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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
January 12, 1999 (December 31, 1998)
ROCKWELL INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-12383 25-1797617
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
600 Anton Boulevard, Suite 700, Costa Mesa, California 92626-7147
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (714) 424-4200
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<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
Item 2. Acquisition or Disposition of Assets.
On December 31, 1998, Rockwell International Corporation
("Registrant") completed the spin-off of its Semiconductor Systems business to
holders of shares of common stock, par value $1 per share, of Registrant, by
means of the distribution (the "Distribution") to such holders of all
outstanding shares of common stock, par value $1 per share, of Conexant Systems,
Inc., then a wholly-owned Delaware subsidiary of Registrant ("Conexant"),
including the preferred share purchase rights associated with such common stock
(collectively, "Conexant Common Stock"). Conexant began operations as an
independent, separately traded, publicly-held company on January 1, 1999.
The Distribution was made without the payment of any consideration or
the exchange of any shares by Registrant's shareowners. In the Distribution,
Registrant's shareowners received one share of Conexant Common Stock for every
two shares of common stock of Registrant owned on December 11, 1998. Ownership
of Conexant Common Stock was registered in book-entry form and each shareowner
of Registrant will receive a stock distribution statement indicating the number
of full shares of Conexant Common Stock that has been credited to the
shareowner.
In connection with the Distribution, Registrant and Conexant entered
into a Distribution Agreement, an Amended and Restated Employee Matters
Agreement and a Tax Allocation Agreement, which are filed herewith as Exhibits
2.1, 2.2 and 2.3, respectively.
As previously announced, Registrant received a ruling from the
Internal Revenue Service that the Distribution will be tax-free to Registrant's
shareowners for United States federal income tax purposes, except to the extent
cash is received by a shareowner in lieu of a fractional share of Conexant
Common Stock.
In connection with the Distribution, Conexant Common Stock was
registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, as
amended. "When-issued" trading in Conexant Common Stock commenced on the Nasdaq
Stock Market, Inc. National Market System ("Nasdaq") on December 9, 1998 under
the trading symbol "CNXTV". Conexant Common Stock began trading "regular way" on
Nasdaq on January 4, 1999 under the trading symbol "CNXT".
(Page 2 of 5 Pages)
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Registrant is not aware of any material relationship between Conexant
and Registrant or any of its affiliates, any director or officer of Registrant
or any associate of any such director or officer that existed at the date of the
Distribution, except as disclosed in Conexant's Registration Statement on Form
10, as amended (File No. 000-24923) and except that Mr. Donald R. Beall,
Chairman of the Executive Committee of the Board of Directors of Registrant,
serves as a non-executive director of Conexant and Mr. Richard M. Bressler, who
resigned as a director of Registrant effective December 30, 1998, serves as a
non-executive director of Conexant.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
2.1 Distribution Agreement dated as of December 31, 1998 by
and between Rockwell International Corporation and
Conexant Systems, Inc.
2.2 Amended and Restated Employee Matters Agreement dated as
of December 31, 1998 by and between Rockwell International
Corporation and Conexant Systems, Inc.
2.3 Tax Allocation Agreement dated as of December 31, 1998 by
and between Rockwell International Corporation and
Conexant Systems, Inc.
(Page 3 of 5 Pages)
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SIGNATURE
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)
By /s/ William J. Calise, Jr.
-------------------------------
William J. Calise, Jr.
Senior Vice President, General
Counsel and Secretary
Dated: January 12, 1999
(Page 4 of 5 Pages)
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EXHIBIT INDEX
Sequentially
Exhibit Numbered
Number Description Page
- ------ ----------- ----
2.1 Distribution Agreement dated as of December 31, 1998 by and
between Rockwell International Corporation and Conexant
Systems, Inc.
2.2 Amended and Restated Employee Matters Agreement dated as of
December 31, 1998 by and between Rockwell International
Corporation and Conexant Systems, Inc.
2.3 Tax Allocation Agreement dated as of December 31, 1998 by
and between Rockwell International Corporation and Conexant
Systems, Inc.
(Page 5 of 5 Pages)
Exhibit 2.1
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DISTRIBUTION AGREEMENT
by and between
ROCKWELL INTERNATIONAL CORPORATION
and
CONEXANT SYSTEMS, INC.
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December 31, 1998
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.........................................................1
Section 1.01 General................................................1
ARTICLE II THE DISTRIBUTION..................................................25
Section 2.01 The Distribution......................................25
Section 2.02 Fractional Shares.....................................26
Section 2.03 Cooperation Prior to the Distribution.................27
Section 2.04 Rockwell Board Action; Conditions to the
Distribution........................................28
Section 2.05 Waiver of Conditions..................................29
Section 2.06 Disclosure............................................29
ARTICLE III TRANSACTIONS RELATING TO THE DISTRIBUTION........................29
Section 3.01 Intercorporate Reorganization.........................29
Section 3.02 Rockwell Group Obligations
Relating to the Semiconductor
Business...........................................32
Section 3.03 Intercompany Accounts and Arrangements................35
Section 3.04 Cash Management.......................................37
Section 3.05 The Semiconductor Board...............................39
Section 3.06 Resignations; Transfer of Stock Held as Nominee.......39
Section 3.07 Company Certificate of
Incorporation and By-Laws;
Rights Plan.........................................40
Section 3.08 Insurance.............................................40
Section 3.09 Use of Names, Trademarks, etc.........................42
Section 3.10 Consents..............................................49
Section 3.11 Cross-License of Intellectual Property................50
Section 3.12 Celeritas Account.....................................69
Section 3.13 Control of Celeritas Litigation.......................69
Section 3.14 Newport Beach Lease...................................69
ARTICLE IV MUTUAL RELEASE; INDEMNIFICATION...................................70
Section 4.01 Mutual Release........................................70
Section 4.02 Indemnification by Rockwell...........................71
Section 4.03 Indemnification by the Company........................72
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Section 4.04 Limitations on Indemnification Obligations............74
Section 4.05 Procedures Relating to Indemnification................75
Section 4.06 Remedies Cumulative...................................79
Section 4.07 Survival of Indemnities...............................79
Section 4.08 Exclusivity of Tax Allocation Agreement...............80
ARTICLE V ACCESS TO INFORMATION..............................................80
Section 5.01 Access to Information.................................80
Section 5.02 Production of Witnesses...............................82
Section 5.03 Retention of Records..................................82
Section 5.04 Confidentiality.......................................82
ARTICLE VI MISCELLANEOUS.....................................................84
Section 6.01 Entire Agreement; Construction........................84
Section 6.02 Survival of Agreements................................84
Section 6.03 Expenses..............................................84
Section 6.04 Governing Law.........................................85
Section 6.05 Notices...............................................85
Section 6.06 Consent to Jurisdiction...............................87
Section 6.07 Amendments............................................87
Section 6.08 Assignment............................................88
Section 6.09 Captions; Currency....................................88
Section 6.10 Severability..........................................88
Section 6.11 Parties in Interest...................................88
Section 6.12 Schedules.............................................89
Section 6.13 Termination...........................................89
Section 6.14 Waivers; Remedies.....................................89
Section 6.15 Further Assurances....................................89
Section 6.16 Counterparts..........................................90
Section 6.17 Performance...........................................90
Section 6.18 Currency Calculations.................................90
ANNEXES
Annex A - Employee Matters Agreement
Annex B - Tax Allocation Agreement
SCHEDULES
Schedule 1.1(a) - By-Laws
Schedule 1.1(b) - Certificate of Incorporation
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Schedule 1.1(c) - Company Subsidiaries
Schedule 1.1(d) - Semiconductor Bank Accounts
Schedule 1.1(e) - Former Businesses of the Company
Schedule 1.1(f) - Semiconductor Financial Instruments
and Shared Agreements
Schedule 1.1(g) - Semiconductor Litigation
Schedule 1.1(h) - Colorado Springs Facility Equipment
Schedule 3.1(c) - Reorganization Transactions
Schedule 3.3(a) - Intercompany Accounts
Schedule 3.3(b)(ii) - Intercompany Agreements
Schedule 3.6 - Continuing Directors and Officers
Schedule 3.11(h) - CMOS Imager Technology
Schedule 4.2 - Certain Form 10 Sections
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DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT (this "Agreement"), dated as of December
31, 1998, by and between ROCKWELL INTERNATIONAL CORPORATION, a Delaware
corporation ("Rockwell"), and CONEXANT SYSTEMS, INC., a Delaware corporation
formerly named Rockwell Semiconductor Systems, Inc. and, as of the date hereof,
a wholly-owned subsidiary of Rockwell (the "Company").
WHEREAS, the Rockwell Board (as defined herein) has determined
that it is appropriate and desirable to distribute all outstanding shares of
Semiconductor Common Stock (as defined herein) on a pro rata basis to the
holders of Rockwell Common Stock (as defined herein); and
WHEREAS, Rockwell and the Company have determined that it is
appropriate and desirable to set forth the principal corporate transactions
required to effect such distribution and certain other agreements that will
govern certain matters relating to such distribution;
NOW, THEREFORE, in consideration of the premises and of the
respective agreements and covenants contained in this Agreement, the parties
hereby agree as follows:
ARTICLE I DEFINITIONS
DEFINITIONS
Section 1.01 General. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"Action" means, with respect to any Person, any actual or
threatened or future action, suit, arbitration, inquiry, proceeding or
investigation by or before any Governmental Entity or any claims or other legal
matters that have been or may be asserted by or against, or otherwise affect,
such Person.
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"Administrative Services" shall have the meaning ascribed thereto
in Section 3.11(d)(i)(A).
"Administrative Services Software" shall have the meaning ascribed
thereto in Section 3.11(d)(i)(B).
"Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person; provided, however, that for purposes of this Agreement, following the
Time of Distribution no member of either Group shall be deemed to be an
Affiliate of any member of the other Group. For purposes of the immediately
preceding sentence, the term "control" (including, with correlative meanings,
the terms "controlled by" and "under common control with"), as used with respect
to any Person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through ownership of voting securities, by contract or otherwise.
"Agreement" shall have the meaning ascribed thereto in the
preamble.
"Ancillary Agreements" means, collectively, the Employee Matters
Agreement, the Tax Allocation Agreement, the Transition Agreement and the
Conveyance and Assumption Instruments.
"Application Software" shall have the meaning ascribed thereto in
Section 3.11(e)(i).
"Assets" means any and all assets, properties and rights, whether
tangible or intangible, real, personal or mixed, fixed, contingent or otherwise,
and wherever located (other than ownership interests in Subsidiaries),
including, without limitation, the following:
(i) real property interests (including, without limitation,
leases), land, plants, buildings and improvements;
(ii) machinery, equipment, tooling, vehicles, furniture and
fixtures, leasehold improvements, repair parts, tools, plant,
laboratory and office
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equipment and supplies, computer hardware and software, computer
networking equipment, engineering and design equipment, test equipment
and other tangible personal property, together with any rights or
claims arising out of maintenance or service contracts relating thereto
or the breach of any express or implied warranty by the manufacturers
or sellers of any of such assets or any component part thereof;
(iii) inventories, including, without limitation, raw
materials, work-in-process, materials, components, finished goods,
parts, accessories and supplies;
(iv) cash, bank accounts, notes, short-term and long-term
investments, accounts, loans and notes receivable (whether current or
not current), interests as beneficiary under letters of credit,
advances and performance and surety bonds;
(v) certificates of deposit, banker's acceptances, shares of
stock, bonds, debentures, evidences of indebtedness, certificates of
interest or participation in profit-sharing agreements,
collateral-trust certificates, preorganization certificates or
subscriptions, transferable shares, investment contracts, voting-trust
certificates, puts, calls, straddles, options, swaps, collars, caps and
other securities or hedging arrangements of any kind;
(vi) financial, accounting, corporate, operating, design,
manufacturing, test and other data and records (in each case, in
whatever form or medium, including, without limitation, electronic
media), including, without limitation, books, records, notes, sales and
sales promotional material and data, advertising materials, credit
information, cost and pricing information, customer and supplier lists,
business plans, reference catalogs, payroll and personnel records and
procedures, blue-prints, research and development files, data and
laboratory books, sales order files, litigation files, minute books,
stock ledgers, stock transfer records and other similar property,
rights and information;
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(vii) (A) inventions (whether patentable or unpatentable and
whether or not reduced to practice), all improvements thereto, and all
patents (including, without limitation, utility and design patents,
industrial designs and utility models), patent applications, and patent
and invention disclosures, and all other rights of inventorship,
worldwide, together with all reissuances, continuations,
continuations-in-part, divisions, revisions, supplementary protection
certificates, extensions and re-examinations thereof; (B) trademarks,
service marks, trade names, trade dress, logos, business and product
names and slogans, any and every other form of trade identity and
registrations and applications for registration thereof, worldwide; (C)
copyrights in copyrightable works, and all other rights of authorship,
worldwide, and all applications (including, without limitation, the
right to file applications), registrations and renewals in connection
therewith; (D) mask works and semiconductor chip rights, worldwide, and
all applications (including, without limitation, the right to file
applications), registrations and renewals in connection therewith; (E)
trade secrets and confidential business and technical information
(including, without limitation, ideas, research and development,
know-how, formulas, technology, compositions, manufacturing and
production processes and techniques, technical data, engineering,
production and other designs, drawings, engineering notebooks,
industrial models, software and specifications and any other
information meeting the definition of a trade secret under the Uniform
Trade Secrets Act); (F) computer and electronic data processing
programs and software, both source code and object code (including,
without limitation, data and related documentation, flow charts,
diagrams, descriptive texts and programs, computer print-outs,
underlying tapes, computer databases and similar items), computer
applications and operating programs; (G) rights to sue for and remedies
against past, present and future infringements of any or all of the
foregoing and rights of priority and protection of interests therein
under the laws of any jurisdiction worldwide; (H) all copies and
tangible embodiments of any or all of the foregoing (in whatever form
or medium, including, without limitation, electronic
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media); (I) all other proprietary and intellectual property rights and
interests; and (J) all other rights relating to any or all of the
foregoing;
(viii) Contracts;
(ix) credits, prepaid expenses, deposits and retentions held
by third parties;
(x) claims, causes of action, choses in action, rights under
express or implied warranties, guarantees, indemnities and similar
rights, rights of recovery, rights of set-off, rights of subrogation
and all other rights of any kind;
(xi) Licenses; and
(xii) goodwill and going concern value.
"Assigning Party" shall have the meaning ascribed thereto in
Section 3.10.
"Assumed Rockwell Liabilities" means Liabilities of the Company
Group as of the Time of Distribution which do not constitute Semiconductor
Liabilities and which relate to or arise in connection with any business of
Rockwell and the Rockwell Subsidiaries other than the Semiconductor Business.
"BNA" means Boeing North American, Inc., a Delaware corporation
formerly named Rockwell International Corporation.
"BNA Transition Agreement" means the Transition Agreement dated as
of December 6, 1996 by and among Rockwell, The Boeing Company and BNA, as the
same may be amended.
"Boeing Post-Closing Covenants Agreement" means the Post-Closing
Covenants Agreement dated as of December 6, 1996 among BNA, The Boeing Company,
Boeing NA, Inc. and Rockwell.
"By-Laws" means the Company's by-laws substantially in the form
attached hereto as Schedule 1.1(a).
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"Cash" means all cash, cash on hand, cash in transit, cash
equivalents, funds, certificates of deposit, similar instruments and other
short-term investments held by Rockwell and its Subsidiaries and Affiliates
(including, without limitation, members of the Company Group) at the Time of
Distribution (it being understood that cash equivalents do not include
intercompany cash management balances which will be eliminated as of the Time of
Distribution pursuant to Section 3.03(a)).
"Celeritas Account" means the account established with the United
States District Court for the Central District of California in respect of the
Celeritas Litigation pursuant to the Celeritas Court Order or any similar
account established in respect of the Celeritas Litigation (as it exists on the
Distribution Date) and, in each case, all cash and investments contained
therein.
"Celeritas Court Order" means the order of the United States
District Court for the Central District of California dated December 3, 1998 in
respect of the Celeritas Litigation, as amended by subsequent order of such
court dated December 11, 1998, and as such order may be further amended from
time to time.
"Celeritas Litigation" means the litigation listed as item A.7 on
Schedule 1.1(g) (including any additional issues raised by the parties in
connection therewith) and any additional litigation relating to the same facts
as such litigation brought by the plaintiff thereunder following any successful
appeal or other resolution in favor of the defendants.
"Certificate of Incorporation" means the Company's certificate of
incorporation substantially in the form attached hereto as Schedule 1.1(b).
"Change in Control" means, with respect to any party, any of the
following events or circumstances: (a) any Person or group of Persons (within
the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended) shall either (i) acquire beneficial ownership (within the meaning of
Rule 13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934) of 25% or more of the outstanding shares of voting stock
of the party or (ii) obtain the
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power (whether or not exercised) to elect a majority of the party's directors or
(b) Continuing Directors shall cease to constitute a majority of the board of
directors of the party.
"Claims Administration" means the processing of claims made under
the Policies, including, without limitation, the reporting of claims to the
insurance carrier, management and defense of claims, and providing for
appropriate releases upon settlement of claims.
"Claims Made Policies" shall have the meaning ascribed thereto in
Section 3.08(a).
"CMOS Imager Technology" means the United States patents and
patent applications listed on Schedule 3.11(h), all corresponding foreign
patents and patent applications based thereon or claiming the priority thereof
and all know-how and other intellectual property rights directly associated
therewith (but not including general fabrication technology for mixed-signal
products).
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor legislation.
"Colorado Springs Facility" means the facilities (including,
without limitation, the wafer fabrication facilities) related to the
Semiconductor Business located at Colorado Springs, Colorado.
"Colorado Springs Liabilities" means (i) all Liabilities based
upon, arising out of, relating to or otherwise in connection with the ownership
and/or operation of the Retained Colorado Springs Assets on or prior to the
Lease Termination Date, including, without limitation, (A) all Liabilities for
environmental claims or matters relating to the operation of the Retained
Colorado Springs Assets on or prior to the Lease Termination Date or for
conditions existing at the Colorado Springs Facility on or prior to the Lease
Termination Date, (B) fines related to permit exceedances and (C) security and
other maintenance costs, (ii) all Liabilities (including, without limitation,
termination fees) based upon, arising out of, relating to or otherwise in
connection with Contracts entered into by Rockwell or any of its Subsidiaries
(including, without limitation, members of the Company Group) on or prior to
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the Distribution Date relating to the Retained Colorado Springs Assets or
Contracts entered into by the Company or any of the Company Subsidiaries after
the Distribution Date relating to the Retained Colorado Springs Assets,
including, without limitation, (A) the Product Supply Agreement dated as of
March 1, 1997 (the "Praxair Contract") by and between Praxair, Inc. and Rockwell
Semiconductor Systems Colorado Springs, Inc. and (B) the Utility Services
Agreement dated as of October 31, 1996 (the "CSU Contract") by and between the
Colorado Springs Utilities ("CSU") and Rockwell Semiconductor Systems Colorado
Springs, Inc. (provided that Rockwell will pay for the actual incremental energy
charges of CSU applicable to industrial users generally for electricity and
natural gas actually used after the Lease Termination Date in the operation of
the Colorado Springs Facility, but Rockwell will not be liable for any demand,
capacity, facility, availability, termination or similar charges or for any
costs for failure to utilize a minimum amount of electricity or natural gas in
any period) and (iii) all Decommissioning Costs (it being understood that as of
the date hereof, Rockwell intends to effect the closure and decommissioning of
the Retained Colorado Springs Assets by hiring one of Blasland, Bouck & Lee,
Arcadis, Geraghty & Miller or Earthtech to perform such activities as are
mutually agreed to in good faith by Conexant, Rockwell and the firm so hired
(or, if no such agreement is reached within ten business days after commencement
of a dispute between Conexant and Rockwell with respect to the scope of such
activities, such activities as Rockwell reasonably deems appropriate), that
Rockwell would request the firm so hired to provide Rockwell and the Company
with a final closure report after completing such activities certifying
completion thereof and that the Company would be permitted to document the
condition of the Colorado Springs Facility prior to the issuance of a final
report by the firm so hired, but that Rockwell may, in its reasonable
discretion, choose to effect such closure and decommissioning through such other
means as Rockwell reasonably deems appropriate).
"Commission" means the Securities and Exchange Commission.
"Company" shall have the meaning ascribed thereto in the preamble.
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"Company Group" means the Company and the Company Subsidiaries.
"Company Subsidiary" means each Person listed on Schedule 1.1(c)
which is a direct or indirect Subsidiary of the Company as of the Time of
Distribution.
"Consents" means consents, approvals, waivers, clearances,
exemptions, allowances, novations, authorizations, filings, registrations and
notifications.
"Continuing Director" means, with respect to either party, any
member of such party's board of directors who either (i) is a member of such
board as of the Time of Distribution or (ii) is thereafter elected to such
board, or nominated for election by stockholders, by a vote of at least
two-thirds of the directors who are Continuing Directors at the time of such
vote; provided that an individual who is so elected or nominated in connection
with a merger, consolidation, acquisition or similar transaction (but excluding
the Distribution) shall not be a Continuing Director unless such individual was
a Continuing Director prior thereto.
"Contracts" means agreements, leases, contracts, memoranda of
understanding, letters of intent, sales orders, purchase orders, open bids and
other commitments and all rights therein and Liabilities thereunder, including,
without limitation, in each case, all amendments, modifications and supplements
thereto and waivers and consents thereunder.
"Conveyance and Assumption Instruments" means, collectively, the
various agreements, deeds, bills of sale, stock powers, certificates of title,
instruments of conveyance and assignment, instruments of assumption and other
instruments and documents to be entered into to effect the transfer of Assets
and Subsidiaries and the assumption of Liabilities contemplated by the
transactions described in Section 3.01.
"Credit Agreement" means the Credit Agreement dated as of December
21, 1998 among the Company, the Company Subsidiaries from time to time party
thereto, the lenders named therein and Credit Suisse First Boston, a bank
organized under the laws of Switzerland, as administrative agent and as
collateral agent.
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"CSU Contract" shall have the meaning ascribed thereto in the
definition of "Colorado Springs Liabilities".
"Decommissioning Costs" means all Liabilities in respect of (x)
preparing the Retained Colorado Springs Assets for closure as a manufacturing
facility (i.e., ceasing manufacturing operations, removing all Semiconductor
Assets and dismantling and removing all unsold production equipment); (y)
preparing the Retained Colorado Springs Assets for sale in an environmental
condition suitable for ultimate use as an office building; and (z) removing and
disposing of hazardous wastes from the Retained Colorado Springs Assets;
including, without limitation (in each case, for any purpose set forth in
clauses (x), (y) or (z) above), all environmental audit and remediation costs,
consultant and contractor fees, costs for dismantling and removing unsold
production equipment, costs for permit closure and any other costs that Rockwell
may deem commercially reasonable (it being understood that at Rockwell's option
such activities may be performed by third parties selected by Rockwell).
Decommissioning Costs shall include, without limitation, the following: (i) the
removal and proper disposal of hazardous materials from all hazardous material
storage areas and hazardous waste storage areas; (ii) the removal and proper
disposal of the following systems: (a) acid exhaust systems, (b) solvent exhaust
systems, (c) ATL Solvent exhaust systems, (d) Hotwall exhaust systems, (e)
industrial wastewater drain systems, (f) fluoride wastewater drain systems, (g)
bulk chemical fill stations, (h) photoresist/thinner collection systems, (i) PRS
collection systems, (j) specialty gas delivery systems (hazardous gases) and (k)
Fab 7 diesel fuel storage and delivery systems; and (iii) following the removal
referred to in clauses (i) and (ii), the removal and proper disposal of all
hazardous material build-up from all remaining structures and equipment that can
be removed through common mechanical processes such as sweeping, wiping and/or
pressure washing. Notwithstanding the foregoing, Decommissioning Costs shall not
include the removal or management of any asbestos containing materials following
the Lease Termination Date.
"Distribution" means the distribution, on the basis provided for
in Section 2.01, to holders of
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Rockwell Common Stock of the shares of Semiconductor Common Stock owned by
Rockwell on the Distribution Date.
"Distribution Agent" means the distribution agent selected by
Rockwell to distribute Semiconductor Common Stock in connection with the
Distribution.
"Distribution Date" means the date determined by the Rockwell
Board as the date as of which the Distribution will be effected.
"Employee Matters Agreement" means the Employee Matters Agreement
between Rockwell and the Company, substantially in the form attached hereto as
Annex A.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Form 10" means the registration statement on Form 10 filed by the
Company with the Commission to effect the registration of the Semiconductor
Common Stock pursuant to the Exchange Act, including, without limitation, all
amendments thereto filed by the Company with the Commission prior to the Time of
Distribution.
"Former Business" means any corporation, partnership, entity,
division, business unit, business, assets, plants, product line, operations or
contract (including, without limitation, any assets and liabilities comprising
the same) that has been sold, conveyed, assigned, transferred or otherwise
disposed of or divested (in whole or in part) by any member of the
Pre-Distribution Group or the operations, activities or production of which has
been discontinued, abandoned, completed or otherwise terminated (in whole or in
part) by any member of the Pre-Distribution Group.
"Governmental Entity" means any government or any court, arbitral
tribunal, administrative agency or commission or other governmental or
regulatory authority or agency, Federal, state, local, domestic, foreign or
international.
"Group" means the Rockwell Group or the Company Group.
"Indemnifiable Losses" means, subject to Section 4.04, any and all
losses, Liabilities, claims,
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damages, deficiencies, obligations, fines, payments, Taxes, Liens, costs and
expenses, matured or unmatured, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated, known or unknown, whenever arising and whether or
not resulting from Third Party Claims (including, without limitation, the costs
and expenses of any and all Actions; all amounts paid in connection with any
demands, assessments, judgments, settlements and compromises relating thereto;
interest and penalties recovered by a third party with respect thereto;
out-of-pocket expenses and reasonable attorneys', accountants' and other
experts' fees and expenses reasonably incurred in investigating, preparing or
defending against any such Actions or in asserting, preserving or enforcing an
Indemnitee's rights hereunder; and any losses that may result from the granting
of injunctive relief as a result of any such Actions).
"Indemnifying Party" shall have the meaning ascribed thereto in
Section 4.04(a).
"Indemnitee" means any of the Rockwell Indemnitees or the
Semiconductor Indemnitees who or which may seek indemnification under this
Agreement.
"Indemnity Reduction Amounts" shall have the meaning ascribed
thereto in Section 4.04(a).
"Information" means all records, books, contracts, instruments,
computer data and other data and information (in each case, in whatever form or
medium, including, without limitation, electronic media).
"Information Statement" means the information statement with
respect to the Company sent to the holders of Rockwell Common Stock in
connection with the Distribution.
"Insurance Proceeds" means monies (a) received by an insured from
an insurance carrier, (b) paid by an insurance carrier on behalf of an insured
or (c) received from any third party in the nature of insurance, contribution or
indemnification in respect of any Liability.
"IRS" means the Internal Revenue Service.
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"Japanese Credit Facility" means the Yen 2.0 billion credit
facility from Bank of Tokyo-Mitsubishi to Conexant Systems Japan Company Ltd.
and any successor, substitute or replacement credit facilities of such credit
facility.
"Japanese Credit Facility Guarantee" means the Letter Guarantee
dated as of December 11, 1998 from Rockwell in favor of Bank of Tokyo-Mitsubishi
with respect to the Japanese Credit Facility and any other guarantee by any
member of the Rockwell Group related to the Japanese Credit Facility, in each
case, as amended, supplemented or otherwise modified or restated from time to
time.
"Japanese Debt Amount" means the aggregate amount payable by
Conexant Systems Japan Company Ltd. under the Japanese Credit Facility,
including, without limitation, any accrued interest and fees with respect
thereto, as of the Time of Distribution.
"Lease Termination Date" means the date on which the Company
ceases to occupy the Colorado Springs Facility in accordance with the Transition
Agreement.
"Liabilities" means any and all claims, debts, liabilities,
commitments and obligations of whatever nature, whether fixed, contingent or
absolute, matured or unmatured, liquidated or unliquidated, accrued or not
accrued, known or unknown, due or to become due, whenever or however arising
(including, without limitation, those arising out of any contract or tort,
whether based on negligence, strict liability or otherwise) and whether or not
the same would be required by generally accepted accounting principles to be
reflected as a liability in financial statements or disclosed in the notes
thereto, including, without limitation, all costs and expenses relating thereto
and those claims, debts, liabilities, commitments and obligations arising under
any law, rule, regulation, Action, order or consent decree of any Governmental
Entity or any award of any arbitrator of any kind, and those arising under any
Contract.
"Licenses" means licenses, permits, authorizations, consents,
certificates, registrations, variances, franchises and other approvals from any
Governmental Entity, including, without limitation, those relating to
environmental matters.
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"Lien" means any lien, security interest, pledge, mortgage,
charge, restriction, claim, retention of title agreement or other encumbrance of
whatever nature.
"Meritor" means Meritor Automotive, Inc., a Delaware corporation.
"Meritor Distribution Agreement" means the Distribution Agreement
dated as of September 30, 1997 by and between Rockwell and Meritor.
"Nasdaq" means The Nasdaq Stock Market, Inc. National Market
System.
"Newport Beach Lease Guarantee" means the Guarantee dated as of
August 18, 1998 executed by Rockwell in favor of Deutsche Bank AG, New York
Branch, in its individual capacity and as Agent Lessor, Deutsche Bank AG, New
York and/or Grand Cayman Branch, in its individual capacity and as Agent, and
the other financial institutions from time to time identified therein, as
amended, supplemented or otherwise modified or restated from time to time.
"No-action Letter" means a letter or letters from the staff of the
Commission indicating that the Division of Corporation Finance will not
recommend enforcement action to the Commission if shares of Semiconductor Common
Stock received by the Rockwell Savings Plans in the Distribution (i) are sold by
the Rockwell Savings Plans on behalf of participants in the Rockwell Savings
Plans who are not affiliates of the Company or (ii) are distributed to such
participants and sold by them, in each case, without compliance with Rule 144
under the Securities Act, registration under the Securities Act or compliance
with any other exemption from registration under the Securities Act.
"Occurrence Basis Policies" shall have the meaning ascribed
thereto in Section 3.08(a).
"Operative Agreement" shall have the meaning ascribed to such term
in Appendix A of the Participation Agreement dated as August 18, 1998 among the
Company, Deutsche Bank AG, New York Branch, as agent for the lessors and as a
lessor, Deutsche Bank AG, New York and/or Cayman Islands Branch, as a lender
(together with
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the other financial institutions from time to time identified therein) and as
agent for the lenders, and Deutsche Bank Securities Inc., as arranger, as
amended, supplemented or otherwise modified or restated from time to time.
"Ordinary Course Intercompany Arrangements" shall have the meaning
ascribed thereto in Section 3.03(b)(ii).
"Owner" shall have the meaning ascribed thereto in Section
3.11(c)(ii).
"Person" means any individual, partnership, joint venture,
corporation, limited liability entity, trust, unincorporated organization or
other entity (including, without limitation, a Governmental Entity).
"Policies" means all insurance policies and insurance contracts of
any kind of the Pre-Distribution Group which include the Company, the Company
Subsidiaries and/or the Semiconductor Business within the definition of the
named insured and which were or are in effect at any time at or prior to the
Time of Distribution, including, without limitation, primary, excess and
umbrella policies, commercial general liability policies, fiduciary liability,
product liability, automobile, aircraft, property and casualty, directors and
officers liability, workers' compensation and employee dishonesty insurance
policies, bonds and captive insurance company arrangements, together with all
rights, benefits and privileges thereunder.
"Praxair Contract" shall have the meaning ascribed thereto in the
definition of "Colorado Springs Liabilities".
"Pre-Distribution Group" means (i) each of Rockwell, the
Subsidiaries of Rockwell existing immediately prior to the Time of Distribution
(including, without limitation, members of the Company Group) and the former
Subsidiaries of Rockwell, (ii) each of the predecessors of each of the foregoing
(including, without limitation, BNA) and (iii) each of the present and former
Subsidiaries and other Affiliates of each of the foregoing, and their
predecessors.
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"Privileged Information" means, with respect to either Group,
Information regarding a member of such Group, or any of its operations,
employees, assets or Liabilities (whether in documents or stored in any other
form or known to its employees or agents) that is or may be protected from
disclosure pursuant to the attorney-client privilege, the work product doctrine
or other applicable privileges, that a member of the other Group may come into
possession of or obtain access to pursuant to this Agreement or otherwise.
"Recipient Party" shall have the meaning ascribed thereto in
Section 3.10.
"Record Date" means the close of business on the date determined
by the Rockwell Board as the record date for the Distribution.
"Recorded Amount" means, with respect to Cash, the amount recorded
by Rockwell as of the Time of Distribution in accordance with Rockwell's
practices and procedures as in effect on the date hereof. The parties
acknowledge that such practices and procedures include (i) deducting the amount
of outstanding checks for the purposes of determining the Recorded Amount of
Cash in non-U.S. bank accounts and (ii) not deducting the amount of outstanding
checks for the purposes of determining the Recorded Amount of Cash in U.S. bank
accounts.
"Representative" means, with respect to any Person, any of such
Person's directors, officers, employees, agents, consultants, advisors,
accountants, attorneys and representatives.
"Retained Colorado Springs Assets" means (i) the Colorado Springs
Facility, the real property and fixtures associated therewith and any mineral
rights related thereto, (ii) all machinery, equipment and computer hardware
contained therein, including, without limitation, the machinery, equipment and
computer hardware listed on Schedule 1.1(h) (other than any such machinery,
equipment and computer hardware that Rockwell shall agree upon in writing to
transfer to the Company), together with any rights or claims arising out of
maintenance or service contracts relating thereto or the breach of any express
or implied warranty by the manufacturers or sellers of any such assets or any
component part thereof and (iii) all claims, causes of
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action, choses in action, rights under express or implied warranties,
guarantees, indemnities and similar rights, rights of recovery, rights of
set-off, rights of subrogation and all other rights of any kind related to the
assets described in clauses (i) and (ii) of this definition.
"Rights" means the Rights to be issued pursuant to the Rights
Plan.
"Rights Plan" means the rights agreement entered into on or prior
to the Distribution Date between the Company and ChaseMellon Shareholder
Services, L.L.C., as rights agent, substantially in the form filed as an exhibit
to the Form 10.
"Rockwell" shall have the meaning ascribed thereto in the
preamble.
"Rockwell Assets" means, collectively, all Assets which
immediately prior to the Time of Distribution are owned by Rockwell or any of
its Subsidiaries (including, without limitation, members of the Company Group),
other than the Semiconductor Assets. Anything contained herein to the contrary
notwithstanding, Rockwell Retained Assets shall be included in Rockwell Assets.
"Rockwell Board" means the Board of Directors of Rockwell or a
duly authorized committee thereof.
"Rockwell CLIR Fund" means the Rockwell Continued Life Insurance
Reserve Fund.
"Rockwell Common Stock" means the Common Stock, par value $1.00
per share, of Rockwell.
"Rockwell Group" means Rockwell and its Affiliates, whether now or
hereafter existing, other than members of the Company Group.
"Rockwell Indemnitees" means Rockwell, each Affiliate of Rockwell,
including the Rockwell Subsidiaries, each of their respective Representatives
and each of the heirs, executors, successors and assigns of any of the
foregoing.
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"Rockwell Retained Accounts" means all bank accounts of Rockwell
and its Subsidiaries and Affiliates (including, without limitation, members of
the Company Group), other than Semiconductor Bank Accounts.
"Rockwell Retained Assets" means the following:
(i) all (A) Rockwell Retained Accounts and (B) Cash,
including, without limitation, all Cash contained in the Rockwell
Retained Accounts and the Semiconductor Bank Accounts, except for (1)
Cash in a Recorded Amount equal to the Japanese Debt Amount, (2) shares
of common stock of Semtech Corporation held by Rockwell and its
Subsidiaries and (3) shares of common stock of Gambit Automated Design,
Inc. held by Rockwell and its Subsidiaries;
(ii) all Policies and all rights therein and related thereto,
other than the benefits of Occurrence Basis Policies and Claims Made
Policies to the extent described in Section 3.08(a);
(iii) all rights in and use of the names, trademarks, trade
names and service marks "Rockwell" and "Rockwell International" and all
corporate symbols and logos related thereto and all names, trademarks,
trade names and service marks which include the words "Rockwell" or
"Rockwell International" or any derivative thereof (other than as
provided for in Section 3.09);
(iv) all assets with respect to pension plans of Rockwell and
its Subsidiaries (including, without limitation, members of the Company
Group), other than as provided for in the Employee Matters Agreement;
(v) all assets of and related to the Rockwell VEBA and the
Rockwell CLIR Fund;
(vi) all Shared Agreements (subject to the provisions of
Section 3.02(e));
(vii) all assets that are used by Rockwell and its
Subsidiaries and Affiliates in providing corporate, insurance and
administrative services to Subsidiaries, divisions or operating units
of the Rockwell Group not included in the Semiconductor
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Business (whether or not the same or similar services are provided to
the Semiconductor Business);
(viii) all interests of Rockwell and its Subsidiaries and
Affiliates (including, without limitation, members of the Company
Group) in charitable trusts and assets thereof;
(ix) all rights in U.S. Patent #4,368,098 entitled "Epitaxial
Composite and Method of Making", all license agreements and royalties
with respect to the licensing thereof and all rights to sue and recover
for and remedies against past, present and future infringements thereof
(including, without limitation, all rights in respect of the Action
Rockwell International Corporation v. United States and SDL, Inc., Civ.
No. 93-542 C, U.S. Court of Federal Claims);
(x) all amounts due and rights in respect of government
Contracts formerly associated with the Company's Newbury Park,
California facility;
(xi) the Retained Colorado Springs Assets; and
(xii) all rights, choses in action, causes of action and
claims arising out of any asset described in clauses (i) through (xi)
above.
