<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 13, 1997
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10
GENERAL FORM FOR
REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
------------------------
111 HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 33-3354643
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
2135 WEST MAPLE ROAD 48084-7186
TROY, MICHIGAN (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (248) 435-1000
------------------------
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON
TO BE SO REGISTERED WHICH EACH CLASS IS TO BE REGISTERED
- ----------------------------------------------------------------------------
<S> <C>
COMMON STOCK, PAR VALUE $1 PER SHARE NEW YORK STOCK EXCHANGE
PREFERRED SHARE PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
</TABLE>
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
================================================================================
<PAGE> 2
111 HOLDINGS, INC.
PART I
INFORMATION INCLUDED IN INFORMATION STATEMENT
AND INCORPORATED IN FORM 10 BY REFERENCE
CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT
AND ITEMS OF FORM 10
<TABLE>
<CAPTION>
ITEM
NO. CAPTION LOCATION IN INFORMATION STATEMENT
- ----- ------------------------------------------ ------------------------------------------
<S> <C> <C>
1. Business.................................. "Summary of Certain Information"; "Special
Factors"; "The
Distribution -- Introduction"; "The
Distribution -- Background and Reasons for
the Distribution"; "The Automotive
Business" and "Management's Discussion and
Analysis of Financial Condition and
Results of Operations".
2. Financial Information..................... "Summary of Certain Information"; "The
Distribution"; "Unaudited Pro Forma
Condensed Financial Statements of the
Company"; "Historical Selected Financial
Data"; "Management's Discussion and
Analysis of Financial Condition and
Results of Operations" and "Financial
Statements".
3. Properties................................ "The Automotive Business -- Properties".
4. Security Ownership of Certain Beneficial
Owners and Management..................... "The Distribution -- Listing and Trading
of Company Common Stock" and "Management
of the Company -- Ownership of Company
Common Stock".
5. Directors and Executive Officers.......... "Arrangements Between Rockwell and the
Company Relating to the Distribution";
"Management of the Company" and "Liability
and Indemnification of Directors and
Officers".
6. Executive Compensation.................... "Arrangements Between Rockwell and the
Company Relating to the Distribution" and
"Management of the Company".
7. Certain Relationships and Related
Transactions.............................. "Summary of Certain Information" and
"Arrangements Between Rockwell and the
Company Relating to the Distribution".
8. Legal Proceedings......................... "The Automotive Business -- Legal
Proceedings".
9. Market Price of and Dividends on the
Registrant's Common Equity and Related
Shareholder Matters....................... "Summary of Certain Information"; "Special
Factors"; "The
Distribution -- Introduction" and "The
Distribution -- Listing and Trading of
Company Common Stock".
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
ITEM
NO. CAPTION LOCATION IN INFORMATION STATEMENT
- ----- ------------------------------------------ ------------------------------------------
<S> <C> <C>
10. Recent Sales of Unregistered Securities... Not Applicable.
11. Description of Registrant's Securities to
be Registered............................. "The Distribution -- Listing and Trading
of Company Common Stock" and "Description
of Company Capital Stock".
12. Indemnification of Directors and
Officers.................................. "Liability and Indemnification of
Directors and Officers".
13. Financial
Statements and Supplementary Data......... "Summary of Certain Information";
"Unaudited Pro Forma Condensed Financial
Statements of the Company"; "Historical
Selected Financial Data"; "Management's
Discussion and Analysis of Financial
Condition and Results of Operations" and
"Financial Statements".
14. Changes in and Disagreements with Account-
ants on Accounting and Financial
Disclosure................................ Not Applicable.
15. Financial Statements and Exhibits......... "Financial Statements" and "Index to
Financial Statements and Schedule".
</TABLE>
<PAGE> 4
[ROCKWELL NAME AND LOGO]
[ ], 1997
Dear Shareowner:
On March 17, 1997, we announced that the Board of Directors of Rockwell
International Corporation ("Rockwell") had approved the distribution (the
"Distribution") to our shareowners of all of the outstanding shares of common
stock of 111 Holdings, Inc. (the "Company"), a newly-formed, wholly-owned
subsidiary of Rockwell, which after the Distribution will be a separately-traded
public company owning Rockwell's Automotive businesses. The Distribution will be
at the rate of one share of Company common stock for every three shares of
Rockwell common stock held as of the close of business on September [ ], 1997.
Consummation of the Distribution is conditioned upon, among other things,
receipt of a favorable ruling of the Internal Revenue Service as to the tax-free
status of the Distribution. The enclosed Information Statement explains the
Distribution in detail and provides important financial and other information
regarding the Company. Holders of Rockwell common stock are not required to take
any action to participate in the Distribution. A shareowner vote is not
required, and, accordingly, your proxy is not being sought.
For over a decade, Rockwell has been shifting its business toward higher growth
commercial and international markets through a carefully managed program of
significant internal investments, coupled with strategic acquisitions and
divestitures. The Distribution will separate Rockwell's electronics and
automotive businesses and will result in your ownership of shares of two
separate and distinct publicly-traded companies: Rockwell, which will focus on
its Automation, Semiconductor Systems and Avionics & Communications businesses,
and the Company, which will focus on the Automotive businesses presently
operated by Rockwell. Your Board of Directors believes that the Distribution, by
enabling Rockwell and the Company to develop their respective businesses
separately, should better position the two companies to produce greater total
shareowner value over the long term. With this separation, investors will be
able to focus on the specific growth and value characteristics of each company.
The Company will begin its operations with all the key elements for growth and
continued success already in place: proven management, strong financial
resources and market-leading products. We are very excited about the future of
the Company as an independent public company.
For Rockwell, this strategic move will complete the transformation of our
company from a broadly diversified concern into an enterprise focused on
commercial electronics markets. Rockwell will emerge from this transaction with
leadership market positions in Automation, Semiconductor Systems and Avionics &
Communications, with projected fiscal 1997 sales of approximately $8 billion. We
look forward to continuing Rockwell's aggressive growth and achieving the full
potential of our electronics businesses.
Sincerely yours,
Donald R. Beall
Chairman of the Board
and Chief Executive Officer
<PAGE> 5
[COMPANY NAME AND LOGO]
[ ], 1997
Dear Future Stockholder:
The enclosed Information Statement includes detailed information about 111
Holdings, Inc. (the "Company"), of which you will soon become a stockholder. As
you know, the Board of Directors of Rockwell International Corporation
("Rockwell") has approved, subject to the satisfaction of certain conditions,
the distribution (the "Distribution") to its shareowners of all of the
outstanding shares of common stock of the Company. After consummation of the
Distribution, the Company will be an independent public company and will own and
operate the Automotive businesses now owned and operated by Rockwell (the
"Automotive Business").
We would like to take this opportunity to welcome you as a stockholder and to
introduce you to our company. The Automotive Business is a leading global
supplier of a broad range of components and systems for use in commercial,
specialty and light vehicles, with fiscal 1996 sales of over $3.1 billion. We
operate 46 manufacturing facilities in 15 countries and serve our customers
worldwide through Heavy Vehicle Systems ("HVS") and Light Vehicle Systems
("LVS"). HVS supplies drivetrain systems and components, including axles,
brakes, transmissions, clutches and drivelines, for heavy-duty and medium-duty
trucks, trailers, off-highway equipment, buses and coaches, as well as other
specialty and military vehicles. LVS supplies electromechanical and other
components and systems, including sunroofs, window regulators, door modules,
door latches and seat adjusting systems, as well as suspension products and
steel wheels, for passenger cars, light trucks and sport utility vehicles. Our
customers include truck manufacturers, light vehicle manufacturers, semi-trailer
producers and off-highway and specialty vehicle manufacturers worldwide.
We are excited about the Company's prospects as an independent public company.
Rockwell's heritage Automotive businesses are leading, world-class participants
in their served markets. The Company possesses a strong and highly motivated
management team, outstanding employees, impressive global manufacturing
resources, a well-deserved reputation for outstanding quality and customer
service and a solid track record of performance. Operating as an independent
company, the Automotive Business will be well positioned to serve its customers,
capitalize on exciting growth opportunities, generate value for stockholders and
provide new opportunities for our employees. We look forward to your
participation in our future.
Sincerely yours,
Larry D. Yost
Chairman of the Board
and Chief Executive Officer
<PAGE> 6
SUBJECT TO COMPLETION, DATED JUNE 13, 1997 -- FOR INFORMATION ONLY
INFORMATION STATEMENT
111 HOLDINGS, INC.
------------------
COMMON STOCK, PAR VALUE $1 PER SHARE
(INCLUDING ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
This Information Statement is being furnished to shareowners of Rockwell
International Corporation ("Rockwell") in connection with the distribution (the
"Distribution") by Rockwell to its shareowners of all of the outstanding shares
of common stock of its wholly-owned subsidiary, 111 Holdings, Inc. (the
"Company"). The Company is in the process of developing a new corporate name and
logo, which will be adopted prior to the Distribution.
The Distribution is expected to be made on September [ ], 1997, to holders
of record of common stock, par value $1 per share, of Rockwell ("Rockwell Common
Stock") as of the close of business on September [ ], 1997 (the "Record Date"),
on the basis of one share of common stock, par value $1 per share, of the
Company (the "Common Stock"; the Common Stock and the associated preferred share
purchase rights of the Company (described below) are collectively referred to
herein as the "Company Common Stock") for every three shares of Rockwell Common
Stock. No consideration will be paid by shareowners of Rockwell for the shares
of Company Common Stock to be received by them in the Distribution, nor will
they be required to surrender or exchange shares of Rockwell Common Stock or
take any other action in order to be entitled to Company Common Stock.
There is no current trading market for the Company Common Stock, although a
"when-issued" trading market is expected to develop prior to the Distribution
Date (as defined below). Application will be made to list the Company Common
Stock on the New York Stock Exchange, Inc. (the "NYSE") under the proposed
trading symbol " ".
SHAREOWNERS SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER
THE SECTION ENTITLED "SPECIAL FACTORS" IN THIS INFORMATION STATEMENT.
NO VOTE OF SHAREOWNERS IS REQUIRED IN CONNECTION WITH THE DISTRIBUTION. WE ARE
NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS INFORMATION STATEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------
THIS INFORMATION STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES.
The date of this Information Statement is [ ], 1997.
<PAGE> 7
HEAVY VEHICLE SYSTEMS
PRODUCTS
[Diagram of truck and trailer illustrating the following HVS products
supplied by the Automotive Business: Anti-Lock Braking Systems (Truck); Drive
Axles; Trailer Axles; Trailer Air Suspensions; Anti-Lock Braking Systems
(Trailer); Cam and Wedge Brakes; Automatic Slack Adjusters; Drivelines; Air
Dryers; Disc Brakes; Steer Axles; Clutches; and Transmissions.]
LIGHT VEHICLE SYSTEMS
PRODUCTS
[Diagram of passenger car illustrating the following LVS products supplied
by the Automotive Business: Sunroofs; Trunk Latches; Fuel Flap Latches; Window
Regulators and Door Modules; Door Latches and Actuators; Seat Adjusting
Systems; Steel Wheels; Remote Keyless Central Controllers; Headlamp Actuators;
Hood Latches; Stabilizer Bars; Coil Springs; and Sunvisors. Diagram also
includes note that Torsion Bars are also supplied on light trucks.]
2
<PAGE> 8
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION........................ 4
SUMMARY OF CERTAIN INFORMATION............... 5
The Distribution......................... 5
The Company.............................. 7
Summary Financial Data................... 10
Summary Pro Forma Financial Data......... 11
Pro Forma Capitalization................. 12
SPECIAL FACTORS.............................. 13
Cyclical Nature of the Automotive Industry... 13
Competition.............................. 13
Dependence on Large Customers............ 13
Industry Consolidation Trend............. 13
International Operations................. 14
Continued Implementation of the Company's
Operations Improvement Program......... 14
Absence of History as an Independent
Company................................ 14
No Prior Market For Company Common Stock;
Possibility of Substantial Sales of
Company Common Stock................... 14
Common Stock Dividend Policy............. 15
Certain Anti-takeover Effects............ 15
Certain Federal Income Tax Considerations... 15
THE DISTRIBUTION............................. 16
Introduction............................. 16
Background and Reasons for the
Distribution........................... 16
Manner of Effecting the Distribution..... 16
Listing and Trading of Company Common
Stock.................................. 17
Dividend Policy.......................... 18
Certain Federal Income Tax Consequences
of the Distribution.................... 18
Conditions; Termination.................. 19
ARRANGEMENTS BETWEEN ROCKWELL AND THE COMPANY
RELATING TO THE DISTRIBUTION............... 20
Distribution Agreement................... 20
Employee Matters Agreement............... 21
Tax Allocation Agreement................. 23
Transition Agreement..................... 23
CREDIT FACILITY.............................. 24
HISTORICAL SELECTED FINANCIAL DATA........... 25
THE AUTOMOTIVE BUSINESS...................... 26
Industry Trends.......................... 27
Business Strategies...................... 28
Products................................. 29
Customers; Sales and Marketing........... 32
Competition.............................. 33
<CAPTION>
PAGE
----
<S> <C>
Raw Materials and Supplies............... 33
Joint Ventures........................... 33
Acquisitions and Dispositions............ 33
Research and Development................. 33
Patents and Trademarks................... 34
Employees................................ 34
Seasonality; Cyclicality................. 34
Properties............................... 35
Environmental Matters.................... 35
Legal Proceedings........................ 35
UNAUDITED PRO FORMA CONDENSED FINANCIAL
STATEMENTS OF THE COMPANY.................. 36
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS................................. 38
Overview and Outlook..................... 38
Financial Condition...................... 38
Results of Operations.................... 39
Income Taxes............................. 40
International Operations................. 41
Cautionary Statement..................... 41
MANAGEMENT OF THE COMPANY.................... 42
Directors of the Company................. 42
Committees of the Board of Directors..... 43
Compensation of Directors................ 44
Executive Officers of the Company........ 45
Historical Compensation of Executive
Officers............................... 46
Option Grants............................ 47
Aggregated Option Exercises and Fiscal
Year-End Values........................ 48
Long-Term Incentive Plan Awards.......... 48
Retirement Benefits...................... 49
Benefit Plans Following the
Distribution........................... 50
Ownership of Company Common Stock........ 56
DESCRIPTION OF COMPANY CAPITAL STOCK......... 58
Company Common Stock..................... 58
Company Preferred Stock.................. 58
Certain Provisions in the Company
Certificate and Company By-Laws........ 61
Company Rights Plan...................... 65
Anti-takeover Legislation................ 68
LIABILITY AND INDEMNIFICATION OF DIRECTORS
AND OFFICERS............................... 68
INDEX TO DEFINED TERMS....................... 69
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE... F-1
</TABLE>
3
<PAGE> 9
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form 10 (the "Registration Statement")
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), with
respect to the Company Common Stock. This Information Statement does not contain
all of the information set forth in the Registration Statement and the exhibits
and schedules thereto. The Registration Statement and any amendments thereto,
including exhibits and schedules filed as a part thereof, are available for
inspection and copying as set forth below.
Following the Distribution, the Company will be subject to the
informational requirements of the Exchange Act, and in accordance therewith will
file reports, proxy statements and other information relating to its business,
financial condition and other matters with the Commission. Such reports, proxy
statements and other information filed by the Company, as well as the
Registration Statement and exhibits and schedules thereto, can be inspected and
copied at the public reference facilities of the Commission at the Commission's
office at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following
Regional Offices of the Commission: 7 World Trade Center, Suite 1300, New York,
New York 10048; and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material may also be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission also maintains a
World Wide Web site that contains reports, proxy and information statements and
other information regarding registrants (including the Company) that file
electronically with the Commission (http://www.sec.gov).
If the Company Common Stock is listed on the NYSE, reports, proxy
statements and other information concerning the Company can be inspected at the
offices of the NYSE, 20 Broad Street, New York, New York 10005.
No person is authorized to give any information or to make any
representation with respect to the matters described in this Information
Statement other than those contained herein or in the documents incorporated by
reference herein and, if given or made, such information or representation must
not be relied upon as having been authorized. This Information Statement does
not constitute an offer to sell or a solicitation of an offer to buy securities.
Neither the delivery of this Information Statement nor any distribution of
shares of Company Common Stock made hereunder shall, under any circumstances,
create any implication that there has been no change in the affairs of the
Company since the date hereof or that the information contained herein is
correct as of any time subsequent to its date.
4
<PAGE> 10
SUMMARY OF CERTAIN INFORMATION
The following summary is not intended to be complete and is qualified by
reference to the more detailed information set forth elsewhere in this
Information Statement, which should be reviewed carefully in its entirety.
Unless the context otherwise indicates, as used in this Information Statement,
the term the "Company" means the Automotive Business (as defined below) for
periods prior to the Distribution and 111 Holdings, Inc. and its subsidiaries
for periods following the Distribution. For the convenience of the reader, an
index of defined terms used herein appears on page 69.
THE DISTRIBUTION
Distributing Company....... Rockwell International Corporation, a Delaware
corporation.
Shares to be Distributed... Approximately 71 million shares of Company Common
Stock, based on the number of shares of Rockwell
Common Stock outstanding as of May 31, 1997. No
consideration will be paid by shareowners of
Rockwell for the shares of Company Common Stock to
be received by them in the Distribution, nor will
they be required to surrender or exchange shares of
Rockwell Common Stock or take any other action in
order to be entitled to Company Common Stock. See
"The Distribution -- Manner of Effecting the
Distribution".
Distribution Ratio......... One share of Company Common Stock for every three
shares of Rockwell Common Stock. See "The
Distribution -- Manner of Effecting the
Distribution".
Direct (Book-Entry)
Registration; Share
Certificates............. Company stockholders will have their ownership of
Company Common Stock registered only in book-entry
form unless they provide notice to the Distribution
Agent (as defined below) that they wish to receive
share certificates. Book-entry registration refers
to a method of recording stock ownership in the
Company's records in which no share certificates
are issued. On the Distribution Date, each holder
of Rockwell Common Stock as of the close of
business on the Record Date will be credited
through book-entry in the stock ownership
registration records of the Company with the number
of full shares of Company Common Stock to which the
shareowner is entitled. Each such Rockwell
shareowner will receive an account statement
indicating the number of shares of Company Common
Stock to which the shareowner is entitled. No
Rockwell shareowner will receive a certificate for
Company Common Stock in the Distribution unless the
shareowner notifies the Distribution Agent on or
before September [ ], 1997 that the shareowner
desires to be sent a share certificate to represent
shares of Company Common Stock. Following the
Distribution Date, any Company stockholder whose
ownership of Company Common Stock is registered in
book-entry form may obtain at any time a
certificate to represent such shares by contacting
the Transfer Agent (as defined below). See "The
Distribution -- Manner of Effecting the
Distribution".
Fractional Share
Interests.................. Fractional shares of Company Common Stock will not
be distributed. Fractional shares will be
aggregated and sold in the public market by the
Distribution Agent and the aggregate net proceeds
will be distributed ratably to those stockholders
entitled to fractional interests. See "The
Distribution -- Manner of Effecting the
Distribution". Although the
5
<PAGE> 11
Distribution is intended to be tax-free,
stockholders will recognize gain or loss for tax
purposes in an amount equal to the difference
between the cash received in respect of any
fractional share and the amount of such
stockholder's tax basis allocable to such
fractional share. See "The Distribution -- Certain
Federal Income Tax Consequences of the
Distribution".
Record Date................ The Record Date is the close of business on
September [ ], 1997.
Distribution Date.......... The Distribution is expected to occur on September
[ ], 1997 (the "Distribution Date"). On or about
the Distribution Date, the Distribution Agent will
commence mailing account statements reflecting
ownership of shares of Company Common Stock to
holders of Rockwell Common Stock as of the close of
business on the Record Date, except that the
Distribution Agent will mail certificates for
shares of Company Common Stock to such Rockwell
shareowners who have given the Distribution Agent
notice on or before September [ ], 1997 that they
wish to receive their shares of Company Common
Stock in certificate form. See "The
Distribution -- Manner of Effecting the
Distribution".
Distribution Agent......... First Chicago Trust Company of New York has been
appointed as the distribution agent (the
"Distribution Agent") for the Distribution. First
Chicago Trust Company of New York also will serve
as transfer agent and registrar (the "Transfer
Agent") for the Company Common Stock. The address
of the Distribution Agent and Transfer Agent is
P.O. Box 2500, Jersey City, New Jersey 07303-2500,
and its telephone number is (800) 519-3111.
Federal Income Tax
Consequences............. The Distribution is conditioned upon the receipt of
a ruling (the "Tax Ruling") from the Internal
Revenue Service (the "IRS") to the effect that the
Distribution will qualify as a tax-free
reorganization within the meaning of Section
368(a)(1)(D) of the Internal Revenue Code of 1986,
as amended (the "Code"). See "The
Distribution -- Certain Federal Income Tax
Consequences of the Distribution".
Trading Market and
Symbol..................... There is no current trading market for the Company
Common Stock, although a "when-issued" trading
market is expected to develop prior to the
Distribution Date. Application will be made to list
the Company Common Stock on the NYSE under the
proposed trading symbol " ". See "The
Distribution -- Listing and Trading of Company
Common Stock".
Conditions to the
Distribution............... The Distribution is conditioned upon, among other
things: (i) receipt of the Tax Ruling; (ii) final
approval of the Distribution by the Board of
Directors of Rockwell; (iii) receipt of all
material consents required to effect the
Distribution; (iv) the Registration Statement being
declared effective by the Commission; (v) the
Company Common Stock being approved for listing on
the NYSE; and (vi) a "no-action" letter from the
staff of the Commission regarding certain aspects
of the Distribution being issued and in full force
and effect. Regardless of whether the conditions
are satisfied, the Distribution Agreement (as
defined below) may be terminated and the
Distribution abandoned by Rockwell's Board of
Directors, in its sole discretion, without the
approval of Rockwell
6
<PAGE> 12
shareowners, at any time prior to the Distribution.
See "The Distribution -- Conditions; Termination".
Arrangements Between
Rockwell and the Company
Relating to the
Distribution............. For the purpose of governing certain of the
relationships between Rockwell and the Company
relating to the Distribution, and to provide for an
orderly transition, Rockwell and the Company will,
prior to the Distribution, enter into certain
agreements, including (i) the Distribution
Agreement providing for, among other things, the
principal corporate transactions required to effect
the separation of the Automotive Business from the
Electronics Business (as defined below) and the
Distribution, and certain other agreements
governing the relationship between Rockwell and the
Company with respect to or in consequence of the
Distribution; (ii) the Employee Matters Agreement
(as defined below) providing for, among other
things, certain matters relating to employees,
employee benefit plans and certain compensation
arrangements for current and former employees of
the Automotive Business and their beneficiaries;
(iii) the Tax Allocation Agreement (as defined
below) providing for, among other things, the
allocation between Rockwell and the Company of
federal, state, local and foreign tax liabilities
relating to the Automotive Business; and (iv) the
Transition Agreement (as defined below) providing
for, among other things, the provision by Rockwell
to the Company, for specified periods after the
Distribution Date and on mutually agreed terms, of
certain services which prior to the Distribution
Date have been provided to the Company by Rockwell.
THE COMPANY
The Company................ The Company, a Delaware corporation incorporated in
May 1997, is currently a wholly-owned subsidiary of
Rockwell with no material assets. Following
consummation of the Distribution, the Company will
be a separately-traded public company and will own
and operate the Automotive businesses now owned and
operated by Rockwell (the "Automotive Business").
Prior to the Distribution Date, Rockwell will
transfer substantially all of the operations,
assets and liabilities related to the Automotive
Business (including liabilities relating to former
operations) to the Company or to subsidiaries of
Rockwell that prior to the Distribution will become
wholly-owned subsidiaries of the Company. The
principal corporate offices of the Company are
located at 2135 West Maple Road, Troy, Michigan
48084-7186; and its telephone number is (248)
435-1000.
The Automotive Business.... The Automotive Business is a leading global
supplier of a broad range of components and systems
for use in commercial, specialty and light
vehicles. The Automotive Business serves its
customers worldwide through Heavy Vehicle Systems
("HVS") and Light Vehicle Systems ("LVS"). HVS
supplies drivetrain systems and components,
including axles, brakes, transmissions, clutches
and drivelines, for heavy-duty and medium-duty
trucks, trailers, off-highway equipment, buses and
coaches, as well as other specialty and military
vehicles. LVS supplies electromechanical and other
components and systems, including roof, door,
7
<PAGE> 13
access control and seat adjusting systems, as well
as suspension products and steel wheels, for
passenger cars, light trucks and sport utility
vehicles. In fiscal 1996, the Automotive Business
had sales of over $3.1 billion and operating
earnings of $182 million (before restructuring
charges of $36 million). See "The Automotive
Business" and "Financial Statements".
Management of the Company has established long-term
financial goals, which include 8% average annual
sales growth, 15% average annual earnings per share
growth and long-term debt to capitalization of 45%,
with a strong emphasis on cash management. The
long-term average annual goals have been
established with the recognition that the industry
in which the Automotive Business operates has been
characterized historically by periodic fluctuations
in overall demand for commercial, specialty and
light vehicles for which the Automotive Business
supplies products, resulting in corresponding
fluctuations in demand for products of the
Automotive Business. Accordingly, the Company will
measure its performance against these goals over a
multi-year period. See "Management's Discussion and
Analysis of Financial Condition and Results of
Operations -- Cautionary Statement".
Management................. All of the initial executive officers of the
Company are expected to be persons who currently
serve as officers or other employees of the
Automotive Business or Rockwell. All such persons
who are employees of Rockwell will resign from
their positions with Rockwell prior to the
Distribution, so that the Company and Rockwell will
have no executive officers in common and none of
the executive officers of the Company will be
employees of Rockwell. It is expected that the
Chairman and Chief Executive Officer of Rockwell
will serve as a non-executive director of the
Company. See "Management of the Company".
Pre-Distribution Payment to
Rockwell................. Prior to the Distribution, the Company will pay
approximately $445 million in cash to Rockwell
through a combination of dividends and other
payments, including repayments of intercompany
indebtedness (collectively, the "Pre-Distribution
Payment"). The Company will fund the
Pre-Distribution Payment through borrowings under
the Credit Facility (as defined below) to be
entered into with a group of banks. Rockwell will
use the proceeds of the Pre-Distribution Payment to
repay outstanding indebtedness. See "Credit
Facility". The effect of these payments will be to
adjust the post-Distribution capital structure of
each of Rockwell and the Company by decreasing the
consolidated debt of Rockwell and increasing the
consolidated debt of the Company. The amount of the
Pre-Distribution Payment was determined based on
the anticipated ability of the Company to generate
cash flow and with the intention of establishing a
strong capital structure for the Company.
Credit Facility............ Prior to the Distribution, the Company will enter
into a $1 billion five-year unsecured revolving
credit facility with a group of banks, which will
be used to fund the Pre-Distribution Payment and
for working capital and other general corporate
purposes of the Company and its subsidiaries
following the Distribution. See "Credit Facility".
8
<PAGE> 14
Certain Provisions of the
Company's Restated
Certificate
of Incorporation and
Amended
By-Laws; Rights
Agreement................ Certain provisions of the Company's Restated
Certificate of Incorporation (the "Company
Certificate") and the Company's Amended By-Laws
(the "Company By-Laws"), as each will be in effect
as of the Distribution Date, would have the effect
of making more difficult an acquisition of control
of the Company in a transaction not approved by the
Company's Board of Directors. See "Description of
Company Capital Stock -- Certain Provisions in the
Company Certificate and Company By-Laws". The
Rights Agreement to be entered into between the
Company and First Chicago Trust Company of New
York, as rights agent, also would make more
difficult an acquisition of control of the Company
in a transaction not approved by the Board of
Directors of the Company. See "Description of
Company Capital Stock -- Company Rights Plan".
Post-Distribution Dividend
Policy................... It is anticipated that following the Distribution,
the Company initially will pay quarterly cash
dividends which, on an annual basis, will equal
$[ ] per share and Rockwell initially will pay
quarterly cash dividends which, on an annual basis,
will equal $[ ] per share. It is therefore
anticipated that the aggregate cash dividends
payable after the Distribution to a holder of
Rockwell Common Stock in respect of (i) shares of
Rockwell Common Stock held on the Distribution Date
and (ii) shares of Company Common Stock received in
the Distribution (giving effect to the distribution
ratio of one share of Company Common Stock for
every three shares of Rockwell Common Stock) will
initially equal the annual rate of the cash
dividend currently paid on Rockwell Common Stock of
$1.16 per share. However, no formal action with
respect to any such dividends has been taken and
the declaration and payment of dividends by the
Company and Rockwell will be at the sole discretion
of their respective Boards of Directors. See "The
Distribution -- Dividend Policy".
Special Factors............ Shareowners should carefully consider the matters
discussed under the section entitled "Special
Factors" in this Information Statement.
9
<PAGE> 15
SUMMARY FINANCIAL DATA
The following summary financial data (other than employee data) have been
derived from the financial statements of the Automotive Business. The data
should be read in conjunction with the financial statements of the Automotive
Business and notes thereto included elsewhere in this Information Statement. The
statement of income data for the years ended September 30, 1994, 1995 and 1996
and the balance sheet data as of September 30, 1995 and 1996 have been derived
from the audited financial statements of the Automotive Business. The statement
of income data for the years ended September 30, 1992 and 1993 and the balance
sheet data as of September 30, 1992, 1993 and 1994 have been derived from
unaudited financial information of the Automotive Business. The statement of
income data for the six months ended March 31, 1996 and 1997 and the balance
sheet data as of March 31, 1996 and 1997 have been derived from the unaudited
financial information of the Automotive Business, which, in the opinion of
management, include all adjustments necessary for a fair presentation of assets
and liabilities as of such dates and results of operations for such periods.
Results for the six months ended March 31, 1997 are not necessarily indicative
of the results that may be expected for the entire year ending September 30,
1997.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED SEPTEMBER 30, MARCH 31,
-------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
------ ------ ------ ------ ------ ---------- ------
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Sales........................................... $2,279 $2,358 $2,653 $3,125 $3,144 $1,593 $1,578
Operating earnings before restructuring
charges(1).................................... 71 100 91 178 182 93 97
As a percent of sales(1)...................... 3.1% 4.2% 3.4% 5.7% 5.8% 5.8% 6.1%
Interest expense................................ $ 23 $ 13 $ 12 $ 11 $ 10 $ 5 $ 4
Net income...................................... 30 57 51 123 114 65 62
BALANCE SHEET DATA: (at end of period)
Working capital(2).............................. $ 153 $ 185 $ 204 $ 216 $ 229 $ 243 $ 265
Property, net................................... 646 588 617 647 646 621 618
Total assets.................................... 1,608 1,488 1,638 1,766 1,833 1,778 1,841
Long-term debt.................................. 15 9 35 31 24 28 20
Minority interests.............................. 18 21 21 24 29 25 36
Equity.......................................... 496 468 509 561 599 569 620
OTHER DATA:
Cash provided by operating activities........... $ 113 $ 162 $ 156 $ 203 $ 197 $ 71 $ 56
Capital expenditures............................ 102 100 102 119 144 57 37
Depreciation and amortization................... 100 92 93 97 102 47 48
EBITDA(3)....................................... 183 207 193 293 294 156 154
Employees at year end........................... 16,500 16,300 17,200 16,700 15,300
</TABLE>
- ---------------
(1) Operating earnings before restructuring charges of $36 million during the
last six months of fiscal 1996.
(2) Working capital consists of all current assets and current liabilities,
including cash and short-term debt.
(3) EBITDA is defined as income before taxes, plus interest expense,
depreciation and amortization.
10
<PAGE> 16
SUMMARY PRO FORMA FINANCIAL DATA
The following sets forth summary unaudited pro forma financial data of the
Automotive Business, giving effect to the Distribution, the incurrence of
indebtedness necessary to make the Pre-Distribution Payment to Rockwell in the
amount of $445 million and the reduction of corporate costs from those allocated
to the Company by Rockwell to management's estimate of stand-alone corporate
costs. For purposes of the pro forma statement of income data, such transactions
are assumed to have taken place on October 1, 1995. For purposes of the pro
forma balance sheet data, such transactions are assumed to have taken place on
March 31, 1997. The summary pro forma financial data should be read in
conjunction with the more detailed pro forma financial data and notes thereto
included in this Information Statement under "Unaudited Pro Forma Condensed
Financial Statements of the Company".
<TABLE>
<CAPTION>
PRO FORMA FINANCIAL DATA
----------------------------------------------------
FISCAL YEAR SIX MONTHS SIX MONTHS
ENDED ENDED ENDED
SEPTEMBER 30, 1996 MARCH 31, 1996 MARCH 31, 1997
------------------ -------------- --------------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
STATEMENT OF INCOME DATA:
Sales................................ $3,144 $1,593 $1,578
Operating earnings before
restructuring charges(1)........... 192 98 103
Interest expense..................... (37) (18) (17)
Net income........................... 102 60 58
Earnings per share(2)................ 1.41 .83 .80
BALANCE SHEET DATA: (at end of
period)
Working capital...................... 265
Property, net........................ 618
Total assets......................... 1,901
Long-term debt....................... 465
Minority interests................... 36
Equity............................... 175
OTHER DATA:
Cash provided by operating
activities......................... 185 66 52
EBITDA(3)............................ 304 161 160
</TABLE>
- ---------------
(1) Operating earnings before restructuring charges of $36 million during the
last six months of fiscal 1996.
(2) Earnings per share are based on the anticipated post-Distribution capital
structure of the Company. These amounts are based on average outstanding
shares of Rockwell Common Stock of 217.6 million for the year ended
September 30, 1996, and 217.2 million and 217.4 million for the six months
ended March 31, 1996 and 1997, respectively, and the distribution ratio of
one share of Company Common Stock for every three shares of Rockwell Common
Stock outstanding.
(3) EBITDA is defined as income before taxes, plus interest expense,
depreciation and amortization.
11
<PAGE> 17
PRO FORMA CAPITALIZATION
The following table sets forth the unaudited pro forma cash, short-term
debt and capitalization of the Company as of March 31, 1997. This information
should be read in conjunction with the pro forma balance sheet and the
introduction to the pro forma financial statements appearing elsewhere herein.
The pro forma information may not reflect the cash, short-term debt and
capitalization of the Company in the future or as it would have been had the
Company been a stand-alone company on March 31, 1997. Assumptions regarding the
number of shares of Company Common Stock may not reflect the actual number
outstanding on the Distribution Date.
PRO FORMA CAPITALIZATION TABLE
AS OF MARCH 31, 1997
<TABLE>
<CAPTION>
AUTOMOTIVE
BUSINESS PRO FORMA COMPANY PRO
HISTORICAL ADJUSTMENTS FORMA
------------- ------------- -------------
(IN MILLIONS)
<S> <C> <C> <C>
Cash........................................ $ 70 $ 60 (1) $ 130
========= ========= =========
Short-term debt............................. 20 -- 20
========= ========= =========
Long-term debt.............................. 20 445 (2) 465
Minority interests.......................... 36 -- 36
Stockholders' equity:
Rockwell's net investment.............. 681 (681)(3) --
Common Stock........................... -- 71 (3) 71
Additional paid-in capital............. -- 610 (3) 165
(445)(2)
Retained earnings...................... -- --
Currency translation................... (61) -- (61)
--------- --------- ---------
Total stockholders' equity............. 620 (445) 175
--------- --------- ---------
Total capitalization.............. $ 676 $ -- $ 676
========= ========= =========
</TABLE>
- ---------------
(1) The Automotive Business will incur approximately $60 million in Canadian
income taxes in connection with the transfer of assets in Canada prior to
the Distribution and Rockwell will provide cash to fund the tax payment.
(2) Long-term debt incurred to finance the Pre-Distribution Payment to be made
by the Company to Rockwell.
(3) To reflect the Distribution as the elimination of Rockwell's net investment
and the issuance of an estimated 71 million shares of Company Common Stock,
par value $1 per share. This is based on the number of shares of Rockwell
Common Stock outstanding on March 31, 1997 of approximately 214 million
shares and the distribution ratio of one share of Company Common Stock for
every three shares of Rockwell Common Stock outstanding.
12
<PAGE> 18
SPECIAL FACTORS
Shareowners should carefully consider and evaluate all of the information
set forth in this Information Statement, including the special factors listed
below. In addition to the historical information included herein, this
Information Statement contains statements relating to future results of the
Company (including certain projections and business trends) that are
"forward-looking statements" as defined in the Private Securities Litigation
Reform Act of 1995. Actual results may differ materially from those projected as
a result of certain risks and uncertainties, including but not limited to the
factors listed below and those detailed from time to time in the filings of the
Company with the Commission. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Cautionary Statement".
CYCLICAL NATURE OF THE AUTOMOTIVE INDUSTRY
The industry in which the Automotive Business operates has been
characterized historically by periodic fluctuations in overall demand for
commercial, specialty and light vehicles for which the Automotive Business
supplies products, resulting in corresponding fluctuations in demand for
products of the Automotive Business. While the Automotive Business has sought
and will continue to seek to expand its operations globally so as, among other
things, to mitigate the effect of periodic fluctuations in demand of the
automotive industry in one or more particular countries, the cyclical nature of
the automotive industry presents a risk that is outside the control of the
Company and that cannot be accurately predicted. The Automotive Business also
experiences certain seasonal variations in the demand for its products to the
extent automotive vehicle production fluctuates. See "The Automotive
Business -- Seasonality; Cyclicality".
COMPETITION
The Automotive Business operates in a highly competitive environment.
Principal competitive factors are price, quality, service, product performance,
design and engineering capabilities, new product innovation and timely delivery.
The Automotive Business competes worldwide with a number of United States and
international manufacturers that are both larger and smaller than the Company in
terms of resources and market shares. In addition, certain original equipment
manufacturers ("OEMs") manufacture for their own use products of the type
supplied by the Company.
DEPENDENCE ON LARGE CUSTOMERS
The Automotive Business is dependent upon large OEM customers with
substantial bargaining power, including with respect to price and other
commercial terms. Although the Automotive Business believes that it generally
enjoys good relations with its OEM customers, loss of all or a substantial
portion of the Automotive Business's sales to any of its large volume customers
for whatever reason (including, but not limited to, reduced or delayed customer
requirements or strikes or other work stoppages affecting production by such
customers) could have a significant adverse effect on the Company's financial
results. In addition, the Automotive Business sells products to certain OEM
customers under long-term arrangements that require the Automotive Business to
provide annual cost reductions (through price reductions or other cost benefits
to the OEMs) by certain percentages each year. See "The Automotive
Business -- Customers; Sales and Marketing". If the Company were unable to
generate sufficient production costs savings in the future to offset such price
reductions, the Company's gross margins could be adversely affected.
INDUSTRY CONSOLIDATION TREND
The industry in which the Automotive Business operates has recently
experienced significant consolidation among suppliers. Such consolidation is in
part attributable to OEMs more frequently awarding long-term, sole-source or
preferred supplier contracts to the most capable global suppliers, thereby
reducing the total number of suppliers from whom components and systems are
purchased. While the Automotive Business is a leading supplier of automotive
components and systems in many of the markets for its products and will consider
acquisitions as a means of further expansion, there can be no assurance that the
Company will
13
<PAGE> 19
participate in the industry consolidation or that it will not be disadvantaged
as a result of consolidation by other suppliers. See "The Automotive
Business -- Competition" and "-- Acquisitions and Dispositions".
INTERNATIONAL OPERATIONS
For the fiscal year ended September 30, 1996, approximately 44% of total
sales of the Automotive Business consisted of sales outside North America. The
Company's international operations are subject to a number of risks inherent in
operating abroad, including, but not limited to, risks with respect to currency
exchange rate fluctuations, local economic and political conditions, disruptions
of capital and trading markets, restrictive governmental actions (such as
restrictions on transfer of funds and trade protection measures, including
export duties and quotas and customs duties and tariffs), changes in legal or
regulatory requirements, import or export licensing requirements, limitations on
the repatriation of funds, difficulty in obtaining distribution and support,
nationalization, the laws and policies of the United States affecting trade,
foreign investment and loans, and tax laws. There can be no assurance that these
factors will not have a material adverse impact on the Company's ability to
increase or maintain its foreign sales or on its financial condition or results
of operations.
CONTINUED IMPLEMENTATION OF THE COMPANY'S OPERATIONS IMPROVEMENT PROGRAM
The Automotive Business has made significant efforts to increase operating
efficiencies, reduce costs and improve its core business processes. In 1994, the
Automotive Business began to implement a strategic program to realign
principally its HVS operations in order to improve product quality and customer
service, rationalize production, reduce costs and focus on its core strengths
and product lines. In 1996, the Automotive Business implemented restructuring
actions related to plant consolidations, staff reductions and outsourcing. The
Company intends to continue its efforts to increase operating efficiencies,
reduce costs and improve its core business processes. See "The Automotive
Business -- Business Strategies". While the Company believes the strategic
actions already taken have benefited the Automotive Business, there can be no
assurance that such efforts ultimately will succeed or that further benefits
will be achieved.
ABSENCE OF HISTORY AS AN INDEPENDENT COMPANY
The Company was formed for the purpose of effecting the Distribution and
does not have an operating history as an independent company. Accordingly, the
financial information included herein may not necessarily reflect the results of
operations, financial position and cash flows of the Automotive Business had the
Company been operated independently during the periods presented. While the
Automotive Business has been profitable as part of Rockwell, there is no
assurance that as a stand-alone company profits will continue at a similar
level. The Automotive Business has historically relied on Rockwell for various
financial and administrative services. After the Distribution, the Company will
maintain its own banking relationships, sources of long-term funding and
administrative functions. See "Arrangements Between Rockwell and the Company
Relating to the Distribution -- Transition Agreement" and "Credit Facility".
NO PRIOR MARKET FOR COMPANY COMMON STOCK; POSSIBILITY OF SUBSTANTIAL SALES OF
COMPANY COMMON STOCK
There is no current trading market for the Company Common Stock, and while
a "when-issued" trading market is expected to develop prior to the Distribution
Date, there can be no assurance as to the prices at which trading in the Company
Common Stock will occur after completion of the Distribution. Until the Company
Common Stock is fully distributed and an orderly market develops, the prices at
which trading in such stock occurs may fluctuate significantly. There can be no
assurance that an active trading market in the Company Common Stock will develop
or be sustained in the future. The prices at which shares of Company Common
Stock trade will be determined by the marketplace and may be influenced by many
factors, including, among other things, the Company's performance and prospects,
the depth and liquidity of the market for Company Common Stock, investor
perception of the Company and the industry in which it operates, the Company's
dividend policy, general financial and other market conditions, and domestic and
international economic conditions. Application will be made to list the Company
Common Stock on the
14
<PAGE> 20
NYSE under the proposed trading symbol " ". See "The
Distribution -- Listing and Trading of Company Common Stock".
Substantially all of the shares of Company Common Stock distributed in the
Distribution will be eligible for immediate resale in the public market. In
spin-off transactions similar to the Distribution, it is not unusual for a
significant redistribution of shares to occur during the first few weeks or even
months following completion of the spin-off. Neither Rockwell nor the Company is
able to predict whether substantial amounts of Company Common Stock will be sold
in the open market following the Distribution or what effect such sales may have
on prices at which shares of Company Common Stock may trade. Any sales of
substantial amounts of Company Common Stock in the public market during this
period, or the perception that any redistribution has not been completed, could
materially adversely affect the market price of Company Common Stock. For a
description of the treatment of shares of Company Common Stock to be held by the
Rockwell International Corporation Savings Plan (the "Rockwell Savings Plan"),
see "Arrangements Between Rockwell and the Company Relating to the
Distribution -- Employee Matters Agreement".
COMMON STOCK DIVIDEND POLICY
The payment and amount of cash dividends on the Company Common Stock after
the Distribution will be subject to the sole discretion of the Company's Board
of Directors. The Company's dividend policy will be reviewed by the Company's
Board of Directors at such times as may be deemed appropriate, and payment of
dividends on the Company Common Stock will depend upon the Company's financial
position, capital requirements, profitability and such other factors as the
Company's Board of Directors deems relevant. See "The Distribution -- Dividend
Policy".
CERTAIN ANTI-TAKEOVER EFFECTS
The Company Certificate, the Company By-Laws, the Company Rights Agreement
(as defined below) and the General Corporation Law of the State of Delaware (the
"DGCL") contain several provisions that would make more difficult the
acquisition of control of the Company in a transaction not approved by the
Company's Board of Directors. See "Description of Company Capital
Stock -- Certain Provisions in the Company Certificate and Company By-Laws" and
"-- Company Rights Plan".
