $ 198 $ 368
Composition of sales
U.S. Commercial $ 1,135 $ 1,063 $ 2,260 $ 2,122
International 661 687 1,378 1,365
U.S. Government 145 149 282 265
Total $ 1,941 $ 1,899 $ 3,920 $ 3,752
Purchased research and development relates to the acquisition of an Avionics &
Communications business.
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
RESULTS OF OPERATIONS (Continued)
1998 Second Quarter Compared to 1997 Second Quarter
Sales for the second quarter of 1998 were about the same as 1997's second
quarter sales. Avionics & Communications' sales were higher due to strong
commercial air transport, business and regional aircraft markets.
Semiconductor Systems' sales were lower due to severe pricing pressure for
both the older V.34 and the new interoperable V.90 PC modem products.
Automation's sales were about the same as a year ago.
Income from continuing operations for the 1998 second quarter was $109
million, or 53 cents per share, compared to income from continuing operations
of $155 million, or 71 cents per share, for the second quarter of 1997.
Earnings per share continues to be favorably impacted by the company's common
stock repurchase program.
Automation's 1998 second quarter operating earnings of $147 million were about
the same as 1997's second quarter earnings of $149 million, with a 30 percent
sales increase in Latin America, offset by sales declines in Asian markets.
Automation's second quarter operating earnings as a percent of sales were 13.0
percent, compared to 12.6 percent in the first quarter of 1998 and 13.4
percent for the same period a year ago.
Avionics & Communications achieved a 35 percent increase in operating earnings
to $77 million from $57 million in 1997's second quarter, primarily due to
strong commercial air transport, business and regional aircraft markets in
North America. Avionics & Communications' second quarter operating earnings
as a percent of sales were 15.5 percent compared to 13.7 percent in the second
quarter of 1997.
Semiconductor Systems recorded an operating loss of $27 million in the second
quarter of 1998 compared to operating earnings of $71 million in 1997's second
quarter. Operating results in the second quarter were adversely impacted by
severe pricing pressure on modem products, continued major research and
development investments in non-modem product lines and a $10 million
restructuring charge.
Six Months Ended March 31, 1998 Compared to Six Months Ended March 31, 1997
Overall, sales for the first six months of 1998 increased four percent over
the same 1997 period as higher sales at Avionics & Communications and
Automation more than offset the decline of Semiconductor Systems' sales.
Avionics & Communications continues to capitalize on strong commercial air
transport markets. Automation recorded a four percent increase in sales,
principally in North and South America offset by sales declines in Asian
markets. Semiconductor Systems' sales were lower due to severe pricing
pressure for both the older V.34 and the new interoperable V.90 PC modem
products.
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
RESULTS OF OPERATIONS (CONTINUED)
For the first six months of 1998, income from continuing operations, before a
special charge of $103 million ($63 million after-tax or 30 cents per
share)which related to the company's acquisition of the IFE business, was $261
million, or $1.26 per share, compared to income from continuing operations of
$309 million, or $1.40 per share, for the first six months of 1997. Earnings
per share continues to be favorably impacted by the company's common stock
repurchase program.
Net income for the first six months of 1998, including the acquisition-related
special charge of $63 million, was $198 million, or 96 cents per share. Net
income for the first six months of 1997, including discontinued operations,
totaled $368 million, or $1.66 per share.
Automation's operating earnings for the first six months of 1998 increased
four percent over the same period a year ago principally due to higher sales
in North and South America.
Avionics & Communications' operating earnings, before the acquisition-related
special charge, for the first six months of 1998 increased 30 percent over
last year as a result of strong commercial air transport, business and
regional aircraft markets. Including the special charge, Avionics &
Communications' operating earnings for the first six months of 1998 were $48
million.
Semiconductor Systems' operating earnings decreased 89 percent for the first
six months of 1998 compared to the first six months of 1997 due to severe
pricing pressure on PC modem products, continuing major research and
development investments in new non-modem product lines and a $10 million
restructuring charge.
The full year 1998 tax rate is expected to be approximately 35.5 percent, one
percentage point less than the 1997 rate of 36.5 percent, as the company
continues to benefit from ongoing tax planning initiatives.
Looking ahead to the second half of 1998, management expects continued
excellent performance from Avionics & Communications. Automation should
achieve higher sales and earnings in 1998 despite the depressed business
activity in Asia, particularly South Korea, which is now adversely impacting
markets in that region. Management anticipates that Semiconductor Systems
will return to profitability in the second half, with increased unit volumes
across all product platforms more than offsetting continued pricing pressures
in modem products.
For the full 1998 fiscal year, management expects earnings per share to be at
about the same level as last year's $2.89 per share; although this level of
performance will require improved Automation markets, and improved volume and
a moderation of price declines in Semiconductor Systems' core modem products.
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
FINANCIAL CONDITION
The major uses of cash for the first six months of 1998 were the acquisition
of the IFE business, the common stock repurchase program, property additions,
and cash dividends paid to shareowners.
During the first six months of 1998, the company completed the $1 billion
common stock repurchase program announced in December 1996 and substantially
completed the $500 million program announced in September 1997. The company
has repurchased a total of 24.4 million shares of its common stock for
approximately $1.45 billion through March 31, 1998 under these programs.
During the second quarter and first six months of 1998, the company
repurchased 6.3 million and 11 million shares of its common stock,
respectively, for $356 million and $595 million, respectively. In February
1998, the company's Board of Directors approved an additional $500 million
common stock repurchase program. Future common stock repurchases are expected
to be funded by cash generated by operating activities and commercial paper
borrowings.
In January 1998, the company issued $800 million of aggregate principal amount
of long-term notes and debentures in a public offering. The proceeds of this
debt offering of approximately $750 million were used to repay approximately
$380 million of outstanding short-term commercial paper borrowings, with the
balance to be used for general corporate purposes, including the company's
ongoing common stock repurchase program.
In the first six months of 1998, the company's dividend payments to
shareowners totaled $103 million or $0.51 per share, compared to $126 million,
or $0.58 per share, in the first six months of fiscal 1997. The lower 1998
dividends reflect the apportionment of the company's total 1997 dividend
between Rockwell and Meritor. Upon the spin-off of Meritor at September 30,
1997, the annual $1.16 per share dividend was apportioned at $1.02 for
Rockwell and $0.14 for Meritor.
A major source of cash for the first six months 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.
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, 1997. Management
believes that at March 31, 1998, there has been no material change to this
information.
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
Item 3. Quantitative And Qualitative Disclosures About Market Risk
The company's financial instruments include cash, equity securities, short-
and long-term debt, and foreign currency forward exchange contracts. At March
31, 1998, 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 enters into foreign
currency forward exchange contracts to protect itself from adverse currency
rate fluctuations on foreign currency commitments entered into in the ordinary
course of business. These commitments are generally for terms of less than
one year. The foreign currency forward exchange contracts are executed with
creditworthy banks and are denominated in currencies of major industrial
countries. The notional amount of all the company's outstanding foreign
currency forward exchange contracts aggregated $363 million at March 31, 1998
and $239 million at September 30, 1997. The gains and losses relating to
these foreign currency forward exchange contracts are deferred and included in
the measurement of the foreign currency transactions subject to the hedge.
Any gain or loss incurred on foreign currency forward exchange contracts is
offset by the effects of currency movements on the respective underlying
hedged transactions.
Based on the company's overall currency rate exposure at March 31, 1998, a 10
percent change in currency rates would not have had a material effect on the
financial position, results of operations, or cash flows of the company.
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
On January 9, 1998, the company issued 154, 205, 35, and 205 shares
of restricted stock, respectively, to the following directors of the
company: George L. Argyros, Richard M. Bressler, William H. Gray,
III, and John D. Nichols. These shares were issued pursuant to
deferral elections made in accordance with the Directors Stock Plan
in partial or full payment for retainer fees otherwise payable in
cash. On February 4, 1998, the company issued 400 shares pursuant to
the Directors Stock Plan to each of the non-employee directors of the
company whose term continued after the annual meeting held on that
date (George L. Argyros, Richard M. Bressler, Judith L. Estrin,
William H. Gray, III, J. Clayburn LaForce, Jr., William T. McCormick,
Jr., John D. Nichols, Bruce M. Rockwell, Joseph F. Toot, Jr. and
William S. Sneath) as annual grants pursuant to the Directors Stock
Plan. The issuance of all these shares was exempt from the
registration requirements of the Securities Act of 1933 pursuant to
Section 4(2) thereof.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The regular annual meeting of shareowners of the company was
held on February 4, 1998.
(c) At the annual meeting, the shareowners:
(i) voted to elect four directors of the company. Each nominee
for director was elected by a vote of the shareowners as
follows:
Affirmative Votes
Votes Withheld
George L. Argyros 169,880,589 2,964,619
Don H. Davis, Jr. 170,014,500 2,830,708
William H. Gray, III 169,797,459 3,047,749
William T. McCormick, Jr. 170,054,092 2,791,116
(ii) voted upon a proposal to approve the selection by the Board
of Directors of the firm of Deloitte & Touche LLP as
auditors of the company. The proposal was approved by a
vote of the shareowners as follows:
Affirmative votes 170,956,825
Negative votes 800,009
Abstentions 1,088,374
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 page 3 of the company's Annual Report on Form
10-K for fiscal year ended September 30, 1997, which is incorporated
herein by reference.
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
PART II. OTHER INFORMATION (Continued)
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 3-b-1 - Copy of resolution of the Board of Directors
of the company, adopted March 27, 1998, amending the
By-Laws of the company effective March 27, 1998.
Exhibit 3-b-2 - By-Laws of the Company as in effect on the date hereof.