"Rockwell Savings Plans" means, collectively, (i) the Rockwell
International Corporation Savings Plan, (ii) the Rockwell Retirement Savings
Plan for Certain Employees, (iii) the Allen-Bradley Savings and Investment Plan
for Salaried Employees, (iv) the Allen-Bradley Savings and Investment Plan for
Hourly Employees, (v) the Allen-Bradley Savings and Investment Plan for
Represented Hourly Employees and (vi) the Reliance Electric Company Savings and
Investment Plan.
"Rockwell Science Center" means Rockwell Science Center, LLC, a
Delaware limited liability company.
"Rockwell Subsidiary" means any Subsidiary of Rockwell other than
the Company or any Company Subsidiary.
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"Rockwell VEBA" means the Trust for Employee Welfare Benefit
Programs of Rockwell International Corporation.
"Securities Act" means the Securities Act of 1933, as amended.
"Semiconductor Assets" means, collectively, all Assets (other than
Rockwell Retained Assets) which immediately prior to the Time of Distribution
are owned by Rockwell or any of its Subsidiaries (including, without limitation,
members of the Company Group) and which are used primarily in or relate
primarily to the Semiconductor Business, as the same shall exist as of such
time, including, without limitation, except as otherwise provided pursuant to
any Transaction Agreement, (i) all assets reflected in the Semiconductor Balance
Sheet, as such assets may have been added to or sold or otherwise changed since
the date thereof, (ii) the Celeritas Account and (iii) the CMOS Imager
Technology (subject to the obligation to reconvey such CMOS Imager Technology to
Rockwell Science Center in accordance with Section 3.11(h)). Anything contained
herein to the contrary notwithstanding, Rockwell Retained Assets shall not be
included in Semiconductor Assets.
"Semiconductor Balance Sheet" means the balance sheet of the
Semiconductor Business as of September 30, 1998 contained in the Form 10.
"Semiconductor Bank Accounts" means all bank accounts set forth on
Schedule 1.1(d).
"Semiconductor Board" means the Board of Directors of the Company.
"Semiconductor Business" means (i) the business engaged in at all
times prior to the Time of Distribution by the Pre-Distribution Group of
researching, developing, designing, engineering, manufacturing, building,
selling, distributing, installing, modifying, repairing, servicing and
supporting semiconductor products and systems for communications electronics
markets such as personal computers, personal imaging devices, wireless
communications products, network access devices and digital information and
entertainment products, and activities related thereto, (ii) Former Businesses
managed or operated with any of the foregoing or
20
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operationally or otherwise related to any of the foregoing, including, without
limitation, the Former Businesses listed on Schedule 1.1(e) and (iii) activities
related to the foregoing; provided, however, that the Semiconductor Business
shall not include (A) the business heretofore and currently engaged in by
Rockwell's Electronic Commerce Division, including, without limitation,
researching, developing, designing, engineering, manufacturing, building,
selling, distributing, installing, modifying, repairing, servicing and
supporting electronic commerce products for call center systems and personalized
electronic commerce applications or (B) Rockwell's mechanical filters product
line, including, without limitation, the developing, designing, engineering,
manufacturing, building and selling of high performance electrical bandpass
filters (operating in the 3 kilohertz to 500 kilohertz center frequency range)
for HF, UHF and VHF radios, automatic train controls and wireless communications
infrastructure equipment. Notwithstanding anything contained herein to the
contrary, the term "Semiconductor Business" shall not include Rockwell Science
Center (or the operations thereof) or Rockwell's Automation or Avionics &
Communications businesses. The parties acknowledge that the Semiconductor
Business in the past has operated under such names as Microelectronics Division,
North American Rockwell Microelectronics Company, Electronic Devices Division,
Semiconductor Products Division, Microelectronics Technology Center, Digital
Communications Division, Rockwell Telecommunications Division, Rockwell
Semiconductor Systems Division, Multimedia Communications Division, Wireless
Communications Division, Personal Computing Products Division, Personal Imaging
Products Division, Digital Infotainment Division and Network Access Division.
"Semiconductor Common Stock" means, collectively, the Common
Stock, par value $1.00 per share, of the Company and the related Rights.
"Semiconductor Financial Instruments" means all credit facilities,
guaranties, foreign currency forward exchange contracts, comfort letters,
letters of credit and similar instruments related to the Semiconductor Business
under which any member of the Rockwell Group has any primary, secondary,
contingent, joint, several or other Liability (other than Shared Agreements),
including, without limitation, those set forth on
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Schedule 1.1(f), the Newport Beach Lease Guarantee and the Japanese Credit
Facility Guarantee.
"Semiconductor Indemnitees" means the Company, each Affiliate of
the Company, including the Company Subsidiaries, each of their respective
Representatives and each of the heirs, executors, successors and assigns of any
of the foregoing.
"Semiconductor Liabilities" means (i) all Liabilities of any
member of the Company Group under any Transaction Agreement to which it is or
becomes a party, (ii) all Liabilities for which any member of the Company Group
is made responsible pursuant to any Transaction Agreement, (iii) all Colorado
Springs Liabilities and (iv) all Liabilities based upon, arising out of,
relating to or otherwise in connection with the Semiconductor Assets or the
Semiconductor Business, whether based upon, arising out of, relating to or
otherwise in connection with events, actions, occurrences, omissions,
circumstances or conditions occurring, existing or asserted before, at or after
the Time of Distribution, including, without limitation: (A) all Liabilities
reflected (or of the type reflected) on the Semiconductor Balance Sheet or
described (or of the type described) in the notes thereto (as such Liabilities
may have been reduced or added to or otherwise changed since the date thereof),
(B) all Liabilities in respect of checks outstanding as of the Time of
Distribution relating to the Semiconductor Business, (C) all Liabilities in
respect of workers' compensation, automobile, general liability, products
liability, intellectual property liability and other claims and matters (whether
direct or by indemnification of any Person or otherwise) relating to the
Semiconductor Business, (D) all Liabilities in respect of all Actions relating
to the Semiconductor Business, including, without limitation, those Actions set
forth on Schedule 1.1(g), provided that (1) with respect to the Western Atlas
Litigation, Semiconductor Liabilities shall include only those Liabilities
described in Sections 4.03(g) and 4.03 (h) and (2) with respect to the Celeritas
Litigation existing on the Distribution Date, in the event the defendants are
successful in their current appeal and Rockwell receives funds from the
Celeritas Account pursuant to Section 3.12, all Liabilities in respect of any
additional Celeritas Litigation occurring thereafter shall be Liabilities of
Rockwell, (E) all Liabilities in respect
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of salary, bonuses, incentive payments, severance payments and other
compensation payments and all Taxes and withholdings related thereto, (F) except
for those Liabilities expressly assumed by the Rockwell Group pursuant to the
Employee Matters Agreement, all Liabilities in respect of employee welfare and
fringe benefits relating to the Semiconductor Business (including, without
limitation, claims for medical and disability benefits), (G) all Liabilities for
environmental matters based upon, arising out of, relating to or otherwise in
connection with the Semiconductor Business, including, without limitation,
Liabilities in respect of any facility to the extent relating to the
Semiconductor Business presently or formerly owned or operated by any member of
the Pre-Distribution Group, (H) all Liabilities based upon, arising out of,
relating to or otherwise in connection with Contracts related to the
Semiconductor Business, including, without limitation, Liabilities to make
payments or otherwise in connection with the termination thereof as a result of
the transactions contemplated hereby or otherwise, (I) all Liabilities in
respect of commitments of charitable trusts and other charitable contributions
and pledges relating to the Semiconductor Business, (J) all Liabilities payable
under the BNA Transition Agreement and all agreements executed in connection
therewith related to the Semiconductor Business, including, without limitation,
payment for all services performed for the Semiconductor Business and (K) all
Liabilities relating to the Japanese Credit Facility and all other credit
facilities to which any member of the Company Group is a party at the Time of
Distribution, including, without limitation, all indebtedness outstanding
thereunder and interest and fees payable with respect thereto.
"Shared Agreements" means all credit facilities, guaranties,
foreign currency forward exchange contracts, comfort letters, letters of credit
and similar instruments, bonds, indemnities, assurances and Contracts under
which Rockwell or any Rockwell Subsidiary has any primary, secondary,
contingent, joint, several or other Liability arising out of or relating to both
(i) the Semiconductor Business and (ii) one or more other businesses of Rockwell
or any Rockwell Subsidiary, which by their terms will be outstanding or in
effect as of or at any time following the Time of Distribution,
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including, without limitation, those set forth on Schedule 1.1(f).
"Subsidiary" means, with respect to any Person, any corporation or
other organization, whether incorporated or unincorporated, of which such Person
or any Subsidiaries of such Person controls or owns, directly or indirectly,
more than 50% of the stock or other equity interest, or more than 50% of the
voting power entitled to vote on the election of members to the board of
directors or similar governing body; provided, however, that for purposes of
this Agreement neither the Company nor any Company Subsidiary shall be deemed to
be a Rockwell Subsidiary (as defined herein).
"Taiwan Purchase Amount" means the amount (not to exceed $1.6
million), if any, payable after the Distribution Date by Conexant Systems Taiwan
Co. Ltd. to Rockwell International Taiwan Company for the Semiconductor Assets
owned by Rockwell International Taiwan Company.
"Tax" shall have the meaning ascribed thereto in the Tax
Allocation Agreement.
"Tax Allocation Agreement" means the Tax Allocation Agreement
between Rockwell and the Company, substantially in the form attached hereto as
Annex B.
"Tax Ruling" means a private letter ruling issued by the IRS in
form and substance satisfactory to Rockwell (in its sole discretion) indicating
that the Distribution will qualify as a tax-free spin-off to the shareowners of
Rockwell for federal income tax purposes under Section 368(a)(1)(D) of the Code.
"Third Party Claim" shall have the meaning ascribed thereto in
Section 4.05(a).
"Third Party Licensee" shall have the meaning ascribed thereto in
Section 3.11(c)(ii).
"Third Party Licensor" shall have the meaning ascribed thereto in
Section 3.11(c)(ii).
"Time of Distribution" means the close of business on the
Distribution Date.
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"Transaction Agreements" means, collectively, this Agreement and
each Ancillary Agreement.
"Transition Agreement" means a transition services agreement
between Rockwell and the Company which will be entered into on or prior to the
Distribution Date and will provide for various service and other relationships
between Rockwell and the Company following the Distribution Date.
"Transition Period" shall have the meaning ascribed thereto in
Section 3.11(d)(i)(C).
"Western Atlas Litigation" means the litigation listed as Item
A.11 on Schedule 1.1(g) existing as of the Distribution Date (it being
understood that the parties to such dispute may raise additional issues in
connection therewith).
"Western Atlas Litigation Expenses" means all internal and
out-of-pocket costs of Rockwell or any Rockwell Subsidiary, including, without
limitation, all overhead allocations allocated or attributable to, and all fees
and expenses for attorneys, accountants, court costs and other experts incurred
in connection with, investigating, preparing, litigating, arbitrating or
settling (excluding amounts paid in settlement) the Western Atlas Litigation
after the Distribution Date.
ARTICLE II
THE DISTRIBUTION
Section 2.01 The Distribution. (a) Subject to Section 2.03, on or
prior to the Distribution Date, Rockwell will deliver to the Distribution Agent,
for the benefit of holders of record of Rockwell Common Stock as of the Record
Date, a certificate or certificates, endorsed by Rockwell in blank,
representing, in the aggregate (and rounded down to the nearest whole share), a
number of shares of Semiconductor Common Stock equal to the number of shares of
Rockwell Common Stock issued and outstanding as of the Record Date (excluding
treasury shares held by Rockwell) divided by two, and Rockwell will instruct the
Distribution Agent to make book-entry credits on the Distribution Date or as
soon thereafter as
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practicable for each holder of record of Rockwell Common Stock as of the Record
Date, or the designated transferee or transferees of such holder, for a number
of shares of Semiconductor Common Stock equal to the quotient obtained by
dividing (i) the number of shares of Rockwell Common Stock so held by such
holder of record as of the Record Date divided by (ii) two. The Distribution
will be effective as of the Time of Distribution.
(b) Rockwell and the Company will each provide to the Distribution
Agent all information (including, without limitation, information necessary to
make appropriate book-entry credits) and share certificates, in each case, as
may be required in order to complete the Distribution on the basis of one share
of Semiconductor Common Stock for every two shares of Rockwell Common Stock
issued and outstanding as of the Record Date (excluding treasury shares held by
Rockwell).
Section 2.02 Fractional Shares. Anything contained herein to the
contrary notwithstanding, no fractional shares of Semiconductor Common Stock
will be distributed to holders of Rockwell Common Stock in the Distribution.
Holders that are otherwise entitled to receive less than one whole share of
Semiconductor Common Stock in the Distribution will receive cash in lieu of such
fractional share as contemplated hereby. As soon as practicable after the
Distribution Date, Rockwell will direct the Distribution Agent to determine in
accordance with its customary practice the number of fractional shares of
Semiconductor Common Stock otherwise allocable to holders of record or
beneficial owners of Rockwell Common Stock as of the Record Date, to aggregate
all such fractional shares and sell as soon as practicable the whole shares
obtained by aggregating such fractional shares either in open market
transactions or otherwise, in each case at then prevailing trading prices, and
to cause to be distributed to each such holder or for the benefit of each such
beneficial owner, in lieu of any fractional share, such holder's or owner's
ratable share of the proceeds of such sale, after making appropriate deductions
of the amount required to be withheld for federal income tax purposes and after
deducting an amount equal to all brokerage charges, commissions and transfer
taxes attributed to such sale. Rockwell will direct the Distribution Agent to
seek to aggregate the shares of Rockwell Common Stock that may be held by any
such beneficial owner thereof through more than one account in
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determining the fractional share allocable to such beneficial owner.
Section 2.03 Cooperation Prior to the Distribution. Prior to the
Distribution:
(a) Rockwell and the Company will prepare, and Rockwell will mail,
promptly after effectiveness of the Form 10 and completion of the Information
Statement included therein, to the holders of Rockwell Common Stock, the
Information Statement, which will set forth appropriate disclosure concerning
the Company, the Distribution and such other matters as Rockwell and the Company
may determine. Rockwell and the Company will prepare, and the Company will file
with the Commission, the Form 10, which will include or incorporate by reference
the Information Statement. The Company will use its reasonable best efforts to
cause the Form 10 to become effective under the Exchange Act as soon as
practicable following the filing thereof.
(b) Rockwell and the Company will cooperate in preparing, filing
with the Commission and causing to become effective any registration statements
or amendments thereof which are required to reflect the establishment of, or
amendments to, any employee benefit and other plans contemplated by the Employee
Matters Agreement.
(c) Rockwell and the Company will take all such action as may be
necessary or appropriate under the securities or "blue sky" laws of the states
or other political subdivisions of the United States and the securities laws of
any applicable foreign countries or other political subdivisions thereof in
connection with the transactions contemplated by this Agreement.
(d) Rockwell and the Company will cause to be prepared, and the
Company will file and use its reasonable best efforts to have approved, an
application for approval of listing on Nasdaq of the Semiconductor Common Stock
to be distributed in the Distribution.
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Section 2.04 Rockwell Board Action; Conditions to the
Distribution. The Rockwell Board will in its discretion establish the Record
Date and the Distribution Date and all appropriate procedures in connection with
the Distribution, but in no event will the Distribution occur prior to such time
as each of the following conditions shall have been satisfied or shall have been
waived by the Rockwell Board in accordance with Section 2.05:
(a) Rockwell shall have received the Tax Ruling and the Tax Ruling
shall be in full force and effect and shall not have been modified or amended in
any respect adversely affecting the tax consequences set forth therein;
(b) the Rockwell Board shall have given final approval of the
Distribution;
(c) all material Consents which are required to effect the
Distribution shall have been obtained and shall be in full force and effect;
(d) the Form 10 shall have become effective under the Exchange
Act;
(e) the Certificate of Incorporation, the By-Laws and the Rights
Plan each shall have been adopted and be in effect;
(f) the Semiconductor Common Stock shall have been approved for
listing on Nasdaq;
(g) the transactions contemplated by Section 3.01 and Section 3.02
shall have been consummated in all material respects;
(h) Rockwell and the Company shall have entered into each of the
Ancillary Agreements and each such agreement shall be in full force and effect;
(i) the No-action Letter shall have been issued and shall be in
full force and effect;
(j) no order, injunction or decree issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing
consummation of the Distribution shall be in effect; and
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(k) no suit, action or proceeding by or before any court of
competent jurisdiction or other Governmental Entity shall have been commenced
and be pending to restrain or challenge the Distribution, and no inquiry shall
have been received that in the reasonable judgment of the Rockwell Board may
lead to such a suit, action or proceeding;
provided that the satisfaction of such conditions will not create any obligation
on the part of Rockwell to effect or seek to effect the Distribution or in any
way limit Rockwell's right to terminate this Agreement set forth in Section 6.13
or alter the consequences of any such termination from those specified in such
Section.
Section 2.05 Waiver of Conditions. Any or all of the conditions
set forth in Section 2.04 may be waived, in whole or in part, in the sole
discretion of the Rockwell Board.
Section 2.06 Disclosure. If at any time after the date hereof
either of the parties shall become aware of any circumstances that will or may
prevent any or all of the conditions contained in Section 2.04 from being
satisfied, it will promptly give to the other party written notice of those
circumstances.
ARTICLE III
TRANSACTIONS RELATING TO THE DISTRIBUTION
Section 3.01 Intercorporate Reorganization. (a) Prior to the
Distribution Date, Rockwell and the Company will take all actions necessary to
increase the outstanding shares of Semiconductor Common Stock so that,
immediately prior to the Distribution, Rockwell will hold a number of shares of
Semiconductor Common Stock (rounded down to the nearest whole share) equal to
the number of shares of Rockwell Common Stock issued and outstanding as of the
Record Date (excluding treasury shares held by Rockwell) divided by two.
(b) Subject to Section 3.10, prior to the Time of Distribution,
Rockwell and the Company will take, or cause to be taken, all actions necessary,
including, without limitation, the actions specified in Section 3.01(c), to:
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(i) have Rockwell and each Rockwell Subsidiary assign and
transfer, or cause to be assigned and transferred, to the Company or a
Company Subsidiary, as appropriate, any and all right, title and
interest of Rockwell and each of the Rockwell Subsidiaries in the
Company Subsidiaries;
(ii) have Rockwell and each Rockwell Subsidiary assign and
transfer, or cause to be assigned and transferred, to the Company or a
Company Subsidiary, as appropriate, any and all right, title and
interest of Rockwell and each of the Rockwell Subsidiaries in the
Semiconductor Assets;
(iii) have the Company and each Company Subsidiary assign and
transfer, or cause to be assigned and transferred, to a Rockwell
Subsidiary any and all right, title and interest of the Company and
each of the Company Subsidiaries in all Rockwell Assets (including,
without limitation, all Rockwell Retained Assets);
(iv) have Rockwell and each Rockwell Subsidiary assign and
transfer, or cause to be assigned and transferred, to the Company or a
Company Subsidiary, as appropriate, and have the Company or a Company
Subsidiary, as appropriate, unconditionally assume and undertake to
pay, perform and discharge, in a timely manner and in accordance with
the terms thereof, all Liabilities of Rockwell and the Rockwell
Subsidiaries that are Semiconductor Liabilities; and
(v) have the Company and each Company Subsidiary assign and
transfer, or cause to be assigned and transferred, to Rockwell or a
Rockwell Subsidiary, as appropriate, and have Rockwell or a Rockwell
Subsidiary, as appropriate, unconditionally assume and undertake to
pay, perform and discharge, in a timely manner and in accordance with
the terms thereof, all of the Assumed Rockwell Liabilities.
In the event that at any time or from time to time (whether prior
to or after the Time of Distribution) either party (or any member of such
party's respective Group) shall receive or otherwise possess any Asset that
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is allocated to any other Person pursuant to this Agreement or any Ancillary
Agreement, such party will promptly transfer, or cause to be transferred, such
Asset to the Person so entitled thereto. Prior to any such transfer, the Person
receiving or possessing such Asset will hold such Asset in trust for the benefit
of the Person entitled thereto (at the expense of the Person entitled thereto).
In the event that at any time or from time to time (whether prior to or after
the Time of Distribution) either Rockwell or the Company determines that the
other party (or any member of such other party's respective Group) shall not
have unconditionally assumed any Liabilities that are allocated to such other
Party (or a member of such other party's respective Group) pursuant to this
Agreement or any Ancillary Agreement, such other party will promptly execute and
deliver, or cause to be executed and delivered, all such documents and
instruments and will take, or cause to be taken, all such actions as the
requesting party may reasonably request to unconditionally assume, or cause to
be unconditionally assumed, such Liabilities.
(c) Subject to Section 3.10, Rockwell and the Company will take,
or cause to be taken, the actions described on Schedule 3.1(c) in connection
with United States and international operations of the Semiconductor Business.
(d) In connection with the transfers of Subsidiaries and Assets
and the assumptions of Liabilities contemplated by subsections (b) and (c) of
this Section 3.01, Rockwell and the Company will execute or cause to be executed
by the appropriate entities the Conveyance and Assumption Instruments. The
transfer of capital stock contemplated by such subsections will be effected by
means of delivery of stock certificates duly endorsed or accompanied by duly
executed stock powers and notation on the stock record books of the corporation
or other legal entities involved and, to the extent required by applicable law,
by notation on appropriate registries.
(e) Each of Rockwell (on behalf of itself and each member of the
Rockwell Group) and the Company (on behalf of itself and each member of the
Company Group) understands and agrees that, except as expressly set forth in any
Transaction Agreement, no party to any Transaction Agreement or any other
agreement or document contemplated by any Transaction Agreement either has or
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is, in such agreement or otherwise, representing or warranting in any way as to
the Assets, Subsidiaries, businesses or Liabilities retained, transferred or
assumed as contemplated hereby or thereby, as to any consents or approvals
required in connection with the transactions contemplated by the Transaction
Agreements, as to the value or freedom from any Lien of, or any other matter
concerning, any Assets or Subsidiaries of such party, or as to the absence of
any defenses or rights of setoff or freedom from counterclaim with respect to
any claim or other Assets or Subsidiaries of any party, or as to the legal
sufficiency of any assignment, document or instrument delivered hereunder or
thereunder to convey title to any Asset or Subsidiary or thing of value upon the
execution, delivery or filing hereof or thereof. Except as may expressly be set
forth in any Transaction Agreement, all Assets and Subsidiaries being
transferred or retained as contemplated by any Transaction Agreement or any
other agreement or document contemplated by any Transaction Agreement are being
transferred, or are being retained, on an "as is", "where is" basis (and, in the
case of the transfer of any real property, by means of a quitclaim or similar
form deed or conveyance) and the respective transferees shall bear the economic
and legal risks that any conveyance shall prove to be insufficient or that the
title to any Asset or Subsidiary shall be other than good and marketable and
free and clear of any Lien.
(f) It is the intention of the parties that payments made by the
parties to each other after the Time of Distribution pursuant to the Transaction
Agreements are to be treated as relating back to the transactions occurring
prior to the Time of Distribution pursuant to this Section 3.01 as an adjustment
to the transfers of Assets, Subsidiaries and Liabilities contemplated by this
Section 3.01, and Rockwell and the Company will, and will cause their
Subsidiaries to, take positions consistent with such intention with any Tax
authority, unless with respect to any payment any party receives an opinion of
counsel reasonably acceptable to the other party to the effect that there is no
substantial authority for such a position.
Section 3.02 Rockwell Group Obligations Relating to the
Semiconductor Business. (a) The Company will, at its expense, take or cause to
be taken all actions and enter into (or cause its Subsidiaries to
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enter into) such agreements and arrangements as shall be necessary to effect the
release of and substitution for each member of the Rockwell Group, as of the
Time of Distribution, from all primary, secondary, contingent, joint, several
and other Liabilities in respect of Semiconductor Financial Instruments, other
than the Newport Beach Lease Guarantee and the Japanese Credit Facilities
Guarantees (it being understood that all Liabilities in respect of Semiconductor
Financial Instruments are Semiconductor Liabilities).
(b) The Company will, at its expense, take or cause to be taken
all actions and enter into (or cause its Subsidiaries to enter into) such
agreements and arrangements as shall be necessary to effect, as soon as
practicable, but in no event later than twenty days after the Distribution Date,
the cancellation and termination of the Japanese Credit Facility Guarantee and
the release of each member of the Rockwell Group from all primary, secondary,
contingent, joint, several and other Liabilities in respect of the Japanese
Credit Facility Guarantee (it being understood that all Liabilities in respect
of the Japanese Credit Facility Guarantee are Semiconductor Liabilities).
(c) The Company will, at its expense, take or cause to be taken
all actions and enter into (or cause its Subsidiaries to enter into) such
agreements and arrangements as shall be necessary to effect, by the earlier of
(i) the termination of the Credit Agreement and (ii) three years after the
Distribution Date, the cancellation and termination of the Newport Beach Lease
Guarantee and the release of each member of the Rockwell Group from all primary,
secondary, contingent, joint, several and other Liabilities in respect of the
Newport Beach Lease Guarantee (it being understood that all Liabilities in
respect of the Newport Beach Lease Guarantee are Semiconductor Liabilities).
(d) The Company will, at its expense, use its reasonable best
efforts to take or cause to be taken all actions and to enter into (or cause its
Subsidiaries to enter into) such agreements and arrangements as shall be
necessary to effect the release of and substitution for each member of the
Rockwell Group, effective as of the Time of Distribution, from all primary,
secondary, contingent, joint, several and other Liabilities in respect of bonds,
indemnities, assurances and Contracts
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(other than Semiconductor Financial Instruments, which are covered by paragraphs
(a) through (c) above, and Shared Agreements, which are covered by paragraph (e)
below) under which any member of the Rockwell Group has any primary, secondary,
contingent, joint, several or other Liability arising out of or relating to the
Semiconductor Business which by their terms will be outstanding or in effect as
of or at any time following the Time of Distribution; provided, however, that
the Company shall not be obligated to pay any consideration therefor to any
third party (it being understood that all Liabilities in respect of such bonds,
indemnities, assurances and Contracts are Semiconductor Liabilities).
(e) The Company will, at its expense, use its reasonable best
efforts to take or cause to be taken all actions and to enter into (or cause its
Subsidiaries to enter into) such agreements and arrangements as shall be
necessary to effect the release of and substitution for each member of the
Rockwell Group, effective as of the Time of Distribution, from all primary,
secondary, contingent, joint, several or other Liabilities arising out of or
relating to the Semiconductor Business under Shared Agreements; provided,
however, that the Company shall not be obligated to pay any consideration
therefor to any third party (it being understood that all Liabilities in respect
of Shared Agreements arising out of or relating to the Semiconductor Business
are Semiconductor Liabilities). No member of the Company Group will incur,
without the prior written consent of Rockwell, any Liabilities under any Shared
Agreement or extend or otherwise amend any Shared Agreement after the Time of
Distribution (except as may otherwise be expressly provided in the Transition
Agreement).
(f) The Company's obligations under this Section 3.02 will
continue to be applicable to all Semiconductor Financial Instruments, bonds,
indemnities, assurances, Contracts and Shared Agreements identified at any time
by Rockwell, whether before, at or after the Time of Distribution.
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Section 3.03 Intercompany Accounts and Arrangements.
(a) Elimination of Intercompany Accounts.
(i) Except as set forth in Section 3.03(a)(ii) or on Schedule
3.3(a), the Company, on behalf of itself and each other member of the
Company Group, on the one hand, and Rockwell, on behalf of itself and
each other member of the Rockwell Group, on the other hand, hereby
settle and eliminate, by cancellation or transfer to a member of the
other Group (whether to cancel or transfer and the manner thereof will
be determined by Rockwell), effective as of the Time of Distribution,
all intercompany receivables, payables and other balances (including,
without limitation, intercompany cash management balances) between the
Company and/or any Company Subsidiary, on the one hand, and Rockwell
and/or any Rockwell Subsidiary, on the other hand.
(ii) The provisions of Section 3.03(a)(i) will not apply to any
intercompany receivables, payables and other balances (A) incurred in
connection with or in contemplation of the transactions described on
Schedule 3.1(c) (including, without limitation, payment of the Taiwan
Purchase Amount by Conexant Systems Taiwan Co. Ltd.) or (B) incurred in
connection with the payment by any party of any expenses which are
required to be paid by the other party pursuant to Section 6.03.
(b) Intercompany Agreements.
(i) Except as set forth in Section 3.03(b)(ii), in furtherance of
the releases and other provisions of Section 4.01, the Company, on
behalf of itself and each other member of the Company Group, on the one
hand, and Rockwell, on behalf of itself and each other member of the
Rockwell Group, on the other hand, hereby terminate any and all
agreements, arrangements, commitments or understandings in existence as
of the Time of Distribution, whether or not in writing, between or
among the Company and/or any Company Subsidiary, on the one hand, and
Rockwell and/or any Rockwell
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Subsidiary, on the other hand, effective as of the Time of
Distribution. No such terminated agreement, arrangement, commitment or
understanding (including, without limitation, any provision thereof
which purports to survive termination) shall be of any further force or
effect after the Time of Distribution.
(ii) The provisions of Section 3.03(b)(i) will not apply to any of
the following agreements, arrangements, commitments or understandings
(or to any of the provisions thereof): (A) the Transaction Agreements
(and each other agreement, instrument or document expressly
contemplated by any Transaction Agreement to be entered into by either
party hereto or any of the members of their respective Groups); (B) any
agreement, arrangement, commitment or understanding relating to any
matter described in Section 3.03(a)(ii); (C) any agreements,
arrangements, commitments or understandings listed or described on
Schedule 3.3(b)(ii); (D) any agreements, arrangements, commitments or
understandings to which any Person other than the parties hereto and
their respective Affiliates is a party; (E) any other agreements,
arrangements, commitments or understandings that any of the Transaction
Agreements expressly contemplates will survive the Time of
Distribution; and (F) any agreements, arrangements, commitments or
understandings between the Company and/or any Company Subsidiary, on
the one hand, and Rockwell and/or any Rockwell Subsidiary, on the other
hand, for the purchase or sale of goods or services of a type which the
provider thereof provides to unaffiliated third parties in the ordinary
course of business ("Ordinary Course Intercompany Arrangements");
provided, however, that in the event any such Ordinary Course
Intercompany Arrangements do not, as of the Time of Distribution,
contain commercially reasonable arm's-length terms of a type to which
unaffiliated parties would reasonably agree or do not include terms
which would normally appear in such arrangements between unaffiliated
parties, Rockwell and the Company will cause such Ordinary Course
Intercompany Arrangements to be amended so that they will contain terms
which are, as of the Time of Distribution, commercially reasonable
arm's-
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length terms of a type to which unaffiliated parties would reasonably
agree.
Section 3.04 Cash Management. (a) Bank Accounts. Subject to
Section 3.04(b), all Semiconductor Bank Accounts will constitute Semiconductor
Assets and all Rockwell Retained Accounts will constitute Rockwell Assets.
(b) Cash Balances. (i) In the event that the Recorded Amount of
Cash in the Semiconductor Bank Accounts (A) exceeds the sum of the
Japanese Debt Amount and the Taiwan Purchase Amount, the Company will
pay to Rockwell (by wire transfer to Rockwell's bank account at Mellon
Bank, N.A., Pittsburgh, Pennsylvania, Account No. 102-3474), within ten
business days after the Distribution Date, an amount equal to such
excess or (B) is less than the sum of the Japanese Debt Amount and the
Taiwan Purchase Amount, Rockwell will pay to the Company (by wire
transfer to Conexant's bank account at First National Bank, Chicago,
Illinois, Account No. 51-52283), within ten business days after the
Distribution Date, an amount equal to such deficit.
(ii) The Company will pay to Rockwell (by wire transfer to
Rockwell's bank account at Mellon Bank, N.A., Pittsburgh, Pennsylvania,
Account No. 102-3474), within three business days after the
Distribution Date, (A) all balances contained as of the Time of
Distribution in petty cash accounts at locations of the Semiconductor
Business and (B) the dollar value of travelers checks as of the Time of
Distribution at locations of the Semiconductor Business.
(c) Rockwell Customer Payments. The Company will, and will cause
its Subsidiaries and Affiliates to, forward promptly to Rockwell (for the
account of Rockwell or its applicable Subsidiary) any customer payments in
respect of accounts receivable owed to any member of the Rockwell Group received
by the Company or any of its Subsidiaries or Affiliates after the Time of
Distribution, whether received in lock boxes, via wire transfer or otherwise.
Such amounts will be forwarded by wire transfer (to Rockwell's bank account at
Mellon Bank, N.A., Pittsburgh, Pennsylvania, Account No. 102-3474) in the case
of customer payments received within thirty days
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after the Distribution Date and by check in the case of customer payments
received thereafter.
(d) Company Customer Payments. Rockwell will, and will cause its
Subsidiaries and Affiliates to, forward promptly to the Company (for the account
of the Company or its applicable Subsidiary) any customer payments in respect of
accounts receivable owed to any member of the Company Group received by Rockwell
or any of its Subsidiaries or Affiliates after the Time of Distribution, whether
received in lock boxes, via wire transfer or otherwise. Such amounts will be
forwarded by wire transfer in the case of customer payments received within
thirty days after the Distribution Date and by check in the case of customer
payments received thereafter.
(e) Funding of Outstanding Checks. (i) The following subsections
of this Section 3.04(e) are intended to implement the parties'
agreement that the Company or a Company Subsidiary will be liable for
payment of checks relating to the Semiconductor Business that are
outstanding as of the Time of Distribution.
(ii) The Company or a Company Subsidiary will fund all amounts in
respect of checks that are outstanding as of the Time of Distribution
and presented for payment after the Time of Distribution in
disbursement or payroll accounts that are Semiconductor Bank Accounts.
(iii) Rockwell or a Rockwell Subsidiary will fund all amounts in
respect of checks that are outstanding as of the Time of Distribution
and presented for payment after the Time of Distribution in
disbursement or payroll accounts that are Rockwell Retained Accounts.
Within three business days after Rockwell's request, the Company will
reimburse Rockwell (by wire transfer to Rockwell's bank account at
Mellon Bank, N.A., Pittsburgh, Pennsylvania, account number 102-3474),
for the account of Rockwell or the applicable Rockwell Subsidiary, for
all such amounts funded by Rockwell or a Rockwell Subsidiary in respect
of checks relating to the Semiconductor Business that are outstanding
as of the Time of Distribution and presented for payment after the Time
of Distribution
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in disbursement or payroll accounts that are Rockwell Retained
Accounts. No checks relating to the Semiconductor Business will be
issued on any Rockwell Retained Accounts after the Time of
Distribution.
(f) Certain Praxair Contract and CSU Contract Payments. The
Company will pay to Rockwell (by wire transfer to Rockwell's bank account at
Mellon Bank, N.A., Pittsburgh, Pennsylvania, Account No. 102-3474), within three
business days after the Distribution Date, an amount equal to all amounts paid
by Rockwell or the Company before the Time of Distribution in respect of (i) the
termination or buy-out of the Praxair Contract or the CSU Contract or (ii) any
other payments in respect of the Praxair Contract or the CSU Contract other than
regularly scheduled payments for purchases of products and services thereunder.
Section 3.05 The Semiconductor Board. The Company and Rockwell
will take all actions which may be required to elect or otherwise appoint as
directors of the Company, prior to the Time of Distribution, the persons named
in the Form 10 to constitute the board of directors of the Company at the Time
of Distribution.
Section 3.06 Resignations; Transfer of Stock Held as Nominee. (a)
Rockwell will cause all of its employees and directors and all of the employees
and directors of each other member of the Rockwell Group to resign, not later
than the Time of Distribution, from all boards of directors or similar governing
bodies of the Company or any other member of the Company Group on which they
serve, and from all positions as officers of the Company or any other member of
the Company Group in which they serve, except as otherwise specified on Schedule
3.6. The Company will cause all of its employees and directors and all of the
employees and directors of each other member of the Company Group to resign, not
later than the Time of Distribution, from all boards of directors or similar
governing bodies of Rockwell or any other member of the Rockwell Group on which
they serve, and from all positions as officers of Rockwell or any other member
of the Rockwell Group in which they serve, except as otherwise specified on
Schedule 3.6.
(b) Rockwell will cause each of its employees, and each of the
employees of the other members of the
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Rockwell Group, who holds stock, or similar evidence of ownership, of any
Company Group entity as nominee for such entity pursuant to the laws of the
country in which such entity is located to transfer such stock, or similar
evidence of ownership, to the Person so designated by the Company to be such
nominee as of and after the Time of Distribution. The Company will cause each of
its employees, and each of the employees of the other members of the Company
Group, who holds stock, or similar evidence of ownership, of any Rockwell Group
entity as nominee for such entity pursuant to the laws of the country in which
such entity is located to transfer such stock, or similar evidence of ownership,
to the Person so designated by Rockwell to be such nominee as of and after the
Time of Distribution.
(c) Rockwell will cause each of its employees and each of the
employees of the other members of the Rockwell Group to revoke or withdraw their
express written authority, if any, to act on behalf of any Company Group entity
as an agent or representative therefor after the Time of Distribution. The
Company will cause each of its employees and each of the employees of the other
members of the Company Group to revoke or withdraw their express written
authority, if any, to act on behalf of any Rockwell Group entity as an agent or
representative therefor after the Time of Distribution.
Section 3.07 Company Certificate of Incorporation and By-Laws;
Rights Plan. Prior to the Time of Distribution, (a) the Semiconductor Board will
(i) approve the Certificate of Incorporation and will cause the same to be filed
with the Secretary of State of the State of Delaware and (ii) adopt the By-Laws,
and (b) Rockwell, as sole stockholder of the Company, will approve the
Certificate of Incorporation. Prior to the Time of Distribution, the
Semiconductor Board will adopt the Rights Plan and declare a dividend of the
Rights so that each share of Semiconductor Common Stock issued and outstanding
as of the Time of Distribution will initially have one Right attached thereto.