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The Distribution is conditioned upon receipt of the Tax Ruling from the IRS
to the effect that, among other things, for United States federal income tax
purposes the Distribution will be tax-free under Section 368(a)(1)(D) of the
Code. See "The Distribution -- Certain Federal Income Tax Consequences of the
Distribution". The continuing validity of any such ruling is subject to certain
factual representations and assumptions. Rockwell and the Company are not aware
of any facts or circumstances which would cause such representations and
assumptions to be untrue. The Tax Allocation Agreement provides that neither
Rockwell nor the Company is to take any action inconsistent with, nor fail to
take any action required by, the request for the Tax Ruling or the Tax Ruling
unless required to do so by law or the other party has given its prior written
consent or, in certain circumstances, a supplemental ruling permitting such
action is obtained. Rockwell and the Company have agreed to indemnify each other
with respect to any tax liability resulting from their respective failures to
comply with such provisions. In addition, the Tax Allocation Agreement provides
that the Company will be responsible for any taxes imposed on Rockwell, the
Company or Rockwell shareowners as a result of the failure of the Distribution
to qualify as a tax-free reorganization within the meaning of Section
368(a)(1)(D) of the Code if such failure is attributable to certain actions by
or in respect of the Company (including its subsidiaries) or its stockholders,
such as the acquisition of the Company by a third party at a time and in a
manner that would cause such a failure. In the event such taxes were to become
payable by the Company, such payment would have a material adverse effect on the
financial position, results of operations and cash flow of the Company. See
"Arrangements Between Rockwell and the Company Relating to the
Distribution -- Tax Allocation Agreement".
15
<PAGE> 21
THE DISTRIBUTION
INTRODUCTION
On March 15, 1997, the Board of Directors of Rockwell approved in principle
a plan to separate Rockwell into two companies by means of a tax-free spin-off
of the Automotive Business. Such approval was conditioned upon, among other
things, receipt of the Tax Ruling and final approval by Rockwell's Board of
Directors. The spin-off is intended to be effected through the Distribution. At
the time of the Distribution, the Company will own, through subsidiaries,
substantially all of the assets, liabilities (including liabilities relating to
former operations) and operations which prior to the Distribution Date comprise
the Automotive Business. See "The Automotive Business". On the Distribution
Date, Rockwell will effect the Distribution by delivering all of the outstanding
shares of Company Common Stock to the Distribution Agent for distribution to the
holders of record of Rockwell Common Stock as of the close of business on the
Record Date.
Shareowners of Rockwell with inquiries relating to the Distribution should
contact the Distribution Agent, telephone number (800) 519-3111 or Rockwell,
Shareowner Services, telephone number (412) 565-7120. After the Distribution
Date, stockholders of the Company with inquiries relating to the Distribution or
their investment in the Company should contact the Company at 2135 West Maple
Road, Troy, Michigan 48084, telephone number (248) 435-1000 or First Chicago
Trust Company of New York, the Company's Transfer Agent, at P.O. Box 2500,
Jersey City, New Jersey 07303-2500, telephone number (800) 519-3111.
BACKGROUND AND REASONS FOR THE DISTRIBUTION
Rockwell's Board of Directors believes that the Distribution will
accomplish a number of important business objectives and, by enabling Rockwell
and the Company to develop their respective businesses separately, should better
position the two companies to produce greater total shareowner value over the
long term. The Distribution will separate two business segments (with the
Company operating the Automotive Business and Rockwell retaining its Automation,
Semiconductor Systems and Avionics & Communications businesses (the "Electronics
Business")) with distinct financial, investment and operating characteristics so
that each can adopt strategies and pursue objectives appropriate to its specific
business. The Distribution will permit the management of each company to
prioritize the allocation of its respective management and financial resources
for achievement of its own corporate objectives. In particular, Rockwell
believes that the Distribution will permit each business to maximize its
strengths and provide greater flexibility to pursue business opportunities,
including acquisitions, joint ventures and other business combinations. In
addition, the establishment of Company Common Stock as a separate,
publicly-traded equity security will increase the Company's ability to
participate in the ongoing process of consolidation in its industry by
facilitating the Company's ability to effect acquisitions using Company Common
Stock as consideration. Further, the Distribution is expected to allow each of
Rockwell and the Company to attract, motivate and retain key personnel by
enabling Rockwell and the Company to provide more effective incentive
compensation programs that are based on the performance of the respective
business in which such individuals are employed without being influenced by the
results of the business in which they have no involvement. Moreover, the
Distribution will enable stockholders and potential investors to evaluate better
the financial performance of each business and its strategies, enhancing the
likelihood that each will achieve appropriate market recognition for its own
performance.
MANNER OF EFFECTING THE DISTRIBUTION
The Distribution was formally declared on [ ], 1997 (conditioned,
among other things, upon receipt of the Tax Ruling from the IRS) and will be
made on the Distribution Date to shareowners of record of Rockwell Common Stock
as of the close of business on the Record Date. In the Distribution, each
Rockwell shareowner will receive one share of Company Common Stock for every
three shares of Rockwell Common Stock held as of the close of business on the
Record Date. The delivery of a share of Company Common Stock in connection with
the Distribution also will constitute the delivery of the Company Right (as
defined below) associated with such share. Based on the number of shares of
Rockwell Common Stock
16
<PAGE> 22
outstanding as of May 31, 1997, approximately 71 million shares of Company
Common Stock will be distributed in the Distribution.
At the time of the Distribution, shares of Company Common Stock will be
delivered to the Distribution Agent. Company stockholders will have their
ownership of Company Common Stock registered only in book-entry form unless they
provide notice as described below that they wish to receive share certificates.
Book-entry registration refers to a method of recording stock ownership in the
Company's records in which no share certificates are issued.
On the Distribution Date, each owner of Rockwell Common Stock as of the
close of business on the Record Date will be credited through book-entry in the
stock ownership registration records of the Company with the number of full
shares of Company Common Stock to which the shareowner is entitled. Commencing
on or about the Distribution Date, the Distribution Agent will begin mailing
account statements to such Rockwell shareowners indicating the number of shares
of Company Common Stock to which each such shareowner is entitled, except that
the Distribution Agent will mail certificates for full shares of Company Common
Stock to such owners of Rockwell Common Stock who have given the Distribution
Agent notice on or before September [ ], 1997 that they wish to receive
their shares of Company Common Stock in certificate form. All shares of Company
Common Stock distributed in the Distribution will be fully paid and
nonassessable and holders thereof will not be entitled to preemptive rights. See
"Description of Company Capital Stock -- Company Common Stock". Following the
Distribution Date, any Company stockholder whose ownership of Company Common
Stock is registered in book-entry form may obtain at any time a certificate to
represent such shares by contacting the Transfer Agent. The Distribution Agent
and the Transfer Agent is First Chicago Trust Company of New York; its address
is P.O. Box 2500, Jersey City, New Jersey 07303-2500, and its telephone number
is (800) 519-3111.
Fractional shares of Company Common Stock will not be distributed.
Fractional shares of Company Common Stock will be aggregated and sold in the
public market by the Distribution Agent and the aggregate net proceeds will be
distributed ratably to those stockholders entitled to fractional interests. See
"-- Certain Federal Income Tax Consequences of the Distribution".
Participants in the Rockwell Savings Plan will have their Rockwell Common
Stock accounts credited with the number of shares (including fractional shares)
of Company Common Stock distributed in the Distribution in respect of the
Rockwell Common Stock held in their Rockwell Savings Plan accounts. Individual
Rockwell Savings Plan participants, rather than the Rockwell Savings Plan, will
have authority to determine if and when shares of Company Common Stock held in
their Rockwell Savings Plan accounts will be sold. See "Arrangements Between
Rockwell and the Company Relating to the Distribution -- Employee Matters
Agreement".
NO CONSIDERATION WILL BE PAID BY SHAREOWNERS OF ROCKWELL FOR THE SHARES OF
COMPANY COMMON STOCK TO BE RECEIVED BY THEM IN THE DISTRIBUTION, NOR WILL THEY
BE REQUIRED TO SURRENDER OR EXCHANGE SHARES OF ROCKWELL COMMON STOCK OR TAKE ANY
OTHER ACTION IN ORDER TO BE ENTITLED TO COMPANY COMMON STOCK.
The Distribution will not affect the number of outstanding shares of
Rockwell Common Stock or the rights attendant thereto. Certificates representing
outstanding shares of Rockwell Common Stock will continue also to represent
rights to purchase shares of Series A Junior Participating Preferred Stock,
without par value, of Rockwell ("Rockwell Junior Preferred Stock") pursuant to
the Rights Agreement, dated as of November 30, 1996, between Rockwell and
ChaseMellon Shareholder Services, L.L.C., as rights agent.
LISTING AND TRADING OF COMPANY COMMON STOCK
There is no current trading market for the Company Common Stock, and while
a "when-issued" trading market is expected to develop prior to the Distribution
Date, there can be no assurance as to the prices at
17
<PAGE> 23
which trading in the Company Common Stock will occur after completion of the
Distribution. See "Special Factors -- No Prior Market For Company Common Stock;
Possibility of Substantial Sales of Company Common Stock".
Application will be made to list the Company Common Stock on the NYSE under
the proposed trading symbol " ". The Company initially will have approximately
63,700 stockholders of record, based on the number of record holders of Rockwell
Common Stock as of May 31, 1997. The Transfer Agent for the Company Common Stock
will be First Chicago Trust Company of New York. For certain information
regarding employee options to purchase Company Common Stock that will be or may
become outstanding after the Distribution, see "Arrangements Between Rockwell
and the Company Relating to the Distribution -- Employee Matters Agreement",
"Management of the Company -- Historical Compensation of Executive Officers" and
"-- Benefit Plans Following the Distribution".
Shares of Company Common Stock distributed to Rockwell shareowners in the
Distribution will be freely transferable, except for shares received by persons
who may be deemed to be "affiliates" of the Company under the Securities Act of
1933, as amended (the "Securities Act"), and the rules promulgated thereunder.
Persons who may be deemed to be affiliates of the Company after the Distribution
generally include individuals or entities that control, are controlled by, or
are under common control with the Company, and may include certain officers and
directors of the Company as well as principal stockholders of the Company, if
any. Persons who are affiliates of the Company will be permitted to sell their
shares of Company Common Stock only pursuant to an effective registration
statement under the Securities Act or an exemption from the registration
requirements of the Securities Act, such as the exemption afforded by Rule 144
under the Securities Act.
DIVIDEND POLICY
It is anticipated that following the Distribution, the Company initially
will pay quarterly cash dividends which, on an annual basis, will equal $[ ]
per share and Rockwell initially will pay quarterly cash dividends which, on an
annual basis, will equal $[ ] per share. It is therefore anticipated that
the aggregate cash dividends payable after the Distribution to a holder of
Rockwell Common Stock in respect of (i) shares of Rockwell Common Stock held on
the Distribution Date and (ii) shares of Company Common Stock received in the
Distribution (giving effect to the distribution ratio of one share of Company
Common Stock for every three shares of Rockwell Common Stock) will initially
equal the annual rate of the cash dividend currently paid on Rockwell Common
Stock of $1.16 per share. However, no formal action with respect to any such
dividends has been taken and the declaration and payment of dividends by the
Company and Rockwell will be at the sole discretion of their respective Boards
of Directors. See "Special Factors -- Common Stock Dividend Policy".
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION
Rockwell has requested the Tax Ruling from the IRS to the effect that,
among other things, the Distribution will qualify as a tax-free reorganization
within the meaning of Section 368(a)(1)(D) of the Code. So long as the
Distribution qualifies under Section 368(a)(1)(D) of the Code, the material
United States federal income tax consequences of the Distribution will be as
follows:
(i) no gain or loss will be recognized by or be includable in the
income of a holder of Rockwell Common Stock solely as a result of the
receipt of Company Common Stock in the Distribution, except, as described
below, in connection with cash received in lieu of fractional shares of
Company Common Stock;
(ii) no gain or loss will be recognized by Rockwell upon the
Distribution;
(iii) assuming that a holder of Rockwell Common Stock holds such
Rockwell Common Stock as a capital asset, such holder's holding period for
Company Common Stock received in the Distribution will include the period
during which such Rockwell Common Stock was held;
18
<PAGE> 24
(iv) a Rockwell shareowner who receives cash as a result of the sale
of a fractional share by the Distribution Agent on behalf of such
shareowner will be treated as having received such fractional share in the
Distribution and then as having sold such fractional share; such shareowner
will recognize gain or loss equal to the difference between the cash
received and the amount of tax basis allocable (as described below) to such
fractional share and such gain or loss will be capital gain or loss if such
fractional share would have been held by such shareowner as a capital
asset; and
(v) the tax basis of Rockwell Common Stock held by a Rockwell
shareowner immediately prior to the Distribution will be apportioned (based
upon relative fair market values at the time of the Distribution) between
such Rockwell Common Stock and Company Common Stock received (including any
fractional share of Company Common Stock deemed received) by such
shareowner in the Distribution.
Promptly following the Distribution, information with respect to the
allocation of tax basis between Rockwell Common Stock and Company Common Stock
will be made available to the holders of Rockwell Common Stock.
THE FOREGOING IS ONLY A SUMMARY OF CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES OF THE DISTRIBUTION UNDER CURRENT LAW AND IS INTENDED FOR GENERAL
INFORMATION ONLY. EACH ROCKWELL SHAREOWNER SHOULD CONSULT HIS OR HER TAX ADVISOR
AS TO THE PARTICULAR CONSEQUENCES OF THE DISTRIBUTION TO SUCH SHAREOWNER,
INCLUDING THE APPLICATION OF STATE, LOCAL AND FOREIGN TAX LAWS, AND AS TO
POSSIBLE CHANGES IN TAX LAW THAT MAY AFFECT THE TAX CONSEQUENCES DESCRIBED
ABOVE.
The Tax Allocation Agreement provides that neither Rockwell nor the Company
is to take any action inconsistent with, nor fail to take any action required
by, the request for the Tax Ruling or the Tax Ruling unless required to do so by
law or the other party has given its prior written consent or, in certain
circumstances, a supplemental ruling permitting such action is obtained. See
"Arrangements Between Rockwell and the Company Relating to the
Distribution -- Tax Allocation Agreement".
CONDITIONS; TERMINATION
The Distribution is subject to certain conditions as set forth in the
Distribution Agreement. Regardless of whether the conditions are satisfied,
Rockwell's Board of Directors, in its sole discretion, without approval of
Rockwell's shareowners, may terminate the Distribution Agreement and abandon the
Distribution at any time prior to the Distribution. See "Arrangements Between
Rockwell and the Company Relating to the Distribution -- Distribution
Agreement".
19
<PAGE> 25
ARRANGEMENTS BETWEEN ROCKWELL
AND THE COMPANY RELATING TO THE DISTRIBUTION
For the purpose of governing certain of the relationships between Rockwell
and the Company relating to the Distribution, and to provide for an orderly
transition, Rockwell and the Company will, prior to the Distribution, enter into
the agreements described below, forms of which (other than the Transition
Agreement) have been filed as exhibits to the Registration Statement of which
this Information Statement is a part. The following summaries are qualified in
their entirety by reference to the agreements as so filed.
DISTRIBUTION AGREEMENT
Rockwell and the Company will enter into a distribution agreement (the
"Distribution Agreement") providing for, among other things, the principal
corporate transactions required to effect the separation of the Automotive
Business from the Electronics Business and the Distribution, and certain other
agreements governing the relationship between Rockwell and the Company with
respect to or in consequence of the Distribution. The Distribution Agreement
provides for the Distribution to be effective as of the close of business on the
Distribution Date.
The Distribution Agreement further provides that prior to the Distribution
Date, Rockwell will transfer substantially all of the operations, assets and
liabilities related to the Automotive Business (including liabilities relating
to former operations) to the Company or to subsidiaries of Rockwell that prior
to the Distribution will become wholly-owned subsidiaries of the Company.
Rockwell will retain all cash and cash equivalents of the Company and its
wholly-owned subsidiaries at the time of the Distribution other than
approximately $35 million. In addition, Rockwell will provide cash of
approximately $60 million to fund the payment of Canadian income taxes expected
to be incurred by the Automotive Business in connection with the transfer of
assets in Canada prior to the Distribution. The Distribution Agreement provides
for the elimination of intercompany indebtedness between Rockwell and the
Company in existence at the time of the Distribution. The Distribution Agreement
also includes cross licenses by each of Rockwell and the Company to the other of
rights to use, subsequent to the Distribution, intellectual property of the
licensor to the extent the same is used by the licensee at the time of the
Distribution.
The Distribution Agreement provides that after the Distribution, Rockwell
will have all rights in and to the names "Rockwell" and "Rockwell International"
and all derivatives thereof, except for certain limited rights of use granted to
the Company and except that the Company may continue to apply the "Rockwell"
brand name to its products after the Distribution. The Company will change the
names of its subsidiaries to eliminate therefrom the names "Rockwell", "Rockwell
International" and all derivatives thereof.
Subject to certain exceptions, the Distribution Agreement provides for
cross-indemnities principally designed to place financial responsibility for the
liabilities of the Automotive Business (including liabilities relating to former
operations) with the Company and financial responsibility for the liabilities of
the Electronics Business (including liabilities relating to former operations)
with Rockwell. In addition, the Distribution Agreement provides that each of
Rockwell and the Company will indemnify the other in the event of certain
liabilities arising under the Exchange Act.
The Distribution Agreement provides that prior to the Distribution the
Board of Directors of the Company will approve the Company Certificate and the
Company By-Laws and that the Company and Rockwell will take all actions which
may be required to elect or otherwise appoint as directors of the Company, at or
prior to the time of the Distribution, the persons named herein to constitute
the Company's Board of Directors at the time of the Distribution. See
"Management of the Company -- Directors of the Company".
The Distribution Agreement provides generally that all costs and expenses
incurred prior to the Distribution in connection with the Distribution, the
preparation, execution and delivery of the Distribution Agreement, the Employee
Matters Agreement, the Tax Allocation Agreement and the Transition Agreement and
the consummation of the transactions contemplated thereby will be charged to
Rockwell, other than the costs and expenses of the Credit Facility and other
costs and expenses to the extent relating to operations of
20
<PAGE> 26
the Automotive Business subsequent to the Distribution, which will be charged to
the Company. Except as otherwise expressly provided, all costs and expenses
incurred following the Distribution in connection with the implementation
thereof will be charged to the party for whose benefit the expenses are
incurred, with any expenses which cannot be allocated on such basis to be split
equally between Rockwell and the Company.
The Distribution Agreement provides that the Distribution will not be made
until all of the following conditions are satisfied or waived by Rockwell's
Board of Directors in its sole discretion: (i) the receipt of the Tax Ruling;
(ii) final approval by Rockwell's Board of Directors of the Distribution; (iii)
receipt of all material consents required to effect the Distribution; (iv) the
Registration Statement of which this Information Statement is a part being
declared effective by the Commission; (v) the Company Certificate, the Company
By-Laws and the Company Rights Agreement being adopted and in full force and
effect; (vi) the Company Common Stock being approved for listing on the NYSE;
(vii) the transactions contemplated by the Distribution Agreement in connection
with separating the Automotive Business and the Electronics Business being
consummated in all material respects; (viii) Rockwell and the Company having
entered into each of the agreements, instruments, understandings, assignments
and other arrangements to be entered into in connection with the transactions
contemplated by the Distribution Agreement, including, without limitation, any
conveyance documents, the Employee Matters Agreement, the Tax Allocation
Agreement and the Transition Agreement, and each such agreement being in full
force and effect; (ix) a "no-action" letter from the staff of the Commission
regarding certain aspects of the Distribution being issued and in full force and
effect; (x) no order, injunction or decree having been issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing
consummation of the Distribution being in effect; and (xi) no suit, action or
proceeding by or before any court of competent jurisdiction or other
governmental entity having been commenced and pending to restrain or challenge
the Distribution, and no inquiry having been received that in the reasonable
judgment of the Board of Directors of Rockwell may lead to such a suit, action
or proceeding. Even if all the conditions have been satisfied, the Distribution
Agreement may be terminated and the Distribution abandoned by Rockwell's Board
of Directors, in its sole discretion, without the approval of Rockwell
shareowners, at any time prior to the Distribution.
EMPLOYEE MATTERS AGREEMENT
Rockwell and the Company will enter into an employee matters agreement (the
"Employee Matters Agreement") providing for certain matters relating to
employees, employee benefit plans and compensation arrangements for current and
former employees of the Automotive Business and their beneficiaries
(collectively, the "Company Participants").
The Employee Matters Agreement provides that, except as expressly set forth
therein, effective as of the time of the Distribution, the Company will or will
cause one or more of its subsidiaries to assume or retain, as the case may be,
all liabilities of Rockwell and its subsidiaries with respect to Company
Participants relating to employment by Rockwell or its subsidiaries, including
liabilities under pension, medical, retiree health and life insurance, short and
long-term disability, workers compensation and other employee benefit plans,
policies and agreements. The Employee Matters Agreement provides that effective
on or before the Distribution Date the Company will establish, and will maintain
for a period of at least one year after the Distribution Date, certain pension,
savings and welfare plans and other employee benefits that are substantially
similar in all material respects to those provided by Rockwell and its
subsidiaries for Company Participants prior to the time of the Distribution.
Pursuant to the Employee Matters Agreement and subject to the terms and
conditions thereof, Rockwell will retain liabilities for all vested benefits of
Company Participants accrued to the time of the Distribution under Rockwell's
U.S. and certain foreign pension plans and all related assets. Rockwell will
cause each employee participating in Rockwell's U.S. and such foreign pension
plans who will be employed by the Company on the Distribution Date to have a
fully non-forfeitable right to such employee's benefit under Rockwell's U.S. and
such foreign pension plans accrued as of the time of the Distribution.
Notwithstanding the foregoing, Rockwell shall not grant to Company Participants
credit for any purpose under the Rockwell U.S. and such foreign pension plans
for service with the Company after the Distribution Date, including without
limitation, credit for purposes of determining eligibility for any early
retirement or disability pension.
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<PAGE> 27
The Company's pension plans will credit each Company employee who participated
in such Rockwell plans for all plan purposes (including determinations of
benefit accruals) with all service which had been credited to such employee
under such Rockwell plans immediately prior to the Distribution (with certain
limited exceptions). Notwithstanding the foregoing, service with Rockwell and
the Company will not be aggregated under the Company's U.S. pension plan for any
periods following the time at which the employee commences the receipt of
benefits under the Rockwell U.S. pension plan if the employee is not also
retired under the Company's U.S. pension plan. In addition, the benefits of each
employee under the Company's pension plans will be reduced by the benefit to
which such employee would be entitled under the Rockwell plans if the employee
commenced receipt of benefits under the Rockwell plans at the same time as from
the Company's pension plans.
The Employee Matters Agreement also provides for adjustment of outstanding
options to purchase Rockwell Common Stock ("Rockwell Options") held by employees
of the Automotive Business granted under the Rockwell International Corporation
1995 Long-Term Incentives Plan (the "Rockwell 1995 LTIP") and the Rockwell
International Corporation 1988 Long-Term Incentives Plan (the "Rockwell 1988
LTIP"). Pursuant to the Employee Matters Agreement, Rockwell Options held by
employees of the Automotive Business at the time of the Distribution that were
granted prior to October 1, 1996 will remain Rockwell Options, but the number of
shares covered thereby and the exercise price per share will be adjusted
pursuant to a formula designed to cause (i) the economic value of such Rockwell
Options (i.e., the difference between the aggregate fair market value of the
shares of Rockwell Common Stock subject to such options and the aggregate per
share exercise price thereof) to remain the same immediately before and
immediately after the Distribution, giving effect to any change in the fair
market value of Rockwell Common Stock resulting from the Distribution, and (ii)
the ratio of the exercise price to the fair market value of the underlying stock
to remain the same immediately before and immediately after the Distribution.
All Rockwell Options held by persons other than employees of the Automotive
Business at the time of the Distribution will be similarly adjusted.
The Employee Matters Agreement further provides that Rockwell Options held
by employees of the Automotive Business at the time of the Distribution that
were granted after September 30, 1996 will be replaced with options to purchase
shares of Company Common Stock ("Company Options"), with the number of shares
covered thereby and the exercise price per share to be determined pursuant to a
formula designed to cause (i) the economic value of such Company Options (i.e.,
the difference between the aggregate fair market value of the shares of Company
Common Stock subject to such options and the aggregate per share exercise price
thereof) immediately after the Distribution to be the same as the economic value
immediately prior to the Distribution of the Rockwell Options being replaced,
and (ii) the ratio of the exercise price to the fair market value of the
underlying stock to remain the same immediately before and immediately after the
Distribution. See "Management of the Company -- Benefits Plans Following the
Distribution -- 1997 Long-Term Incentives Plan".
Pursuant to the Employee Matters Agreement, following the Distribution,
Rockwell will retain sponsorship of the Rockwell Savings Plan and the trust
related thereto. Rockwell will cause each employee who will be employed by the
Company or one of its subsidiaries on the Distribution Date to have a fully
nonforfeitable right to such employee's account balances, if any, under the
Rockwell Savings Plan. The account balances of each such employee will be
maintained under the Rockwell Savings Plan until distributed in accordance with
the terms of the Rockwell Savings Plan and applicable law.
Based upon the Rockwell Savings Plan's ownership of Rockwell Common Stock
on April 30, 1997, the Rockwell Savings Plan is expected to hold approximately
14.9 million shares of Company Common Stock or approximately 21% of the Company
Common Stock outstanding immediately following the Distribution. It is expected
that the Rockwell Savings Plan will be amended in order to provide Rockwell
Savings Plan participants a high degree of flexibility with respect to continued
investment in Company Common Stock in their Rockwell Savings Plan accounts, so
that individual participants, rather than the Rockwell Savings Plan, would have
authority to determine if and when shares of Company Common Stock held in
participant accounts will be sold and reinvested in accordance with the
provisions of the Rockwell Savings Plan. Such amendments would provide that a
participant in the Rockwell Savings Plan may elect at any time, but not
22
<PAGE> 28
more frequently than twice during each calendar month, to have all or a portion
of the Company Common Stock in his or her accounts under the Rockwell Savings
Plan sold, with the net proceeds reinvested as provided for in the Rockwell
Savings Plan. Under the Rockwell Savings Plan, as so amended, dispositions of
Company Common Stock would be effected only at the direction and on behalf of
individual participants.
TAX ALLOCATION AGREEMENT
Through the Distribution Date, the results of the operations of the
Automotive Business have been and will be included in Rockwell's consolidated
United States federal income tax returns. As part of the Distribution, Rockwell
and the Company will enter into a tax allocation agreement (the "Tax Allocation
Agreement") which provides, among other things, for the allocation between
Rockwell and the Company of federal, state, local and foreign tax liabilities
relating to the Automotive Business.
The Tax Allocation Agreement also allocates between Rockwell and the
Company liability for any taxes which may arise in connection with separating
the Automotive Business and the Electronics Business. The Tax Allocation
Agreement provides, in general, that Rockwell will be responsible for any such
taxes. However, the Tax Allocation Agreement provides that neither Rockwell nor
the Company is to take any action inconsistent with, nor fail to take any action
required by, the request for the Tax Ruling or the Tax Ruling unless required to
do so by law or the other party has given its prior written consent or, in
certain circumstances, a supplemental ruling permitting such action is obtained.
Rockwell and the Company have agreed to indemnify each other with respect to any
tax liability resulting from their respective failures to comply with such
provisions. In addition, the Company will be responsible for any taxes imposed
on Rockwell, the Company or Rockwell shareowners as a result of the failure of
the Distribution to qualify as a tax-free reorganization within the meaning of
Section 368(a)(1)(D) of the Code if such failure is attributable to certain
actions by or in respect of the Company (including its subsidiaries) or its
stockholders, such as the acquisition of the Company by a third party at a time
and in a manner that would cause such a failure. In the event such taxes were to
become payable by the Company, such payment would have a material adverse effect
on the financial position, results of operations and cash flow of the Company.
Though valid as between the parties thereto, the Tax Allocation Agreement
is not binding on the IRS and does not affect the liability of each of the
Company, Rockwell and their respective subsidiaries to the IRS for all federal
taxes of the consolidated group relating to periods prior to the Distribution
Date.
TRANSITION AGREEMENT
Rockwell and the Company will enter into a transition services agreement
(the "Transition Agreement") on or prior to the Distribution Date. Pursuant to
the Transition Agreement, Rockwell will provide to the Company, for specified
periods after the Distribution Date and on mutually agreed terms, certain
services which prior to the Distribution Date have been provided to the Company
by Rockwell.
23
<PAGE> 29
CREDIT FACILITY
The Company has obtained a commitment letter dated June 3, 1997 from First
Chicago Capital Markets, Inc. and NBD Bank to arrange for a group of lenders to
provide a $1 billion five-year unsecured revolving credit facility (the "Credit
Facility") to the Company. The Credit Facility will be used to fund the Pre-
Distribution Payment and for working capital and other general corporate
purposes of the Company and its subsidiaries following the Distribution. A
definitive credit agreement containing the terms described below is expected to
be executed prior to the Distribution Date.
Up to $500 million of the Credit Facility will be available for
eurocurrency loans to certain foreign subsidiaries of the Company and up to $100
million of the Credit Facility will be available for the issuance of standby
letters of credit. Loans obtained under the Credit Facility are expected to bear
interest, at the election of the Company, at (i) a fluctuating rate equal to the
higher of (a) the corporate base rate publicly announced from time to time by
Morgan Guaranty Trust Company of New York and (b) the Federal funds rate plus
1/2% per annum, (ii) a periodic fixed rate equal to, in the case of U.S. dollar
loans, the London Interbank Offered Rate ("LIBOR") plus an applicable margin or,
in the case of eurocurrency loans, a rate based on the cost of funding in the
relevant currency (determined under mutually agreed procedures to be set forth
in the definitive credit agreement) plus an applicable margin, in either case
with the applicable margin varying based on the Company's financial performance
or, if and when obtained, the ratings on the Company's long-term senior
unsecured indebtedness, or (iii) a competitive bid rate to be set through an
auction process. The Company anticipates that the applicable margin on
LIBOR-based and eurocurrency loans will initially be 20 basis points. The
Company will also pay a facility fee on the entire amount of the Credit Facility
at a per annum rate that will vary depending on the same criteria used to
determine the applicable margin, and which the Company anticipates will
initially be 10 basis points. The Company also will pay a letter of credit fee
with respect to any letters of credit and certain other customary fees.
The Credit Facility is expected to contain, among other terms, conditions
precedent, covenants, representations and warranties, mandatory and voluntary
prepayment provisions and events of default customary for facilities of this
type. Such covenants will include certain restrictions on incurrence of
indebtedness, consolidations and mergers, sales of assets and creation of liens
and encumbrances. The Credit Facility will also include financial covenants
requiring a minimum net worth and a maximum leverage ratio based on earnings
before interest, taxes, depreciation and amortization.
24
<PAGE> 30
HISTORICAL SELECTED
FINANCIAL DATA
The following selected financial data (other than employee data) have been
derived from the financial statements of the Automotive Business. The data
should be read in conjunction with the financial statements of the Automotive
Business and notes thereto included elsewhere in this Information Statement. The
statement of income data for the years ended September 30, 1994, 1995 and 1996
and the balance sheet data as of September 30, 1995 and 1996 have been derived
from the audited financial statements of the Automotive Business. The statement
of income data for the years ended September 30, 1992 and 1993 and the balance
sheet data as of September 30, 1992, 1993 and 1994 have been derived from
unaudited financial information of the Automotive Business. The statement of
income data for the six months ended March 31, 1996 and 1997 and the balance
sheet data as of March 31, 1996 and 1997 have been derived from the unaudited
financial statements of the Automotive Business, which, in the opinion of
management, include all adjustments necessary for a fair presentation of assets
and liabilities as of such dates and results of operations for such periods.
Operating results for the six months ended March 31, 1997 are not necessarily
indicative of the results that may be expected for the entire year ending
September 30, 1997.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED SEPTEMBER 30, MARCH 31,
---------------------------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- ------ ------
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT ANNUAL SALES PER EMPLOYEE)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Sales......................... $ 2,279 $ 2,358 $ 2,653 $ 3,125 $ 3,144 $1,593 $1,578
Annual sales growth rate...... 5.4% 3.5% 12.5% 17.8% 0.6%
Gross margin.................. $ 251 $ 282 $ 282 $ 381 $ 397 $ 194 $ 207
As a percent of sales....... 11.0% 12.0% 10.6% 12.2% 12.6% 12.2% 13.1%
Operating earnings before
restructuring charges(1).... $ 71 $ 100 $ 91 $ 178 $ 182 $ 93 $ 97
As a percent of sales(1).... 3.1% 4.2% 3.4% 5.7% 5.8% 5.8% 6.1%
Interest expense.............. $ 23 $ 13 $ 12 $ 11 $ 10 $ 5 $ 4
Net income.................... 30 57 51 123 114 65 62
BALANCE SHEET DATA: (at end of period)
Working capital(2)............ $ 153 $ 185 $ 204 $ 216 $ 229 $ 243 $ 265
Property (at cost)............ 1,456 1,361 1,440 1,535 1,558 1,515 1,542
Accumulated depreciation...... (810) (773) (823) (888) (912) (894) (924)
Property, net................. 646 588 617 647 646 621 618
Goodwill...................... 31 25 30 40 45 39 44
Total assets.................. 1,608 1,488 1,638 1,766 1,833 1,778 1,841
Short-term debt............... 48 28 17 14 8 11 20
Long-term debt................ 15 9 35 31 24 28 20
Minority interests............ 18 21 21 24 29 25 36
Equity........................ 496 468 509 561 599 569 620
OTHER DATA:
Cash provided by operating
activities.................. $ 113 $ 162 $ 156 $ 203 $ 197 $ 71 $ 56
Capital expenditures.......... 102 100 102 119 144 57 37
As a percent of sales....... 4.5% 4.2% 3.8% 3.8% 4.6% 3.6% 2.3%
Depreciation and
amortization................ $ 100 $ 92 $ 93 $ 97 $ 102 $ 47 $ 48
EBITDA(3)..................... 183 207 193 293 294 156 154
Employees at year end......... 16,500 16,300 17,200 16,700 15,300
Annual sales per
employee(4)................. $140,000 $150,000 $159,000 $182,000 $198,000
</TABLE>
- ---------------
(1) Operating earnings before restructuring charges of $36 million during the
last six months of fiscal 1996.
(2) Working capital consists of all current assets and current liabilities,
including cash and short-term debt.
(3) EBITDA is defined as income before taxes, plus interest expense,
depreciation and amortization.
(4) Annual sales per employee is based on the average of the monthly ending
number of employees during the year.
25
<PAGE> 31
THE AUTOMOTIVE BUSINESS
The Automotive Business is a leading global supplier of a broad range of
components and systems for use in commercial, specialty and light vehicles.
Tracing its heritage to 1909 as one of the first suppliers to the emerging
automotive industry, the Automotive Business was conducted by Rockwell Standard
Company until 1967, when Rockwell Standard and North American Aviation, Inc.
merged to form the predecessor to Rockwell International Corporation. With
fiscal 1996 sales of over $3.1 billion, the Automotive Business has grown into a
major independent global supplier to the automotive industry. Sales outside
North America accounted for approximately 44% of total sales in fiscal 1996.
The Automotive Business serves a broad range of OEM customers worldwide,
including truck OEMs, light vehicle OEMs, semi-trailer producers and off-highway
and specialty vehicle manufacturers. Its ten largest customers accounted for 61%
of total fiscal 1996 sales. The Automotive Business operates 46 manufacturing
facilities around the world.
The Automotive Business serves its customers worldwide through HVS and LVS.
HVS, which had fiscal 1996 sales of approximately $1.8 billion, supplies
drivetrain systems and components, including axles, brakes, transmissions,
clutches and drivelines, for heavy-duty and medium-duty trucks, trailers,
off-highway equipment, buses and coaches, as well as other specialty and
military vehicles. LVS, which had fiscal 1996 sales of approximately $1.3
billion, supplies electromechanical and other components and systems, including
roof, door, access control and seat adjusting systems, as well as suspension
products and steel wheels, for passenger cars, light trucks and sport utility
vehicles.
Automotive Business sales by product class for the three fiscal years ended
September 30, 1996 and the six months ended March 31, 1996 and 1997 were as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR SIX MONTHS
ENDED SEPTEMBER 30, ENDED MARCH 31,
------------------------------ ------------------
1994 1995 1996 1996 1997
------ ------ ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Heavy Vehicle Systems:
Truck and Trailer Products...... $1,299 $1,504 $1,360 $ 703 $ 655
Off-Highway, Specialty and
Military Vehicle Products..... 454 433 467 224 239
Light Vehicle Systems................ 900 1,188 1,317 666 684
------ ------ ------ ------ ------
Total........................... $2,653 $3,125 $3,144 $1,593 $1,578
====== ====== ====== ====== ======
</TABLE>
The following charts depict HVS sales by product and geographic region for
the fiscal year ended September 30, 1996:
HEAVY VEHICLE SYSTEMS
1996 SALES BY PRODUCT
[Pie chart illustrating HVS 1996 Sales by Product: Truck and Trailer Axles and
Brakes - 66%; Off-Highway, Specialty and Military Vehicle Products - 26%;
Transmissions, Clutches, Drivelines and Other Products - 8%.]
1996 SALES BY GEOGRAPHIC REGION
[Pie chart illustrating HVS 1996 Sales by Geographic Region: Americas - 78%;
Europe - 20%; Asia-Pacific - 2%.]
In fiscal 1996, aftermarket sales represented 14% of total HVS sales and
were made primarily in North America across all product areas.
26
<PAGE> 32
The following charts depict LVS sales by product and geographic region for
the fiscal year ended September 30, 1996:
LIGHT VEHICLE SYSTEMS
1996 SALES BY PRODUCT
[Pie chart illustrating LVS 1996 Sales by Product: Roof Systems - 34%; Door
Systems - 30%; Access Control Sytems - 12%, Suspension Products - 12%; Steel
Wheels - 9%; Seat Adjusting Systems - 3%.]
1996 SALES BY GEOGRAPHIC REGION
[Pie chart illustrating LVS 1996 Sales by Geographic Region: Europe - 55%;
Americas - 41%; Asia-Pacific - 4%.]
INDUSTRY TRENDS
The automotive industry is experiencing several significant trends that
present opportunities and challenges to industry suppliers. These trends, which
influence the Company's business strategies, include the globalization of OEMs
and their suppliers, increased outsourcing by OEMs, increased demand for modules
and systems by OEMs and the consolidation of suppliers worldwide.
Globalization is a major trend affecting automotive OEMs and suppliers. As
OEMs expand geographically to access new markets, they are able to achieve
significant cost savings and enhanced product quality and consistency by
sourcing from the most capable, full-service global suppliers. OEMs and
suppliers also have the opportunity to take advantage of economies of scale
through global sourcing of components and systems and by designing platforms
that can be used in different geographic markets, but still be adapted to local
preferences.
Another major trend in the automotive industry is increased outsourcing of
product engineering and manufacturing by OEMs. OEMs are responding to global
competitive pressures to improve quality and reduce manufacturing costs and
related capital investments by outsourcing products which they historically have
engineered and manufactured internally. Outsourcing enables OEMs to focus on
their core design, assembly and marketing capabilities. In markets addressed by
LVS, this increased outsourcing trend has extended not only to components, but
to entire modules and systems, requiring suppliers to provide a higher level of
engineering, design, electromechanical and systems integration expertise in
order to remain competitive. Increased outsourcing by light vehicle OEMs has
produced higher overall per vehicle sales by independent suppliers. Accordingly,
such increased outsourcing can result in supplier sales growth independent of
the overall automotive industry growth trend.
OEMs also are reducing their total number of suppliers and are more
frequently entering into supply arrangements with the most capable global
suppliers. Increasingly, the criteria for selection include not only quality,
cost and responsiveness, but also certain full-service capabilities, including
design and engineering. This trend among OEMs, as well as the globalization
trend described above, has contributed to the consolidation of automotive
suppliers into larger, more efficient and more capable companies.
As a major independent global supplier with strong customer relationships,
proven design, engineering and manufacturing capabilities, and facilities
located throughout the world, the Company believes it is well positioned to
capitalize on these automotive industry trends.
27
<PAGE> 33
BUSINESS STRATEGIES
The Automotive Business has developed many leadership market positions as
it has grown into a global supplier of a broad range of components and systems
for use in commercial, specialty and light vehicles worldwide. See "--
Products". The Automotive Business seeks to enhance its leadership positions and
capitalize on its existing customer, product and geographic strengths, as well
as the industry trends described above, and to increase its sales, earnings and
profitability by employing the following business strategies:
Continuously Improve Core Business Processes. A key strategy of the
Automotive Business is continuous improvement of its core business processes
through investment in information technology and capital equipment,
rationalization of production among facilities, deintegration of non-core
processes, establishment of highly flexible assembly sites and simplification
and increased commonality of products. These actions are designed to reduce
product costs and improve product quality while lowering required asset
investment levels, reducing product development times and increasing flexibility
to meet customer needs. Management believes the actions already taken to improve
core business processes have benefited the Automotive Business and better
position the Company to meet its long-term business goals.
Capitalize On Customer Outsourcing Activities. A significant growth
strategy of the Automotive Business is to provide lower cost and higher quality
products to customers in connection with their increasing outsourcing
activities. Since the early 1990s, for example, several North American customers
of LVS have selected the Automotive Business to supply suspension products which
these OEMs had historically manufactured internally. Management believes truck
and trailer OEMs in Europe will increasingly outsource in order to achieve cost
and efficiency advantages. The Automotive Business intends to work proactively
with current and prospective customers worldwide to identify and implement
mutually beneficial outsourcing opportunities.
Focus on Higher Value Integrated Systems. The Automotive Business has
sought and will continue to seek to utilize its broad product line and design,
engineering and manufacturing expertise by expanding its sales of higher value
modules and systems. For example, a new door system customer recently selected
the Automotive Business as its source for a high volume, integrated door module
for which LVS will coordinate the integration of the window regulator, acoustic
components, speaker brackets, anti-theft devices, wire harnesses and
electronics, among other components. Management believes that truck and trailer
OEMs in North America and light vehicle OEMs in all markets will increasingly
outsource complete systems to achieve further product quality and cost
improvements. The Company will seek to utilize its leadership positions in the
supply of electromechanical systems to light vehicle OEMs and its ability to
provide drivetrain systems to truck and specialty vehicle OEMs to capitalize on
this anticipated customer demand.
Leverage Geographic Strengths. Geographic expansion to meet the global
sourcing needs of customers and to address new markets will continue to be an
important element of the Automotive Business's growth strategy. Management
believes opportunities exist to increase further the Company's presence in the
North American light vehicle markets, where its sales of light vehicle products
increased from approximately $173 million in fiscal 1994 ($11.85 content per
light vehicle manufactured in North America) to approximately $415 million in
fiscal 1996 ($27.48 content per light vehicle manufactured in North America).
The Automotive Business also believes there are opportunities to increase sales
to heavy-duty and medium-duty commercial vehicle OEMs in Europe, building on
established customer relationships with their North American affiliates and the
Automotive Business's existing manufacturing presence in Europe. Emerging
markets such as the Asia-Pacific region and Latin America also present growth
opportunities as demand for commercial, specialty and light vehicles increases
in these areas.
Introduce New Products and Technologies. The Automotive Business is
considered a leader in its markets in offering new and enhanced products for its
customers. The Automotive Business plans to continue investing in new
technologies, including electronics, and product development and working closely
with its customers to develop and implement design, engineering, manufacturing
and quality improvements. The Company will draw upon the engineering resources
of its Technical Center in Troy, Michigan and its engineering centers of
expertise in the United States, Brazil, Canada, France, Germany and the United
28
<PAGE> 34
Kingdom, as well as its ongoing relationship with the Rockwell Science Center.
See "-- Research and Development".
Recent technological and product advancements of the Automotive Business
include the following:
- Engine Synchro Shift(TM) transmission -- An advanced truck transmission
system that significantly simplifies gear shifting efforts for drivers
in a cost efficient manner.
- Easy Steer Plus(TM) front axle -- A front truck axle with preassembled
and calibrated wheel ends that extends life and significantly reduces
installation and maintenance costs.
- Seat adjusting system -- A quieter and lighter weight seat adjusting
system featuring integrated electronic memory and electric motors
manufactured by the Automotive Business.
- Bplus sunroof -- An innovative sunroof designed for high volume
applications at reduced costs, the Bplus sunroof uses fewer components
and lighter materials and provides improved performance characteristics.
Management believes that its strategy of continuing to introduce new and
improved products and technologies will be an important factor in its efforts to
achieve its growth objectives.
Expand Aftermarket Business. The Automotive Business intends to pursue
growth of its aftermarket business, which historically has generated higher
profit margins than those associated with original equipment sales. The
Automotive Business's fiscal 1996 aftermarket sales exceeded $250 million,
representing sales of components and services principally to HVS North American
customers. The Automotive Business will seek to expand its aftermarket business
by utilizing its advanced distribution center in Florence, Kentucky, and
leveraging its existing aftermarket channels with new products, both those
manufactured by the Automotive Business and those manufactured by others and
sold by the Automotive Business under distribution agreements.