Exhibit 11 - Computation of Earnings Per Share
Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges for the Six
Months Ended March 31, 1998.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K:
The company filed a Current Report on Form 8-K dated January
20, 1998 in respect of the company's press release reporting
earnings for the three months ended December 31, 1997 (Items 5
and 7(c)). The company filed a Current Report on Form 8-K
dated January 26, 1998 relating to the issuance of $800 million
in aggregate principal amount of long-term notes and debentures
(Items 5 and 7(c)).
<PAGE>
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 May 13, 1998 By W. E. Sanders
W. E. Sanders
Vice President and Controller
(Principal Accounting Officer)
Date May 13, 1998 By W. J. Calise, Jr.
W. J. Calise, Jr.
Senior Vice President,
General Counsel and Secretary
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
INDEX OF EXHIBITS TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
Page
Exhibit 3-b-1 - Copy of resolution of the Board of Directors
of the company, adopted March 27, 1998,
amending the By-Laws of the company effective
March 27, 1998.
Exhibit 3-b-2 - By-Laws of the company as in effect on the
date hereof.
Exhibit 11 - Computation of Earnings Per Share for the
Three Months Ended March 31, 1998.
Exhibit 12 - Computation of Ratio of Earnings to
Fixed Charges for the Three Months Ended March 31, 1998.
Exhibit 27 - Financial Data Schedule
<PAGE>
<PAGE>
EXHIBIT 11
ROCKWELL INTERNATIONAL CORPORATION
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31
1998 1997 1998 1997
(In millions, except per share amounts)
<S> <C> <C> <C> <C>
Basic earnings per share:
Income from continuing operations.. $ 109 $ 155 $ 198 $ 309
Income from discontinued
Operations....................... - 34 - 59
Net income......................... $ 109 $ 189 $ 198 $ 368
Average number of common shares
Outstanding during the period.... 200.2 216.2 202.6 217.4
Basic earnings per share:
Continuing operations............ $ 0.55 $ 0.72 $ 0.98 $ 1.42
Discontinued operations.......... - 0.15 - 0.27
Net income....................... $ 0.55 $ 0.87 $ 0.98 $ 1.69
Diluted earnings per share:
Income from continuing operations.. $ 109 $ 155 $ 198 $ 309
Income from discontinued
operations....................... - 34 - 59
Net income......................... $ 109 $ 189 $ 198 $ 368
Average number of common shares
Outstanding during the period
assuming full dilution:
Common stock.................. 200.2 216.2 202.6 217.4
Assumed issuance of stock
under award plans........... 3.4 3.4 3.3 3.3
Total diluted shares............. 203.6 219.6 205.9 220.7
Diluted earnings per share:
Continuing operations........... $ 0.53 $ 0.71 $ 0.96 $ 1.40
Discontinued operations......... - 0.14 - 0.26
Net income...................... $ 0.53 $ 0.85 $ 0.96 $ 1.66
</TABLE>
<PAGE>
Exhibit 12
ROCKWELL INTERNATIONAL CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
SIX MONTHS ENDED MARCH 31, 1998
(In millions, except ratio)
EARNINGS AVAILABLE FOR FIXED CHARGES:
Income from continuing operations before income taxes............ $ 302
Less undistributed income of affiliates.......................... (3)
299
Add fixed charges included in earnings:
Interest expense.............................................. 17
Interest element of rentals................................... 28
45
Total earnings available for fixed charges....................... $ 344
FIXED CHARGES:
Fixed charges included in earnings............................... $ 45
Capitalized interest............................................. 7
Total fixed charges........................................... $ 52
RATIO OF EARNINGS TO FIXED CHARGES (1).............................. 6.6
(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 MARCH
31, 1998 CONSOLIDATED BALANCE SHEET, CONSOLIDATED STATEMENT OF INCOME FOR THE
SIX MONTHS ENDED MARCH 31, 1998 AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1998
<CASH> 272
<SECURITIES> 0
<RECEIVABLES> 1340
<ALLOWANCES> 66
<INVENTORY> 1699
<CURRENT-ASSETS> 3780
<PP&E> 2298
<DEPRECIATION> 0
<TOTAL-ASSETS> 8123
<CURRENT-LIABILITIES> 1853
<BONDS> 907
0
0
<COMMON> 216
<OTHER-SE> 4141
<TOTAL-LIABILITY-AND-EQUITY> 8123
<SALES> 3920
<TOTAL-REVENUES> 3969
<CGS> 2810
<TOTAL-COSTS> 3667
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17
<INCOME-PRETAX> 302
<INCOME-TAX> 104
<INCOME-CONTINUING> 198
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 198
<EPS-PRIMARY> 0.98
<EPS-DILUTED> 0.96
</TABLE>
<PAGE>
Exhibit 3-b-1
ROCKWELL INTERNATIONAL CORPORATION
ADVICE OF ACTION
To: THOSE CONCERNED Date: MARCH 27, 1998
Subject: BY-LAW AMENDMENTS
You are hereby notified of action as follows:
By: BOARD OF DIRECTORS
Place of Meeting: CAREFREE, ARIZONA
Date of Meeting: MARCH 27, 1998
RESOLVED, that the amendments to the By-Laws
of this Corporation as described in the document entitled
"Memorandum of Proposed Amendments to the By-Laws of
Rockwell International Corporation," a copy of which was
presented to, and ordered filed with the supporting records for, this
meeting, be, and they hereby are, approved and adopted effective
immediately.
* * *
I, William J. Calise, Jr., Secretary of Rockwell International Corporation,
hereby certify that the foregoing resolution was duly adopted by the Board of
Directors at a meeting held in Carefree, Arizona on March 27, 1998, and that
the same is in full force and effect.
/s/ William J. Calise, Jr.
Secretary
<PAGE>
MEMORANDUM OF PROPOSED AMENDMENTS TO THE
BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION
It is proposed to amend the By-Laws of Rockwell International Corporation (the
"Corporation") to delegate to the Chief Executive Officer (or such other
officer as the Board may designate from time to time) authority to make
required determinations with respect to indemnification under the By-Laws of
persons who are not present or former directors or officers of the
Corporation and to clarify the intent that the directors, officers,
employees and agents of the Corporation's majority-owned subsidiaries are
eligible for indemnification under the Corporation's By-Laws.
New matter is set in underscored italics and deleted matter is lined through.
1. Change the title of Section 13 of Article III to "Indemnification of
Directors and Officers" and amend subsections 13(A) through (G) and (J) of
Article III to read in their entirety as follows:
(A) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the Corporation) by reason of the fact that such person is or was a director,
officer, employee or agent of the Corporation or any of its majority-owned
subsidiaries or is or was serving at the request of the Corporation as a
director, officer, employee or agent (except in each of the foregoing
situations to the extent any agreement, arrangement or understanding of
agency contains provisions that supersede or abrogate indemnification
under this section) of another corporation or of any partnership, joint
venture, trust, employee benefit plan or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection
with such action, suit or proceeding if such person acted in good faith and
in a manner such person reasonably believed to be in or not opposed to the
best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which such person reasonably believed
to be in or not opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had reasonable cause to
believe that his or her conduct was unlawful.
<PAGE>
(B) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
director, officer, employee or agent of the Corporation or any of its
majority-owned subsidiaries, or is or was serving at the request of the
Corporation as a director, officer, employee or agent (except in each of the
foregoing situations to the extent any agreement, arrangement or
understanding of agency contains provisions that supersede or abrogate
indemnification under this section) of another corporation or of any
partnership, joint venture, trust, employee benefit plan or other enterprise
against expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection with the defense or settlement of
such action or suit if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of
the Corporation and except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent
that the Court of Chancery of Delaware or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery of Delaware or such other court
shall deem proper.
(C) To the extent that a director, officer, employee or agent of the
Corporation or any of its majority-owned subsidiaries has been successful
on the merits or otherwise in defense of any action, suit or proceeding
referred to in subsections (A) and (B), or in defense of any claim, issue or
matter therein, such person shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by or on
behalf of such person in connection therewith. If any such person is not
wholly successful in any such action, suit or proceeding but is successful,
on the merits or otherwise, as to one or more but less than all claims,
issues or matters therein, the Corporation shall indemnify such person
against all expenses (including attorneys' fees) actually and reasonably
incurred by or on behalf of such person in connection with each claim,
issue or matter that is successfully resolved. For purposes of this
subsection and without limitation, the termination of any claim, issue or
matter by dismissal, with or without prejudice, shall be deemed to be a
successful result as to such claim, issue or matter.
<PAGE>
(D) Notwithstanding any other provision of this section, to the
extent any person is a witness in, but not a party to, any action, suit or
proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that such person is or was a director, officer, employee
or agent of the Corporation or any of its majority-owned subsidiaries, or is
or was serving at the request of the Corporation as a director, officer,
employee or agent (except in each of the foregoing situations to the extent
any agreement, arrangement or understanding of agency contains
provisions that supersede or abrogate indemnification under this section)
of another corporation or of any partnership, joint venture, trust, employee
benefit plan or other enterprise, such person shall be indemnified against
all expenses (including attorneys' fees) actually and reasonably incurred
by or on behalf of such person in connection therewith.