Section 3.08 Insurance. (a) Coverage. Coverage of the Company and
the Company Subsidiaries under all Policies shall cease as of the Time of
Distribution. From and after the Time of Distribution, the Company and the
Company Subsidiaries will be
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responsible for obtaining and maintaining all insurance coverages in their own
right. All Policies will constitute Rockwell Retained Assets and will be
retained by Rockwell and the Rockwell Subsidiaries (with Rockwell and the
Rockwell Subsidiaries being the only named insureds thereunder), together with
all rights, benefits and privileges thereunder (including, without limitation,
the right to receive any and all return premiums with respect thereto). The
Company and the Company Subsidiaries will have no rights with respect to any
Policies, except that (i) the Company will have the right to assert claims (and
Rockwell will use reasonable best efforts to assist the Company in asserting
claims) for any loss, liability or damage with respect to Semiconductor Assets
under Policies with third-party insurers which are "occurrence basis" Policies
("Occurrence Basis Policies") arising out of insured incidents occurring from
the date coverage thereunder first commenced until the Time of Distribution to
the extent that the terms and conditions of any such Occurrence Basis Policies
and agreements relating thereto so allow and (ii) the Company will have the
right to continue to prosecute claims properly asserted with the insurance
carrier prior to the Time of Distribution (and Rockwell will use reasonable best
efforts to assist the Company in connection therewith) under Policies with
third-party insurers which are Policies written on a "claims made" basis
("Claims Made Policies") arising out of insured incidents occurring from the
date coverage thereunder first commenced until the Time of Distribution to the
extent that the terms and conditions of any such Claims Made Policies and
agreements relating thereto so allow, provided that, in the case of both clauses
(i) and (ii) above, (A) all of Rockwell's and each Rockwell Subsidiary's
reasonable costs and expenses incurred in connection with the foregoing are
promptly paid by the Company, (B) Rockwell and the Rockwell Subsidiaries may, at
any time, without liability or obligation to the Company or any Company
Subsidiary (other than as set forth in Section 3.08(b)), amend, commute,
terminate, buy-out, extinguish liability under or otherwise modify any
Occurrence Basis Policies or Claims Made Policies (and such claims shall be
subject to any such amendments, commutations, terminations, buy-outs,
extinguishments and modifications), (C) such claims will be subject to (and
recovery thereon will be reduced by the amount of) any applicable deductibles,
retentions, self-insurance provisions or any payment or reimbursement
obligations of
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Rockwell, any Rockwell Subsidiary or any Affiliate of Rockwell or any Rockwell
Subsidiary in respect thereof and (D) such claims will be subject to exhaustion
of aggregate limits. Rockwell's obligation to use reasonable best efforts to
assist the Company in asserting claims under Occurrence Basis Policies will
include using reasonable best efforts in assisting the Company to establish its
right to coverage under Occurrence Basis Policies (so long as all of Rockwell's
costs and expenses in connection therewith are promptly paid by the Company).
None of Rockwell or the Rockwell Subsidiaries will bear any Liability for the
failure of an insurance carrier to pay any claim under any Occurrence Basis
Policy or Claims Made Policy. It is understood that any Claims Made Policies
will not provide any coverage to the Company and the Company Subsidiaries for
incidents occurring prior to the Time of Distribution but which are asserted
with the insurance carrier after the Time of Distribution.
(b) Rockwell Actions. In the event that Rockwell or any Rockwell
Subsidiary proposes to amend, commute, terminate, buy-out, extinguish liability
under or otherwise modify any Occurrence Basis Policies or Claims Made Policies
under which the Company has rights to assert claims pursuant to Section 3.08(a)
in a manner that would adversely affect any such rights of the Company, (i)
Rockwell will give the Company prior notice thereof and consult with the Company
with respect to such action (it being understood that the decision to take any
such action will be in the sole discretion of Rockwell) and (ii) Rockwell will
pay to the Company its equitable share (based on the amount of premiums paid by
or allocated to the Semiconductor Business in respect of the applicable Policy)
of any net proceeds actually received by Rockwell from the insurance carrier of
the applicable Policy as a result of such action by Rockwell (after deducting
Rockwell's reasonable costs and expenses incurred in connection with such
action).
(c) Administration. From and after the Time of Distribution:
(i) Rockwell will be responsible for the Claims Administration
with respect to claims of Rockwell and the Rockwell Subsidiaries under
Occurrence Basis Policies and Claims Made Policies; and
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(ii) The Company or a Company Subsidiary, as appropriate, will be
responsible for the Claims Administration with respect to the claims of
the Company and the Company Subsidiaries under Occurrence Basis
Policies and Claims Made Policies.
(d) Insurance Premiums. Rockwell will pay all premiums
(retrospectively-rated or otherwise) as required under the terms and conditions
of the respective Policies in respect of periods prior to the Time of
Distribution, whereupon the Company will upon receipt of evidence thereof,
forthwith reimburse Rockwell for that portion of such premiums paid by Rockwell
as are attributable to the Semiconductor Business.
(e) Agreement for Waiver of Conflict and Shared Defense. In the
event that an Occurrence Basis Policy or Claims Made Policy provides coverage
for both Rockwell and/or a Rockwell Subsidiary, on the one hand, and the Company
and/or a Company Subsidiary, on the other hand, relating to the same occurrence,
Rockwell and the Company agree to defend jointly and to waive any conflict of
interest necessary to the conduct of that joint defense. Nothing in this Section
3.08(e) will be construed to limit or otherwise alter in any way the indemnity
obligations of the parties to this Agreement, including, without limitation,
those created by this Agreement, by operation of law or otherwise.
(f) Directors' and Officers' Insurance. Rockwell will use its
reasonable best efforts to cause the persons currently serving as directors
and/or officers of Rockwell or any Subsidiary of Rockwell who will be effective
as of the Time of Distribution directors and/or officers of the Company or any
Company Subsidiary to be covered for a period of six years from the Time of
Distribution with respect to claims arising from facts or events which occurred
prior to the Time of Distribution by the directors' and officers' liability
insurance policies maintained by Rockwell during such six-year period following
the Time of Distribution for all persons who served as directors and/or officers
of Rockwell or any Rockwell Subsidiary prior to the Time of Distribution with
respect to claims arising from facts or events which occurred prior to the Time
of Distribution.
Section 3.09 Use of Names, Trademarks, etc. (a) From and after the
Time of Distribution, Rockwell
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will have all rights in and use of the names "Rockwell" and "Rockwell
International" and all corporate symbols and logos related thereto and all
derivatives thereof. Prior to or promptly after the Time of Distribution (but in
no event later than 90 days after the Distribution Date in the case of United
States Persons and 180 days after the Distribution Date in the case of
non-United States Persons), the Company will change the name of any Subsidiary
or other Person under its control to eliminate therefrom the names "Rockwell"
and "Rockwell International" and all derivatives thereof.
(b) From and after the Time of Distribution, except as permitted
in this Section 3.09(b), the Company Group will not use or have any rights to
the names "Rockwell" or "Rockwell International" or any derivatives thereof or
any other trademark, trade name, service mark or logo of the Rockwell Group
constituting Rockwell Assets, including, without limitation, the trademarks,
trade names and service marks "Rockwell" and "Rockwell International", or any
corporate symbol or logo related thereto or to any thereof or any name or mark
which includes the words "Rockwell" or "Rockwell International" or any
derivative thereof or name or mark confusingly similar thereto, or any special
script, type font, form, style, logo, design, device, trade dress or symbol used
or possessed by the Rockwell Group before or after the Time of Distribution
which contains the trademark, trade name or service mark "Rockwell" or "Rockwell
International" or any derivative thereof or any name or mark confusingly similar
thereto and the Company Group will not hold itself out as having any affiliation
with the Rockwell Group. However, Rockwell, on behalf of Rockwell Science
Center, hereby grants to the Company a non-exclusive, non-transferable (other
than by way of sublicenses to members of the Company Group) license to utilize
without obligation to pay royalties to Rockwell or Rockwell Science Center the
trademarks or trade names "Rockwell" or "Rockwell International" or any
corporate symbol or logo related thereto in connection with stationery,
supplies, labels, catalogs, vehicles, signs and products of the Semiconductor
Business only as set forth in paragraphs (i) through (vi) of this Section
3.09(b), subject to the terms and conditions of this Section 3.09(b) and Section
3.09(c), in each case in the same manner and to the same extent as such
trademarks, trade names, corporate symbols or logos were used by the
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Semiconductor Business at any time within the five year period preceding the
Distribution:
(i) All documents constituting Semiconductor Assets as of the Time
of Distribution within the following categories may be used for the
duration of the periods following the Distribution Date indicated below
or until the supply is exhausted, whichever is the first to occur:
Maximum Period
of Permitted Use
Following the
Category of Documents Distribution Date
--------------------- -----------------
A. Stationery 6 months
B. Invoices, purchase orders, debit
and credit memos and other
similar documents of a transactional nature 6 months
C. Business cards 6 months
D. Other outside forms such as packing
lists, labels, packing materials
and cartons, etc. 12 months
E. Forms for internal use only 12 months
F. Product literature 12 months;
provided, however, that the Company will use its reasonable best
efforts to cause each document within any of the above categories A, B
or F used for any purpose within the stated period to clearly and
prominently display a statement, the form of which is approved by
Rockwell, to the effect that the Company Group was formerly affiliated
with Rockwell (it being understood that such reasonable best efforts
shall not include reprinting or relabeling existing stocks of
advertising or brochures).
(ii) All documents of the Semiconductor Business of the type
described in paragraph (i) above and displays and signs of the
Semiconductor Business of the type described in paragraph (iv) below
may, for a period not to exceed two years after the Distribution Date
(or such longer period as shall be approved by Rockwell), contain the
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<PAGE>
statement "A Heritage of Rockwell Technology" (or other similar phrase,
the form of which is approved by Rockwell) in conjunction with the name
of the Company or any Company Subsidiary so long as such statement is
of a type no more prominent than such name of the Company or the
Company Subsidiary.
(iii) All vehicles constituting Semiconductor Assets as of the
Time of Distribution may continue to be used without re-marking (except
as to legally required permit numbers, license numbers, etc.) for a
period not to exceed twelve months following the Distribution Date or
the date of disposition of the vehicle, whichever is the first to
occur. The Company will cause all markings on such vehicles to be
removed or permanently obscured prior to disposition of such vehicles.
(iv) Within six months following the Distribution Date, the
Company will cause to be removed from display at all facilities
constituting Semiconductor Assets all demountable displays which
contain the trademarks or trade names "Rockwell" or "Rockwell
International" or any corporate symbol related thereto or any
trademark, trade name or corporate symbol constituting Rockwell Assets
and the Company will remove, or will cause the removal of, all signs
displaying any such trademark, trade name or corporate symbol at all
such facilities (A) located in the United States, no later than six
months following the Distribution Date and (B) located outside the
United States, no later than twelve months following the Distribution
Date.
(v) Products of the Semiconductor Business may have applied
thereto the trademarks or trade names "Rockwell" or "Rockwell
International" or any Rockwell corporate symbol or logo related thereto
for a period of six months after the Distribution.
(vi) Products of the Semiconductor Business in finished goods
inventory and work in process (to the extent the same bear the
trademark or trade name "Rockwell" or "Rockwell International" at the
Time of Distribution or have any such trademark or trade name applied
to them in accordance with paragraph (v) above) may be disposed of
without re-marking.
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(c)(i) Apart from the rights granted under Section 3.09(b), no
member of the Company Group shall acquire any right, title or interest
in or to the use of the trademarks or trade names "Rockwell" or
"Rockwell International" or any corporate symbol or logo related
thereto, either alone or in combination with any other word, name,
symbol, device, trademarks, or any combination thereof. Anything
contained herein to the contrary notwithstanding, except as expressly
permitted by Section 3.09(b)(ii), in no event will any member of the
Company Group utilize the trademarks or trade names "Rockwell" or
"Rockwell International" or any corporate symbol or logo related
thereto as a component of a company or trade name. The Company will
not, and will cause each other member of the Company Group not to,
challenge or contest the validity of such trademarks, trade names,
corporate symbols or logos, the registration thereof or the ownership
thereof by the Rockwell Group. The Company will not, and will cause
each other member of the Company Group not to, apply anywhere at any
time for any registration as owner or exclusive licensee of such
trademarks, trade names, corporate symbols or logos. If,
notwithstanding the foregoing, any member of the Company Group
develops, adopts or acquires, directly or indirectly, any right, title
or interest in or to the use of any such trademarks, trade names,
corporate symbols or logos in any jurisdiction, or any goodwill
incident thereto, the Company will, upon the request of Rockwell, and
for a nominal consideration of one dollar, assign or cause to be
assigned to Rockwell or any designee of Rockwell, all right, title and
interest in and to the use of such trademarks, trade names, corporate
symbols or logos in any and all jurisdictions, together with any
goodwill incident thereto.
(ii) If the laws of any country require that any mark subject to
Section 3.09(b) or the right of any member of the Company Group to use
any mark as permitted by Section 3.09(b) be registered in order to
fully protect the Rockwell Group, Rockwell and the Company will
cooperate in constituting such member of the Company Group as a
registered user (or its equivalent) in each of the countries in which
such registration is necessary. If any such laws of
47
<PAGE>
any country require that any such mark or the use by any member of the
Company Group of any such mark be registered prior to use in order to
protect fully the Rockwell Group, the license granted pursuant to
Section 3.09(b) will not extend to such country until such registration
has been effected to the reasonable satisfaction of Rockwell. Any
expenses for registering such mark or constituting such member of the
Company Group as a registered user in any country shall be borne by the
Company. Any registration of such member of the Company Group as a
registered user of any mark hereunder shall be expunged on termination
of the period of permitted use under this Agreement or upon a breach or
threatened breach by any member of the Company Group of the terms of
this Section 3.09 and the Company will, upon request of Rockwell, take
all necessary steps to cause such registration to be so expunged upon
such termination or breach or threatened breach. In addition, the
Company hereby constitutes and appoints Rockwell the true and lawful
attorney of the Company, with full power of substitution, in the name
and on behalf of the Company (and at the cost of the Company) to take
all necessary steps to cause such registration to be so expunged upon
such termination or breach or threatened breach.
(iii) The Company will cause each member of the Company Group to
comply with the provisions of this Section 3.09. Nothing in this
Section 3.09 will prevent any member of the Rockwell Group from
enforcing the provisions of this Section 3.09 against any member of the
Company Group.
(iv) Rockwell will have the right to terminate the license granted
in Section 3.09(b) upon 30 days written notice for any failure by any
member of the Company Group to observe the terms of this Section
3.09(c), provided that such failure is not remedied prior to the
effectiveness of the termination.
(d) From and after the Distribution Date, the Rockwell Group will
not hold itself out as having an affiliation with the Company Group. However,
the Rockwell Group will have rights to use trademarks or trade names or
corporate symbols or any thereof constituting Semiconductor Assets in connection
with
48
<PAGE>
stationery, supplies, labels, catalogs, vehicles, signs and finished goods
inventory on the same terms and subject to the same conditions as are set forth
in Section 3.09(b).
Section 3.10 Consents. Prior to and after the Distribution Date,
Rockwell and the Company will, and will cause their respective Subsidiaries to,
use their reasonable best efforts (as requested by the other party) to obtain,
or to cause to be obtained, all Consents and to resolve all impracticalities of
assignments or transfers necessary for the transfer of all Assets, Subsidiaries
and Liabilities contemplated to be transferred pursuant to this Article III;
provided, however, that none of Rockwell or the Company or their respective
Subsidiaries shall be obligated to pay any consideration or offer or grant any
financial accommodation in connection therewith. Anything contained herein to
the contrary notwithstanding, this Agreement shall not constitute an agreement
to assign any Contract, License or Asset if an assignment or attempted
assignment of the same without the Consent of any other party or parties thereto
or other required Consent would constitute a breach thereof or of any applicable
law or in any way impair the rights of any member of the Rockwell Group or the
Company Group thereunder. If any such Consent is not obtained or if an attempted
assignment would be ineffective or would impair any member of either Group's
rights under any such Contract, License or Asset so that the contemplated
assignee hereunder (the "Recipient Party") would not receive all such rights,
then (x) the party contemplated hereunder to assign such Contract, License or
Asset (the "Assigning Party") will use reasonable best efforts (it being
understood that such efforts shall not include any requirement of the Assigning
Party to pay any consideration or offer or grant any financial accommodation) to
provide or cause to be provided to the Recipient Party, to the extent permitted
by law, the benefits of any such Contract, License or Asset and the Assigning
Party will promptly pay or cause to be paid to the Recipient Party when received
all moneys and properties received by the Assigning Party with respect to any
such Contract, License or Asset and (y) the Recipient Party will pay, perform
and discharge on behalf of the Assigning Party all of the Assigning Party's
Liabilities thereunder in a timely manner and in accordance with the terms
thereof. In addition, the
49
<PAGE>
Assigning Party will take such other actions (at the Recipient Party's expense)
as may reasonably be requested by the Recipient Party in order to place the
Recipient Party, insofar as reasonably possible, in the same position as if such
Contract, License or Asset had been transferred as contemplated hereby and so
all the benefits and burdens relating thereto, including, without limitation,
possession, use, risk of loss, potential for gain and dominion, control and
command, shall inure to the Recipient Party. If and when such Consents are
obtained, the transfer of the applicable Contract, License or Asset shall be
effected as promptly following the Time of Distribution as shall be practicable
in accordance with the terms of this Agreement. To the extent that any transfers
and assumptions contemplated by this Article III shall not have been consummated
on or prior to the Time of Distribution, the parties shall cooperate to effect
such transfers as promptly following the Time of Distribution as shall be
practicable, it nonetheless being agreed and understood by the parties that
neither party shall be liable in any manner to the other party for any failure
of any of the transfers contemplated by this Article III to be consummated prior
to the Time of Distribution.
Section 3.11 Cross-License of Intellectual Property. (a) Effective
immediately after the Time of Distribution, Rockwell, on behalf of itself and
the Rockwell Subsidiaries, hereby grants to the Company a royalty-free,
world-wide, irrevocable, non-exclusive license under all intellectual property
rights (including, without limitation, patents, patent applications, trade
secrets, copyrights or other similar industrial property rights, but excluding
trademarks, trade names, service marks, trade dress or any other form of trade
identity) which constitute Rockwell Assets and which are owned by the Rockwell
Group or under which the Rockwell Group has a right to license without the
payment of royalties to a third party immediately after the Time of Distribution
and which are used in the conduct of the business of the Company Group at the
Time of Distribution to make, have made, use, import, sell or otherwise dispose
of products, or to practice any process in connection therewith, in the business
of the Company Group being conducted at the Time of Distribution or any related
extensions or expansions thereof; said non-exclusive license being transferable
only by sublicenses (to the extent permitted in the case of any restricted
50
<PAGE>
grant to Rockwell or a Rockwell Subsidiary, as a licensee) to members of the
Company Group and in connection with the sale of all or any part of the
Semiconductor Business to which such intellectual property rights relate. To the
extent that the Company Group does not have copies of any information or
materials relating to intellectual property rights licensed under this Section
3.11(a), Rockwell will, upon reasonable request, supply to the Company Group
copies of any such information or materials relating to such intellectual
property rights. Except as expressly provided in this Section 3.11, none of the
intellectual property rights of the Rockwell Group shall be licensed by the
Company or any Company Subsidiary to any third party.
(b) Effective immediately after the Time of Distribution, the
Company, on behalf of itself and the Company Subsidiaries, hereby grants to
Rockwell Science Center a royalty-free, world-wide, irrevocable, non-exclusive
license under all intellectual property rights (including, without limitation,
patents, patent applications, trade secrets, copyrights or other similar
industrial property rights, but excluding trademarks, trade names, service
marks, trade dress or any other form of trade identity) which constitute
Semiconductor Assets (other than the CMOS Imager Technology, which is covered by
Section 3.11(h)) and which are owned by the Company Group or under which the
Company Group has a right to license without the payment of royalties to a third
party immediately after the Time of Distribution and which are used in the
conduct of the businesses of the Rockwell Group other than the Semiconductor
Business at the Time of Distribution to make, have made, use, import, sell or
otherwise dispose of products, or to practice any process in connection
therewith, in the businesses of the Rockwell Group (other than the Semiconductor
Business) being conducted at the Time of Distribution or any related extensions
or expansions thereof; said non-exclusive license being transferable only by
sublicenses (to the extent permitted in the case of any restricted grant to the
Company or a Company Subsidiary, as a licensee) to members of the Rockwell Group
and in connection with the sale of all or any part of the Rockwell Group's
businesses to which such intellectual property rights relate. To the extent that
the Rockwell Group does not have copies of any information or materials relating
to intellectual property rights
51
<PAGE>
licensed under this Section 3.11(b), the Company will, upon reasonable request,
supply to the Rockwell Group copies of any such information or materials
relating to such intellectual property rights. Except as expressly provided in
this Section 3.11, none of the intellectual property rights of the Company Group
shall be licensed by Rockwell or any Rockwell Subsidiary to any third party.
(c)(i) From and after the Time of Distribution, each party (and
members of such party's Group) has and retains the unrestricted right
to enforce against any third party such intellectual property rights as
that party then owns. Notwithstanding the grant of any license or
sublicense to the other party (or the members of such other party's
Group) under Section 3.11(a), 3.11(b) or 3.11(h), the owner of such
intellectual property rights may enforce the same without any
obligation (prior or contemporaneous) to notify or consult with the
other party.
(ii) Either party (as a "Third Party Licensor") may grant to a
third party (a "Third Party Licensee") a license under patents owned by
the other party (the "Owner") at the Time of Distribution, whether or
not the Third Party Licensor is itself licensed under such patent(s) in
accordance with the provisions of Section 3.11(a), 3.11(b) or 3.11(h),
in fields of use other than the businesses of the Owner, subject to
strict compliance with the provisions of this Section 3.11(c)(ii), each
of which is material:
(A) the Third Party Licensor shall first confer with the
Owner and tender the proposed terms and conditions of the license to
the Third Party Licensee;
(B) the Owner may reject or condition the proposed terms and
conditions of the license for any of the following reasons:
(1) the Third Party Licensee is a competitor of the
Owner in markets or market sectors in which both compete for the
business of common customers or the output of common suppliers and
the grant of a license to such a Third Party Licensee would, in
the Owner's
52
<PAGE>
judgment, reduce the competitiveness of the Owner in
such common markets (or sectors) or otherwise demonstrably harm
its business interests;
(2) the Owner is currently engaged in or has taken
substantial steps to prepare to become engaged in negotiations
with the Third Party Licensee regarding the grant of intellectual
property licenses or cross-licenses between them, whether or not
including the patent(s) sought to be licensed by the Third Party
Licensor;
(3) the Owner has, within the immediately preceding
twelve months, negotiated with the Third Party Licensee a license
or cross-license of the patent(s) sought to be licensed to that
Third Party Licensee by the Third Party Licensor;
(4) the proposed terms and conditions would impose
obligations on the Owner other than or in addition to a naked
patent grant including, without limitation, the obligations to
enforce the patent(s) or to transfer technology;
(5) in the Owner's judgment, the grant is broader than
is reasonably required to meet the purpose for which the license
is to be granted;
(6) the Owner and the Third Party Licensee are engaged
in or are reasonably likely to become engaged in a dispute and, in
the Owner's judgment, the grant of such a license would
effectively abrogate the Owner's rights of enforcement as stated
in Section 3.11(c)(i);
(7) in the Owner's judgment, the license would violate
or conflict with any contractual obligation of the Owner;
(8) the Owner can demonstrate a significant, near-term
competitive harm to its business other than one specified in
subparts
53
<PAGE>
(1)-(7) above were the proposed license to be granted; or
(9) the Owner believes it is in its strategic interest
to reject or condition the proposed terms of the License;
provided, however, that it shall not be deemed a sufficient reason to
reject or condition a proposed grant merely because the Owner itself
could have granted a license to the Third Party Licensee.
(C) No license shall become effective and no rights shall be
granted to a Third Party Licensee unless and until the Owner has
approved in writing all of the terms and conditions of the proposed
license.
(D) The Third Party Licensor may propose for approval by the
Owner the grant of a license to a Third Party Licensee under the
provisions of this Section 3.11 (c)(ii) only for one or more of the
following purposes:
(1) the Third Party Licensor and the Third Party
Licensee are engaged in a dispute involving intellectual property,
including a pre-litigation dispute, and the proposed grant of a
license will materially assist the Third Party Licensor in
resolving such dispute, in whole or in part; or
(2) the Third Party Licensor and the Third Party
Licensee are engaged in or are preparing to engage in negotiations
to establish an alliance between them, strategic to the Third
Party Licensor's business, for any of the following purposes:
(a) developing, manufacturing, selling or
distributing products or services of the type developed,
manufactured, distributed or sold by the Third Party Licensor
at the Time of Distribution;
(b) pooling or cross-licensing intellectual
property to permit either the
54
<PAGE>
Third Party Licensor or the Third Party Licensee to enter or
remain in a market or market sector blocked by the
intellectual property of either or both; or
(c) developing standards to be adopted by a
recognized standard setting organization (e.g., ITU, ANSI);
and the proposed grant will materially assist the Third Party
Licensor in securing the alliance and provided that such
alliance is in fact established;
provided, however, that it shall not be deemed a sufficient
reason to propose or to grant a license under subpart (1) or
(2) of this subsection (D) that the Third Party Licensor may
recover or obtain from the Third Party Licensee revenue,
royalty or otherwise, for such a grant unless such revenue is
incidental to a purpose expressed in subpart (1) or (2) of
this subsection (D).
(E) The Third Party Licensor shall bear all costs and
expenses associated with the grant of any license under this Section
3.11(c)(ii) and shall indemnify and hold harmless the Owner from and
against any and all Indemnifiable Losses it or its Representatives may
suffer on account of the grant of such a license or the relationship
created with the Third Party Licensee under such a license.
(F) Any revenue recovered by the Third Party Licensor from
the Third Party Licensee shall be shared equally between the Owner and
the Third Party Licensor, net of licensing expenses.
(G) In lieu of approving the grant of a license, the Owner
may, in its sole discretion, elect to assign to the Third Party
Licensor any one or more of the patents proposed to be licensed to the
Third Party Licensee, subject to a reservation to the Owner of an
irrevocable, royalty-free, freely assignable, world-wide license to
practice the assigned patent in the Owner's business on terms and
conditions agreed to by the parties.
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<PAGE>
(H) The rights granted between the parties under this Section
3.11(c)(ii) shall expire five years from the Time of Distribution;
provided, however, that any license granted to a Third Party Licensee
may be made for the life of the patent rights underlying such grant and
all such licenses shall survive expiration of this Section 3.11(c)(ii)
and remain in full force and effect for the duration of the license as
specified in such license.
(I) Anything contained herein to the contrary
notwithstanding, the rights granted between the parties under this
Section 3.11(c)(ii) are personal and nontransferable by either party to
any other Person, whether or not in connection with the sale of any
party's business or any portion thereof. The rights granted between the
parties under this Section 3.11(c)(ii) shall terminate upon a Change in
Control of either party; provided, however, that licenses granted prior
to such termination shall remain in full force and effect for the
duration of the license as specified in each such license.
(J) In any dispute between the parties arising under the
provisions of this Section 3.11(c)(ii) with respect to the right to
grant a license or the scope of such license, the General Counsel of
Rockwell and the General Counsel of the Company will attempt a good
faith resolution of such dispute within thirty days after either party
notifies the other of such dispute. If such dispute is not resolved
within thirty days of such notification, such dispute will be referred
for resolution to the Chief Executive Officers of Rockwell and the
Company whose joint decision will be final and binding on the parties.
Notwithstanding anything contained in this Agreement to the contrary,
this Section 3.11(c)(ii)(J) shall be the parties' exclusive remedy with
respect to claims arising under the provisions of this Section 3.11(c).
(iii) Upon the occurrence of either (x) any dispute involving
intellectual property in which a party would be entitled to act as
Third Party Licensor under Section 3.11(c)(ii), including a
pre-litigation dispute, or (y) any alleged infringement by a third
party competitor of the intellectual
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<PAGE>
property rights licensed pursuant to Section 3.11(a), 3.11(b) or
3.11(h) relating to the field of business of the licensee, the party
that would be entitled to act as Third Party Licensor under Section
3.11(c)(ii) or that is licensed to use the other Group's intellectual
property rights under the provisions of Section 3.11(a), 3.11(b) or
3.11(h) (in either case, the "Enforcing Party"), may request from the
other party who is the Owner or the licensor of the applicable
intellectual property, as the case may be (in either case, the
"Licensor"), the right to enforce patent(s) owned by the Licensor at
the Time of Distribution or licensed to and enforceable by the Licensor
at the Time of Distribution against a third party, but only during the
five-year period following the Distribution Date and subject to strict
compliance with the provisions of this Section 3.11(c)(iii), each of
which is material. Upon any alleged infringement of intellectual
property rights licensed pursuant to Section 3.11(a), 3.11(b) or
3.11(h), enforcement shall be limited to enforcement of the applicable
intellectual property licensed under such provisions. The enforcement
rights granted hereunder are not in lieu of seeking the grant of a
license from the Owner under the provisions of Section 3.11(c)(ii).
(A) The Licensor requested to commence enforcement pursuant
to this Section 3.11(c)(iii) may either initiate suit against the
alleged infringer as co-plaintiff with the Enforcing Party or assign to
the Enforcing Party the intellectual property rights necessary for the
Enforcing Party to initiate suit in its own name as plaintiff along
with the rights necessary to obtain remedies for past infringement. The
Licensor will cooperate as reasonably required for the Enforcing Party
to resolve the controversy with the third party and, if necessary, to
enforce the intellectual property rights, whether as co-plaintiff with
the Enforcing Party or as assignor to the Enforcing Party, provided
that all costs to the Licensor occasioned thereby shall be promptly and
fully paid by the Enforcing Party.
(B) If the Licensor elects to commence suit along with the
Enforcing Party as co-plaintiff
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as provided in clause (A) above, the Enforcing Party shall be
responsible for all costs for prosecution of the suit and shall control
prosecution of the suit through settlement or judgment as the Enforcing
Party considers appropriate; provided, however, that the Licensor may,
at its own expense, be represented by its own counsel and participate
in the proceedings and any settlement, subject to the Enforcing Party's
right of control.
(C) If the Licensor elects to assign the intellectual
property rights to the Enforcing Party as provided in clause (A) above,
any such assignment shall be subject to the reservation to the Licensor
of an irrevocable, freely assignable, royalty-free, world-wide license
to practice the assigned intellectual property rights in the Licensor's
business on terms and conditions agreed to by the parties. Should the
Licensor nevertheless be joined in any suit as a proper or necessary
party, the Enforcing Party shall bear all costs and expenses of the
Licensor associated with such enforcement and shall indemnify and hold
harmless the Licensor from and against any and all Indemnifiable Losses
it or its Representatives may suffer on account of enforcement of such
intellectual property rights.
(D) With respect to the enforcement of intellectual property
rights pursuant to this Section 3.11(c)(iii), the Enforcing Party shall
retain recoveries for damages suffered as the result of a third party's
infringement to the extent such infringement relates to the Enforcing
Party's business. All other recoveries for damages shall be retained by
the Licensor.
(E) Anything contained herein to the contrary
notwithstanding, the Licensor will not be required to initiate suit,
assign intellectual property rights to the Enforcing Party or otherwise
cooperate in the enforcement of intellectual property rights (1) if the
putative defendant or party against which enforcement is sought is a
duly authorized licensee or sublicensee of the Licensor under the
intellectual property rights sought to be enforced by the Enforcing
Party or (2) other than with respect to enforcement of intellectual
property rights licensed pursuant to Section 3.11(a), 3.11(b)
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or 3.11(h), for any reason set forth in Sections 3.11(c)(ii)(B)(1)
through (9).
(F) The Enforcing Party's right to commence enforcement of
intellectual property rights pursuant to this Section 3.11(c)(iii)
shall expire five years after the Distribution Date (it being
understood that proceedings in respect of enforcement of such rights
which were initiated pursuant this Section 3.11(c)(iii) prior to the
expiration of such five-year period may continue after the expiration
thereof).
(G) Anything contained herein to the contrary
notwithstanding, the enforcement rights granted under this Section
3.11(c)(iii) are personal and nontransferable by either party to any
other Person, whether or not in connection with the sale of any party's
business or any portion thereof. The enforcement rights granted between
the parties under this Section 3.11(c)(iii) shall terminate upon a
Change in Control of either party.
(d)(i) For purposes of this Section 3.11(d), the following
terms will have the following definitions:
(A) "Administrative Services" means services pertaining
to personnel, payroll, property management, benefits, human
resource management, financial planning, case docketing and
management, contract and subcontract management, facilities
management, proposal activities and other similar services.
(B) "Administrative Services Software" means software
originated internally and owned by Rockwell or any of its
Subsidiaries (including, without limitation, members of the
Company Group) prior to the Time of Distribution and relating to
the provision of Administrative Services to the Semiconductor
Business immediately prior to the Time of Distribution, regardless
of where ownership of such software vests after the Time of
Distribution. Administrative Services Software also shall include
materials and documentation
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<PAGE>
supplied by one party to the other pursuant to clause (iv) of
this Section 3.11(d).
(C) "Transition Period" means the period from the Time
of Distribution until the termination or expiration of the
provision of services pursuant to the Transition Agreement.
(ii) Anything contained herein to the contrary notwithstanding,
the following licenses shall govern the licensing of Administrative
Services Software. Effective as of the Time of Distribution, Rockwell,
on behalf of itself and the Rockwell Subsidiaries, hereby grants to the
Company a royalty-free, world-wide, irrevocable non-exclusive license
under Administrative Services Software which constitutes Rockwell
Assets and which is owned by the Rockwell Group or under which the
Rockwell Group has a right to license without the payment of royalties
to a third party immediately after the Time of Distribution to use such
Administrative Services Software only for the internal business
purposes of the Company Group, including the right to sublicense only
to (x) members of the Company Group and (y) service providers to use
the Administrative Services Software only for or on behalf of the
Company Group. Effective as of the Time of Distribution, the Company,
on behalf of itself and the Company Subsidiaries, hereby grants to
Rockwell Science Center a royalty-free, world-wide, irrevocable,
non-exclusive license under Administrative Services Software which
constitutes Semiconductor Assets and which is owned by the Company
Group or under which the Company Group has a right to license without
the payment of royalties to a third party immediately after the Time of
Distribution to use such Administrative Services Software for the
internal business purposes of the Rockwell Group, including the right
to sublicense only to (x) members of the Rockwell Group and (y) service
providers to use the Administrative Services Software only for or on
behalf of the Rockwell Group. Except as set forth in the preceding two
sentences, the licenses granted pursuant to this Section 3.11(d) do not
include the right to sublicense. Software originated or maintained
during the Transition Period by a party and relating to the provision
of Administrative Services to the other party pursuant to the
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Transition Agreement shall be considered Administrative Services
Software subject to the above licenses provided that the party to be
licensed has paid a mutually agreeable share of the origination and/or
maintenance costs for such software and requests during the Transition
Period that such software be subject to such licenses.
(iii) Each party shall have the right to use, disclose, perform,
display, copy, distribute and make derivatives of the Administrative
Services Software within the scope of the licenses granted herein.
Title to Administrative Services Software and all rights therein,
including, without limitation, all rights in patents, copyrights and
trade secrets and any other intellectual property rights applicable
thereto, shall remain vested in the party to which ownership is
allocated pursuant to this Agreement. Notwithstanding anything to the
contrary contained herein, each licensed party agrees that it will not
use, copy, disclose, sell, assign or sublicense, or otherwise transfer
Administrative Services Software licensed to it under this Section
3.11(d) or any derivatives thereof, except as expressly provided in
this Section 3.11(d).
(iv) To the extent that a licensed party does not have copies of
any Administrative Services Software or materials and documentation
(such as source code listings, flow charts, user guides and
programmer's guides) relating to the operation and maintenance of such
Administrative Services Software to which the other party has
ownership, such owning party shall, as soon as practicable after
request of the licensed party, supply to the licensed party copies of
such Administrative Services Software and any related operating and
maintenance materials or documentation existing as of the Time of
Distribution.
(v) In the event that Administrative Services Software is used by
the owner in the ordinary course of its business either associated or
bundled with software owned or controlled by a third party (e.g., as a
suite of software), without which the Administrative Services Software
would be wholly or partly inoperable or otherwise unfit for its
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intended purposes, the grant of the licenses under the provisions of
this Section 3.11(d) shall not be construed as an implied license to
use the software of such a third party or as an undertaking on the part
of the owner of the Administrative Services Software to obtain a
license to permit the use of such third party software.
(e)(i) For purposes of this Section 3.11(e), "Application
Software" means software originated internally and owned by Rockwell or
any of its Subsidiaries (including, without limitation, members of the
Company Group) prior to the Time of Distribution and relating to
computer-aided-design or other similar engineering or technical
analysis functions and related tools or utilities, regardless of where
ownership of such software vests after the Time of Distribution.
Anything contained herein to the contrary notwithstanding, Application
Software does not include any Administrative Services Software.
(ii) Anything contained herein to the contrary notwithstanding,
the following licenses shall govern the licensing of Application
Software. Effective as of the Time of Distribution, Rockwell, on behalf
of itself and the Rockwell Subsidiaries, hereby grants to the Company a
royalty-free, world-wide, irrevocable, non-exclusive license under
Application Software which constitutes Rockwell Assets and which is
owned by the Rockwell Group or under which the Rockwell Group has a
right to license without the payment of royalties to a third party
immediately after the Time of Distribution to use, disclose, perform,
display, copy, distribute and make derivatives of such Application
Software, in any form, in connection with the Semiconductor Business or
any related extensions or expansions thereof to the same extent as was
done in the Semiconductor Business at the Time of Distribution, and the
Company may sublicense only to (x) members of the Company Group and (y)
suppliers, subcontractors and Affiliates of the Company Group only in
connection with work performed by them for the Company Group to the
same extent as was done in the Semiconductor Business at the Time of
Distribution. Effective as of the Time of Distribution, the Company, on
behalf of itself and the Company Subsidiaries, hereby
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grants to Rockwell Science Center a royalty-free, world-wide,
irrevocable, non-exclusive license under Application Software which
constitutes Semiconductor Assets and which is owned by the Company
Group or under which the Company Group has a right to license without
the payment of royalties to a third party immediately after the Time of
Distribution to use, disclose, perform, display, copy, distribute and
make derivatives of such Application Software, in any form, in
connection with businesses of the Rockwell Group or any related
extensions or expansions thereof to the same extent as was done in
businesses of the Rockwell Group (other than the Semiconductor
Business) at the Time of Distribution, and Rockwell Science Center may
sublicense only to (x) members of the Rockwell Group and (y) suppliers,
contractors and Affiliates of the Rockwell Group only in connection
with work performed by them for the Rockwell Group to the same extent
as was done in businesses of the Rockwell Group (other than the
Semiconductor Business) at the Time of Distribution. Except as set
forth in the preceding two sentences, the licenses granted pursuant to
this Section 3.11(e) do not include the right to sublicense.