Selectively Pursue Strategic Opportunities. The Automotive Business
regularly evaluates various strategic and business development opportunities,
including license agreements, marketing arrangements, joint ventures and
acquisitions. The Automotive Business intends to continue selectively to pursue
alliances and acquisitions that would allow it to gain access to new customers
and technologies, penetrate new geographic markets and enter new product
markets.
PRODUCTS
The Automotive Business designs, develops, manufactures, markets,
distributes, sells, services and supports a broad range of products for use in
commercial, specialty and light vehicles. In addition to sales to the OEM
market, the Automotive Business provides its truck and trailer products and
off-highway and specialty products to OEMs, dealers, distributors, fleets and
other end-users in the aftermarket. Principal products of the Automotive
Business include the following:
HEAVY VEHICLE SYSTEMS
Truck and Trailer Products
Truck Axles. The Automotive Business is the world's leading independent
supplier of axles for heavy-duty commercial vehicles. The Company's five axle
manufacturing facilities located in the United States, Brazil, England and Italy
produced approximately 400,000 axles in fiscal 1996 for heavy-duty and medium-
duty commercial vehicles. The Company's extensive truck axle product line
includes a wide range of drive and non-drive front steer axles and single and
tandem rear drive axles, which can include driver-controlled differential lock
for extra traction, aluminum carriers to reduce weight and pressurized filtered
lubrication systems for longer life. The Company's front steer and rear drive
axles can be equipped with the Company's cam, wedge or air disc brakes,
automatic slack adjusters and anti-lock braking systems.
Brakes. The Automotive Business is a leading independent supplier of air
brakes to heavy-duty and medium-duty commercial vehicle manufacturers. Through
four manufacturing facilities located in the United States, Canada, England and
Italy, the Automotive Business manufactures a broad range of foundation air
29
<PAGE> 35
brakes, as well as automatic slack adjusters for brake systems. The Automotive
Business's foundation air brake products include cam drum brakes, which offer
improved lining life and tractor/trailer interchangeability, air disc brakes,
which provide fade resistant braking for demanding applications, and wedge drum
brakes, which are lightweight and provide automatic internal wear adjustment.
Through its 50%-owned joint venture with WABCO Automotive Products
("WABCO"), a wholly-owned subsidiary of American Standard, Inc., the Automotive
Business is the leading supplier of anti-lock braking systems ("ABS") and a
supplier of other electronic and pneumatic control systems for North American
heavy-duty commercial vehicles. In March 1997, the unconsolidated WABCO joint
venture announced the launch of its next generation ABS for air braked vehicles
which provides advanced control and diagnostics capability, and reduced size and
cost. Through the joint venture, the Automotive Business also supplies hydraulic
ABS to the North American medium-duty truck market.
In 1995, the United States Department of Transportation, National Highway
Traffic Safety Administration, adopted federal regulations requiring that new
heavy-duty and medium-duty vehicles sold in the United States be equipped with
ABS. The first phase of this regulation requiring truck-tractors to be ABS
equipped became effective in March 1997. ABS also will be required on all
trailers, single-unit trucks and buses with air brakes manufactured after March
1, 1998 and on all trucks and buses with hydraulic brakes manufactured after
March 1, 1999.
Trailer Products. The Automotive Business believes it is the world's
leading manufacturer of heavy-duty trailer axles, with leadership positions in
North America and in Europe, where the Company's ROR(TM) brand name is a
recognized leader in trailer axles. The Automotive Business's trailer axles are
available in over forty models in capacities from 20,000 to 30,000 pounds for
virtually all heavy trailer applications, and are available with the Automotive
Business's broad range of brake products, including anti-lock braking systems.
In addition to axles, brakes and brake systems, the Automotive Business supplies
trailer air suspension products, for which it has strong market positions in
Europe and growing market presence in North America.
Transmissions. The Automotive Business introduced its transmission product
line in 1989, enabling it to supply a complete drivetrain system to heavy-duty
commercial vehicle manufacturers in North America. The Automotive Business's
range of transmission models includes its recently developed Engine Synchro
Shift(TM) transmission for heavy-duty trucks that is designed to reduce gear
shifting effort for drivers and reduce wear on clutches and other drivetrain
components in a cost efficient manner by automatically synchronizing engine
speed to road speed shifts without use of the clutch.
Clutches, Drivelines and Other Products. The Automotive Business also
supplies universal joints and driveline components, as well as clutches,
including diaphragm-spring clutches, which together with transmissions are
designed to provide low pedal resistance for smooth release and engagement. The
Automotive Business believes that its Permalube(TM) universal joint is currently
the only permanently lubricated universal joint used in the high mileage
on-highway market. The Automotive Business also supplies Tripmaster(R) on-board
computers, which provide trip and vehicle diagnostics, to truck OEMs and fleet
operators.
Off-Highway, Specialty and Military Vehicle Products
Off-Highway Vehicle Products. The Automotive Business supplies heavy-duty
axles, brakes and drivelines for use in numerous off-highway vehicle
applications, including construction, material handling, agriculture, mining and
forestry, in North America, South America, Europe and China. These products are
designed to tolerate high tonnages and operate under extreme conditions.
Specialty Vehicle Products. The Automotive Business supplies axles, brakes
and transfer cases for use in buses, coaches and recreational, fire and other
specialty vehicles in North America and Europe, and is the leading supplier of
bus and coach axles and brakes in North America.
Military Vehicle Products. The Automotive Business supplies axles, brakes,
brake system components including ABS, trailer products, transfer cases and
drivelines for use in medium-duty and heavy-duty military tactical wheeled
vehicles, principally in North America.
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<PAGE> 36
LIGHT VEHICLE SYSTEMS
Roof Systems. The Automotive Business is one of the world's leading
independent suppliers of sunroofs and roof systems products, including its
widely recognized Golde(R) brand sunroofs, for use in passenger cars, light
trucks and sport utility vehicles. The Automotive Business's roof system
manufacturing facilities in North America, Europe and Asia-Pacific supplied
approximately two million sunroofs and sunroof systems in fiscal 1996. The
Automotive Business's highly automated Gifhorn, Germany roof system facility is
noted in the industry for its advanced just-in-time manufacturing processes
which enable it to provide products in less than 2 1/2 hours after a customer
order is placed.
Door Systems. The Automotive Business is the world's leading supplier of
manual and power window regulators and a leading supplier of integrated door
modules and systems. The Automotive Business manufactures approximately 23
million window regulators annually at plants in North America, South America,
Europe and Asia-Pacific to meet the requirements of light vehicle and heavy-duty
commercial vehicle manufacturers. The Automotive Business's wide range of power
and manual door system products utilize numerous technologies and offer the
Automotive Business's own electric motors, which are designed for individual
applications and to maximize operating efficiency and reduce noise levels.
Access Control Systems. The Automotive Business supplies manual and power
activated latch systems to light vehicle and heavy-duty commercial vehicle
manufacturers, with leadership market positions in Europe and a growing market
presence in North America and the Asia-Pacific region. The Automotive Business's
access control products include modular and integrated door latches, actuators,
trunk and hood latches and fuel flap locking devices. From its access control
systems manufacturing facilities in North America, Europe and Asia-Pacific, the
Automotive Business manufactures over 18 million latches and 6 million actuators
annually.
Seat Adjusting Systems. The Automotive Business supplies manual and power
seat adjusting systems for passenger cars, light trucks and sport utility
vehicles, principally in North America. The Automotive Business's seat adjusting
system products, first introduced in 1994, feature systems with integrated
electronic memory and electric motors manufactured by the Automotive Business
which are designed with speed and power capabilities to meet the specific
requirements of each vehicle platform.
Suspension Products. Through its 57%-owned joint venture with Mitsubishi
Steel Mfg. Co., the Automotive Business is one of the leading independent
suppliers of products used in suspension systems for passenger cars, light
trucks and sport utility vehicles in North America. The Automotive Business's
suspension system products, which are manufactured at three facilities in the
United States and Canada, include coil springs, stabilizer bars and torsion
bars. This business has experienced significant sales growth over the past five
years as light vehicle OEMs have increased their outsourcing of suspension
system products and the light vehicle market has grown.
Steel Wheels. The Automotive Business is a leading supplier of steel
wheels to the light vehicle OEM market, principally in North and South America,
where the Automotive Business's Fumagalli(TM) brand name is a well-known leader
in steel wheels. The Automotive Business's wheel manufacturing facility in
Brazil, which has been consistently recognized with numerous supplier quality
and performance awards, and its recently established facility in Mexico, combine
to produce more than ten million wheels annually.
31
<PAGE> 37
CUSTOMERS; SALES AND MARKETING
The Automotive Business has numerous customers worldwide and has developed
long-standing business relationships with many of these customers. Customers
include, among others, the following:
<TABLE>
<CAPTION>
PRODUCTS
----------------------------------------------------------------------------
TRUCK/ SPECIALTY LIGHT
CUSTOMER TRAILER OFF-HIGHWAY VEHICLE MILITARY AFTERMARKET VEHICLE
- ---------------------------------------- -------- ------------ -------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
BMW A.G................................. X
Case Corporation........................ X X
Chrysler Corporation.................... X
Fiat S.P.A.............................. X
Ford Motor Company...................... X X X X
Freightliner Corporation (a subsidiary
of
Daimler-Benz A.G.).................... X X X X X
General Motors Corporation.............. X X X
Gillig Corporation (a subsidiary of
Herrick-
Pacific Corporation).................. X X
Gradall Industries, Inc................. X X
Great Dane Ltd. Partnership............. X X
Grove Worldwide Co...................... X X
Honda Motor Company, Ltd................ X
Isuzu Motors Ltd........................ X X X
Iveco N.V. (a subsidiary of Fiat
S.P.A.)............................... X X
Johnson Controls, Inc................... X
Kia Motors Ltd.......................... X
Lear Corporation........................ X
Mack Trucks, Inc. (a subsidiary of
Renault S.A.)......................... X X X
Mazda Motor Corporation................. X
Mercedes-Benz A.G. (a subsidiary of
Daimler-Benz A.G.).................... X X
Mitsubishi Motors Ltd................... X
Montracon Tasker Ltd.................... X X
Motor Coach Industries, Inc............. X X
NACCO Materials Handling Group Inc...... X X
Navistar International Corporation...... X X X X
Nissan Motor Company, Ltd............... X X
Oshkosh Truck Corporation............... X X X
Ottawa Truck Inc........................ X X
PACCAR Inc.............................. X X X
Peugeot S.A............................. X
Renault S.A............................. X X
Sisu, Inc............................... X X
Stewart & Stevenson Services, Inc....... X X X
Suzuki Motor Corporation................ X
Terberg Benschop BV..................... X X
Terex Corporation....................... X X
Toyota Motor Corporation................ X
Volkswagen A.G.......................... X X X
Volvo AB................................ X X X X
Western Star Trucks Holding Ltd......... X X X
</TABLE>
The Automotive Business markets and sells its products principally to OEMs.
In North America, the Automotive Business also markets its truck and trailer
products directly to dealers, fleets and other end-users, who may designate the
components and systems of a particular supplier for installation in the vehicles
they purchase from OEMs. Most Automotive Business sales to OEMs, consistent with
industry practice, are made through open purchase orders, which do not require
the purchase of a minimum number of products and typically may be canceled by
the customer on reasonable notice without penalty. The Automotive Business also
sells products to certain customers under long-term arrangements that require
the Automotive Business to provide annual cost reductions to its customers. See
"Special Factors -- Dependence on Large Customers". In addition to sales to the
OEM market, the Automotive Business also provides its truck and trailer products
and off-highway and specialty products to OEMs, dealers, distributors, fleets
and other end-users in the aftermarket.
32
<PAGE> 38
During fiscal 1996, Freightliner Corporation and Mercedes-Benz AG (each of
which is owned by Daimler-Benz A.G.) together accounted for approximately 11% of
total sales of the Automotive Business. In February 1997, Freightliner
Corporation agreed to purchase Ford Motor Company's heavy truck business, also a
customer of the Automotive Business. Freightliner, Mercedes and Ford's heavy
truck business together accounted for approximately 16% of total fiscal 1996
sales of the Automotive Business. See "Special Factors -- Dependence on Large
Customers".
Except as noted above with respect to the North American market for
heavy-duty trucks, the Automotive Business generally competes for new business
from OEMs both at the beginning of the development of new vehicle platforms and
upon the redesign of existing platforms. New platform development generally
begins two to four years prior to start-up of production. Once a supplier has
been designated to supply products to a new platform, an OEM will generally
continue to purchase those products from the supplier for the life of the
platform, which typically lasts four to six years.
COMPETITION
The Automotive Business operates in a highly competitive environment.
Principal competitive factors are price, quality, service, product performance,
design and engineering capabilities, new product innovation and timely delivery.
The Automotive Business competes worldwide with a number of United States and
international manufacturers that are both larger and smaller than the Automotive
Business in terms of resources and market shares. In addition, certain OEMs
manufacture for their own use products of the type supplied by the Automotive
Business.
RAW MATERIALS AND SUPPLIES
The Automotive Business believes it has adequate sources for the supply of
raw materials and components for its manufacturing needs with suppliers located
around the world. The Automotive Business does, however, concentrate its
purchases of certain raw materials and parts over a limited number of suppliers
and is dependent upon the ability of its suppliers to meet performance and
quality specifications and delivery schedules. Although the Automotive Business
historically has not experienced any significant difficulties in obtaining an
adequate supply of raw materials and components necessary for its manufacturing
operations, the loss of a significant supplier or the inability of a supplier to
meet performance and quality specifications or delivery schedules could have an
adverse effect on the Automotive Business.
JOINT VENTURES
As the automotive industry has become more globalized, joint ventures and
other cooperative arrangements have become an important element of the business
strategies of the Automotive Business. The Automotive Business currently has
interests in 14 joint ventures with operations in the United States, Australia,
Brazil, Canada, China, India, Japan, Mexico and Turkey. In accordance with
generally accepted accounting principles, operating results of the eight joint
ventures more than 50% owned are consolidated in the financial statements of the
Automotive Business.
ACQUISITIONS AND DISPOSITIONS
The Company intends regularly to consider various strategic and business
opportunities, including license agreements, marketing arrangements and
acquisitions, and to review the prospects of its existing businesses to
determine whether any of them should be modified, sold or otherwise
discontinued. See "Special Factors -- Industry Consolidation Trend".
RESEARCH AND DEVELOPMENT
The Automotive Business has significant research, development, engineering
and product design capabilities. See "-- Business Strategies". The Automotive
Business spent approximately $57 million, $58 million and $51 million in fiscal
1994, 1995 and 1996, respectively, on research and development. At September 30,
1996, the Automotive Business employed approximately 560 professional engineers
and
33
<PAGE> 39
scientists. Rockwell's Science Center also provides assistance to the Automotive
Business in the development of various technological and product advancements.
See "-- Business Strategies -- Introduce New Products and Technologies".
PATENTS AND TRADEMARKS
Numerous United States and foreign patents and patent applications are
owned or licensed by the Automotive Business in its manufacturing operations and
other activities. While in the aggregate the patents and licenses of the
Automotive Business are considered important to the operation of its business,
management does not consider them of such importance that the loss or
termination of any one of them would materially affect the Company.
Significant trademarks owned by the Automotive Business include Golde(R)
(sunroofs), Fumagalli(TM) (wheels) and ROR(TM) (trailer axles). The Company will
introduce its new name in the near future and will initiate federal trademark
applications seeking federally registered protection of its new name and logo.
Under the terms of the Distribution Agreement, the Company may continue to apply
the "Rockwell" brand name to its products after the Distribution.
EMPLOYEES
As of March 31, 1997, the Automotive Business had approximately 16,000
full-time employees. Approximately 3,200 Automotive Business employees in the
United States and Canada are covered by collective bargaining agreements. The
Automotive Business believes its relationship with unionized employees is
satisfactory. No significant work stoppages have occurred in the past five
years.
SEASONALITY; CYCLICALITY
The Automotive Business may experience seasonal variations in the demand
for its products to the extent automotive vehicle production fluctuates.
Historically, such demand has been somewhat lower in the Company's first and
fourth fiscal quarters (third and fourth calendar quarters) when OEM plants may
close during model changeovers and vacation and holiday periods.
In addition, the industry in which the Automotive Business operates has
been characterized historically by periodic fluctuations in overall demand for
trucks, passenger cars and other vehicles for which the Automotive Business
supplies products, resulting in corresponding fluctuations in demand for
products of the Automotive Business. Cycles in the major automotive industry
markets of North America and Europe are not necessarily concurrent or related.
The following table sets forth vehicle production in principal markets
served by the Automotive Business for the last five fiscal years:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
---------------------------------------------
1992 1993 1994 1995 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Heavy Vehicles (In thousands):
North America, Heavy-Duty Trucks......... 128 179 214 248 204
North America, Medium-Duty Trucks........ 102 109 125 147 126
North America, Trailers.................. 180 211 270 327 266
Europe, Trailers......................... 89 79 75 95 94
Light Vehicles (In millions):
North America............................ 12.8 13.0 14.6 15.1 15.1
Europe................................... 14.1 11.5 12.1 12.9 13.0
Asia-Pacific............................. 11.7 11.2 15.6 15.6 16.8
</TABLE>
- ---------------
Source: Automotive industry publications and management estimates.
34
<PAGE> 40
PROPERTIES
The Automotive Business operates 46 manufacturing facilities throughout the
United States and in Europe, Brazil, Canada, Mexico, Australia and the Far East.
It also has 19 engineering facilities, sales offices, warehouses and service
centers. These facilities have aggregate floor space of approximately 11 million
square feet, substantially all of which is in use. Of this floor space,
approximately 92% is owned and approximately 8% is leased. There are no major
encumbrances (other than financing arrangements which in the aggregate are not
material) on any of the Automotive Business's plants or equipment. In the
opinion of management, the Automotive Business's properties have been well
maintained, are in sound operating condition and contain all equipment and
facilities necessary to operate at present levels. A summary of floor space of
these facilities at September 30, 1996 is as follows:
<TABLE>
<CAPTION>
OWNED LEASED
LOCATION FACILITIES FACILITIES TOTAL
--------------------------------------------------- ---------- --------- -----------
(IN THOUSANDS OF SQUARE FEET)
<S> <C> <C> <C>
United States...................................... 4,020 251 4,271
Canada............................................. 661 38 699
Europe............................................. 3,123 244 3,367
Asia-Pacific....................................... 322 392 714
Latin America...................................... 1,413 -- 1,413
Corporate Offices (including certain research and
development facilities).......................... 401 -- 401
------- ----- --------
Total.................................... 9,940 925 10,865
======= ===== ========
</TABLE>
ENVIRONMENTAL MATTERS
Federal, state and local requirements relating to the discharge of
substances into the environment, the disposal of hazardous wastes, and other
activities affecting the environment have had and will continue to have an
impact on the manufacturing operations of the Automotive Business. Thus far,
compliance with environmental requirements and resolution of environmental
claims have been accomplished without material effect on the Automotive
Business's liquidity and capital resources, competitive position or financial
statements.
Management believes that the Company's expenditures for environmental
capital investment and remediation necessary to comply with present regulations
governing environmental protection and other expenditures for the resolution of
environmental claims will not have a material adverse effect on the Company's
liquidity and capital resources, competitive position, or financial statements.
Management cannot assess the possible effect of compliance with future
requirements.
LEGAL PROCEEDINGS
Various lawsuits, claims and proceedings have been or may be instituted or
asserted against Rockwell or the Company or their respective subsidiaries
relating to the conduct of the Automotive Business, including those pertaining
to product liability, intellectual property, environmental, safety and health,
and employment matters. Although the outcome of litigation cannot be predicted
with certainty and some lawsuits, claims or proceedings may be disposed of
unfavorably to the Company, management believes the disposition of matters which
are pending or asserted will not have a material adverse effect on the financial
statements of the Automotive Business.
Pursuant to the terms of the Distribution Agreement, if the Distribution is
consummated the Company will assume responsibility for all litigation (including
environmental proceedings) against Rockwell or its subsidiaries in respect of
the Automotive Business.
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<PAGE> 41
UNAUDITED PRO FORMA CONDENSED
FINANCIAL STATEMENTS OF THE COMPANY
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET OF THE COMPANY
The unaudited pro forma condensed combined balance sheet of the Company has
been derived from the unaudited historical balance sheet of the Automotive
Business and has been prepared assuming the Distribution occurred on March 31,
1997.
The unaudited pro forma condensed combined balance sheet should be read in
conjunction with the historical financial statements of the Automotive Business
and the notes thereto for the three years in the period ended September 30, 1996
and for the six months ended March 31, 1997 included elsewhere herein. The
unaudited pro forma condensed combined balance sheet is not necessarily
indicative of the financial position of the Company had the Distribution
occurred on March 31, 1997.
<TABLE>
<CAPTION>
MARCH 31, 1997
----------------------------------
AUTOMOTIVE
BUSINESS PRO FORMA COMPANY
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------- ----------
(IN MILLIONS)
<S> <C> <C> <C>
ASSETS
Cash........................................................ $ 70 $ 60(1) $ 130
Receivables................................................. 520 520
Inventories................................................. 290 290
Other current assets........................................ 134 134
------ ------ ------
Total current assets.............................. 1,014 60 1,074
------ ------ ------
Property, net............................................... 618 618
Other assets................................................ 209 209
------ ------ ------
Total assets...................................... $1,841 $ 60 $1,901
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term debt............................................. $ 20 $ $ 20
Canadian income taxes payable............................... -- 60(1) 60
Accounts payable and accrued liabilities.................... 729 729
------ ------ ------
Total current liabilities......................... 749 60 809
------ ------ ------
Long-term debt.............................................. 20 445(2) 465
Accrued retirement benefits................................. 393 393
Other liabilities........................................... 23 23
Minority interests.......................................... 36 36
Stockholders' equity:
Rockwell's net investment................................... 681 (681)(3) --
Common stock................................................ -- 71(3) 71
Additional paid-in capital.................................. -- 610(3) 165
(445)(2)
Retained earnings........................................... -- --
Currency translation........................................ (61) -- (61)
------ ------ ------
Total stockholders' equity........................ 620 (445) 175
------ ------ ------
Total liabilities and stockholders' equity... $1,841 $ 60 $1,901
====== ====== ======
</TABLE>
- ---------------
(1) The Automotive Business will incur approximately $60 million in Canadian
income taxes in connection with the transfer of assets in Canada prior to
the Distribution and Rockwell will provide cash to fund the tax payment.
(2) Long-term debt incurred to finance the Pre-Distribution Payment to be made
by the Company to Rockwell.
(3) To reflect the Distribution as a reduction in Rockwell's net investment and
the issuance of an estimated 71 million shares of Company Common Stock, par
value $1 per share. This is based on the number of shares of Rockwell Common
Stock outstanding on March 31, 1997 of approximately 214 million shares and
the distribution ratio of one share of Company Common Stock for every three
shares of Rockwell Common Stock outstanding.
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<PAGE> 42
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME OF THE COMPANY
The unaudited pro forma condensed combined statements of income of the
Company have been derived from the historical statements of income of the
Automotive Business and have been prepared assuming the Distribution occurred on
October 1, 1995.
The unaudited pro forma condensed combined statements of income should be
read in conjunction with the historical financial statements of the Automotive
Business and notes thereto for the three years in the period ended September 30,
1996 and for the six month periods ended March 31, 1996 and 1997 included
elsewhere herein. The unaudited pro forma condensed combined statements of
income are not necessarily indicative of the financial results of the Company
had the Distribution occurred on October 1, 1995.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30, 1996
--------------------------------------
AUTOMOTIVE
BUSINESS PRO FORMA COMPANY
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------- ----------
(IN MILLIONS, EXCEPT PER SHARE AMOUNT)
<S> <C> <C> <C>
Sales................................................... $3,144 $ $3,144
Cost of sales........................................... 2,747 2,747
------ ------ ------
Gross margin....................................... 397 -- 397
Selling, general and administrative..................... 215 (10)(1) 205
Restructuring........................................... 36 36
------ ------ ------
Operating earnings................................. 146 10 156
Other income-net........................................ 46 46
Interest expense........................................ (10) (27)(2) (37)
------ ------ ------
Income before income taxes.............................. 182 (17) 165
Provision for income taxes.............................. 68 (5)(3) 63
------ ------ ------
Net income......................................... $ 114 $ (12) $ 102
====== ====== ======
Earnings per share...................................... $ 1.41(4)
======
Average outstanding shares.............................. 72.5(4)
======
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31, 1997
--------------------------------------
AUTOMOTIVE
BUSINESS PRO FORMA COMPANY
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------- ----------
(IN MILLIONS, EXCEPT PER SHARE AMOUNT)
<S> <C> <C> <C>
Sales................................................... $1,578 $ $1,578
Cost of sales........................................... 1,371 1,371
------ ------ ------
Gross margin....................................... 207 207
Selling, general and administrative..................... 110 (6)(1) 104
------ ------ ------
Operating earnings................................. 97 6 103
Other income-net........................................ 9 9
Interest expense........................................ (4) (13)(2) (17)
------ ------ ------
Income before income taxes.............................. 102 (7) 95
Provision for income taxes.............................. 40 (3)(3) 37
------ ------ ------
Net income......................................... $ 62 $ (4) $ 58
====== ====== ======
Earnings per share...................................... $ 0.80(4)
======
Average outstanding shares.............................. 72.5(4)
======
</TABLE>
- ---------------
(1) To reflect the reduction of corporate costs from those allocated to the
Automotive Business by Rockwell to management's estimate of costs that would
have been incurred on a stand-alone basis.
(2) Interest expense at 5.9% for both the year ended September 30, 1996 and the
six months ended March 31, 1997 related to the debt to be incurred by the
Company in connection with the Pre-Distribution Payment to Rockwell. The
interest rate represents the Company's estimated cost of borrowing for the
periods presented.
(3) Income tax effect of adjustments (1) and (2).
(4) Earnings per share and average outstanding shares are based on the
anticipated post-Distribution capital structure of the Company. These
amounts are based on average outstanding shares of Rockwell Common Stock of
217.4 million for the six months ended March 31, 1997 and 217.6 million for
the year ended September 30, 1996 and the distribution ratio of one share of
Company Common Stock for every three shares of Rockwell Common Stock
outstanding.
37
<PAGE> 43
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW AND OUTLOOK
The Automotive Business is a leading global supplier of a broad range of
components and systems for use in commercial, specialty and light vehicles, with
sales of over $3.1 billion in fiscal 1996. Operating earnings of the Automotive
Business in fiscal 1996 grew to $182 million (before restructuring charges of
$36 million) from $91 million in 1994. The Automotive Business serves a broad
range of OEM customers worldwide, including truck OEMs, light vehicle OEMs,
semi-trailer producers and off-highway and specialty vehicle manufacturers. In
fiscal 1996, Automotive Business sales were in the following geographic regions:
North America, 56%; Europe, 35%; South America, 6%; and Asia-Pacific, 3%.
The Company believes the Credit Facility (described below) and cash flows
provided by operations will provide an adequate source of funds and liquidity to
support the future cash requirements of the Automotive Business, including the
payment of dividends initially expected to be approximately [ ] million per
year or [ ] cents per share.
The Automotive Business has initiated ongoing programs to improve product
quality and customer service, rationalize production, reduce costs and focus on
its core strengths and product lines. These programs have included investments
to improve operational efficiencies, realignment of the worldwide manufacturing
function to improve asset utilization, introduction of new products and
expansion into new markets. In addition, in fiscal 1996 the Automotive Business
recorded a restructuring charge related to plant consolidations and costs
associated with staff reductions and outsourcing actions. Management believes
that these efforts have benefited financial performance over the past three
fiscal years.
Management of the Company has established long-term financial goals, which
include 8% average annual sales growth, 15% average annual earnings per share
growth and long-term debt to capitalization of 45%, with a strong emphasis on
cash management. The long-term average annual goals have been established with
the recognition that the industry in which the Automotive Business operates has
been characterized historically by periodic fluctuations in overall demand for
commercial, specialty and light vehicles for which the Automotive Business
supplies products, resulting in corresponding fluctuations in demand for
products of the Automotive Business. Accordingly, the Company will measure its
performance against these goals over a multi-year period.
FINANCIAL CONDITION
The Automotive Business has generated strong cash flows with cash provided
by operating activities amounting to $197 million in fiscal 1996, $203 million
in fiscal 1995 and $156 million in fiscal 1994. Cash provided by operating
activities was $56 million in the first six months of fiscal 1997, which was
lower than the $71 million provided by operating activities in the comparable
period of 1996, primarily due to the funding of the 1996 restructuring costs and
lower funds provided by the factoring of trade accounts receivable in France.
These cash flows have allowed the Automotive Business to fund capital
expenditures of $37 million for the first six months of fiscal 1997, $144
million for fiscal 1996, $119 million for fiscal 1995 and $102 million for
fiscal 1994. Capital expenditures included equipment to support new product
introductions (roof systems, door systems, seat adjusting systems and the
Permalube(TM) driveline products), capacity expansion (wheels and electric
motors) and new production processes. Capital expenditures for the fiscal year
ending September 30, 1997 are expected to total approximately $115 million.
The Automotive Business has retirement medical and pension plans which
cover most of its United States and certain non-United States employees (see
Notes 10 and 11 to Notes to Combined Financial Statements). Retirement medical
plan cash payments aggregated $35 million in 1996 and are expected to
approximate this amount in 1997 and 1998. The Automotive Business, as a
participant in Rockwell pension plans, made, and expects to make, pension plan
contributions of approximately $2 million in each of 1996 and 1997. As an
independent company, the Automotive Business will establish a U.S. pension plan,
and will
38
<PAGE> 44
continue existing non-U.S. pension plans. Management expects pension plan
contributions in 1998 to approximate $25 million.
In May 1997, the Automotive Business began the initial steps to secure
financing on a stand-alone basis in order to operate as an independent company
and to make the Pre-Distribution Payment of approximately $445 million to
Rockwell. Prior to the Distribution, the Automotive Business will enter into the
$1 billion five-year unsecured revolving Credit Facility with a group of banks.
The initial interest rate on borrowings under the Credit Facility is expected to
be based on the Automotive Business's ratio of Debt to EBITDA (such ratio and
terms to be defined in the definitive credit agreement for the Credit Facility)
(the "Financial Ratio"), or based on the credit ratings the Automotive Business
receives from rating agencies when such ratings are received (the "Ratings
Grid"). Based on the Company's anticipated Financial Ratio, the initial
aggregate interest rate (including a facility fee of 10 basis points) on
borrowings under the Credit Facility is expected to be 30 basis points above
LIBOR, which is consistent with BBB and Baa2 ratings under the Ratings Grid. At
March 31, 1997, the interest rate based on the Company's anticipated Financial
Ratio and three-month LIBOR would have been approximately 6.0 percent. Pro forma
long-term debt to total capitalization would have been 69 percent at March 31,
1997 with pro forma pre-tax interest coverage of 6.9x for the six months ended
March 31, 1997.
RESULTS OF OPERATIONS
The following represents the sales and operating earnings of the Automotive
Business for the years ended September 30, 1994, 1995 and 1996 and for the six
months ended March 31, 1996 and 1997 (dollars in millions):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, MARCH 31,
-------------------------- --------------------
1994 1995 1996 1996 1997
------ ------ ------ ---------- ------
<S> <C> <C> <C> <C> <C>
Sales:
Heavy Vehicle Systems......................... $1,753 $1,937 $1,827 $ 927 $ 894
Light Vehicle Systems......................... 900 1,188 1,317 666 684
------ ------ ------ ------ ------
Total sales..................................... $2,653 $3,125 $3,144 $1,593 $1,578
====== ====== ====== ====== ======
Gross margin.................................... $ 282 $ 381 $ 397 $ 194 $ 207
====== ====== ====== ====== ======
Operating earnings before restructuring
charges....................................... $ 91 $ 178 $ 182 $ 93 $ 97
Restructuring charge............................ -- -- (36) -- --
------ ------ ------ ------ ------
Operating earnings.............................. 91 178 146 93 97
Other income-net................................ 9 18 46 16 9
Interest expense................................ (12) (11) (10) (5) (4)
Provision for income taxes...................... (37) (62) (68) (39) (40)
------ ------ ------ ------ ------
Net income...................................... $ 51 $ 123 $ 114 $ 65 $ 62
====== ====== ====== ====== ======
Operating earnings before restructuring charges
as % of sales................................. 3.4% 5.7% 5.8% 5.8% 6.1%
</TABLE>
SIX MONTHS ENDED MARCH 31, 1997 COMPARED TO SIX MONTHS ENDED MARCH 31, 1996
Sales for the first six months of fiscal 1997 were approximately the same
as for the comparable 1996 period. Higher sales of LVS products resulting from
continued strong demand in the North American market were offset by lower sales
of HVS products, as heavy vehicle production in the North American and European
markets declined.
For the first six months of fiscal 1997, gross margin increased $13
million, or 7 percent, and operating earnings increased $4 million, or 4
percent, from the comparable 1996 period. Gross margin and operating earnings
benefited from continued improvement in production processes, material cost
reductions and the restructuring actions initiated during fiscal 1996. These
benefits more than offset investments in new product
39
<PAGE> 45
development, continuing launch costs for seat adjusting systems products and
higher engineering costs. Other income decreased by $7 million for the first six
months of fiscal 1997 from the comparable 1996 period primarily due to a gain on
the sale of Brazilian assets in 1996.
1996 COMPARED TO 1995
Sales for fiscal 1996 were slightly higher than fiscal 1995 principally due
to an 11 percent sales increase in LVS products, which offset a 6 percent
decrease in HVS product sales. The increased sales of LVS products resulted
primarily from the expansion of the Automotive Business's customer base in the
light truck and sport utility vehicle markets in North America. This expansion
was fueled by product placement on new vehicle platforms, a strong vehicle
market and new product introductions.
The decrease in sales of HVS products was due to lower vehicle production
levels, principally in the North and South American markets. North American
heavy truck and trailer production decreased approximately 18 percent from the
high levels achieved in 1995. The Brazilian medium-duty and heavy-duty vehicle
markets experienced a 38 percent decline due to depressed economic conditions.
Gross margin for the 1996 period improved $16 million, or 4 percent, in
comparison to the 1995 period as a result of continued product cost reductions.
Operating earnings before restructuring charges for 1996 increased $4 million,
or 2 percent, from 1995, principally due to continued product cost reductions
which were offset by launch costs related to the introduction of door systems
and seat adjusting systems products in the North American market and an increase
in selling, general and administrative expenses. Selling, general and
administrative expenses in fiscal 1996 increased $12 million, or 6 percent, over
fiscal 1995, primarily due to higher marketing costs and increased reserves for
uncollectible receivables. Operating earnings decreased by 18 percent after
restructuring charges of $36 million, referred to above.
Other income in 1996 increased by $28 million as compared to 1995 primarily
due to a $14 million gain on the sale of Brazilian assets and a $15 million
favorable insurance claim settlement.
1995 COMPARED TO 1994
Sales for fiscal 1995 increased $472 million, or 18 percent, over fiscal
1994, as both HVS and LVS experienced improved markets and benefited from new
product introductions.
LVS product sales increased 32 percent compared to fiscal 1994 principally
due to the introduction of new roof and door systems products which contributed
to higher sales in Europe. Sales in the North American market also improved due
to new product introductions and growth in the light truck market. In addition,
the acquisition of the window regulator business of Dura Automotive Systems,
Inc. contributed to these sales increases.
HVS product sales improved 11 percent over 1994 as worldwide vehicle
production levels increased. Heavy truck and trailer production in North America
in fiscal 1995 expanded by 16 percent and 20 percent, respectively, over 1994
levels. These increased levels more than offset a decline in military product
sales.
Gross margin increased $99 million, or 35 percent, and operating earnings
increased $87 million, or 96 percent, for fiscal 1995 over the comparable 1994
period. These improvements were the result of higher sales, improved operating
performance and lower product warranty costs for transmissions in 1995.
Operating earnings and gross margin in 1994 were depressed by $38 million of
higher product warranty provisions due to higher than anticipated costs related
to extended warranty programs as well as a non-recurring charge to recognize the
cost of inspections and potential field modifications of certain transmission
products. Cost reduction efforts initiated by the Automotive Business and
improved plant utilization also improved 1995 results.
INCOME TAXES
The Automotive Business's effective income tax rate in 1996 was 37.6
percent compared to 33.4 percent in 1995 and 41.5 percent in 1994. The lower tax
rate in 1995 was due principally to the realization of foreign
40
<PAGE> 46
net operating loss carryforwards combined with relatively higher levels of U.S.
taxable income related to improved sales in the North American truck markets.
The higher tax rate in 1994 was due to losses at certain non-U.S. subsidiaries
for which no tax benefits were recorded.
At September 30, 1996, the Automotive Business had unrecognized tax
benefits from foreign net operating loss carryforwards of approximately $15
million, which generally expire between 1997 and 2001 and are available to
reduce future income taxes of the Company.
INTERNATIONAL OPERATIONS
Nearly one-half of the Automotive Business's total assets and sales for the
year ended September 30, 1996 were outside North America, primarily in France,
the United Kingdom, Germany, Brazil and Italy. Management expects that the
long-term debt necessary to finance the Pre-Distribution Payment to Rockwell
will be incurred primarily in the United States, Canada, France, Germany and the
United Kingdom. Management believes that international operations have
significantly benefited financial performance of the Automotive Business.
However, the Company's international operations are subject to a number of risks
inherent in operating abroad. See "Special Factors -- International Operations".
CAUTIONARY STATEMENT
This Information Statement contains statements relating to future results
of the Company (including certain projections and business trends) that are
"forward-looking statements". Actual results may differ materially from those
projected as a result of certain risks and uncertainties, including but not
limited to global economic and market conditions, including but not limited to
the demand for commercial, specialty and light vehicles for which the Automotive
Business supplies products; risks inherent in operating abroad; demand for and
market acceptance of new and existing products; successful development of new
products; reliance on major OEM customers; labor relations of the Company, its
customers and suppliers; and competitive product and pricing pressures, as well
as other risks and uncertainties, including but not limited to those set forth
under "Special Factors" and those detailed from time to time in the filings of
the Company with the Commission.
41
<PAGE> 47
MANAGEMENT OF THE COMPANY
DIRECTORS OF THE COMPANY
Immediately after the Distribution Date, the Board of Directors of the
Company is expected to consist of the individuals named below. The Company
Certificate provides that the Company will have three classes of directors, the
initial terms of office of which will expire, respectively, at the annual
meetings of stockholders in 1998, 1999 and 2000. Successors to any directors
whose terms are expiring are elected to three-year terms and hold office until
their successors are elected and qualified. Also set forth below with respect to
each director is the class of which such director will be a member. Unless
otherwise indicated, (i) the business address for each person listed below is
111 Holdings, Inc., 2135 West Maple Road, Troy, Michigan 48084-7186 and (ii)
each individual listed below is a citizen of the United States. See "Description
of Company Capital Stock -- Certain Provisions in the Company Certificate and
Company By-Laws".
CLASS I DIRECTORS
Class I Directors will serve until the 1998 Annual Meeting of Stockholders
of the Company and until their respective successors are elected and qualified.
LARRY D. YOST -- Mr. Yost, age 59, will serve as Chairman of the Board and
Chief Executive Officer of the Company. Mr. Yost joined Allen-Bradley Company,
Inc. (automation), a subsidiary of Rockwell, as a manager in 1971 and, after
serving in a number of increasingly responsible management positions, served as
Senior Vice President of Allen-Bradley from July 1992 until November 1994. He
served as President, Heavy Vehicle Systems of Rockwell from November 1994 until
March 1997 and has been Senior Vice President and President, Automotive and
Acting President, Heavy Vehicle Systems of Rockwell since March 1997. Mr. Yost
is a director of Kennametal Inc. and the GMI Engineering and Management
Institute.
CHARLES H. HARFF -- Mr. Harff, age 67, is a consultant to Rockwell. From
November 1994 to February 1996, Mr. Harff served as Senior Vice President and
Special Counsel of Rockwell. From March 1984, when he joined Rockwell, until
November 1994, Mr. Harff served as Senior Vice President, General Counsel and
Secretary of Rockwell. He is a Director of the Fulbright Association, the
Christian A. Johnson Endeavor Foundation and several civic organizations.
CLASS II DIRECTORS
Class II Directors will serve until the 1999 Annual Meeting of Stockholders
of the Company and until their respective successors are elected and qualified.
HAROLD A. POLING -- Mr. Poling, age 71, is an investor in Metapoint
Partners, an investment partnership, and retired as Chairman of the Board and
Chief Executive Officer of Ford Motor Company (automotive manufacturer) in
January 1994. He joined Ford in 1951 and served in a number of senior management
positions prior to becoming President (in 1975) and Chairman (in 1977) of Ford
in Europe. Mr. Poling became President and Chief Operating Officer of Ford in
February 1985 and served as Chairman of the Board from March 1990 to January
1994. He is a director of Flint Ink Corporation, Kellogg Company, LTV
Corporation and Shell Oil Company. He is also a director, trustee or member of a
number of business, educational and civic organizations.
[Additional director to come]
CLASS III DIRECTORS
Class III Directors will serve until the 2000 Annual Meeting of
Stockholders of the Company and until their respective successors are elected
and qualified.
JOSEPH B. ANDERSON, JR. -- Mr. Anderson, age 54, is Chairman of the Board
and Chief Executive Officer of Chivas Products, Ltd. (automotive component
supplier). He has held that position since October 1994. From December 1992 to
October 1994, Mr. Anderson was President and Chief Executive Officer of
42
<PAGE> 48
Composite Energy Management Systems, Incorporated (automotive component
supplier). Mr. Anderson served in a variety of positions, primarily in
manufacturing, with General Motors Corporation (automotive manufacturer) from
1979 until December 1992. He also served as an assistant to the U.S. Secretary
of Commerce from 1977 to 1979. Mr. Anderson is a director of the GMI Engineering
and Management Institute and Quaker Chemical Corporation.
DONALD R. BEALL -- Mr. Beall, age 58, is Chairman of the Board and Chief
Executive Officer of Rockwell, has been a director of Rockwell since 1978 and
was elected to his present position at Rockwell in February 1988 after serving
nine years as President and Chief Operating Officer. Mr. Beall joined Rockwell
in 1968 and served in a number of senior management positions prior to becoming
Executive Vice President in September 1977 and President in February 1979. Mr.
Beall is a director of Amoco Corporation, The Procter & Gamble Company and The
Times Mirror Company. He is a trustee of the California Institute of Technology
and a member of the University of California -- Irvine Board of Overseers and
the Board of Visitors of its Graduate School of Management as well as The
Business Council, The Business Roundtable, the Chief Executives' Organization
and the Council on Competitiveness. He is also a director, trustee or member of
a number of other professional and civic organizations.
JOHN J. CREEDON -- Mr. Creedon, age 72, is a consultant and director of
certain corporations and retired President and Chief Executive Officer of
Metropolitan Life Insurance Company. He joined Metropolitan Life in 1942 and was
appointed Senior Vice President and General Counsel in 1973. He became an
Executive Vice President in 1976, President and a director in 1980, served as
Chief Executive Officer from 1983 through August 1989, and then as Chairman of
the Executive Committee until April 1991. He is a director of Corporate Partners
and Union Carbide Corporation and serves as a consultant to Rockwell pursuant to
a retirement arrangement for former directors. He is also a director, trustee or
member of a number of business, educational and civic organizations.
COMMITTEES OF THE BOARD OF DIRECTORS
The standing committees of the Board of Directors of the Company will
include an Audit Committee, a Compensation Committee, a Board Composition
Committee and an Environmental and Social Responsibility Committee, each of
which will be comprised of non-employee directors. The functions of each of
these four committees are described and the initial members of each are listed
below.
The Audit Committee will review the scope and effectiveness of audits of
the Company by the Company's independent public accountants and internal
auditors; select and recommend to the Board of Directors the employment of
independent public accountants for the Company, subject to approval of the
stockholders; review the audit plans of the Company's independent public
accountants and internal auditors; review and approve the fees charged by the
independent public accountants; review the Company's annual financial statements
before their release; review the adequacy of the Company's system of internal
controls and recommendations of the independent public accountants with respect
thereto; review and act on comments and suggestions by the independent public
accountants and by the internal auditors with respect to their audit activities;
and monitor compliance by the employees of the Company with the Company's
standards of business conduct policies. The initial members of the Audit
Committee will be [ ].
The principal functions of the Compensation Committee will be to evaluate
the performance of the Company's senior executives and plans for management
succession and development, to consider the design and competitiveness of the
Company's compensation plans, to review and approve senior executive
compensation and to administer the Company's incentive, deferred compensation,
stock option and long-term incentives plans pursuant to the terms of the
respective plans. The members of the Compensation Committee will be ineligible
to participate in any of the plans or programs which are administered by the
Committee except the Directors Plan (as defined below). The initial members of
the Compensation Committee will be [ ].