(E) Indemnification under subsections (A) and (B) (unless ordered
by a court) shall be made only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because such person has met the
applicable standard of conduct set forth in subsections (A) and (B). Such
determination shall be made (1) if a Change of Control (as hereinafter
defined) shall not have occurred, (a) with respect to a person who is a
present or former director or officer of the Corporation, (i) by the Board
of Directors by a majority vote of the Disinterested Directors (as
hereinafter defined), even though less than a quorum or (b) (ii) if there are
no Disinterested Directors or, even if there are Disinterested Directors, a
majority of such Disinterested Directors so directs, by (i) (x)Independent
Counsel (as hereinafter defined) in a written opinion to the Board of
Directors, a copy of which shall be delivered to the claimant, or (ii) (y) the
shareowners of the Corporation, or (b) with respect to a person who is not
a present or former director or officer of the Corporation, by the chief
executive officer of the Corporation or by such other officer of the
Corporation as shall be designated from time to time by the Board of
Directors; or (2) if a Change of Control shall have occurred, by
Independent Counsel selected by the claimant in a written opinion to the
Board of Directors, a copy of which shall be delivered to the claimant,
unless the claimant shall request that such determination be made by or at
the direction of the Board of Directors (in the case of a claimant who is a
present or former director or officer of the Corporation) or by an officer
of the Corporation authorized to make such determination (in the case of a
claimant who is not a present or former director or officer of the
Corporation), in which case it shall be made in accordance with clause (1)
of this sentence. Any claimant shall be entitled to be indemnified against
the expenses (including attorneys' fees) actually and reasonably incurred
by such claimant in cooperating with the person or entity making the
determination of entitlement to indemnification (irrespective of the
determination as to the claimant's entitlement to indemnification) and, to
the extent successful, in connection with any litigation or arbitration with
respect to such claim or the enforcement thereof.
<PAGE>
(F) If a Change of Control shall not have occurred, or if a Change
of Control shall have occurred and a director, officer, employee or agent
requests pursuant to clause (2) of the second sentence in subsection (E)
that the determination whether the claimant is entitled to indemnification
be made by or at the direction of the Board of Directors (in the case of a
claimant who is a present or former director or officer of the Corporation)
or by an officer of the Corporation authorized to make such determination
(in the case of a claimant who is not a present or former director or
officer of the Corporation), the claimant shall be conclusively presumed to
have been determined pursuant to subsection (E) to be entitled to
indemnification if (1)(a) in the case of a claimant who is a present or
former director or officer of the Corporation, (a)(i) within fifteen days
after the next regularly scheduled meeting of the Board of Directors
following receipt by the Corporation of the request therefor, the Board of
Directors shall not have resolved by majority vote of the Disinterested
Directors to submit such determination to (i) (x) Independent Counsel for
its determination or (ii) (y) the shareowners for their determination at the
next annual meeting, or any special meeting that may be held earlier, after
such receipt, and (b) (ii) within sixty days after receipt by the Corporation
of the request therefor (or within ninety days after such receipt if the
Board of Directors in good faith determines that additional time is
required by it for the determination and, prior to expiration of such sixty-
day period, notifies the claimant thereof), the Board of Directors shall not
have made the determination by a majority vote of the Disinterested
Directors, or (2) (b) after a resolution of the Board of Directors, timely
made pursuant to clause (1)(a)(ii)(a)(i)(y) above, to submit the
determination to the shareowners, the shareowners meeting at which the
determination is to be made shall not have been held on or before the date
prescribed (or on or before a later date, not to exceed sixty days beyond
the original date, to which such meeting may have been postponed or
adjourned on good cause by the Board of Directors acting in good faith),
or (2) in the case of a claimant who is not a present or former director or
officer of the Corporation, within sixty days after receipt by the
Corporation of the request therefor (or within ninety days after such
receipt if an officer of the Corporation authorized to make such
determination in good faith determines that additional time is required for
the determination and, prior to expiration of such sixty-day period,
notifies the claimant thereof), an officer of the Corporation authorized to
make such determination shall not have made the determination; provided,
however, that this sentence shall not apply if the claimant has misstated or
failed to state a material fact in connection with his or her request for
indemnification. Such presumed determination that a claimant is entitled
to indemnification shall be deemed to have been made (I) at the end of the
sixty-day or ninety-day period (as the case may be) referred to in clause
<PAGE>
(1)(b)(1)(a)(ii) or (2) of the immediately preceding sentence or (II) if the
Board of Directors has resolved on a timely basis to submit the
determination to the shareowners, on the last date within the period
prescribed by law for holding such shareowners meeting (or a
postponement or adjournment thereof as permitted above).
(G) Expenses (including attorneys' fees) incurred in defending a
civil, criminal, administrative or investigative action, suit or proceeding
shall be paid by the Corporation in advance of the final disposition of such
action, suit or proceeding to a present or former director or officer of the
Corporation, promptly after receipt of a request therefor stating in
reasonable detail the expenses incurred, and to an employee or agent a
person who is not a present or former director or officer of the
Corporation as authorized by the chief executive officer of the
Corporation or by such other officer of the Corporation as shall be
designated from time to time by the Board of Directors; provided that in
each case the Corporation shall have received an undertaking by or on
behalf of the present or former director, officer, employee or agent to
repay such amount if it shall ultimately be determined that such person is
not entitled to be indemnified by the Corporation as authorized in this
section.
(J) The Indemnification and advancement of expenses herein
provided, or granted pursuant hereto, shall not be deemed exclusive of any
other rights to which any of those indemnified or eligible for advancement
of expenses may be entitled under any agreement, vote of shareowners or
Disinterested Directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person. Notwithstanding any
amendment, alteration or repeal of this section or any of its provisions, or
of any of the procedures established by the Board of Directors pursuant to
subsection (H) hereof, any person who is or was a director, officer,
employee or agent of the Corporation or any of its majority-owned
subsidiaries or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of any
partnership, joint venture, employee benefit plan or other enterprise shall
be entitled to indemnification in accordance with the provisions hereof and
thereof with respect to any action taken or omitted prior to such
amendment, alteration or repeal except to the extent otherwise required by
law.
<PAGE>
2. Amend subsection 2(C) of the Appendix entitled "Procedures for Submission
and Determination of Claims for Indemnification pursuant to Article III,
Section 13 of the By-Laws" to read in its entirety as follows:
(C) "Indemnitee" includes any person who was or is, or is
threatened to be made, a witness in or a party to any Proceeding by reason
of the fact that such person is or was a director, officer, employee or agent
of the Corporation or any of its majority-owned subsidiaries or is or was
serving at the request of the Corporation as a director, officer, employee or
agent (except in each of the foregoing situations to the extent any
agreement, arrangement or understanding of agency contains provisions
that supersede or abrogate indemnification under Article III, Section 13 of
the by-laws) of another corporation or of any partnership, joint venture,
trust, employee benefit plan or other enterprise.
3. Amend subsection 3(A) of the Appendix entitled "Procedures for Submission
and Determination of Claims for Indemnification pursuant to Article III,
Section 13 of the By-Laws" to read in its entirety as follows:
(A) To obtain indemnification or advancement of Expenses under
Article III, Section 13 of the by-laws, an Indemnitee shall submit to the
Secretary of the Corporation a written request therefor, including therein
or therewith such documentation and information as is reasonably
available to the Indemnitee and is reasonably necessary to permit a
determination as to whether and what extent the Indemnitee is entitled to
indemnification or advancement of Expenses, as the case may be. The
Secretary shall, promptly upon receipt of a request for indemnification,
advise the Board of Directors (if the Indemnitee is a present or former
director or officer of the Corporation) or the officer of the Corporation
authorized to make the determination as to whether an Indemnitee is
entitled to indemnification (if the Indemnitee is not a present or former
director or officer of the Corporation) thereof in writing if a determination
in accordance with Article III, Section 13(E) of the by-laws is required.
<PAGE>
Exhibit 3-b-2
BY-LAWS
OF ROCKWELL INTERNATIONAL CORPORATION
(AS AMENDED EFFECTIVE MARCH 27, 1998)
ARTICLE I.
OFFICES
SECTION 1. Registered Office in Delaware; Resident Agent. The address
of the Corporation's registered office in the State of Delaware and the name and
address of its resident agent in charge thereof are as filed with the Secretary
of State of the State of Delaware.
SECTION 2. Other Offices. The Corporation may also have an office or
offices at such other place or places either within or without the State of
Delaware as the Board of Directors may from time to time determine or the
business of the Corporation requires.
ARTICLE II.
MEETINGS OF SHAREOWNERS
SECTION 1. Place of Meetings. All meetings of the shareowners of the
Corporation shall be held at such place, within or without the State of
Delaware, as may from time to time be designated by resolution passed by the
Board of Directors.
SECTION 2. Annual Meeting. An annual meeting of the shareowners for the
election of directors and for the transaction of such other proper business,
notice of which was given in the notice of meeting, shall be held on a date and
at a time as may from time to time be designated by resolution passed by the
Board of Directors.
SECTION 3. Special Meetings. A special meeting of the shareowners for
any purpose or purposes shall be called only by the Board of Directors pursuant
to a resolution adopted by a majority of the whole Board.
SECTION 4. Notice of Meetings. Except as otherwise provided by law,
written notice of each meeting of the shareowners, whether annual or special,
shall be mailed, postage prepaid, not less than ten nor more than sixty days
before the date of the meeting, to each shareowner entitled to vote at such
meeting, at the shareowner's address as it appears on the records of the
Corporation. Every such notice shall state the place, date and hour of the
meeting and, in the case of a special meeting, the purpose or purposes for which
the meeting is called. Notice of any adjourned meeting of the shareowners shall
not be required to be given, except when expressly required by law.
SECTION 5. List of Shareowners. The Secretary shall, from information
obtained from the transfer agent, prepare and make, at least ten days before
<PAGE>
1 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION
every meeting of shareowners, a complete list of the shareowners entitled to
vote at the meeting, arranged in alphabetical order, and showing the
address of each shareowner and the number of shares registered in the name of
each shareowner. Such list shall be open to the examination of any shareowner,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or if not so specified, at the place where the meeting is
to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
shareowner who is present. The stock ledger shall be the only evidence as to who
are the shareowners entitled to examine the stock ledger, the list referred to
in this section or the books of the Corporation, or to vote in person or by
proxy at any meeting of shareowners.