(iii) Title to Application Software and all rights therein,
including, without limitation, all rights in patents, copyrights and
trade secrets and any other intellectual property rights applicable
thereto, shall remain vested in the party to which ownership is
allocated pursuant to this Agreement. Notwithstanding anything to the
contrary contained herein, each licensed party agrees that it will not
use, copy, disclose, sell, assign, sublicense or otherwise transfer
Application Software licensed to it under this Section 3.11(e) or any
derivatives thereof, except as expressly provided in this Section
3.11(e).
(iv) In the event that Application Software is used by the owner
in the ordinary course of its business either associated or bundled
with software owned or controlled by a third party (e.g., as a suite of
software), without which the Application Software would be wholly or
partly inoperable or otherwise unfit for its intended purposes, the
grant of the licenses under the provisions of this Section 3.11(e)
shall not be construed as an implied license
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to use the software of such a third party or as an undertaking on the
part of the owner of the Application Software to obtain a license to
permit the use of such third party software.
(f) If any member of the Rockwell Group requires a license with
respect to any of the intellectual property contained in the Semiconductor
Assets which is not covered by this Section 3.11 with respect to its businesses
existing at the Time of Distribution, or if any member of the Company Group
requires a license with respect to any of the intellectual property contained in
the Rockwell Assets which is not covered by this Section 3.11 with respect to
its business existing at the Time of Distribution, upon notice of the party
requiring such a license, the parties will negotiate in good faith the grant of
such a license, upon reasonable terms, including royalties, permitting the
requesting party to undertake activities in fields of use which do not have an
adverse competitive effect on the businesses of the granting party and its
Affiliates.
(g)(i) Rockwell makes no representations or warranties of any kind
with respect to the validity, scope or enforceability of any
intellectual property rights licensed by Rockwell and the Rockwell
Subsidiaries pursuant to this Section 3.11 and Rockwell has no
obligation to file or prosecute any patent applications or maintain any
patents in force in connection therewith. Rockwell will, at no cost to
the Company Group, promptly execute or cause a member of the Rockwell
Group promptly to execute such further documents as the Company may
reasonably request as necessary or desirable to carry out the terms of
this Section 3.11. Notwithstanding anything contained herein to the
contrary, this Section 3.11 will not be applicable to any rights in and
use of the names, trademarks, trade names and service marks "Rockwell"
and "Rockwell International" and all corporate symbols and logos
related thereto and all names, trademarks, trade names and service
marks which include the words "Rockwell" or "Rockwell International" or
any derivative thereof.
(ii) The Company makes no representations or warranties of any
kind with respect to the validity, scope or enforceability of any
intellectual property
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rights licensed by the Company and the Company Subsidiaries pursuant to
this Section 3.11 and the Company has no obligation to file or
prosecute any patent applications or maintain any patents in force in
connection therewith. The Company will, at no cost to Rockwell,
promptly execute or cause a member of the Company Group promptly to
execute such further documents as Rockwell may reasonably request as
necessary or desirable to carry out the terms of this Section 3.11.
(h)(i) The parties acknowledge that the Company on behalf of
itself and the Company Subsidiaries, has granted to Rockwell Science
Center a royalty-free, world-wide, irrevocable, non-exclusive license
under the CMOS Imager Technology and all intellectual property rights
relating to the CMOS Imager Technology to make, have made, use, import,
sell or otherwise dispose of products, or to practice any process in
connection therewith, in all fields other than the field of the
Semiconductor Business at the Time of Distribution, said non-exclusive
license being transferable only by sublicenses to members of the
Rockwell Group and in connection with the sale of all or any part of
the Rockwell Group's businesses to which such intellectual property
rights relate. To the extent that the Rockwell Group does not have
copies of any information or materials relating to intellectual
property rights licensed under this Section 3.11(h)(i), the Company
will, upon reasonable request, supply to the Rockwell Group copies of
any such information or materials relating to such intellectual
property rights.
(ii) From the Distribution Date through eighteen months after the
Distribution Date, the Company will not, and will cause the Company
Subsidiaries not to, sell, license or otherwise dispose of the CMOS
Imager Technology or any intellectual property rights of the Company
and the Company Subsidiaries relating thereto; provided, that with the
prior written consent of Rockwell, which consent shall not be
unreasonably withheld, the Company and any Company Subsidiary may
license the CMOS Imager Technology.
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(iii) Notwithstanding anything contained herein to the contrary,
if in any rolling three month period commencing after the Distribution
Date and ending prior to achievement of Commercialization of the CMOS
Imager Technology by the Company, the Company shall not have met the
criteria for Development of the CMOS Imager Technology set forth in
Section 3.11(h)(v) during such rolling three month period, then,
immediately at the end of such rolling three month period, the Company
and the Company Subsidiaries shall (at no cost to Rockwell or any of
its Affiliates) assign, convey and transfer to Rockwell Science Center
the Company's and the Company Subsidiaries' right, title and interest
in and to all CMOS Imager Technology and all intellectual property
rights of the Company and the Company Subsidiaries relating thereto
(including enhancements thereto and improvements thereof, whether or
not patented or patentable), subject to a royalty-free, world-wide,
irrevocable, non-exclusive license under such CMOS Imager Technology
and intellectual property rights in favor of the Company to make, have
made, use, import, sell or otherwise dispose of products, or to
practice any process in connection therewith, in the business of the
Company Group being conducted at the time of such transfer or any
related extensions or expansions thereof; said non-exclusive license
being transferable only by sublicenses to members of the Company Group
and in connection with the sale of all or any part of the Company
Group's businesses to which such intellectual property rights relate.
(iv) Notwithstanding anything contained herein to the contrary, if
by eighteen months after the Distribution Date, the Company shall not
have caused Commercialization of the CMOS Imager Technology, then, on
the date which is eighteen months after the Distribution Date, the
Company and the Company Subsidiaries shall (at no cost to Rockwell or
any of its Affiliates) assign, convey and transfer to Rockwell Science
Center the Company's and the Company Subsidiaries' right, title and
interest in and to all CMOS Imager Technology and all intellectual
property rights of the Company and the Company Subsidiaries relating
thereto (including enhancements thereto and improvements thereof,
whether or not patented or patentable), subject to a
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royalty-free, world-wide, irrevocable, non-exclusive license under such
CMOS Imager Technology and intellectual property rights in favor of the
Company to make, have made, use, import, sell or otherwise dispose of
products, or to practice any process in connection therewith, in the
business of the Company Group being conducted at the time of such
transfer or any related extensions or expansions thereof; said
non-exclusive license being transferable only by sublicenses to members
of the Company Group and in connection with the sale of all or any part
of the Company Group's businesses to which such intellectual property
rights relate.
(v) For purposes of this Section 3.11(h), the term
"Commercialization" shall mean (a) the production and sale by the
Company and the Company Subsidiaries each month for six consecutive
months during the period commencing on the Distribution Date and ending
eighteen months thereafter, of commercially significant quantities of
devices made in accordance with the CMOS Imager Technology or having
such CMOS Imager Technology embedded within such devices, in a manner
and to an extent that the use or incorporation of such CMOS Imager
Technology serves as a source of differentiation from other competitive
products or devices or (b) the Company and the Company Subsidiaries
achieving one or more "design wins" (as that term is used in the trade)
having a substantial likelihood of producing the result specified in
clause (a) of this sentence.
(vi) For purposes of this Section 3.11(h), the criteria for
Development of the CMOS Imager Technology shall be the investment,
including budgeted allocations by the Company and the Company
Subsidiaries, of at least $600,000 for the continuing and ongoing
improvement of the CMOS Imager Technology in each rolling three month
period commencing after the Distribution Date. Funding by the Company
of research and development services at Rockwell Science Center
pursuant to Section 2 of the Transition Agreement shall not be included
within the calculation of the investment required by this Section
3.11(h)(vi).
(vii) Notwithstanding anything contained herein to the contrary,
if prior to the date which
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is eighteen months after the Distribution Date, any obligations under
the Credit Agreement shall have been accelerated (other than a
voluntary termination or prepayment of the Credit Agreement by the
Company), then the Company and the Company Subsidiaries shall
immediately upon such acceleration (at no cost to Rockwell or any of
its Affiliates) assign, convey and transfer to Rockwell Science Center
the Company's and the Company Subsidiaries' right, title and interest
in and to all CMOS Imager Technology and all intellectual property
rights of the Company and the Company Subsidiaries relating thereto
(including enhancements thereto and improvements thereof, whether or
not patented or patentable), subject to a royalty-free, world-wide,
irrevocable, non-exclusive license under such CMOS Imager Technology
and intellectual property rights in favor of the Company to make, have
made, use, import, sell or otherwise dispose of products, or to
practice any process in connection therewith, in the business of the
Company Group being conducted at the time of such transfer or any
related extensions or expansions thereof; said non-exclusive license
being transferable only by sublicenses to members of the Company Group
and in connection with the sale of all or any part of the Company
Group's businesses to which such intellectual property rights relate.
(viii) Notwithstanding anything contained in any Transaction
Agreement to the contrary, if Conexant cannot accommodate reasonable
requirements of Rockwell with respect to quality, quantity, price or
delivery schedule, Rockwell may, pursuant to Rockwell's "have made"
rights set forth in Section 3.11(h)(i), qualify a third party
manufacturing source with respect to CMOS Imager Technology products
and procure CMOS Imager Technology products therefrom (it being
understood that any transfer of technology from the Company to any
third-party manufacturing source in connection therewith shall be
subject to the Company's reasonable confidentiality restrictions and
that Rockwell will be responsible for an aggregate of up to $100,000 of
actual costs of the Company associated with such transfers of
technology by the Company with the Company being responsible for all
costs in excess of $100,000 in connection with such transfers; provided
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that the Company shall not be responsible for the costs directly
attributable to the purchase or qualification of any products, all of
which shall be borne by Rockwell).
Section 3.12 Celeritas Account. Rockwell will, on behalf of the
Company, make all deposits required to be made into the Celeritas Account after
the Distribution Date pursuant to the Celeritas Court Order. Rockwell will be
entitled to all funds and investments disbursed from the Celeritas Account. If
at any time the Company or any of its Affiliates shall receive any disbursement
of funds or investments from the Celeritas Account, the Company shall, within
three days of receipt thereof, wire transfer to Rockwell (at Rockwell's bank
account at Mellon Bank, N.A., Pittsburgh, Pennsylvania, account number 102-3474)
any and all such amounts received by the Company or any of its Affiliates.
Section 3.13 Control of Celeritas Litigation. Anything contained
herein to the contrary notwithstanding (including, without limitation, Section
4.05), Rockwell shall control all matters in respect of the Celeritas Litigation
and may take or refrain from taking any actions which it deems appropriate, in
its sole discretion, without the consent of or notice to the Company, in respect
of the Celeritas Litigation (in all cases, whether or not Liabilities arising
out of the Celeritas Litigation are Semiconductor Liabilities), and the Company
and the Company Subsidiaries (i) will participate in the Celeritas Litigation
only to the extent requested by Rockwell and (ii) will cooperate with and
provide assistance to Rockwell (without charge to Rockwell) in respect thereof
as and to the extent reasonably requested by Rockwell.
Section 3.14 Newport Beach Lease. During such period as the
Newport Beach Lease Guarantee shall be in effect, the Company shall not amend,
supplement or modify any Operative Agreement or execute any new Operative
Agreement (in each case, whether or not Rockwell is a party to any such
agreement) without the prior written consent of Rockwell.
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ARTICLE IV
MUTUAL RELEASE; INDEMNIFICATION
Section 4.01 Mutual Release. Effective as of the Time of
Distribution and except as otherwise specifically set forth in the Transaction
Agreements, each of Rockwell, on the one hand, and the Company, on the other
hand, on its own behalf and on behalf of each of its respective Subsidiaries,
hereby releases and forever discharges the other and its Subsidiaries, and its
and their respective officers, directors, agents, Affiliates, record and
beneficial security holders (including, without limitation, trustees and
beneficiaries of trusts holding such securities), advisors and Representatives
(in their respective capacities as such) and their respective heirs, executors,
administrators, successors and assigns, of and from all debts, demands, actions,
causes of action, suits, accounts, covenants, contracts, agreements, damages,
claims and Liabilities whatsoever of every name and nature, both in law and in
equity, which the releasing party has or ever had, which arise out of or relate
to events, circumstances or actions taken by such other party occurring or
failing to occur or any conditions existing at or prior to the Time of
Distribution; provided, however, that the foregoing general release shall not
apply to (i) any Liabilities (including, without limitation, Liabilities with
respect to indemnification or contribution) under the Transaction Agreements or
assumed, transferred, assigned, allocated or arising under any of the
Transaction Agreements (including, without limitation, any Liability that the
parties may have with respect to indemnification or contribution pursuant to any
Transaction Agreement for claims brought against the parties by third Persons)
and will not affect any party's right to enforce the Transaction Agreements in
accordance with their terms, (ii) any Liability arising from or relating to any
agreement, arrangement, commitment or undertaking described in Section
3.03(b)(ii) (including, without limitation, Ordinary Course Intercompany
Arrangements) or (iii) any Liability the release of which would result in the
release of any Person other than a Person released pursuant to this Section 4.01
(provided that the parties agree not to bring suit or permit any of their
Subsidiaries to bring suit against any Person with respect to any Liability to
the extent such Person would
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be released with respect to such Liabilities by this Section 4.01 but for to
this clause (iii)).
Section 4.02 Indemnification by Rockwell. Except as otherwise
specifically provided in any Transaction Agreement and subject to the provisions
of this Article IV, Rockwell shall indemnify, defend and hold harmless the
Semiconductor Indemnitees from and against, and pay or reimburse, as the case
may be, the Semiconductor Indemnitees for, all Indemnifiable Losses, as
incurred, suffered by any Semiconductor Indemnitee based upon, arising out of,
relating to or otherwise in connection with:
(a) businesses of Rockwell, the Rockwell Subsidiaries and their
respective predecessors (other than the Semiconductor Business) engaged in at or
prior to the Time of Distribution, the Rockwell Assets or Liabilities of
Rockwell or any Rockwell Subsidiary as of the Time of Distribution which are not
Semiconductor Liabilities (including, without limitation, the failure by
Rockwell or any other member of the Rockwell Group to pay, perform or otherwise
discharge such Liabilities in accordance with their terms), whether such
Indemnifiable Losses are based upon, arise out of or relate to or are otherwise
in connection with events, occurrences, actions, omissions, facts, circumstances
or conditions occurring, existing or asserted before, at or after the Time of
Distribution;
(b) any untrue statement or alleged untrue statement of a material
fact contained in the sections of the Form 10 listed on Schedule 4.2, or any
omission or alleged omission to state in such sections a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; but only in each
case with respect to information relating to the Rockwell Group provided by
Rockwell expressly for use in the sections of the Form 10 listed on Schedule
4.2;
(c) the breach by any member of the Rockwell Group of any
agreement or covenant contained in a Transaction Agreement which does not by its
express terms expire at the Time of Distribution;
(d) the use by members of the Rockwell Group of any trademarks,
trade names or corporate symbols or
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logos pursuant to Section 3.09(d) or intellectual property licensed by the
Company and the Company Subsidiaries pursuant to Section 3.11;
(e) in the event the Company or a Company Subsidiary is a Licensor
that elects to assign intellectual property rights to a member of the Rockwell
Group as provided in Section 3.11(c)(iii)(A), acts of the Enforcing Party taken
to enforce, or in connection with the enforcement of, such intellectual property
rights; or
(f) the enforcement by the Semiconductor Indemnitees of their
rights to be indemnified, defended and held harmless under this Agreement.
Section 4.03 Indemnification by the Company. Except as otherwise
specifically provided in any Transaction Agreement and subject to the provisions
of this Article IV, the Company and the Company Subsidiaries shall indemnify,
defend and hold harmless the Rockwell Indemnitees from and against, and pay or
reimburse, as the case may be, the Rockwell Indemnitees for, all Indemnifiable
Losses, as incurred, suffered by any Rockwell Indemnitee based upon, arising out
of, relating to or otherwise in connection with:
(a) the Semiconductor Business, the Semiconductor Assets or
the Semiconductor Liabilities (including, without limitation, (i) any
guarantees or obligations to assure performance or perform given or
made by, or other Liabilities of, Rockwell or any Rockwell Subsidiary
with respect to the Semiconductor Business, (ii) the failure by the
Company or any other member of the Company Group to pay, perform or
otherwise discharge Semiconductor Liabilities in accordance with their
terms, (iii) any Liabilities relating to the Semiconductor Business for
which Rockwell has agreed to indemnify BNA and certain other Persons
pursuant to the Boeing Post-Closing Covenants Agreement and (iv) any
Liabilities relating to the Semiconductor Business for which Rockwell
has agreed to indemnify Meritor and certain other Persons pursuant to
the Meritor Distribution Agreement), whether such Indemnifiable Losses
are based upon, arise out of or relate to or are otherwise in
connection with events, occurrences, actions, omissions, facts,
circumstances or conditions occurring, existing or
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asserted before, at or after the Time of Distribution;
(b) any untrue statement or alleged untrue statement of a
material fact contained in the Form 10, or any omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except in
each case with respect to information relating to the Rockwell Group
provided by Rockwell expressly for use in the sections of the Form 10
listed on Schedule 4.2;
(c) the breach by any member of the Company Group of any
agreement or covenant contained in a Transaction Agreement which does
not by its express terms expire at the Time of Distribution;
(d) the use by members of the Company Group of any
trademarks, trade names or corporate symbols or logos pursuant to
Section 3.09(b) or intellectual property licensed by Rockwell and the
Rockwell Subsidiaries pursuant to Section 3.11;
(e) in the event Rockwell or a Rockwell Subsidiary is a
Licensor that elects to assign intellectual property rights to a member
of the Company Group as provided in Section 3.11(c)(iii)(A), acts of
the Enforcing Party taken to enforce, or in connection with the
enforcement of, such intellectual property rights;
(f) the enforcement by the Rockwell Indemnitees of their
rights to be indemnified, defended and held harmless under this
Agreement;
(g) 50% of the Western Atlas Litigation Expenses; or
(h) all Liabilities in respect of the Western Atlas
Litigation (other than Western Atlas Litigation Expenses which are
covered by clause (h) above) pursuant to (x) a final and non-appealable
order, decree or judgment by a court of competent jurisdiction in
respect of the Western Atlas Litigation or (y) a settlement arrangement
which is approved in writing by the Company (which approval
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shall not be unreasonably withheld) in respect of the Western Atlas
Litigation, in each case, which are reasonably allocated by Rockwell to
the Company based upon the portion of such Liabilities relating to
products containing chipsets supplied by the Semiconductor Business
other than chipsets supplied by the Semiconductor Business to other
businesses of Rockwell.
Section 4.04 Limitations on Indemnification Obligations. (a) The
amount which any party (an "Indemnifying Party") is or may be required to pay to
an Indemnitee in respect of Indemnifiable Losses or other Liability for which
indemnification is provided under this Agreement shall be reduced by any amounts
actually received (including, without limitation, Insurance Proceeds actually
received) by or on behalf of such Indemnitee (net of increased insurance
premiums and charges related directly and solely to the related Indemnifiable
Losses and costs and expenses (including, without limitation, reasonable legal
fees and expenses) incurred by such Indemnitee in connection with seeking to
collect and collecting such amounts) in respect of such Indemnifiable Losses or
other Liability (such net amounts are referred to herein as "Indemnity Reduction
Amounts"). If any Indemnitee receives any Indemnity Reduction Amounts in respect
of an Indemnifiable Loss for which indemnification is provided under this
Agreement after the full amount of such Indemnifiable Loss has been paid by an
Indemnifying Party or after an Indemnifying Party has made a partial payment of
such Indemnifiable Loss and such Indemnity Reduction Amounts exceeds the
remaining unpaid balance of such Indemnifiable Loss, then the Indemnitee shall
promptly remit to the Indemnifying Party an amount equal to the excess (if any)
of (A) the amount theretofore paid by the Indemnifying Party in respect of such
Indemnifiable Loss, less (B) the amount of the indemnity payment that would have
been due if such Indemnity Reduction Amounts in respect thereof had been
received before the indemnity payment was made. An insurer or other third party
who would otherwise be obligated to pay any claim shall not be relieved of the
responsibility with respect thereto or, solely by virtue of the indemnification
provisions hereof, have any subrogation rights with respect thereto, it being
expressly understood and agreed that no insurer or any other third party shall
be entitled to any benefit they would not be entitled to receive in the absence
of the
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indemnification provisions by virtue of the indemnification provisions hereof.
(b) In determining the amount of any Indemnifiable Losses, such
amount shall be (i) reduced to take into account any net Tax benefit realized by
the Indemnitee arising from the incurrence or payment by the Indemnitee of such
Indemnifiable Losses and (ii) increased to take into account any net Tax cost
incurred by the Indemnitee as a result of the receipt or accrual of payments
hereunder (grossed-up for such increase), in each case determined by treating
the Indemnitee as recognizing all other items of income, gain, loss, deduction
or credit before recognizing any item arising from such Indemnifiable Losses. It
is the intention of the parties to this Agreement that indemnity payments made
pursuant to this Agreement are to be treated as relating back to the
Distribution as an adjustment to capital (i.e., capital contribution or
distribution), and the parties shall not take any position inconsistent with
such intention before any Tax Authority (as defined in the Tax Allocation
Agreement), except to the extent that a final determination (as defined in
Section 1313 of the Code) with respect to the recipient party causes any such
payment not to be so treated.
Section 4.05 Procedures Relating to Indemnification. (a) If a
claim or demand is made against an Indemnitee, or an Indemnitee shall otherwise
learn of an assertion, by any Person who is not a party to this Agreement (or an
Affiliate thereof) as to which an Indemnifying Party may be obligated to provide
indemnification pursuant to this Agreement (a "Third Party Claim"), such
Indemnitee will notify the Indemnifying Party in writing, and in reasonable
detail, of the Third Party Claim reasonably promptly (and in any event within 20
business days) after becoming aware of such Third Party Claim; provided,
however, that failure to give such notification will not affect the
indemnification provided hereunder except to the extent the Indemnifying Party
shall have been actually prejudiced as a result of such failure (except that the
Indemnifying Party will not be liable for any expenses incurred during the
period in which the Indemnitee failed to give such notice). Thereafter, the
Indemnitee will deliver to the Indemnifying Party, promptly after the
Indemnitee's receipt thereof, copies of all notices and documents (including,
without limitation, court papers)
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received or transmitted by the Indemnitee relating to the Third Party Claim.
(b) If a Third Party Claim is made against an Indemnitee, the
Indemnifying Party will be entitled to participate in or to assume the defense
thereof (in either case, at the expense of the Indemnifying Party) with counsel
selected by the Indemnifying Party and reasonably satisfactory to the
Indemnitee. Should the Indemnifying Party so elect to assume the defense of a
Third Party Claim, the Indemnifying Party will not be liable to the Indemnitee
for any legal or other expenses subsequently incurred by the Indemnitee in
connection with the defense thereof; provided that, if in the Indemnitee's
reasonable judgment a conflict of interest exists in respect of such claim or if
the Indemnifying Party shall have assumed responsibility for such claim with any
reservations or exceptions, such Indemnitee will have the right to employ
separate counsel reasonably satisfactory to the Indemnifying Party to represent
such Indemnitee and in that event the reasonable fees and expenses of such
separate counsel (but not more than one separate counsel for all Indemnitees
similarly situated) shall be paid by such Indemnifying Party. If the
Indemnifying Party assumes the defense of any Third Party Claim, the Indemnitee
will have the right to participate in the defense thereof and to employ counsel,
at its own expense, separate from the counsel employed by the Indemnifying
Party, it being understood that the Indemnifying Party will control such
defense. The Indemnifying Party will be liable for the fees and expenses of
counsel employed by the Indemnitee for any period during which the Indemnifying
Party has failed to assume the defense thereof (other than during any period in
which the Indemnitee shall have failed to give notice of the Third Party Claim
as provided above). If the Indemnifying Party assumes the defense of any Third
Party Claim, the Indemnifying Party will promptly supply to the Indemnitee
copies of all correspondence and documents relating to or in connection with
such Third Party Claim and keep the Indemnitee fully informed of all
developments relating to or in connection with such Third Party Claim
(including, without limitation, providing to the Indemnitee on request updates
and summaries as to the status thereof). If the Indemnifying Party chooses to
defend a Third Party Claim, the parties hereto will cooperate in the defense
thereof (such cooperation to be at the expense, including, without limitation,
reasonable
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legal fees and expenses, of the Indemnifying Party), which cooperation shall
include the retention in accordance with this Agreement and (upon the
Indemnifying Party's request) the provision to the Indemnifying Party of records
and information which are reasonably relevant to such Third Party Claim, and
making employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder.
(c) No Indemnifying Party will consent to any settlement,
compromise or discharge (including the consent to entry of any judgment) of any
Third Party Claim without the Indemnitee's prior written consent (which consent
will not be unreasonably withheld); provided, that if the Indemnifying Party
assumes the defense of any Third Party Claim, the Indemnitee will agree to any
settlement, compromise or discharge of such Third Party Claim which the
Indemnifying Party may recommend and which by its terms obligates the
Indemnifying Party to pay the full amount of Indemnifiable Losses in connection
with such Third Party Claim and unconditionally and irrevocably releases the
Indemnitee completely from all Liability in connection with such Third Party
Claim; provided, however, that the Indemnitee may refuse to agree to any such
settlement, compromise or discharge (x) that provides for injunctive or other
nonmonetary relief affecting the Indemnitee or (y) that, in the reasonable
opinion of the Indemnitee, would otherwise materially adversely affect the
Indemnitee. Whether or not the Indemnifying Party shall have assumed the defense
of a Third Party Claim, the Indemnitee will not (unless required by law) admit
any liability with respect to, or settle, compromise or discharge, such Third
Party Claim without the Indemnifying Party's prior written consent (which
consent will not be unreasonably withheld).
(d) Any claim on account of Indemnifiable Losses which does not
involve a Third Party Claim will be asserted by reasonably prompt written notice
given by the Indemnitee to the Indemnifying Party from whom such indemnification
is sought. The failure by any Indemnitee so to notify the Indemnifying Party
will not relieve the Indemnifying Party from any liability which it may have to
such Indemnitee under this Agreement, except to the extent that the Indemnifying
Party shall have been actually prejudiced by such failure. Any notice pursuant
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to this Section 4.05(d) will contain a statement, in prominent and conspicuous
type, that if the Indemnifying Party does not dispute its liability to the
Indemnitee with respect to the claim made in such notice by notice to the
Indemnitee prior to the expiration of a 30-calendar-day period following the
Indemnifying Party's receipt of the second notice of such claim, the claim shall
be conclusively deemed a liability of the Indemnifying Party. If the Indemnitee
has provided the Indemnifying Party two such notices not less than 30 days apart
and the Indemnifying Party does not notify the Indemnitee prior to the
expiration of a 30-calendar-day period following its receipt of the second such
notice that the Indemnifying Party disputes its liability to the Indemnitee
under this Agreement, such claim specified by the Indemnitee in such notice will
be conclusively deemed a liability of the Indemnifying Party under this
Agreement and the Indemnifying Party will pay the amount of such liability to
the Indemnitee on demand or, in the case of any notice in which the amount of
the claim (or any portion thereof) is estimated, on such later date when the
amount of such claim (or such portion thereof) becomes finally determined. If
the Indemnifying Party has timely disputed its liability with respect to such
claim, as provided above, the Indemnifying Party and the Indemnitee will proceed
in good faith to negotiate a resolution of such dispute and, if not resolved
through negotiations by the 120th day after notice of such claim was given to
the Indemnifying Party, the Indemnifying Party and the Indemnitee will be free
to pursue such remedies as may be available to such parties under this Agreement
or under applicable law.
(e) In the event of payment in full by an Indemnifying Party to
any Indemnitee in connection with any Third Party Claim, such Indemnifying Party
will be subrogated to and shall stand in the place of such Indemnitee as to any
events or circumstances in respect of which such Indemnitee may have any right
or claim relating to such Third Party Claim against any claimant or plaintiff
asserting such Third Party Claim or against any other Person. Such Indemnitee
will cooperate with such Indemnifying Party in a reasonable manner, and at the
cost and expense of such Indemnifying Party, in prosecuting any subrogated right
or claim.
(f) Notwithstanding anything contained herein to the contrary,
Rockwell will control the defense of the
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Western Atlas Litigation with counsel selected by Rockwell. The Company will
have the right to participate in the defense thereof and to employ counsel, at
its own expense, separate from the counsel employed by Rockwell, it being
understood that Rockwell will control such defense. Rockwell will supply to the
Company copies of all material correspondence and documents relating to or in
connection with the Western Atlas Litigation and will keep the Company
reasonably informed of all material developments relating to or in connection
therewith. The Company shall cooperate in the defense of the Western Atlas
Litigation, including, without limitation, the retention and provision (upon
Rockwell's request) of records and information which are relevant to the Western
Atlas Litigation and making employees available on a mutually convenient basis
to provide additional information and explanation of any material provided
hereunder. The Company will also promptly provide Rockwell with copies of all
materials received by the Company (other than from Rockwell or any of its
Subsidiaries) relating to the Western Atlas Litigation. Rockwell will on a
monthly basis deliver to the Company a statement setting forth the Western Atlas
Litigation Expenses for which the Company is obligated to indemnify Rockwell,
and within 30 days of receipt of such statement, the Company shall pay Rockwell
the amounts set forth on such statement as due by the Company. At the request of
the Company, Rockwell will provide to the Company reasonably detailed
documentation evidencing the incurrence of the Western Atlas Litigation Expenses
set forth on such statement.
Section 4.06 Remedies Cumulative. The remedies provided in this
Article IV shall be cumulative and shall not preclude assertion by any
Indemnitee of any other rights or the seeking of any and all other remedies
against any Indemnifying Party.
Section 4.07 Survival of Indemnities. The obligations of each of
Rockwell and the Company under this Article IV will not terminate at any time
and will survive the sale or other transfer by any party of any assets or
businesses or the assignment by any party of any Liabilities with respect to any
Indemnifiable Losses of the other related to such assets, businesses or
Liabilities.
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Section 4.08 Exclusivity of Tax Allocation Agreement.
Notwithstanding anything in this Agreement to the contrary, the Tax Allocation
Agreement will be the exclusive agreement among the parties with respect to all
Tax matters, including, without limitation, indemnification in respect of Tax
matters.
ARTICLE V
ACCESS TO INFORMATION
Section 5.01 Access to Information. From and after the Time of
Distribution, Rockwell will, and will cause each Rockwell Subsidiary to, afford
to the Company and its Representatives (at the Company's expense) reasonable
access and duplicating rights during normal business hours and upon reasonable
advance notice to all Information within Rockwell's possession or control or in
the possession or control of a Rockwell Subsidiary relating to the Company, any
Company Subsidiary or the Semiconductor Business, insofar as such access is
reasonably required by the Company or any Company Subsidiary, subject to the
provisions below regarding Privileged Information. From and after the Time of
Distribution, the Company will, and will cause each Company Subsidiary to,
afford to Rockwell and its Representatives (at Rockwell's expense) reasonable
access and duplicating rights during normal business hours and upon reasonable
advance notice to all Information within the Company's possession or control or
in the possession or control of a Company Subsidiary relating to Rockwell, any
Rockwell Subsidiary or the businesses of the Pre-Distribution Group, insofar as
such access is reasonably required by Rockwell or any Rockwell Subsidiary,
subject to the provisions below regarding Privileged Information. Without
limiting the foregoing, Information may be requested under this Article V for
audit, accounting, claims, litigation, insurance, environmental and safety and
tax purposes, as well as for purposes of fulfilling disclosure and reporting
obligations and for performing this Agreement and the transactions contemplated
hereby.
In furtherance of the foregoing:
(a) Each party acknowledges that (i) each of Rockwell and the
Company (and the members of the Rockwell Group and the Company Group,
respectively) has or may
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obtain Privileged Information; (ii) there are a number of Actions affecting one
or more of the members of the Rockwell Group and the Company Group; (iii) the
parties may have a common legal interest in Actions, in the Privileged
Information, and in the preservation of the confidential status of the
Privileged Information, in each case relating to the business of the Rockwell
Group or the Company Group; and (iv) both Rockwell and the Company intend that
the transactions contemplated by the Transaction Agreements and any transfer of
Privileged Information in connection therewith shall not operate as a waiver of
any potentially applicable privilege.
(b) Each of Rockwell and the Company agrees, on behalf of itself
and each member of the Group of which it is a member, not to disclose or
otherwise waive any privilege attaching to any Privileged Information relating
to the business of the Company Group or the Rockwell Group, respectively,
without providing prompt written notice to and obtaining the prior written
consent of the other, which consent will not be unreasonably withheld. In the
event of a disagreement between any member of the Rockwell Group and any member
of the Company Group concerning the reasonableness of withholding such consent,
no disclosure will be made prior to a final, nonappealable resolution of such
disagreement.
(c) Upon any member of the Rockwell Group or any member of the
Company Group receiving any subpoena or other compulsory disclosure notice from
a court, other Governmental Entity or otherwise which requests disclosure of
Privileged Information, in each case relating to the business of the Company
Group or the Rockwell Group, respectively, the recipient of the notice will
promptly provide to the other party (following the notice provisions set forth
herein) a copy of such notice, the intended response, and all materials or
information relating to the other Group that might be disclosed. In the event of
a disagreement as to the intended response or disclosure, unless and until the
disagreement is resolved as provided in Section 5.01(b), the parties will
cooperate to assert all defenses to disclosure claimed by either Group, at the
cost and expense of the Group claiming such defense to disclosure, and shall not
disclose any disputed documents or information until all legal defenses and
claims of privilege have been finally determined.
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Section 5.02 Production of Witnesses. Subject to Section 5.01,
after the Time of Distribution, each of Rockwell and the Company will, and will
cause each member of the Rockwell Group and the Company Group, respectively, to,
make available to the other party and its Subsidiaries, upon written request and
at the cost and expense of the party so requesting, its directors, officers,
employees and agents as witnesses to the extent that any such Person may
reasonably be required (giving consideration to business demands of such
Representatives) in connection with any Actions or other proceedings in which
the requesting party may from time to time be involved, provided that the same
shall not unreasonably interfere with the conduct of business by the Group of
which the request is made.
Section 5.03 Retention of Records. Except as otherwise required by
law or agreed to in writing, if any Information relating to the business, assets
or Liabilities of a member of a Group is retained by a member of the other
Group, each of Rockwell and the Company will, and will cause the members of the
Group of which it is a member to, retain for the period required by the
applicable Rockwell records retention policy in effect immediately prior to the
Time of Distribution all such Information in such Group's possession or under
its control. In addition, after the expiration of such required retention
period, if any member of either Group wishes to destroy or dispose of any such
Information, prior to destroying or disposing of any of such Information, (1)
Rockwell or the Company, on behalf of the member of its Group that is proposing
to dispose of or destroy any such Information, will provide no less than 30
days' prior written notice to the other party, specifying in reasonable detail
the Information proposed to be destroyed or disposed of, and (2) if, prior to
the scheduled date for such destruction or disposal, the recipient of such
notice requests in writing that any of the Information proposed to be destroyed
or disposed of be delivered to such requesting party, the party whose Group is
proposing to dispose of or destroy such Information promptly will arrange for
the delivery of the requested Information to a location specified by, and at the
expense of, the requesting party.
Section 5.04 Confidentiality. Subject to Section 5.01, which shall
govern Privileged Information, from and after the Time of Distribution, each of
Rockwell
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and the Company shall hold, and shall use reasonable efforts to cause its
Affiliates and Representatives to hold, in strict confidence all Information
concerning the other party's Group in its possession or control or furnished to
it by such other party's Group pursuant to the Transaction Agreements or the
transactions contemplated thereby and will not release or disclose such
Information to any other Person, except its Affiliates and Representatives, who
will be bound by the provisions of this Section 5.04; provided, however, that
any member of the Rockwell Group or the Company Group may disclose such
Information to the extent that (a) disclosure is compelled by judicial or
administrative process or, in the opinion of such Person's counsel, by other
requirements of law (in which case the party required to make such disclosure
will notify the other party as soon as practicable of such obligation or
requirement and cooperate with the other party to limit the Information required
to be disclosed and to obtain a protective order or other appropriate remedy
with respect to the Information ultimately disclosed), or (b) such Person can
show that such Information was (i) available to such Person on a nonconfidential
basis (other than from a member of the other party's Group) prior to its
disclosure by such Person, (ii) in the public domain through no fault of such
Person or (iii) lawfully acquired by such Person from another source after the
time that it was furnished to such Person by the other party's Group, and not
acquired from such source subject to any confidentiality obligation on the part
of such source known to the acquiror, or on the part of the acquiror. Each party
acknowledges that it will be liable for any breach of this Section 5.04 by its
Representatives to whom such Information is disclosed by such party.
Notwithstanding the foregoing, each of Rockwell and the Company will be deemed
to have satisfied its obligations under this Section 5.04 with respect to any
Information (other than Privileged Information) if it exercises the same care
with regard to such Information as it takes to preserve confidentiality for its
own similar Information.