The principal functions of the Board Composition Committee will be to
consider and recommend to the Board qualified candidates for election as
directors of the Company and periodically to prepare and submit to the Board for
adoption the Committee's selection criteria for director nominees. The Committee
will also periodically assess the performance of the Board of Directors and
report thereon to the Board. Stockholders of
43
<PAGE> 49
the Company may recommend candidates for consideration by the Committee by
writing to the Secretary of the Company within certain specified time periods,
giving the candidate's name, biographical data and qualifications. See
"Description of Company Capital Stock -- Certain Provisions in the Company
Certificate and Company By-Laws". Any such recommendation should be accompanied
by a written statement from the individual of his or her consent to be named as
a candidate and, if nominated and elected, to serve as a director. The initial
members of the Board Composition Committee will be [ ].
The Environmental and Social Responsibility Committee will review and
assess the Company's policies and practices in the following areas: employee
relations, with emphasis on equal employment opportunity and advancement; the
protection and enhancement of the environment and energy resources; product
integrity and safety; employee health and safety; and community and civic
relations including programs for and contributions to health, educational,
cultural and other social institutions. The initial members of the Environmental
and Social Responsibility Committee will be [ ].
COMPENSATION OF DIRECTORS
Non-employee directors of the Company will receive a retainer at the rate
of $35,000 per year for Board service. Pursuant to the Directors Plan, each
non-employee director will receive a grant of 500 shares of Company Common Stock
following the Distribution and thereafter will receive a grant of 1,000 shares
of Company Common Stock immediately after each Annual Meeting of Stockholders of
the Company. In addition, pursuant to the Directors Plan, each non-employee
director will be granted an option to purchase, at the closing price of the
Company Common Stock on the NYSE Composite Transactions reporting system on the
date of grant, 1,500 shares of Company Common Stock following the Distribution
and thereafter will be granted an option for 3,000 shares of Company Common
Stock immediately after each Annual Meeting of Stockholders of the Company (in
each case, subject to approval of the Directors Plan at the 1998 Annual Meeting
of Stockholders of the Company). Under the terms of the Company's directors'
deferred compensation plan, a director may elect to defer all or part of the
cash payment of retainer fees until such time as shall be specified, with
interest on deferred amounts accruing quarterly at 120% of the Federal long-term
rate set each month by the Secretary of the Treasury. Each director shall also
have the option each year to determine whether to defer all the annual grant of
shares and all or any portion of the cash retainers by electing to receive
restricted shares valued at the closing price of the Company Common Stock on the
NYSE Composite Transactions reporting system on the date of the annual grant and
the date each retainer payment would otherwise be made in cash. See "-- Benefit
Plans Following the Distribution -- Directors Stock Plan".
44
<PAGE> 50
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below is information with respect to those individuals who are
expected to serve as executive officers of the Company immediately following the
Distribution. Those individuals named below who are currently officers or
employees of Rockwell will resign from all such positions prior to the
Distribution. Executive officers of the Company will be elected to serve until
they resign or are removed, or are otherwise disqualified to serve, or until
their successors are elected and qualified.
<TABLE>
<CAPTION>
NAME, OFFICE AND POSITION, AND PRINCIPAL OCCUPATIONS AND EMPLOYMENT AGE
- -------------------------------------------------------------------------------------- ---
<S> <C>
LARRY D. YOST -- Chairman of the Board and Chief Executive Officer. Senior Vice
President, President, Automotive and Acting President, Heavy Vehicle Systems of
Rockwell since March 1997; President, Heavy Vehicle Systems of Rockwell from
November 1994 to March 1997; Senior Vice President, Operations of Allen-Bradley
Company, Inc. (automation), a subsidiary of Rockwell, prior thereto................. 59
ROBERT A. CALDER -- Senior Vice President and President, Light Vehicle Systems.
President, Light Vehicle Systems of Rockwell since November 1994; Executive Vice
President, Automotive Body and Chassis Systems of Rockwell from November 1992 to
November 1994; Vice President and General Manager, Automotive Body Systems of
Rockwell prior thereto.............................................................. 61
GARY L. COLLINS -- Senior Vice President, Human Resources. Vice President -- Human
Resources and Government Relations, Automotive of Rockwell since September 1991..... 51
DAVID W. GREENFIELD -- Senior Vice President, General Counsel and Secretary. Associate
General Counsel of Rockwell since July 1995; Assistant General Counsel of Rockwell
prior thereto....................................................................... 47
THOMAS J. JOYCE -- Vice President and Treasurer. Vice President, Investor and
Community Relations of Rockwell since May 1989...................................... 50
SUSAN P. KAMPE -- Senior Vice President and Chief Information Officer. Vice President
-- Information Technology, Heavy Vehicle Systems of Rockwell since August 1996;
Director of Global Information Systems and Services, Safety Restraints Business of
Allied-Signal Automotive (automotive component supplier) from August 1994 to August
1996; Manager, Manufacturing Systems, North America of ITT Automotive (automotive
component supplier) prior thereto................................................... 39
THOMAS A. MADDEN -- Senior Vice President and Chief Financial Officer. Vice President
and Senior Vice President -- Finance, Automotive of Rockwell since March 1997; Vice
President, Corporate Development of Rockwell from September 1996 to March 1997; Vice
President -- Finance & Administration, Light Vehicle Systems of Rockwell from May
1996 to September 1996; Vice President -- Finance & Administration, Automotive of
Rockwell from October 1994 to May 1996; Assistant Controller of Rockwell prior
thereto............................................................................. 43
PRAKASH R. MULCHANDANI -- Senior Vice President and President, Worldwide Truck and
Trailer Systems. President -- Worldwide Truck and Trailer Systems, Heavy Vehicle
Systems of Rockwell since April 1996; President -- North American Truck Systems,
Automotive of Rockwell from June 1994 to April 1996; General Manager -- Trailer
Products, Automotive of Rockwell prior thereto...................................... 52
RICHARD C. QUAID -- Senior Vice President and President, Off-Highway and Specialty
Products. President -- Off-Highway and Specialty Products, Heavy Vehicle Systems of
Rockwell since April 1996; President -- Off-Highway Products, Automotive of Rockwell
prior thereto....................................................................... 54
RODNEY J. WALTER -- Senior Vice President, Business Development and Communications.
Vice President -- Business Development, Heavy Vehicle Systems of Rockwell since June
1995; Director -- Business Development of Rockwell prior thereto................... 46
</TABLE>
45
<PAGE> 51
HISTORICAL COMPENSATION OF EXECUTIVE OFFICERS
There is shown below information concerning the annual and long-term
compensation for services rendered in all capacities to Rockwell and its
subsidiaries for the fiscal year ended September 30, 1996 of the individual who
will serve as chief executive officer of the Company and the other four most
highly compensated executive officers of the Company, based on their employment
by Rockwell or an affiliate of Rockwell at September 30, 1996 (the "Named
Executive Officers"). The compensation described in this table was paid by
Rockwell or an affiliate of Rockwell. References to "stock options" relate to
awards of Rockwell Options under the Rockwell 1995 LTIP and the Rockwell 1988
LTIP. The services rendered to Rockwell were, in many cases, in capacities not
equivalent to those to be provided to the Company and this table does not
reflect the compensation to be paid to executive officers of the Company in the
future.
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------
ANNUAL COMPENSATION ALL OTHER
-------------------------------------- AWARDS PAYOUTS COMPENSATION
OTHER ------------ ---------- ------------
NAME AND ANNUAL STOCK LONG- TERM
PRINCIPAL POSITION COMPEN- OPTIONS INCENTIVE
WITH THE COMPANY YEAR SALARY BONUS SATION (SHARES) PAYOUTS
- ------------------------------- ------ ------------ ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Larry D. Yost.................. 1996 $ $ $ $ $
Chairman of the Board and
Chief Executive Officer
Robert A. Calder............... 1996
Senior Vice President and
President, Light Vehicle
Systems
Thomas A. Madden............... 1996
Senior Vice President and
Chief Financial Officer
Prakash R. Mulchandani......... 1996
Senior Vice President and
President, Worldwide Truck
and Trailer Systems
Richard C. Quaid............... 1996
Senior Vice President and
President, Off-Highway and
Specialty Products
</TABLE>
- ---------------
(1) In accordance with the executive compensation disclosure rules adopted by
the Commission, the compensation of the Named Executive Officers is not
shown for fiscal 1994 and 1995 because the Company was not a reporting
company under the Exchange Act for such years and such compensation
information has not been provided in a prior filing with the Commission.
Effective October 1, 1997, the annual salaries of Messrs. Yost, Calder,
Madden, Mulchandani and Quaid are expected to be $[ ], $[ ],
$[ ], $[ ] and $[ ], respectively. It is anticipated that
options for an aggregate of approximately [ ] shares of Company Common
Stock will be granted to employees of the Company, including the Named Executive
Officers, in the last calendar quarter of 1997, subject to approval of the
Company's 1997 Long-Term Incentives Plan at the 1998 Annual Meeting of
Stockholders of the Company. See "-- Benefit Plans Following the
Distribution -- 1997 Long-Term Incentives Plan -- Initial Option Grants".
Rockwell has entered into an arrangement with Mr. Calder providing for a
payment of $100,000 by Rockwell to Mr. Calder if he is employed by the Company
on the Distribution Date and a payment of $390,000 (the "Retention Payment") by
the Company to Mr. Calder 13 months after the Distribution Date if the
Distribution is consummated and Mr. Calder does not voluntarily terminate
employment with the Company for at least 12 months thereafter. In addition, a
severance payment of $585,000 (less the amount of the Retention Payment if it
has been paid) will be payable by the Company to Mr. Calder if he is
involuntarily terminated (other than for cause) or if he voluntarily terminates
employment after his responsibilities are substantially diminished, in either
case within two years after the Distribution Date.
46
<PAGE> 52
OPTION GRANTS
Shown below is further information on grants to the Named Executive
Officers of stock options pursuant to the Rockwell 1995 LTIP during the fiscal
year ended September 30, 1996, which are reflected in the Summary Compensation
Table above.
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS VALUE
- ---------------------------------------------------------------------------------------------- -----------
PERCENTAGE
OF TOTAL
OPTIONS
NUMBER OF GRANTED
SECURITIES TO
UNDERLYING ROCKWELL
OPTIONS EMPLOYEES EXERCISE OR GRANT DATE
GRANTED IN FISCAL BASE PRICE EXPIRATION PRESENT
NAME (SHARES)(1)(2) 1996 (PER SHARE)(2) DATE VALUE(3)
- ------------------------------ -------------- --------- -------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Larry D. Yost................. 15,000 0.83% $ 51.875 12/06/05 $ 175,500
Robert A. Calder.............. 15,000 0.83% 51.875 12/06/05 175,500
Thomas A. Madden.............. -- -- % -- -- --
Prakash R. Mulchandani........ -- -- % -- -- --
Richard C. Quaid.............. -- -- % -- -- --
</TABLE>
- ---------------
(1) All options granted to the Named Executive Officers were granted on December
6, 1995 and the first of three substantially equal installments became
exercisable December 6, 1996.
(2) In connection with the acquisition by The Boeing Company of the Aerospace
and Defense Businesses of Rockwell on December 6, 1996, pursuant to the
adjustment provisions of the Rockwell 1995 LTIP, the Rockwell 1988 LTIP and
other Rockwell stock option plans (collectively, the "Rockwell Option
Plans"), the exercise price of options to purchase Rockwell Common Stock and
the number of shares of Rockwell Common Stock for which such options are
exercisable were adjusted to preserve for each optionee the aggregate
"spread" that existed immediately prior to such acquisition between the
aggregate fair market value of the Rockwell Common Stock for which such
options are exercisable and the aggregate per share exercise price of the
optionee's options to purchase Rockwell Common Stock.
(3) These values are based on the Black-Scholes option pricing model which
produces a per option share value of $11.70 using the following assumptions
and inputs: options exercised after 7 1/2 years, weighted five-year prior
stock price volatility and dividend yield of 0.1762 and 2.86%, respectively,
and an interest rate of 5.72%, which was the zero coupon 7 1/2-year Treasury
bond rate at date of grant. The actual value, if any, the executive officer
may realize from these options will depend solely on the gain in stock value
over the exercise price when the options are exercised.
The Black-Scholes option pricing methodology, on which the present value of
the stock options granted to the Named Executive Officers is based, attempts to
portray the value of an option at the date of grant. While the options have no
value if the stock price does not increase, were the $11.70 present value of the
options converted into a future stock price at the end of the 7 1/2-year period
when it is assumed the options would be exercised, the shareowners of the
approximately 217 million shares of Rockwell Common Stock outstanding on the
grant date of those options (assuming that number of shares remains outstanding)
would realize aggregate appreciation of $3,854.8 million compared to aggregate
appreciation on the options of approximately $0.5 million for the Named
Executive Officers (assuming that they held their options or the shares acquired
on exercise thereof for the whole 7 1/2-year period).
On or after December 6, 1996, options to purchase an aggregate of 15,000,
13,500 and 22,500 shares of Rockwell Common Stock were granted under the
Rockwell 1995 LTIP to Messrs. Yost, Calder and Madden, respectively. Such
options are exercisable at average exercise prices of $61.50, $61.50 and
$63.625, respectively.
As set forth in the Employee Matters Agreement, any Rockwell Option granted
after September 30, 1996 held by an employee who will be employed by the
Automotive Business at the time of the Distribution will be converted into a
Company Option, having the same terms and vesting schedule as the original
Rockwell Option, but with adjustments in order to provide equivalent value to
each optionholder. All other Rockwell Options will continue as Rockwell Options
with adjustments in order to provide equivalent value to each optionholder after
giving effect to the Distribution. See "Arrangements Between Rockwell and the
Company Relating to the Distribution -- Employee Matters Agreement".
47
<PAGE> 53
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is information with respect to (i) exercises by the Named
Executive Officers during fiscal 1996 of options to purchase Rockwell Common
Stock granted under the Rockwell Option Plans and (ii) the unexercised options
to purchase Rockwell Common Stock granted to the Named Executive Officers in
fiscal 1996 and prior years under the Rockwell Option Plans and held by them at
September 30, 1996.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
SHARES SEPTEMBER 30, 1996(1) SEPTEMBER 30, 1996(1)(2)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Larry D. Yost........... -- -- 4,000 23,000 $ 83,000 $ 233,500
Robert A. Calder........ -- -- 31,000 23,000 849,125 233,500
Thomas A. Madden........ 1,100 $ 37,538 23,700 -- 627,975 --
Prakash R.
Mulchandani........... -- -- 12,400 -- 407,038 --
Richard C. Quaid........ 4,500 158,906 8,500 -- 211,438 --
</TABLE>
- ---------------
(1) In connection with the acquisition by The Boeing Company of the Aerospace
and Defense Businesses of Rockwell on December 6, 1996, pursuant to the
adjustment provisions of the Rockwell Option Plans, the exercise price of
options to purchase Rockwell Common Stock and the number of shares of
Rockwell Common Stock for which such options are exercisable were adjusted
to preserve for each optionee the aggregate "spread" that existed
immediately prior to such acquisition between the aggregate fair market
value of the Rockwell Common Stock for which such options are exercisable
and the aggregate per share exercise price of the optionee's options to
purchase Rockwell Common Stock.
(2) Based on the closing price of Rockwell Common Stock on the NYSE Composite
Transactions reporting system on September 30, 1996, the last trading day in
that month ($56.375).
LONG-TERM INCENTIVE PLAN AWARDS
The following table shows for each Named Executive Officer the specified
information with respect to awards (other than stock options included in the
Summary Compensation Table above) during fiscal 1996 under long-term incentive
plans of Rockwell.
<TABLE>
<CAPTION>
NUMBER OF PERFORMANCE OR ESTIMATED FUTURE PAYOUT UNDER
SHARES, OTHER PERIOD UNTIL NON-STOCK PRICE-BASED PLANS
UNITS OR OTHER MATURATION OR --------------------------------
NAME RIGHTS PAYOUT THRESHOLD TARGET MAXIMUM
- ------------------------------------- ---------------- ------------------ --------- ------ -------
<S> <C> <C> <C> <C> <C>
Larry D. Yost........................
Robert A. Calder.....................
Thomas A. Madden.....................
Prakash R. Mulchandani...............
Richard C. Quaid.....................
</TABLE>
All liabilities in respect of outstanding Rockwell long-term incentive plan
awards granted to Automotive Business employees as of the time of the
Distribution will be assumed by the Company. Such outstanding long-term
incentive plan awards are based in part on achieving goals measured by sales
growth, return on sales and return on assets of the Automotive Business, and
performance of Rockwell Common Stock, for 3-year performance cycles ending on
each of September 30, 1997, September 30, 1998 and September 30, 1999. It is
anticipated that payments in respect of grants made for the 3-year performance
cycle ending September 30, 1997 will be paid by the Company in December 1997. It
is estimated that Messrs. Yost, Calder, Madden, Mulchandani and Quaid will earn
$ , $ , $ , $ and $ , respectively,
for such 3-year performance cycle and it is expected that the Compensation
Committee will determine that all amounts earned by such persons will be paid in
restricted shares of Company Common Stock that will vest after five years or
upon earlier retirement under the Company's retirement plans, or as the
Compensation Committee may otherwise determine. The number of restricted shares
delivered will be based on the market value of Company Common Stock on the date
the Compensation Committee makes its determination; assuming such market value
of Company Common Stock is between $[ ] and $[ ] per
48
<PAGE> 54
share, the foregoing Named Executive Officers would receive between [ ]
and [ ], [ ] and [ ], [ ] and [ ],
[ ] and [ ] and [ ] and [ ] restricted
shares of Company Common Stock, respectively. Grants made in respect of the
3-year performance cycle ending September 30, 1998 will continue, with such
adjustments as may be deemed appropriate by the Compensation Committee to
reflect the Distribution. Grants made in respect of the 3-year performance cycle
ending September 30, 1999 will be terminated as of September 30, 1997, with pro
rated payments to be made in respect thereof based on performance during the
fiscal year ended September 30, 1997 and forecast results for fiscal 1998 and
1999. It is anticipated that payments to the Named Executive Officers for the
3-year performance cycle ending September 30, 1999 also will be made in
restricted shares of Company Common Stock, determined in the same manner as
described above for the 3-year performance cycle ending September 30, 1997. In
addition, because of the early termination of the 3-year performance cycle
ending September 30, 1999, it is anticipated that an aggregate of approximately
[ ] Company Options will be granted to participants in such cycle,
including an aggregate of approximately [ ] Company Options to be
granted to four of the Named Executive Officers.
RETIREMENT BENEFITS
All of the Named Executive Officers are expected to participate in a
defined benefit pension plan which qualifies under Section 401(a) of the Code
and which the Company will establish effective as of the time of the
Distribution. The plan will be substantially similar in all material respects to
Rockwell's defined benefit pension plan in which the Named Executive Officers
(other than Mr. Yost) currently participate. See "Arrangements Between Rockwell
and the Company Relating to the Distribution -- Employee Matters Agreement".
The following table shows the estimated aggregate annual retirement
benefits payable on a straight life annuity basis to participating employees in
the earnings and years of service classifications indicated, under the
retirement plans of Rockwell and the Company which will cover most officers and
other salaried employees of the Company on a noncontributory basis. Such
benefits reflect a reduction to recognize in part the cost of Social Security
benefits related to service for Rockwell and the Company. The plans also provide
for the payment of benefits to an employee's surviving spouse or other
beneficiary.
<TABLE>
<CAPTION>
AVERAGE ESTIMATED ANNUAL RETIREMENT BENEFITS FOR YEARS OF SERVICE INDICATED
ANNUAL -------------------------------------------------------------------------
EARNINGS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- ------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$200,000................. $ 52,085 $ 78,117 $ 82,772 $ 87,427 $ 92,082 $ 96,738
300,000................. 78,755 118,117 125,272 132,427 139,582 146,738
400,000................. 105,425 158,117 167,772 177,427 187,082 196,738
500,000................. 132,095 198,117 210,272 222,427 234,582 246,738
600,000................. 158,765 238,117 252,772 267,427 282,082 296,738
700,000................. 185,435 278,117 295,272 312,427 329,582 346,738
</TABLE>
Covered compensation includes salary and annual bonus. The calculation of
retirement benefits under the plans generally is based upon average earnings for
the highest five consecutive years of the ten years preceding retirement.
The credited years of service of Messrs. Calder, Madden, Mulchandani and
Quaid are 12, 16, 23 and 23, respectively.
49
<PAGE> 55
The following table shows the estimated annual retirement benefits payable
on a straight life annuity basis to participating employees, in the earnings and
years of service classifications indicated, under the retirement plans of
Allen-Bradley Company, Inc. ("Allen-Bradley"), which cover Mr. Yost on a
non-contributory basis. Such benefits reflect a reduction to recognize in part
the cost of Social Security benefits related to service for Allen-Bradley and
also reflect supplemental benefits payable to provide eligible officers with at
least 20 years of service an annual retirement benefit that is at least 50% of
final average covered compensation. Allen-Bradley's plans also provide for the
payment of benefits to an employee's surviving spouse or other beneficiary.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT BENEFITS FOR YEARS OF
AVERAGE SERVICE INDICATED
ANNUAL --------------------------------------------------------
EARNINGS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- --------------------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$300,000............................... $146,290 $146,290 $146,290 $166,243
400,000............................... 200,840 200,840 200,840 223,521
500,000............................... 255,390 255,390 255,390 280,798
600,000............................... 309,940 309,940 309,940 338,076
700,000............................... 364,490 364,490 364,490 395,353
800,000............................... 419,040 419,040 419,040 452,631
</TABLE>
Covered compensation includes salary, bonus and the cash portion of
payments through fiscal 1996 under long-term incentive plans. The calculation of
retirement benefits under the plans generally is based upon average earnings for
the highest five years of the ten years preceding retirement. Mr. Yost has 25
credited years of service. It is contemplated that prior to the Distribution,
Mr. Yost will be covered by Rockwell retirement plans other than the
Allen-Bradley plans.
Sections 401(a)(17) and 415 of the Code limit the annual benefits which may
be paid from a tax-qualified retirement plan. As permitted by the Employee
Retirement Income Security Act of 1974, Rockwell has established and the Company
will establish supplemental plans which authorize the payment out of their
respective general funds of any benefits calculated under provisions of the
applicable retirement plan which may be above the limits under these sections.
Pursuant to the Employee Matters Agreement, the Company will assume all of
Rockwell's liabilities with respect to Company Participants under such
supplemental plans of Rockwell.
BENEFIT PLANS FOLLOWING THE DISTRIBUTION
The following are descriptions of certain benefit plans that are expected
to provide benefits to management employees of the Company after the
Distribution. Except as set forth below, the Company's 1997 Long-Term Incentives
Plan and the Directors Plan are substantially similar in all material respects
to the comparable plans currently maintained by Rockwell for its management
employees.
1997 LONG-TERM INCENTIVES PLAN
The Company's 1997 Long-Term Incentives Plan (the "1997 LTIP") will be
adopted by the Company's Board of Directors and approved by Rockwell as the
Company's sole stockholder. The 1997 LTIP will also be submitted to the
Company's stockholders for approval at the 1998 Annual Meeting of Stockholders
of the Company. The 1997 LTIP will permit grants to be made from time to time as
nonqualified stock options, incentive stock options, stock appreciation rights
("SARs") and restricted stock. In addition, the 1997 LTIP will authorize
establishment of performance plans applicable to one or more business units of
the Company.
Administration. The 1997 LTIP will be administered by the Compensation
Committee, consisting of two or more members of the Company's Board of Directors
who are not eligible to participate in the 1997 LTIP. In order to meet the
requirements of Section 162(m) of the Code and the rules under Section 16 of the
Exchange Act, however, all grants under the 1997 LTIP will be made by a Grant
Committee consisting of those members of the Compensation Committee who are both
"outside directors" as defined for purposes of Section 162(m) of the Code and
regulations thereunder and "nonemployee directors" as defined for purposes of
Section 16 of the Exchange Act. In addition, the Company's Board of Directors
has authority to perform all functions of the Compensation Committee and the
Grant Committee under the 1997 LTIP.
50
<PAGE> 56
Participation. The persons to whom grants are made under the 1997 LTIP
("1997 LTIP Participants") will be selected from time to time by the Grant
Committee in its sole discretion from among corporate officers and other key
employees of the Company and its subsidiaries and affiliates. In selecting 1997
LTIP Participants and determining the type and amount of their grants, the Grant
Committee may consider recommendations of the Chief Executive Officer of the
Company and take into account such factors as the 1997 LTIP Participant's level
of responsibility, performance, performance potential, level and type of
compensation and potential value of grants under the 1997 LTIP.
Shares Subject to 1997 LTIP. The 1997 LTIP will authorize the issuance or
transfer of an aggregate of [ ] million shares of Company Common Stock,
provided that the total number of shares as to which grants may be made under
the 1997 LTIP in any one fiscal year may not exceed [ ]% of the total
outstanding and treasury shares. Of the shares available for grant under the
1997 LTIP, it is expected that options to purchase approximately [ ] shares
will be granted to effectuate the replacement of certain Rockwell Options held
by persons who will become employees of the Company on the Distribution Date and
that approximately [ ] restricted shares of Company Common Stock will be
delivered in payment of amounts earned by the Named Executive Officers under
certain outstanding long-term incentive plan awards. See "-- Long-Term Incentive
Plan Awards" and "Arrangements Between Rockwell and the Company Relating to the
Distribution -- Employee Matters Agreement".
Performance Plans. The 1997 LTIP will authorize the establishment by the
Compensation Committee of performance plans applicable to the Company or one or
more of its business units. Each such plan must include provision for
establishment of performance cycles (ending no later than September 30, 2007) of
not less than three fiscal years and establishment of a performance measure and
performance objectives based on criteria selected by the Compensation Committee
or the affected business unit and may provide for adjustment (up or down) of the
performance objectives or modification of the performance measure, or both, if
the Compensation Committee (or with its approval, the person or committee
delegated to administer any plan except insofar as it relates to any executive
officer) determines that conditions, including changes in the economy, changes
in law or government regulations, changes in generally accepted accounting
principles or material acquisitions or divestitures, warrant such adjustment.
The Compensation Committee may authorize the Company's Chief Executive Officer
to approve the definitive terms and conditions of any performance plan,
including the employees or categories of employees eligible to participate in
each performance plan, but the Compensation Committee's authorization is
required for participation by any of the Company's executive officers in a
performance plan. Potential awards under performance plans are expressed as cash
amounts and are paid in cash unless the Compensation Committee decides that
payment should be in shares of Company Common Stock or a combination of shares
of Company Common Stock and cash. Payment in Company Common Stock may, in the
discretion of the Compensation Committee, be made in shares of restricted
Company Common Stock. See "-- Long-Term Incentive Plan Awards".
Stock Options, Stock Appreciation Rights and Restricted Stock. The 1997
LTIP authorizes grants to 1997 LTIP Participants of stock options, which may be
either incentive stock options eligible for special tax treatment or
nonqualified stock options, SARs and restricted stock.
Under the provisions of the 1997 LTIP authorizing the grant of stock
options, (a) other than with respect to Company Options issued in replacement of
Rockwell Options in connection with the Distribution, the option price may not
be less than the fair market value of the shares of Company Common Stock at the
date of grant, (b) the aggregate fair market value (determined as of the date
the option is granted) of the shares of Company Common Stock for which any
employee may be granted incentive stock options which are exercisable for the
first time in any calendar year may not exceed $100,000, (c) other than with
respect to Company Options issued in replacement of Rockwell Options in
connection with the Distribution, stock options generally may not be exercised
prior to one year nor after ten years from the date of grant and generally
become exercisable in three approximately equal installments on the first,
second and third anniversaries of the date of grant, and (d) at the time of
exercise of a stock option the option price must be paid in full in cash or in
shares of Company Common Stock or in a combination of cash and shares of Company
Common Stock. If a 1997 LTIP Participant who holds an outstanding stock option
or SAR dies, the 1997 LTIP permits the exercise thereof within three years of
the date of death even if it were not exercisable
51
<PAGE> 57
at such date. The 1997 LTIP permits the Compensation Committee to make
determinations as to exercisability upon other termination of a 1997 LTIP
Participant's employment, subject to certain limitations.
The 1997 LTIP permits the grant of SARs related to a stock option (a
"tandem SAR"), either at the time of the option grant or thereafter during the
term of the option, or the grant of SARs separate and apart from the grant of an
option (a "freestanding SAR"). Tandem SARs permit an optionee, upon exercise of
such rights and surrender of the related option to the extent of an equivalent
number of shares of Company Common Stock, to receive a payment equal to the
excess of the fair market value (on the date of exercise) of the portion of the
option so surrendered over the option exercise price of such shares of Company
Common Stock. Freestanding SARs entitle the grantee, upon exercise of such
rights, to receive a payment equal to the excess of the fair market value (on
the date of exercise) of all or part of a designated number of shares of Company
Common Stock over the fair market value of such shares of Company Common Stock
on the date such rights were granted. Such payment may be made in shares of
Company Common Stock (valued on the basis of the fair market value of the shares
of Company Common Stock on the date of exercise of the SARs), or in cash or
partly in cash and partly in shares of Company Common Stock, as the Compensation
Committee may determine.
Under the 1997 LTIP, the Grant Committee may also grant shares of Company
Common Stock subject to specified restrictions ("restricted stock") to 1997 LTIP
Participants. Grants of restricted stock are subject to forfeiture if the
grantee does not continue as an employee of the Company or a subsidiary or
affiliate (i) for a period of three years or longer, as may be specified by the
Grant Committee, from the grant date, or (ii) until performance criteria
specified by the Grant Committee are met, except that in the event of a
grantee's death, or retirement under a retirement plan of the Company after age
62 or becoming entitled to an unreduced benefit under the applicable retirement
plan, before the end of the restricted period, the grantee's heirs or the
grantee will be entitled to the shares of Company Common Stock. In the case of a
grantee whose employment terminates for any other reason before the end of the
restricted period, the Compensation Committee, taking into account the purpose
of the 1997 LTIP and such other factors as in its sole discretion it deems
appropriate, may waive the forfeiture of all or a portion of those shares of
restricted stock granted. During the restricted period, shares of restricted
stock have all the attributes of outstanding shares of Company Common Stock,
except that such shares of Company Common Stock and dividends thereon are
delivered to and held by the Company for the grantee's account, unless the
Compensation Committee determines otherwise at the time of grant. As and to the
extent that shares of restricted stock are no longer subject to forfeiture, such
shares and any dividends related thereto withheld by the Company, together with
interest thereon as determined by the Board of Directors of the Company, are
delivered to the grantee.
Under the 1997 LTIP, stock options, freestanding SARs and restricted stock
may not be granted after September 30, 2007 but tandem SARs may be granted with
respect to outstanding stock options granted before that date.
Initial Option Grants. It is anticipated that options to purchase an
aggregate of approximately [ ] shares of Company Common Stock will be granted to
employees of the Company, including the Named Executive Officers, in the last
calendar quarter of 1997, subject to approval of the 1997 LTIP at the 1998
Annual Meeting of Stockholders of the Company. Such grants would be in addition
to options granted under the 1997 LTIP in replacement of certain Rockwell
Options in connection with the Distribution. See "-- Shares Subject to 1997
LTIP".
Tax Matters. The following is a brief summary of the principal generally
applicable Federal income tax consequences of benefits under the 1997 LTIP under
present law and regulations:
(a) Payments under Performance Plans. Any cash and the fair market
value of any shares of Company Common Stock (other than restricted stock,
as described below) received as payments under performance plans
established in accordance with the 1997 LTIP will constitute ordinary
income to the employee in the year in which paid, and the Company will be
entitled to a deduction in the same amount.
(b) Incentive Stock Options. The grant of an incentive stock option
will not result in any immediate tax consequences to the Company or the
optionee. An optionee will not realize taxable
52
<PAGE> 58
income, and the Company will not be entitled to any deduction, upon the
timely exercise of an incentive stock option, but the excess of the fair
market value of the shares of Company Common Stock acquired over the option
exercise price will be includable in the optionee's "alternative minimum
taxable income" for purposes of the alternative minimum tax. If the
optionee does not dispose of the shares of Company Common Stock acquired
within one year after their receipt (and within two years after the option
was granted), gain or loss realized on the subsequent disposition of the
shares of Company Common Stock will be treated as long-term capital gain or
loss. Capital losses of individuals are deductible only against capital
gains and a limited amount of ordinary income. In the event of an earlier
disposition, the optionee will realize ordinary income in an amount equal
to the lesser of (i) the excess of the fair market value of the shares of
Company Common Stock on the date of exercise over the option exercise price
or (ii) if the disposition is a taxable sale or exchange, the amount of any
gain realized. Upon such a disqualifying disposition, the Company will be
entitled to a deduction in the same amount and at the same time as the
optionee realizes such ordinary income.
(c) Nonqualified Stock Options. The grant of a nonqualified stock
option will not result in any immediate tax consequences to the Company or
the optionee. Upon the exercise of a nonqualified stock option, the
optionee will realize ordinary income, and the Company will be entitled to
a deduction, equal to the difference between the option exercise price and
the fair market value of the shares of Company Common Stock acquired at the
time of exercise.
(d) Stock Appreciation Rights. The grant of either a tandem SAR or a
freestanding SAR will not result in any immediate tax consequences to the
Company or the employee. Upon the exercise of either a tandem SAR or a
freestanding SAR, any cash received and the fair market value on the
exercise date of any shares of Company Common Stock received will
constitute ordinary income to the grantee. The Company will be entitled to
a deduction in the same amount and at the same time.
(e) Restricted Stock. An employee normally will not realize taxable
income in connection with an award of restricted stock, and the Company
will not be entitled to a deduction, until the termination of the
restrictions. Upon such termination, the employee will realize ordinary
income in an amount equal to the fair market value of the shares of Company
Common Stock at that time, plus the amount of the dividends and interest
thereon to which the employee then becomes entitled. However, an employee
may elect to realize taxable ordinary income in the year the restricted
stock is awarded in an amount equal to its fair market value at that time,
determined without regard to the restrictions. The Company will be entitled
to a deduction in the same amount and at the same time as the employee
realizes income.
Other. During the period that SARs are outstanding, the Company will
accrue as an expense the amount, if any, by which the fair market value of the
shares of Company Common Stock as to which SARs are expected to be exercised
exceeds the exercise price of any related option shares of Company Common Stock
or the fair market value on the date of grant of the designated number of shares
of Company Common Stock for freestanding SARs.
Change of Control Benefits. In order to maintain the rights of 1997 LTIP
Participants in the event of a change of control of the Company, the 1997 LTIP
provides that unless prior to the occurrence of such a change the Company's
Board of Directors shall have determined otherwise by vote of at least
two-thirds of its members, all performance cycles (except those under
performance plans that do not provide for a change of control contingency) not
then complete shall be deemed completed, the respective performance objectives
shall be deemed to have been attained and all potential awards granted with
respect thereto shall be deemed to have been fully earned; all outstanding stock
options and SARs then outstanding shall become fully exercisable whether or not
otherwise then exercisable; and the restrictions on all shares of Company Common
Stock granted as restricted stock would lapse. A change of control is deemed to
occur under the same circumstances as provided in Article III, Section 13(I) of
the Company By-Laws.
Amendment, Suspension or Termination of 1997 LTIP. The Company's Board of
Directors may at any time amend, suspend or terminate the 1997 LTIP or grants
made thereunder. In the event any change in or affecting shares of Company
Common Stock occurs, the Company's Board of Directors may make appropriate
amendments to or adjustments in the 1997 LTIP or grants made thereunder,
including changes in the number
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<PAGE> 59
of shares of Company Common Stock which may be issued or transferred under the
1997 LTIP and the number of shares of Company Common Stock and price per share
of Company Common Stock subject to outstanding options and stock appreciation
rights. The Board of Directors of the Company may not, however (except in making
amendments and adjustments in the event of changes in or affecting shares of
Company Common Stock) (i) without the consent of the person affected, cancel or
reduce any grant theretofore made other than as provided for or contemplated in
the agreement evidencing the grant or (ii) without the approval of stockholders,
change the class of persons eligible to receive incentive stock options under
the 1997 LTIP, increase the number of shares of Company Common Stock that may be
issued or transferred under the 1997 LTIP, reduce the option exercise price of
any stock option below the fair market value of the shares of Company Common
Stock covered thereby at the date of grant or decrease the forfeiture period for
any restricted stock below that permitted under the 1997 LTIP.
DIRECTORS STOCK PLAN
The Company's Directors Stock Plan (the "Directors Plan") will be adopted
by the Company's Board of Directors and approved by Rockwell as the Company's
sole stockholder. The Directors Plan will also be submitted to the Company's
stockholders for approval at the Company's 1998 Annual Meeting of Stockholders.
An aggregate of [ ] shares of Company Common Stock may be issued or
transferred under the Directors Plan, subject to appropriate adjustment in the
event of any change in or affecting shares of Company Common Stock, including
but not limited to stock dividends, stock splits and recapitalizations.
Participation. Participation in the Directors Plan will be limited to
directors who are not employees of the Company or any of its subsidiaries.
Issuance of Shares. Under the Directors Plan grants of 500 shares of
Company Common Stock will be made to each non-employee Director during the last
calendar quarter of 1997 and thereafter grants of 1,000 shares of Company Common
Stock will be made to each non-employee director immediately after each Annual
Meeting of Stockholders beginning with grants immediately following the 1998
Annual Meeting of Stockholders. In addition, each non-employee director elected
at a meeting of the Company's Board of Directors will receive immediately after
that meeting an award of 1,000 shares of Company Common Stock if elected after
an annual meeting and prior to May 1; 750 shares if elected between May 1 and
July 31; 500 shares if elected between August 1 and October 31; and 250 shares
if elected between November 1 and the next annual meeting. Directors will be
encouraged to hold shares granted until their service on the Board of Directors
of the Company ends, and shares awarded under the Directors Plan may not in any
event be sold, transferred or otherwise disposed of for a period of six months
after receipt (except in the case of death or disability of the director).
Directors may elect to receive their annual 1,000 shares of Company Common
Stock and their cash retainer for board service in the form of restricted shares
of Company Common Stock. Restricted shares, if elected, would be held by the
Company until ten days after the recipient retires from the Company's Board of
Directors after reaching age 72 and with at least three years of service or
ceases to be a director by reason of the antitrust laws, compliance with the
Company's conflict of interest policies, death, disability or other
circumstances the Company's Board of Directors determines not to be adverse to
the best interests of the Company. Restricted shares would have all the
attributes of outstanding shares including the right to vote and to receive
dividends thereon.
Stock Options. In addition, under the Directors Plan grants of options to
purchase 1,500 shares of Company Common Stock will be made to each non-employee
director during the last calendar quarter of 1997 and thereafter grants of
options to purchase 3,000 shares of Company Common Stock will be made annually
to each non-employee director immediately following each Annual Meeting of
Stockholders beginning with grants after the 1998 Annual Meeting of Stockholders
(in each case, subject to approval of the Directors Plan at the 1998 Annual
Meeting of Stockholders of the Company). In addition, each non-employee director
elected at a meeting of the Company's Board of Directors will receive
immediately after that meeting an option to purchase 3,000 shares of Company
Common Stock if elected after an annual meeting and prior to May 1; 2,250 shares
if elected between May 1 and July 31; 1,500 shares if elected between August 1
and
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<PAGE> 60
October 31; and 750 shares if elected between November 1 and the next annual
meeting. The purchase price of the shares subject to the option will be one
hundred percent (100%) of the fair market value on the date an option is
granted. Upon exercise of an option, the option price must be paid in full in
cash, shares of Company Common Stock valued at their fair market value on the
date of exercise, or a combination of both.
Options granted under the Directors Plan may not be exercised prior to one
year nor after ten years from the date of grant and become exercisable in three
approximately equal installments on the first, second and third anniversaries of
the date of grant. If an optionee who holds an outstanding stock option dies,
the Directors Plan permits the exercise of such option within three years of the
date of death, even if it were not exercisable at such date. If an optionee who
holds an outstanding stock option retires from the Company's Board of Directors
after reaching age 72 and with at least three years service, all options then
held will be exercisable even if they were not exercisable at such retirement
date. The Directors Plan permits the Compensation Committee to make
determinations as to exercisability upon other termination of an optionee's
membership on the Company's Board of Directors.
Administration and Amendment. The Directors Plan will be administered by
the Compensation Committee. The Company's Board of Directors may amend the
Directors Plan in any respect, provided that no amendment may be made without
stockholder approval that would materially (i) increase the maximum number of
shares of Company Common Stock available for issuance under the Directors Plan
(other than adjustments to reflect changes in or affecting shares of Company
Common Stock), (ii) increase the benefits accruing to participants under the
Directors Plan, or (iii) modify the requirements as to eligibility for
participation in the Directors Plan. Award provisions of the Directors Plan may
not be amended more than once every six months except to comport with changes in
the Code, the Employee Retirement Income Security Act of 1974, as amended, or
regulations under either of those statutes. The Company's Board of Directors
also has authority to terminate the Directors Plan at any time.
Tax Matters. The principal Federal income tax consequences of awards of
Company Common Stock under the Directors Plan under present law and regulations
are that the fair market value of shares of Company Common Stock awarded to a
director thereunder will constitute ordinary income to the director recognized
for Federal income tax purposes six months after the effective date of the award
unless the director makes an election under Section 83(b) of the Code to
recognize that income on the effective date of the award. The director's holding
period for tax purposes, including determining whether any gain or loss on the
shares of Company Common Stock is long or short term, will begin on the date
that income is recognized. The Company will be entitled to a deduction equal to
the income recognized by the director on the date of recognition.
The principal Federal income tax consequences of the issuance or transfer
of restricted shares awarded in lieu of stock awards under the Directors Plan or
cash retainers is that the value thereof is not taxable to the recipient, and
the Company will not be entitled to its deduction, until the restriction lapses
(at the value of the shares on the date the restriction lapses).
The principal Federal income tax consequences of the grant of options under
the Directors Plan are that the optionee realizes ordinary income, and the
Company is entitled to a deduction, equal to the difference between the option
exercise price and the fair market value of the shares acquired at the time of
exercise.
INCENTIVE COMPENSATION PLAN
The Company's Incentive Compensation Plan (the "ICP") will be adopted by
the Company's Board of Directors and approved by Rockwell as the Company's sole
stockholder. The ICP will also be submitted to the Company's stockholders for
approval at the 1998 Annual Meeting of Stockholders of the Company.
The purposes of the ICP will be to provide a reward and an incentive to
employees in managerial, staff or technical capacities who have contributed and,
in the future, are likely to contribute to the success of the Company and to
enhance the Company's ability to attract and retain outstanding employees to
serve in such capacities.
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<PAGE> 61
Administration. The ICP will be administered by the Compensation
Committee, which has sole authority to interpret the ICP. The Compensation
Committee will determine the amounts, if any, to be awarded under the ICP for
any fiscal year. The Company's Chief Executive Officer will submit to the
Compensation Committee, before its determinations are made, his recommendations
concerning awards. In its discretion, the Compensation Committee will determine:
(i) the extent to which awards, if any, shall be made; (ii) the employees to
whom any such awards shall be made; (iii) the amount of any award; and (iv) the
form, terms and conditions of awards. Among other things, the Committee may
determine whether and to what extent awards shall be paid in installments and in
cash or in shares of Company Common Stock or partly in cash and partly in shares
of Company Common Stock.
Eligibility. Any person in the salaried employ of the Company during some
part of the fiscal year for which awards are made may be selected for an award
by the Compensation Committee. Unless he or she is also an employee of the
Company, no member of the Company's Board of Directors will be eligible to
participate in the ICP. The total number of shares of Company Common Stock which
may be awarded under the ICP shall not exceed [ ], subject to adjustment by the
Company's Board of Directors in the event of any changes in or affecting Company
Common Stock.
Amendment and Termination. The Company's Board of Directors will have the
power, in its discretion, to amend, suspend or terminate the ICP at any time. It
will not have the power, however, (i) to take any such action that would
adversely affect rights under an award already made, without the consent of the
person affected, or (ii) without stockholder approval, to increase the total
number of shares of Company Common Stock subject to the ICP (except as otherwise
provided in the ICP).
OWNERSHIP OF COMPANY COMMON STOCK
The following table sets forth the number of shares of Company Common Stock
expected to be beneficially owned following the Distribution, directly or
indirectly, by each director, each Named Executive Officer and such persons and
other executive officers, as a group, based upon the beneficial ownership of
such persons of Rockwell Common Stock reported to Rockwell as of [ ],
1997, including shares as to which a right to acquire ownership exists (for
example, through the exercise of stock options, conversions of securities or
through various trust arrangements) within the meaning of Rule 13d-3(d)(1) under
the Exchange Act.
<TABLE>
<CAPTION>
COMMON STOCK
--------------------------------------------------------------
NAME SHARES(1) PERCENT OF CLASS(2)
- ------------------------------ ------------------------------ ------------------------------
<S> <C> <C>
Joseph B. Anderson, Jr........