SECTION 6. Quorum. At each meeting of the shareowners, the holders of a
majority of the issued and outstanding stock of the Corporation present either
in person or by proxy shall constitute a quorum for the transaction of business
except where otherwise provided by law or by the Certificate of Incorporation or
by these by-laws for a specified action. Except as otherwise provided by law, in
the absence of a quorum, a majority in interest of the shareowners of the
Corporation present in person or by proxy and entitled to vote shall have the
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until shareowners holding the requisite amount of
stock shall be present or represented. At any such adjourned meeting at which a
quorum may be present, any business may be transacted which might have been
transacted at a meeting as originally called, and only those shareowners
entitled to vote at the meeting as originally called shall be entitled to vote
at any adjournment or adjournments thereof. The absence from any meeting of the
number of shareowners required by law or by the Certificate of Incorporation or
by these by-laws for action upon any given matter shall not prevent action at
such meeting upon any other matter or matters which may properly come before the
meeting, if the number of shareowners required in respect of such other matter
or matters shall be present.
SECTION 7. Organization. At every meeting of the shareowners the
Chairman of the Board, or, in his absence, a director or an officer of the
Corporation designated by the Board, shall act as Chairman. The Secretary, or,
in his absence, an Assistant Secretary, shall act as Secretary at all meetings
of the shareowners. In the absence from any such meeting of the Secretary and
the Assistant Secretaries, the Chairman may appoint any person to act as
Secretary of the meeting.
SECTION 8. Notice of Shareowner Business and Nominations.
(A) Annual Meetings of Shareowners. (1) Nominations of persons for
election to the Board of Directors of the Corporation and the proposal of
business to be considered by the shareowners may be made at an annual meeting of
shareowners (a) pursuant to the Corporation's notice of meeting, (b) by or at
the direction of the Board of Directors or (c) by any shareowner of the
Corporation who was a shareowner of record at the time of giving of notice
provided for in this by-law, who is entitled to vote at the meeting and who
complies with the notice procedures set forth in this by-law.
<PAGE>
2 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION
(2) For nominations or other business to be properly brought before
an annual meeting by a shareowner pursuant to clause (c) of paragraph (A) (1) of
this by-law, the shareowner must have given timely notice thereof in writing to
the Secretary of the Corporation and such other business must otherwise be a
proper matter for shareowner action. To be timely, a shareowner's notice shall
be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 60th day nor earlier
than the close of business on the 90th day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is more than 30 days before or more than 60 days
after such anniversary date, notice by the shareowner to be timely must be so
delivered not earlier than the close of business on the 90th day prior to such
annual meeting and not later than the close of business on the later of the 60th
day prior to such annual meeting or the 10th day following the day on which
public announcement of the date of such meeting is first made by the
Corporation. In no event shall the public announcement of an adjournment of an
annual meeting commence a new time period for the giving of a shareowner's
notice as described above. Such shareowner's notice shall set forth (a) as to
each person whom the shareowner proposes to nominate for election or reelection
as a director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors in an election
contest, or is otherwise required, in each case pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule
14a-11 thereunder (including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected); (b) as to
any other business that the shareowner proposes to bring before the meeting, a
brief description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such shareowner and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the shareowner giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is made
(i) the name and address of such shareowner, as they appear on the Corporation's
books, and of such beneficial owner and (ii) the class and number of shares of
the Corporation which are owned beneficially and of record by such shareowner
and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph
(A)(2) of this by-law to the contrary, in the event that the number of
directors to be elected to the Board of Directors of the Corporation is
increased and there is no public announcement by the Corporation naming all
of the nominees for director or specifying the size of the increased Board of
Directors at least 70 days prior to the first anniversary of the preceding
year's annual meeting, a shareowner's notice required by this by-law shall
also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the Secretary
at the principal executive offices of the Corporation not later than the
close of business on the 10th day following the day on which such public
announcement is first made by the Corporation.
(B) Special Meetings of Shareowners. Only such business shall be
conducted at a special meeting of shareowners as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
<PAGE>
3 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION
of shareowners at which directors are to be elected pursuant to the
Corporation's notice of meeting (a) by or at the direction of the Board of
Directors or (b) provided that the Board of Directors has determined that
directors shall be elected at such meeting, by any shareowner of the Corporation
who is a shareowner of record at the time of giving of notice provided for in
this by-law, who shall be entitled to vote at the meeting and who complies with
the notice procedures set forth in this by-law. In the event the Corporation
calls a special meeting of shareowners for the purpose of electing one or more
directors to the Board of Directors, any such shareowner may nominate a person
or persons (as the case may be), for election to such position(s) as specified
in the Corporation's notice of meeting, if the shareowner's notice required by
paragraph (A)(2) of this by-law shall be delivered to the Secretary at the
principal executive offices of the Corporation not earlier than the close of
business on the 90th day prior to such special meeting and not later than the
close of business on the later of the 60th day prior to such special meeting or
the 10th day following the day on which public announcement is first made of the
date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting. In no event shall the public
announcement of an adjournment of a special meeting commence a new time period
for the giving of a shareowner's notice as described above.
(C) General. (1) Only such persons who are nominated in accordance with
the procedures set forth in this by-law shall be eligible to serve as directors
and only such business shall be conducted at a meeting of shareowners as shall
have been brought before the meeting in accordance with the procedures set forth
in this by-law. Except as otherwise provided by law, the Certificate of
Incorporation or these by-laws, the Chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made or proposed, as the case may be, in
accordance with the procedures set forth in this by-law and, if any proposed
nomination or business is not in compliance with this by-law, to declare that
such defective proposal or nomination shall be disregarded.
(2) For purposes of this by-law, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the Corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this by-law, a
shareowner shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this by-law. Nothing in this by-law shall be deemed to affect any
rights (i) of shareowners to request inclusion of proposals in the Corporation's
proxy statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the
holders of any series of Preferred Stock to elect directors under specified
circumstances.
SECTION 9. Business and Order of Business. At each meeting of the
shareowners such business may be transacted as may properly be brought before
such meeting, except as otherwise provided by law or in these by-laws. The order
of business at all meetings of the shareowners shall be as determined by the
<PAGE>
4 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION
Chairman, unless otherwise determined by a majority in interest of the
shareowners present in person or by proxy at such meeting and entitled to vote
thereat.
SECTION 10. Voting. Except as otherwise provided by law, the
Certificate of Incorporation or these by-laws, each shareowner shall at every
meeting of the shareowners be entitled to one vote for each share of stock held
by such shareowner. Any vote on stock may be given by the shareowner entitled
thereto in person or by proxy appointed by an instrument in writing, subscribed
(or transmitted by electronic means and authenticated as provided by law) by
such shareowner or by the shareowner's attorney thereunto authorized, and
delivered to the Secretary; provided, however, that no proxy shall be voted
after three years from its date unless the proxy provides for a longer period.
Except as otherwise provided by law, the Certificate of Incorporation or these
by-laws, at all meetings of the shareowners, all matters shall be decided by the
vote (which need not be by ballot) of a majority in interest of the shareowners
present in person or by proxy and entitled to vote thereat, a quorum being
present.
ARTICLE III.
BOARD OF DIRECTORS
SECTION 1. General Powers. The property, affairs and business of the
Corporation shall be managed by or under the direction of its Board of
Directors.
SECTION 2. Number, Qualifications, and Term of Office. Subject to the
rights of the holders of any series of Preferred Stock to elect additional
directors under specified circumstances, the number of directors of the
Corporation shall be fixed from time to time exclusively by the Board of
Directors pursuant to a resolution adopted by a majority of the
whole Board. A director need not be a shareowner.
The directors, other than those who may be elected by the holders of
any series of Preferred Stock or any other series or class of stock, as provided
herein or in any Preferred Stock Designation, shall be divided into three
classes, as nearly equal in number as possible. One class of directors shall be
initially elected for a term expiring at the annual meeting of shareowners to be
held in 1997, another class shall be initially elected for a term expiring at
the annual meeting of shareowners to be held in 1998, and another class shall be
initially elected for a term expiring at the annual meeting of shareowners to be
held in 1999. Members of each class shall hold office until their successors are
elected and shall have qualified. At each annual meeting of the shareowners of
the Corporation, commencing with the 1997 annual meeting, the successors of the
class of directors whose term expires at that meeting shall be elected by a
plurality vote of all votes cast at such meeting to hold office for a term
expiring at the annual meeting of shareowners held in the third year following
the year of their election.
<PAGE>
SECTION 3. Election of Directors. At each meeting of the shareowners
for the election of directors, at which a quorum is present, the directors shall
5 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION
be the persons receiving the greatest number of votes cast by the holders of
stock entitled to vote for such directors.
SECTION 4. Quorum and Manner of Acting. A majority of the members of
the Board of Directors shall constitute a quorum for the transaction of business
at any meeting, and the act of a majority of the directors present at any
meeting at which a quorum is present shall be the act of the Board of Directors
unless otherwise provided by law, the Certificate of Incorporation or these
by-laws. In the absence of a quorum, a majority of the directors present may
adjourn any meeting from time to time until a quorum shall be obtained. Notice
of any adjourned meeting need not be given. The directors shall act only as a
board and the individual directors shall have no power as such.
SECTION 5. Place of Meetings. The Board of Directors may hold its
meetings at such place or places within or without the State of Delaware as the
Board may from time to time determine or as shall be specified or fixed in the
respective notices or waivers of notice thereof.