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ARTICLE VI
MISCELLANEOUS
Section 6.01 Entire Agreement; Construction. This Agreement
and the Ancillary Agreements, including, without limitation, any annexes,
schedules and exhibits hereto or thereto, and other agreements and documents
referred to herein and therein, will together constitute the entire agreement
between the parties with respect to the subject matter hereof and thereof and
will supersede all prior negotiations, agreements and understandings of the
parties of any nature, whether oral or written, with respect to such subject
matter. Notwithstanding any other provisions in the Transaction Agreements to
the contrary, (i) in the event and to the extent that there is a conflict
between the provisions of this Agreement and the provisions of the Employee
Matters Agreement or the Tax Allocation Agreement, the provisions of the
Employee Matters Agreement or the Tax Allocation Agreement, as appropriate, will
control and (ii) in the event and to the extent that there is a conflict between
the provisions of this Agreement and the provisions of any Conveyance and
Assumption Instruments, the provisions of this Agreement will control.
Section 6.02 Survival of Agreements. Except as otherwise
contemplated by the Transaction Agreements, all covenants and agreements of the
parties contained in the Transaction Agreements will remain in full force and
effect and survive the Time of Distribution.
Section 6.03 Expenses. Except as otherwise set forth in any
Transaction Agreement, all out-of-pocket costs and expenses incurred through the
Time of Distribution in connection with the Distribution, the preparation,
execution and delivery of the Transaction Agreements and the consummation of the
transactions contemplated thereby will be charged to and paid by Rockwell (other
than (i) the out-of-pocket costs and expenses of and related to the Company's
credit facilities, (ii) $1 million for out-of-pocket costs and expenses relating
to consultants retained by the Company in connection with the Distribution and
(iii) out-of-pocket costs and expenses to the extent the same relate to
operations of the Semiconductor Business subsequent to the Time of Distribution
(whether the costs and expenses described in clauses (i), (ii) or (iii) are
incurred
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and/or paid before, at or after the Time of Distribution), which costs and
expenses described in clauses (i), (ii) and (iii) will be charged to and paid by
the Company). Within ten days after the Distribution Date, the Company will
reimburse Rockwell (by wire transfer to Rockwell's bank account at Mellon Bank,
N.A., Pittsburgh, Pennsylvania, account number 102-3474) for all amounts in
respect of out-of-pocket costs and expenses described in clauses (i) and (ii) of
the preceding sentence (including, without limitation, all underwriting and
other fees in respect of the Company's credit facilities) paid by Rockwell or
any of its Subsidiaries before or at the Time of Distribution (the parties
acknowledge that the out-of-pocket costs and expenses described in clause (ii)
of the preceding sentence were paid by Rockwell prior to the Time of
Distribution and will be included in such reimbursement). Promptly after
Rockwell's request therefor, the Company will reimburse Rockwell (by wire
transfer to the same bank account referred to in the preceding sentence) for all
out-of-pocket costs and expenses described in clauses (i), (ii) and (iii) of the
first sentence of this Section 6.03 paid by Rockwell or any of its Subsidiaries
before, at or after the Time of Distribution (other than as previously
reimbursed by the Company pursuant to the preceding sentence). Except as
otherwise set forth in any Transaction Agreement, all out-of-pocket costs and
expenses incurred following the Time of Distribution in connection with
implementation of the transactions contemplated by the Transaction Agreements
will be charged to and paid by the party for whose benefit the expenses are
incurred, with any out-of-pocket expenses which cannot be allocated on such
basis to be split equally between the parties.
Section 6.04 Governing Law. This Agreement will be governed by and
construed in accordance with the internal laws of the State of New York
applicable to contracts made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.
Section 6.05 Notices. All notices, requests, claims, demands
and other communications required or permitted to be given hereunder will be in
writing and will be delivered by hand or telecopied or sent, postage prepaid, by
registered, certified or express mail or reputable overnight courier service and
will be deemed
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given when so delivered by hand or telecopied, or three business days after
being so mailed (one business day in the case of express mail or overnight
courier service). All such notices, requests, claims, demands and other
communications will be addressed as set forth below, or pursuant to such other
instructions as may be designated in writing by the party to receive such
notice:
(a) If to Rockwell:
Rockwell International Corporation
600 Anton Boulevard
Costa Mesa, California 92626
Attention: Mr. W. Michael Barnes
Senior Vice President,
Finance and Planning and
Chief Financial Officer
Telecopy: (714) 424-4218
with a copy to:
Rockwell International Corporation
600 Anton Boulevard
Costa Mesa, California 92626
Attention: William J. Calise, Jr., Esq.
Senior Vice President,
General Counsel and
Secretary
Telecopy: (714) 424-4265
(b) If to the Company:
Conexant Systems, Inc.
4311 Jamboree Road
Newport Beach, California 92660-3095
Attention: Mr. Dwight W. Decker
Chairman and Chief
Executive Officer
Telecopy: (949) 483-4318
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with a copy to:
Conexant Systems, Inc.
4311 Jamboree Road
Newport Beach, California 92660-3095
Attention: Dennis E. O'Reilly, Esq.
Senior Vice President,
General Counsel and
Secretary
Telecopy: (949) 483-3018
Section 6.06 Consent to Jurisdiction. Each of Rockwell and the
Company irrevocably submits to the exclusive jurisdiction of (i) the Court of
Chancery in and for the State of Delaware and the Superior Court in and for the
State of Delaware and (ii) the United States District Court for the District of
Delaware, for the purposes of any suit, action or other proceeding arising out
of the Transaction Agreements or any transaction contemplated thereby (and
agrees not to commence any action, suit or proceeding relating thereto except in
such courts). Each of Rockwell and the Company further agrees that service of
any process, summons, notice or document hand delivered or sent by U.S.
registered mail to such party's respective address set forth in Section 6.05
will be effective service of process for any action, suit or proceeding in
Delaware with respect to any matters to which it has submitted to jurisdiction
as set forth in the immediately preceding sentence. Each of Rockwell and the
Company irrevocably and unconditionally waives any objection to the laying of
venue of any action, suit or proceeding arising out of the Transaction
Agreements or the transactions contemplated thereby in (i) the Court of Chancery
in and for the State of Delaware and the Superior Court in and for the State of
Delaware or (ii) the United States District Court for the District of Delaware,
and hereby further irrevocably and unconditionally waives and agrees not to
plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
Section 6.07 Amendments. This Agreement cannot be amended,
modified or supplemented except by a written agreement executed by Rockwell and
the Company.
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Section 6.08 Assignment. Neither party to this Agreement will
convey, assign or otherwise transfer any of its rights or obligations under this
Agreement without the prior written consent of the other party in its sole and
absolute discretion, except that, other than as expressly provided herein, any
party may (without obtaining any consent) assign any of its rights hereunder to
a successor to all or any part of its business. Any such conveyance, assignment
or transfer requiring the prior written consent of another party which is made
without such consent will be void ab initio. No assignment of this Agreement
will relieve the assigning party of its obligations hereunder.
Section 6.09 Captions; Currency. The article, section and
paragraph captions herein and the table of contents hereto are for convenience
of reference only, do not constitute part of this Agreement and will not be
deemed to limit or otherwise affect any of the provisions hereof. Unless
otherwise specified, all references herein to numbered articles or sections are
to articles and sections of this Agreement and all references herein to annexes
or schedules are to annexes and schedules to this Agreement. Unless otherwise
specified, all references contained in this Agreement, in any annex or schedule
referred to herein or in any instrument or document delivered pursuant hereto to
dollars or "$" shall mean United States Dollars.
Section 6.10 Severability. If any provision of this Agreement or
the application thereof to any Person or circumstance is determined by a court
of competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to Persons or
circumstances other than those as to which it has been held invalid or
unenforceable, will remain in full force and effect and will in no way be
affected, impaired or invalidated thereby. If the economic or legal substance of
the transactions contemplated hereby is affected in any manner adverse to any
party as a result thereof, the parties will negotiate in good faith in an effort
to agree upon a suitable and equitable substitute provision to effect the
original intent of the parties.
Section 6.11 Parties in Interest. This Agreement is binding upon
and is for the benefit of the parties hereto and their respective successors and
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permitted assigns. This Agreement is not made for the benefit of any Person not
a party hereto, and no Person other than the parties hereto or their respective
successors and permitted assigns will acquire or have any benefit, right, remedy
or claim under or by reason of this Agreement, except that the provisions of
Sections 4.02 and 4.03 hereof shall inure to the benefit of the Persons referred
to therein.
Section 6.12 Schedules. All annexes and schedules attached hereto
are hereby incorporated in and made a part of this Agreement as if set forth in
full herein. Capitalized terms used in the schedules hereto but not otherwise
defined therein will have the respective meanings assigned to such terms in this
Agreement.
Section 6.13 Termination. This Agreement may be terminated and the
Distribution abandoned at any time prior to the Time of Distribution by and in
the sole discretion of the Rockwell Board without the approval of the Company or
of Rockwell's shareowners. In the event of such termination, no party will have
any liability of any kind to any other party on account of such termination.
Section 6.14 Waivers; Remedies. The conditions to Rockwell's
obligation to consummate the Distribution are for the sole benefit of Rockwell
and may be waived in writing by Rockwell in whole or in part in Rockwell's sole
discretion. No failure or delay on the part of either Rockwell or the Company in
exercising any right, power or privilege hereunder will operate as a waiver
thereof, nor will any waiver on the part of either Rockwell or the Company of
any right, power or privilege hereunder operate as a waiver of any other right,
power or privilege hereunder, nor will any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder. The
rights and remedies herein provided are cumulative and are not exclusive of any
rights or remedies which the parties may otherwise have at law or in equity.
Section 6.15 Further Assurances. From time to time after the
Distribution, as and when requested by either party hereto, the other party
shall execute and
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deliver, or cause to be executed and delivered, all such documents and
instruments and shall take, or cause to be taken, all such actions as the
requesting party may reasonably request to consummate the transactions
contemplated by the Transaction Agreements.
Section 6.16 Counterparts. This Agreement may be executed in
separate counterparts, each such counterpart being deemed to be an original
instrument, and all such counterparts will together constitute the same
agreement.
Section 6.17 Performance. Each party will cause to be performed
and hereby guarantees the performance of all actions, agreements and obligations
set forth herein to be performed by any Subsidiary or Affiliate of such party.
Section 6.18 Currency Calculations. Following the Distribution
Date, for purposes of calculating the United States Dollar equivalent of any
amount payable under any Transaction Agreement which is denominated in a
currency other than United States Dollars, the New York foreign exchange selling
rate applicable to such currency will be used, as published in the Wall Street
Journal, New York Edition, for the second business day preceding the earlier of
the date such payment is due or the date such payment is made (it being
understood that this Section 6.18 shall not apply to the conversion of foreign
currency balances made as of the
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Distribution Date in accordance with standard Rockwell accounting practices and
procedures, including, without limitation, calculations made in respect of the
Recorded Amount).
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties as of the date first
hereinabove written.
ROCKWELL INTERNATIONAL CORPORATION
By: /s/ William J. Calise, Jr.
---------------------------------------
William J. Calise, Jr.
Senior Vice President, General
Counsel and Secretary
CONEXANT SYSTEMS, INC.
By: /s/ Dwight W. Decker
--------------------------------------
Dwight W. Decker
Chairman and Chief
Executive Officer
91
Exhibit 2.2
===============================================================================
AMENDED AND RESTATED
EMPLOYEE MATTERS AGREEMENT
by and between
ROCKWELL INTERNATIONAL CORPORATION
and
CONEXANT SYSTEMS, INC.
===============================================================================
December 31, 1998
===============================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.......................................................1
Section 1.01 General..................................................1
ARTICLE II EMPLOYEES........................................................9
Section 2.01 Employees................................................9
Section 2.02 Collective Bargaining Agreements........................10
ARTICLE III PENSION PLANS..................................................12
Section 3.01 Rockwell Pension Plan...................................12
Section 3.02 Conexant Newport Beach Pension
Plan..................................................12
Section 3.03 U.S. Nonqualified Pension Plans.........................14
Section 3.04 Conexant VERP...........................................14
Section 3.05 U.K. Pension Plan.......................................15
Section 3.06 German Stand-Alone Pension Plan.........................16
ARTICLE IV SAVINGS PLANS...................................................16
Section 4.01 U.S. Savings Plan.......................................16
Section 4.02 Newport Beach Savings Plan..............................18
Section 4.03 Rockwell El Paso Savings Sub-Plan.......................19
Section 4.04 Nonqualified Savings Plans..............................20
ARTICLE V STOCK PLANS......................................................21
Section 5.01 Stock Plans.............................................21
ARTICLE VI OTHER EMPLOYEE PLANS AND MATTERS................................23
Section 6.01 Welfare Plans...........................................23
Section 6.02 Long-Term Incentive Plan and
Incentive Compensation Plans...........................25
Section 6.03 Deferred Compensation Plans.............................26
Section 6.04 Severance Pay...........................................26
Section 6.05 Employment, Consulting and Other
Employee Related Agreements............................27
Section 6.06 Rockwell VEBA and CLIR Fund.............................28
Section 6.07 Other Liabilities.......................................28
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ARTICLE VII MISCELLANEOUS..................................................29
Section 7.01 Indemnification.........................................29
Section 7.02 Sharing of Information..................................29
Section 7.03 Entire Agreement; Construction..........................29
Section 7.04 Survival of Agreements..................................30
Section 7.05 Governing Law...........................................30
Section 7.06 Notices.................................................30
Section 7.07 Amendments..............................................30
Section 7.08 Assignment..............................................30
Section 7.09 Captions; Currency......................................31
Section 7.10 Severability............................................31
Section 7.11 Parties in Interest.....................................31
Section 7.12 Schedules...............................................31
Section 7.13 Termination.............................................32
Section 7.14 Change of Name..........................................32
Section 7.15 Waivers; Remedies.......................................32
Section 7.16 Counterparts............................................32
Section 7.17 Performance.............................................33
SCHEDULES
Schedule 2.01 - Certain Conexant Employees
Schedule 2.02(a) - Conexant Collective Bargaining
Agreements
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AMENDED AND RESTATED
EMPLOYEE MATTERS AGREEMENT
AMENDED AND RESTATED EMPLOYEE MATTERS AGREEMENT (this "Agreement"),
dated as of December 31, 1998, by and between ROCKWELL INTERNATIONAL
CORPORATION, a Delaware corporation ("Rockwell"), and CONEXANT SYSTEMS, INC., a
Delaware corporation and, as of the date hereof, a wholly-owned subsidiary of
Rockwell (the "Company").
WHEREAS, the Rockwell Board has determined that it is appropriate and
desirable to distribute all outstanding shares of Conexant Common Stock on a pro
rata basis to the holders of Rockwell Common Stock (the "Distribution"); and
WHEREAS, Rockwell and the Company are entering into a Distribution
Agreement dated as of the date hereof (the "Distribution Agreement") which,
among other things, sets forth the principal corporate transactions required to
effect the Distribution and certain other agreements that will govern certain
matters relating to the Distribution; and
WHEREAS, in connection with the Distribution, Rockwell and the Company
have determined that it is appropriate and desirable to provide for the
allocation of certain assets and liabilities and certain other matters relating
to employees, employee benefit plans and compensation arrangements;
NOW, THEREFORE, in consideration of the premises and of the respective
agreements and covenants contained in this Agreement, the parties hereby agree
as follows:
ARTICLE I
DEFINITIONS
Section 1.01 General. Capitalized terms used in this Agreement but not
defined herein (other than the names of employee benefit plans) shall have the
meanings ascribed to such terms in the Distribution Agreement. As used in this
Agreement, the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):
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"Average Price of Conexant Common Stock" means the average of the daily
closing prices per share of Conexant Common Stock as reported on Nasdaq for the
five consecutive Nasdaq trading days ending on and including the Distribution
Date (the "Nasdaq Pre-Distribution Period"), assuming that "when-issued" trading
in Conexant Common Stock occurs during the Nasdaq Pre-Distribution Period in
daily volume of not less than 1,000 shares (and if on any day (a "Conexant
Excluded Day") during the Nasdaq Pre-Distribution Period (i) such trading does
not occur in such volume or (ii) such day is a Rockwell Excluded Day, then
trading on each Conexant Excluded Day shall not be considered and trading on up
to five Substitute Nasdaq Trading Days shall be included so that a total of five
trading days are included in the averaging period); provided, that if the
Committee shall determine on or before 2:00 p.m. (New York City time) on the
first Nasdaq trading day following the Distribution Date that, notwithstanding
satisfaction of the 1,000 share per day minimum trading volume requirement,
"when-issued" trading on one or more days during the Nasdaq Pre-Distribution
Period does not fairly represent the value of Conexant Common Stock, then each
such day so determined shall be treated as a Conexant Excluded Day, trading on
each Conexant Excluded Day shall not be considered and trading on up to five
Substitute Nasdaq Trading Days shall be included so that a total of five trading
days are included in the averaging period.
"Committee" means the committee appointed by the Rockwell Board on
December 2, 1998 for certain purposes, including in respect of the option
adjustments provided for in this Agreement.
"Conexant Employee" means any individual who, as of the Time of
Distribution, (i) will be employed by a member of the Semiconductor Group
pursuant to Section 2.01 or (ii) is a director of Conexant who is not also a
director of Rockwell.
"Conexant Former Employee" means any individual who was, at any time
prior to the Time of Distribution, employed by any member of the
Pre-Distribution Group, who is not as of the Time of Distribution a Rockwell
Employee or a Conexant Employee, and whose most recent active employment with
such member of the Pre-Distribution Group was with the Semiconductor Business.
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"Conexant Newport Beach Pension Plan" shall have the meaning ascribed
thereto in Section 3.02(a).
"Conexant Newport Beach Savings Plan" shall have the meaning ascribed
thereto in Section 4.02(a).
"Conexant Option" means an option to purchase from the Company shares
of Conexant Common Stock provided to a holder of a Rockwell Option pursuant to
Section 5.01.
"Conexant Option Ratio" means the amount obtained by dividing (i) the
Average Price of Conexant Common Stock by (ii) the Pre-Distribution Average
Price of Rockwell Common Stock.
"Conexant Option Spread" means (i) with respect to any Conexant Option
received by a holder of a Rockwell Split Option pursuant to Section 5.01(b) that
is not subject to Section 5.01(c), the Pre-Distribution Rockwell Option Spread
of the corresponding Rockwell Split Option minus the Ex-Distribution Rockwell
Option Spread of such Rockwell Split Option or (ii) with respect to any Conexant
Option received by a holder of a Rockwell Split Option pursuant to Section
5.01(b) that is subject to the provisions of Section 5.01(c), (A) the Average
Price of Conexant Common Stock minus $1.00, multiplied by (B) the number of
shares of Conexant Common Stock subject to such Conexant Option.
"Conexant Participants" means Conexant Employees, Conexant Former
Employees and their respective beneficiaries.
"Conexant Savings Plan" shall have the meaning ascribed thereto in
Section 4.01(a).
"Conexant Welfare Plans" shall have the meaning ascribed thereto in
Section 6.01(a).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor legislation.
"Ex-Distribution Average Price of Rockwell Common Stock" means the
average of the daily closing prices per share of Rockwell Common Stock trading
on an "ex-distribution when-issued" basis as reported on the NYSE Composite
Transactions reporting system for the five consecutive NYSE trading days ending
on and including
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the Distribution Date (the "NYSE Pre-Distribution Period"), assuming that
"ex-distribution when-issued" trading in Rockwell Common Stock occurs during the
NYSE Pre-Distribution Period in daily volume of not less than 1,000 shares (and
if on any day (a "Rockwell Excluded Day") during the NYSE Pre-Distribution
Period (i) such trading does not occur in such volume or (ii) such day is a
Conexant Excluded Day, then trading on each Rockwell Excluded Day shall not be
considered and trading on up to five Substitute NYSE Trading Days shall be
included so that a total of five trading days are included in the averaging
period); provided, that if the Committee shall determine on or before 2:00 p.m.
(New York City time) on the first NYSE trading day following the Distribution
Date that, notwithstanding satisfaction of the 1,000 share per day minimum
trading volume requirement, "ex-distribution when-issued" trading on one or more
days during the NYSE Pre-Distribution Period does not fairly represent the value
of Rockwell Common Stock (excluding the value of the Conexant Common Stock to be
distributed in respect thereof), then each such day so determined shall be
treated as a Rockwell Excluded Day, trading on each Rockwell Excluded Day shall
not be considered and trading on up to five Substitute NYSE Trading Days shall
be included so that a total of five trading days are included in the averaging
period.
"Ex-Distribution Rockwell Option Spread" means, (i) with respect to any
Rockwell Split Option (after its being adjusted pursuant to Section 5.01(b))
that is not subject to Section 5.01(c), (A) the Ex-Distribution Average Price of
Rockwell Common Stock minus the per-share exercise price of such adjusted
Rockwell Split Option, multiplied by (B) the number of shares of Rockwell Common
Stock subject to such Rockwell Split Option or (ii) with respect to any Rockwell
Split Option that is subject to Section 5.01(c), the Pre-Distribution Rockwell
Option Spread of the Rockwell Split Option minus the Conexant Option Spread of
the corresponding Conexant Option.
"German Stand-Alone Pension Plan" shall have the meaning ascribed
thereto in Section 3.06.
"Incentive Compensation Plan" means the Rockwell International
Corporation Incentive Compensation Plan, as amended through the Distribution
Date.
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"LTIP" shall have the meaning ascribed thereto in Section 6.02.
"Nasdaq" means the Nasdaq Stock Market, Inc. National Market System.
"NYSE" means the New York Stock Exchange.
"Pre-Distribution Average Price of Rockwell Common Stock" means the
average of the daily closing prices per share of Rockwell Common Stock trading
on a "regular way" basis (i.e., including the value of the Conexant Common Stock
to be distributed in respect thereof) as reported on the NYSE Composite
Transactions reporting system for the NYSE Pre-Distribution Period; provided,
that if any day during such period (an "Old Rockwell Excluded Day") is either a
Conexant Excluded Day or a Rockwell Excluded Day, then trading on such Old
Rockwell Excluded Day shall not be considered and trading on up to five
Substitute Old Rockwell Trading Days shall be included so that a total of five
trading days are included in the averaging period.
"Pre-Distribution Rockwell Option Spread" means, with respect to any
Rockwell Split Option (prior to its being adjusted pursuant to Section 5.01(b)
or 5.01(c)), (i) the Pre-Distribution Average Price of Rockwell Common Stock
minus the per-share exercise price of such unadjusted Rockwell Split Option,
multiplied by (ii) the number of shares of Rockwell Common Stock subject to such
Rockwell Split Option.
"Rockwell CLIR Fund" shall have the meaning ascribed thereto in Section
6.06(a).
"Rockwell Deferred Compensation Plan" shall have the meaning ascribed
thereto in Section 6.03.
"Rockwell El Paso Savings Sub-Plan" means Sub-Plan 153 of the Rockwell
Retirement Savings Plan - Plan No. 133, as amended through the Distribution
Date, covering El Paso Employees.
"Rockwell Employee" means any individual who will be employed by a
member of the Rockwell Group as of the Time of Distribution pursuant to Section
2.01.
"Rockwell Former Employee" means any individual who was, at any time
prior to the Time of Distribution,
5
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employed by any member of the Pre-Distribution Group, who is not as of the Time
of Distribution a Rockwell Employee or a Conexant Employee, and whose most
recent active employment with a member of the Pre-Distribution Group was with a
business other than the Semiconductor Business.
"Rockwell Newport Beach Pension Sub-Plan" means Sub-Plan 30, the
Collins Radio Retirement Plan for Production Employees, of the Rockwell Pension
Plan, as amended through the Distribution Date, covering members of the
International Brotherhood of Electrical Workers, Local 2295 in Newport Beach.
"Rockwell Newport Beach Savings Sub-Plan" means Sub-Plan 150 of the
Rockwell Retirement Savings Plan - Plan No. 133, as amended through the
Distribution Date, covering members of the International Brotherhood of
Electrical Workers, Local 2295 in Newport Beach.
"Rockwell Nonqualified Pension Plans" shall have the meaning ascribed
thereto in Section 3.04.
"Rockwell Nonqualified Savings Plans" shall have the meaning ascribed
thereto in Section 4.04.
"Rockwell Option" means an option to purchase from Rockwell shares of
Rockwell Common Stock granted pursuant to one of the Rockwell Stock Plans.
"Rockwell Option Ratio" means the amount obtained by dividing (i) the
Ex-Distribution Average Price of Rockwell Common Stock by (ii) the
Pre-Distribution Average Price of Rockwell Common Stock.
"Rockwell Participants" means Rockwell Employees, Rockwell Former
Employees and their respective beneficiaries.
"Rockwell Pension Plan" means the Rockwell International Corporation
Retirement Plan for Eligible Employees, as amended through the Distribution
Date. The Rockwell Pension Plan shall include, without limitation, each of the
following subplans thereof, in each case, as amended through the Distribution
Date: (i) the Retirement Plan for Hourly Employees, El Paso Facility, (ii) the
Retirement Income Plan for Certain Salaried Employees, (iii) the Salaried
Employees'
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Retirement Plan - Electronic Operations and (iv) the Rockwell Newport Beach
Pension Sub-Plan.
"Rockwell Savings Plan" means the Rockwell International Corporation
Savings Plan, as amended through the Distribution Date.
"Rockwell Split Option" means a Rockwell Option that was granted
between January 1, 1990 and August 31, 1998.
"Rockwell Stock Plans" means, collectively, the Rockwell 1995 Long-Term
Incentives Plan, the Rockwell 1988 Long-Term Incentives Plan and the Rockwell
Directors Stock Plan, in each case, as amended through the Distribution Date.
"Rockwell U.K. Pension Plan" means, collectively, the Rockwell Collins
U.K. Pension Scheme and the Rockwell U.K. Executive Plan, in each case, as
amended through the Distribution Date.
"Rockwell Welfare Plans" shall have the meaning ascribed thereto in
Section 6.01(a).
"Substitute Nasdaq Trading Day" means the first immediately preceding
Nasdaq trading day in the five Nasdaq trading day period immediately preceding
the Nasdaq Pre-Distribution Period (the "Nasdaq Earlier Period") that is not
already a Substitute Nasdaq Trading Day or an Excluded Nasdaq Trading Day (as
defined below), assuming that "when-issued" trading in Conexant Common Stock
occurs during the Nasdaq Earlier Period in daily volume of not less than 1,000
shares (and if on any day during the Nasdaq Earlier Period (an "Excluded Nasdaq
Trading Day") (i) such trading does not occur in such volume or (ii) such day is
an Excluded NYSE Trading Day, then trading on that day shall not be considered a
Substitute Nasdaq Trading Day and the next immediately preceding Nasdaq trading
day in the Nasdaq Earlier Period shall be considered for purposes of this
definition); provided, that if the Committee shall determine on or before 2:00
p.m. (New York City time) on the first Nasdaq trading day following the
Distribution Date that, notwithstanding satisfaction of the 1,000 share per day
minimum trading volume requirement, "when-issued" trading on such Substitute
Nasdaq Trading Day does not fairly represent the value of Conexant Common Stock,
then each such day
7
<PAGE>
so determined shall be treated as an Excluded Nasdaq Trading Day and shall not
be considered as a Substitute Nasdaq Trading Day and the next immediately
preceding Nasdaq trading day in the Nasdaq Earlier Period shall be considered
for purposes of this definition; provided, further, that if there are an
insufficient number of Substitute Nasdaq Trading Days available in the Nasdaq
Earlier Period for a total of five trading days to be included in the averaging
period for the Average Price of Conexant Common Stock, then up to five Nasdaq
trading days (as determined by the Committee) immediately following the
Distribution Date shall be included as a Substitute Nasdaq Trading Day so that a
total of five trading days are included in the averaging period.
"Substitute NYSE Trading Day" means the first immediately preceding
NYSE trading day in the five NYSE trading day period immediately preceding the
NYSE Pre-Distribution Period (the "NYSE Earlier Period") that is not already a
Substitute NYSE Trading Day or an Excluded NYSE Trading Day (as defined below),
assuming that "ex-distribution when-issued" trading in Rockwell Common Stock
occurs during the NYSE Earlier Period in daily volume of not less than 1,000
shares (and if on any day during the NYSE Earlier Period (an "Excluded NYSE
Trading Day") (i) such trading does not occur in such volume or (ii) such day is
an Excluded Nasdaq Trading Day, then trading on that day shall not be considered
a Substitute NYSE Trading Day and the next immediately preceding NYSE trading
day in the NYSE Earlier Period shall be considered for purposes of this
definition); provided, that if the Committee shall determine on or before 2:00
p.m. (New York City time) on the first NYSE trading day following the
Distribution Date that, notwithstanding satisfaction of the 1,000 share per day
minimum trading volume requirement, "ex-distribution when-issued" trading on
such Substitute NYSE Trading Day does not fairly represent the value of Rockwell
Common Stock (i.e., without the value of the Conexant Common Stock to be
distributed in respect thereof), then each such day so determined shall be
treated as an Excluded NYSE Trading Day and shall not be considered as a
Substitute NYSE Trading Day and the next immediately preceding NYSE trading day
in the NYSE Earlier Period shall be considered for purposes of this definition;
provided, further, that if there are an insufficient number of Substitute NYSE
Trading Days available in the NYSE Earlier Period for a total of five trading
days to be
8
<PAGE>
included in the averaging period for the Average Price of Rockwell Common Stock,
then up to five NYSE trading days (as determined by the Committee) immediately
following the Distribution Date shall be included as a Substitute NYSE Trading
Day so that a total of five trading days are included in the averaging period.
"Substitute Old Rockwell Trading Day" means the first immediately
preceding NYSE trading day in the NYSE Earlier Period that is not already a
Substitute Old Rockwell Trading Day, an Excluded Nasdaq Trading Day or an
Excluded NYSE Trading Day; provided, that if there are an insufficient number of
Substitute Old Rockwell Trading Days available in the NYSE Earlier Period for a
total of five trading days to be included in the averaging period for the
Pre-Distribution Average Price of Rockwell Common Stock, then notwithstanding
any other provision of this Agreement up to five NYSE trading days (as
determined by the Committee) that would otherwise have been excluded during the
NYSE Pre-Distribution Period or the NYSE Earlier Period shall be included as
Substitute Old Rockwell Trading Days so that a total of five trading days are
included in the averaging period.
"Welfare Plan" means an employee welfare benefit plan as defined in
Section 3(1) of ERISA, including, without limitation, medical, vision, dental
and other health plans, retiree health plans, life insurance plans, retiree life
insurance plans, accidental death and dismemberment plans, long-term disability
plans and severance pay plans.
ARTICLE II
EMPLOYEES
Section 2.01 Employees. (a) Each individual (other than those engaged
primarily in the businesses of Rockwell and its Subsidiaries (including
Rockwell's Electronic Commerce Division, Rockwell's mechanical filters product
line and Rockwell Science Center) other than the Semiconductor Business) who is
employed by any member of the Company Group immediately prior to the Time of
Distribution (including, without limitation, those who are actively employed or
on lay-off, leave, short-term or long-term disability or other permitted absence
from employment) will continue to be employed by such member of the Company
Group
9
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as of the Time of Distribution and will be a Conexant Employee. In addition,
each individual who is employed by Rockwell or any of its Subsidiaries (other
than by members of the Company Group) immediately prior to the Time of
Distribution and (x) who is engaged primarily in the Semiconductor Business or
(y) who Rockwell consents to becoming a Conexant Employee, it being understood
that Rockwell has granted such consent in respect of individuals identified on
the attached Schedule 2.01 (including, in the case of both clauses (x) and (y),
those who are actively employed or on lay-off, leave, short-term or long-term
disability or other permitted absence from employment) will be employed by a
member of the Company Group as of the Time of Distribution and will be a
Conexant Employee.
(b) Each individual (other than those engaged primarily in the
Semiconductor Business and those who Rockwell consents to becoming a Conexant
Employee) who is employed by any member of the Rockwell Group immediately prior
to the Time of Distribution (including, without limitation, those who are
actively employed or on lay-off, leave, short-term or long-term disability or
other permitted absence from employment) will continue to be employed by a
member of the Rockwell Group as of the Time of Distribution and will be a
Rockwell Employee. In addition, each individual who is employed by any member of
the Company Group immediately prior to the Time of Distribution and who is
engaged primarily in businesses of Rockwell and its Subsidiaries (including
Rockwell's Electronic Commerce Division, Rockwell's mechanical filters product
line and Rockwell Science Center) other than the Semiconductor Business
(including those who are actively employed or on lay-off, leave, short-term or
long-term disability or other permitted absence from employment) will be
employed by a member of the Rockwell Group as of the Time of Distribution and
will be a Rockwell Employee.
(c) Nothing contained in this Section 2.01 is intended to confer upon
any employee of the Rockwell Group or the Company Group any right to continued
employment after the Distribution Date.
Section 2.02 Collective Bargaining Agreements. (a) Effective as of the
Time of Distribution, the Company will, or will cause one or more Company
Subsidiaries to, unconditionally assume or retain (as applicable) all
Liabilities (including, without limitation, those relating to wages, hours or
other terms and conditions of employment) relating to Conexant Participants
under each of the
10
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collective bargaining agreements of the Pre-Distribution Group relating to the
Semiconductor Business and collateral agreements related thereto, including,
without limitation, those listed on Schedule 2.02(a). From and after the Time of
Distribution, none of Rockwell, the Rockwell Subsidiaries or their Affiliates
will have any Liabilities with respect to Conexant Participants under collective
bargaining agreements relating to the Semiconductor Business or collateral
agreements relating thereto. Rockwell and the Company will take, or cause to be
taken, all such action as may be necessary or appropriate to establish,
effective as of the Time of Distribution, the Company or one or more Company
Subsidiaries as successors to Rockwell and the Rockwell Subsidiaries as to all
rights, duties and Liabilities under, or with respect to, such collective
bargaining agreements and collateral agreements.
(b) Effective as of the Time of Distribution, Rockwell will, or will
cause one or more Rockwell Subsidiaries to, unconditionally assume or retain (as
applicable) all Liabilities (including, without limitation, those relating to
wages, hours or other terms and conditions of employment) relating to Rockwell
Participants under each of the collective bargaining agreements of the
Pre-Distribution Group relating to businesses of Rockwell and its Subsidiaries
other than the Semiconductor Business and collateral agreements related thereto.
From and after the Time of Distribution, none of the Company, the Company
Subsidiaries or their Affiliates will have any Liabilities with respect to
Rockwell Participants under collective bargaining agreements relating to
businesses of Rockwell and its Subsidiaries other than the Semiconductor
Business or collateral agreements relating thereto. Rockwell and the Company
will take, or cause to be taken, all such action as may be necessary or
appropriate to establish, effective as of the Time of Distribution, Rockwell or
one or more Rockwell Subsidiaries as successors to members of the Company Group
as to all rights, duties and Liabilities under, or with respect to, such
collective bargaining agreements and collateral agreements.
(c) Rockwell and the Company will cooperate in engaging in all
appropriate negotiations, implementing all appropriate communications,
transferring appropriate records and taking all other actions as may be
necessary or appropriate to implement the provisions of this Section 2.02.
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ARTICLE III
PENSION PLANS
Section 3.01 Rockwell Pension Plan. (a) Effective as of the Time of
Distribution, the Conexant Employees who participated in the Rockwell Pension
Plan immediately prior to the Time of Distribution will cease to accrue service
credits for benefit, benefit eligibility, vesting, and all other purposes under
the Rockwell Pension Plan and will have the right to receive such Conexant
Employee's benefit, if any, payable at normal retirement age under the Rockwell
Pension Plan accrued as of the Time of Distribution in accordance with the terms
of the Rockwell Pension Plan; provided, however, that, effective as of the Time
of Distribution, Conexant Employees who participated in the Rockwell Pension
Plan immediately prior to the Time of Distribution will have a nonforfeitable
right to such benefit, if any, under the Rockwell Pension Plan. Notwithstanding
anything to the contrary contained herein, no provision of this Agreement shall
be construed to provide any Conexant Employee additional credit for purposes of
determining eligibility for any early retirement benefit under the Rockwell
Pension Plan. None of the Company or the Company Subsidiaries or the Affiliates
of any thereof will have or acquire any interest in or right to any of the
assets of the Rockwell Pension Plan, and Rockwell will retain full power and
authority with respect to the amendment and termination of the Rockwell Pension
Plan and the investment and disposition of assets held in the Rockwell Pension
Plan to the extent permitted by law. From and after the Time of Distribution,
none of Rockwell or the Rockwell Subsidiaries, the Affiliates of any thereof,
the Rockwell Pension Plan or the trust thereunder will have any Liabilities with
respect to benefits and entitlements of Conexant Participants under the Rockwell
Pension Plan, except with respect to benefits accrued under the Rockwell Pension
Plan prior to the Time of Distribution.
(b) The Company and Rockwell will cooperate in making all appropriate
filings required under the Code or ERISA, the regulations thereunder and any
other applicable laws, implementing all appropriate communications with
participants, exchanging and sharing appropriate records and taking such other
actions as may be necessary or appropriate to implement the provisions of this
Section 3.01.