Donald R. Beall...............
John J. Creedon...............
Charles H. Harff..............
Harold A. Poling..............
Larry D. Yost.................
Robert A. Calder..............
Thomas A. Madden..............
Prakash R. Mulchandani........
Richard C. Quaid..............
All of the above and other
executive officers as a
group (15 persons)..........
</TABLE>
- ---------------
(1) Each person has sole voting and investment power with respect to the shares
listed unless otherwise indicated.
(2) The shares owned by each person, and by the group, and the shares included
in the number of shares outstanding have been adjusted, and the percentage
of shares owned (where such percentage exceeds 0.1%) has been computed, in
accordance with Rule 13d-3(d)(1) under the Exchange Act.
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<PAGE> 62
In addition to the expected beneficial ownership of Company Common Stock
set forth in the table above, the Named Executive Officers are expected to
obtain substantial additional ownership of Company Common Stock through grants
of restricted shares of Company Common Stock in payment of certain amounts
earned under long-term incentive plans. See "-- Long-Term Incentive Plan
Awards".
With the exception of Wells Fargo Bank, N.A., as trustee under the Rockwell
Savings Plan, which held approximately 21% of the outstanding shares of Rockwell
Common Stock as of April 30, 1997, there are no persons known to Rockwell who
are expected to be "beneficial owners" (as that term is defined in the rules of
the Commission) of more than 5% of any class of the Company's voting securities
outstanding as of the Distribution Date.
In order to align closely the financial interests of the Company's key
executives with those of the Company's stockholders, it is expected that the
Compensation Committee will adopt effective after the Distribution the following
minimum ownership guidelines requiring ownership of shares of Company Common
Stock with a market value equal to the multiple of base salary indicated:
<TABLE>
<CAPTION>
MULTIPLE OF BASE
SALARY
--------------------
<C> <S> <C>
- Chairman of the Board and Chief Executive Officer....... 5
- Other Executive Officers................................ 2
- Other Vice Presidents subject to the guidelines......... 1
</TABLE>
Only shares owned directly (including restricted shares) or through the
Company's savings plan or the Rockwell Savings Plan, but not shares subject to
unexercised stock options, will be considered for determining whether an
executive meets such ownership guidelines. The [ ] executives who will be
subject to the guidelines immediately following the Distribution will have a
transition period of 5 years beginning on the Distribution Date within which to
meet the guidelines. Other executives who become subject to the guidelines after
the Distribution Date will also have a transition period of 5 years within which
to meet the guidelines.
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<PAGE> 63
DESCRIPTION OF COMPANY CAPITAL STOCK
Immediately prior to the Distribution, the Company will be authorized to
issue (i) 350,000,000 shares of Company Common Stock, of which (based on the
number of shares of Rockwell Common Stock outstanding as of May 31, 1997)
approximately 71 million shares of Company Common Stock will be issued to
shareowners of Rockwell in the Distribution, and (ii) 25,000,000 shares of
Preferred Stock, without par value ("Company Preferred Stock"), of which
1,000,000 shares will be designated as Series A Junior Participating Preferred
Stock ("Company Junior Preferred Stock") for issuance in connection with the
exercise of the Company Rights. See "-- Company Rights Plan".
The discussion contained herein is qualified by reference to the Company
Certificate, which will be in effect immediately prior to the Distribution, a
copy of which has been filed as an exhibit to the Registration Statement of
which this Information Statement is a part.
COMPANY COMMON STOCK
The Company Certificate (except as to the numbers of authorized shares of
capital stock) and the Company By-Laws will be substantially similar to the
Restated Certificate of Incorporation of Rockwell (the "Rockwell Certificate")
and the By-Laws of Rockwell (the "Rockwell By-Laws"), including provisions
establishing a classified Board of Directors, requiring stockholders to provide
advance notice of any stockholder nominations of directors or any proposal of
new business to be considered at any meeting of stockholders, requiring a
supermajority vote to remove a director or to amend or repeal certain provisions
of the Company Certificate or the Company By-Laws and precluding stockholders
from calling a special meeting of stockholders. See "-- Certain Provisions in
the Company Certificate and Company By-Laws".
Holders of Company Common Stock will be entitled to such dividends as may
be declared by the Board of Directors of the Company out of any funds of the
Company legally available therefor. Dividends may not be paid on Company Common
Stock unless all accrued dividends on Company Preferred Stock, if any, have been
paid or set aside. In the event of any liquidation, dissolution or winding up of
the Company, the holders of Company Common Stock will be entitled to share pro
rata in the assets remaining after payment to creditors and after payment of the
liquidation preference plus any unpaid dividends to holders of any outstanding
Company Preferred Stock. Each holder of Company Common Stock will be entitled to
one vote for each such share outstanding in such holder's name. No holder of
Company Common Stock will be entitled to cumulate such holder's votes in voting
for directors. The Company Certificate provides that, unless otherwise
determined by the Board of Directors of the Company, no holder of Company Common
Stock will, as such holder, have any right to purchase or subscribe for any
stock of any class which the Company may issue or sell.
Except as described below under "-- Certain Provisions in the Company
Certificate and Company By-Laws", the rights, privileges and preferences of
Company Common Stock will otherwise be substantially similar to the rights,
privileges and preferences of Rockwell Common Stock.
COMPANY PREFERRED STOCK
GENERAL
The Company Certificate authorizes the Board of Directors of the Company to
establish one or more series of Company Preferred Stock (of up to an aggregate
of 25,000,000 shares) and to determine, with respect to any series of Company
Preferred Stock, the terms and rights of such series, including (i) the
designation of the series, (ii) the number of shares of the series, which number
the Board of Directors of the Company may thereafter (except where otherwise
provided in the applicable certificate of designation) increase or decrease (but
not below the number of shares thereof then outstanding), (iii) whether
dividends, if any, will be cumulative or noncumulative, and, in the case of
shares of any series having cumulative dividend rights, the date or dates or
method of determining the date or dates from which dividends on the shares of
such series shall be cumulative, (iv) the rate of any dividends (or method of
determining such dividends) payable
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<PAGE> 64
to the holders of the shares of such series, any conditions upon which such
dividends will be paid and the date or dates or the method for determining the
date or dates upon which such dividends will be payable, (v) the redemption
rights and price or prices, if any, for shares of the series, (vi) the terms and
amounts of any sinking fund provided for the purchase or redemption of shares of
the series, (vii) the amounts payable on and the preferences, if any, of shares
of the series in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, (viii) whether the
shares of the series will be convertible or exchangeable into shares of any
other class or series, or any other security, of the Company or any other
corporation, and, if so, the specification of such other class or series or such
other security, the conversion or exchange price or prices or rate or rates, any
adjustments thereof, the date or dates as of which such shares will be
convertible or exchangeable and all other terms and conditions upon which such
conversion or exchange may be made, (ix) restrictions on the issuance of shares
of the same series or of any other class or series, (x) the voting rights, if
any, of the holders of the shares of the series and (xi) any other relative
rights, preferences and limitations of such series.
The Board of Directors of the Company believes that the ability of the
Board to issue one or more series of Company Preferred Stock will provide the
Company with flexibility in structuring possible future financings and
acquisitions, and in meeting other corporate needs which might arise. The
authorized shares of Company Preferred Stock, as well as Company Common Stock,
will be available for issuance without further action by the Company's
stockholders, unless such action is required by applicable law or the rules of
any stock exchange or automated quotation system on which the Company's
securities may be listed or traded. If the approval of the Company's
stockholders is not so required, the Board of Directors of the Company may
determine not to seek stockholder approval.
Although the Board of Directors of the Company has no intention at the
present time of doing so (other than as described below with respect to the
Company Junior Preferred Stock), it could issue a series of Company Preferred
Stock that could, depending on the terms of such series, impede the completion
of a merger, tender offer or other takeover attempt. The Board of Directors of
the Company will make any determination to issue such shares based on its
judgment as to the best interests of the Company and its stockholders. The Board
of Directors of the Company, in so acting, could issue Company Preferred Stock
having terms that could discourage an acquisition attempt through which an
acquirer may be able to change the composition of the Board of Directors of the
Company, including a tender offer or other transaction that some, or a majority,
of the Company's stockholders might believe to be in their best interests or in
which stockholders might receive a premium for their stock over the then current
market price of such stock.
COMPANY JUNIOR PREFERRED STOCK
The summary of the terms of the Company Junior Preferred Stock contained
herein does not purport to be complete and is subject and qualified by reference
to the provisions of the Company Certificate, a copy of which has been filed as
an exhibit to the Registration Statement of which this Information Statement is
a part.
Prior to the Distribution, the Board of Directors of the Company will
authorize the issuance of up to 1,000,000 shares of Company Junior Preferred
Stock. The terms of the Company Junior Preferred Stock will be set forth in the
Company Certificate. The Company Junior Preferred Stock, when issued upon
exercise of the Company Rights, will be fully paid and nonassessable. See
"-- Company Rights Plan".
Ranking and Redemption. The Company Junior Preferred Stock will rank
junior to all series of any other class of Company Preferred Stock with respect
to payments of dividends and distribution of assets and will be non-redeemable.
Dividend Rights. Holders of Company Junior Preferred Stock will be
entitled to receive, when, as and if declared by the Board of Directors of the
Company out of funds legally available therefor, quarterly dividends equal to
the greater of (i) $1 or (ii) 100 times the amount of cash dividends and 100
times the amount (payable in kind) of non-cash dividends or other distributions
(other than stock dividends of Company Common Stock) declared per share of the
Company Common Stock. If the Company at any time declares or pays a stock
dividend payable in Company Common Stock, or effects a subdivision or
combination or
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<PAGE> 65
consolidation of Company Common Stock, then the amount to which holders of
Company Junior Preferred Stock will be entitled under clause (ii) of the
previous sentence will be adjusted in accordance with the antidilution
provisions contained in the Company Certificate.
Dividends and distributions on the Company Junior Preferred Stock will be
declared immediately after the declaration of the dividend or distribution on
the Company Common Stock and will be payable quarterly on the second Monday of
March, June, September and December in each year (a "Dividend Payment Date"). In
the event that no dividend or distribution is declared on Company Common Stock,
then a dividend of $1 per share of Company Junior Preferred Stock will
nevertheless be payable on the next Dividend Payment Date. The Board of
Directors of the Company may fix a record date for the determination of the
holders of Company Junior Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date may not be more
than 60 days prior to the payment date. Dividends on the Company Junior
Preferred Stock will accrue and be cumulative. Accrued and unpaid dividends will
not bear interest.
If quarterly dividends or other dividends or distributions payable on the
Company Junior Preferred Stock are in arrears, until all accrued and unpaid
dividends and distributions on the Company Junior Preferred Stock are paid in
full, the Company may not (i) declare or pay any dividend or distribution with
respect to any stock ranking junior to the Company Junior Preferred Stock; (ii)
declare or pay any dividend or distribution with respect to any stock ranking on
parity with the Company Junior Preferred Stock, other than pro rata
distributions made on the Company Junior Preferred Stock and all such parity
stock; (iii) redeem or purchase or otherwise acquire shares of Company Junior
Preferred Stock or any stock ranking junior to the Company Junior Preferred
Stock (provided that the Company may redeem or purchase or otherwise acquire
shares of any such junior stock in exchange for shares of any stock ranking
junior to the Company Junior Preferred Stock); and (iv) redeem or purchase or
otherwise acquire shares of any stock ranking on parity with the Company Junior
Preferred Stock, except in accordance with a purchase offer made in writing or
publication to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the
respective series or classes.
Liquidation Preference. In the event of any liquidation, dissolution or
winding up of the Company, no distributions will be made with respect to (i) any
shares of stock ranking junior to the Company Junior Preferred Stock, unless
holders of shares of Company Junior Preferred Stock have received an amount per
share equal to $100 plus an amount per share equal to any dividends accrued but
unpaid thereon, without interest, provided that such holders will be entitled to
receive an amount per share equal to 100 times the amount to be distributed per
share to holders of Company Common Stock or (ii) any shares of stock ranking on
parity with the Company Junior Preferred Stock, except for pro rata
distributions made on the Company Junior Preferred Stock and all such parity
stock. If the Company at any time declares or pays a stock dividend payable in
Company Common Stock, or effects a subdivision or combination or consolidation
of Company Common Stock, then the amount to which holders of Company Junior
Preferred Stock will be entitled will be adjusted in accordance with the
antidilution provisions contained in the Company Certificate.
Voting Rights. Each share of Company Junior Preferred Stock will be
entitled to 100 votes per share. If the Company at any time declares or pays a
stock dividend payable in Company Common Stock, or effects a subdivision or
combination or consolidation of Company Common Stock, then the number of votes
to which holders of Company Junior Preferred Stock will be entitled will be
adjusted in accordance with the antidilution provisions contained in the Company
Certificate. The Company Junior Preferred Stock shall vote together with the
Company Common Stock and any other capital stock of the Company having general
voting rights as one class on all matters submitted to a vote of stockholders of
the Company, except as otherwise provided in a certificate of designation for
any other class of Company Preferred Stock filed with the Secretary of State of
the State of Delaware or by law. Except as otherwise provided by law, the
Company Junior Preferred Stock will have no special voting rights, and except to
the extent the Company Junior Preferred Stock is entitled to vote with the
Company Common Stock, the consent of the Company Junior Preferred Stock will not
be required for taking any corporate action.
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<PAGE> 66
Rights Upon Consolidation, Merger or Combination. If the Company enters
into any consolidation, merger, combination or other transaction in which shares
of Company Common Stock are exchanged for or changed into other stock or
securities, cash and/or other property, then each share of Company Junior
Preferred Stock will at the same time be similarly exchanged or changed into an
amount per share equal to 100 times the aggregate amount of stock, securities,
cash and/or other property (payable in kind) into which or for which each share
of Company Common Stock is changed or exchanged. If the Company at any time
declares or pays a stock dividend payable in Company Common Stock, or effects a
subdivision or combination or consolidation of Company Common Stock, then the
amount to which holders of Company Junior Preferred Stock will be entitled with
respect to such exchange or change will be adjusted in accordance with the
antidilution provisions contained in the Company Certificate.
CERTAIN PROVISIONS IN THE COMPANY CERTIFICATE AND COMPANY BY-LAWS
Except as described below, the Company Certificate and the Company By-Laws
will be substantially similar to the Rockwell Certificate and the Rockwell
By-Laws. Accordingly, the Company Certificate and the Company By-Laws will
contain various provisions intended to (i) promote stability of the Company's
stockholder base and (ii) render more difficult certain unsolicited or hostile
attempts to take over the Company which could disrupt the Company, divert the
attention of the Company's directors, officers and employees and adversely
affect the independence and integrity of the Company's business. A summary of
these provisions of the Company Certificate and the Company By-Laws is set forth
below.
CLASSIFIED BOARD OF DIRECTORS AND REMOVAL OF DIRECTORS
Pursuant to the Company Certificate, the number of directors of the Company
will be fixed by the Board of Directors of the Company. The directors (other
than those elected by the holders of any series of Company Preferred Stock or
any other series or class of stock, other than Company Common Stock) will be
divided into three classes, each class to consist as nearly as possible of
one-third of the directors. Directors elected by stockholders at an Annual
Meeting of Stockholders will be elected by a plurality of all votes cast at such
annual meeting. Initially, the terms of office of the three classes of directors
will expire, respectively, at the Annual Meeting of Stockholders in 1998, 1999
and 2000. The term of the successors of each such class of directors expires
three years from the year of election.
The Company Certificate provides that except as otherwise provided for or
fixed by or pursuant to a certificate of designations setting forth the rights
of the holders of any class or series of Company Preferred Stock and unless the
Board of Directors of the Company otherwise determines, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the Board of Directors of the Company resulting from death,
resignation, disqualification, removal or other cause will be filled by the
affirmative vote of a majority of the remaining directors then in office, even
though less than a quorum of the Board of Directors of the Company, and not by
the stockholders. Any director elected in accordance with the preceding sentence
will hold office for the remainder of the full term of the class of directors in
which the new directorship was created or the vacancy occurred and until such
director's successor shall have been duly elected and qualified. No decrease in
the number of directors constituting the Board of Directors of the Company will
shorten the term of any incumbent director. Subject to the rights of holders of
any Company Preferred Stock, any director may be removed from office only for
cause by the affirmative vote of the holders of at least 80 percent of the
voting power of all the outstanding capital stock of the Company entitled to
vote generally in the election of directors (the "Voting Power"), voting
together as a single class.
These provisions of the Company Certificate would preclude a third party
from removing incumbent directors and simultaneously gaining control of the
Board of Directors of the Company by filling the vacancies created by removal
with its own nominees. Under the classified board provisions described above, it
would take at least two elections of directors for any individual or group to
gain control of the Board of Directors of the Company. Accordingly, these
provisions could discourage a third party from initiating a proxy contest,
making a tender offer or otherwise attempting to gain control of the Company.
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<PAGE> 67
FAIR PRICE PROVISION
The Company Certificate contains a provision (the "Fair Price Provision")
pursuant to which a Business Combination (as defined below) between the Company
or a subsidiary of the Company and an Interested Stockholder (as defined below)
requires approval by the affirmative vote of the holders of not less than 80
percent of the Voting Power, unless the Business Combination is approved by at
least two-thirds of the Continuing Directors (as defined below) or certain fair
price criteria and procedural requirements specified in the Fair Price Provision
and described below are met. If either the requisite Board of Directors approval
or the fair price and procedural requirements were met, the Business Combination
would be subject to the voting requirements otherwise applicable under the DGCL
and the NYSE, which for most types of Business Combinations currently would be
the affirmative vote of the holders of a majority of the outstanding shares of
stock of the Company entitled to vote thereon.
The general purpose of the Fair Price Provision is to protect stockholders
against so-called front-end loaded or two-tier tender offers which may afford
some stockholders a disproportionately higher price for their shares than
stockholders receive generally. The Fair Price Provision is intended to help
assure the Company's stockholders fair and equitable treatment in the event a
third party were to seek to acquire the Company.
A "Business Combination" is defined as: (i) a merger or consolidation of
the Company or any subsidiary with an Interested Stockholder; (ii) the sale,
lease, exchange, mortgage, pledge, transfer or other disposition by the Company
or a subsidiary of assets or securities having a value of $25 million or more if
an Interested Stockholder is a party to the transaction; (iii) the adoption of
any plan or proposal for the liquidation or dissolution of the Company proposed
by or on behalf of an Interested Stockholder; (iv) any reclassification of
securities, recapitalization, merger with a subsidiary or other transaction
which has the effect, directly or indirectly, of increasing an Interested
Stockholder's proportionate share of the outstanding capital stock of the
Company or a subsidiary; or (v) any agreement or contract providing for any of
the foregoing.
An "Interested Stockholder" is defined as any person who is the beneficial
owner of 10 percent or more of the Voting Power other than the Company, certain
of its subsidiaries, or the employee benefit plans of the Company, any
subsidiary or Rockwell and the trustees of such plans. A person is the
"beneficial owner" of stock that such person, directly or indirectly, owns or
has the right to acquire or vote. The Company is not aware of any person or
group who would have been within the definition of an "Interested Stockholder"
if the Distribution had occurred on [ ], 1997.
"Fair Price" Criteria. Under the Fair Price Provision, the fair price
criteria that must be satisfied to avoid the 80 percent stockholder voting
requirement include the requirements that the consideration paid to the
Company's stockholders in a Business Combination must be (i) either cash or the
same form of consideration used by the Interested Stockholder in acquiring its
beneficial ownership of the largest number of shares of the relevant class or
series of the Company's capital stock acquired by the Interested Stockholder and
(ii) at least equal to the highest of (A) the highest per share price paid by or
on behalf of the Interested Stockholder in the two-year period immediately
preceding the date of the first public announcement of the proposal of the
Business Combination or in the transaction in which it became an Interested
Stockholder, whichever is higher, (B) the fair market value per share of the
relevant class or series of the Company's capital stock on the date the
Interested Stockholder became an Interested Stockholder or the date of the first
public announcement of the proposal of the Business Combination, whichever is
higher, or (C) the liquidation preference of the relevant class or series of the
Company's capital stock (other than Company Common Stock). The Interested
Stockholder would be required to meet the fair price criteria with respect to
each class of the Company's capital stock, whether or not the Interested
Stockholder beneficially owned shares of that class prior to proposing the
Business Combination. If the Business Combination does not involve any cash or
other property being received by any of the other stockholders, such as a sale
of assets or an issuance of the Company's securities to an Interested
Stockholder, then the fair price criteria discussed above would not apply, and
approval by the holders of 80 percent of the Voting Power would be required
unless the transaction were approved by at least two-thirds of the Continuing
Directors.
Procedural Requirements. Under the Fair Price Provision, even if the
foregoing fair price criteria are met, the following procedural requirements
must be met if the Business Combination is not to require
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approval by at least two-thirds of the Continuing Directors or approval by the
holders of 80 percent of the Voting Power: (i) the Company, after the Interested
Stockholder became an Interested Stockholder, must not have failed to pay full
quarterly dividends on the Company Preferred Stock, if any, or reduced the rate
of dividends paid on the Company Common Stock, unless such failure or reduction
was approved by at least two-thirds of the Continuing Directors; (ii) the
Interested Stockholder must not have acquired at any time after becoming an
Interested Stockholder any additional shares of the Company's capital stock in
any transaction unless after giving effect to such acquisition there would be no
increase in the Interested Stockholder's percentage beneficial ownership of any
class of the Company's capital stock; (iii) the Interested Stockholder must not
have received (other than proportionately as a stockholder) at any time after
becoming an Interested Stockholder, whether in connection with the proposed
Business Combination or otherwise, the benefit of any loans or other financial
assistance or any tax advantages provided by the Company; (iv) a proxy or
information statement describing the proposed Business Combination and complying
with the requirements of the Exchange Act must have been mailed to all
stockholders of the Company at least 30 days prior to the consummation of the
Business Combination; and (v) the Interested Stockholder must not have made any
material change in the Company's business or equity capital structure without
the approval of at least two-thirds of the Continuing Directors.
Continuing Director Approval. If the Business Combination with an
Interested Stockholder is approved by at least two-thirds of the Continuing
Directors, neither the fair price criteria and other procedural requirements nor
the 80 percent stockholder vote requirement would be applicable. A "Continuing
Director" is any member of the Board of Directors of the Company who is not
affiliated or associated with or a representative of the Interested Stockholder
and who was a director of the Company prior to the time the Interested
Stockholder became an Interested Stockholder, and any successor to such
Continuing Director who is not affiliated or associated with or a representative
of an Interested Stockholder and who was recommended or elected by at least
two-thirds of the Continuing Directors.
80 Percent Stockholder Vote. If the fair price criteria and procedural
requirements are not satisfied and the Business Combination is not approved by
at least two-thirds of the Continuing Directors, the Fair Price Provision
requires the approval of the holders of 80 percent of the Voting Power, voting
as a single class, in addition to any vote required by law or otherwise. If the
fair price criteria and other procedural requirements were met or at least
two-thirds of the Continuing Directors approved a particular Business
Combination, the normal voting requirements of the DGCL and the NYSE would
apply. Under current provisions of the DGCL, certain mergers, consolidations,
reclassifications of securities, sales of substantially all assets and plans of
dissolution would have to be approved by the holders of a majority of the
outstanding shares of stock of the Company entitled to vote thereon. Under the
current rules of the NYSE, on which shares of Company Common Stock are to be
listed, the issuance of additional shares of Company Common Stock aggregating 20
percent of the outstanding shares could, under certain circumstances, require
approval by a majority of the votes cast by the holders of the shares of the
stock of the Company entitled to vote thereon. Certain other transactions, such
as sales of less than substantially all assets, mergers involving a 90%-owned
subsidiary and recapitalizations not involving any amendments to the Company
Certificate, would not require stockholder approval under the DGCL or NYSE
rules, although such transactions may constitute Business Combinations subject
to the Fair Price Provision.
Amendment of the Fair Price Provision. Any amendment or repeal of the Fair
Price Provision, or the adoption of provisions inconsistent therewith, must be
approved by the affirmative vote of the holders of not less than 80 percent of
the Voting Power, voting together as a single class, unless such amendment,
repeal or adoption were approved by at least two-thirds of the Continuing
Directors, in which case the provisions of the DGCL would require the
affirmative vote of the holders of a majority of the outstanding shares of the
Company's stock entitled to vote thereon.
SPECIAL STOCKHOLDERS' MEETINGS AND RIGHT TO ACT BY WRITTEN CONSENT
The Company Certificate and the Company By-Laws provide that a special
meeting of stockholders may be called only by a resolution adopted by a majority
of the entire Board of Directors of the Company. Stockholders are not permitted
to call, or to require that the Board of Directors call, a special meeting of
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stockholders. Moreover, the business permitted to be conducted at any special
meeting of stockholders is limited to the business brought before the meeting
pursuant to the notice of the meeting given by the Company. In addition, the
Company Certificate provides that any action taken by the stockholders of the
Company must be effected at an annual or special meeting of stockholders and may
not be taken by written consent in lieu of a meeting.
The provisions of the Company Certificate and the Company By-Laws
prohibiting stockholder action by written consent may have the effect of
delaying consideration of a stockholder proposal until the next annual meeting.
These provisions would also prevent the holders of a majority of the Voting
Power from unilaterally using the written consent procedure to take stockholder
action. Moreover, a stockholder could not force stockholder consideration of a
proposal over the opposition of the Board of Directors of the Company by calling
a special meeting of stockholders prior to the time the Board believes such
consideration to be appropriate.
PROCEDURES FOR STOCKHOLDER NOMINATIONS AND PROPOSALS
The Company By-Laws establish an advance notice procedure for stockholders
to nominate candidates for election as directors or to bring other business
before meetings of stockholders of the Company (the "Stockholder Notice
Procedure").
Only those stockholder nominees who are nominated in accordance with the
Stockholder Notice Procedure will be eligible for election as directors of the
Company. Under the Stockholder Notice Procedure, notice of stockholder
nominations to be made at an annual meeting (or of any other business to be
brought before such meeting) must be received by the Company not less than 60
days nor more than 90 days prior to the first anniversary of the previous year's
annual meeting (or, in the case of the 1998 Annual Meeting of Stockholders or if
the date of the annual meeting is more than 30 days before or more than 60 days
after such anniversary date, not earlier than the 90th day prior to such meeting
and not later than the later of (i) the 60th day prior to such meeting or (ii)
the 10th day after public announcement of the date of such meeting is first
made). Notwithstanding the foregoing, in the event that the number of directors
to be elected is increased and there is no public announcement naming all of the
nominees for director or specifying the size of the increased Board of Directors
made by the Company at least 70 days prior to the first anniversary of the
preceding year's annual meeting, a stockholder's notice will be timely, but only
with respect to nominees for any new positions created by such increase, if it
is received by the Company not later than the 10th day after such public
announcement is first made by the Company.
The Company By-Laws provide that only such business may be conducted at a
special meeting as is specified in the notice of meeting. Nominations for
election to the Company's Board of Directors may be made at a special meeting at
which directors are to be elected only by or at the Company's Board of Directors
direction or by a stockholder who has given timely notice of nomination. Under
the Stockholder Notice Procedure, such notice must be received by the Company
not earlier than the 90th day before such meeting and not later than the later
of (i) the 60th day prior to such meeting or (ii) the 10th day after public
announcement of the date of such meeting is first made. Stockholders will not be
able to bring other business before special meetings of stockholders.
The Stockholder Notice Procedure provides that at an annual meeting only
such business may be conducted as has been brought before the meeting by, or at
the direction of the Company's Board of Directors or by a stockholder who has
given timely written notice (as set forth above) to the Company of such
stockholder's intention to bring such business before such meeting.
Under the Stockholder Notice Procedure, a stockholder's notice to the
Company proposing to nominate an individual for election as a director must
contain certain information, including, without limitation, the identity and
address of the nominating stockholder, the class and number of shares of stock
of the Company owned by such stockholder, and all information regarding the
proposed nominee that would be required to be included in a proxy statement
soliciting proxies for the proposed nominee. Under the Stockholder Notice
Procedure, a stockholder's notice relating to the conduct of business other than
the nomination of directors must contain certain information about such business
and about the proposing stockholder, including without
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limitation, a brief description of the business the stockholder proposes to
bring before the meeting, the reasons for conducting such business at such
meeting, the name and address of such stockholder, the class and number of
shares of stock of the Company beneficially owned by such stockholder, and any
material interest of such stockholder in the business so proposed. If the
Chairman or other officer presiding at a meeting determines that an individual
was not nominated, or other business was not brought before the meeting, in
accordance with the Stockholder Notice Procedure, such individual will not be
eligible for election as a director, or such business will not be conducted at
such meeting, as the case may be.
By requiring advance notice of nominations by stockholders, the Stockholder
Notice Procedure will afford the Company's Board of Directors an opportunity to
consider the qualifications of the proposed nominees and, to the extent deemed
necessary or desirable by the Company's Board of Directors, to inform
stockholders about such qualifications. By requiring advance notice of other
proposed business, the Stockholder Notice Procedure will provide a more orderly
procedure for conducting annual meetings of stockholders and, to the extent
deemed necessary or desirable by the Company's Board of Directors, will provide
the Company's Board of Directors with an opportunity to inform stockholders,
prior to such meetings, of any business proposed to be conducted at such
meetings, together with the Company's Board of Directors' position regarding
action to be taken with respect to such business, so that stockholders can
better decide whether to attend such a meeting or to grant a proxy regarding the
disposition of any such business.
Although the Company By-Laws do not give the Company's Board of Directors
any power to approve or disapprove stockholder nominations for the election of
directors or proposals for action, they may have the effect of precluding a
contest for the election of directors or the consideration of stockholder
proposals if the proper procedures are not followed, and of discouraging or
deterring a third party from conducting a solicitation of proxies to elect its
own slate of directors or to approve its own proposal, without regard to whether
consideration of such nominees or proposals might be harmful or beneficial to
the Company and its stockholders.
AMENDMENT OF THE COMPANY CERTIFICATE AND COMPANY BY-LAWS
The Company Certificate provides that the affirmative vote of at least 80
percent of the Voting Power, voting together as a single class, would be
required to (i) amend or repeal the provisions of the Company Certificate with
respect to (A) the election of directors, (B) the right to call a special
stockholders' meeting and (C) the right to act by written consent, (ii) adopt
any provision inconsistent with such provisions and (iii) amend or repeal the
provisions of the Company Certificate with respect to amendments to the Company
Certificate or the Company By-Laws. In addition, the Company Certificate
provides that the Board of Directors of the Company may make, alter, amend and
repeal the by-laws of the Company and that the amendment or repeal by
stockholders of any by-laws of the Company would require the affirmative vote of
at least 80 percent of the Voting Power, voting together as a single class.
COMPANY RIGHTS PLAN
The Company's Board of Directors will declare a dividend of one preferred
share purchase right ("Company Right") to be paid in respect of each share of
Company Common Stock to be issued in the Distribution. Each Company Right will
entitle the registered holder to purchase from the Company one one-hundredth of
a share of Company Junior Preferred Stock, at a price to be established by the
Board of Directors of the Company at the time the Company Rights Agreement is
entered into (the "Purchase Price"), subject to adjustment. The description and
terms of the Company Rights will be set forth in a Rights Agreement (the
"Company Rights Agreement") to be entered into between the Company and First
Chicago Trust Company of New York, as Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) 10 days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") has acquired beneficial ownership of 20% or more of the outstanding
Company Common Stock or (ii) 10 business days (or such later date as may be
determined by the Company's Board of Directors prior to such time as any person
or group becomes an Acquiring Person) following the commencement of, or
announcement of an intention to make, a tender offer or exchange offer
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the consummation of which would result in the beneficial ownership by a person
or group of 20% or more of the outstanding Company Common Stock (the earlier of
such dates being called the "Rights Distribution Date"), the Company Rights will
be attached to Company Common Stock and the Company Rights will be owned by the
registered owners of Company Common Stock.
The Company Rights Agreement will provide that, until the Rights
Distribution Date (or until the earlier redemption or expiration of the Company
Rights), (i) the Company Rights will be transferred with and only with the
Company Common Stock, (ii) certificates representing Company Common Stock and
initial transaction statements in respect of shares of Company Common Stock
registered in book-entry form will contain a notation incorporating the terms of
the Company Rights by reference and (iii) the transfer of any shares of Company
Common Stock will also constitute the transfer of the Company Rights associated
therewith. As soon as practicable following the Rights Distribution Date,
separate certificates evidencing the Company Rights ("Rights Certificates") will
be mailed to holders of record of the Company Common Stock as of the close of
business on the Rights Distribution Date and such separate Rights Certificates
alone will evidence the Company Rights.
The Company Rights will not be exercisable until the Rights Distribution
Date. The Company Rights will expire on the tenth anniversary of the
Distribution (the "Final Expiration Date"), unless the Final Expiration Date is
extended or unless the Company Rights are earlier redeemed by the Company, in
each case, as described below.
The Purchase Price payable, and the number of shares of Company Junior
Preferred Stock or other securities or property issuable, upon exercise of the
Company Rights will be subject to adjustment from time to time to prevent
dilution (i) in the event of a stock dividend on, or a subdivision, combination
or reclassification of, Company Junior Preferred Stock, (ii) upon the grant to
holders of shares of Company Junior Preferred Stock of certain rights or
warrants to subscribe for or purchase shares of Company Junior Preferred Stock
at a price, or securities convertible into shares of Company Junior Preferred
Stock with a conversion price, less than the then current market price of the
shares of Company Junior Preferred Stock or (iii) upon the distribution to
holders of shares of Company Junior Preferred Stock of evidences of indebtedness
or assets (excluding regular periodic cash dividends or dividends payable in
shares of Company Junior Preferred Stock) or of subscription rights or warrants
(other than those referred to above).
The number of outstanding Company Rights and the number of one
one-hundredths of a share of Company Junior Preferred Stock issuable upon
exercise of each Company Right will also be subject to adjustment in the event
of a stock split of the Company Common Stock or a stock dividend on the Company
Common Stock payable in Company Common Stock or subdivisions, consolidations or
combinations of the Company Common Stock occurring, in any such case, prior to
the Rights Distribution Date.
Shares of Company Junior Preferred Stock purchasable upon exercise of the
Company Rights will not be redeemable. Each share of Company Junior Preferred
Stock will be entitled to a minimum preferential quarterly dividend payment of
$1 per share but will be entitled to an aggregate dividend of 100 times the
dividend declared per share of Company Common Stock whenever such dividend is
declared. In the event of liquidation, the holders of Company Junior Preferred
Stock will be entitled to a minimum preferential liquidation payment of $100 per
share but will be entitled to an aggregate payment of 100 times the payment made
per share of Company Common Stock. Each share of Company Junior Preferred Stock
will have 100 votes, voting together with the Company Common Stock. Finally, in
the event of any merger, consolidation or other transaction in which shares of
Company Common Stock are exchanged, each share of Company Junior Preferred Stock
will be entitled to receive 100 times the amount received per share of Company
Common Stock. These rights will be protected by customary antidilution
provisions.
Because of the nature of the Company Junior Preferred Stock's dividend,
liquidation and voting rights, the value of the one one-hundredth interest in a
share of Company Junior Preferred Stock purchasable upon exercise of each
Company Right should approximate the value of one share of Company Common Stock.
In the event that, at any time after a person has become an Acquiring
Person, the Company is acquired in a merger or other business combination
transaction or 50% or more of its consolidated assets or earning power
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is sold, proper provision will be made so that each holder of a Company Right
will thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of the Company Right, that number of shares of common
stock of the acquiring company which at the time of such transaction will have a
market value of two times the exercise price of the Company Right. In the event
that any person becomes an Acquiring Person, proper provision shall be made so
that each holder of a Company Right, other than Company Rights beneficially
owned by the Acquiring Person (which will thereafter be void), will thereafter
have the right to receive upon exercise, in lieu of shares of Company Junior
Preferred Stock, that number of shares of Company Common Stock having a market
value of two times the exercise price of the Company Right.
At any time after any person or group of affiliated or associated persons
becomes an Acquiring Person, and prior to the acquisition by such person or
group of 50% or more of the outstanding shares of Company Common Stock, the
Company's Board of Directors may exchange the Company Rights for Company Common
Stock or Company Junior Preferred Stock (other than Company Rights owned by such
person or group, which will have become void after such person became an
Acquiring Person), in whole or in part, at an exchange ratio of one share of
Company Common Stock, or one hundredth of a share of Company Junior Preferred
Stock (or of a share of another series of Company Preferred Stock having
equivalent rights, preferences and privileges), per Company Right (subject to
adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares of Company Junior Preferred Stock will
be issued (other than fractions which are integral multiples of one
one-hundredth of a share of Company Junior Preferred Stock, which may, at the
election of the Company, be evidenced by depository receipts) and in lieu
thereof, an adjustment in cash will be made based on the market price of the
Company Junior Preferred Stock on the last trading day prior to the date of
exercise.
At any time prior to the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 20% or more of the outstanding
shares of Company Common Stock, the Board of Directors of the Company may redeem
the Company Rights in whole, but not in part, at a price of $.01 per Company
Right (the "Redemption Price"). The redemption of the Company Rights may be made
effective at such time, on such basis and with such conditions as the Company's
Board of Directors may determine, in its sole discretion. Immediately upon any
redemption of the Company Rights, the right to exercise the Company Rights will
terminate and the only right of the holders of Company Rights will be to receive
the Redemption Price.
The terms of the Company Rights may be amended by the Board of Directors of
the Company without the consent of the holders of the Company Rights, including
an amendment to decrease the threshold at which a person becomes an Acquiring
Person from 20% to not less than 10%, except that from and after such time as
any person becomes an Acquiring Person no such amendment may adversely affect
the interests of the holders of the Company Rights.
Until a Company Right is exercised, the holder thereof, as such, will have
no rights as a stockholder of the Company, including, without limitation, the
right to vote or to receive dividends.
The Company Rights will have certain anti-takeover effects. The Company
Rights will cause substantial dilution to a person or group that attempts to
acquire the Company on terms not approved by the Company's Board of Directors,
except pursuant to an offer conditioned on a substantial number of the Company
Rights being acquired. The Company Rights should not interfere with any merger
or business combination approved by the Company's Board of Directors, since the
Company Rights may be redeemed by the Company at the Redemption Price prior to
the time that a person or group has become an Acquiring Person.
The foregoing summary of certain terms of the Company Rights does not
purport to be complete and is qualified by reference to the form of the Company
Rights Agreement, which has been filed as an exhibit to the Registration
Statement of which this Information Statement is a part.
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ANTI-TAKEOVER LEGISLATION
Section 203 of the DGCL provides that, subject to certain exceptions
specified therein, a corporation shall not engage in any business combination
with any interested stockholder for a three-year period following the time that
such stockholder becomes an interested stockholder unless (i) prior to such
time, the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding certain shares); or
(iii) at or subsequent to such time, the business combination is approved by the
board of directors of the corporation and by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder. Except as specified in Section 203 of the DGCL, an "interested
stockholder" is defined to include (x) any person that is the owner of 15% or
more of the outstanding voting stock of the corporation, or is an affiliate or
associate of the corporation and was the owner of 15% or more of the outstanding
voting stock of the corporation at any time within three years immediately prior
to the relevant date and (y) the affiliates and associates of any such person.
Under certain circumstances, Section 203 of the DGCL makes it more
difficult for a person who would be an interested stockholder to effect various
business combinations with a corporation for a three-year period, although the
stockholders may elect to exclude a corporation from the restrictions imposed
thereunder. The Company Certificate does not exclude the Company from the
restrictions imposed under Section 203 of the DGCL. It is anticipated that the
provisions of Section 203 of the DGCL may encourage companies interested in
acquiring the Company to negotiate in advance with the Company's Board of
Directors, since the stockholder approval requirement would be avoided if a
majority of the directors then in office approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder.
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
The DGCL permits Delaware corporations to eliminate or limit the monetary
liability of directors for breach of their fiduciary duty of care, subject to
certain limitations. The Company Certificate provides that Company directors are
not liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Company or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) for willful or negligent violation of the laws governing
the payment of dividends or the purchase or redemption of stock or (iv) for any
transaction from which a director derived an improper personal benefit.
The DGCL provides for indemnification of directors, officers, employees and
agents subject to certain limitations. The Company By-Laws and the appendix
thereto provide for the indemnification of directors, officers, employees and
agents of the Company to the extent permitted by Delaware law. It is expected
that the Company's directors and officers will be insured against certain
liabilities for actions taken in such capacities, including liabilities under
the Securities Act.
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INDEX TO DEFINED TERMS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
1997 LTIP.............................. 50
1997 LTIP Participants................. 51
ABS.................................... 30
Acquiring Person....................... 65
Allen-Bradley.......................... 50
Automotive Business.................... 7
beneficial owner....................... 62
Business Combination................... 62
Code................................... 6
Commission............................. 4
Common Stock........................... 1
Company................................ 1, 5
Company By-Laws........................ 9
Company Certificate.................... 9
Company Common Stock................... 1
Company Junior Preferred Stock......... 58
Company Options........................ 22
Company Participants................... 21
Company Preferred Stock................ 58
Company Right.......................... 65
Company Rights Agreement............... 65
Continuing Director.................... 63
Credit Facility........................ 24
DGCL................................... 15
Directors Plan......................... 54
Distribution........................... 1
Distribution Agent..................... 6
Distribution Agreement................. 20
Distribution Date...................... 6
Dividend Payment Date.................. 60
Electronics Business................... 16
Employee Matters Agreement............. 21
Exchange Act........................... 4
Fair Price Provision................... 62
Final Expiration Date.................. 66
Financial Ratio........................ 39
freestanding SAR....................... 52
HVS.................................... 7
ICP.................................... 55
Interested Stockholder................. 62
interested stockholder................. 68
IRS.................................... 6
LIBOR.................................. 24
LVS.................................... 7
Named Executive Officers............... 46
NYSE................................... 1
OEMs................................... 13
Pre-Distribution Payment............... 8
Purchase Price......................... 65
Ratings Grid........................... 39
Record Date............................ 1
Redemption Price....................... 67
Registration Statement................. 4
restricted stock....................... 52
Retention Payment...................... 46
Rights Agent........................... 65
Rights Certificates.................... 66
Rights Distribution Date............... 66
Rockwell............................... 1
Rockwell 1988 LTIP..................... 22
Rockwell 1995 LTIP..................... 22
Rockwell By-Laws....................... 58
Rockwell Certificate................... 58
Rockwell Common Stock.................. 1
Rockwell Junior Preferred Stock........ 17
Rockwell Option Plans.................. 47
Rockwell Options....................... 22
Rockwell Savings Plan.................. 15
SARs................................... 50
Securities Act......................... 18
stock options.......................... 46
Stockholder Notice Procedure........... 64
tandem SAR............................. 52
Tax Allocation Agreement............... 23
Tax Ruling............................. 6
Transfer Agent......................... 6
Transition Agreement................... 23
Voting Power........................... 61
WABCO.................................. 30
</TABLE>
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INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<CAPTION>
PAGE
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<S> <C>
AUTOMOTIVE BUSINESS
Independent Auditors' Report.......................................................... F-2
Combined Balance Sheet as of September 30, 1995 and 1996 and (Unaudited) March 31,
1997................................................................................ F-3
Combined Statement of Income for the years ended September 30, 1994, 1995 and 1996 and
(Unaudited) the six months ended March 31, 1996 and 1997............................ F-4
Combined Statement of Cash Flows for the years ended September 30, 1994, 1995 and 1996
and (Unaudited) the six months ended March 31, 1996 and 1997........................ F-5
Notes to Combined Financial Statements................................................ F-6
Independent Auditors' Report.......................................................... F-18
Schedule II -- Valuation and Qualifying Accounts...................................... F-19
111 HOLDINGS, INC.
Independent Auditors' Report.......................................................... F-20
Balance Sheet as of June 10, 1997 and Note to Balance Sheet........................... F-21
</TABLE>
F-1
<PAGE> 76
INDEPENDENT AUDITORS' REPORT
To the Directors and Shareowners of
Rockwell International Corporation:
We have audited the accompanying combined balance sheet of the Automotive
Business of Rockwell International Corporation (Rockwell), as described in Note
1 to the financial statements, as of September 30, 1996 and 1995, and the
related combined statements of income and cash flows for each of the three years
in the period ended September 30, 1996. These financial statements are the
responsibility of Rockwell's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such combined financial statements present fairly, in all
material respects, the financial position of the Automotive Business of Rockwell
at September 30, 1996 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended September 30, 1996 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
June 10, 1997
F-2
<PAGE> 77
AUTOMOTIVE BUSINESS
COMBINED BALANCE SHEET
(IN MILLIONS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------- MARCH 31,
1995 1996 1997
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash.............................................................. $ 62 $ 74 $ 70
Receivables (less allowance for doubtful accounts: 1995, $8; 1996,
$14; 1997, $10)................................................. 454 485 520
Inventories....................................................... 319 294 290
Other current assets.............................................. 107 140 134
------ ------ ------
Total current assets.................................... 942 993 1,014
------ ------ ------
PROPERTY
Property at cost.................................................. 1,535 1,558 1,542
Less accumulated depreciation..................................... 888 912 924
------ ------ ------
Property, net..................................................... 647 646 618
------ ------ ------
OTHER ASSETS...................................................... 177 194 209
------ ------ ------
TOTAL ASSETS............................................ $1,766 $1,833 $ 1,841
====== ====== ======
LIABILITIES AND ROCKWELL'S NET INVESTMENT
CURRENT LIABILITIES
Short-term debt................................................... $ 14 $ 8 $ 20
Accounts payable.................................................. 420 441 441
Accrued compensation and benefits................................. 116 124 120
Other current liabilities......................................... 176 191 168
------ ------ ------
Total current liabilities............................... 726 764 749
LONG-TERM DEBT.................................................... 31 24 20
ACCRUED RETIREMENT BENEFITS....................................... 395 391 393
OTHER LIABILITIES................................................. 29 26 23
MINORITY INTERESTS................................................ 24 29 36
ROCKWELL'S NET INVESTMENT......................................... 561 599 620
------ ------ ------
TOTAL LIABILITIES AND ROCKWELL'S NET INVESTMENT......... $1,766 $1,833 $ 1,841
====== ====== ======
</TABLE>
See notes to combined financial statements.