SECTION 6. First Meeting. Promptly after each annual election of
directors, the Board of Directors shall meet for the purpose of organization,
the election of officers and the transaction of other business, at the same
place as that at which the annual meeting of shareowners was held or as
otherwise determined by the Board. Notice of such meeting need not be given.
Such meeting may be held at any other time or place which shall be specified in
a notice given as hereinafter provided for special meetings of the Board of
Directors.
SECTION 7. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such places and at such times as the Board shall from time to
time determine. If any day fixed for a regular meeting shall be a legal holiday
at the place where the meeting is to be held, then the meeting which would
otherwise be held on that day shall be held at the same hour on the next
succeeding business day not a legal holiday. Notice of regular meetings need not
be given.
SECTION 8. Special Meetings; Notice. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board and shall
be called by the Chairman of the Board or the Secretary at the written request
of three directors. Notice of each such meeting stating the time and place of
the meeting shall be given to each director by mail, telephone, other electronic
transmission or personally. If by mail, such notice shall be given not less than
five days before the meeting; and if by telephone, other electronic transmission
or personally, not less than two days before the meeting.
A notice mailed at least two weeks before the meeting need not state the purpose
thereof except as otherwise provided in these by-laws. In all other cases the
notice shall state the principal purpose or purposes of the meeting. Notice of
any meeting of the Board need not be given to a director, however, if waived by
the director in writing before or after such meeting or if the director shall be
present at the meeting.
<PAGE>
SECTION 9. Organization. At each meeting of the Board of Directors, the
Chairman of the Board, or, in his absence, a director or an officer of the
Corporation designated by the Board, shall act as Chairman. The Secretary, or,
6 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION
in the Secretary's absence, any person appointed by the Chairman, shall act as
Secretary of the meeting.
SECTION 10. Order of Business. At all meetings of the Board of
Directors, business shall be transacted in the order determined by the Board.
SECTION 11. Resignations. Any director of the Corporation may resign at
any time by giving written notice to the Chairman of the Board or the Secretary
of the Corporation. The resignation of any director shall take effect at the
time specified therein, and unless otherwise specified therein, the acceptance
of such resignation shall not be necessary to make it effective.
SECTION 12. Compensation. Each director shall be paid such
compensation, if any, as shall be fixed by the Board of Directors.
SECTION 13. Indemnification.
(A) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that such person is or was a director, officer, employee or
agent of the Corporation or any of its majority-owned subsidiaries, or is or
was serving at the request of the Corporation as a director, officer,
employee or agent (except in each of the foregoing situations to the extent
any agreement, arrangement or understanding of agency contains provisions
that supersede or abrogate indemnification under this section) of another
corporation or of any partnership, joint venture, trust, employee benefit
plan or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the Corporation,
and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his or her conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which such person reasonably believed to be in or not opposed to the
best interests of the Corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
(B) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment in
its favor by reason of the fact that such person is or was a director, officer,
employee or agent of the Corporation or any of its majority-owned subsidiaries,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent (except in each of the foregoing situations to the extent any
agreement, arrangement or understanding of agency contains provisions that
<PAGE>
supersede or abrogate indemnification under this section) of another
corporation or of any partnership, joint venture, trust, employee benefit
plan or other enterprise, against expenses (including attorneys' fees)
actually and reasonably
7 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION
incurred by such person in connection with the defense or settlement of such
action or suit if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of
Chancery of Delaware or such other court shall deem proper.
(C) To the extent that a director, officer, employee or agent of the
Corporation or any of its majority-owned subsidiaries has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred
to in subsections (A) and (B), or in defense of any claim, issue or matter
therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by or on behalf of such
person in connection therewith. If any such person is not wholly successful
in any such action, suit or proceeding but is successful, on the merits or
otherwise, as to one or more but less than all claims, issues or matters
therein, the Corporation shall indemnify such person against all expenses
(including attorneys' fees) actually and reasonably incurred by or on behalf
of such person in connection with each claim, issue or matter that is
successfully resolved. For purposes of this subsection and without limitation
, the termination of any claim, issue or matter by dismissal, with or without
prejudice, shall be deemed to be a successful result as to such claim, issue
or matter.
(D) Notwithstanding any other provision of this section, to the extent
any person is a witness in, but not a party to, any action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is or was a director, officer, employee or agent of the
Corporation or any of its majority-owned subsidiaries, or is or was serving at
the request of the Corporation as a director, officer, employee or agent
(except in each of the foregoing situations to the extent any agreement,
arrangement or understanding of agency contains provisions that supersede or
abrogate indemnification under this section) of another corporation or of any
partnership, joint venture, trust, employee benefit plan or other enterprise,
such person shall be indemnified against all expenses (including attorneys'
fees) actually and reasonably incurred by or on behalf of such person in
connection therewith.
(E) Indemnification under subsections (A) and (B) (unless ordered by a
court) shall be made only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because such person has met the applicable
standard of conduct set forth in subsections (A) and (B). Such determination
shall be made (1) if a Change of Control (as hereinafter defined) shall not have
occurred, (a) with respect to a person who is a present or former director or
officer of the Corporation, (i) by the Board of Directors by a majority vote of
the Disinterested Directors (as hereinafter defined), even though less than a
quorum or (ii) if there are no Disinterested Directors or, even if there are
Disinterested Directors, a majority of such Disinterested Directors so directs,
<PAGE>
8 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION
by (x) Independent Counsel (as hereinafter defined) in a written opinion to the
Board of Directors, a copy of which shall be delivered to the claimant, or (y)
the shareowners of the Corporation; or (b) with respect to a person who is not
a present or former director or officer of the Corporation, by the chief
executive officer of the Corporation or by such other officer of the
Corporation as shall be designated from time to time by the Board of
Directors; or (2) if a Change of Control shall have occurred, by Independent
Counsel selected by the claimant in a written opinion to the Board of
Directors, a copy of which shall be delivered to the claimant, unless the
claimant shall request that such determination be made by or at the direction
of the Board of Directors (in the case of a claimant who is a present or
former director or officer of the Corporation) or by an officer of the
Corporation authorized to make such determination (in the case of a claimant
who is not a present or former director or officer of the Corporation), in
which case it shall be made in accordance with clause (1) of this sentence.
Any claimant shall be entitled to be indemnified against the expenses
(including attorneys' fees) actually and reasonably incurred by such claimant
in cooperating with the person or entity making the determination of
entitlement to indemnification (irrespective of the determination as to the
claimant's entitlement to indemnification) and, to the extent successful, in
connection with any litigation or arbitration with respect to such claim or
the enforcement thereof.
(F) If a Change of Control shall not have occurred, or if a Change of
Control shall have occurred and a director, officer, employee or agent requests
pursuant to clause (2) of the second sentence in subsection (E) that the
determination whether the claimant is entitled to indemnification be made by or
at the direction of the Board of Directors (in the case of a claimant who is a
present or former director or officer of the Corporation) or by an officer of
the Corporation authorized to make such determination (in the case of a
claimant who is not a present or former director or officer of the
Corporation), the claimant shall be conclusively presumed to have been
determined pursuant to subsection (E) to be entitled to indemnification if
(1)in the case of a claimant who is a present or former director or officer
of the Corporation, (a)(i) within fifteen days after the next regularly
scheduled meeting of the Board of Directors following receipt by the
Corporation of the request therefor, the Board of Directors shall not have
resolved by majority vote of the Disinterested Directors to submit such
determination to (x) Independent Counsel for its determination or (y) the
shareowners for their determination at the next annual meeting, or any
special meeting that may be held earlier, after such receipt, and (ii) within
sixty days after receipt by the Corporation of the request therefor (or
within ninety days after such receipt if the Board of Directors in good faith
determines that additional time is required by it for the determination and,
prior to expiration of such sixty-day period, notifies the claimant thereof),
the Board of Directors shall not have made the determination by a majority
vote of the Disinterested Directors, or (b) after a resolution of
the Board of Directors, timely made pursuant to clause (a)(i)(y) above, to
submit the determination to the shareowners, the shareowners meeting at which
the determination is to be made shall not have been held on or before the date
<PAGE>
prescribed (or on or before a later date, not to exceed sixty days beyond the
original date, to which such meeting may have been postponed or adjourned on
good cause by the Board of Directors acting in good faith), or (2) in the case
of a claimant who is not a present or former director or officer of the
Corporation, within sixty days after receipt by the Corporation of the request
<PAGE>
9 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION
therefor (or within ninety days after such receipt if an officer of the
Corporation authorized to make such determination in good faith determines that
additional time is required for the determination and, prior to expiration of
such sixty-day period, notifies the claimant thereof), an officer of the
Corporation authorized to make such determination shall not have made the
determination; provided, however, that this sentence shall not apply if the
claimant has misstated or failed to state a material fact in connection with
his or her request for indemnification. Such presumed determination that a
claimant is entitled to indemnification shall be deemed to have been made (I)
at the end of the sixty-day or ninety-day period (as the case may be)
referred to in clause(1)(a)(ii) or (2) of the immediately preceding sentence
or (II) if the Board of Directors has resolved on a timely basis to submit
the determination to the shareowners, on the last date within the period
prescribed by law for holding such shareowners meeting (or a postponement or
adjournment thereof as permitted above).
(G) Expenses (including attorneys' fees) incurred in defending a civil,
criminal, administrative or investigative action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding to a present or former director or officer of the Corporation,
promptly after receipt of a request therefor stating in reasonable detail the
expenses incurred, and to a person who is not a present or former director or
officer of the Corporation as authorized by the chief executive officer of the
Corporation or such other officer of the Corporation as shall be designated
from time to time by the Board of Directors; provided that in each case the
Corporation shall have received an undertaking by or on behalf of the present
or former director, officer, employee or agent to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified by
the Corporation as authorized in this section.