Section 3.02 Conexant Newport Beach Pension Plan (a) As of the Time of
Distribution, the Company will have
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established, and will cover Conexant Employees who participated in the Rockwell
Newport Beach Pension Sub-Plan immediately prior to the Time of Distribution
under, a defined benefit pension plan (the "Conexant Newport Beach Pension
Plan"), which will be qualified under Section 401(a) of the Code, and will have
established a related trust which will be exempt from taxation under Section
501(a) of the Code. The Conexant Newport Beach Pension Plan will be
substantially similar in all material respects to the Rockwell Newport Beach
Pension Sub-Plan as of the Time of Distribution, and will provide a benefit
formula for Conexant Employees which will be substantially similar in all
material respects to the benefit formula that the Rockwell Newport Beach Pension
Sub-Plan provides as of the Time of Distribution. The Conexant Newport Beach
Pension Plan will credit each Conexant Employee for purposes of eligibility to
participate, vesting, benefit accruals and all other plan purposes with all
service which had been credited to such Conexant Employee for such purposes
under the Rockwell Newport Beach Pension Sub-Plan immediately prior to the Time
of Distribution (excluding any such service which was not counted under the
Rockwell Newport Beach Pension Sub-Plan by operation of its "break in service"
rules). Notwithstanding the above, the Conexant Newport Beach Pension Plan will
provide that the benefit of each Conexant Employee under the Conexant Newport
Beach Pension Plan will be reduced by the amount of the benefit to which the
Conexant Employee would be entitled under the Rockwell Newport Beach Pension
Sub-Plan if the Conexant Employee commenced receipt of benefits from the
Rockwell Newport Beach Pension Sub-Plan at the same time as from the Conexant
Newport Beach Pension Plan, based on the Conexant Employee's service and salary
history under the Rockwell Newport Beach Pension Sub-Plan at the Time of
Distribution. Within 180 days after the Time of Distribution, Rockwell will
provide the Company with the following information for each Conexant Employee
who was an active participant in the Rockwell Newport Beach Pension Sub-Plan at
the Time of Distribution: (i) the amount of the accrued vested benefit payable
at normal retirement age from the Rockwell Newport Beach Pension Sub-Plan as of
the Time of Distribution and (ii) the years of credited service and vesting
service as of the Time of Distribution.
(b) The parties acknowledge and agree that the provisions of Section
3.01 are applicable to all Conexant Employees who participated in the Rockwell
Newport Beach Pension Sub-Plan immediately prior to the Time of Distribution.
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(c) The Company and Rockwell will cooperate in making all appropriate
filings required under the Code or ERISA, the regulations thereunder and any
other applicable laws, implementing all appropriate communications with
participants, exchanging and sharing appropriate records and taking such other
actions as may be necessary or appropriate to implement the provisions of this
Section 3.02.
Section 3.03 U.S. Nonqualified Pension Plans. Rockwell will retain all
Liabilities for and will pay when due all benefits accrued as of the Time of
Distribution by, and attributable to, Conexant Employees under the Rockwell
International Corporation Supplemental Retirement Plan for Highly Compensated
Employees and the Rockwell International Corporation Excess Benefit Retirement
Plan, in each case, as amended through the Time of Distribution (collectively,
the "Rockwell Nonqualified Pension Plans"). Effective as of the Time of
Distribution, the Conexant Employees who participated in the Rockwell
Nonqualified Pension Plans immediately prior to the Time of Distribution will
cease to accrue service credits for benefit, benefit eligibility and all other
purposes under the Rockwell Nonqualified Pension Plans and will have the right
to receive such Conexant Employee's benefit, if any, payable at normal
retirement age under the Rockwell Nonqualified Pension Plans accrued as of the
Time of Distribution in accordance with the terms of the Rockwell Nonqualified
Pension Plans. Rockwell will retain full power and authority with respect to the
amendment and termination of the Rockwell Nonqualified Pension Plans to the
extent permitted by law. From and after the Time of Distribution, none of
Rockwell or the Rockwell Subsidiaries, the Affiliates of any thereof or the
Rockwell Nonqualified Pension Plans will have any Liabilities with respect to
benefits and entitlements of Conexant Participants under the Rockwell
Nonqualified Pension Plans, except with respect to benefits accrued under the
Rockwell Nonqualified Pension Plans prior to the Time of Distribution.
Section 3.04 Conexant VERP. As of the Time of Distribution, the Company
will have established, and will cover Conexant Employees who (i) receive a
written offer to retire early from employment with the Company and (ii) accept
such offer to retire early from employment with the Company under, a voluntary
early retirement program in the form of a nonqualified defined benefit pension
plan (the "Conexant VERP"). The Company and Rockwell acknowledge that the
benefit to be provided to each Conexant Employee covered by the Conexant VERP
will equal the difference between (a) the pension benefit which such Conexant
Employee would be
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entitled to receive under the Rockwell Pension Plan, calculated under the
benefit formula provided for under the Rockwell Pension Plan as if such Conexant
Employee had an additional five years of age and an additional five years of
service on December 15, 1998, minus (b) the pension benefit which such Conexant
Employee is entitled to receive under the Rockwell Pension Plan (as determined
under Section 3.01). From and after the Time of Distribution, none of Rockwell
or the Rockwell Subsidiaries or their Affiliates will have any Liabilities with
respect to the Conexant VERP. Rockwell and the Company will cooperate in making
all appropriate filings required by law, implementing all appropriate
communications with participants, exchanging and sharing appropriate records and
taking such other actions as may be necessary or appropriate to implement the
provisions of this Section 3.04.
Section 3.05 U.K. Pension Plan. (a) Effective as of the Time of
Distribution, the Conexant Employees who participated in the Rockwell U.K.
Pension Plan immediately prior to the Time of Distribution will cease to accrue
service credits for benefit, benefit eligibility, vesting, and all other
purposes under the Rockwell U.K. Pension Plan and will have the right to receive
such Conexant Employee's benefit, if any, payable at normal retirement age under
the Rockwell U.K. Pension Plan accrued as of the Time of Distribution in
accordance with the terms of the Rockwell U.K. Pension Plan; provided, however,
that, effective as of the Time of Distribution, Conexant Employees who
participated in the Rockwell U.K. Pension Plan immediately prior to the Time of
Distribution will have a nonforfeitable right to such benefit, if any, under the
Rockwell U.K. Pension Plan. Notwithstanding anything to the contrary contained
herein, no provision of this Agreement shall be construed to provide any
Conexant Employee additional credit for purposes of determining eligibility for
any early retirement benefit under the Rockwell U.K. Pension Plan. None of the
Company or the Company Subsidiaries, or the Affiliates of any thereof will have
or acquire any interest in or right to any of the assets of the Rockwell U.K.
Pension Plan, and Rockwell will retain full power and authority with respect to
the amendment and termination of the Rockwell U.K. Pension Plan and the
investment and disposition of assets held in the Rockwell U.K. Pension Plan to
the extent permitted by law. From and after the Time of Distribution, none of
Rockwell or the Rockwell Subsidiaries, the Affiliates of any thereof, the
Rockwell U.K. Pension Plan or the trust thereunder will have any Liabilities
with respect to benefits and entitlements of Conexant
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Participants under the Rockwell U.K. Pension Plan, except with respect to
benefits accrued under the Rockwell U.K. Pension Plan prior to the Time of
Distribution.
(b) The Company and Rockwell will cooperate in making all appropriate
filings required under applicable laws, implementing all appropriate
communications with participants, exchanging and sharing appropriate records and
taking such other actions as may be necessary or appropriate to implement the
provisions of this Section 3.05.
Section 3.06 German Stand-Alone Pension Plan. Effective as of the Time
of Distribution, the Company will or will cause one or more Company Subsidiaries
to (i) assume and adopt sponsorship of the Rockwell International GmbH,
Martinsried-Munchen, as amended through the Time of Distribution (the "German
Stand-Alone Pension Plan"), and all Liabilities related thereto, and (ii) fully
perform, pay and discharge all of the Pre-Distribution Group's Liabilities with
respect to the German Stand-Alone Pension Plan. From and after the Time of
Distribution, none of Rockwell or the Rockwell Subsidiaries or their Affiliates
will have any Liabilities with respect to the German Stand-Alone Pension Plan.
Rockwell and the Company will take, or cause to be taken, all such action as may
be necessary or appropriate to establish, effective as of the Time of
Distribution, the Company and the Company Subsidiaries as successors to Rockwell
and the Rockwell Subsidiaries as to all rights, duties and Liabilities under, or
with respect to, the German Stand-Alone Pension Plan. Rockwell and the Company
will cooperate in making all appropriate filings required by law, implementing
all appropriate communications with participants, transferring appropriate
records, replacing any trustees under the German Stand-Alone Pension Plan with
trustees designated by the Company and taking all other actions as may be
necessary or appropriate to implement the provisions of this Section 3.06.
ARTICLE IV
SAVINGS PLANS
Section 4.01 U.S. Savings Plan. (a) As of the Time of Distribution, the
Company will have established, and will cover the Conexant Employees who
participated in the Rockwell Savings Plan immediately prior to the Time of
Distribution under, a defined contribution plan (the "Conexant Savings Plan"),
which will be qualified pursuant
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to Sections 401(a) and 401(k) of the Code, and will have established a related
trust which shall be exempt from taxation under Section 501(a) of the Code. The
Conexant Savings Plan will credit each Conexant Employee for purposes of vesting
and eligibility with all service which had been credited to such Conexant
Employee for such purposes under the Rockwell Savings Plan immediately prior to
the Time of Distribution (excluding any such service which was not counted under
the Rockwell Savings Plan by operation of its "break in service" rules).
(b) Effective as of the Time of Distribution, Conexant Employees who
participated in the Rockwell Savings Plan immediately prior to the Time of
Distribution will be treated as terminated, fully vested participants under the
Rockwell Savings Plan, except that they will not be treated as having terminated
employment for purposes of entitlement to distributions or the repayment of
outstanding loans solely as a result of becoming Conexant Employees. Effective
as of the Time of Distribution, Conexant Employees will cease to be eligible to
contribute to, or receive contributions in respect of, their Rockwell Savings
Plan accounts. None of the Company or the Company Subsidiaries, the Affiliates
of any thereof, the Conexant Savings Plan or the trust thereunder will have or
acquire any interest in or right to any of the assets of the Rockwell Savings
Plan, and Rockwell will retain full power and authority with respect to the
amendment and termination of the Rockwell Savings Plan and the investment and
disposition of assets held in the Rockwell Savings Plan to the extent permitted
by law. From and after the Time of Distribution, none of Rockwell or the
Rockwell Subsidiaries, the Affiliates of any thereof, the Rockwell Savings Plan
or the trust thereunder will have any Liabilities with respect to benefits and
entitlements of Conexant Participants under the Rockwell Savings Plan, except
with respect to benefits accrued under the Rockwell Savings Plan prior to the
Time of Distribution.
(c) The Company and Rockwell will cooperate in making all appropriate
filings required under the Code or ERISA, the regulations thereunder and any
other applicable laws, implementing all appropriate communications with
participants, exchanging and sharing appropriate records and taking all other
actions as may be necessary or appropriate to implement the provisions of this
Section 4.01.
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Section 4.02 Newport Beach Savings Plan.
(a) Effective as of the Time of Distribution, Rockwell will cause each
Conexant Participant who participated in the Rockwell Newport Beach Savings
Sub-Plan immediately prior to the Time of Distribution to have a fully
nonforfeitable right to such person's account balances, if any, under the
Rockwell Newport Beach Savings Sub-Plan. As of the Time of Distribution, the
Company will extend coverage under a new defined contribution plan (the
"Conexant Newport Beach Savings Plan") to the Conexant Participants who have
account balances under the Rockwell Newport Beach Savings Sub-Plan as of the
Time of Distribution. The Conexant Newport Beach Savings Plan will credit each
Conexant Participant for purposes of vesting and eligibility with all service
which had been credited to such Conexant Participant for such purposes under the
Rockwell Newport Beach Savings Sub-Plan immediately prior to the Time of
Distribution (excluding any such service which was not counted under the
Rockwell Newport Beach Savings Sub-Plan by operation of its "break in service"
rules). As soon as practicable following (i) the Time of Distribution, (ii) the
establishment of the Conexant Newport Beach Savings Plan and (iii) the receipt
by the Company of a favorable determination letter issued by the Internal
Revenue Service for the Conexant Newport Beach Savings Plan or an opinion of
counsel of the Company reasonably satisfactory to Rockwell opining that the
Conexant Newport Beach Savings Plan is qualified under Section 401(a) of the
Code, Rockwell shall cause to be transferred from the trust for the Rockwell
Newport Beach Savings Sub-Plan to the trust for the Conexant Newport Beach
Savings Plan an amount in cash or in kind (as determined by Rockwell) equal to
the aggregate account balances of Conexant Participants who have account
balances under the Rockwell Newport Beach Savings Sub-Plan at the Time of
Distribution determined in accordance with the procedures and methods of
valuation set forth in the Rockwell Newport Beach Savings Sub-Plan; provided,
that to the extent any Conexant Participant owes any amount to the Rockwell
Newport Beach Savings Sub-Plan pursuant to the terms of a loan from the Rockwell
Newport Beach Savings Sub-Plan to such Conexant Participant, an in-kind transfer
of such loan shall be made in lieu of a transfer of cash. From and after the
date of such transfer, the Company shall cause the Conexant Newport Beach
Savings Plan to assume the obligations of the Rockwell Newport Beach Savings
Sub-Plan with respect to the benefits so transferred. Rockwell shall cause the
transfers contemplated pursuant to this Section 4.02 to be made in compliance
with the provisions of the
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Rockwell Newport Beach Savings Sub-Plan and applicable law (including, without
limitation, Treasury Regulation 1.411(d)-4).
(b) The Company and Rockwell will cooperate in making all appropriate
filings required under the Code or ERISA, the regulations thereunder and any
other applicable laws, implementing all appropriate communications with
participants, exchanging and sharing appropriate records and taking all other
actions as may be necessary or appropriate to implement the provisions of this
Section 4.02.
Section 4.03 Rockwell El Paso Savings Sub-Plan.
(a) Effective as of the Time of Distribution, Rockwell will cause each
Conexant Participant who participated in the Rockwell El Paso Savings Sub-Plan
immediately prior to the Time of Distribution to have a fully nonforfeitable
right to such person's account balances, if any, under the Rockwell El Paso
Savings Sub-Plan. As of the Time of Distribution, the Company will extend
coverage under the Conexant Savings Plan to the Conexant Participants who are
eligible to participate under the Rockwell El Paso Savings Sub-Plan as of the
Time of Distribution. The Conexant Savings Plan will credit each Conexant
Participant for purposes of vesting and eligibility with all service which had
been credited to such Conexant Participant for such purposes under the Rockwell
El Paso Savings Sub-Plan immediately prior to the Time of Distribution
(excluding any such service which was not counted under the Rockwell El Paso
Savings Sub-Plan by operation of its "break in service" rules). As soon as
practicable following (i) the Time of Distribution, (ii) the establishment of
the Conexant Savings Plan and (iii) the receipt by the Company of a favorable
determination letter issued by the Internal Revenue Service for the Conexant
Savings Plan or an opinion of counsel of the Company reasonably satisfactory to
Rockwell opining that the Conexant Plan is qualified under Section 401(a) of the
Code, Rockwell shall cause to be transferred from the trust for the Rockwell El
Paso Savings Sub-Plan to the trust for the Conexant El Paso Savings Plan an
amount in cash or in kind (as determined by Rockwell) equal to the aggregate
account balances of Conexant Participants who have account balances under the
Rockwell El Paso Savings Sub-Plan at the Time of Distribution determined in
accordance with the procedures and methods of valuation set forth in the
Rockwell El Paso Savings Sub-Plan; provided, that to the extent any Conexant
Participant owes any amount to the Rockwell El Paso Savings
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Sub-Plan pursuant to the terms of a loan from the Rockwell El Paso Savings
Sub-Plan to such Conexant Participant, an in-kind transfer of such loan shall be
made in lieu of a transfer of cash. From and after the date of such transfer,
the Company shall cause the Conexant Savings Plan to assume the obligations of
the Rockwell El Paso Savings Sub-Plan with respect to the benefits so
transferred. Rockwell shall cause the transfers contemplated pursuant to this
Section 4.03 to be made in compliance with the provisions of the Rockwell El
Paso Savings Sub-Plan and applicable law (including, without limitation,
Treasury Regulation 1.411(d)-4).
(b) The Company and Rockwell will cooperate in making all appropriate
filings required under the Code or ERISA, the regulations thereunder and any
other applicable laws, implementing all appropriate communications with
participants, exchanging and sharing appropriate records and taking all other
actions as may be necessary or appropriate to implement the provisions of this
Section 4.03.
Section 4.04 Nonqualified Savings Plans. Rockwell will retain all
Liabilities for and will pay when due all benefits accrued as of the Time of
Distribution by, and attributable to, Conexant Employees under the Rockwell
International Corporation Supplemental Savings Plan for Highly Compensated
Employees and the Rockwell International Corporation Excess Benefit Savings
Plan, in each case as amended through the Time of Distribution (collectively,
the "Rockwell Nonqualified Savings Plans"). From and after the Time of
Distribution, none of Rockwell or the Rockwell Subsidiaries, the Affiliates of
any thereof or the Rockwell Nonqualified Savings Plans will have any Liabilities
with respect to benefits and entitlements of Conexant Employees under the
Rockwell Nonqualified Savings Plans, except with respect to benefits accrued
(including earnings thereon) under the Rockwell Nonqualified Savings Plans prior
to the Time of Distribution. Rockwell will retain full power and authority with
respect to the amendment and termination of the Rockwell Nonqualified Savings
Plans to the extent permitted by law.
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ARTICLE V
STOCK PLANS
Section 5.01 Stock Plans.
(a) Rockwell and the Company will take all action necessary or
appropriate so that each Rockwell Option held by a Conexant Employee that is
outstanding as of the Time of Distribution shall be and become a Conexant Option
pursuant to the equitable adjustment provisions of the applicable Rockwell Stock
Plan under which such Rockwell Option was granted. The per-share exercise price
of such Conexant Option will equal the per-share exercise price of such Rockwell
Option being replaced immediately prior to the Time of Distribution, multiplied
by the Conexant Option Ratio. The number of shares of Conexant Common Stock
subject to the Conexant Option will equal the number of shares subject to such
Rockwell Option being replaced immediately prior to the Time of Distribution,
multiplied by the reciprocal of the Conexant Option Ratio, and, if any resultant
fractional share of Conexant Common Stock exists, rounded down to the nearest
whole share, without any payment for such fractional share. Such Conexant Option
will otherwise have substantially the same terms and conditions as the
corresponding Rockwell Option being replaced, except as provided in Section
5.01(d) and except that references to Rockwell will be changed to refer to the
Company and references to any of the Rockwell Stock Plans will be changed to
refer to the Conexant 1998 Stock Option Plan.
(b) Rockwell and the Company will take all action necessary or
appropriate so that each Rockwell Split Option held by any person (other than a
Conexant Employee) that is outstanding as of the Time of Distribution shall be
adjusted pursuant to the equitable adjustment provisions of the applicable
Rockwell Stock Plan under which such Rockwell Split Option was granted so that
the per-share exercise price of such Rockwell Split Option will equal the
per-share exercise price of such Rockwell Split Option immediately prior to the
Time of Distribution and prior to such adjustment, multiplied by the Rockwell
Option Ratio, subject to the provisions of Section 5.01(c). The number of shares
subject to the adjusted Rockwell Split Option will equal the number of shares
subject to such Rockwell Split Option immediately prior to the Time of
Distribution. Such adjusted Rockwell Split Option will otherwise have the same
terms and conditions as those in effect prior to the adjustment, except as
provided in Section 5.01(e). In
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addition, each person (other than a Conexant Employee) holding a Rockwell Split
Option will receive a Conexant Option pursuant to the equitable adjustment
provisions of the applicable Rockwell Stock Plan under which such Rockwell Split
Option was granted. The number of shares of Conexant Common Stock subject to
such Conexant Option will equal one-half the number of shares subject to such
Rockwell Split Option immediately prior to the Time of Distribution, and, if any
resultant fractional share of Conexant Common Stock exists, rounded down to the
nearest whole share, without any payment for such fractional share. Subject to
the provisions of Section 5.01(c), the Conexant Option will have a per-share
exercise price equal to (i) the Average Price of Conexant Common Stock, minus
(ii) the amount obtained by dividing the Conexant Option Spread of such Conexant
Option by the number of shares of Conexant Common Stock subject to such Conexant
Option. Such Conexant Option will otherwise have substantially the same terms
and conditions as the corresponding Rockwell Split Option being adjusted, except
as provided in Section 5.01(d) and except that references to Rockwell will be
changed to refer to the Company and references to any of the Rockwell Stock
Plans will be changed to refer to the Conexant 1998 Stock Option Plan.
(c) Notwithstanding anything to the contrary contained herein, if the
per-share exercise price of the Conexant Option determined in accordance with
Section 5.01(b) results in a price less than $1.00, the per-share exercise price
of such Conexant Option shall be deemed to be $1.00 and the per-share exercise
price of the corresponding Rockwell Split Option shall be determined in
accordance with this Section 5.01(c). In such case, the per-share exercise price
of the Rockwell Split Option will be adjusted to equal (i) the Ex-Distribution
Average Price of Rockwell Common Stock, minus (ii) the amount obtained by
dividing the Ex-Distribution Rockwell Option Spread of such Rockwell Split
Option by the number of shares of Rockwell Common Stock subject to such Rockwell
Split Option.
(d) Any Conexant Option received by a holder pursuant to the
adjustments to such holder's Rockwell Option provided for in this Agreement that
would otherwise by its terms expire after the Time of Distribution and on or
before March 31, 1999 shall not expire until April 30, 1999.
(e) Any Rockwell Option (as adjusted pursuant to the provisions of this
Agreement) granted after March 1, 1989 that would otherwise by its terms expire
after the Time
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of Distribution and before January 31, 1999 shall not expire until January 31,
1999.
ARTICLE VI
OTHER EMPLOYEE PLANS AND MATTERS
Section 6.01 Welfare Plans. (a) As of the Time of Distribution, the
Company and the Company Subsidiaries will have established or assumed, and will
cover Conexant Participants under, Welfare Plans and other employee welfare
benefit and fringe benefit arrangements (collectively, "Conexant Welfare Plans")
that are comparable in the aggregate to the Welfare Plans and other employee
welfare benefit and fringe benefit arrangements maintained by Rockwell and its
Subsidiaries (including members of the Company Group) immediately prior to the
Time of Distribution ("Rockwell Welfare Plans") for the benefit of Conexant
Participants, with such changes or amendments thereto as the Company may deem
appropriate.
(b) The Conexant Welfare Plans will provide for the immediate
participation of those Conexant Participants who participated in the Rockwell
Welfare Plans immediately prior to the Time of Distribution. The Conexant
Welfare Plans will credit each Conexant Participant for all Conexant Welfare
Plan purposes with all service and any other item which had been credited to or
otherwise accumulated for the benefit of such Conexant Participant under the
Rockwell Welfare Benefit Plans immediately prior to the Time of Distribution,
including service credited toward any waiting periods and amounts credited
toward any medical or health insurance deductible or co-payment. Without
limiting the generality of the foregoing, each Conexant Welfare Plan, to the
extent applicable: (i) will recognize all amounts applied to deductibles,
co-payments, out-of-pocket maximums and lifetime maximum benefits with respect
to Conexant Participants under the corresponding Rockwell Welfare Plan for the
plan year that includes the Time of Distribution and for prior periods (if
applicable); (ii) will recognize all service credited to waiting periods with
respect to Conexant Participants under the corresponding Rockwell Welfare Plan;
(iii) will not impose any limitations on coverage of pre-existing conditions of
Conexant Participants except to the extent such limitations applied to such
Conexant Participants under the corresponding Rockwell Welfare Plan immediately
before such Conexant Welfare Plan became effective; and (iv) will not impose any
other conditions
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(such as proof of good health, evidence of insurability or a requirement of a
physical examination) upon the participation by Conexant Participants who were
participating in the corresponding Rockwell Welfare Plan immediately before such
Conexant Welfare Plan became effective.
(c) The Company and the Company Subsidiaries will credit each Conexant
Employee with the unused vacation days and personal and sickness days accrued in
accordance with the vacation and personnel policies and labor agreements of
Rockwell and its Subsidiaries (including members of the Company Group)
applicable to such employees in effect immediately prior to the Time of
Distribution.
(d) From and after the Time of Distribution, except as specifically set
forth in this Agreement, the Company and the Company Subsidiaries will assume or
retain, as the case may be, and will be solely responsible for and will fully
perform, pay and discharge, all Liabilities in respect of Conexant Participants
(and claims by or relating to Conexant Participants) with respect to employee
welfare and fringe benefits (including, without limitation, medical, dental,
life, travel, accident, short- and long-term disability, hospitalization,
workers' compensation and other insurance benefits), whether under the Rockwell
Welfare Plans, the Conexant Welfare Plans or otherwise, whether incurred, or
arising in connection with incidents occurring, before, at or after the Time of
Distribution and whether any claim is made with respect thereto before, at or
after the Time of Distribution. Without limiting the generality of the
foregoing, from and after the Time of Distribution, the Company and the Company
Subsidiaries (or where appropriate, the Conexant Welfare Plans) will assume,
will be solely responsible for and will fully perform, pay and discharge all
Liabilities in respect of Conexant Participants (and claims by or relating to
Conexant Participants) with respect to retiree health and welfare benefits and
retiree life insurance benefits, whether under the Rockwell Welfare Plans, the
Conexant Welfare Plans or otherwise, whether incurred, or arising in connection
with incidents occurring, before, at or after the Time of Distribution and
whether any claim is made with respect thereto before, at or after the Time of
Distribution.
(e) From and after the Time of Distribution, except as specifically set
forth in this Agreement, Rockwell and the Rockwell Subsidiaries will assume or
retain, as the case may be, and will be solely responsible for and will
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fully perform, pay and discharge, all Liabilities in respect of Rockwell
Participants (and claims by or relating to Rockwell Participants) with respect
to employee welfare and fringe benefits (including, without limitation, medical,
dental, life, travel, accident, short- and long-term disability,
hospitalization, workers' compensation and other insurance benefits), whether
under the Rockwell Welfare Plans or otherwise, whether incurred, or arising in
connection with incidents occurring, before, at or after the Time of
Distribution and whether any claim is made with respect thereto before, at or
after the Time of Distribution. Without limiting the generality of the
foregoing, from and after the Time of Distribution, Rockwell and the Rockwell
Subsidiaries (or where appropriate, the Rockwell Welfare Plans) will assume or
retain, as the case may be, will be solely responsible for and will fully
perform, pay and discharge all Liabilities in respect of Rockwell Participants
(and claims by or relating to Rockwell Participants) with respect to retiree
health and welfare benefits and retiree life insurance benefits, whether under
the Rockwell Welfare Plans or otherwise, whether incurred before, at or after
the Time of Distribution and whether any claim is made with respect thereto
before, at or after the Time of Distribution.
(f) The Company and Rockwell will cooperate in making all appropriate
filings required by law, implementing all appropriate communications with
participants, exchanging and sharing appropriate records and taking such other
actions as may be necessary or appropriate to implement the provisions of this
Section 6.01.
Section 6.02 Long-Term Incentive Plan and Incentive Compensation Plans.
Effective as of the Time of Distribution, the Company hereby assumes and agrees
to fully perform, pay and discharge all Liabilities (including, but not limited
to, liability for earned but unpaid incentive payments) for, due to and/or
attributable to Conexant Participants under the Rockwell International Business
Unit Long-Term Incentive Plan (the "LTIP"), the Incentive Compensation Plan and
all other long-term and annual incentive compensation plans of Rockwell and its
Subsidiaries (including members of the Company Group) in effect at or prior to
the Time of Distribution. Rockwell and the Company will cooperate in taking all
actions necessary or appropriate to adjust the performance goals and other terms
and conditions of awards under the LTIP and such other incentive compensation
plans for performance periods that begin before and end after the Distribution
Date as
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appropriate to reflect the Distribution. From and after the Time of
Distribution, none of Rockwell or the Rockwell Subsidiaries or their Affiliates
will have any Liabilities with respect to benefits of Conexant Participants
under the LTIP, the Incentive Compensation Plan and such other incentive
compensation plans. Rockwell and the Company will cooperate in making all
appropriate filings required by law, implementing all appropriate communications
with participants, exchanging and sharing appropriate records and taking all
other actions as may be necessary or appropriate to implement the provisions of
this Section 6.02.
Section 6.03 Deferred Compensation Plans. Effective as of the Time of
Distribution, the Company hereby assumes and agrees to fully perform, pay and
discharge all Liabilities (including but not limited to the obligation to pay
when due all benefits accrued and not paid as of the Time of Distribution) for,
due to and/or attributable to Conexant Participants under the Rockwell
International Corporation Deferred Compensation Plan (the "Rockwell Deferred
Compensation Plan"), as in effect immediately prior to the Time of Distribution.
From and after the Time of Distribution, none of Rockwell or the Rockwell
Subsidiaries or their Affiliates will have any Liabilities with respect to
benefits of Conexant Participants under the Rockwell Deferred Compensation Plan.
Rockwell and the Company will cooperate in making all appropriate filings
required by law, implementing all appropriate communications with participants,
exchanging and sharing appropriate records and taking all other actions as may
be necessary or appropriate to implement the provisions of this Section 6.03.
Section 6.04 Severance Pay. (a) Rockwell and the Company acknowledge
and agree that the transactions contemplated by the Transaction Agreements will
not constitute a severance of employment of any Conexant Employee or Rockwell
Employee prior to or as a result of the transactions contemplated thereby, and
that individuals who, in connection with the Distribution, become Conexant
Employees or Rockwell Employees pursuant to this Agreement will not be deemed to
have experienced a termination, layoff or severance of employment from Rockwell
and its Subsidiaries (including members of the Company Group), in each case for
purposes of any policy, plan, program or agreement of Rockwell or any of its
Subsidiaries (including members of the Company Group) that provides for the
payment of severance, salary continuation or similar benefits.
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(b) The Company and the Company Subsidiaries will assume or retain (as
applicable) and be solely responsible for, and will fully perform, pay and
discharge, all Liabilities in connection with claims made by or on behalf of
Conexant Participants in respect of severance pay, salary continuation and
similar obligations relating to the termination or alleged termination (whether
voluntary or involuntary) of any such person's employment, whether such
termination or alleged termination occurred before, at or after the Time of
Distribution and whether any claim is made with respect thereto before, at or
after the Time of Distribution (whether or not such claim is based on any
severance policy, agreement, arrangement or program which may exist or arise
under any contract, employment agreement or collective bargaining agreement or
under any Federal, state, local, provincial or foreign law).
(c) Rockwell and the Rockwell Subsidiaries will assume or retain (as
applicable) and be solely responsible for, and will fully perform, pay and
discharge, all Liabilities in connection with claims made by or on behalf of
Rockwell Participants in respect of severance pay, salary continuation and
similar obligations relating to the termination or alleged termination (whether
voluntary or involuntary) of any such person's employment, whether such
termination or alleged termination occurred before, at or after the Time of
Distribution and whether any claim is made with respect thereto before, at or
after the Time of Distribution (whether or not such claim is based on any
severance policy, agreement, arrangement or program which may exist or arise
under any contract, employment agreement or collective bargaining agreement or
under any Federal, state, local, provincial or foreign law).
Section 6.05 Employment, Consulting and Other Employee Related
Agreements. Effective as of the Time of Distribution, the Company will or will
cause one or more Company Subsidiaries to assume or retain (as applicable) all
Liabilities relating to Conexant Participants under their respective employment,
consulting, separation, agreements to arbitrate, and other employee related
agreements with any member of the Pre-Distribution Group, as the same are in
effect immediately prior to the Time of Distribution. Effective as of the Time
of Distribution, Rockwell will or will cause one or more Rockwell Subsidiaries
to assume or retain (as applicable) all Liabilities relating to Rockwell
Participants under their respective employment, consulting, separation,
agreements to arbitrate, and other employee related agreements with any member
of the Pre-Distribution
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Group, as the same are in effect immediately prior to the Time of Distribution.
Section 6.06 Rockwell VEBA and CLIR Fund. As of and after the Time of
Distribution, Rockwell will retain all assets of and related to (i) the Trust
for Employee Welfare Benefit Programs of Rockwell International Corporation and
(ii) the Rockwell Continued Life Insurance Reserve Fund.
Section 6.07 Other Liabilities. (a) From and after the Time of
Distribution, except as specifically set forth in this Agreement, the Company
and the Company Subsidiaries will assume or retain, as the case may be, and be
solely responsible for, and will fully perform, pay and discharge, all
Liabilities in respect of Conexant Participants arising out of or relating to
employment by any member of the Pre-Distribution Group, whether pursuant to
benefit plans or otherwise and whether such Liabilities arose before, at or
after the Time of Distribution or any claim is made with respect thereto before,
at or after the Time of Distribution. From and after the Time of Distribution,
except as specifically set forth in this Agreement, Rockwell and the Rockwell
Subsidiaries will assume or retain, as the case may be, and be solely
responsible for, and will fully perform, pay and discharge, all Liabilities in
respect of Rockwell Participants arising out of or relating to employment by any
member of the Pre-Distribution Group, whether pursuant to benefit plans or
otherwise and whether such Liabilities arose before, at or after the Time of
Distribution or any claim is made with respect thereto before, at or after the
Time of Distribution.
(b) The Company shall be solely responsible for and shall pay when due
any and all direct or indirect Liabilities based upon, arising out of, relating
to or otherwise in connection with any differences between employee benefits
provided to Conexant Participants by any member of the Pre-Distribution Group
prior to the Time of Distribution and employee benefits provided to Conexant
Participants by any member of the Company Group after the Time of Distribution,
including, without limitation, all Liabilities arising out of claims made by any
Conexant Participant based upon, arising out of, relating to or otherwise in
connection with a change in benefits provided to such Conexant Participant after
the Time of Distribution, whether or not such Liabilities are asserted against,
imposed on or incurred by any member of the Company Group or any member of the
Rockwell Group.
28
<PAGE>
ARTICLE VII
MISCELLANEOUS
Section 7.01 Indemnification. All Liabilities retained or assumed by or
allocated to the Company or any Company Subsidiary pursuant to this Agreement
will be deemed to be Semiconductor Liabilities (as defined in the Distribution
Agreement), and all Liabilities retained or assumed by or allocated to Rockwell
or any Rockwell Subsidiary pursuant to this Agreement will be deemed to be
Liabilities of Rockwell which do not constitute such Semiconductor Liabilities,
and, in each case, will be subject to the indemnification provisions set forth
in Article IV of the Distribution Agreement.
Section 7.02 Sharing of Information. Each of Rockwell and the Company
will, and will cause each of their respective Subsidiaries to, provide to the
other all such Information in its possession as the other may reasonably request
to enable the requesting party to administer its employee benefit plans and
programs, and to determine the scope of, and fulfill, its obligations under this
Agreement. Such Information will, to the extent reasonably practicable, be
provided in the format and at the times and places requested, but in no event
will the party providing such Information be obligated to incur any direct
expense not reimbursed by the party making such request, nor to make such
Information available outside its normal business hours and premises. The right
of the parties to receive Information hereunder will, without limiting the
generality of the foregoing, extend to any and all reports, and the data
underlying such reports. Any Information shared or exchanged pursuant to this
Agreement will be subject to the same confidentiality requirements set forth in
the Distribution Agreement.
Section 7.03 Entire Agreement; Construction. This Agreement, the
Distribution Agreement and the other Ancillary Agreements, including any
annexes, schedules and exhibits hereto or thereto, and other agreements and
documents referred to herein and therein, will together constitute the entire
agreement between the parties with respect to the subject matter hereof and
thereof and will supersede all prior negotiations, agreements and understandings
of the parties of any nature, whether oral or written, with respect to such
subject matter. Notwithstanding any other provisions in this Agreement to the
contrary, in the event and to the extent that there is a
29
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conflict between the provisions of this Agreement and the provisions of the
Distribution Agreement, the provisions of this Agreement will control.
Section 7.04 Survival of Agreements. Except as otherwise contemplated
by this Agreement, all covenants and agreements of the parties contained in this
Agreement will remain in full force and effect and survive the Time of
Distribution.
Section 7.05 Governing Law. This Agreement will be governed by and
construed in accordance with the internal laws of the State of New York
applicable to contracts made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.
Section 7.06 Notices. All notices, requests, claims, demands and other
communications required or permitted to be given hereunder will be in writing
and will be delivered by hand or telecopied or sent, postage prepaid, by
registered, certified or express mail or reputable overnight courier service and
will be deemed given when so delivered by hand or telecopied, or three business
days after being so mailed (one business day in the case of express mail or
overnight courier service). All such notices, requests, claims, demands and
other communications will be addressed as set forth in Section 6.05 of the
Distribution Agreement, or pursuant to such other instructions as may be
designated in writing by the party to receive such notice.
Section 7.07 Amendments. This Agreement cannot be amended, modified or
supplemented except by a written agreement executed by Rockwell and the Company.
Section 7.08 Assignment. Neither party to this Agreement will convey,
assign or otherwise transfer any of its rights or obligations under this
Agreement without the prior written consent of the other party in its sole and
absolute discretion, except that any party may (without obtaining any consent)
assign any of its rights hereunder to a successor to all or any part of its
business. Any such conveyance, assignment or transfer requiring the prior
written consent of another party which is made without such consent will be void
ab initio. No assignment of this Agreement will relieve the assigning party of
its obligations hereunder.
30
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Section 7.09 Captions; Currency. The article, section and paragraph
captions herein and the table of contents hereto are for convenience of
reference only, do not constitute part of this Agreement and will not be deemed
to limit or otherwise affect any of the provisions hereof. Unless otherwise
specified, all references herein to numbered articles or sections are to
articles and sections of this Agreement and all references herein to schedules
are to schedules to this Agreement. Unless otherwise specified, all references
contained in this Agreement, in any schedule referred to herein or in any
instrument or document delivered pursuant hereto to dollars will mean United
States Dollars.
Section 7.10 Severability. If any provision of this Agreement or the
application thereof to any Person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to Persons or
circumstances other than those as to which it has been held invalid or
unenforceable, will remain in full force and effect and will in no way be
affected, impaired or invalidated thereby. If the economic or legal substance of
the transactions contemplated hereby is affected in any manner adverse to any
party as a result thereof, the parties will negotiate in good faith in an effort
to agree upon a suitable and equitable substitute provision to effect the
original intent of the parties.