F-3
<PAGE> 78
AUTOMOTIVE BUSINESS
COMBINED STATEMENT OF INCOME
(IN MILLIONS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED SEPTEMBER 30, ENDED MARCH 31,
------------------------ ---------------
1994 1995 1996 1996 1997
------ ------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales................................................. $2,653 $3,125 $3,144 $1,593 $1,578
Cost of sales......................................... 2,371 2,744 2,747 1,399 1,371
------ ------ ------ ------ ------
GROSS MARGIN.......................................... 282 381 397 194 207
Selling, general, and administrative.................. 191 203 215 101 110
Restructuring......................................... -- -- 36 -- --
------ ------ ------ ------ ------
OPERATING EARNINGS.................................... 91 178 146 93 97
Other income - net.................................... 9 18 46 16 9
Interest expense...................................... (12) (11) (10) (5) (4)
------ ------ ------ ------ ------
INCOME BEFORE INCOME TAXES............................ 88 185 182 104 102
Provision for income taxes............................ 37 62 68 39 40
------ ------ ------ ------ ------
NET INCOME.................................. $ 51 $ 123 $ 114 $ 65 $ 62
====== ====== ====== ====== ======
</TABLE>
See notes to combined financial statements.
F-4
<PAGE> 79
AUTOMOTIVE BUSINESS
COMBINED STATEMENT OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED SEPTEMBER ENDED MARCH
30, 31,
--------------------- -----------
1994 1995 1996 1996 1997
----- ----- ----- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income................................................. $ 51 $ 123 $ 114 $ 65 $ 62
Adjustments to net income to arrive at cash provided by
operating activities:
Depreciation and amortization............................ 93 97 102 47 48
Loss (gain) on sale of property and businesses........... 4 (5) (19) (14) --
Restructuring, net of expenditures....................... -- -- 26 -- --
Deferred income taxes.................................... (13) (11) (20) (4) (4)
Net pension expense, net of contributions................ 19 26 23 13 12
Changes in assets and liabilities, excluding effects of
acquisitions, divestitures, and foreign currency
adjustments:
Receivables........................................... (51) (33) (32) (43) (52)
Inventories........................................... 4 (39) 19 8 --
Accounts payable...................................... 47 56 24 2 11
Other assets and liabilities.......................... 2 (11) (40) (3) (21)
----- ----- ----- ---- ----
CASH PROVIDED BY OPERATING ACTIVITIES............ 156 203 197 71 56
----- ----- ----- ---- ----
INVESTING ACTIVITIES
Property additions......................................... (102) (119) (144) (57) (37)
Acquisitions of businesses and investments................. (2) (19) (15) -- (16)
Proceeds from the disposition of property and businesses... 5 11 58 39 6
----- ----- ----- ---- ----
CASH USED FOR INVESTING ACTIVITIES............... (99) (127) (101) (18) (47)
----- ----- ----- ---- ----
FINANCING ACTIVITIES
(Decrease) increase in short-term borrowings............... (14) -- (3) (2) 17
Decrease in long-term debt................................. (3) (9) (7) (2) (5)
Net transfers to Rockwell.................................. (24) (71) (74) (47) (25)
----- ----- ----- ---- ----
CASH USED FOR FINANCING ACTIVITIES............... (41) (80) (84) (51) (13)
----- ----- ----- ---- ----
INCREASE (DECREASE) IN CASH................................ 16 (4) 12 2 (4)
CASH AT BEGINNING OF PERIOD................................ 50 66 62 62 74
----- ----- ----- ---- ----
CASH AT END OF PERIOD...................................... $ 66 $ 62 $ 74 $ 64 $ 70
===== ===== ===== ==== ====
</TABLE>
See notes to combined financial statements.
F-5
<PAGE> 80
AUTOMOTIVE BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
On March 17, 1997, Rockwell International Corporation (Rockwell) announced
its intention to transfer its automotive businesses (the Automotive Business)
into a newly formed entity, 111 Holdings, Inc. (the Company). The shares of the
Company will be distributed to the shareowners of Rockwell in a tax-free spin-
off, with each Rockwell shareowner receiving one share of Company common stock
(including the associated right) for every three shares of Rockwell common stock
owned. The Company will be renamed and will become a separately traded, public
company. Prior to the spin-off, the Company will make a special payment of
approximately $445 million to Rockwell, which will be financed through bank
borrowings. The transaction, which is subject to several conditions, including
receipt of a ruling by the Internal Revenue Service that the transaction
qualifies as a tax-free distribution and final approval of Rockwell's board of
directors, is expected to be completed by September 30, 1997.
The accompanying financial statements present the historical financial
position, results of operations and cash flows of the ongoing Automotive
businesses of Rockwell to be spun off, and are not necessarily indicative of
what the financial position, results of operations or cash flows would have been
had the Automotive Business been an independent public company during the
periods presented. The actual assets and liabilities to be spun off are subject
to final determination, based on execution of a definitive Distribution
Agreement, which will occur shortly before the spin-off date.
The financial statements of the Automotive Business have been prepared in
accordance with generally accepted accounting principles which require
management to make estimates and assumptions that affect the amounts reported in
the financial statements. Actual results could differ from those estimates.
Rockwell provides certain services to the Automotive Business's United
States (U.S.) businesses, including payroll and employee benefits
administration, data processing, and telecommunications services. Rockwell
administers certain programs in which the Automotive Business's U.S. operations
participate, including active medical and insurance programs. Costs for these
services and programs are billed to the Automotive Business based on actual
usage and are included in the Automotive Business's statement of income. These
costs totaled $31 million, $27 million and $25 million in fiscal years 1994,
1995 and 1996, respectively, and $12 million for each of the six-month periods
ended March 31, 1996 and 1997. Management believes that the methods of billing
these costs are reasonable and that the costs charged to the Automotive Business
are approximately that which would be incurred on a stand-alone basis.
Rockwell also provides management to the Automotive Business, including
corporate oversight, financial, legal, tax, corporate communications, and human
resources. The costs of providing these services are included in selling,
general and administrative expense on the statement of income and were $31
million, $34 million and $27 million in fiscal years 1994, 1995 and 1996,
respectively, and $14 million for each of the six month periods ended March 31,
1996 and 1997 and have been allocated to the Automotive Business based on the
Automotive Business's sales in proportion to total Rockwell sales. Management
believes that the method of allocating these costs to the Automotive Business is
reasonable. Management estimates the cost of providing these services on a
stand-alone basis to be approximately $17 million per year.
The Automotive Business's U.S. and certain of its non-U.S. operations
participate in Rockwell centralized cash management systems wherein receipts are
centrally deposited and disbursements are centrally funded. Accordingly, the
financial statements exclude cash, debt and interest income and expense in
countries with centralized cash management systems. Accounts payable includes
$18 million, $22 million and $20 million as of September 30, 1995 and 1996 and
March 31, 1997, respectively, related to outstanding checks drawn on centralized
disbursement accounts.
The balance sheet includes $35 million of cash related to wholly-owned
subsidiaries of the Automotive Business, plus all cash balances related to
consolidated subsidiaries that are not wholly-owned. Rockwell intends to retain
all other cash balances.
F-6
<PAGE> 81
AUTOMOTIVE BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The results of operations for the six months ended March 31, 1997 are not
necessarily indicative of the results for the full year. In the opinion of
management, the unaudited interim financial statements contain all adjustments,
consisting solely of adjustments of a normal recurring nature, necessary to
present fairly the assets and liabilities, results of operations, and cash flows
for the periods presented. At the end of each interim reporting period
management makes an estimate of the effective tax rate expected to be applicable
for the full fiscal year. The rate so determined is used in providing for income
taxes on a year-to-date basis. All amounts in the financial statements as of or
for the six months ended March 31, 1996 and 1997 are unaudited.
2. ACCOUNTING POLICIES
Basis of Combination
The combined financial statements of the Automotive Business include all
majority-owned subsidiaries of Rockwell which relate solely to the Automotive
Business and Automotive Business divisions of certain majority-owned
subsidiaries of Rockwell. All significant accounts and transactions between
Automotive locations have been eliminated. Intercompany accounts receivable and
payable between the Automotive Business and Rockwell or its subsidiaries as of
the date of the spin-off will be canceled or otherwise eliminated. Investments
in affiliates which are not majority-owned are reported using the equity method.
Inventories
Inventories are stated at the lower of cost (using LIFO, FIFO, or average
methods) or market (determined on the basis of estimated realizable values).
Tooling
Costs incurred by the Automotive Business for certain engineering and
tooling projects, principally on passenger car and light truck platforms, for
which customer reimbursement is anticipated are classified as other current
assets on the accompanying balance sheet. Provisions for losses are provided at
the time management anticipates engineering and tooling costs to exceed
anticipated customer reimbursement. Company-owned tooling is classified as
property and depreciated over its expected life or the life of the related
vehicle platform, whichever is shorter.
Property
Property is stated at cost. Depreciation of property is based on estimated
useful lives generally using the straight-line method. Significant renewals and
betterments are capitalized and replaced units are written off. Maintenance and
repairs, as well as renewals of minor amount, are charged to expense.
Intangible Assets
Goodwill represents the excess of the cost of purchased businesses over the
fair value of their net assets at the date of acquisition and is amortized by
the straight-line method over periods ranging from 5 to 40 years. Management
reviews periodically the realizability of goodwill and other intangible assets
based on an evaluation of remaining useful lives and cash flows, and has
determined that there is no impairment at September 30, 1996.
Environmental Matters
The Automotive Business records accruals for environmental issues in the
accounting period in which its responsibility is established and the cost can be
reasonably estimated. At environmental sites in which more than one potentially
responsible party has been identified, the Automotive Business records a
liability for its allocable share of costs related to its involvement with the
site as well as an allocable share of costs related to
F-7
<PAGE> 82
AUTOMOTIVE BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
insolvent parties or unidentified shares. At environmental sites in which the
Automotive Business is the only responsible party, the Automotive Business
records a liability for the total estimated costs of remediation before
consideration of recovery from insurers or other third parties. If recovery from
a third party is determined to be probable, the Automotive Business records a
receivable for the estimated recovery.
New Accounting Standards
In 1996, the Automotive Business adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of ". The adoption of this standard did not
have a material effect on the financial statements.
In October 1996, the American Institute of Certified Public Accountants
issued Statement of Position No. 96-1, "Environmental Remediation Liabilities",
which is effective for fiscal year 1998. Management does not expect adoption of
this statement to have a material effect on the financial statements.
3. RESTRUCTURING
During 1996, the Automotive Business recorded restructuring charges of $36
million ($24 million after tax) related to rationalizing manufacturing processes
at several locations, mostly outside the United States. The provision includes
severance and other employee costs of $22 million related to 1,400 employees,
asset impairments of $8 million, and other costs of $6 million. Approximately
$10 million had been paid by September 30, 1996 and the remaining restructuring
actions are expected to be substantially completed by the end of the 1997 fiscal
year.
4. INVENTORIES
Inventories are summarized as follows (in millions):
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------- MARCH 31,
1995 1996 1997
---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
Finished goods............................................... $109 $114 $ 113
Work in process.............................................. 163 146 128
Raw materials, parts, and supplies........................... 100 88 103
---- ---- ----
Total........................................................ 372 348 344
Less allowance to adjust the carrying value of certain
inventories (1995, $144; 1996, $125) to a LIFO basis....... 53 54 54
---- ---- ----
Inventories.................................................. $319 $294 $ 290
==== ==== ====
</TABLE>
5. OTHER CURRENT ASSETS
Other current assets are summarized as follows (in millions):
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------- MARCH 31,
1995 1996 1997
---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current deferred income taxes (see Note 13).................. $ 77 $ 95 $ 94
Customer tooling............................................. 16 21 16
Prepaid expenses............................................. 9 11 10
Other........................................................ 5 13 14
---- ---- ----
Other current assets......................................... $107 $140 $ 134
==== ==== ====
</TABLE>
F-8
<PAGE> 83
AUTOMOTIVE BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
6. PROPERTY
Property is summarized as follows (in millions):
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------- MARCH 31,
1995 1996 1997
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Property at cost:
Land and land improvements.............................. $ 33 $ 32 $ 31
Buildings............................................... 299 282 282
Machinery and equipment................................. 947 950 963
Company-owned tooling................................... 178 188 189
Construction in progress................................ 78 106 77
------ ------ ------
Total..................................................... 1,535 1,558 1,542
Less accumulated depreciation............................. 888 912 924
------ ------ ------
Property, net............................................. $ 647 $ 646 $ 618
====== ====== ======
</TABLE>
7. OTHER ASSETS
Other assets are summarized as follows (in millions):
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------- MARCH 31,
1995 1996 1997
---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
Net deferred income taxes (see Note 13)...................... $ 60 $ 66 $ 69
Goodwill (net of accumulated amortization of: 1995, $16;
1996, $18; 1997, $20)...................................... 40 45 44
Investments in affiliates.................................... 37 38 43
Prepaid pension costs (see Note 11).......................... 24 26 27
Other........................................................ 16 19 26
---- ---- ----
Other assets................................................. $177 $194 $ 209
==== ==== ====
</TABLE>
8. OTHER CURRENT LIABILITIES
Other current liabilities are summarized as follows (in millions):
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------- MARCH 31,
1995 1996 1997
---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
Accrued product warranties................................... $ 90 $ 99 $ 86
Accrued taxes other than income taxes........................ 26 24 25
Accrued restructuring........................................ -- 19 11
Other........................................................ 60 49 46
---- ---- ----
Other current liabilities.................................... $176 $191 $ 168
==== ==== ====
</TABLE>
The $23 million reduction in other current liabilities from September 1996
to March 1997 primarily relates to lower warranty accrual requirements and the
funding of the restructuring charge in 1996.
9. FINANCIAL INSTRUMENTS
The Automotive Business's financial instruments include cash, short- and
long-term debt, and foreign currency forward exchange contracts. As of September
30, 1995 and 1996 and March 31, 1997, the carrying
F-9
<PAGE> 84
AUTOMOTIVE BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
values of the Automotive Business's financial instruments approximated their
fair values based on prevailing market prices and rates.
It is the policy of the Automotive Business not to enter into derivative
financial instruments for speculative purposes. The Automotive Business does
enter into foreign currency forward exchange contracts to minimize risk of loss
from currency rate fluctuations on foreign currency commitments entered into in
the ordinary course of business. These commitments are generally for terms of
less than one year. The foreign currency forward exchange contracts are executed
with creditworthy banks and are denominated in currencies of major industrial
countries. The notional amount of outstanding foreign currency forward exchange
contracts aggregated $82 million, $85 million, and $119 million at September 30,
1995 and 1996, and March 31, 1997, respectively. The Automotive Business does
not anticipate any material adverse effect on its results of operations or
financial position relating to these foreign currency forward exchange
contracts.
10. RETIREMENT MEDICAL PLANS
The Automotive Business has retirement medical plans which cover most of
its U.S. and certain non-U.S. employees and provide for medical payments to
eligible employees and dependents upon retirement.
The components of retirement medical expense are as follows (in millions):
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Service cost-benefits attributed to service during the year......... $ 3 $ 2 $ 2
Interest accrued on accumulated retirement medical obligation....... 25 27 27
Amortization of plan amendments and net actuarial losses............ (3) (3) (1)
---- ---- ----
Retirement medical expense.......................................... $25 $26 $28
==== ==== ====
</TABLE>
The retirement medical obligation at September 30, 1995 and 1996 is
comprised of the following (in millions):
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------
1995 1996
---- -----
<S> <C> <C>
Accumulated retirement medical obligation:
Retirees........................................................... $303 $ 336
Employees eligible to retire....................................... 21 20
Employees not eligible to retire................................... 45 35
---- -----
Total...................................................... 369 391
Unamortized amounts:
Plan amendments.................................................... 26 22
Actuarial (losses) gains:
Discount rate................................................... (42) (35)
Health care cost trend.......................................... 21 30
Demographic and other........................................... (63) (104)
---- -----
Recorded liability................................................... $311 $ 304
==== =====
Assumptions used (June 30 measurement date):
Discount rate...................................................... 7.5% 7.75%
Health care cost trend rates (decreasing to 5.5% after 2015)....... 8.5% 8.0%
</TABLE>
The actuarial losses relating to demographics are due principally to earlier
than assumed retirements resulting from plant closures and restructuring
actions. The net actuarial losses will be considered in the determination of
retirement medical expense in the future.
F-10
<PAGE> 85
AUTOMOTIVE BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Changing the health care cost trend rates by one percentage point would change
the accumulated retirement medical obligation at September 30, 1996 by
approximately $29 million and would change retirement medical expense by
approximately $2 million. Retirement medical payments totaled $31 million, $30
million and $35 million for 1994, 1995 and 1996, respectively.
11. RETIREMENT PENSION PLANS
The Automotive Business participates in a Rockwell pension plan which
provides for monthly pension payments to eligible U.S. employees upon
retirement. Pension benefits for U.S. salaried employees are based on years of
credited service and compensation. Pension benefits for certain U.S. hourly
employees are based on years of service and specified benefit amounts.
In connection with the spin-off, Rockwell will retain the obligation for
vested benefits earned by the Automotive Business participants in the U.S.
pension plan and all related assets. The Automotive Business will establish a
pension plan with substantially similar benefits and which credits participants
for service earned with Rockwell. The benefits payable under the Automotive
Business plan will be equal to the difference between the total benefit earned
with both companies and the vested benefit obligation retained by Rockwell.
Accordingly, the balance sheet includes a liability for the U.S. pension plan
equal to the excess of the projected benefit obligation over the vested benefit
obligation retained by Rockwell. For the U.S. pension plan, the statement of
income includes interest cost on the obligation to be assumed by the Automotive
Business.
Certain non-U.S. pension plans, which relate solely to employees and
retirees of the Automotive Business, will be assumed by the Automotive Business.
Net pension expense consisted of the following (in millions):
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Service cost-benefits earned during the year...................... $ 15 $ 14 $ 16
Interest accrued on projected benefit obligation.................. 13 16 17
Assumed return on plan assets..................................... (11) (12) (12)
Amortization of unrecognized amounts.............................. 4 11 4
---- ---- ----
Net pension expense............................................... $ 21 $ 29 $ 25
==== ==== ====
</TABLE>
F-11
<PAGE> 86
AUTOMOTIVE BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The following table reconciles the funded status of the pension assets and
liabilities to be assumed by the Automotive Business to amounts included in the
balance sheet (in millions):
<TABLE>
<CAPTION>
1995 1996
------------------------- -------------------------
PLANS WITH PLANS WITH PLANS WITH PLANS WITH
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEEDING BENEFITS EXCEEDING BENEFITS
ACCUMULATED EXCEEDING ACCUMULATED EXCEEDING
BENEFITS ASSETS BENEFITS ASSETS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Accumulated benefit obligation,
principally vested.................... $ 92 $ 100 $ 94 $ 96
Effects of projected compensation
increases............................. 4 42 7 41
---- ----- ---- -----
Projected benefit obligation............ 96 142 101 137
Fair value of plan assets............... 113 29 136 25
---- ----- ---- -----
Plan assets in excess of (less than)
projected benefit obligation.......... 17 (113) 35 (112)
Items not yet recognized in the balance
sheet:
Net actuarial losses (gains).......... 11 21 (5) 10
Prior service cost.................... 15 5 14 3
Remaining initial net asset........... (19) (5) (18) (4)
Unfunded pension adjustment............. -- (7) -- (4)
---- ----- ---- -----
Prepaid (accrued) pension costs at
September 30.......................... $ 24 $ (99) $ 26 $(107)
==== ===== ==== =====
</TABLE>
Assumptions used (June 30 measurement date):
<TABLE>
<CAPTION>
1995 1996
-------- ---------
<S> <C> <C>
Discount rate................................................. 7.5-8.0% 7.75-8.0%
Compensation increase rate.................................... 4.5% 4.0-4.5%
Long-term rate of return on plan assets....................... 9.0% 9.0%
</TABLE>
The Automotive Business also participates in certain Rockwell defined
contribution savings plans for eligible employees. Expense related to these
plans was $5 million for 1994 and $6 million each for 1995 and 1996.
12. OTHER INCOME - NET
Other income - net is comprised of the following (in millions):
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Gain (loss) on the sale of property and businesses.................. $(4) $ 5 $19
Equity in earnings of affiliates.................................... 6 6 11
Minority interests.................................................. (6) (8) (11)
Interest income..................................................... 3 4 4
Insurance settlement................................................ -- -- 15
Other............................................................... 10 11 8
--- --- ---
Other income - net.................................................. $ 9 $18 $46
=== === ===
</TABLE>
13. INCOME TAXES
Most of the Automotive Business's operations are included in the
consolidated U.S. and non-U.S. income tax returns of Rockwell. Rockwell intends
to indemnify the Automotive Business for all income tax liabilities
F-12
<PAGE> 87
AUTOMOTIVE BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
and retain rights to all tax refunds relating to operations included in
consolidated tax returns for periods prior to the spin-off date. Accordingly,
the balance sheet does not include current or prior period income tax
receivables or payables related to wholly-owned subsidiaries which file on a
combined basis with Rockwell. The income tax provisions included in the
statement of income have been determined as if the Automotive Business was a
separate taxpayer.
The components of the provision for income taxes are summarized as follows
(in millions):
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Current tax expense:
United States............................................... $ 7 $ 21 $ 32
Foreign..................................................... 41 47 48
State and local............................................. 2 5 8
---- ---- ----
Total current tax expense........................... 50 73 88
---- ---- ----
Deferred tax (benefit) expense:
United States............................................... (15) (13) (15)
Foreign..................................................... 5 4 (2)
State and local............................................. (3) (2) (3)
---- ---- ----
Total deferred tax benefit.......................... (13) (11) (20)
---- ---- ----
Provision for income taxes.................................... $ 37 $ 62 $ 68
==== ==== ====
</TABLE>
The deferred tax benefit represents the tax impact related to certain
accrued expenses, principally restructuring and warranty, that have been
recorded for financial statement purposes, but are not deductible for income tax
purposes until paid. Net deferred income tax benefits included in Other Current
Assets in the accompanying balance sheet consist of the tax effects of temporary
differences related to the following (in millions):
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------
1995 1996
---- ----
<S> <C> <C>
Accrued product warranties............................................. $31 $36
Accrued compensation and benefits...................................... 22 26
Restructuring.......................................................... 3 12
Other - net............................................................ 21 21
---- ----
Current deferred income taxes.......................................... $77 $95
==== ====
</TABLE>
Net deferred income tax benefits included in Other Assets in the
accompanying balance sheet consist of the tax effects of temporary differences
related to the following (in millions):
<TABLE>
<CAPTION>
SEPTEMBER
30,
-----------
1995 1996
---- ----
<S> <C> <C>
Accrued retirement medical costs........................................ $110 $106
Property................................................................ (69) (69)
Pensions................................................................ 11 14
Loss carryforwards...................................................... 19 19
Other - net............................................................. 4 11
---- ----
Subtotal................................................................ 75 81
Valuation allowance..................................................... (15) (15)
---- ----
Long-term deferred income taxes......................................... $ 60 $ 66
==== ====
</TABLE>
F-13
<PAGE> 88
AUTOMOTIVE BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Management believes it is more likely than not that current and long-term
deferred tax benefits will reduce future current income tax expense and
payments. Significant factors considered by management in its determination of
the probability of the realization of the deferred tax benefits included: (a)
the historical operating results of the Automotive Business, (b) expectations of
future earnings, and (c) the extended period of time over which the retirement
medical liability will be paid. The valuation allowance represents the amount of
tax benefits related to net operating loss carryforwards that have not yet been
recognized. The carryforward periods for $13 million of net operating losses
expire between 1997 and 2001. The carryforward period for the remaining net
operating losses is indefinite.
The Automotive Business's effective tax rate was different from the U.S.
statutory rate for the reasons set forth below:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Statutory tax rate................................................ 35.0% 35.0% 35.0%
State and local income taxes...................................... (0.5) 1.2 2.0
Foreign income taxes.............................................. 5.1 2.2 2.3
Utilization of foreign loss carryforwards......................... (2.4) (6.6) (2.4)
Other............................................................. 4.3 1.6 0.7
---- ---- ----
Effective tax rate................................................ 41.5% 33.4% 37.6%
==== ==== ====
</TABLE>
The income tax provisions were calculated based upon the following
components of income before income taxes (in millions):
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
United States (loss) income....................................... $(41) $ 21 $ 43
Foreign income.................................................... 129 164 139
---- ---- ----
Total................................................... $ 88 $185 $182
==== ==== ====
</TABLE>
No provision has been made for U.S., state, or additional foreign income
taxes related to approximately $163 million of undistributed earnings of foreign
subsidiaries which have been or are intended to be permanently reinvested.
14. ROCKWELL'S NET INVESTMENT
Changes in Rockwell's net investment are summarized as follows (in
millions):
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Beginning balance................................................. $468 $509 $561
Net income........................................................ 51 123 114
Net transfers to Rockwell......................................... (24) (71) (74)
Currency translation gain (loss).................................. 14 -- (2)
---- ---- ----
Ending balance.................................................... $509 $561 $599
==== ==== ====
</TABLE>
The cumulative deferred currency translation loss was $42 million, $42
million and $44 million as of September 30, 1994, 1995 and 1996, respectively.
F-14
<PAGE> 89
AUTOMOTIVE BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
15. SUPPLEMENTAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
(MILLIONS)
<S> <C> <C> <C>
Statement of income data:
Maintenance and repairs..................................................... $58 $65 $64
Research and development.................................................... 57 58 51
Rental expense.............................................................. 17 19 17
Statement of cash flows data:
Interest payments........................................................... $13 $12 $10
Income tax payments......................................................... 10 6 7
</TABLE>
16. CONTINGENT LIABILITIES
Federal, state and local requirements relating to the discharge of
substances into the environment, the disposal of hazardous wastes, and other
activities affecting the environment have had and will continue to have an
impact on the manufacturing operations of the Automotive Business. Compliance
with environmental requirements and resolution of environmental claims have been
accomplished without material effect on the Automotive Business's liquidity and
capital resources, competitive position or financial statements.
The Automotive Business has been designated as a potentially responsible
party at three Superfund sites, excluding sites as to which the Automotive
Business's records disclose no involvement or as to which the Automotive
Business's potential liability has been finally determined. Management estimates
the total reasonably possible costs the Automotive Business could incur for the
remediation of Superfund sites at September 30, 1996 to be about $22 million, of
which $13 million has been accrued.
Various other lawsuits, claims, and proceedings have been asserted against
the Automotive Business alleging violations of federal, state and local
environmental protection requirements, or seeking remediation of alleged
environmental impairments, principally at previously disposed of properties. For
these matters, management has estimated the total reasonably possible costs the
Automotive Business could incur at September 30, 1996 to be about $36 million.
The Automotive Business has recorded environmental accruals for these matters of
$11 million.
At September 30, 1996, the Automotive Business had no receivables recorded
from third parties related to environmental matters.
Based on its assessment, management believes that the Automotive Business's
expenditures for environmental capital investment and remediation necessary to
comply with present regulations governing environmental protection and other
expenditures for the resolution of environmental claims will not have a material
adverse effect on the Company's liquidity and capital resources, competitive
position or financial statements. Management cannot assess the possible effect
of compliance with future requirements.
Various other lawsuits, claims and proceedings have been or may be
instituted or asserted against the Automotive Business relating to the conduct
of its business, including those pertaining to product liability, intellectual
property, safety and health and employment matters. Although the outcome of
litigation cannot be predicted with certainty and some lawsuits, claims, or
proceedings may be disposed of unfavorably to the Automotive Business,
management believes the disposition of matters which are pending or asserted
will not have a material adverse effect on the Automotive Business's financial
statements.
F-15
<PAGE> 90
AUTOMOTIVE BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
17. BUSINESS SEGMENT INFORMATION
The Automotive Business operates in one industry segment, the supply of
automotive components and systems, including:
HEAVY VEHICLE SYSTEMS -- Drivetrain systems and components, including
axles, brakes, transmissions, clutches and drivelines, for heavy-duty and
medium-duty trucks, trailers, off-highway equipment, buses and coaches, as
well as specialty and military vehicles.
LIGHT VEHICLE SYSTEMS -- Electromechanical and other components and
systems, including roof, door, access control and seat adjusting systems,
as well as suspension components and steel wheels, for passenger cars,
light trucks and sport utility vehicles.
Sales by Geographic Area
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
(MILLIONS)
<S> <C> <C> <C>
North America........................................ $1,487 $1,712 $1,758
Europe............................................... 832 1,042 1,094
South America........................................ 257 270 206
Asia-Pacific......................................... 77 101 86
------ ------ ------
Total Sales................................ $2,653 $3,125 $3,144
====== ====== ======
</TABLE>
In 1994, 1995 and 1996, there were sales to two original equipment
manufacturers that represented 10% or more of total Automotive Business sales.
Sales to these customers were ($ in millions): 1994 -- customer A $274 (10%) and
customer B $259 (10%); 1995 -- customer A $325 (10%) and customer B $313 (10%);
1996 -- customer A $230 (7%) and customer B $338 (11%).
Earnings by Geographic Area
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
(MILLIONS)
<S> <C> <C> <C>
North America............................................. $ 33 $ 74 $102
Europe.................................................... 53 81 73
South America............................................. 6 16 1
Asia-Pacific.............................................. (1) 7 6
---- ---- ----
Operating earnings before restructuring charge............ 91 178 182
Restructuring charge...................................... -- -- (36)
---- ---- ----
Operating earnings........................................ 91 178 146
Other income - net........................................ 9 18 46
Interest expense.......................................... (12) (11) (10)
Provision for income taxes................................ (37) (62) (68)
---- ---- ----
Net income...................................... $ 51 $123 $114
==== ==== ====
</TABLE>
F-16
<PAGE> 91
AUTOMOTIVE BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Identifiable Assets by Geographic Area
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
(MILLIONS)
<S> <C> <C> <C>
North America........................................ $ 860 $ 912 $ 962
Europe............................................... 520 569 593
South America........................................ 175 209 188
Asia-Pacific......................................... 83 76 90
------ ------ ------
Total...................................... $1,638 $1,766 $1,833
====== ====== ======
</TABLE>
18. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
1996 FISCAL QUARTERS
-------------------------------
FIRST SECOND THIRD FOURTH 1996
----- ------ ----- ------ ------
(MILLIONS)
<S> <C> <C> <C> <C> <C>
Sales...................................................... $ 756 $837 $ 804 $747 $3,144
Cost of sales.............................................. 675 724 699 649 2,747
Net income................................................. 22 43 29 20 114
</TABLE>
<TABLE>
<CAPTION>
1995 FISCAL QUARTERS
-------------------------------
FIRST SECOND THIRD FOURTH 1995
----- ------ ----- ------ ------
(MILLIONS)
<S> <C> <C> <C> <C> <C>
Sales...................................................... $ 727 $814 $ 836 $748 $3,125
Cost of sales.............................................. 636 708 735 665 2,744
Net income................................................. 28 34 34 27 123
</TABLE>
Fourth quarter 1996 net income was reduced by a $30 million ($20 million
after-tax) charge related to restructuring, and increased by a $15 million ($9
million after-tax) insurance settlement.
Third quarter 1996 net income was reduced by a $6 million ($4 million
after-tax) charge related to restructuring.
Second quarter 1996 net income was increased by an $11 million ($8 million
after-tax) gain on the sale of a product line.
F-17
<PAGE> 92
INDEPENDENT AUDITORS' REPORT
To the Directors and Shareowners of
Rockwell International Corporation:
We have audited the combined financial statements of the Automotive
Business of Rockwell International Corporation (Rockwell) as of September 30,
1996 and 1995, and for each of the three years in the period ended September 30,
1996, and have issued our report thereon dated June 10, 1997; such report is
included elsewhere in this Form 10. Our audits also included the combined
financial statement schedule of the Automotive Business of Rockwell
International Corporation, listed in the Index to Financial Statements and
Schedule at page F-1. This financial statement schedule is the responsibility of
Rockwell's management. Our responsibility is to express an opinion on this
schedule based on our audits. In our opinion, such combined financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
June 10, 1997
F-18
<PAGE> 93
SCHEDULE II
AUTOMOTIVE BUSINESS
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF YEAR(A) EXPENSES DEDUCTIONS YEAR(A)
- ----------------------------------------------- ----------- ---------- ---------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Year ended September 30, 1996:
Allowance for doubtful accounts.............. $10.1 $ 10.5 $ 3.7(b) $ 16.9
Year ended September 30, 1995:
Allowance for doubtful accounts.............. 9.6 1.7 1.2(b) 10.1
Year ended September 30, 1994:
Allowance for doubtful accounts.............. 8.6 1.9 0.9(b) 9.6
</TABLE>
- ---------------
(a) Includes allowances for trade and other long-term receivables.
(b) Uncollectible accounts written off.
F-19
<PAGE> 94
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of 111 Holdings, Inc.:
We have audited the accompanying balance sheet of 111 Holdings, Inc. (a
wholly-owned subsidiary of Rockwell International Corporation) as of June 10,
1997. This balance sheet is the responsibility of the Company's management. Our
responsibility is to express an opinion on this balance sheet based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, such balance sheet presents fairly, in all material
respects, the financial position of 111 Holdings, Inc. (a wholly-owned
subsidiary of Rockwell International Corporation) as of June 10, 1997 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
June 10, 1997
F-20
<PAGE> 95
111 HOLDINGS, INC.
BALANCE SHEET
JUNE 10, 1997
<TABLE>
<S> <C>
Stockholder's Equity:
Common stock, $1.00 par value, 1,000 shares authorized;
1 share issued and outstanding................................................... $ 1
Additional paid-in capital......................................................... 999
Receivable from Rockwell International Corporation................................. (1,000)
-------
Stockholder's Equity............................................................... $ --
=======
</TABLE>
NOTE TO BALANCE SHEET
BASIS OF PRESENTATION
The balance sheet of 111 Holdings, Inc. (111 Holdings) consists of the
accounts of an inactive wholly-owned subsidiary of Rockwell International
Corporation (Rockwell). 111 Holdings was incorporated in Delaware on May 5, 1997
in anticipation of a proposed spin-off of Rockwell's automotive businesses
(Automotive Business). The spin-off, which is expected to be completed by
September 30, 1997, will result in the transfer to 111 Holdings of the assets
and liabilities of the Automotive Business. 111 Holdings will be renamed and the
shares of 111 Holdings common stock (including the associated rights) will be
distributed in a tax-free spin-off, with each Rockwell shareowner receiving one
share of 111 Holdings common stock (including the associated right) for every
three shares of Rockwell common stock owned.
F-21
<PAGE> 96
PART II
INFORMATION NOT INCLUDED IN INFORMATION STATEMENT
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- ----------------------------------------------------------------------------------
<C> <C> <S>
2 -- Form of Distribution Agreement
3.1 -- Certificate of Incorporation of the Company
3.2 -- By-Laws of the Company
4.1 -- Form of Restated Certificate of Incorporation of the Company
4.2 -- Form of Amended By-Laws of the Company
*4.3 -- Specimen certificate for Company Common Stock, par value $1 per share
4.4 -- Form of Rights Agreement by and between the Company and the rights agent named
therein
*10.1 -- Form of Company's 1997 Long-Term Incentives Plan
*10.2 -- Form of Company's Directors Stock Plan
10.3 -- Form of Employee Matters Agreement
*10.4 -- Form of Tax Allocation Agreement
*10.5 -- Form of Credit Agreement
27 -- Financial Data Schedule (for Commission use only)
</TABLE>
- ---------------
* To be filed by amendment
II-1
<PAGE> 97
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, as amended, the registrant has duly caused this registration statement
to be signed on its behalf by the undersigned, thereunto duly authorized.
111 HOLDINGS, INC.
By: /s/ THOMAS A. MADDEN
------------------------------------
Name: Thomas A. Madden
Title: Senior Vice President and
Chief Financial Officer
Date: June 13, 1997
II-2
<PAGE> 98
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
- ------- ----------------------------------------------------------------------------- ----
<C> <C> <S> <C>
2 -- Form of Distribution Agreement...............................................
3.1 -- Certificate of Incorporation of the Company..................................
3.2 -- By-Laws of the Company.......................................................
4.1 -- Form of Restated Certificate of Incorporation of the Company.................
4.2 -- Form of Amended By-Laws of the Company.......................................
*4.3 -- Specimen certificate for Company Common Stock, par value $1 per share........
4.4 -- Form of Rights Agreement by and between the Company and the rights agent
named therein................................................................
*10.1 -- Form of Company's 1997 Long-Term Incentives Plan.............................
*10.2 -- Form of Company's Directors Stock Plan.......................................
10.3 -- Form of Employee Matters Agreement...........................................
*10.4 -- Form of Tax Allocation Agreement.............................................
*10.5 -- Form of Credit Agreement.....................................................
27 -- Financial Data Schedule......................................................
</TABLE>
- ---------------
* To be filed by amendment
<PAGE> 1
Exhibit 2
- --------------------------------------------------------------------------------
DISTRIBUTION AGREEMENT
by and between
ROCKWELL INTERNATIONAL CORPORATION
and
[111 HOLDINGS, INC.]
- --------------------------------------------------------------------------------
[ ], 1997
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS..........................................................1
Section 1.01 General.................................................1
ARTICLE II THE DISTRIBUTION...................................................16
Section 2.01 The Distribution.......................................16
Section 2.02 Fractional Shares......................................17
Section 2.03 Cooperation Prior to the
Distribution........................................17
Section 2.04 Rockwell Board Action; Conditions to
the Distribution....................................18
Section 2.05 Waiver of Conditions...................................20
Section 2.06 Disclosure.............................................20
ARTICLE III TRANSACTIONS RELATING TO THE DISTRIBUTION.........................20
Section 3.01 Intercorporate Reorganization..........................20
Section 3.02 Rockwell Group Obligations Relating
to the Automotive Business..........................23
Section 3.03 Intercompany Accounts and
Arrangements........................................24
Section 3.04 Cash Management........................................28
Section 3.05 The Automotive Board...................................28
Section 3.06 Resignations; Transfer of Stock Held
as Nominee..........................................28
Section 3.07 Automotive Certificate of
Incorporation and By-Laws; Rights Plan..............29
Section 3.08 Insurance..............................................30
Section 3.09 Use of Names, Trademarks, etc..........................33
Section 3.10 Consents...............................................36
Section 3.11 Cross-License of Intellectual Property.................37
ARTICLE IV MUTUAL RELEASE; INDEMNIFICATION....................................39
Section 4.01 Mutual Release.........................................39
Section 4.02 Indemnification by Rockwell............................40
Section 4.03 Indemnification by Automotive..........................41
Section 4.04 Limitations on Indemnification
Obligations.........................................42
Section 4.05 Procedures Relating to
Indemnification.....................................44
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 4.06 Remedies Cumulative....................................47
Section 4.07 Survival of Indemnities................................47
Section 4.08 Exclusivity of Tax Allocation
Agreement...........................................47
ARTICLE V ACCESS TO INFORMATION...............................................48
Section 5.01 Access to Information..................................48
Section 5.02 Production of Witnesses................................49
Section 5.03 Retention of Records...................................50
Section 5.04 Confidentiality........................................50
ARTICLE VI MISCELLANEOUS......................................................51
Section 6.01 Entire Agreement; Construction.........................51
Section 6.02 Survival of Agreements.................................52
Section 6.03 Expenses...............................................52
Section 6.04 Governing Law..........................................52
Section 6.05 Notices................................................53
Section 6.06 Consent to Jurisdiction................................54
Section 6.07 Amendments.............................................55
Section 6.08 Assignment.............................................55
Section 6.09 Captions; Currency.....................................55
Section 6.10 Severability...........................................55
Section 6.11 Parties in Interest....................................56
Section 6.12 Schedules..............................................56
Section 6.13 Termination............................................56
Section 6.14 Waivers; Remedies......................................56
Section 6.15 Counterparts...........................................57
Section 6.16 Performance............................................57
</TABLE>
ANNEXES
Annex A - Employee Matters Agreement
Annex B - Tax Allocation Agreement
SCHEDULES
<TABLE>
<CAPTION>
<S> <C>
Schedule 1.1(a) - Automotive Former Businesses
Schedule 1.1(b) - Automotive Financial Instruments
Schedule 1.1(c) - Automotive Subsidiaries
Schedule 1.1(d) - Automotive By-Laws
Schedule 1.1(e) - Automotive Certificate of Incorporation
Schedule 1.1(f) - Shared Agreements
Schedule 3.1(c) - Reorganization Transactions
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
Schedule 3.3(b)(ii) - Intercompany Agreements
Schedule 3.4 - Automotive Bank Accounts
Schedule 3.6 - Continuing Directors and Officers
Schedule 4.1 - Exceptions to Release
Schedule 4.2 - Certain Form 10 Sections
</TABLE>
iii
<PAGE> 5
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT (this "Agreement"), dated as of
_________, 1997, by and between ROCKWELL INTERNATIONAL CORPORATION, a Delaware
corporation ("Rockwell"), and [111 HOLDINGS, INC.], a Delaware corporation and,
as of the date hereof, a wholly-owned subsidiary of Rockwell ("Automotive").
WHEREAS, the Rockwell Board (as defined herein) has determined
that it is appropriate and desirable to distribute all outstanding shares of
Automotive Common Stock (as defined herein) on a pro rata basis to the holders
of Rockwell Common Stock (as defined herein); and
WHEREAS, Rockwell and Automotive 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
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 may be asserted by or against, or otherwise affect, such Person.
"Affiliate" means, with respect to any specified Person, any
other Person that directly, or
<PAGE> 6
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.
"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 leases), land,
plants, buildings and improvements;
(ii) machinery, equipment, tooling, vehicles, furniture
and fixtures, leasehold improvements, repair parts, tools, plant,
laboratory and office equipment and 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;
2
<PAGE> 7
(iii) inventories, including 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;
(vii) (A) inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents (including 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
3
<PAGE> 8
slogans and registrations and applications for registration thereof,
worldwide; (C) copyrights in copyrightable works, and all other rights
of authorship, worldwide, and all applications, registrations and
renewals in connection therewith; (D) mask works and semiconductor chip
rights, worldwide, and all applications, registrations and renewals in
connection therewith; (E) trade secrets and confidential business and
technical information (including 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); (F) computer and
electronic data processing programs and software, both source code and
object code (including 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 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.
4
<PAGE> 9
"Assigning Party" shall have the meaning ascribed thereto in
Section 3.10.
"Assumed Rockwell Liabilities" means Liabilities of the
Automotive Group as of the Time of Distribution which do not constitute
Automotive Liabilities and which relate to or arise in connection with any
business of Rockwell and the Rockwell Subsidiaries other than the Automotive
Business.
"Automotive" shall have the meaning ascribed thereto in the
preamble.
"Automotive 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 Automotive Group) and which are used
primarily in or relate primarily to the Automotive Business, as the same shall
exist as of such time, including, without limitation, all assets reflected in
the Automotive Balance Sheet, as such assets may have been added to or sold or
otherwise changed since the date thereof. Anything contained herein to the
contrary notwithstanding, Rockwell Retained Assets shall not be included in
Automotive Assets.
"Automotive Balance Sheet" means the balance sheet of the
Automotive Business as of [March 31, 1997] contained in the Form 10.
"Automotive Board" means the Board of Directors of Automotive.