(H) The Board of Directors shall establish reasonable procedures for
the submission of claims for indemnification pursuant to this section,
determination of the entitlement of any person thereto and review of any such
determination. Such procedures shall be set forth in an appendix to these
by-laws and shall be deemed for all purposes to be a part hereof.
(I) For purposes of this section,
(1) "Change of Control" means a change of control of the Corporation
at any time after the distribution of the shares of capital stock of the
Corporation to the holders of capital stock of Rockwell International
Corporation of a nature that would be required to be reported in a proxy
statement pursuant to Section 14(a) of the Exchange Act or in a Form 8-K
pursuant to Section 13 of the Exchange Act (or in any similar form or schedule
under either of those provisions or any successor provision), whether or not the
Corporation is then subject to such reporting requirement; provided, however,
that, without limitation, a Change of Control shall be deemed to have occurred
<PAGE>
if (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 20% or more of the combined voting power of the
Corporation's then outstanding securities without the prior approval of at least
two-thirds of the members of the Board of Directors in office immediately prior
<PAGE>
10 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION
to such person attaining such percentage interest; (ii) the Corporation is a
party to a merger, consolidation, sale of assets or other reorganization, or a
proxy contest, as a consequence of which members of the Board of Directors in
office immediately prior to such transaction or event constitute less than a
majority of the Board of Directors immediately thereafter; or (iii) during any
period of two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors (including for this purpose any new director
whose election or nomination for election by the Corporation's shareowners was
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of such period) cease for any reason to
constitute at least a majority of the Board of Directors.
(2) "Disinterested Director" means a director of the Corporation who
is not and was not a party to an action, suit or proceeding in respect of which
indemnification is sought by a director, officer, employee or agent.
(3) "Independent Counsel" means a law firm, or a member of a law
firm, that (i) is experienced in matters of corporation law; (ii) neither
presently is, nor in the past five years has been, retained to represent the
Corporation, the director, officer, employee or agent claiming indemnification
or any other party to the action, suit, or proceeding giving rise to a claim for
indemnification under this section, in any matter material to the Corporation,
the claimant or any such other party; and (iii) would not, under applicable
standards of professional conduct then prevailing, have a conflict of interest
in representing either the Corporation or such director, officer, employee or
agent in an action to determine the Corporation's or such person's rights under
this section.
(J) The Indemnification and advancement of expenses herein provided, or
granted pursuant hereto, shall not be deemed exclusive of any other rights to
which any of those indemnified or eligible for advancement of expenses may be
entitled under any agreement, vote of shareowners or Disinterested Directors or
otherwise, both as to action in such person's official capacity and as to action
in another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such person.
Notwithstanding any amendment, alteration or repeal of this section or any of
its provisions, or of any of the procedures established by the Board of
Directors pursuant to subsection (H) hereof, any person who is or was a
director, officer, employee or agent of the Corporation or any of its majority-
owned subsidiaries, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of any
partnership, joint venture, employee benefit plan or other enterprise, shall be
entitled to indemnification in accordance with the provisions hereof and
thereof with respect to any action taken or omitted prior to such amendment,
alteration or repeal except to the extent otherwise required by law.
(K) No indemnification shall be payable pursuant to this section with
respect to any action against the Corporation commenced by an officer, director,
employee or agent unless the Board of Directors shall have authorized the
commencement thereof or unless and to the extent that this section or the
<PAGE>
11 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION
procedures established pursuant to subsection (H) shall specifically provide for
indemnification of expenses relating to the enforcement of rights under this
section and such procedures.
ARTICLE IV.
COMMITTEES
SECTION 1. Appointment and Powers. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more
committees, each committee to consist of two or more directors of the
Corporation, which, to the extent provided in said resolution or in these
by-laws and not inconsistent with Section 141 of the Delaware General
Corporation Law, as amended, shall have and may exercise the powers of the Board
of Directors in the management of the business and affairs of the Corporation,
and may authorize the seal of the Corporation to be affixed to all papers which
may require it. Such committee or committees shall have such name or names as
may be determined from time to time by resolution adopted by the Board of
Directors.
SECTION 2. Term of Office and Vacancies. Each member of a committee
shall continue in office until a director to succeed him or her shall have been
elected and shall have qualified, or until he or she ceases to be a director or
until he or she shall have resigned or shall have been removed in the manner
hereinafter provided. Any vacancy in a committee shall be filled by the vote of
a majority of the whole Board of Directors at any regular or special meeting
thereof.
SECTION 3. Alternates. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee.
SECTION 4. Organization. Unless otherwise provided by the Board of
Directors, each committee shall appoint a chairman. Each committee shall keep a
record of its acts and proceedings and report the same from time to time to the
Board of Directors.
SECTION 5. Resignations. Any regular or alternate member of a committee
may resign at any time by giving written notice to the Chairman of the Board
or the Secretary of the Corporation. Such resignation shall take effect at the
time of the receipt of such notice or at any later time specified therein, and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
<PAGE>
SECTION 6. Removal. Any regular or alternate member of a committee may
be removed with or without cause at any time by resolution passed by a majority
of the whole Board of Directors at any regular or special meeting.
SECTION 7. Meetings. Regular meetings of each committee, of which no
notice shall be necessary, shall be held on such days and at such places as the
<PAGE>
12 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION
chairman of the committee shall determine or as shall be fixed by a resolution
passed by a majority of all the members of such committee. Special meetings of
each committee will be called by the Secretary at the request of any two members
of such committee, or in such other manner as may be determined by the
committee. Notice of each special meeting of a committee shall be mailed to each
member thereof at least two days before the meeting or shall be given personally
or by telephone or other electronic transmission at least one day before the
meeting. Every such notice shall state the time and place, but need not state
the purposes of the meeting. No notice of any meeting of a committee shall be
required to be given to any alternate.
SECTION 8. Quorum and Manner of Acting. Unless otherwise provided by
resolution of the Board of Directors, a majority of a committee (including
alternates when acting in lieu of regular
members of such committee) shall constitute a quorum for the transaction of
business and the act of a majority of those present at a meeting at which a
quorum is present shall be the act of such committee. The members of each
committee shall act only as a committee and the individual members shall have no
power as such.
SECTION 9. Compensation. Each regular or alternate member of a
committee shall be paid such compensation, if any, as shall be fixed by the
Board of Directors.
ARTICLE V.
OFFICERS
SECTION 1. Officers. The officers of the Corporation shall be a
Chairman of the Board of Directors, who shall be chosen from the members of the
Board of Directors, one or more Vice Presidents (one or more of whom may be
Executive Vice Presidents, Senior Vice Presidents or otherwise as may be
designated by the Board), a Secretary and a Treasurer, all of whom shall be
elected by the Board of Directors. Any two or more offices may be held by the
same person. The Board of Directors may also from time to time elect such other
officers as it deems necessary.
SECTION 2. Term of Office. Each officer shall hold office until his or
her successor shall have been duly elected and qualified in his or her stead, or
until his or her death or until he or she shall have resigned or shall have been
removed in the manner hereinafter provided.
SECTION 3. Additional Officers; Agents. The Chairman of the Board may
from time to time appoint and remove such additional officers and agents as may
be deemed necessary. Such persons shall hold office for such period, have such
authority, and perform such duties as in these by-laws provided or as the
Chairman of the Board may from time to time prescribe. The Board of Directors or
the Chairman of the Board may from time to time authorize any officer to appoint
and remove agents and employees and to prescribe their powers and duties.
<PAGE>
13 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION
SECTION 4. Salaries. Unless otherwise provided by resolution passed by
a majority of the whole Board, the salaries of all officers elected by the Board
of Directors shall be fixed by the Board of Directors.
SECTION 5. Removal. Except where otherwise expressly provided in a
contract authorized by the Board of Directors, any officer may be removed,
either with or without cause, by the vote of a majority of the Board at any
regular or special meeting or, except in the case of an officer elected by the
Board, by any superior officer upon whom the power of removal may be conferred
by the Board or by these by-laws.
SECTION 6. Resignations. Any officer elected by the Board of Directors
may resign at any time by giving written notice to the Chairman of the Board
or the Secretary. Any other officer may resign at any time by giving written
notice to the Chairman of the Board. Any such resignation shall take effect at
the date of receipt of such notice or at any later time specified therein, and
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
SECTION 7. Vacancies. A vacancy in any office because of death,
resignation, removal, or otherwise, shall be filled for the unexpired portion of
the term in the manner provided in these by-laws for regular election or
appointment to such office.
SECTION 8. Chairman of the Board of Directors. The Chairman of the
Board of Directors shall be the chief executive officer of the Corporation and,
subject to the control of the Board of Directors, shall have general and overall
charge of the business and affairs of the Corporation and of its officers. He
shall preside at all meetings of the shareowners and of the Board of Directors
and shall enforce the observance of the rules of order for the meetings of the
shareowners and the Board and of the by-laws of the Corporation. He shall keep
the Board of Directors appropriately informed on the business and affairs of the
Corporation.
SECTION 9. Executive Vice Presidents. One or more Executive Vice
Presidents shall, subject to the control of the Chairman of the Board, have lead
accountability for components or functions of the Corporation as and to the
extent designated by the Chairman of the Board. Each Executive Vice President
shall keep the Chairman of the Board appropriately informed on the business and
affairs of the designated components or functions of the Corporation.
SECTION 10. Vice Presidents. The Vice Presidents shall perform such
duties as may from time to time be assigned to them or any of them by the
Chairman of the Board.