Section 7.11 Parties in Interest. This Agreement is binding upon and is
for the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement is not made for the benefit of any Person not
a party hereto, and no Person other than the parties hereto or their respective
successors and permitted assigns will acquire or have any benefit, right, remedy
or claim under or by reason of this Agreement. No provision of this Agreement
will be construed (a) to limit the right of Rockwell, any Rockwell Subsidiary,
the Company or any Company Subsidiary to amend any plan or terminate any plan,
or (b) to create any right or entitlement whatsoever in any employee, former
employee or beneficiary including, without limitation, a right to continued
employment or to any benefit under a plan or any other benefit or compensation.
Section 7.12 Schedules. All schedules attached hereto are hereby
incorporated in and made a part of this Agreement as if set forth in full
herein. Capitalized terms used in the schedules hereto but not otherwise defined
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therein will have the respective meanings assigned to such terms in this
Agreement.
Section 7.13 Termination. This Agreement may be terminated and the
Distribution abandoned at any time prior to the Time of Distribution by and in
the sole discretion of the Rockwell Board without the approval of the Company or
of Rockwell's shareowners. In the event of such termination, no party will have
any liability of any kind to any other party on account of such termination.
Section 7.14 Change of Name. On or promptly after the Distribution
Date, the Company will take such actions as may be required to change the names
of all employee benefit plans sponsored or maintained by it or its Affiliates to
eliminate therefrom any reference to "Rockwell", "Rockwell International",
"Collins" or any derivative thereof.
Section 7.15 Waivers; Remedies. No failure or delay on the part of
either Rockwell or the Company in exercising any right, power or privilege
hereunder will operate as a waiver thereof, nor will any waiver on the part of
either Rockwell or the Company of any right, power or privilege hereunder
operate as a waiver of any other right, power or privilege hereunder, nor will
any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder. The rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies which the parties may
otherwise have at law or in equity.
Section 7.16 Counterparts. This Agreement may be executed in separate
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts will together constitute the same agreement.
32
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Section 7.17 Performance. Each party will cause to be performed and
hereby guarantees the performance of all actions, agreements and obligations set
forth herein to be performed by any Subsidiary or Affiliate of such party.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of the parties as of the date first hereinabove
written.
ROCKWELL INTERNATIONAL CORPORATION
By: /s/ William J. Calise, Jr.
-------------------------------------
William J. Calise, Jr.
Senior Vice President, General
Counsel and Secretary
CONEXANT SYSTEMS, INC.
By: /s/ Dwight W. Decker
-------------------------------------
Dwight W. Decker
Chairman and Chief Executive
Officer
33
Exhibit 2.3
===============================================================================
TAX ALLOCATION AGREEMENT
by and between
ROCKWELL INTERNATIONAL CORPORATION
and
CONEXANT SYSTEMS, INC.
===============================================================================
December 31, 1998
===============================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS................................................. 2
1.01 General............................................... 2
1.02 Schedules, etc........................................ 8
ARTICLE II FILING OF TAX RETURNS; PAYMENT OF TAXES; REFUNDS............ 9
2.01 Preparation of Tax Returns......................... 9
2.02 Payment of Taxes................................... 12
2.03 Tax Refunds and Carrybacks......................... 15
2.04 Allocation of Straddle Period Taxes................ 17
2.05 Schedule of Foreign Income Tax Returns
and Payments................................... 17
ARTICLE III TAX INDEMNIFICATION; TAX CONTESTS........................ 18
3.01 Indemnification.................................... 18
3.02 Conexant Tax Acts.................................. 20
3.03 Notice of Indemnity................................ 21
3.04 Payments........................................... 21
3.05 Tax Contests....................................... 24
ARTICLE IV COMPENSATION PAYMENTS; OPTIONS;
COLORADO SPRINGS FACILITY REAL
ESTATE TAXES; CELERITAS LITIGATION;
CALIFORNIA MANUFACTURER'S
INVESTMENT CREDIT; INTEREST CHARGE
FOR LATE PAYMENTS; CURRENCY
CALCULATIONS; EFFECTIVE TIME OF
TRANSACTIONS.......................................... 25
4.01 Compensation Payments.............................. 25
4.02 Stock Options...................................... 26
4.03 Colorado Springs Facility Real Estate
Taxes............................................ 28
4.04 Celeritas Litigation............................... 28
4.05 Tax Benefit Attributable to California
Manufacturers Investment Credit
Carryforward................................ 30
4.06 Change in Law...................................... 30
4.07 Interest Charge for Late Payments.................. 30
4.08 Currency Calculations.............................. 31
4.09 Effective Time of Transaction...................... 31
i
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Page
ARTICLE V COOPERATION AND EXCHANGE OF
INFORMATION........................................... 31
5.01 Inconsistent Actions............................... 31
5.02 Ruling Request..................................... 31
5.03 IRS Gain Recognition Agreement;
Notification of Certain
Dispositions..................................... 31
5.04 Cooperation and Exchange of
Information...................................... 32
5.05 Tax Records........................................ 33
ARTICLE VI MISCELLANEOUS .......................................... 34
6.01 Entire Agreement; Construction..................... 34
6.02 Effectiveness...................................... 34
6.03 Survival of Agreements............................. 34
6.04 Governing Law...................................... 34
6.05 Notices............................................ 34
6.06 Consent to Jurisdiction............................ 36
6.07 Amendments ........................................ 36
6.08 Successors and Assigns............................. 37
6.09 Captions; Currency................................. 37
6.10 Severability....................................... 37
6.11 No Third Party Beneficiaries....................... 37
6.12 Schedules ........................................ 38
6.13 Termination........................................ 38
6.14 Waivers; Remedies.................................. 38
6.15 Counterparts....................................... 38
6.16 Performance........................................ 39
SCHEDULE 1.01 TRANSACTIONS BEING CARRIED OUT FOR
BUSINESS REASONS UNRELATED TO THE
DISTRIBUTION
SCHEDULE 2.01(c) FOREIGN INCOME TAX RETURNS TO BE FILED BY
CONEXANT AND ROCKWELL
SCHEDULE 2.01(g) TAX RETURNS TO BE FILED BY NON-RESPONSIBLE
PARTY
SCHEDULE 3.01 PRE-DISTRIBUTION TAX-FREE TRANSACTIONS
SCHEDULE 3.02(a) CONEXANT TAX ACT
SCHEDULE 3.02(b) CONEXANT TAX REPRESENTATION LETTER
ii
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SCHEDULE 4.03 COLORADO SPRINGS FACILITY REAL ESTATE
TAXES
SCHEDULE 4.04 CELERITAS LITIGATION
SCHEDULE 4.05 TAX BENEFIT ATTRIBUTABLE TO CALIFORNIA
MANUFACTURER'S INVESTMENT CREDIT
CARRYFORWARD
SCHEDULE 5.03 PARTIES TO IRS GAIN RECOGNITION AGREEMENTS
iii
<PAGE>
TAX ALLOCATION AGREEMENT
THIS TAX ALLOCATION AGREEMENT (this "Agreement") is made and entered
into as of December 31, 1998, by and between ROCKWELL INTERNATIONAL CORPORATION,
a Delaware corporation ("Rockwell"), and CONEXANT SYSTEMS, INC., a Delaware
corporation and, as of the date hereof, a wholly-owned subsidiary of Rockwell
("Conexant").
W I T N E S S E T H :
WHEREAS, the Rockwell Board (as hereinafter defined) has determined
that it is appropriate and desirable to distribute all outstanding shares of
Conexant Common Stock (as hereinafter defined) on a pro rata basis to the
holders of Rockwell Common Stock (as hereinafter defined);
WHEREAS, the Rockwell Board has determined that it is appropriate and
desirable to effectuate the Distribution (as hereinafter defined) in a
transaction that will qualify under Section 368(a)(1)(D) of the Code (as
hereinafter defined) as a tax-free reorganization; and
WHEREAS, Rockwell and Conexant wish to provide for and agree upon the
allocation between the Rockwell Tax Group (as hereinafter defined) and the
Conexant Tax Group (as hereinafter defined) of all responsibilities, liabilities
and benefits relating to or affecting Taxes (as hereinafter defined) paid or
payable by either of them for all taxable periods, whether beginning before, on
or after the Distribution Date (as hereinafter defined).
NOW, THEREFORE, in consideration of the premises and of the respective
agreements contained in this Agreement, the parties hereto hereby agree as
follows:
<PAGE>
ARTICLE I
DEFINITIONS
1.01 General. As used in this Agreement, the following terms shall have
the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"Actually Realized" shall mean, for purposes of determining the timing
of any Taxes (or related Tax cost or benefit) relating to any payment,
transaction, occurrence or event, the time at which the amount of Taxes
(including estimated Taxes) payable by any person is increased above or reduced
below, as the case may be, the amount of Taxes that such person would be
required to pay but for the payment, transaction, occurrence or event.
"Automotive Distribution" shall mean the distribution of the Meritor
Automotive, Inc. common stock on a pro rata basis to holders of Rockwell Common
Stock on September 30, 1997 pursuant to the Distribution Agreement by and
between Rockwell and Meritor Automotive, Inc. dated September 30, 1997.
"Automotive Ruling Request" shall mean the private letter ruling
request dated March 17, 1997 filed by Rockwell with the IRS (as modified or
supplemented by any materials submitted to the IRS), seeking rulings that, inter
alia, the Automotive Distribution qualified for U.S. federal Income Tax purposes
as a tax-free reorganization under Section 368(a)(1)(D) of the Code.
"Automotive Transaction Agreements" shall have the meaning ascribed
thereto in the Distribution Agreement by and between Rockwell and Meritor
Automotive, Inc. dated September 30, 1997.
"Boeing" shall mean The Boeing Company, a Delaware corporation.
"Boeing Tax Group" shall mean Boeing and its affiliates.
"Celeritas Litigation" shall have the meaning ascribed thereto in the
Distribution Agreement.
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"Code" shall mean the Internal Revenue Code of 1986, as amended, or any
successor legislation.
"Colorado Springs Facility" shall mean the facilities located in
Colorado Springs, Colorado as more fully defined in the Distribution Agreement.
"Compensation Payments" shall mean all non-qualified employee benefit
plan and welfare benefit plan payments made by any member of the Conexant Tax
Group under the Employee Matters Agreement dated as of December 31, 1998 by and
between Rockwell and Conexant.
"Conexant" shall have the meaning ascribed thereto in the preamble.
"Conexant Common Stock" shall mean, collectively, the Common Stock, par
value $1 per share, of Conexant and the related Rights.
"Conexant Common Stock Options" shall mean options to acquire Conexant
Common Stock.
"Conexant Group Employees and Former Employees" shall mean individuals
(i) who are employees of any member of the Conexant Tax Group on the date of the
event giving rise to a deduction in respect of any Compensation Payments made to
such individuals or Stock Options held by such individuals, (ii) who were
employees of any member of the Conexant Tax Group and were not thereafter
employees of any member of the Rockwell Tax Group, or (iii) who were employees
of Old Rockwell and its affiliates who were engaged in the Conexant business and
who retired on or before December 6, 1996 and were not thereafter employees of
any member of the Rockwell Tax Group.
"Conexant Tax Act" shall have the meaning set forth in Section 3.02(a).
"Conexant Tax Group" shall mean (i) Conexant, (ii) any corporation or
other legal entity which Conexant directly or indirectly owns immediately
following the Distribution, (iii) California Solution Networks Corporation, (iv)
Brooktree Technologies Ltd., (v) Brooktree International Ltd., and (vi)
Brooktree Ltd.
3
<PAGE>
"Conexant Tax Representation Letter" shall mean the letter delivered by
Conexant to Rockwell on the Distribution Date, substantially in the form set
forth in Schedule 3.02(b) attached hereto.
"Distribution" shall mean the distribution of the Conexant Common Stock
on a pro rata basis to holders of Rockwell Common Stock on the Distribution Date
pursuant to the Distribution Agreement.
"Distribution Agreement" shall mean the Distribution Agreement dated as
of December 31, 1998 by and between Rockwell and Conexant.
"Distribution Date" shall mean the date on which the Distribution
occurs (or, if different, the date on which the Distribution is deemed to occur
for U.S. federal Income Tax purposes). For purposes of this Agreement, the
Distribution shall be deemed effective as of the end of the day on the
Distribution Date.
"Distribution Transaction" shall mean any transaction undertaken in
connection with the Distribution and described in the Ruling Request except for
those transactions specified on Schedule 1.01 that are being carried out for
business reasons unrelated to the Distribution.
"Foreign Income Tax" shall mean any Income Tax other than a U.S.
federal, state or local Income Tax.
"Foreign Income Tax Returns" shall mean any Income Tax Return which is
not a U.S. federal, state or local Income Tax Return.
"Income Tax" shall mean (a) any Tax based upon, measured by, or
calculated with respect to (i) net income or profits (including, but not limited
to, any capital gains, minimum Tax and any Tax on items of Tax preference, but
not including sales, use, real or personal property, gross or net receipts,
transfer or similar Taxes) or (ii) multiple bases (including, but not limited
to, corporate franchise, doing business or occupation Taxes) if one or more of
the bases upon which such Tax may be based, measured by, or calculated with
respect to, is described in clause (i) above, or (b) any U.S. state or local
franchise Tax; including in the case of each of (a) and (b) any related interest
and any
4
<PAGE>
penalties, additions to such Tax or additional amounts imposed with respect
thereto by any Tax Authority.
"Income Tax Benefit" shall mean for any taxable period the excess of
(i) the hypothetical Income Tax liability of the taxpayer for the taxable period
calculated as if the Timing Difference or Reverse Timing Difference, as the case
may be, had not occurred but with all other facts unchanged, over (ii) the
actual Income Tax liability of the taxpayer for the taxable period, calculated
taking into account the Timing Difference or Reverse Timing Difference, as the
case may be (treating an Income Tax refund or credit as a negative Income Tax
liability for purposes of such calculation).
"Income Tax Detriment" shall mean for any taxable period the excess of
(i) the actual Income Tax liability of the taxpayer for the taxable period,
calculated taking into account the Timing Difference or Reverse Timing
Difference, as the case may be, over (ii) the hypothetical Income Tax liability
of the taxpayer for the taxable period, calculated as if the Timing Difference
or Reverse Timing Difference, as the case may be, had not occurred but with all
other facts unchanged (treating an Income Tax refund or credit as a negative
Income Tax liability for purposes of such calculation).
"Income Tax Return" shall mean any Tax Return that relates to Income
Taxes.
"Indemnitee" shall have the meaning set forth in Section 3.03.
"Indemnitor" shall have the meaning set forth in Section 3.03.
"Indemnity Issue" shall have the meaning set forth in Section 3.03.
"IRS" shall mean the Internal Revenue Service.
"IRS Gain Recognition Agreement" shall mean any gain recognition
agreement entered into between the IRS and any member of the Rockwell Tax Group
or the Conexant Tax Group pursuant to Section 367 of the Code and the
regulations thereunder or the Ruling, and any revised or successor agreement
thereto.
5
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"Old Rockwell" shall mean the corporation, formerly named Rockwell
International Corporation, which owned all of the Rockwell Common Stock prior to
the distribution of the Rockwell Common Stock to the shareholders of such
corporation on December 6, 1996.
"Pre-Distribution Taxable Period" shall mean a taxable period ending on
or before the Distribution Date.
"Post-Distribution Tax Act" shall have the meaning set forth in Section
3.01(a).
"Post-Distribution Taxable Period" shall mean a taxable period
beginning after the Distribution Date.
"Post-Tax Indemnification Period" shall mean any Post-Distribution
Taxable Period and that portion of any Straddle Period that begins on the day
after the Distribution Date.
"Reverse Timing Difference" shall mean an increase in income, gain or
recapture, or a decrease in deduction, loss or credit, as calculated for Income
Tax purposes, of the taxpayer for the Tax Indemnification Period coupled with an
increase in deduction, loss or credit, or a decrease in income, gain or
recapture, of the taxpayer for any Post-Tax Indemnification Period.
"Rights" shall have the meaning ascribed thereto in the Distribution
Agreement.
"Rockwell" shall have the meaning ascribed thereto in the preamble.
"Rockwell Board" shall mean the Board of Directors of Rockwell or a
duly authorized committee thereof.
"Rockwell Common Stock" shall mean the Common Stock, par value $1.00
per share, of Rockwell.
"Rockwell Common Stock Options" shall mean options to acquire Rockwell
Common Stock.
"Rockwell Tax Group" shall mean (i) Rockwell, (ii) any corporation or
other legal entity which Rockwell directly or indirectly owns immediately
following the Distribution, (iii) any other corporation or other legal
6
<PAGE>
entity which Rockwell or Old Rockwell directly or indirectly owned at any time
prior to the Distribution (but only with respect to the period such corporation
or other entity was so owned by Rockwell or Old Rockwell) other than a member of
the Conexant Tax Group, and (iv) solely for purposes of this Agreement and not
for purposes of any other Transaction Agreement, for any taxable period up to or
including December 6, 1996, Old Rockwell and any other corporation or legal
entity owned by Old Rockwell other than a member of the Conexant Tax Group.
"Ruling" shall mean the private letter ruling issued by the IRS in
reply to the Ruling Request including any amendment or supplement thereto.
"Ruling Request" shall mean the private letter ruling request dated
June 29, 1998 filed by Rockwell with the IRS (as modified or supplemented by any
materials submitted to the IRS), seeking rulings that, inter alia, the
Distribution will qualify for U.S. federal Income Tax purposes as a tax-free
reorganization under Section 368(a)(1)(D) of the Code.
"Stock Options" shall mean Conexant Common Stock Options or Rockwell
Common Stock Options.
"Straddle Period" shall mean a taxable period that includes but does
not end on the Distribution Date.
"Tax" and "Taxes" shall mean all forms of taxation, whenever created or
imposed, and whether of the United States or elsewhere, and whether imposed by a
federal, state, municipal, governmental, territorial, local, foreign or other
body, and without limiting the generality of the foregoing, shall include net
income, gross income, gross receipts, sales, use, value added, ad valorem,
transfer, recording, franchise, profits, license, lease, service, service use,
payroll, wage, withholding, employment, unemployment insurance, workers
compensation, social security, excise, severance, stamp, business license,
business organization, occupation, premium, property, environmental, windfall
profits, customs, duties, alternative minimum, estimated or other taxes, fees,
premiums, assessments or charges of any kind whatever imposed or collected by
any governmental entity or political subdivision thereof, together with any
related interest and any penalties, additions to such tax
7
<PAGE>
or additional amounts imposed with respect thereto by any Tax Authority.
"Tax Authority" shall mean, with respect to any Tax, any governmental
entity, quasi-governmental body or political subdivision thereof that imposes
such Tax and the agency (if any) charged with the determination or collection of
such Tax for such entity, body or subdivision.
"Tax Group" shall mean the Rockwell Tax Group or the Conexant Tax
Group, as the case may be.
"Tax Indemnification Period" shall mean any Pre-Distribution Taxable
Period and that portion of any Straddle Period that ends on the Distribution
Date.
"Tax Return" shall mean any return, filing, questionnaire, information
return, election or other document required or permitted to be filed, including
requests for extensions of time, filings made with respect to estimated tax
payments, claims for refund and amended returns that may be filed, for any
period with any Tax Authority (whether domestic or foreign) in connection with
any Tax (whether or not a payment is required to be made with respect to such
filing).
"Timing Difference" means an increase in income, gain or recapture, or
a decrease in deduction, loss or credit, as calculated for Income Tax purposes,
of the taxpayer for any Post-Tax Indemnification Period coupled with an increase
in deduction, loss or credit, or a decrease in income, gain or recapture, of the
taxpayer for the Tax Indemnification Period.
"Transaction Agreements" shall have the meaning ascribed thereto in the
Distribution Agreement.
Any capitalized term not otherwise defined in this Agreement shall have
the meaning ascribed to it in the Distribution Agreement.
1.02 Schedules, etc. References to a "Schedule" are, unless otherwise
specified, to the Schedule attached to this Agreement; references to "Section"
or "Article" are, unless otherwise specified, to one of the Sections or Articles
of this Agreement; references to "sub-section" are, unless the context
8
<PAGE>
otherwise requires, references to the section in which the reference appears;
and references to this Agreement include the Schedules.
ARTICLE II
FILING OF TAX RETURNS; PAYMENT OF TAXES; REFUNDS
2.01 Preparation of Tax Returns.
(a) United States Federal Income Tax Returns. Rockwell shall prepare
and file or cause to be prepared and filed all U.S. federal Income Tax Returns
(including amendments thereto) which include a member of the Rockwell Tax Group
or a member of the Conexant Tax Group which are required to be filed for any
Pre-Distribution Taxable Period. Conexant hereby irrevocably designates, and
agrees to cause each of its affiliates to so designate, Rockwell as its agent to
take any and all actions necessary or incidental to the preparation and filing
of such U.S. federal Income Tax Returns.
(b) United States State and Local Income Tax Returns. (i) Rockwell
shall prepare and file or cause to be prepared and filed all U.S. state and
local Income Tax Returns (including amendments thereto) (A) which are required
to be filed for any Pre-Distribution Taxable Period which include a member of
the Rockwell Tax Group or a member of the Conexant Tax Group and (B) which are
required to be filed for any Straddle Period which (I) relate to a member or
members of the Rockwell Tax Group or their respective businesses, assets or
activities, (II) relate to members of each of the Rockwell Tax Group (other than
Rockwell Science Center, LLC, Rockwell Electronic Commerce Corporation, Rockwell
Semiconductor Systems Colorado Springs, Inc. and Rockwell Collins Filter
Products Corporation) and the Conexant Tax Group or their respective businesses,
assets or activities, or (III) relate to a member of the Conexant Tax Group for
a period in which such member conducts or has conducted both a Conexant business
and a non-Conexant business (other than a business being conducted by Rockwell
Science Center, LLC, Rockwell Electronic Commerce Corporation, Rockwell
Semiconductor Systems Colorado Springs, Inc. and Rockwell Collins Filter
Products Corporation). Conexant hereby irrevocably designates, and agrees to
cause each of its affiliates to so
9
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designate, Rockwell as its agent to take any and all actions necessary or
incidental to the preparation and filing of such U.S. state and local Income Tax
Returns.
(ii) All U.S. state and local Income Tax Returns (including amendments
thereto) which relate to a member of the Conexant Tax Group or their respective
businesses, assets or activities for all Straddle Periods which are not the
responsibility of the Rockwell Tax Group shall be the responsibility of the
Conexant Tax Group.
(c) Foreign Income Tax Returns. (i) Conexant shall prepare and file or
cause to be prepared and filed all Foreign Income Tax Returns which are required
to be filed for any Pre-Distribution Taxable Period or any Straddle Period which
relate to the entities set forth on Schedule 2.01(c) attached hereto. Rockwell
hereby irrevocably designates, and agrees to cause each of its affiliates to so
designate, Conexant as its agent to take any and all actions necessary or
incidental to the preparation and filing of such Foreign Income Tax Returns.
(ii) Rockwell shall prepare and file or cause to be prepared and filed
all Foreign Income Tax Returns (including amendments thereto) which include a
member of the Conexant Tax Group which are required to be filed for any
Pre-Distribution Taxable Period or any Straddle Period which relate to the
entities set forth on Schedule 2.01(c) attached hereto. Conexant hereby
irrevocably designates, and agrees to cause each of its affiliates to so
designate, Rockwell as its agent to take any and all actions necessary or
incidental to the preparation and filing of such Foreign Income Tax Returns.
(d) Non-Income Tax Returns. (i) All Tax Returns (including amendments
thereto) which are not Income Tax Returns for all Pre-Distribution Taxable
Periods and all Straddle Periods shall be the responsibility of the Rockwell Tax
Group if such Tax Returns (A) relate to a member or members of the Rockwell Tax
Group or their respective businesses, assets or activities, (B) relate to
members of each of the Rockwell Tax Group and the Conexant Tax Group or their
respective businesses, assets or activities, or (C) relate to a member of the
Conexant Tax Group for a period in which such member conducts or has conducted
both a Conexant
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business and a non-Conexant business. Conexant hereby irrevocably designates,
and agrees to cause each of its affiliates to so designate, Rockwell as its
agent to take any and all actions necessary or incidental to the preparation and
filing of such Tax Returns.
(ii) All Tax Returns (including amendments thereto) which are not
Income Tax Returns which relate to a member of the Conexant Tax Group or their
respective businesses, assets or activities for all Pre-Distribution Taxable
Periods and Straddle Periods which are not the responsibility of the Rockwell
Tax Group shall be the responsibility of the Conexant Tax Group.
(e) Post-Distribution Date Tax Returns. All Tax Returns (including
amendments thereto) for all Post-Distribution Taxable Periods shall be the
responsibility of the Rockwell Tax Group if such Tax Returns relate to a member
or members of the Rockwell Tax Group or their respective businesses, assets or
activities, and shall be the responsibility of the Conexant Tax Group if such
Tax Returns relate to a member or members of the Conexant Tax Group or their
respective businesses, assets or activities.
(f) Consistent with Past Practice; Review by Non-Responsible Party.
Unless Rockwell and Conexant otherwise agree in writing, all Tax Returns
(including amendments thereto) described in this Section 2.01 filed after the
date of this Agreement for Pre-Distribution Taxable Periods or Straddle Periods,
in the absence of a controlling change in law or circumstances, shall be
prepared on a basis consistent with the elections, accounting methods,
conventions and principles of taxation used for the most recent taxable periods
for which Tax Returns involving similar matters have been filed. Upon the
request of the non-responsible party, the party responsible under this Section
2.01 for preparation of a particular Tax Return for Pre-Distribution Taxable
Periods or Straddle Periods shall make available a draft of such Tax Return (or
relevant portions thereof) for review and comment by such non-responsible party.
Subject to the provisions of this Agreement, all decisions relating to the
preparation of Tax Returns shall be made in the sole discretion of the party
responsible under this Agreement for such preparation.
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(g) Responsibility for Filing. Although, pursuant to this Agreement,
Rockwell or Conexant may be responsible for filing a particular Tax Return,
Rockwell and Conexant have agreed that the actual preparation and filing of
certain Tax Returns will be done by the non-responsible party. Schedule 2.01(g)
attached hereto sets forth a schedule specifying such Tax Returns. Rockwell and
Conexant may agree from time to time to additions to or deletions from Schedule
2.01(g).
2.02 Payment of Taxes.
(a) United States Federal Income Taxes. Except as otherwise provided in
this Agreement, Rockwell shall pay or cause to be paid, on a timely basis, all
Taxes due with respect to the consolidated U.S. federal Income Tax liability for
all Pre-Distribution Taxable Periods of all members of the Rockwell Tax Group or
the Conexant Tax Group.
(b) United States State and Local Income Taxes. Except as otherwise
provided in this Agreement:
(i) Rockwell shall pay or cause to be paid, on a timely basis, all
Taxes due with respect to the U.S. state and local Income Tax liability (A) for
all Pre-Distribution Taxable Periods of all members of the Rockwell Tax Group or
the Conexant Tax Group and (B) for all Straddle Periods which relate to (I) a
member or members of the Rockwell Tax Group or their respective businesses,
assets or activities, (II) members of each of the Rockwell Tax Group (other than
Rockwell Science Center, LLC, Rockwell Electronic Commerce Corporation, Rockwell
Semiconductor Systems Colorado Springs, Inc., and Rockwell Collins Filter
Products Corporation) and the Conexant Tax Group or their respective businesses,
assets or activities, or (III) a member of the Conexant Tax Group for a period
in which such member conducts or has conducted both a Conexant business and a
non-Conexant business (other than a business being conducted by Rockwell Science
Center, LLC, Rockwell Electronic Commerce Corporation, Rockwell Semiconductor
Systems Colorado Springs, Inc., and Rockwell Collins Filter Products
Corporation), provided, however, that Conexant, on behalf of the Conexant Tax
Group, hereby assumes and agrees to pay directly to or at the direction of
Rockwell, at least two days prior to the date payment (including estimated
payment) thereof is due, the portion
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of such U.S. state and local Income Taxes for that portion of any Straddle
Period which begins on the day after the Distribution Date which relates to a
member of the Conexant Tax Group or its business, assets or activities.
(ii) Conexant shall pay or cause to be paid, on a timely basis, all
U.S. state and local Income Taxes for all Straddle Periods which relate to a
member of the Conexant Tax Group, Rockwell Science Center, LLC, Rockwell
Electronic Commerce Corporation, Rockwell Semiconductor Systems Colorado
Springs, Inc., or Rockwell Collins Filter Products Corporation , their
businesses, assets or activities which are not the responsibility of the
Rockwell Tax Group other than any U.S. state and local Income Taxes imposed in
connection with the transactions contemplated by the Transaction Agreements or
any other agreement entered into for the purpose of implementing the
Distribution, provided, however, that Rockwell, on behalf of the Rockwell Tax
Group, hereby assumes and agrees to pay directly to or at the direction of
Conexant, at least two days prior to the date payment (including estimated
payment) thereof is due, the portion of such U.S. state and local Income Taxes
actually due which relates to Rockwell Science Center, LLC, Rockwell Electronic
Commerce Corporation, Rockwell Semiconductor Systems Colorado Springs, Inc., and
Rockwell Collins Filter Products Corporation or their business, assets or
activities.
(c) Foreign Income Taxes. Except as otherwise provided in this
Agreement:
(i) Conexant shall pay or cause to be paid, on a timely basis, all
Foreign Income Taxes due with respect to the Foreign Income Tax liability for
all Pre-Distribution Taxable Periods and all Straddle Periods which relate to
the entities set forth on Schedule 2.01(c) attached hereto, provided, however,
Rockwell, on behalf of the Rockwell Tax Group, hereby assumes and agrees to pay
directly to or at the direction of Conexant, at least two days prior to the date
payment (including estimated payment) thereof is due such Foreign Income Tax
liability resulting from any Distribution Transaction; and
(ii) Except as provided in Section 2.02(c)(i) above, Rockwell shall pay
or cause to be paid, on a
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timely basis, all Foreign Income Taxes due with respect to the Foreign Income
Tax liability of all members of the Conexant Tax Group or Rockwell Tax Group for
all Pre-Distribution Taxable Periods and Straddle Periods, provided, however,
that Conexant, on behalf of the Conexant Tax Group, hereby assumes and agrees to
pay directly to or at the direction of Rockwell, at least two days prior to the
date payment (including estimated payment) thereof is due (A) the portion of
such Foreign Income Taxes for that portion of any Straddle Period which begins
on the day after the Distribution Date which relates to a member of the Conexant
Tax Group or its business, assets or activities and (B) any such Foreign Income
Taxes which may be due as a result of any transaction specified on Schedule
1.01.
(d) Non-Income Taxes. Except as otherwise provided in this Agreement:
(i) Rockwell shall pay or cause to be paid, on a timely basis, all
Taxes due with respect to the non-Income Tax liability for all Pre-Distribution
Taxable Periods and Straddle Periods which relate to (A) a member or members of
the Rockwell Tax Group or their respective businesses, assets or activities, (B)
members of each of the Rockwell Tax Group and the Conexant Tax Group or their
respective businesses, assets or activities, or (C) a member of the Conexant Tax
Group for a period in which such member conducts or has conducted both a
Conexant business and a non-Conexant business, provided, however, that Conexant,
on behalf of the Conexant Tax Group, hereby assumes and agrees to pay directly
to or at the direction of Rockwell, at least two days prior to the date payment
(including estimated payment) thereof is due the portion of such non-Income
Taxes which relates to a member of the Conexant Tax Group (other than such
non-Income Taxes which relate to the Science Center, the Electronic Commerce
Division or the filter products business) or the Conexant business, assets or
activities for such Pre-Distribution Taxable Periods and Straddle Periods other
than any such non-Income Taxes resulting from any Distribution Transaction; and
(ii) Conexant shall pay or cause to be paid, on a timely basis, all
non-Income Taxes for all Pre-Distribution Taxable Periods and Straddle Periods
which relate to the Conexant Tax Group business, assets or activities which are
not the responsibility of the
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Rockwell Tax Group other than any non-Income Taxes imposed in connection with
the transactions contemplated by the Transaction Agreements or any other
agreement entered into for the purpose of implementing the Distribution.
(e) Post-Distribution Date Taxes. Except as otherwise provided in this
Agreement, all Taxes for all Post-Distribution Taxable Periods shall be paid or
caused to be paid by the party responsible under this Agreement for filing the
Tax Return pursuant to which such Taxes are due or, if no such Tax Returns are
due, by the party liable for such Taxes.
(f) Credit for Prior Tax Payments. To the extent any member of a Tax
Group has made a payment of Taxes (including estimated Taxes) on or before the
Distribution Date, the party liable for paying such Taxes under this Agreement
shall be entitled to treat the payment as having been paid or caused to have
been paid by such party, and such party shall not be required to reimburse the
party which actually paid such Taxes.
(g) Responsibility for Payment; Notice of Payment Due. Although
Rockwell or Conexant may be responsible for paying a particular Tax liability,
Rockwell and Conexant may agree that the actual payment to a Taxing Authority of
certain Tax liabilities will be made by the non-responsible party. Rockwell and
Conexant may agree to prepare a schedule setting forth such Tax liabilities and
may agree from time to time to additions to or deletions from such schedule. In
each case where Rockwell or Conexant, as the case may be, is required to make
payment of Taxes to the other party, Rockwell or Conexant, as the case may be
shall notify the other party as to the amount of Taxes due from the other party
at least five days prior to the date payment (including estimated payment) is
due.
2.03 Tax Refunds and Carrybacks.
(a) Retention and Payment of Tax Refunds. Except as otherwise provided
in this Agreement, Rockwell shall be entitled to retain, and to receive within
ten days after Actually Realized by the Conexant Tax Group, the portion of all
refunds or credits of Taxes for which the Rockwell Tax Group is liable pursuant
to Section 2.02 or Section 3.01(a) or is treated as having paid or caused
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to have been paid pursuant to Section 2.02(f), and Conexant shall be entitled to
retain, and to receive within ten days after Actually Realized by the Rockwell
Tax Group, the portion of all refunds or credits of Taxes for which the Conexant
Tax Group is liable pursuant to Section 2.02 or Section 3.01(b) (including all
non-Income Taxes for which Conexant would have been liable pursuant to Section
2.02(d) had such non-Income Taxes been due and not paid) or is treated as having
paid or caused to have been paid pursuant to Section 2.02(f). The amount of any
refund or credit of Taxes to which Rockwell or Conexant is entitled to retain or
receive pursuant to the foregoing sentence shall be reduced to take account of
any Taxes incurred by the Conexant Tax Group, in the case of a refund or credit
to which Rockwell is entitled, or the Rockwell Tax Group, in the case of a
refund or credit to which Conexant is entitled, upon the receipt of such refund
or credit.
(b) Carrybacks. Unless the parties otherwise agree in writing, Conexant
shall elect and shall cause each member of the Conexant Tax Group to elect,
where permitted by law, to carry forward any net operating loss, net capital
loss, charitable contribution or other item arising after the Distribution Date
that could, in the absence of such election, be carried back to a
Pre-Distribution Taxable Period. Except as otherwise provided in this Agreement,
notwithstanding the provisions of Section 2.03(a), (i) any refund or credit of
Taxes resulting from the carryback of any item of Taxes attributable to the
Conexant Tax Group arising in a Post-Tax Indemnification Period to a Tax
Indemnification Period shall be for the account and benefit of the Conexant Tax
Group, and (ii) any refund or credit of Taxes resulting from the carryback of
any item of Taxes attributable to the Rockwell Tax Group arising in a Post-Tax
Indemnification Period to a Tax Indemnification Period shall be for the account
and benefit of the Rockwell Tax Group.
(c) Refund Claims. Rockwell shall be permitted to file at Rockwell's
sole expense, and Conexant shall reasonably cooperate with Rockwell in
connection with, any claims for refund of Taxes to which Rockwell is entitled
pursuant to this Section 2.03 or any other provision of this Agreement. Rockwell
shall reimburse Conexant for any reasonable out-of-pocket costs and expenses
incurred by any member of the Conexant Tax
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Group in connection with such cooperation. Conexant shall be permitted to file
at Conexant's sole expense, and Rockwell shall reasonably cooperate with
Conexant in connection with, any claims for refunds of Taxes to which Conexant
is entitled pursuant to this Section 2.03 or any other provision of this
Agreement. Conexant shall reimburse Rockwell for any reasonable out-of-pocket
costs and expenses incurred by any member of the Rockwell Tax Group in
connection with such cooperation.
2.04 Allocation of Straddle Period Taxes In the case of any Straddle
Period:
(a) the Taxes of a member of the Rockwell Tax Group or the Conexant Tax
Group or its business, assets or activities for that portion of any Straddle
Period beginning after the Distribution Date shall be computed on a
"closing-of-the-books" basis as if such taxable period began on the day after
the Distribution Date, and, in the case of any Taxes of a member of the Rockwell
Tax Group or the Conexant Tax Group or its business, assets or activities with
respect to any equity interest in any partnership or other "flowthrough" entity,
as if a taxable period of such partnership or other "flowthrough" entity began
as of the day after the Distribution Date; and
(b) the Taxes of the Rockwell Tax Group and the Conexant Tax Group with
respect to any Tax Return for a Straddle Period which includes a member of each
of the Rockwell Tax Group and the Conexant Tax Group or their respective
businesses, assets or activities shall be allocated between the Rockwell Tax
Group, on the one hand, and the Conexant Tax Group, on the other hand,
determined in a manner analogous to that set forth in Treasury Regulation
Section 1.1552-1(a)(2).
2.05 Schedule of Foreign Income Tax Returns and Payments. Following the
Distribution Date, Rockwell and Conexant agree to use their best efforts to
jointly prepare a schedule showing (a) each Foreign Income Tax Return required
to be filed by a member of the Rockwell Tax Group and each Foreign Income Tax
Return required to be filed by a member of the Conexant Tax Group for taxable
periods ending after September 30, 1998 and (b) the party responsible for filing
such Foreign Income Tax Returns.