"Automotive 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, manufacturing, selling, distributing,
installing, modifying, repairing, servicing and supporting drivetrain systems
and components for heavy-duty and medium-duty trucks, trailers, buses, coaches,
off-highway equipment, specialty vehicles and military vehicles (including,
without limitation, axles, brakes, braking systems, transmissions, suspension
systems, clutches, drivelines and Tripmaster(R) vehicle on-board computers),
(ii) the business engaged in at all times prior to the Time of Distribution by
the Pre-Distribution Group of researching, developing, designing,
5
<PAGE> 10
manufacturing, selling, distributing, installing, modifying, repairing,
servicing and supporting systems and components for passenger cars, light-,
medium and heavy-duty trucks and sport utility vehicles, including, without
limitation, roof, door, access control and seat adjusting systems, suspension
products and steel wheels, (iii) Former Businesses managed or operated with any
of the foregoing or operationally or otherwise related to any of the foregoing,
including, without limitation, the Former Businesses listed on Schedule 1.1(a)
and (iv) activities related to any of the foregoing. Notwithstanding anything to
the contrary contained herein, the Automotive Business shall not include the
business previously and/or currently engaged in by the Pre-Distribution Group of
researching, developing, designing, manufacturing, selling, distributing,
installing, modifying, repairing, servicing and supporting automobile global
positioning systems and activities related thereto.
"Automotive Common Stock" means, collectively, the Common
Stock, par value $1.00 per share, of Automotive and the related Rights.
"Automotive Financial Instruments" means all credit
facilities, guaranties, foreign currency forward exchange contracts, comfort
letters, letters of credit and similar instruments related to the Automotive
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 Schedule 1.1(b).
"Automotive Group" means Automotive and the Automotive
Subsidiaries.
"Automotive Indemnitees" means Automotive, each Affiliate of
Automotive, including the Automotive Subsidiaries, each of their respective
Representatives and each of the heirs, executors, successors and assigns of any
of the foregoing.
"Automotive Liabilities" means all of (i) the Liabilities of
any member of the Automotive Group under any Transaction Agreement to which it
is or becomes a party and (ii) the Liabilities based upon, arising out of,
relating to or otherwise in connection with the
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Automotive Assets or the Automotive 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 Automotive 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 Automotive Business, (C) all Liabilities in
respect of workers' compensation, automobile, general liability, products
liability and other claims and matters relating to the Automotive Business, (D)
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 Automotive Business (including claims for
medical and disability benefits), (E) all Liabilities for environmental matters
based upon, arising out of, relating to or otherwise in connection with the
Automotive Business, including, without limitation, Liabilities in respect of
any facility to the extent relating to the Automotive Business presently or
formerly owned or operated by any member of the Pre-Distribution Group and (F)
all Liabilities based upon, arising out of, relating to or otherwise in
connection with Contracts related to the Automotive 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.
"Automotive Subsidiary" means each Person listed on Schedule
1.1(c) which is a direct or indirect Subsidiary of Automotive as of the Time of
Distribution.
"BNA" means Boeing North American, Inc., a Delaware
corporation formerly named Rockwell International Corporation.
"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.
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"By-Laws" means Automotive's by-laws substantially in the form
attached hereto as Schedule 1.1(d).
"Certificate of Incorporation" means Automotive's certificate
of incorporation substantially in the form attached hereto as Schedule 1.1(e).
"Claims Administration" means the processing of claims made
under the Policies, including 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).
"Code" means the Internal Revenue Code of 1986, as amended, or
any successor legislation.
"Commission" means the Securities and Exchange Commission.
"Consents" means consents, waivers, approvals, allowances,
novations, authorizations, filings, registrations and notifications.
"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,
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.
"Distribution" means the distribution, on the basis provided
for in Section 2.01, to holders of Rockwell Common Stock of the shares of
Automotive Common Stock owned by Rockwell on the Distribution Date.
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"Distribution Agent" means the distribution agent selected by
Rockwell to distribute the Automotive 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 Automotive, 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
Automotive with the Commission to effect the registration of the Automotive
Common Stock pursuant to the Exchange Act, including all amendments thereto
filed by Automotive with the Commission prior to the Time of Distribution.
"Former Business" means any corporation, division, business
unit, business, assets, plants, product line, operations or contract (including
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 or production of
which has been discontinued, 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 Automotive Group.
"Indemnifiable Losses" means, subject to Section 4.04, any and
all losses, Liabilities, claims, 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
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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
Automotive 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 Automotive 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.
"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
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or however arising (including, without limitation, whether 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 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.
"Lien" means any lien, security interest, pledge, mortgage,
charge, restriction, claim, retention of title agreement or other encumbrance of
whatever nature.
"No-action Letter" means a letter from the staff of the
Commission indicating, among other things, that the Division of Corporation
Finance will not recommend enforcement action to the Commission if the
Distribution is effected without registration of the Automotive Common Stock
under the Securities Act of 1933, as amended.
"NYSE" means the New York Stock Exchange, Inc.
"Occurrence Basis Policies" shall have the meaning ascribed
thereto in Section 3.08(a).
"Ordinary Course Intercompany Arrangements" shall have the
meaning ascribed thereto in Section 3.03(c)(ii).
"Person" means any individual, partnership, joint venture,
corporation, limited liability entity, trust, unincorporated organization or
other entity (including a Governmental Entity).
"Policies" means all insurance policies and insurance
contracts of any kind of the Pre-Distribution
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Group which include Automotive, the Automotive Subsidiaries and/or the
Automotive Business within the definition of the named insured and which was or
is 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. Notwithstanding the above, Policies will not include
insurance policies of joint ventures of the Automotive Business with respect to
which Rockwell is not a named insured or Rockwell's political risk insurance
policy with National Union covering the Automotive Business' Ege Fren Sanayii ve
Ticaret A.S. joint venture in Turkey.
"Pre-Distribution Group" means (i) each of Rockwell,
Subsidiaries of Rockwell existing immediately prior to the Time of Distribution
(including members of the Automotive Group) and 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.
"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.
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"Representative" means, with respect to any Person, any of
such Person's directors, officers, employees, agents, consultants, advisors,
accountants, attorneys and representatives.
"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 Automotive and First Chicago Trust
Company of New York, 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 Automotive
Group), other than the Automotive 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 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 Automotive 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.
"Rockwell Retained Assets" means the following:
(i) all cash, cash on hand, cash in transit, cash
equivalents, funds, certificates of deposit, similar instruments and
short-term investments held by Rockwell and its Subsidiaries and
Affiliates
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(other than members of the Automotive Group and joint ventures of the
Automotive Business) at the Time of Distribution;
(ii) all bank accounts of Rockwell and its Subsidiaries
and Affiliates (including members of the Automotive Group) and cash
contained therein, other than those listed in Schedule 3.4;
(iii) 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);
(iv) 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);
(v) all assets with respect to pension plans of
Rockwell and its Subsidiaries (including members of the Automotive
Group), other than as provided for in the Employee Matters Agreement;
(vi) all Shared Agreements (subject to the provisions
of Section 3.02(c));
(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 Automotive Business (whether
or not the same or similar services are provided to the Automotive
Business);
(viii) all refunds of Taxes, or recoveries of Taxes
from customers or other parties required by contract or otherwise to
indemnify Rockwell or its Subsidiaries or other Affiliates (including
members of the Automotive Group) for Taxes, attributable to payments of
Taxes made prior to the Time of Distribution, whether or not any refund
claims have been filed prior to the Time of Distribution; and
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(ix) all rights, causes of action and claims arising
out of any asset described in clauses (i) through (viii) above.
"Rockwell Subsidiary" means any Subsidiary of Rockwell other
than Automotive or any Automotive Subsidiary.
"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 the
Automotive Business, as well as other businesses of Rockwell or any Rockwell
Subsidiary (other than the Automotive Business), which by their terms will be
outstanding or in effect as of or at any time following the Time of
Distribution, including, without limitation, those set forth in 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 Automotive nor any Automotive Subsidiary shall be deemed
to be a Rockwell Subsidiary (as defined herein).
"Tax" shall have the meaning ascribed thereto in the Tax
Allocation Agreement.
"Tax Allocation Agreement" means the Tax Allocation Agreement
between Rockwell and Automotive, 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.
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"Third Party Claim" shall have the meaning ascribed thereto in
Section 4.05(a).
"Time of Distribution" means the close of business on the
Distribution Date.
"Transaction Agreements" means, collectively, this Agreement
and each Ancillary Agreement.
"Transition Agreement" means a transition services agreement
between Rockwell and Automotive which will be entered into on or prior to the
Distribution Date and will provide for various service and other relationships
between Rockwell and Automotive following the Distribution Date.
ARTICLE II
THE DISTRIBUTION
Section 2.01 The Distribution.
(a) Subject to Section 2.04, 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 Automotive
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 three, and Rockwell will instruct the Distribution Agent to make
book-entry credits on the Distribution Date or as soon thereafter as 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, or to distribute on the
Distribution Date or as soon thereafter as practicable to each such holder of
record or designated transferee or transferees a certificate or certificates
representing, one share of Automotive Common Stock for every three shares of
Rockwell Common Stock so held. The Distribution will be effective as of the Time
of Distribution.
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(b) Rockwell and Automotive will each provide to the
Distribution Agent all information (including 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
Automotive Common Stock for every three shares of Rockwell Common Stock
outstanding as of the Record Date.
Section 2.02 Fractional Shares. Anything contained herein to
the contrary notwithstanding, no fractional shares of Automotive 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
Automotive 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
Automotive 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 determining the fractional share
allocable to such beneficial owner.
Section 2.03 Cooperation Prior to the Distribution. Prior to
the Distribution:
(a) Rockwell and Automotive will prepare, and Rockwell will
mail, promptly after effectiveness of the Form 10, to the holders of Rockwell
Common Stock, the Information Statement, which will set forth appropriate
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disclosure concerning Automotive, the Distribution and such other matters as
Rockwell and Automotive may determine. Rockwell and Automotive will prepare, and
Automotive will file with the Commission, the Form 10, which will include or
incorporate by reference the Information Statement. Automotive 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 Automotive 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 Automotive 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 Automotive will cause to be prepared, and
Automotive will file and use its reasonable best efforts to have approved, an
application for the listing on the NYSE of the Automotive Common Stock to be
distributed in the Distribution.
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;
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(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 been declared effective by the
Commission;
(e) the Certificate of Incorporation, the By-Laws and the
Rights Plan shall each have been adopted and be in effect;
(f) the Automotive Common Stock shall have been approved for
listing upon notice of issuance on the NYSE;
(g) the transactions contemplated by Section 3.01 and Section
3.02 shall have been consummated in all material respects;
(h) Rockwell and Automotive 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
(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.
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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; provided, however, that the condition set
forth in paragraph (a) of Section 2.04 will not be waived unless the Rockwell
Board determines in its sole discretion, based on an opinion of nationally
recognized tax counsel, that the Distribution will qualify as a tax-free
spin-off to the Rockwell's U.S. shareowners for federal income tax purposes
under Section 368(a)(1)(D) of the Code.
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 Automotive
will take all actions necessary to increase the outstanding shares of Automotive
Common Stock so that, immediately prior to the Distribution, Rockwell will hold
a number of shares of Automotive 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 three.
(b) Subject to Section 3.10, prior to the Time of
Distribution, Rockwell and Automotive will take, or cause to be taken, all
actions necessary, including, without limitation, the actions specified in
Section 3.01(c), to:
(i) have Rockwell and each Rockwell Subsidiary assign
and transfer, or cause to be assigned and transferred, to Automotive or
an Automotive Subsidiary, as appropriate, any and all right, title and
interest of Rockwell and each of
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the Rockwell Subsidiaries in the Automotive Subsidiaries;
(ii) have Rockwell and each Rockwell Subsidiary assign
and transfer, or cause to be assigned and transferred, to Automotive or
an Automotive Subsidiary, as appropriate, any and all right, title and
interest of Rockwell and each of the Rockwell Subsidiaries in the
Automotive Assets;
(iii) have Automotive and each Automotive Subsidiary
assign and transfer, or cause to be assigned and transferred, to
Rockwell or a Rockwell Subsidiary, as appropriate, any and all right,
title and interest of Automotive and each of the Automotive
Subsidiaries in all of their Assets (including, without limitation, all
Rockwell Retained Assets) which do not constitute Automotive Assets;
(iv) have Rockwell and each Rockwell Subsidiary assign
and transfer, or cause to be assigned and transferred, to Automotive or
an Automotive Subsidiary, as appropriate, and have Automotive or an
Automotive 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 Automotive Liabilities;
and
(v) have Automotive and each Automotive 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) any party (or any member of such
party's respective Group) shall receive or otherwise possess any Asset that 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
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will hold such Asset in trust for the benefit of the Person entitled thereto (at
the expense of the Person entitled thereto).
(c) Subject to Section 3.10, prior to the Time of
Distribution, Rockwell and Automotive 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 Automotive 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 Automotive 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 Automotive (on behalf of itself and each member of the
Automotive 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
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 and 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
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<PAGE> 27
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 Automotive 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
Automotive Business.
(a) Automotive 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 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 Automotive Financial Instruments (it being understood
that all Liabilities in respect of Automotive Financial Instruments are
Automotive Liabilities).
(b) Automotive 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,
contingent,
23
<PAGE> 28
secondary, joint, several and other Liabilities in respect of bonds,
indemnities, assurances and Contracts (other than Automotive Financial
Instruments, which are covered by paragraph (a) above, and Shared Agreements,
which are covered by paragraph (c) below) under which any member of the Rockwell
Group has any primary, contingent, secondary, joint, several or other Liability
arising out of or relating to the Automotive 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 Automotive 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
Automotive Liabilities).
(c) Automotive 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 Automotive Business under Shared Agreements; provided, however,
that Automotive 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 Automotive Business are Automotive
Liabilities). No member of the Automotive Group will incur any Liabilities under
any Shared Agreement or extend or otherwise amend any Shared Agreement after the
Time of Distribution.
(d) Automotive's obligations under this Section 3.02 will
continue to be applicable to all Automotive Financial Instruments, bonds,
indemnities, assurances, Contracts and Shared Agreements identified at any time
by Rockwell, whether before, or after the Time of Distribution.
Section 3.03 Intercompany Accounts and Arrangements.
(a) Elimination of Intercompany Accounts. The parties will
take all action as may be necessary in order to settle or eliminate (whether
through repayment,
24
<PAGE> 29
forgiveness, contributions to capital or otherwise) as of the Time of
Distribution all intercompany receivables, payables and other balances between
Automotive and the Automotive Subsidiaries, on the one hand, and Rockwell and
the Rockwell Subsidiaries, on the other hand (after giving effect to the
transactions contemplated by Section 3.01).
(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,
Automotive, on behalf of itself and each other member of the Automotive
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 Automotive and/or any Automotive Subsidiary, on the
one hand, and Rockwell and/or any Rockwell Subsidiary, on the other
hand, effective as of the Time of Distribution. No such terminated
agreement, arrangement, commitment or understanding (including 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 any of the parties hereto or any of the members of
their respective Groups); (B) any agreements, arrangements, commitments
or understandings listed or described on Schedule 3.3(b)(ii); (C) any
agreements, arrangements, commitments or understandings to which any
Person other than the parties hereto and their respective Affiliates is
a party; (D) any other agreements, arrangements, commitments or
understandings that any of the Transaction Agreements expressly
contemplates will survive the Time of Distribution; and (E) any
agreements, arrangements, commitments or understandings between
25
<PAGE> 30
Automotive or any Automotive Subsidiary, on the one hand, and Rockwell
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 Automotive
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-length terms of a type to
which unaffiliated parties would reasonably agree.
Section 3.04 Cash Management.
(a) Bank Accounts. Notwithstanding anything to the contrary
contained in the Transaction Agreements, all bank accounts set forth on Schedule
3.4 will constitute Automotive Assets and all other bank accounts of Rockwell
and its Subsidiaries (including members of the Automotive Group) will not
constitute Automotive Assets.
(b) Cash Balances. The parties (i) estimate that cash in bank
accounts set forth on Schedule 3.4 at the Time of Distribution and cash in
transit, cash on hand, cash equivalents, funds, certificates of deposit, similar
instruments and short-term investments held by members of the Automotive Group
at the Time of Distribution will collectively total approximately $35,000,000
and (ii) contemplate that in order to satisfy certain obligations of the
Automotive Group in connection with transactions preceding the Distribution, an
additional amount equal to $60,000,000 will be deposited in a bank account of an
Automotive Canadian Subsidiary at the Time of Distribution or invested in
short-term investments of an Automotive Canadian Subsidiary at the Time of
Distribution.
(c) Rockwell Customer Payments. Automotive will, and will
cause its Subsidiaries and Affiliates to,
26
<PAGE> 31
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 Automotive 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.
(d) Automotive Customer Payments. Rockwell will, and will
cause its Subsidiaries and Affiliates to, forward promptly to Automotive (for
the account of Automotive or its applicable Subsidiary) any customer payments in
respect of accounts receivable owed to any member of the Automotive 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 Automotive will
be liable for payment of checks relating to the Automotive Business
that are outstanding as of the Time of Distribution and Rockwell or a
Rockwell Subsidiary will be liable for payment of checks relating to
businesses of Rockwell and the Rockwell Subsidiaries other than the
Automotive Business that are outstanding as of the Time of
Distribution.
(ii) Automotive 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 included in Automotive Assets. Within three
business days after Automotive's request, Rockwell will reimburse
Automotive (by wire transfer) for all such amounts funded by Automotive
in respect of checks relating to businesses of
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<PAGE> 32
Rockwell and the Rockwell Subsidiaries other than the Automotive
Business 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 included in the Automotive Assets. No checks
relating to any businesses of the Rockwell Group (as constituted after
the Time of Distribution) will be issued on any accounts that
constitute Automotive Assets after the Time of Distribution.
(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 its disbursement or payroll accounts that are not included in the
Automotive Assets. Within three business days after Rockwell's request,
Automotive will reimburse Rockwell (by wire transfer to Rockwell's bank
account at Mellon Bank, N.A., Pittsburgh, Pennsylvania, account number
102-3474) for all such amounts funded by Rockwell or a Rockwell
Subsidiary in respect of checks relating to the Automotive Business
that are outstanding as of the Time of Distribution and presented for
payment after the Time of Distribution in its disbursement or payroll
accounts that are not included in the Automotive Assets. No checks
relating to the Automotive Business will be issued on any accounts of
Rockwell or any Rockwell Subsidiary that do not constitute Automotive
Assets after the Time of Distribution (other than checks relating to
payroll payments to the extent expressly permitted by the Transition
Agreement).
Section 3.05 The Automotive Board. Automotive and Rockwell will take
all actions which may be required to elect or otherwise appoint as directors of
Automotive, prior to the Time of Distribution, the persons named in the Form 10
to constitute the board of directors of Automotive 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
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<PAGE> 33
later than the Time of Distribution, from all boards of directors or
similar governing bodies of Automotive or any other member of the Automotive
Group on which they serve, and from all positions as officers of Automotive or
any other member of the Automotive Group in which they serve, except as
otherwise specified on Schedule 3.6. Automotive will cause all of its employees
and directors and all of the employees and directors of each other member of the
Automotive 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 Rockwell Group, who holds stock, or
similar evidence of ownership, of any Automotive 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 Automotive to be such nominee as of and after the Time of
Distribution. Automotive will cause each of its employees, and each of the
employees of the other members of the Automotive 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 Automotive Group entity as an
agent or representative therefor after the Time of Distribution. Automotive will
cause each of its employees and each of the employees of the other members of
the Automotive 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 Automotive Certificate of Incorporation and By-Laws;
Rights Plan. Prior to the
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<PAGE> 34
Time of Distribution, (a) the Automotive 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 Automotive, will approve the Certificate of Incorporation. Prior
to the Time of Distribution, the Automotive Board will adopt the Rights Plan and
declare a dividend of the Rights so that each share of Automotive 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 Automotive and the Automotive Subsidiaries
under all Policies shall cease as of the Time of Distribution. From and after
the Time of Distribution, Automotive and the Automotive Subsidiaries will be
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).
Automotive and the Automotive Subsidiaries will have no rights with respect to
any Policies, except that (i) Automotive will have the right to assert claims
(and Rockwell will use reasonable efforts to assist Automotive in asserting
claims) for any loss, liability or damage with respect to Automotive Assets
under Policies which are third-party "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) Automotive 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 efforts to assist
Automotive in connection therewith) under Policies which are third-party
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
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<PAGE> 35
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 Automotive, (B) Rockwell and the Rockwell Subsidiaries may, at
any time, without liability or obligation to Automotive or any Automotive
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 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
efforts to assist Automotive in asserting claims under Occurrence Basis Policies
will include using reasonable efforts in assisting Automotive 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 Automotive).
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 Automotive and the Automotive 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 Automotive has rights to assert claims pursuant to Section
3.08(a), (i) Rockwell will give Automotive prior notice thereof and consult with
Automotive 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 Automotive its equitable share (based on the amount of
premiums paid by or allocated to the Automotive Business in respect of the
applicable Policy) of any net
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<PAGE> 36
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
(ii) Automotive or an Automotive Subsidiary, as
appropriate, will be responsible for the Claims Administration
with respect to the claims of Automotive and the Automotive
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 Automotive will upon receipt of evidence thereof,
forthwith reimburse Rockwell for that portion of such premiums paid by Rockwell
as are attributable to the Automotive 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 or a Rockwell Subsidiary, on the one hand, and
Automotive or a Automotive Subsidiary, on the other hand, relating to the same
occurrence, Rockwell and Automotive 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(d) will be construed to limit or otherwise alter in any way
the indemnity obligations of the parties to this Agreement, including 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
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<PAGE> 37
will become effective as of the Time of Distribution directors and/or officers
of Automotive or any Automotive 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 will
have all rights in and use of the names "Rockwell" and "Rockwell International"
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), Automotive 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 Automotive 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 not constituting Automotive 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 Automotive Group will not hold
itself out as having any affiliation with the Rockwell Group. However,
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<PAGE> 38
Automotive may, and may permit the other members of the Automotive Group to,
utilize without obligation to pay royalties to Rockwell the trademarks or trade
names "Rockwell" or "Rockwell International" or any corporate symbol or logo
related thereto or any thereof in connection with stationery, supplies, labels,
catalogs, vehicles and signs constituting Automotive Assets, and products of the
Automotive Business, after the Distribution Date, subject to the terms and
conditions of this Section 3.09(b):
(i) All documents constituting Automotive 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:
<TABLE>
<CAPTION>
Maximum Period
of Permitted Use
Following the
Category of Documents Distribution Date
--------------------- -----------------
<S> <C>
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;
</TABLE>
provided, however, that no document within any of the above
categories A, B or F may be used by the Automotive Group for any
purpose within the stated period unless such document clearly and
prominently displays a statement, the form of which is approved
by Rockwell, to the effect that the Automotive Group was formerly
affiliated with Rockwell.
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<PAGE> 39
(ii) All documents of the Automotive Business of
the type described in paragraph (i) above and displays and signs
of the type described in paragraph (iv) below may, for a period
of 10 years after the Distribution Date, contain a statement, the
form of which is approved by Rockwell, to the effect that the
Automotive Group was formerly affiliated with Rockwell.
(iii) All vehicles constituting Automotive
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. Automotive 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, Automotive will cause to be removed from
display at all facilities constituting Automotive Assets as of
the Time of Distribution 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 not constituting
Automotive Assets and Automotive 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 Automotive Business may have
applied thereto the trademarks or trade names "Rockwell" or
"Rockwell International" after the Distribution Date in the same
manner and to the same extent as applied at the Time of
Distribution.
(c) From and after the Distribution Date, the
Rockwell Group will not hold itself out as having an affiliation with the
Automotive Group. However, the Rockwell Group will have rights to use trademarks
or trade names or corporate symbols related thereto or any
35
<PAGE> 40
thereof constituting Automotive Assets in connection with stationery, supplies,
labels, catalogs, vehicles, signs and finished goods inventory not constituting
Automotive Assets as of the Time of Distribution 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 Automotive 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 Automotive 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 the other
party or parties thereto or other required Consent would constitute a breach
thereof or in any way impair the rights of any member of the Rockwell Group or
the Automotive 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
36
<PAGE> 41
timely manner and in accordance with the terms thereof. In addition, the
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 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 all the parties that no 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 as of the Time of Distribution, Rockwell,
on behalf of itself and the Rockwell Subsidiaries, in consideration for the
rights granted by Automotive and the Automotive Subsidiaries pursuant to Section
3.11(b), hereby grants to the Automotive Group a royalty-free, world-wide,
irrevocable, non-exclusive license, under all intellectual property rights
(including, without limitation, patents, patent applications, trade secrets,
copyrights or other similar industrial property rights, except for trademarks,
trade names, service marks, trade dress or any other form of trade identity)
which constitute Rockwell Assets and which are owned by the Rockwell Group or
under which the Rockwell Group has a right to license immediately after the Time
of Distribution and which are used in the conduct of the businesses of the
Automotive 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 businesses of the
37
<PAGE> 42
Automotive Group being conducted at the Time of Distribution; said non-exclusive
license being transferable only in connection with the sale of all or any part
of the Automotive Business to which such intellectual property rights relate. To
the extent that the Automotive Group does not have copies of any information or
materials relating to such intellectual property rights, Rockwell will, upon
reasonable request, supply to the Automotive Group copies of any such
information or materials relating to such intellectual property rights. Rockwell
makes no representations or warranties of any kind with respect to the validity,
scope or enforceability of any such intellectual property rights licensed
hereunder and 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 Automotive Group, promptly execute or cause a member of
the Rockwell Group promptly to execute such further documents as Automotive may
reasonably request as necessary or desirable to carry out the terms of this
Section 3.11(a). Notwithstanding anything contained herein to the contrary, this
Section 3.11(a) 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.
(b) Effective as of the Time of Distribution,
Automotive on behalf of itself and the Automotive Subsidiaries, in consideration
for the rights granted by Rockwell and the Rockwell Subsidiaries pursuant to
Section 3.11(a), hereby grants to the Rockwell Group a royalty-free, world-wide,
irrevocable, non-exclusive license, under all intellectual property rights
(including, without limitation, patents, patent applications, trade secrets,
copyrights or other similar industrial property rights, except for trademarks,
trade names, service marks, trade dress or any other form of trade identity)
which constitute Automotive Assets and which are owned by the Automotive Group
or under which the Automotive Group has a right to license immediately after the
Time of Distribution and which are used in the conduct of the businesses of the
Rockwell Group other than the Automotive Business at the Time of Distribution to
make, have made, use, import, sell or otherwise
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dispose of products, or to practice any process in connection therewith, in the
businesses of the Rockwell Group as conducted by the Rockwell Group at the Time
of Distribution; said non-exclusive license being transferable only 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
such intellectual property rights, Automotive will, upon reasonable request,
supply to the Rockwell Group copies of any such information or materials
relating to such intellectual property rights. Automotive makes no
representations or warranties of any kind with respect to the validity, scope or
enforceability of any such intellectual property rights licensed hereunder and
Automotive has no obligation to file or prosecute any patent applications or
maintain any patents in force in connection therewith. Automotive will, at no
cost to Rockwell, promptly execute or cause a member of the Automotive 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(b).
[Enforcement and sub-license provisions to be added]
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 Automotive, on
the other hand, on its own behalf and on behalf of each of its respective
Subsidiaries, releases and forever discharges the other and its Subsidiaries,
and its and their respective officers, directors, agents, Affiliates, record and
beneficial security holders (including, without limitation, trustees and
beneficiaries of trusts holding such securities), advisors and Representatives
(in their respective capacities as such) and their respective heirs, executors,
administrators, successors and assigns, of and from all debts, demands, actions,
causes of action, suits, accounts, covenants, contracts,
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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 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),
(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 be released with respect to such Liabilities by this Section 4.01 but for
the proviso to this clause (iii)) or (iv) any matter set forth on Schedule 4.1.
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 Automotive Indemnitees from and against, and pay or reimburse, as
the case may be, the Automotive Indemnitees for, all Indemnifiable Losses, as
incurred, suffered by any Automotive 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 Automotive Business) engaged
in at or prior to the Time of Distribution or Assets or Liabilities of Rockwell
or any Rockwell Subsidiary as of the Time of
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Distribution which are not Automotive Assets or Automotive Liabilities
(including, without limitation, the failure by Rockwell or any other member of
the Rockwell Group to pay, perform or otherwise discharge any 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 therein a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; but only in each case
with respect to information 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; or
(d) the enforcement by the Automotive Indemnitees of
their rights to be indemnified, defended and held harmless under this Agreement.
Section 4.03 Indemnification by Automotive. Except as
otherwise specifically provided in any Transaction Agreement and subject to the
provisions of this Article IV, Automotive and the Automotive 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 Automotive Business, the Automotive
Assets or the Automotive 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
Automotive
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Business, (ii) the failure by Automotive or any other member of
the Automotive Group to pay, perform or otherwise discharge
Automotive Liabilities in accordance with their terms and (iii)
any Liabilities relating to the Automotive Business for which
Rockwell has agreed to indemnify BNA and certain other Persons
pursuant to the Boeing Post-Closing Covenants 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 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
Automotive 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) any Action or other claim alleging that
any Liability was improperly allocated to the Automotive Group or
that any Asset was improperly withheld from the Automotive Group,
in each case pursuant to any of the Transaction Agreements; or
(e) the enforcement by the Rockwell
Indemnitees of their rights to be indemnified, defended and held
harmless under this Agreement.
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
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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 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 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,
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deduction or credit before recognizing any item arising from such Indemnifiable
Losses.
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 court papers) 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
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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 reasonable 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) 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,
without the Indemnitee's prior written consent, the Indemnifying Party will not
consent to any settlement,
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compromise or discharge of a Third Party Claim (including the consent to entry
of any judgment), and 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 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
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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.
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 Automotive 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.
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 indemnification in respect of Tax matters.
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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 Automotive and its Representatives (at Automotive'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
Automotive, any Automotive Subsidiary or the Automotive Business, insofar as
such access is reasonably required by Automotive or any Automotive Subsidiary,
subject to the provisions below regarding Privileged Information. Similarly,
from and after the Time of Distribution, Automotive will, and will cause each
Automotive 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
Automotive's possession or control or in the possession or control of an
Automotive Subsidiary relating to Rockwell, any Rockwell Subsidiary or the
businesses of the Pre-Distribution Group (other than the Automotive Business),
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
Automotive (and the members of the Rockwell Group and the Automotive Group,
respectively) has or may obtain Privileged Information; (ii) there are a number
of Actions affecting one or more of the members of the Rockwell Group and the
Automotive 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
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or the Automotive Group; and (iv) both Rockwell and Automotive 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 Automotive 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 Automotive 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 Automotive 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 Automotive 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 Automotive 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.
Section 5.02 Production of Witnesses. Subject to Section
5.01, after the Time of Distribution, each of Rockwell and Automotive will, and
will cause each member of the Rockwell Group and the Automotive Group,
respectively, to, make available to the other party and its Subsidiaries, upon
written request and at the cost
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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 Automotive 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 Automotive, 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 and Automotive 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
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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 Automotive 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, or on the part of the acquiror, known to
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 Automotive
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.
ARTICLE VI
MISCELLANEOUS
Section 6.01 Entire Agreement; Construction. This Agreement
and the 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
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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 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 Rockwell (other than the costs and
expenses of Automotive's credit facilities and costs and expenses to the extent
the same relate to operations of the Automotive Business subsequent to the Time
of Distribution, which will be charged to Automotive). Except as otherwise set
forth in any Transaction Agreement, all 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 the party for
whose benefit the expenses are incurred, with any 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
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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 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
2201 Seal Beach Boulevard
Seal Beach, California 90740-8250
Attention: Mr. W. Michael Barnes
Senior Vice President,
Finance and Planning and
Chief Financial Officer
Telecopy: (562) 797-5280
with a copy to:
Rockwell International Corporation
2201 Seal Beach Boulevard
Seal Beach, California 90740-8250
Attention: William J. Calise, Jr., Esq.
Senior Vice President,
General Counsel and
Secretary
Telecopy: (562) 797-5687
53
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(b) If to Automotive:
[111 Holdings, Inc.]
2135 West Maple Road
Troy, Michigan 48084-7186
Attention: Mr. Thomas A. Madden
Senior Vice President and
Chief Financial Officer
Telecopy: (248) 435-8397
with a copy to:
[111 Holdings, Inc.]
2135 West Maple Road
Troy, Michigan 48084-7186
Attention: David W. Greenfield, Esq.
Senior Vice President,
General Counsel and
Secretary
Telecopy:
Section 6.06 Consent to Jurisdiction. Each of Rockwell and
Automotive 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 Automotive 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 Automotive 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
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<PAGE> 59
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
Automotive.
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 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 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
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<PAGE> 60
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 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 Automotive 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 Automotive 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
Automotive 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
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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. 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 6.16. 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:
------------------------
Name:
Title:
[111 HOLDINGS, INC.]
By:
------------------------
Name:
Title:
57
<PAGE> 1
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
111 HOLDINGS, INC.
FIRST: The name of the Corporation is 111 Holdings, Inc.
SECOND: The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is The Corporation Trust
Company.
THIRD: The nature of the business or purposes to be conducted or promoted
are: To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock that the Corporation shall
have authority to issue is One Thousand (1,000), and the par value of each of
such shares is $1.
FIFTH: The name and mailing address of the sole incorporator are as
follows:
Name Mailing Address
---- ---------------
Kevin C. Smith Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
SIXTH: The Board of Directors is authorized to adopt, amend or repeal the
By-Laws of the Corporation.
SEVENTH: Meetings of stockholders shall be held at such place, within or
without the State of Delaware, as may be designated by or in the manner provided
in the By-Laws, or, if not so designated or provided, at the registered office
of the Corporation in the State of Delaware. Elections of directors need not be
by written ballot unless and to the extent that the By-Laws so provide.
<PAGE> 2
EIGHTH: No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that the foregoing clause shall not apply
to any liability of a director to the extent provided by applicable law (i) for
any breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the Delaware General Corporation Law or (iv) for any transaction from which the
director derived an improper personal benefit. Neither the amendment nor repeal
of this Article EIGHTH, nor the adoption of any provision of this Certificate of
Incorporation inconsistent with this Article EIGHTH, shall be effective with
respect to any cause of action, suit, claim or other matter that, but for this
Article EIGHTH, would accrue or arise prior to such amendment, repeal or
adoption of an inconsistent provision.
NINTH: The Corporation reserves the right to amend, alter or repeal any
provision contained in this Certificate of Incorporation in the manner now or
hereafter prescribed by statute, and all rights of stockholders herein are
subject to this reservation.
THE UNDERSIGNED, being the sole incorporator above named, for the purpose
of forming a corporation pursuant to the General Corporation Law of the State of
Delaware, has signed this instrument this 5th day of May, 1997.
/s/ Kevin C. Smith
------------------------------
Kevin C. Smith
Sole Incorporator
2
<PAGE> 1
Exhibit 3.2
111 HOLDINGS, INC.
(Delaware)
BY-LAWS
ARTICLE ONE
STOCKHOLDERS
SECTION 1.1. Annual Meeting. An annual meeting of stockholders for
the election of directors and for the transaction of such other business as may
properly be presented at the meeting, notice of which was given in the notice of
meeting, shall be held on such date and at such time as may from time to time be
designated by resolution duly adopted by the Board of Directors, at such place
(within or without the State of Delaware) as the Board of Directors, the
Executive Committee, if any, or the Chairman of the Board may fix.
SECTION 1.2. Special Meetings. A special meeting of stockholders may
be called for any proper purpose, notice of which was given in the notice of
meeting, at any time by the Board of Directors, the Executive Committee, if any,
or the Chairman of the Board and shall be called by any of them or by the
Secretary upon receipt of a written request to do so specifying the matter or
matters, appropriate for action at such a meeting, that are proposed to be
presented at the meeting, signed by holders of record of a majority of the
shares of stock that would be entitled to be voted on such matter or matters if
the meeting were held on the day such request is received and the record date
for such meeting were the close of business on the preceding day. Any such
meeting shall be held on such date, at such time and at such place, within or
without the State of Delaware, as shall be determined by the body or person
calling such meeting and as shall be stated in the notice of such meeting.
SECTION 1.3. Notice of Meeting. For each meeting of stockholders
written notice shall be given stating the place, date and hour and the purpose
or purposes for which the meeting is called and, if other than the place where
the meeting is to be held, the place within the city in which the meeting is to
be held where the list of stockholders required
<PAGE> 2
by Section 1.10 is to be open for examination at least 10 days prior to the
meeting. Except as otherwise provided by Delaware law, the written notice
of any meeting shall be given not less than 10 nor more than 60 days before
the date of the meeting to each stockholder entitled to vote at such meeting.
If mailed, notice shall be deemed to be given when deposited in the United
States mail, postage prepaid, directed to the stockholder at his address as it
appears on the records of the Corporation.
SECTION 1.4. Quorum. Except as otherwise required by law or in the
Certificate of Incorporation, the holders of record of a majority of the shares
of stock entitled to be voted present in person or represented by proxy at a
meeting shall constitute a quorum for the transaction of business at the
meeting, but, in the absence of a quorum, the holders of record present in
person or represented by proxy at such meeting may vote to adjourn the meeting
from time to time until a quorum is obtained.
SECTION 1.5. Presiding Officer and Secretary at Meetings. Each meeting
of stockholders shall be presided over by the Chairman of the Board or, in his
absence, by the person designated in writing by the Chairman of the Board or, if
no such person is present, then by a person designated by the Board of
Directors; if no such person is present, then the stockholders at the meeting
present in person or represented by proxy shall by plurality vote elect a person
to act as chairman of the meeting. The Secretary, or in his absence an Assistant
Secretary, shall act as secretary of the meeting, or, if no such officer is
present, a secretary of the meeting shall be designated by the chairman of the
meeting.
SECTION 1.6. Voting. Except as otherwise provided by law or in the
Certificate of Incorporation, and subject to the provisions of Section 1.11:
(a) each stockholder of record shall be entitled at every meeting of
stockholders to one vote for each share standing in his name on the books
of the Corporation;
(b) directors shall be elected by a plurality vote;
(c) each matter, other than election of directors, properly
presented to any meeting, shall be decided by a majority of the votes cast
on the matter; and
(d) election of directors and the vote on any other matter presented
to a meeting shall be by written
2
<PAGE> 3
ballot only if so ordered by the chairman of the meeting or if so
requested by any stockholder at the meeting present in person or
represented by proxy entitled to vote in such election or on such matter,
as the case may be.
SECTION 1.7. Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy, but no such proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer period.
SECTION 1.8. Adjourned Meetings. A meeting of stockholders may be
adjourned to another time or place as provided in Sections 1.4 or 1.6(c). Unless
the Board of Directors fixes a new record date, stockholders of record for an
adjourned meeting shall be as originally determined for the meeting from which
the adjournment was taken. If the adjournment is for more than 30 days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting. At the adjourned meeting, provided a quorum is
present, any business may be transacted that might have been transacted at the
meeting as originally called.
SECTION 1.9. Consent of Stockholders in Lieu of Meeting. Any action
that may be taken at any annual or special meeting of stockholders may be taken
without a meeting, without prior notice and without a vote, if one or more
consents in writing, setting forth the action so taken and signed by the holders
of outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted, are delivered to the
Corporation by delivery to its registered office in the State of Delaware by
hand or by certified or registered mail, return receipt requested, to its
principal place of business, or to an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Every consent shall bear the date of signature of each stockholder
signing the consent and no written consent shall be effective to take the
corporate action referred to therein unless written consents signed by a
sufficient number of stockholders to take the action are delivered to the
Corporation, in the manner required by law, within 60 days of the earliest dated
consent so delivered. Prompt notice of the taking of such action shall be given
to each stockholder that did not consent in writing.
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<PAGE> 4
SECTION 1.10. List of Stockholders Entitled to Vote. A complete list of
the stockholders entitled to vote at every meeting of stockholders, arranged in
alphabetical order and showing the address of each stockholder and the number of
shares registered in the name of each stockholder, shall be prepared and shall
be open to the examination of any stockholder for any purpose germane to the
meeting, during ordinary business hours, for a period of at least 10 days prior
to the meeting, either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. Such list shall be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present.
SECTION 1.11. Fixing of Record Date. The Board of Directors, by
resolution, may fix a date for determining the stockholders of record, which
record date shall not be earlier than the date of such resolution. The record
date shall be determined as follows:
(a) The record date for stockholders entitled to notice of or
to vote at any meeting of stockholders or any adjournment thereof shall
not be more than 60 nor less than 10 days before the date of the meeting.
If no such record date is fixed by the Board of Directors, the record date
shall be the close of business on the day immediately preceding the day on
which notice is given, or, if notice is waived, at the close of business
on the day immediately preceding the day on which the meeting is held. The
record date shall apply to any adjournment of the meeting unless the Board
of Directors fixes a new record date for the adjourned meeting.
(b) The record date for determining the stockholders entitled
to consent to corporate action in writing without a meeting shall not be
more than 10 days after the date upon which the resolution fixing the
record date is adopted by the Board of Directors. If no such record date
is fixed by the Board of Directors, the record date shall be determined as
follows:
(i) if no prior action by the Board of Directors is
required under the Delaware General Corporation Law, the record date
shall be the first date on which a signed written consent setting
forth the action taken or proposed to be taken is delivered to the
Corporation pursuant to the requirements of Section 1.9; and
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<PAGE> 5
(ii) if prior action by the Board of Directors is
required under the Delaware General Corporation Law, the record date
shall be the close of business on the day on which the Board of
Directors adopts a resolution taking such prior action.
(c) The record date for determining the stockholders
entitled to receive payment of any dividend or other distribution or
allotment of any rights or the stockholders entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for
the purpose of any other lawful action, shall be not more than 60 days
prior to such action. If no such record date is fixed by the Board of
Directors, the record date for determining stockholders for any such
purpose shall be the close of business on the day on which the Board of
Directors adopts the resolution relating to such purpose.
ARTICLE TWO
DIRECTORS
SECTION 2.1. General Powers. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors.
SECTION 2.2. Number; Term of Office. The number of directors that shall
constitute the whole Board of Directors shall be determined by action of the
Board of Directors taken by the affirmative vote of a majority of the whole
Board of Directors or, if the Board of Directors shall not have taken such
action, it shall be the number of directors elected by the sole incorporator.
Directors shall be elected at the annual meeting of stockholders to hold office,
subject to Sections 2.3 and 2.4, until the next annual meeting of stockholders
and until their respective successors are elected and qualified.
SECTION 2.3. Resignation. Any director of the Corporation may resign at
any time by giving written notice of such resignation to the Board of Directors,
the Chairman of the Board or the Secretary of the Corporation. Any such
resignation shall take effect at the time specified therein or, if no time is
specified, upon receipt thereof by the Board of Directors or one of the
above-named officers. Unless specified therein, the acceptance of such
resignation shall not be necessary to make it effective. When one or more
directors shall resign from the Board of Directors effective at a future date, a
majority of the directors then in office, including those who have so resigned,
shall have power to fill such vacancy or vacancies, the vote thereon to take
effect
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when such resignation or resignations shall become effective, and each director
so chosen shall hold office as provided in these By-Laws in the filling of other
vacancies.
SECTION 2.4. Removal. Any one or more directors may be
removed, with or without cause, by the holders of a majority of the
shares entitled to vote at an election of directors.
SECTION 2.5. Vacancies; Newly Created Directorships. Vacancies and
newly created directorships resulting from any increase in the authorized number
of directors may be filled by a vote of a majority of the directors then in
office, although less than a quorum, or by the sole remaining director, and the
directors so chosen shall hold office, subject to Sections 2.3 and 2.4, until
the next annual meeting of stockholders and until their respective successors
are elected and qualified.
SECTION 2.6. Regular and Annual Meetings; Notice. Regular meetings
of the Board of Directors shall be held at such time and at such place (within
or without the State of Delaware) as the Board of Directors may from time to
time prescribe. No notice need be given of any regular meeting, and a notice, if
given, need not specify the purposes thereof. A meeting of the Board of
Directors may be held without notice immediately after an annual meeting of
stockholders at the same place as that at which such meeting was held.
SECTION 2.7. Special Meetings; Notice. A special meeting of the
Board of Directors may be called at any time by the Board of Directors, the
Executive Committee, if any, the Chairman of the Board or any person acting in
the place of the Chairman of the Board and shall be called by any one of them or
by the Secretary upon receipt of a written request to do so specifying the
matter or matters, appropriate for action at such a meeting, proposed to be
presented at the meeting and signed by at least two directors. Any such meeting
shall be held at such time and at such place (within or without the State of
Delaware) as shall be determined by the body or person calling such meeting.
Notice of such meeting stating the time and place thereof shall be given (a) by
deposit of the notice in the United States mail, first class, postage prepaid,
at least seven days before the day fixed for the meeting, addressed to each
director at his address as it appears on the Corporation's records or at such
other address as the director may have furnished the Corporation for that
purpose, or (b) by delivery of the notice similarly addressed for dispatch by
telex, telecopy, telegraph, cable or radio or by delivery of the notice by
telephone or in person, in each case at least 24 hours before the time fixed for
the meeting.