SECTION 11. Secretary. The Secretary shall keep or cause to be kept in
books provided for the purpose the minutes of the meetings of the shareowners,
of the Board of Directors and of any committee constituted pursuant to Article
IV of these by-laws. The Secretary shall be custodian of the corporate seal and
see that it is affixed to all documents as required and attest the same. The
Secretary shall perform all duties incident to the office of Secretary and such
other duties as from time to time may be assigned to him or her.
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14 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION
SECTION 12. Assistant Secretaries. At the request of the Secretary, or
in his or her absence or disability, the Assistant Secretary designated by him
or her shall perform all the duties of the Secretary and, when so acting, shall
have all the powers of, and be subject to all the restrictions upon, the
Secretary. The Assistant Secretaries shall perform such other duties as from
time to time may be assigned to them.
SECTION 13. Treasurer. The Treasurer shall have charge of and be
responsible for the receipt, disbursement and safekeeping of all funds and
securities of the Corporation. The Treasurer shall deposit all such funds in the
name of the Corporation in such banks, trust companies or other depositories as
shall be selected in accordance with the provisions of these by-laws. From time
to time and whenever requested to do so, the Treasurer shall render statements
of the condition of the finances of the Corporation to the Board of Directors.
The Treasurer shall perform all the duties incident to the office of Treasurer
and such other duties as from time to time may be assigned to him or her.
SECTION 14. Assistant Treasurers. At the request of the Treasurer, or
in his or her absence or disability, the Assistant Treasurer designated by him
or her shall perform all the duties of the Treasurer and, when so acting, shall
have all the powers of, and be subject to all the restrictions upon, the
Treasurer. The Assistant Treasurers shall perform such other duties as from time
to time may be assigned to them.
SECTION 15. Certain Agreements. The Board of Directors shall have power
to authorize or direct the proper officers of the Corporation, on behalf of the
Corporation, to enter into valid and binding agreements in respect of
employment, incentive or deferred compensation, stock options, and similar or
related matters, notwithstanding the fact that a person with whom the
Corporation so contracts may be a member of its Board of Directors. Any such
agreement may validly and lawfully bind the Corporation for a term of more than
one year, in accordance with its terms, notwithstanding the fact that one of the
elements of any such agreement may involve the employment by the Corporation of
an officer, as such, for such term.
ARTICLE VI.
AUTHORIZATIONS
SECTION 1. Contracts. The Board of Directors, except as in these
by-laws otherwise provided, may authorize any officer, employee or agent of the
Corporation to enter into any contract or execute and deliver any instrument in
the name of and on behalf of the Corporation, and such authority may be general
or confined to specific instances.
SECTION 2. Loans. No loan shall be contracted on behalf of the
Corporation and no negotiable paper shall be issued in its name, unless
authorized by the Board of Directors.
SECTION 3. Checks, Drafts, Etc. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by such officer or officers, employee or
<PAGE>
15 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION
employees, of the Corporation as shall from time to time be determined in
accordance with authorization of the Board of Directors.
SECTION 4. Deposits. All funds of the Corporation shall be deposited
from time to time to the credit of the Corporation in such banks, trust
companies or other depositories as the Board of Directors may from time to time
designate, or as may be designated by any officer or officers of the Corporation
to whom such power may be delegated by the Board, and for the purpose of such
deposit the officers and employees who have been authorized to do so in
accordance with the determinations of the Board may endorse, assign and deliver
checks, drafts, and other orders for the payment of money which are payable to
the order of the Corporation.
SECTION 5. Proxies. Except as otherwise provided in these by-laws or in
the Certificate of Incorporation, and unless otherwise provided by resolution of
the Board of Directors, the Chairman of the Board or any other officer may from
time to time appoint an attorney or attorneys or agent or agents of the
Corporation, in the name and on behalf of the Corporation to cast the votes
which the Corporation may be entitled to cast as a shareowner or otherwise in
any other corporation any of whose stock or other securities may be held by the
Corporation, at meetings of the holders of the stock or other securities of
such other corporations, or to consent in writing to any action by such other
corporation, and may instruct the person or persons so appointed as to the
manner of casting such vote or giving such consent, and may execute or cause to
be executed in the name and on behalf of the Corporation and under its
corporate seal, or otherwise, all such written proxies or other instruments
as he may deem necessary or proper in the premises.
ARTICLE VII. SHARES AND THEIR TRANSFER
SECTION 1. Certificates of Stock. Certificates for shares of the stock
of the Corporation shall be in such form as shall be approved by the Board of
Directors. They shall be numbered in the order of their issue, by class and
series, and shall be signed by the Chairman of the Board or a Vice President,
and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary, of the Corporation. If such certificate is countersigned (1) by a
transfer agent other than the Corporation or its employee, or (2) by a
registrar other than the Corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if such person were such officer, transfer agent, or registrar at
the date of issue.
SECTION 2. Record Ownership. A record of the name and address of the
holder of each certificate, the number of shares represented thereby and the
date of issuance thereof shall be made on the Corporation's books. The
Corporation shall be entitled to treat the holder of record of any share of
stock as the holder in fact thereof and accordingly shall not be bound to
<PAGE>
16 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION
recognize any equitable or other claim to or interest in such share on the part
of any other person, whether or not it shall have express or other notice
thereof, except as required by law.
SECTION 3. Transfer of Stock. Shares of stock shall be transferable on
the books of the Corporation by the person named in the certificate for such
stock in person or by such person's attorney or other duly constituted
representative upon surrender of such certificate with an assignment endorsed
thereon or attached thereto duly executed and with such guarantee of signature
as the Corporation may reasonably require.
SECTION 4. Lost, Destroyed and Mutilated Certificates. The Corporation
may issue a new certificate of stock in the place of any certificate theretofore
issued by it, alleged to have been lost, stolen or destroyed, and the
Corporation may require the owner of the lost, stolen or destroyed certificate,
or such person's legal representative, to give the Corporation a bond sufficient
to indemnify it against any claim that may be made against it on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
such new certificate.
SECTION 5. Transfer Agent and Registrar; Regulations. The Corporation
shall, if and whenever the Board of Directors shall so determine, maintain one
or more transfer offices or agencies, each in charge of a transfer agent
designated by the Board of Directors, where the shares of the stock of the
Corporation shall be directly transferable, and also one or more registry
offices, each in charge of a registrar designated by the Board of Directors,
where such shares of stock shall be registered, and no certificate for shares of
the stock of the Corporation, in respect of which a registrar and transfer agent
shall have been designated, shall be valid unless countersigned by such transfer
agent and registered by such registrar. The Board of Directors may also make
such additional rules and regulations as it may deem expedient concerning the
issue, transfer and registration of certificates for shares of stock of the
Corporation.
SECTION 6. Fixing Record Date. For the purpose of determining the
shareowners entitled to notice of or to vote at any meeting of shareowners or
any adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. If no record
date is fixed (1) the record date for determining shareowners entitled to notice
of or to vote at a meeting of shareowners shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held and (2) the record date for determining shareowners for any
other purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of shareowners
of record entitled to notice of or to vote at a meeting of shareowners shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
<PAGE>
17 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION
SECTION 7. Examination of Books by Shareowners. The Board of Directors
shall, subject to the laws of the State of Delaware, have power to determine
from time to time, whether and to what extent and under what conditions and
regulations the accounts and books of the Corporation, or any of them, shall be
open to the inspection of the shareowners; and no shareowner shall have any
right to inspect any book or document of the Corporation, except as conferred by
the laws of the State of Delaware, unless and until authorized so to do by
resolution of the Board of Directors or of the shareowners of the Corporation.
ARTICLE VIII.
NOTICE
SECTION 1. Manner of Giving Written Notice. Any notice in writing
required by law or by these by-laws to be given to any person may be delivered
personally, may be transmitted by electronic means or may be given by depositing
the same in the post office or letter box in a postpaid envelope addressed to
such person at such address as appears on the books of the Corporation. Notice
by mail shall be deemed to be given at the time when the same shall be mailed,
and notice by other means shall be deemed given when actually delivered (and in
the case of notice transmitted by electronic means, when authenticated if and as
required by law).
SECTION 2. Waiver of Notice. Whenever any notice is required to be
given to any person, a waiver thereof by such person in writing or transmitted
by electronic means (and authenticated if and as required by law), whether
before or after the time stated therein, shall be deemed equivalent thereto.
ARTICLE IX.
SEAL
The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal" and
"Delaware".
ARTICLE X.
FISCAL YEAR
The fiscal year of the Corporation shall begin on the first day of
October in each year.
<PAGE>
18 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION
APPENDIX
PROCEDURES FOR SUBMISSION AND DETERMINATION OF CLAIMS FOR INDEMNIFICATION
PURSUANT TO ARTICLE III, SECTION 13 OF THE BY-LAWS.
SECTION 1. Purpose. The Procedures for Submission and Determination of
Claims for Indemnification Pursuant to Article III, Section 13 of the by-laws
(the "Procedures") are to implement the provisions of Article III, Section 13 of
the by-laws of the Corporation (the "by-laws") in compliance with the
requirement of subsection (H) thereof.
SECTION 2. Definitions. For purposes of these Procedures:
(A) All terms that are defined in Article III, Section 13 of the
by-laws shall have the meanings ascribed to them therein when used in these
Procedures unless otherwise defined herein.
(B) "Expenses" include all reasonable attorneys' fees, court costs,
transcript costs, fees of experts, witness fees, travel expenses, duplicating
costs, printing and binding costs, telephone charges, postage, delivery service
fees, and all other disbursements or expenses of the types customarily incurred
in connection with prosecuting, defending, preparing to prosecute or defend,
investigating, or being or preparing to be a witness in, a Proceeding; and shall
also include such retainers as counsel may reasonably require in advance of
undertaking the representation of an indemnitee in a Proceeding.