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ARTICLE III
TAX INDEMNIFICATION; TAX CONTESTS
3.01 Indemnification.
(a) Rockwell Indemnification. Subject to Section 3.01(b) and Section
3.02, Rockwell shall indemnify, defend and hold harmless each member of the
Conexant Tax Group and each of their respective shareowners, directors,
officers, employees and agents and each of the heirs, executors, successors and
assigns of any of the foregoing from and against:
(i) all Taxes of the Rockwell Tax Group;
(ii) all Taxes of the Conexant Tax Group for all Pre-Distribution
Taxable Periods and all Straddle Periods for which Rockwell is liable pursuant
to Section 2.02;
(iii) all liability as a result of Treasury Regulation Section
1.1502-6(a) (which imposes several liability on members of an affiliated group
that file a U.S. federal consolidated Income Tax return) or comparable U.S.
state or local provision for Income Taxes of any person which is or has ever
been affiliated with any member of the Rockwell Tax Group or with which any
member of the Rockwell Tax Group joins or has ever joined (or is or has ever
been required to join) in filing any consolidated, combined or unitary Income
Tax Return for any Tax period ending on or before or including the Distribution
Date;
(iv) all Taxes for any Tax period (whether beginning before, on or
after the Distribution Date) that would not have been payable but for the breach
by any member of the Rockwell Tax Group of any representation, warranty,
covenant or obligation under this Agreement;
(v) all liability for a breach by any member of the Rockwell Tax Group
of any representation, warranty, covenant or obligation under this Agreement;
(vi) all Income Taxes and non-Income Taxes imposed in connection with
the transactions contemplated by the Transaction Agreements or any other
agreement entered into for the purpose of implementing the
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Distribution other than any transaction specified on Schedule 1.01;
(vii) all Taxes for which Rockwell is liable pursuant to Section 3.02;
and
(viii) all liability for any reasonable legal, accounting, appraisal,
consulting or similar fees and expenses relating to the foregoing.
Notwithstanding the foregoing and subject to Section 3.01(b) and
Section 3.02, Rockwell shall not indemnify, defend or hold harmless any member
of the Conexant Tax Group from any liability for Taxes (other than Taxes
resulting from (I) the failure of the Distribution to qualify as a
reorganization described in Section 368(a)(1)(D) of the Code, (II) the failure
of the Distribution to qualify as tax-free to Rockwell under Section 361(c) of
the Code or (III) the failure of any pre-Distribution transaction specified in
Schedule 3.01 to be non-taxable) attributable to any action (including the
making of an election under Section 338 of the Code) taken by any member of the
Conexant Tax Group after the Distribution (other than any such action expressly
required or otherwise expressly contemplated by the Transaction Agreements or
any other agreement entered into for the purpose of implementing the
Distribution or taken in the ordinary course of business) (a "Post-Distribution
Tax Act").
(b) Conexant Indemnification. Conexant shall be liable for, and
shall indemnify, defend and hold harmless each member of the Rockwell Tax Group
and each of the respective shareowners, directors, officers, employees and
agents and each of the heirs, executors, successors and assigns of any of the
foregoing from and against:
(i) all Taxes of any member of the Conexant Tax Group (other than Taxes
for which Rockwell provides indemnification pursuant to Section 3.01(a));
(ii) all Taxes for any Tax period (whether beginning before, on or
after the Distribution Date) that would not have been payable but for the breach
by any member of the Conexant Tax Group of any representation, warranty,
covenant or obligation under this Agreement or
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that arise in connection with a transaction specified in Schedule 1.01;
(iii) all liability for a breach by any member of the Conexant Tax
Group of any representation, warranty, covenant or obligation under this
Agreement;
(iv) all Taxes for which Conexant is liable pursuant to Section 3.02;
(v) all Taxes arising under any IRS Gain Recognition Agreement
specified in Schedule 5.03 or any revised or successor agreement thereto;
(vi) all Taxes attributable to a Post-Distribution Tax Act; and
(vii) all liability for any reasonable legal, accounting, appraisal,
consulting or similar fees and expenses relating to the foregoing.
3.02 Conexant Tax Acts.
(a) Notwithstanding Section 3.01, Conexant agrees to indemnify, defend
and hold harmless each member of the Rockwell Tax Group and each of the
respective shareowners, directors, officers, employees and agents and each of
the heirs, executors, successors and assigns of any of the foregoing from and
against any Taxes resulting from any Conexant Tax Act which causes (i) the
Distribution to fail to qualify as a reorganization described in Section
368(a)(1)(D) of the Code, (ii) the Distribution to fail to qualify as tax-free
to Rockwell under Section 361(c) of the Code, or (iii) any pre-Distribution
transaction specified in Schedule 3.01 undertaken in connection with the
Distribution or the Automotive Distribution to become taxable. A Conexant Tax
Act shall mean any action specified on Schedule 3.02(a) attached hereto.
(b) Conexant shall, and shall cause each member of the Conexant Tax
Group to, comply with and take no action inconsistent with the Conexant Tax
Representation Letter, unless, pursuant to a favorable ruling letter obtained
from the IRS which is satisfactory to Rockwell or the advice of Chadbourne &
Parke LLP or other nationally recognized tax counsel to Rockwell, which advice
shall be satisfactory to Rockwell, such act
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or omission would not adversely affect the U.S. federal Income Tax consequences
of the Distribution to Rockwell or the shareowners of Rockwell. Notwithstanding
Sections 3.01(b)(iii), 3.01(b)(iv) and 3.01(b)(vi), the parties intend that the
sole remedy for breach of the covenants contained in this Section 3.02(b) shall
be as set forth in Section 3.02(a).
(c) Notwithstanding the foregoing, a Conexant Tax Act shall not include
any transaction or action specifically disclosed or specifically described in
any of the Transaction Agreements or, except as specifically set forth in
Schedule 3.01 occurring on or prior to the Distribution Date, any action taken
on or prior to the Distribution Date. A Conexant Tax Act shall not include any
action on the part of any member of the Rockwell Tax Group. Rockwell agrees to
indemnify and hold each member of the Conexant Tax Group harmless from and
against any Taxes resulting from the failure of the Distribution to qualify (i)
as a reorganization described in Section 368(a)(1)(D) of the Code or (ii) as
tax-free to Rockwell under Section 361(c) of the Code, except where such failure
is attributable to a Conexant Tax Act.
3.03 Notice of Indemnity Whenever a party hereto (hereinafter an
"Indemnitee") becomes aware of the existence of an issue raised by any Tax
Authority which could reasonably be expected to result in a determination that
would increase the liability for any Tax of the other party hereto or any member
of its Tax Group for any Tax period or require a payment hereunder by the other
party (hereinafter an "Indemnity Issue"), the Indemnitee shall in good faith
promptly give notice to such other party (hereinafter the "Indemnitor") of such
Indemnity Issue. The failure of the Indemnitee to give such notice shall not
relieve the Indemnitor of its obligations under this Agreement, except to the
extent such Indemnitor or a member of its Tax Group is actually prejudiced by
such failure to give notice.
3.04 Payments
(a) Timing Adjustments. (i) Timing Differences. If a Tax audit
proceeding or an amendment of a Tax Return results in a Timing Difference, and
such Timing Difference results in a decrease in an indemnity obligation Rockwell
has or would otherwise have under Section 3.01(a) and/or an increase in the
amount of a Tax
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refund or credit to which Rockwell is entitled under Section 2.03, then in each
Post-Tax Indemnification Period in which the Conexant Tax Group Actually
Realizes an Income Tax Detriment, Rockwell shall pay to Conexant an amount equal
to such Income Tax Detriment; provided, however, that the aggregate payments
which Rockwell shall be required to make under this Section 3.04(a)(i) with
respect to any Timing Difference shall not exceed the aggregate amount of the
Income Tax Benefits realized by the Rockwell Tax Group for all taxable periods
and the Conexant Tax Group for all Tax Indemnification Periods as a result of
such Timing Difference. Rockwell shall make all such payments within ten days
after Conexant notifies Rockwell that the relevant Income Tax Detriment has been
Actually Realized.
(ii) Reverse Timing Differences. If a Tax audit proceeding or an
amendment to a Tax Return results in a Reverse Timing Difference, and such
Reverse Timing Difference results in an increase in an indemnity payment
obligation of Rockwell under Section 3.01 and/or a decrease in the amount of a
Tax refund or credit to which Rockwell is or would otherwise be entitled under
Section 2.03, then in each Post-Tax Indemnification Period in which the Conexant
Tax Group Actually Realizes an Income Tax Benefit, Conexant shall pay to
Rockwell within ten days after Conexant has Actually Realized such Income Tax
Benefit an amount equal to such Income Tax Benefit, provided, however, that the
aggregate payments which Conexant shall be required to make under this Section
3.04(a)(ii) with respect to Reverse Timing Differences shall not exceed the
aggregate amount of the Income Tax Detriments realized by the Conexant Tax Group
and the Rockwell Tax Group for all Tax Indemnification Periods as a result of
such Reverse Timing Difference.
(b) Time for Payment. Except as otherwise provided in this Section
3.04(b), any indemnity payment required to be made pursuant to this Agreement
shall be paid within thirty days after the indemnified party makes written
demand upon the indemnifying party, provided that in no event shall such payment
be required to be made earlier than five business days prior to the date on
which the relevant Taxes (including estimated Taxes) are required to be paid (or
would be required to be paid if no such Taxes are due) to the relevant Tax
Authority. Notwithstanding any other provision in this Agreement, to simplify
the administration of this Agreement, the
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payment of any amount less than $100,000 required to be made pursuant to this
Agreement by one party hereto to another party hereto need not be made to such
other party prior to thirty days following the later of (i) the close of the
calendar quarter during which such payment obligation arose and (ii) the day
during such calendar quarter when the aggregate amount of all such less than
$100,000 payment obligations arising during such calendar quarter exceeds
$500,000. Unless otherwise specified by the recipient for items exceeding
$250,000, any such payment may be made on a net Tax basis (i.e., reduced to take
account of any net Tax benefit to be realized by the recipient (computed at the
effective Tax rate set forth in Section 3.04(c)) to the extent such recipient is
entitled to a corresponding deduction.
(c) Payments Net of Taxes and Tax Benefits. The amount of any payment
under this Agreement shall be (i) reduced to take into account any net Tax
benefit realized by the recipient's Tax Group arising from the incurrence or
payment by such recipient's Tax Group of any amount in respect of which such
payment is made and (ii) increased to take into account any net Tax cost
incurred by the recipient's Tax Group as a result of the receipt or accrual of
payments hereunder (grossed-up for such increase), in each case determined by
treating the recipient as recognizing all other items of income, gain, loss,
deduction or credit before recognizing any item arising from the receipt of
accrual of any payment hereunder. In determining the amount of any such Tax
benefit or Tax cost, the recipient's Tax Group shall be deemed to be subject to
(A) U.S. federal Income Taxes and foreign Income Taxes at the maximum statutory
rate then in effect and (B) U.S. state and local Income Taxes at an assumed rate
of five percent net of U.S. federal Income Tax benefits. Except as otherwise
provided in this Agreement or unless the parties otherwise agree to an
alternative method for determining the present value of any such anticipated Tax
benefit or Tax cost, any payment hereunder shall initially be made without
regard to this section and shall be increased or reduced to reflect any such net
Tax cost (including gross-up) or net Tax benefit only after the recipient's Tax
Group has Actually Realized such Tax cost or Tax benefit.
(d) Right to Offset. Any party making a payment under this Agreement
shall have the right to
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reduce any such payment by any undisputed amounts owed to it by the other party
to this Agreement.
(e) Characterization of Payments. It is the intention of the parties to
this Agreement that payments made pursuant to this Agreement are to be treated
as relating back to the Distribution as an adjustment to capital (i.e., capital
contribution or distribution), and the parties shall not take any position
inconsistent with such intention before any Tax Authority, except to the extent
that a final determination (as defined in Section 1313 of the Code) with respect
to the recipient party causes any such payment not to be so treated.
3.05 Tax Contests. The Indemnitor and its representatives, at the
Indemnitor's expense, shall be entitled to participate (a) in all conferences,
meetings and proceedings with any Tax Authority, the subject matter of which is
or includes an Indemnity Issue and (b) in all appearances before any court, the
subject matter of which is or includes an Indemnity Issue. The party who has
responsibility for filing the Tax Return under this Agreement (the "Responsible
Party") with respect to which there could be an increase in liability for any
Tax or with respect to which a payment could be required hereunder shall have
the right to decide as between the parties hereto how such matter is to be dealt
with and finally resolved with the appropriate Tax Authority and shall control
all audits and similar proceedings. If no Tax Return is or was required to be
filed in respect of an Indemnity Issue, the Indemnitor shall be treated as the
Responsible Party with respect thereto. The Responsible Party agrees to
cooperate in the settlement of any Indemnity Issue with the other party and to
take such other party's interests into account. Notwithstanding any other
provision of this Agreement, if Rockwell has materially satisfied its
obligations under this Agreement and if Conexant fails to permit Rockwell to
control any audit or proceeding regarding any Indemnity Issue relating to (i)
the qualification of the Distribution as a "reorganization" within the meaning
of Section 368(a)(1)(D) of the Code or as tax-free to Rockwell under Section
361(c) of the Code, (ii) the qualification of any transactions undertaken
pursuant to the Transaction Agreements or described in the Ruling Request as
transactions described in Section 355 of the Code, "reorganizations" within the
meaning of Section 368(a)(1)(D) of the Code or as otherwise tax-free
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transactions or (iii) the qualification of any transactions undertaken pursuant
to the Automotive Transaction Agreements or described in the Automotive Ruling
Request as transactions described in Section 355 of the Code, "reorganizations"
within the meaning of Section 368(a)(1)(D) of the Code or as otherwise tax-free
transactions, then Rockwell shall not be liable for and shall not indemnify the
Conexant Tax Group for any Tax deficiency resulting from an adverse
determination of such Indemnity Issue.
ARTICLE IV
COMPENSATION PAYMENTS; OPTIONS; COLORADO SPRINGS FACILITY
REAL ESTATE TAXES; CELERITAS LITIGATION; CALIFORNIA
MANUFACTURER'S INVESTMENT CREDIT; INTEREST CHARGE
FOR LATE PAYMENTS; CURRENCY CALCULATIONS; EFFECTIVE TIME
OF TRANSACTIONS
4.01 Compensation Payments.
(a) Tax Deductions. Notwithstanding anything to the contrary in this
Agreement, unless Rockwell and Conexant otherwise agree in writing, (i) the
Boeing Tax Group (and not the Conexant Tax Group) shall claim the
post-Distribution Date Tax deductions in respect of Compensation Payments paid
to Conexant Group Employees and Former Employees who ceased employment on or
before December 6, 1996 and Rockwell shall pay to Conexant the amount received
from Boeing as a result of any Tax benefit realized arising in respect of such
Tax deductions within ten days after such amount is received by Rockwell, (ii)
the Conexant Tax Group (and not the Rockwell Tax Group) shall claim the
post-Distribution Date Tax deductions in respect of Compensation Payments paid
by the Conexant Tax Group to all other Conexant Group Employees and Former
Employees, and (iii) the Rockwell Tax Group (and not the Conexant Tax Group
shall claim the post-Distribution Date Tax deductions in respect of Compensation
Payments paid by the Rockwell Tax Group to all other Conexant Group Employees
and Former Employees.
(b) Notices, Withholding, Reporting. The party responsible for making
the Compensation Payments pursuant to the Employee Matters Agreement shall
withhold applicable Taxes and satisfy applicable Tax reporting
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obligations in connection with the Compensation Payments made to all Conexant
Group Employees and Former Employees.
(c) Tax Audit Adjustments. Notwithstanding the provisions of Section
4.01(a), in the event a Tax audit proceeding shall determine (by settlement or
otherwise), or the parties otherwise determine pursuant to Section 4.06, that
all or a portion of the Tax deductions in respect of Compensation Payments paid
to Conexant Group Employees or Former Employees was not available to the party
claiming the Tax deduction, then the appropriate party shall claim such Tax
deductions (by an amended Tax Return or otherwise) and shall pay to the party
which had previously claimed such Tax deduction, within ten days after such Tax
deduction has been Actually Realized by the such appropriate party, the amount
of the resulting Tax benefit to such appropriate party.
4.02 Stock Options.
(a) Stock Option Adjustments. Pursuant to the terms of the Employee
Matters Agreement, Rockwell Common Stock Options outstanding at the time of the
Distribution will be adjusted as follows:
(i) Rockwell Common Stock Options held by employees of the Conexant Tax
Group at the time of the Distribution will be replaced with Conexant Common
Stock Options;
(ii) except as provided in (iii) below, Rockwell Common Stock Options
held by persons other than employees of the Conexant Tax Group at the time of
the Distribution will be adjusted so that following the Distribution each such
holder will hold Rockwell Common Stock Options and Conexant Common Stock
Options; and
(iii) Rockwell Common Stock Options granted prior to January 1, 1990 or
after August 31, 1998 held by persons other than employees of the Conexant Tax
Group at the time of the Distribution will remain Rockwell Common Stock Options.
(b) Tax Deductions. Notwithstanding anything to the contrary in this
Agreement, unless the IRS issues a contrary private letter ruling to Rockwell or
Conexant,
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or Rockwell and Conexant otherwise agree in writing, (i) the Rockwell Tax Group
or the Boeing Tax Group (and not the Conexant Tax Group) shall claim the
post-Distribution Date Tax deductions in respect of Rockwell Common Stock
Options and (ii) the Conexant Tax Group (and not the Rockwell Tax Group or the
Boeing Tax Group) shall claim any post-Distribution Date Tax deductions in
respect of Conexant Common Stock Options.
(c) Notices, Withholding, Reporting. (i) Rockwell shall promptly notify
Conexant of any post-Distribution Date event giving rise to income to any
Conexant Group Employees and Former Employees in connection with the Rockwell
Common Stock Options and, if required by law, Conexant shall withhold applicable
Taxes and satisfy applicable Tax reporting obligations in connection therewith.
Rockwell shall within ten days of demand thereof reimburse Conexant for all
reasonable out-of-pocket expenses incurred in connection with the Rockwell
Common Stock Options, including with respect to incremental Tax reporting
obligations and any incremental employment Tax obligations; provided that
Conexant shall use reasonable efforts to collect any such amounts required to be
paid by Conexant Group Employees and Former Employees from such Conexant Group
Employees and Former Employees.
(ii) Conexant shall promptly notify Rockwell of any post-Distribution
Date event giving rise to income to any non-Conexant Group Employees and Former
Employees in connection with the Conexant Common Stock Options and, if required
by law, Rockwell shall withhold applicable Taxes and satisfy applicable Tax
reporting obligations in connection therewith. Conexant shall within ten days of
demand thereof reimburse Rockwell for all reasonable out-of-pocket expenses
incurred in connection with the Conexant Common Stock Options, including with
respect to incremental Tax reporting obligations and any incremental employment
Tax obligations; provided that Rockwell shall use reasonable efforts to collect
any such amounts required to be paid by non-Conexant Group Employees and Former
Employees from such non-Conexant Group Employees and Former Employees.
(d) Tax Audit Adjustments. Notwithstanding the provisions of Section
4.02(b), in the event a Tax audit proceeding shall determine (by settlement or
otherwise), or the parties otherwise determine pursuant
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to Section 4.06, that all or a portion of the Tax deductions in respect of
Rockwell Common Stock Options or Conexant Common Stock Options should have been
claimed by the Conexant Tax Group or the Rockwell Tax Group, respectively, the
Conexant Tax Group or the Rockwell Tax Group, respectively, shall claim such Tax
deductions (by an amended Tax Return or otherwise) and shall pay to Rockwell or
Conexant, as the case may be, the amount of any Tax refund or credit arising in
respect of such Tax deduction within ten days after such Tax refund or credit is
Actually Realized by the Conexant Tax Group or the Rockwell Tax Group, as the
case may be.
4.03 Colorado Springs Facility Real Estate Taxes. Rockwell and Conexant
agree that real estate Taxes payable in connection with the Colorado Springs
Facility shall be allocated between Rockwell and Conexant as set forth in
Schedule 4.03 attached hereto.
4.04 Celeritas Litigation.
(a) Tax Deductions. Notwithstanding anything to the contrary in this
Agreement, unless the IRS issues a contrary private letter ruling to Rockwell or
Conexant, or Rockwell and Conexant otherwise agree in writing, Rockwell and
Conexant agree that (i) Conexant's Tax deduction in respect of amounts paid on
behalf of Conexant to the court on or before December 31, 1998 in connection
with the Celeritas Litigation shall be included in Rockwell's federal
consolidated Tax Return (such amounts paid by Rockwell on behalf of Conexant to
be treated as capital contributions); (ii) Conexant's Tax deduction in respect
of amounts paid on behalf of Conexant to the court after December 31, 1998 in
connection with the Celeritas Litigation shall be included in Conexant's federal
consolidated Tax Returns (any such amounts paid by Rockwell on behalf of
Conexant to be treated as capital contributions related back to the
Distribution); (iii) Conexant shall include in taxable income any taxable
interest income earned on amounts deposited with the court, such interest income
up through the Distribution Date to be included in Rockwell's federal
consolidated Tax Return and treated as an additional deductible payment for such
period, and such interest income earned thereafter to be included in Conexant's
federal consolidated Tax Returns and treated as an additional deductible payment
for such periods; and (iv) the Conexant Tax Group (and not the Rockwell Tax
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Group) shall include in taxable income any amount returned by the court to
Rockwell and/or Conexant (Conexant's actual (or deemed) payment of such amount
to Rockwell to be treated as a capital transaction relating back to the
Distribution), all as more fully described in Schedule 4.04 attached hereto. The
Conexant Tax Group shall pay to Rockwell the amount of any Tax refund or credit
arising in respect of any Tax deduction claimed by the Conexant Tax Group
pursuant to Clause (ii) above within ten days after such Tax refund or credit is
Actually Realized by the Conexant Tax Group.
(b) Tax Audit Adjustments. Notwithstanding the provisions of Section
4.04(a), in the event a Tax audit proceeding shall determine (by settlement or
otherwise), or the parties otherwise determine pursuant to Section 4.06 or
otherwise, that (i) all or a portion of the Tax deductions in respect of the
Celeritas Litigation included in Rockwell's federal consolidated Tax Return
pursuant to Section 4.01(a)(i) or otherwise, should be or should have been
claimed by the Conexant Tax Group, the Conexant Tax Group shall claim such Tax
deductions (by an amended Tax Return or otherwise) and shall pay to Rockwell the
amount of any Tax refund or credit arising in respect of such Tax deduction
within ten days after such Tax refund or credit is Actually Realized by the
Conexant Tax Group, (ii) that all or a portion of the tax deductions in respect
of the Celeritas Litigation included in Conexant's federal consolidated Tax
Return pursuant to Section 4.01(a)(ii) should be or should have been included in
Rockwell's federal consolidated Tax Returns, Rockwell shall claim such Tax
deductions (by amended Tax Return or otherwise) and shall pay to Conexant the
amount of any Tax refund or credit arising in respect of such Tax deduction
within ten days after such Tax refund or credit is Actually Realized by the
Rockwell Tax Group, such amount of payment not to exceed the payments made by
Conexant to Rockwell pursuant to the last sentence of Section 4.04(a), (iii)
that all or a portion of any amount included in Conexant's federal consolidated
Tax Returns in accordance with Section 4.04(a)(iii) should be or should have
been included in Rockwell's federal consolidated Tax Returns, the Conexant Tax
Group shall claim a corresponding exclusion from taxable income (by amended Tax
Return or otherwise) and Rockwell shall be entitled to treat such amount as an
additional deductible payment in respect of the Celeritas Litigation or, if such
Tax deduction is properly claimed
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by the Conexant Tax Group, Rockwell shall be entitled to receive from the
Conexant Tax Group the amount of any Tax refund or credit within ten days after
such Tax refund or credit is Actually Realized by the Conexant Tax Group,
provided that, the Conexant Tax Group will not be deemed to Actually Realize a
Tax refund or credit except to the extent it has been permitted to exclude the
interest from taxable income; and (iv) that all or a portion of any amount
included in Conexant's federal consolidated Tax Returns in accordance with
Section 4.04(a)(iv) should have been included in the Rockwell federal
consolidated Tax Returns, the Conexant Tax Group shall claim a corresponding Tax
refund or credit (by an amended Tax Return or otherwise) and shall pay to the
Rockwell Tax Group the amount of such Tax refund or credit within ten days after
such Tax refund or credit is Actually Realized by the Conexant Tax Group.
4.05 Tax Benefit Attributable to California Manufacturers Investment
Credit Carryforward. Notwithstanding anything in this Agreement to the contrary,
the Conexant Tax Group shall pay to the Rockwell Tax Group the amount of any
savings in Taxes attributable to California manufacturer's investment credit
carryforwards as set forth in Schedule 4.05 hereto.
4.06 Change in Law. Notwithstanding the agreement with respect to
reporting of Tax items and the claiming of the deductions set forth in Article 4
of this Agreement, neither the Conexant Tax Group nor the Rockwell Tax Group
shall have any obligation to report any such Tax items or claim such deductions
as set forth in such Article in the event that either such party determines,
based on an opinion of nationally recognized tax counsel, which opinion shall be
satisfactory to the other party, that there is no substantial authority to
support reporting such Tax items or claiming such deductions on a Tax Return
filed by such party as a result of a change in or amendment to any law or
regulation, or any change in the official interpretation thereof, effective or
occurring after the date of this Agreement, and such Tax Group provides prompt
notice to the other Tax Group of any such determination.
4.07 Interest Charge for Late Payments. Any amount due and owing by one
party to the other party pursuant to this Agreement that is not paid when due
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shall bear interest from the due date thereof until paid at a rate equal to the
Mellon Bank prime rate in effect from time to time during such period plus 1%.
4.08 Currency Calculations. All currency calculations shall be made in
accordance with Section 4.07 of the Distribution Agreement.
4.09 Effective Time of Transaction. Rockwell and Conexant agree that
any transaction that, pursuant to the Distribution Agreement, is expressly
effective immediately after the Time of Distribution shall be treated for
federal Income Tax purposes as occurring at the beginning of the day following
the Distribution Date.
ARTICLE V
COOPERATION AND EXCHANGE OF INFORMATION
5.01 Inconsistent Actions. Each party to this Agreement agrees (i) to,
and to cause each of the relevant members of its Tax Group to, report the
Distribution as a transaction described in Section 368(a)(1)(D) of the Code on
all Tax Returns and other filings, (ii) to use its best efforts to ensure that
the Distribution receives such treatment for U.S. federal Tax purposes and (iii)
that, unless it has obtained the prior written consent of the other party, it
(and the members of its Tax Group) shall not take any action inconsistent with,
or fail to take any action required by, the Transaction Agreements.
5.02 Ruling Request. Each party hereto represents that neither it (nor
any of the members of its Tax Group) will take or has any plan or intention to
take any action which is inconsistent with any factual statements,
representations or other similar conditions contained in the Ruling Request or
in the Ruling.
5.03 IRS Gain Recognition Agreement; Notification of Certain
Dispositions. Conexant shall give Rockwell at least sixty days prior written
notice in the event that at any time prior to the date which is ten years after
the Distribution Date, Conexant directly or indirectly disposes of all or any
portion of the ownership interest in, or all or a substantial portion of the
assets of, any entity identified on Schedule 5.03.
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Such notice shall describe any such disposition in sufficient detail to enable
Rockwell (i) to comply with the requirements of Section 367 of the Code,
applicable regulations thereunder and any IRS Gain Recognition Agreement, and
(ii) if applicable, to enter into a revised IRS Gain Recognition Agreement under
Section 367 of the Code and the applicable regulations thereunder. At the time
of the delivery of such notice, Conexant shall provide to Rockwell security
reasonably satisfactory to Rockwell for the performance of all obligations of
Conexant under Section 3.01(b) hereof and this Section 5.03 in respect of the
disposition referred to in such notice.
5.04 Cooperation and Exchange of Information. Each party hereto agrees
to provide, and to cause each member of its Tax Group to provide, such
cooperation and information as such other party shall request, on a timely
basis, in connection with the preparation or filing of any Tax Return or claim
for Tax refund not inconsistent with this Agreement or in conducting any Tax
audit, Tax dispute, or otherwise in respect of Taxes or to carry out the
provisions of this Agreement. To the extent necessary to carry out the purposes
of this Agreement and subject to the other provisions of this Agreement, such
cooperation and information shall include without limitation the non-exclusive
designation of an officer of Rockwell as an officer of Conexant and each of its
affiliates for the purpose of signing Tax Returns, cashing refund checks,
pursuing refund claims, dealing with Tax Authorities and defending audits as
well as promptly forwarding copies of appropriate notices and forms or other
communications received from or sent to any Tax Authority which relate to the
Conexant Tax Group for the Tax Indemnification Period and providing copies of
all relevant Tax Returns for the Tax Indemnification Period, together with
accompanying schedules and related workpapers, documents relating to rulings or
other determinations by Tax Authorities, including without limitation, foreign
Tax Authorities, and records concerning the ownership and Tax basis of property,
which either party may possess. Subject to the rights of the Conexant Tax Group
under the other provisions of this Agreement, such officer shall have the
authority to execute powers of attorney (including Form 2848) on behalf of each
member of the Conexant Tax Group with respect to Tax Returns for the Tax
Indemnification Period. Each party to this Agreement shall make, or
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shall cause its affiliates to make, its employees and facilities available on a
mutually convenient basis to provide an explanation of any documents or
information provided hereunder.
5.05 Tax Records.
(a) Rockwell and Conexant agree to (and to cause each member of their
respective Tax Group to) (i) retain all Tax Returns, related schedules and
workpapers, and all material records and other documents as required under
Section 6001 of the Code and the regulations promulgated thereunder relating
thereto existing on the date hereof or created through the Distribution Date,
for a period of at least ten years following the Distribution Date and (ii)
allow the party to this Agreement, at times and dates reasonably acceptable to
the retaining party, to inspect, review and make copies of such records, as
Rockwell and Conexant may reasonably deem necessary or appropriate from time to
time. In addition, after the expiration of such ten-year period, such Tax
Returns, related schedules and workpapers, and material records shall not be
destroyed or otherwise disposed of at any time, unless, prior to such
destruction or disposal, (A) the party proposing to destroy or otherwise dispose
of such records shall provide no less than 30 days' prior written notice to the
other party, specifying in reasonable detail the records proposed to be
destroyed or disposed of and (B) if a recipient of such notice shall request in
writing prior to the scheduled date for such destruction or disposal that any of
the records proposed to be destroyed or disposed of be delivered to such
requesting party, the party proposing the destruction or disposal shall promptly
arrange for the delivery of such requested records at the expense of the party
requesting such records.
(b) Notwithstanding anything in this Agreement to the contrary, if any
party fails to comply with the requirements of Section 5.05(a) hereof, the party
failing so to comply shall be liable for, and shall hold the other party,
harmless from, any Taxes (including without limitation, penalties for failure to
comply with the record retention requirements of the Code) and other costs
resulting from such party's failure to comply.
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ARTICLE VI
MISCELLANEOUS
6.01 Entire Agreement; Construction. This Agreement, the Distribution
Agreement, all other Transaction Agreements, including, without limitation, any
annexes, schedules and exhibits hereto or thereto, and other agreements and
documents referred to herein and therein, will together constitute the entire
agreement between the parties with respect to the subject matter hereof and
thereof and will supersede all prior negotiations, agreements and understandings
of the parties of any nature, whether oral or written, with respect to such
subject matter. Notwithstanding any other provisions in this Agreement to the
contrary, in the event and to the extent that there shall be a conflict relating
to Taxes between the provisions of this Agreement and the provisions of the
Distribution Agreement or any other Transaction Agreement, the provisions of
this Agreement shall control.
6.02 Effectiveness. All covenants and agreements of the parties
contained in this Agreement shall be subject to and conditioned upon the
Distribution becoming effective.
6.03 Survival of Agreements. Except as otherwise contemplated by this
Agreement, all covenants and agreements of the parties contained in this
Agreement will remain in full force and effect and will survive the Time of
Distribution.
6.04 Governing Law. This Agreement will be governed by and construed in
accordance with the internal laws of the State of New York applicable to
contracts made and to be performed entirely within such State, without regard to
the conflicts of law principles of such State.
6.05 Notices. All notices, requests, claims, demands and other
communications required or permitted to be given hereunder will be in writing
and will be delivered by hand or telecopied or sent, postage prepaid, by
registered, certified or express mail or reputable overnight courier service and
will be deemed given when so delivered by hand or telecopied, or three business
days after being so mailed (one business day in the case
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of express mail or overnight courier service). All such notices, requests,
claims, demands and other communications will be addressed as set forth below,
or pursuant to such other instructions as may be designated in writing by the
party to receive such notice:
(a) If to Rockwell:
Rockwell International Corporation
600 Anton Boulevard
Costa Mesa, California 92626
Attention: Mr. W. Michael Barnes
Senior Vice President,
Finance and Planning and
Chief Financial Officer
Telecopy: (714) 424-4218
with a copy to:
Rockwell International Corporation
600 Anton Boulevard
Costa Mesa, California 92626
Attention: William J. Calise, Jr., Esq.
Senior Vice President,
General Counsel and
Secretary
Telecopy: (714) 424-4265
(b) If to Conexant:
Conexant Systems, Inc.
4311 Jamboree Road
Newport Beach, California 92660-3095
Attention: Mr. Dwight W. Decker
Chairman and Chief
Executive Officer
Telecopy: (949) 483-4318
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with a copy to:
Conexant Systems, Inc.
4311 Jamboree Road
Newport Beach, California 92660-3095
Attention: Dennis E. O'Reilly, Esq.
Senior Vice President,
General Counsel and
Secretary
Telecopy: (949) 483-3018
6.06 Consent to Jurisdiction. Each of the parties hereto irrevocably
submits to the exclusive jurisdiction of (a) the Court of Chancery in and for
the State of Delaware and the Superior Court in and for the State of Delaware
and (b) the U.S. District Court for the District of Delaware, for the purposes
of any suit, action or other proceeding arising out of this Agreement or any
transaction contemplated hereby (and agrees not to commence any action, suit or
proceeding relating thereto except in such courts). Each of the parties further
agrees that service of any process, summons, notice or document hand delivered
or sent by U.S. registered mail to such party's respective address set forth in
Section 6.05 will be effective service of process for any action, suit or
proceeding in Delaware with respect to any matters to which it has submitted to
jurisdiction as set forth in the immediately preceding sentence. Each of the
parties irrevocably and unconditionally waives any objection to the laying of
venue of any action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby in (i) the Court of Chancery in and for the
State of Delaware and the Superior Court in and for the State of Delaware or
(ii) the U.S. District Court for the District of Delaware, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum.
6.07 Amendments. This Agreement may not be amended, modified or
supplemented except by a written agreement executed by Rockwell and Conexant.
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6.08 Successors and Assigns. The rights and benefits under this
Agreement may not be assigned and the duties and obligations may not be
delegated by any party in whole or in part without the prior written consent of
the other party, which consent shall not be unreasonably withheld or delayed.
This Agreement and all of the provisions hereof shall be binding upon and inure
to the benefit of the parties and their respective successors and permitted
assigns.
6.09 Captions; Currency. The article, section and paragraph captions
herein and the table of contents hereto are for convenience of reference only,
do not constitute part of this Agreement and will not be deemed to limit or
otherwise affect any of the provisions hereof. Unless otherwise specified, all
references herein to numbered articles or sections are to articles and sections
of this Agreement and all references herein to schedules are to schedules to
this Agreement. Unless otherwise specified, all references contained in this
Agreement or in any schedule referred to herein to dollars or "$" shall mean
U.S. dollars.
6.10 Severability. If any provision of this Agreement or the
application thereof to any person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to persons or
circumstances other than those as to which it has been held invalid or
unenforceable, will remain in full force and effect and will in no way be
affected, impaired or invalidated thereby. If the economic or legal substance of
the transactions contemplated hereby is affected in any manner adverse to any
party as a result thereof, the parties will negotiate in good faith in an effort
to agree upon a suitable and equitable substitute provision to effect the
original intent of the parties.
6.11 No Third Party Beneficiaries. Except for the provisions of Article
III relating to Tax Indemnification, this Agreement is solely for the benefit of
the parties hereto and the respective members of their Tax Group and should not
be deemed to confer upon third parties (including any employee of Rockwell or
Conexant or of any Rockwell or Conexant subsidiary) any remedy, claim,
reimbursement, claim of action or other right in
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excess of those existing without reference to this Agreement.
6.12 Schedules. All schedules attached hereto are hereby incorporated
in and made a part of this Agreement as if set forth in full herein. Capitalized
terms used in the schedules hereto but not otherwise defined therein will have
the respective meanings assigned to such terms in this Agreement.
6.13 Termination. This Agreement may be terminated and the Distribution
abandoned at any time prior to the Time of Distribution by and in the sole
discretion of the Rockwell Board without the approval of Conexant or of
Rockwell's shareowners. In the event of such termination, no party will have any
liability of any kind to any other party on account of such termination.
6.14 Waivers; Remedies. No failure or delay by any party hereto in
exercising any right, power or privilege hereunder will operate as a waiver
thereof, nor will any waiver on the part of any party hereto of any right, power
or privilege hereunder operate as a waiver of any other right, power or
privilege hereunder, nor will any single or partial exercise of any right, power
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder. The rights and
remedies herein provided are cumulative and are not exclusive of any rights or
remedies which the parties may otherwise have at law or in equity.
6.15 Counterparts. This Agreement may be executed in separate
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts will together constitute the same agreement.
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6.16 Performance. Each party hereto will cause to be performed, and
hereby guarantees the performance of all actions, agreements and obligations set
forth herein to be performed by any subsidiary or any member of such party's Tax
Group.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of the parties as of the date first hereinabove
written.
ROCKWELL INTERNATIONAL CORPORATION
By: /s/ William J. Calise, Jr.
-------------------------------------
William J. Calise, Jr.
Senior Vice President, General
Counsel and Secretary
CONEXANT SYSTEMS, INC.
By: /s/ Dwight W. Decker
-------------------------------------
Dwight W. Decker
Chairman and Chief
Executive Officer
39