(C) "Indemnitee" includes any person who was or is, or is threatened to
be made, a witness in or a party to any Proceeding by reason of the fact that
such person is or was a director, officer, employee or agent of the Corporation
or any of its majority-owned subsidiaries, or is or was serving at the request
of the Corporation as a director, officer, employee or agent (except in each of
the foregoing situations to the extent any agreement, arrangement or
understanding of agency contains provisions that supersede or abrogate
indemnification under Article III, Section 13 of the by-laws) of another
corporation or of any partnership, joint venture, trust, employee benefit plan
or other enterprise.
(D) "Proceeding" includes any action, suit, arbitration, alternative
dispute resolution mechanism, investigation, administrative hearing or any other
proceeding, whether civil, criminal, administrative or investigative, except one
initiated by an Indemnitee unless the Board of Directors shall have authorized
the commencement thereof.
SECTION 3. Submission and Determination of Claims.
(A) To obtain indemnification or advancement of Expenses under Article
III, Section 13 of the by-laws, an Indemnitee shall submit to the Secretary of
the Corporation a written request therefor, including therein or therewith such
documentation and information as is reasonably available to the Indemnitee and
is reasonably necessary to permit a determination as to whether and what extent
<PAGE>
19 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION
the Indemnitee is entitled to indemnification or advancement of Expenses, as the
case may be. The Secretary shall, promptly upon receipt of a request for
indemnification, advise the Board of Directors (if the Indemnitee is a present
or former director or officer of the Corporation) or the officer of the
Corporation authorized to make the determination as to whether an Indemnitee is
entitled to indemnification (if the Indemnitee is not a present or former
director or officer of the Corporation) thereof in writing if a determination in
accordance with Article III, Section 13(E) of the by-laws is required.
(B) Upon written request by an Indemnitee for indemnification pursuant
to Section 3(A) hereof a determination with respect to the Indemnitee's
entitlement thereto in the specific case, if required by the by-laws, shall be
made in accordance with Article III, Section 13(E) of the by-laws, and, if it is
so determined that the Indemnitee is entitled to indemnification, payment to the
Indemnitee shall be made within ten days after such determination. The
Indemnitee shall cooperate with the person, persons or entity making such
determination, with respect to the Indemnitee's entitlement to indemnification,
including providing to such person, persons or entity upon reasonable advance
request any documentation or information which is not privileged or otherwise
protected from disclosure and which is reasonably available to the Indemnitee
and reasonably necessary to such determination.
(C) If entitlement to indemnification is to be made by Independent
Counsel pursuant to Article III, Section 13(E) of the by-laws, the Independent
Counsel shall be selected as provided in this Section 3(C). If a Change of
Control shall not have occurred, the Independent Counsel shall be selected by
the Board of Directors, and the Corporation shall give written notice to the
Indemnitee advising the Indemnitee of the identity of the Independent Counsel so
selected. If a Change of Control shall have occurred, the Independent Counsel
shall be selected by the Indemnitee (unless the Indemnitee shall request that
such selection be made by the Board of Directors, in which event the immediately
preceding sentence shall apply), and the Indemnitee shall give written notice to
the Corporation advising it of the identity of the Independent Counsel so
selected. In either event, the Indemnitee or the Corporation, as the case may
be, may, within seven days after such written notice of selection shall have
been given, deliver to the Corporation or to the Indemnitee, as the case may be,
a written objection to such selection. Such objection may be asserted only on
the ground that the Independent Counsel so selected does not meet the
requirements of "Independent Counsel" as defined in Article III, Section 13 of
the by-laws, and the objection shall set forth with particularity the factual
basis of such assertion. If such written objection is made, the Independent
Counsel so selected may not serve as Independent Counsel unless and until a
court has determined that such objection is without merit. If, within twenty
days after the next regularly scheduled Board of Directors meeting following
submission by the Indemnitee of a written request for indemnification pursuant
to Section 3(A) hereof, no Independent Counsel shall have been selected and not
objected to, either the Corporation or the Indemnitee may petition the Court of
Chancery of the State of Delaware or other court of competent jurisdiction for
resolution of any objection which shall have been made by the Corporation or the
Indemnitee to the other's selection of Independent Counsel and/or for the
appointment as Independent Counsel of a person selected by the Court or by such
other person as the Court shall designate, and the person with respect to whom
an objection is favorably resolved or the person so appointed shall act as
<PAGE>
20 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION
Independent Counsel under Article III, Section 13(E) of the by-laws. The
Corporation shall pay any and all reasonable fees and expenses (including
without limitation any advance retainers reasonably required by counsel) of
Independent Counsel incurred by such Independent Counsel in connection with
acting pursuant to Article III, Section 13(E) of the by-laws, and the
Corporation shall pay all reasonable fees and expenses (including without
limitation any advance retainers reasonably required by counsel) incident to the
procedures of Article III, Section 13(E) of the by-laws and this Section 3(C),
regardless of the manner in which Independent Counsel was selected or appointed.
Upon the delivery of its opinion pursuant to Article III, Section 13 of the
by-laws or, if earlier, the due commencement of any judicial proceeding or
arbitration pursuant to Section 4(A)(3) of these Procedures, Independent Counsel
shall be discharged and relieved of any further responsibility in such capacity
(subject to the applicable standards of professional conduct then prevailing).
(D) If a Change of Control shall have occurred, in making a
determination with respect to entitlement to indemnification under the by-laws,
the person, persons or entity making such determination shall presume that an
Indemnitee is entitled to indemnification under the by-laws if the Indemnitee
has submitted a request for indemnification in accordance with Section 3(A)
hereof, and the Corporation shall have the burden of proof to overcome that
presumption in connection with the making by any person, persons or entity of
any determination contrary to that presumption.
SECTION 4. Review and Enforcement of Determination.
(A) In the event that (1) advancement of Expenses is not timely made
pursuant to Article III, Section 13(G) of the by-laws, (2) payment of
indemnification is not made pursuant to Article III, Section 13(C) or (D) of the
by-laws within ten days after receipt by the Corporation of written request
therefor, (3) a determination is made pursuant to Article III, Section 13(E) of
the by-laws that an Indemnitee is not entitled to indemnification under the
by-laws, (4) the determination of entitlement to indemnification is to be made
by Independent Counsel pursuant to Article III, Section 13(E) of the by-laws and
such determination shall not have been made and delivered in a written opinion
within ninety days after receipt by the Corporation of the written request for
indemnification, or (5) payment of indemnification is not made within ten days
after a determination has been made pursuant to Article III, Section 13(E) of
the by-laws that an Indemnitee is entitled to indemnification or within ten days
after such determination is deemed to have been made pursuant to Article III,
Section 13(F) of the by-laws, the Indemnitee shall be entitled to an
adjudication in an appropriate court of the State of Delaware, or in any other
court of competent jurisdiction, of the Indemnitee's entitlement to such
indemnification or advancement of Expenses. Alternatively, the Indemnitee, at
his or her option, may seek an award in arbitration to be conducted by a single
arbitrator pursuant to the rules of the American Arbitration Association. The
Indemnitee shall commence such proceeding seeking an adjudication or an award in
arbitration within one year following the date on which the Indemnitee first has
the right to commence such proceeding pursuant to this Section 4(A). The
Corporation shall not oppose the Indemnitee's right to seek any such
adjudication or award in arbitration.
<PAGE>
21 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION
(B) In the event that a determination shall have been made pursuant to
Article III, Section 13(E) of the by-laws that an Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant to
this Section 4 shall be conducted in all respects as a de novo trial, or
arbitration, on the merits and the Indemnitee shall not be prejudiced by reason
of that adverse determination. If a Change of Control shall have occurred, the
Corporation shall have the burden of proving in any judicial proceeding or
arbitration commenced pursuant to this Section 4 that the Indemnitee is not
entitled to indemnification or advancement of Expenses, as the case may be.
(C) If a determination shall have been made or deemed to have been made
pursuant to Article III, Section 13(E) or (F) of the by-laws that an Indemnitee
is entitled to indemnification, the Corporation shall be bound by such
determination in any judicial proceeding or arbitration commenced pursuant to
this Section 4, absent (1) a misstatement or omission of a material fact in
connection with the Indemnitee's request for indemnification, or (2) a
prohibition of such indemnification under applicable law.
(D) The Corporation shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 4 that the
procedures and presumptions of these Procedures are not valid, binding and
enforceable, and shall stipulate in any such judicial proceeding or arbitration
that the Corporation is bound by all the provisions of these Procedures.
(E) In the event that an Indemnitee, pursuant to this Section 4, seeks
to enforce the Indemnitee's rights under, or to recover damages for breach of,
Article III, Section 13 of the by-laws or these Procedures in a judicial
proceeding or arbitration, the Indemnitee shall be entitled to recover from the
Corporation, and shall be indemnified by the Corporation against, any and all
expenses (of the types described in the definition of Expenses in Section 2 of
these Procedures) actually and reasonably incurred in such judicial proceeding
or arbitration, but only if the Indemnitee prevails therein. If it shall be
determined in such judicial proceeding or arbitration that the Indemnitee is
entitled to receive part but not all of the indemnification or advancement of
Expenses sought, the expenses incurred by the Indemnitee in connection with
such judicial proceeding or arbitration shall be appropriately prorated.
SECTION 5. Amendments. These Procedures may be amended at any time and
from time to time in the same manner as any by-law of the Corporation in
accordance with the Certificate of Incorporation; provided, however, that
notwithstanding any amendment, alteration or repeal of these Procedures or any
provision hereof, any Indemnitee shall be entitled to utilize these Procedures
with respect to any claim for indemnification arising out of any action taken or
omitted prior to such amendment, alteration or repeal except to the extent
otherwise required by law.
22 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION