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SECTION 2.8. Presiding Officer and Secretary at Meetings. Each
meeting of the Board of Directors shall be presided over by the Chairman of the
Board or in his absence, by such member of the Board of Directors as shall be
chosen by a majority of the directors present. The Secretary, or in his absence
an Assistant Secretary, shall act as secretary of the meeting, or if no such
officer is present, a secretary of the meeting shall be designated by the person
presiding over the meeting.
SECTION 2.9. Quorum; Voting. A majority of the whole Board of
Directors shall constitute a quorum for the transaction of business, but in the
absence of a quorum a majority of those present (or if only one be present, then
that one) may adjourn the meeting, without notice other than announcement at the
meeting, until such time as a quorum is present. Except as otherwise required by
law, the Certificate of Incorporation or the By-Laws, the vote of a majority of
the directors present at a meeting at which a quorum is present shall be the act
of the Board of Directors.
SECTION 2.10. Meeting by Telephone. Members of the Board of
Directors or of any committee thereof may participate in meetings of the Board
of Directors or of such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation shall constitute presence in
person at such meeting.
SECTION 2.11. Action Without Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if all members of the Board of
Directors or of such committee, as the case may be, consent thereto in writing
and the writing or writings are filed with the minutes of proceedings of the
Board of Directors or of such committee.
SECTION 2.12. Executive and Other Committees. The Board of Directors
may, by resolution passed by a majority of the whole Board of Directors,
designate an Executive Committee or one or more other committees, each such
committee to consist of one or more directors as the Board of Directors may from
time to time determine. Any such committee, to the extent provided in such
resolution or resolutions, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation, including the power to authorize the seal of the
Corporation to be affixed to all papers that may require it; but no such
committee shall have such power or authority in reference to amending the
Certificate of Incorporation (except for such amendments as by law are expressly
permitted to be made by committees of the Board of Directors), adopting an
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<PAGE> 8
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the Corporation's property and
assets, recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending the By-Laws; and unless the resolution
shall expressly so provide, no such committee shall have the power or authority
to declare a dividend or to authorize the issuance of stock or to adopt a
certificate of ownership and merger. The Board of Directors may designate one or
more directors as alternate members of any committee who, in the absence or
disqualification of a member or members of a committee at a meeting, may replace
such absent or disqualified member or members at such meeting. In the absence of
such a designation, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Each such
committee other than the Executive Committee shall have such name as may be
determined from time to time by the Board of Directors.
SECTION 2.13. Compensation. A director shall receive such
compensation, if any, for his services as a director as may from time to time be
fixed by the Board of Directors, which compensation may be based, in whole or in
part, upon his attendance at meetings of the Board of Directors or of its
committees. He may also be reimbursed for his expenses in attending any meeting.
ARTICLE THREE
OFFICERS
SECTION 3.1. Election; Qualification. The officers of the
Corporation shall be a Chairman of the Board, one or more Vice Presidents, a
Secretary and a Treasurer, each of whom shall be elected by the Board of
Directors. Two or more offices may be held by the same person.
SECTION 3.2. Term of Office. Each officer shall hold office from the
time of his election and qualification until the expiration of the term for
which he is elected and until the time his successor is elected and qualified,
unless sooner he shall die or resign or shall be removed pursuant to Section
3.4.
SECTION 3.3. Resignation. Any officer of the Corporation may resign
at any time by giving written notice of such resignation to the Board of
Directors, the Chairman of the Board or the Secretary of the Corporation. Any
such resignation shall take effect at the time specified therein
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or, if no time be specified, upon receipt thereof by the Board of Directors or
one of the above-named officers. Unless specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
SECTION 3.4. Removal. Any officer of the Corporation may be removed at
any time, with or without cause, by the vote of a majority of the whole Board of
Directors.
SECTION 3.5. Vacancies. Any vacancy, however caused, in any office of
the Corporation may be filled by the Board of Directors.
SECTION 3.6. Compensation. The compensation of each officer shall be
such as the Board of Directors may from time to time determine.
SECTION 3.7. Chairman of the Board. The Chairman of the Board shall be
the chief executive officer of the Corporation and shall have general charge of
the business and affairs of the Corporation, subject, however, to the right of
the Board of Directors to confer specified powers on officers and subject
generally to the direction of the Board of Directors and the Executive
Committee, if any.
SECTION 3.8. Vice President. Each Vice President shall have such powers
and duties as generally pertain to the office of Vice President and as the Board
of Directors or the Chairman of the Board may from time to time prescribe.
During the absence of the Chairman of the Board or his inability to act, the
Vice President, or if there shall be more than one Vice President then that one
designated by the Board of Directors, shall exercise the powers and shall
perform the duties of the Chairman of the Board, subject to the direction of the
Board of Directors and the Executive Committee, if any.
SECTION 3.9. Secretary. The Secretary shall keep the minutes of all
meetings of stockholders and of the Board of Directors. He shall be custodian of
the corporate seal and shall affix it or cause it to be affixed to such
instruments as require such seal and attest the same and shall exercise the
powers and shall perform the duties incident to the office of Secretary, subject
to the direction of the Board of Directors and the Executive Committee, if any.
SECTION 3.10. Treasurer. The Treasurer shall have care of all funds and
securities of the Corporation and shall exercise the powers and shall perform
the duties incident to the office of Treasurer, subject to the direction of the
Board of Directors and the Executive Committee, if any.
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SECTION 3.11. Other Officers. The Board of Directors may designate any
other officers of the Corporation, including one or more Assistant Secretaries
and one or more Assistant Treasurers, who shall exercise the powers and shall
perform the duties incident to their offices, subject to the direction of the
Board of Directors and the Executive Committee, if any.
ARTICLE FOUR
INDEMNIFICATION
SECTION 4.1. Indemnification. (a) The Corporation shall indemnify,
subject to the requirements of subsection (d) of this Section, any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Corporation),
by reason of the fact that he is or was a director, officer, employee or agent
of the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) The Corporation shall indemnify, subject to the requirements of
subsection (d) of this Section, any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
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reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery of the State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery of the State of Delaware or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
Section, or in defense of any claim, issue or matter therein, the Corporation
shall indemnify him against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this
Section (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in subsections (a) and (b)
of this Section. Such determination shall be made (1) by the Board of Directors
by a majority vote of a quorum consisting of directors who were not parties to
such action, suit or proceeding, or (2) if such a quorum is not obtainable, or,
even if obtainable a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses incurred by a director, officer, employee or agent in
defending a civil or criminal action, suit or proceeding may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in this Section.
Such expenses incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the Board of Directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this Section shall not limit the
Corporation from providing any other indemnification or advancement of expenses
permitted
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by law nor shall they be deemed exclusive of any other rights to which a person
seeking indemnification or advancement of expenses may be entitled under any
by-law, agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding such office.
(g) The Corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Section.
(h) For the purposes of this Section, references to "the
Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees or
agents, so that any person who is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under the provisions of this Section with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
(i) For purposes of this Section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to any employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this
Section.
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(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section shall, unless otherwise provided when
authorized or ratified by the Board of Directors, continue as to a person who
has ceased to be a director, officer, employee or agent of the Corporation and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
ARTICLE FIVE
CAPITAL STOCK
SECTION 5.1. Stock Certificates. The interest of each holder of
stock of the Corporation shall be evidenced by a certificate or certificates in
such form as the Board of Directors may from time to time prescribe, provided
the Board of Directors may by resolution provide that some or all of any or all
classes or series of its stock shall be uncertificated shares. Notwithstanding
the adoption of such a resolution by the Board of Directors, every holder of
uncertificated shares, upon request, shall be entitled to receive from the
Corporation a certificate representing the number of shares registered in such
stockholder's name on the books of the Corporation. Each stock certificate and
certificate representing previously uncertificated shares shall be signed by or
in the name of the Corporation by the Chairman of the Board or a Vice President
and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary. Any or all of the signatures appearing on any such certificate or
certificates may be a facsimile. If any officer, transfer agent or registrar who
has signed or whose facsimile signature has been placed upon any such
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of issue.
SECTION 5.2. Transfer of Stock. Shares of stock of the Corporation
shall be transferable on the books of the Corporation by the holder of record
thereof or by his attorney, pursuant to applicable law and such rules and
regulations as the Board of Directors shall from time to time prescribe. Any
shares represented by a certificate shall be transferable only upon surrender of
the certificate with an assignment endorsed thereon or attached thereto duly
executed and with such proof of authenticity of signatures as the Corporation
may reasonably require.
SECTION 5.3. Holders of Record. Prior to due presentment for
registration of transfer, the Corporation may treat the holder of record of a
share of its stock as the complete owner thereof exclusively entitled to vote,
to re-
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ceive notifications and otherwise entitled to all the rights and powers of a
complete owner thereof, notwithstanding notice to the contrary.
SECTION 5.4. Lost, Destroyed, Mutilated or Stolen Certificates. The
Corporation shall issue a new certificate of stock or uncertificated shares to
replace a certificate theretofore issued by it alleged to have been lost,
destroyed, mutilated or stolen, if the owner or his legal representative (i)
submits a written request for the replacement of the certificate, together with
the mutilated certificate or such evidence as the Board of Directors may deem
satisfactory of the loss, destruction or theft of the certificate, and such
request is received by the Corporation before the Corporation has notice that
the certificate has been acquired by a bona fide purchaser, (ii) files with the
Corporation a bond sufficient to indemnify the Corporation against any claim
that may be made against it on account of the alleged loss, destruction,
mutilation or theft of any such certificate or the issuance of any such new
certificate and (iii) satisfies such other terms and conditions as the Board of
Directors may from time to time prescribe.
ARTICLE SIX
MISCELLANEOUS
SECTION 6.1. Waiver of Notice. Whenever notice is required to be
given by the Certificate of Incorporation, the By-Laws or any provision of the
General Corporation Law of the State of Delaware, a written waiver thereof,
signed by the person entitled to notice, whether before or after the time
required for such notice, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors or members of a
committee of directors need be specified in any written waiver of notice.
SECTION 6.2. Fiscal Year. The fiscal year of the
Corporation shall start on October 1 in each year.
SECTION 6.3. Corporate Seal. The corporate seal shall be in such
form as the Board of Directors may from time to time prescribe, and the same may
be used by causing it or a facsimile thereof to be impressed or affixed or in
any other manner reproduced.
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ARTICLE SEVEN
AMENDMENT OF BY-LAWS
SECTION 7.1. Amendment. The By-Laws may be adopted, amended
or repealed by the stockholders of the Corporation or by the Board of
Directors by a majority vote of the whole Board of Directors.
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Exhibit 4.1
RESTATED CERTIFICATE OF INCORPORATION
OF
[111 HOLDINGS, INC.]
FIRST: The name of the Corporation is
[111 Holdings, Inc.]
SECOND: The Corporation's registered office in the State of Delaware is located
at 1209 Orange Street, in the City of Wilmington, County of New Castle. The name
and address of its registered agent is The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801.
THIRD: The nature of the business, or objects or purposes to be transacted,
promoted or carried on, are: To engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of Delaware.
FOURTH: The total number of shares of all classes of stock which the Corporation
shall have the authority to issue is 375,000,000, of which 25,000,000 shares
without par value are to be of a class designated Preferred Stock and
350,000,000 shares of the par value of $1 each are to be of a class designated
Common Stock.
In this Article Fourth, any reference to a section or paragraph, without further
attribution, within a provision relating to a particular class of stock is
intended to refer solely to the specified section or paragraph of the other
provisions relating to the same class of stock.
COMMON STOCK
The Common Stock shall have the following voting powers, designations,
preferences and relative, participating, optional and other special
rights, and qualifications, limitations or restrictions thereof:
<PAGE> 2
1. Dividends. Whenever the full dividends upon any outstanding Preferred
Stock for all past dividend periods shall have been paid and the full
dividends thereon for the then current respective dividend periods shall
have been paid, or declared and a sum sufficient for the respective
payments thereof set apart, the holders of shares of the Common Stock
shall be entitled to receive such dividends and distributions in equal
amounts per share, payable in cash or otherwise, as may be declared
thereon by the Board of Directors from time to time out of assets or funds
of the Corporation legally available therefor.
2. Rights on Liquidation. In the event of any liquidation, dissolution or
winding-up of the Corporation, whether voluntary or involuntary, after the
payment or setting apart for payment to the holders of any outstanding
Preferred Stock of the full preferential amounts to which such holders are
entitled as herein provided or referred to, all of the remaining assets of
the Corporation shall belong to and be distributable in equal amounts per
share to the holders of the Common Stock. For purposes of this paragraph
2, a consolidation or merger of the Corporation with any other
corporation, or the sale, transfer or lease of all or substantially all
its assets shall not constitute or be deemed a liquidation, dissolution or
winding-up of the Corporation.
3. Voting. Except as otherwise provided by the laws of the State of
Delaware or by this Article Fourth, each share of Common Stock shall
entitle the holder thereof to one vote.
PREFERRED STOCK
The Preferred Stock may be issued from time to time in one or more series.
The Board of Directors is hereby authorized to provide for the issuance of
shares of Preferred Stock in series and, by filing a certificate pursuant
to the applicable law of the State of Delaware (hereinafter referred to as
a "Preferred Stock Designation"), to establish from time to time the
number of shares to be included in each such series, and to fix the
designation, powers, preferences and rights of the shares of each
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such series and the qualifications, limitations and restrictions thereof.
The authority of the Board of Directors with respect to each series shall
include, but not be limited to, determination of the following:
(a) the designation of the series, which may be by distinguishing
number, letter or title;
(b) the number of shares of the series, which number the Board of
Directors may thereafter (except where otherwise provided in the
Preferred Stock Designation) increase or decrease (but not below the
number of shares thereof then outstanding);
(c) whether dividends, if any, shall be cumulative or noncumulative
and the dividend rate of the series;
(d) the dates at which dividends, if any, shall be payable;
(e) the redemption rights and price or prices, if any, for shares of
the series;
(f) the terms and amount of any sinking fund provided for the
purchase or redemption of shares of the series;
(g) the amounts payable on shares of the series in the event of any
voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Corporation;
(h) whether the shares of the series shall be convertible into
shares of any other class or series, or any other security, of the
Corporation or any other corporation, and, if so, the specification
of such other class or series or such other security, the conversion
price or prices or rate or rates, any adjustments thereof, the date
or dates as of which such shares shall be convertible and all other
terms and conditions upon which such conversion may be made;
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(i) restrictions on the issuance of shares of the same series or of
any other class or series; and
(j) the voting rights, if any, of the holders of shares of the
series.
Except as may be provided in this Certificate of Incorporation or in a
Preferred Stock Designation, the Common Stock shall have the exclusive
right to vote for the election of directors and for all other purposes,
and holders of Preferred Stock shall not be entitled to receive notice of
any meeting of stockholders at which they are not entitled to vote. The
number of authorized shares of Preferred Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by
the affirmative vote of the holders of a majority of the outstanding
Common Stock, without a vote of the holders of the Preferred Stock, or of
any series thereof, unless a vote of any such holders is required pursuant
to any Preferred Stock Designation.
The Corporation shall be entitled to treat the person in whose name any
share of its stock is registered as the owner thereof for all purposes and
shall not be bound to recognize any equitable or other claim to, or
interest in, such share on the part of any other person, whether or not
the Corporation shall have notice thereof, except as expressly provided by
applicable law.
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
1. Designation and Amount. A series of Preferred Stock, without par value,
is hereby created and shall be designated as "Series A Junior
Participating Preferred Stock" (the "Series A Preferred Stock") and the
number of shares constituting the Series A Preferred Stock shall be
1,000,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease shall
reduce the number of shares of Series A Preferred Stock to a number less
than the number of shares then outstanding plus the number of shares
reserved for issuance upon the exercise of outstanding options,
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rights or warrants or upon the conversion of any outstanding securities
issued by the Corporation convertible into Series A Preferred Stock.
2. Dividends and Distributions.
2.1. Subject to the rights of the holders of any shares of any series
of Preferred Stock (or any similar stock) ranking prior and superior to
the Series A Preferred Stock with respect to dividends, the holders of
shares of Series A Preferred Stock, in preference to the holders of
Common Stock and of any other junior stock of the Corporation, shall be
entitled to receive, when, as and if declared by the Board of Directors
out of funds legally available for the purpose, quarterly dividends
payable in cash on the second Monday of March, June, September and
December in each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share or fraction
of a share of Series A Preferred Stock, in an amount per share (rounded
to the nearest cent) equal to the greater of (a) $1 or (b) subject to
the provision for adjustment hereinafter set forth, 100 times the
aggregate per share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non-cash dividends
or other distributions, other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of Common Stock
(by reclassification or otherwise), declared on the Common Stock since
the immediately preceding Quarterly Dividend Payment Date or, with
respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A Preferred
Stock. In the event the Corporation shall at any time declare or pay
any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock then in each such case the
amount to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under clause (b) of the
preceding sentence shall be
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adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to such event.
2.2. The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph 2.1 immediately after
it declares a dividend or distribution on the Common Stock (other than
a dividend payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on the
Common Stock during the period between any Quarterly Dividend Payment
Date and the next subsequent Quarterly Dividend Payment Date, a
dividend of $1 per share on the Series A Preferred Stock shall
nevertheless be payable on such subsequent Quarterly Dividend Payment
Date.
2.3. Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment
Date next preceding the date of issue of such shares, unless the date
of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares
shall begin to accrue from the date of issue of such shares, or unless
the date of issue is a Quarterly Dividend Payment Date or is a date
after the record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events
such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not
bear interest. Dividends paid on the shares of Series A Preferred Stock
in an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The
Board of Directors may fix a record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon, which record
date shall be not
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more than 60 days prior to the date fixed for the payment thereof.
3. Voting Rights. The holders of shares of Series A Preferred Stock
shall have the following voting rights:
3.1. Subject to the provision for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof
to 100 votes on all matters submitted to a vote of the stockholders of
the Corporation. In the event the Corporation shall at any time declare
or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise
than by payment of a dividend in shares of Common Stock) into a greater
or lesser number of shares of Common Stock, then in each such case the
number of votes per share to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to such event.
3.2. Except as otherwise provided herein, in any other Preferred Stock
Designation creating a series of Preferred Stock or any similar stock,
or by law, the holders of shares of Series A Preferred Stock and the
holders of shares of Common Stock and any other capital stock of the
Corporation having general voting rights shall vote together as one
class on all matters submitted to a vote of stockholders of the
Corporation.
3.3. Except as set forth herein, or as otherwise provided by law,
holders of Series A Preferred Stock shall have no special voting rights
and their consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth herein) for
taking any corporate action.
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4. Certain Restrictions.
4.1. Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in paragraph 2 are
in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preferred
Stock outstanding shall have been paid in full, the Corporation shall
not:
(a) declare or pay dividends, or make any other distributions,
on any shares of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series
A Preferred Stock;
(b) declare or pay dividends, or make any other distributions,
on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with
the Series A Preferred Stock, except dividends paid ratably on
the Series A Preferred Stock and all such parity stock on
which dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are then
entitled;
(c) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A
Preferred Stock, provided that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any such
junior stock in exchange for shares of any stock of the
Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A
Preferred Stock; or
(d) redeem or purchase or otherwise acquire for consideration
any shares of Series A Preferred Stock, or any shares of stock
ranking on a parity with the Series A Preferred Stock, except
in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of
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Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the
respective series or classes.
4.2. The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock
of the Corporation unless the Corporation could, under subparagraph (c)
of paragraph 4.1, purchase or otherwise acquire such shares at such
time and in such manner.
5. Reacquired Shares. Any shares of Series A Preferred Stock purchased
or otherwise acquired by the Corporation in any manner whatsoever shall
be retired and cancelled promptly after the acquisition thereof. All
such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new
series of Preferred Stock subject to the conditions and restrictions on
issuance set forth herein or in any other Preferred Stock Designation
creating a series of Preferred Stock or any similar stock or as
otherwise required by law.
6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be
made (i) to the holders of shares of stock ranking junior (either as
to dividend or upon liquidation,
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dissolution or winding up) to the Series A Preferred Stock unless,
prior thereto, the holders of shares of Series A Preferred Stock shall
have received $100 per share, plus an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not declared, to
the date of such payment, provided that the holders of shares of Series
A Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth,
equal to 100 times the aggregate amount to be distributed per share to
holders of shares of Common Stock, or (ii) to the holders of shares of
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock, except
distributions made ratably on the Series A Preferred Stock and all such
parity stock in proportion to the total amounts to which the holders of
all such shares are entitled upon such liquidation, dissolution or
winding up. In the event the Corporation shall at any time declare or
pay any dividend on the Common Stock payable in shares of Common Stock,
or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise
than by payment of a dividend in shares of Common Stock) into a greater
or lesser number of shares of Common Stock, then in each such case the
aggregate amount to which holders of shares of Series A Preferred Stock
were entitled immediately prior to such event under the proviso in
clause (i) of the preceding sentence shall be adjusted by multiplying
such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
7. Consolidation, Merger, etc. In case the Corporation shall enter into
any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other
stock or securities, cash and/or any other property, then in any such
case each share of Series A Preferred Stock shall at the same time be
similarly exchanged or changed into an amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 100 times the
aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged. In the event the
Corporation shall at any time declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock
(by reclassification or otherwise than by payment of a dividend in
shares of Common Stock) into a greater or lesser number of shares of
Common Stock, then in each such case the amount set forth in the
preceding sentence with respect to the
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exchange or change of shares of Series A Preferred Stock shall be
adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to such event.
8. No Redemption. The shares of Series A Preferred Stock shall not be
redeemable.
9. Rank. The Series A Preferred Stock shall rank, with respect to the
payment of dividends and the distribution of assets, junior to
all series of any other class of the Corporation's Preferred Stock.
10. Amendment. The Certificate of Incorporation of the Corporation
shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A
Preferred Stock so as to affect them adversely without the affirmative
vote of the holders of at least two-thirds of the outstanding shares of
Series A Preferred Stock, voting together as a single class.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: The private property of the stockholders of the Corporation shall not be
subject to the payment of corporate debts to any extent whatever.
SEVENTH: Subject to the rights of the holders of any series of Preferred Stock
to elect additional directors under specified circumstances, the number of
directors of the Corporation shall be fixed from time to time exclusively by the
Board of Directors pursuant to a resolution adopted by a majority of the whole
Board. A director need not be a stockholder. The election of directors of the
Corporation need not be by ballot unless the by-laws so require.
The directors, other than those who may be elected by the holders of any series
of Preferred Stock or any other series or class of stock, as provided herein or
in any Preferred Stock Designation, shall be divided into three classes, as
nearly equal in number as possible. One class of directors shall be initially
elected for a term
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expiring at the annual meeting of stockholders to be held in 1998, another class
shall be initially elected for a term expiring at the annual meeting of
stockholders to be held in 1999, and another class shall be initially elected
for a term expiring at the annual meeting of stockholders to be held in 2000.
Members of each class shall hold office until their successors are elected and
shall have qualified. At each annual meeting of the stockholders of the
Corporation, commencing with the 1998 annual meeting, the successors of the
class of directors whose term expires at that meeting shall be elected by a
plurality vote of all votes cast for the election of directors at such meeting
to hold office for a term expiring at the annual meeting of stockholders held in
the third year following the year of their election.
Subject to the rights of the holders of any series of Preferred Stock, and
unless the Board of Directors otherwise determines, newly created directorships
resulting from any increase in the authorized number of directors or any
vacancies on the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause may be filled
only by a majority vote of the directors then in office, though less than a
quorum, and directors so chosen shall hold office for a term expiring at the
annual meeting of stockholders at which the term of office of the class to which
they have been elected expires and until such director's successor shall have
been duly elected and qualified. No decrease in the number of authorized
directors constituting the whole Board of Directors shall shorten the term of
any incumbent director.
Subject to the rights of the holders of any series of Preferred Stock or any
other series or class of stock, as provided herein or in any Preferred Stock
Designation, to elect additional directors under specific circumstances, any
director may be removed from office at any time, but only for cause and only by
the affirmative vote of the holders of at least 80 percent of the voting power
of the then outstanding capital stock of the Corporation (the "Capital Stock")
entitled to vote generally in the election of directors (the "Voting Stock"),
voting together as a single class.
No director of the Corporation shall be liable to the Corporation or its
stockholders for monetary damages for
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breach of fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. This paragraph shall not eliminate or limit the
liability of a director for any act or omission occurring prior to the effective
date of its adoption. No repeal or modification of this paragraph, directly or
by adoption of an inconsistent provision of this Certificate of Incorporation,
by the stockholders of the Corporation shall be effective with respect to any
cause of action, suit, claim or other matter that, but for this paragraph, would
accrue or arise prior to such repeal or modification.
EIGHTH: Unless otherwise determined by the Board of Directors, no holder of
stock of the Corporation shall, as such holder, have any right to purchase or
subscribe for any stock of any class which the Corporation may issue or sell,
whether or not exchangeable for any stock of the Corporation of any class or
classes and whether out of unissued shares authorized by the Certificate of
Incorporation of the Corporation as originally filed or by any amendment thereof
or out of shares of stock of the Corporation acquired by it after the issue
thereof.
NINTH: Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them and/or between this Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof, or on the application of
any receiver or receivers appointed for this Corporation under the provisions
of section 291 of Title 8 of the Delaware Code or on the application of
trustees in dissolution or of any receiver or receivers appointed for this
Corporation under the provisions of section 279 of Title 8 of the Delaware
Code order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority
in number representing three-fourths in value of the
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creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this Corporation, as the case
may be, and also on this Corporation.
TENTH:
1. Amendment of Certificate of Incorporation. From time to time any of the
provisions of the Certificate of Incorporation may be amended, altered or
repealed, and other provisions authorized by the statutes of the State of
Delaware at the time in force may be added or inserted in the manner at the time
prescribed by said statutes, and all rights at any time conferred upon the
stockholders of the Corporation by its Certificate of Incorporation are granted
subject to the provisions of this Article Tenth. Notwithstanding anything
contained in this Certificate of Incorporation to the contrary, the affirmative
vote of the holders of at least 80% of the voting power of the then outstanding
Voting Stock, voting together as a single class, shall be required to amend or
repeal Article Seventh, this Article Tenth or Article Twelfth or adopt any
provision inconsistent with any of the foregoing articles.
2. By-laws. The Board of Directors is expressly authorized to make, alter, amend
and repeal the by-laws of the Corporation, in any manner not inconsistent with
the laws of the State of Delaware or of the Certificate of Incorporation of the
Corporation, subject to the power of the holders of the Capital Stock to alter
or repeal the by-laws made by the Board of Directors; provided, that any such
amendment or repeal by stockholders shall require the affirmative vote of the
holders of at least 80% of the voting power of the then outstanding Voting
Stock, voting together as a single class.
ELEVENTH: The stockholder vote required to approve Business Combinations (as
hereinafter defined) shall be as set forth in this Article Eleventh.
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1. Higher Vote for Business Combinations. In addition to any
affirmative vote required by law, this Certificate of Incorporation or
the by-laws of the Corporation, and except as otherwise expressly
provided in Section 2 of this Article Eleventh, a Business Combination
shall not be consummated without the affirmative vote of the holders of
at least 80% of the voting power of the then outstanding shares of the
Voting Stock, voting together as a single class. Such affirmative vote
shall be required notwithstanding the fact that no vote may be
required, or that a lesser percentage or separate class vote may be
specified, by law or in any agreement with any national securities
exchange or otherwise.
2. When Higher Vote Is Not Required. The provisions of Section 1 of
this Article Eleventh shall not be applicable to a Business Combination
if the conditions specified in either of the following paragraphs A or
B are met.
A. Approval by Continuing Directors. The Business Combination shall
have been approved by at least two-thirds of the Continuing Directors
(as hereinafter defined), whether such approval is made prior to or
subsequent to the date on which the Interested Stockholder (as
hereinafter defined) became an Interested Stockholder (the
"Determination Date").
B. Price and Procedure Requirements. Each of the seven conditions
specified in the following subparagraphs (i) through (vii) shall have
been met:
(i) The aggregate amount of the cash and the Fair Market Value (as
hereinafter defined) as of the date of the consummation of the
Business Combination (the "Consummation Date") of any consideration
other than cash to be received per share by holders of Common Stock
in such Business Combination shall be an amount at least equal to
the higher amount determined under clauses (a) and (b) below (the
requirements of this paragraph B (i) shall be applicable with
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respect to all shares of Common Stock outstanding, whether or not
the Interested Stockholder has previously acquired any shares of
the Common Stock): (a) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees)
paid by or on behalf of the Interested Stockholder for any shares
of Common Stock acquired beneficially by it (1) within the two-year
period immediately prior to the first public announcement of the
proposal of the Business Combination (the "Announcement Date") or
(2) in the transaction in which it became an Interested
Stockholder, whichever is higher, plus interest compounded annually
from the Determination Date through the Consummation Date at the
prime rate of interest of Morgan Guaranty Trust Company of New York
(or other major bank headquartered in New York City selected by at
least two-thirds of the Continuing Directors) from time to time in
effect in New York City, less the aggregate amount of any cash
dividends paid, and the Fair Market Value of any dividends paid in
other than cash, per share of Common Stock from the Determination
Date through the Consummation Date in an amount up to but not
exceeding the amount of such interest payable per share of Common
Stock; and (b) the Fair Market Value per share of Common Stock on
the Announcement Date or on the Determination Date, whichever is
higher.
(ii) The aggregate amount of the cash and the Fair Market Value as
of the Consummation Date of any consideration other than cash to be
received per share by holders of shares of any class or series of
outstanding Capital Stock, other than the Common Stock, in such
Business Combination shall be an amount at least equal to the
highest amount determined under clauses (a), (b) and (c) below (the
requirements of this paragraph B(ii) shall be applicable with
respect to all shares
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of every class or series of outstanding Capital Stock, other than
the Common Stock, whether or not the Interested Stockholder has
previously acquired any shares of a particular class or series of
Capital Stock):
(a) the highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid
by or on behalf of the Interested Stockholder for any shares
of such class or series of Capital Stock acquired beneficially
by it (1) within the two-year period immediately prior to the
Announcement Date or (2) in the transaction in which it became
an Interested Stockholder, whichever is higher, plus interest
compounded annually from the Determination Date through the
Consummation Date at the prime rate of interest of Morgan
Guaranty Trust Company of New York (or other major bank
headquartered in New York City selected by at least two-thirds
of the Continuing Directors) from time to time in effect in
New York City, less the aggregate amount of any cash dividends
paid, and the Fair Market Value of any dividends paid in other
than cash, per share of such class or series of Capital Stock
from the Determination Date through the Consummation Date in
an amount up to but not exceeding the amount of such interest
payable per share of such class or series of Capital Stock;
and
(b) the Fair Market Value per share of such class or series of
Capital Stock on the Announcement Date or on the Determination
Date, whichever is higher; and
(c) the highest preferential amount per share to which the
holders of shares of such class or series of
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Capital Stock would be entitled in the event of any
voluntary or involuntary liquidation, dissolution or winding
up of the affairs of the Corporation, regardless of whether
the Business Combination to be consummated constitutes such
an event.
(iii) The consideration to be received by holders of a particular
class or series of outstanding Capital Stock (including Common
Stock) shall be in cash or in the same form as previously has been
paid by or on behalf of the Interested Stockholder in its direct or
indirect acquisition of beneficial ownership of shares of such
class or series of Capital Stock. If the consideration so paid for
shares of any class or series of Capital Stock varied as to form,
the form of consideration for such class or series of Capital Stock
shall be either cash or the form used to acquire beneficial
ownership of the largest number of shares of such class or series
of Capital Stock previously acquired by the Interested Stockholder.
(iv) After such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business
Combination, such Interested Stockholder shall not have become the
beneficial owner of any additional shares of Capital Stock except
as part of the transaction that results in such Interested
Stockholder becoming an Interested Stockholder and except in a
transaction that, after giving effect thereto, would not result in
any increase in the Interested Stockholder's percentage beneficial
ownership of any class or series of Capital Stock; and, except as
approved by at least two-thirds of the Continuing Directors: (a)
there shall have been no failure to declare and pay at the regular
date therefor any full quarterly dividends (whether or not
cumulative) payable in accordance with the
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terms of any outstanding Capital Stock; (b) there shall have been
no reduction in the annual rate of dividends paid on the Common
Stock (except as necessary to reflect any stock split, stock
dividend or subdivision of the Common Stock); and (c) there shall
have been an increase in the annual rate of dividends paid on the
Common Stock as necessary to reflect any reclassification
(including any reverse stock split), recapitalization,
reorganization or any similar transaction which has the effect of
reducing the number of outstanding shares of Common Stock.
(v) After such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have received
the benefit, directly or indirectly (except proportionately as a
stockholder of the Corporation), of any loans, advances,
guarantees, pledges or other financial assistance or any tax
credits or other tax advantages provided by the Corporation,
whether in anticipation of or in connection with such Business
Combination or otherwise.
(vi) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations
thereunder (or any subsequent provisions replacing such Act, rules
or regulations) shall be mailed to all stockholders of the
Corporation at least 30 days prior to the consummation of such
Business Combination (whether or not such proxy or information
statement is required to be mailed pursuant to such Act or
subsequent provisions). The proxy or information statement shall
contain on the first page thereof, in a prominent place, any
statement as to the advisability of the Business Combination that
the Continuing Directors, or any of them, may choose to
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make and, if deemed advisable by at least two-thirds
of the Continuing Directors, the opinion of an investment banking
firm selected for and on behalf of the Corporation by at least
two-thirds of the Continuing Directors as to the fairness of the
terms of the Business Combination from a financial point of view to
the holders of the outstanding shares of Capital Stock other than
the Interested Stockholder and its Affiliates or Associates (as
hereinafter defined).
(vii) Such Interested Stockholder shall not have made any material
change in the Corporation's business or equity capital structure
without the approval of at least two-thirds of the Continuing
Directors.
Any Business Combination to which Section 1 of this Article Eleventh
shall not apply by reason of this Section 2 shall require only such
affirmative vote as is required by law, any other provision of this
Certificate of Incorporation, the by-laws of the Corporation or any
agreement with any national securities exchange.
3. Certain Definitions. For the purposes of this Article Eleventh:
A. A "Business Combination" shall mean:
(i) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with (i) any Interested Stockholder or (ii)
any other corporation (whether or not itself an Interested Stockholder)
which is, or after such merger or consolidation would be, an Affiliate
or Associate of an Interested Stockholder; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with
any Interested Stockholder or any Affiliate or Associate of any
Interested Stockholder involving any assets or securities
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<PAGE> 21
of the Corporation, any Subsidiary or any Interested Stockholder or
any Affiliate or Associate of any Interested Stockholder having an
aggregate Fair Market Value of $25,000,000 or more; or
(iii) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an
Interested Stockholder or any Affiliate or Associate of any
Interested Stockholder; or
(iv) any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any merger
or consolidation of the Corporation with any of its Subsidiaries or
any other transaction (whether or not with or into or otherwise
involving an Interested Stockholder) that has the effect, directly
or indirectly, of increasing the proportionate share of any class
or series of Capital Stock, or any securities convertible into
Capital Stock or into equity securities of any Subsidiary, that is
beneficially owned by any Interested Stockholder or any Affiliate
or Associate of any Interested Stockholder; or
(v) any agreement, contract, arrangement or other understanding
providing for any one or more of the actions specified in clauses
(i) through (iv) above.
B. A "person" shall mean any individual, firm, corporation or other entity
and shall include any group composed of any person and any other person
with whom such person or any Affiliate or Associate of such person has any
agreement, arrangement or understanding, directly or indirectly, for the
purpose of acquiring, holding, voting or disposing of Capital Stock.
C. "Interested Stockholder" shall mean any person (other than the
Corporation or any Subsidiary and other than any profit-sharing, employee
stock ownership or other employee benefit plan of the Corporation, any
Subsidiary or Rockwell International Corporation or any trustee of or
21
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fiduciary with respect to any such plan when acting in such capacity) who
or which:
(i) is the beneficial owner of Voting Stock having 10% or more of the
votes entitled to be cast by the holders of all then outstanding
shares of Voting Stock; or (ii) is an Affiliate or Associate of the
Corporation and at any time within the two-year period immediately
prior to the date in question was the beneficial owner of Voting Stock
having 10% or more of the votes entitled to be cast by the holders of
all then outstanding shares of Voting Stock; or
(iii) is an assignee of or has otherwise succeeded to any shares of
Voting Stock which were at any time within the two-year period
immediately prior to the date in question beneficially owned by any
Interested Stockholder, if such assignment or succession shall have
occurred in the course of a transaction or series of transactions not
involving a public offering within the meaning of the Securities Act of
1933.
D. A person shall be a "beneficial owner" of any Capital Stock:
(i) which such person or any Affiliate or Associate of such person
beneficially owns, directly or indirectly; or
(ii) which such person or any Affiliate or Associate of such person
has, directly or indirectly, (a) the right to acquire (whether such
right is exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise, or (b) the right to vote pursuant to any agreement,
arrangement or understanding; or
(iii) which are beneficially owned, directly or indirectly, by any
other person with which such person or any Affiliate or Associate of
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<PAGE> 23
such person has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any shares of
Capital Stock.
E. For the purposes of determining whether a person is an Interested
Stockholder pursuant to paragraph C of this Section 3, the number of shares
of Capital Stock deemed to be outstanding shall include shares deemed owned
by the Interested Stockholder through application of paragraph D of this
Section 3 but shall not include any other shares of Capital Stock that may
be issuable pursuant to any agreement, arrangement or understanding, or
upon exercise of conversion rights, warrants or options, or otherwise.
F. "Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on [ ], 1997 (the term
"registrant" in such Rule 12b-2 meaning in this case the Corporation).
G. "Subsidiary" means any corporation of which a majority of any class of
equity security is beneficially owned by the Corporation; provided,
however, that for the purposes of the definition of Interested Stockholder
set forth in paragraph C of this Section 3, the term "Subsidiary" shall
mean only a corporation of which a majority of each class of equity
security is beneficially owned by the Corporation.
H. "Continuing Director" means any member of the Board of Directors of the
Corporation (the "Board") who is not an Affiliate or Associate or
representative of the Interested Stockholder and was a member of the Board
prior to the time that the Interested Stockholder became an Interested
Stockholder, and any successor of a Continuing Director who is not an
Affiliate or Associate or representative of the Interested Stockholder and
is recommended or elected to succeed a Continuing Director by at least
two-thirds of the Continuing Directors then members of the Board.
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I. "Fair Market Value" means: (i) in the case of cash, the amount of such
cash; (ii) in the case of stock, the highest closing sale price during the
30-day period immediately preceding the date in question of a share of such
stock on the Composite Tape for New York Stock Exchange-Listed Stocks, or,
if such stock is not quoted on the Composite Tape, on the New York Stock
Exchange, or, if such stock is not listed on such Exchange, on the
principal United States securities exchange registered under the Securities
Exchange Act of 1934 on which such stock is listed, or, if such stock is
not listed on any such exchange, the highest closing bid quotation with
respect to a share of such stock during the 30-day period immediately
preceding the date in question on the National Association of Securities
Dealers, Inc., Automated Quotations System or any system then in use, or if
no such quotations are available, the fair market value on the date in
question of a share of such stock as determined in good faith by at least
two-thirds of the Continuing Directors; and (iii) in the case of property
other than cash or stock, the fair market value of such property on the
date in question as determined in good faith by at least two-thirds of the
Continuing Directors.
J. In the event of any Business Combination in which the Corporation
survives, the phrase "consideration other than cash to be received" as used
in paragraphs B(i) and (ii) of Section 2 of this Article Eleventh shall
include the shares of Common Stock and/or the shares of any other class or
series of Capital Stock retained by the holders of such shares.
4. Powers of Continuing Directors. Any determination as to compliance with
this Article Eleventh, including without limitation (A) whether a person is
an Interested Stockholder, (B) the number of shares of Capital Stock or
other securities beneficially owned by any person, (C) whether a person is
an Affiliate or Associate of another, (D) whether the requirements of
paragraph B of Section 2 have been met with respect to any Business
Combination, and (E) whether the assets that are the subject of any
Business Combination have, or the consideration to be received for the
issuance or
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transfer of securities by the Corporation or any Subsidiary in any Business
Combination has, an aggregate Fair Market Value of $25,000,000 or more
shall be made only upon action by not less than two-thirds of the
Continuing Directors of the Corporation; and the good faith determination
of at least two-thirds of the Continuing Directors on such matters shall be
conclusive and binding for all the purposes of this Article Eleventh.
5. No Effect on Fiduciary Obligations. Nothing contained in this Article
Eleventh shall be construed to relieve the Board of Directors or any
Interested Stockholder from any fiduciary obligation imposed by law.
6. Amendment, Repeal, etc. Notwithstanding any other provisions of this
Certificate of Incorporation or the by-laws of the Corporation (and
notwithstanding the fact that a lesser percentage or separate class vote
may be specified by law, this Certificate of Incorporation or the by-laws
of the Corporation), the affirmative vote of the holders of at least 80% of
the voting power of the then outstanding shares of Voting Stock, voting
together as a single class, shall be required to amend or repeal, or adopt
any provisions inconsistent with, this Article Eleventh; provided, however,
that the preceding provisions of this Section 6 shall not apply to any
amendment to this Article Eleventh, and such amendment shall require only
such affirmative vote as is required by law and any other provisions of
this Certificate of Incorporation or the by-laws of the Corporation, if
such amendment shall have been approved by at least two-thirds of the
members of the Board who are persons who would be eligible to serve as
Continuing Directors.
TWELFTH: Any action required or permitted to be taken by the stockholders shall
be taken only at an annual or special meeting of such stockholders and not by
consent in writing. Special meetings of the stockholders for any purpose or
purposes shall be called only by the Board of Directors pursuant to a resolution
adopted by a majority of the whole Board.
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<PAGE> 1
Exhibit 4.2
BY-LAWS
OF
[111 HOLDINGS, INC.]
ARTICLE I.
OFFICES
SECTION 1. REGISTERED OFFICE IN DELAWARE; RESIDENT AGENT. The
address of the Corporation's registered office in the State of Delaware and the
name and address of its resident agent in charge thereof are as filed with the
Secretary of State of the State of Delaware.
SECTION 2. OTHER OFFICES. The Corporation may also have an
office or offices at such other place or places either within or without the
State of Delaware as the Board of Directors may from time to time determine or
the business of the Corporation requires.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. All meetings of the stockholders
of the Corporation shall be held at such place, within or without the State of
Delaware, as may from time to time be designated by resolution passed by the
Board of Directors.
SECTION 2. ANNUAL MEETING. An annual meeting of the
stockholders for the election of directors and for the transaction of such other
proper business, notice of which was given in the notice of meeting, shall be
held on a date and at a time as may from time to time be designated by
resolution passed by the Board of Directors.
SECTION 3. SPECIAL MEETINGS. A special meeting of the
stockholders for any purpose or purposes shall be called only by the Board of
Directors pursuant to a resolution adopted by a majority of the whole Board.
SECTION 4. NOTICE OF MEETINGS. Except as otherwise provided by
law, written notice of each meeting of the stockholders, whether annual or
special, shall be
<PAGE> 2
mailed, postage prepaid, not less than ten nor more than sixty days before the
date of the meeting, to each stockholder entitled to vote at such meeting, at
the stockholder's address as it appears on the records of the Corporation. Every
such notice shall state the place, date and hour of the meeting and, in the case
of a special meeting, the purpose or purposes for which the meeting is called.
Notice of any adjourned meeting of the stockholders shall not be required to be
given, except when expressly required by law.
SECTION 5. LIST OF STOCKHOLDERS. The Secretary shall, from
information obtained from the transfer agent, prepare and make, at least ten
days before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or if not so specified, at the place where the meeting is
to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present. The stock ledger shall be the only evidence as to
who are the stockholders entitled to examine the stock ledger, the list referred
to in this section or the books of the Corporation, or to vote in person or by
proxy at any meeting of stockholders.
SECTION 6. QUORUM. At each meeting of the stockholders, the
holders of a majority of the issued and outstanding stock of the Corporation
present either in person or by proxy shall constitute a quorum for the
transaction of business except where otherwise provided by law or by the
Certificate of Incorporation or by these by-laws for a specified action. Except
as otherwise provided by law, in the absence of a quorum, a majority in interest
of the stockholders of the Corporation present in person or by proxy and
entitled to vote shall have the power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until stockholders
holding the requisite amount of stock
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<PAGE> 3
shall be present or represented. At any such adjourned meeting at which a quorum
may be present, any business may be transacted which might have been transacted
at a meeting as originally called, and only those stockholders entitled to vote
at the meeting as originally called shall be entitled to vote at any adjournment
or adjournments thereof. The absence from any meeting of the number of
stockholders required by law or by the Certificate of Incorporation or by these
by-laws for action upon any given matter shall not prevent action at such
meeting upon any other matter or matters which may properly come before the
meeting, if the number of stockholders required in respect of such other matter
or matters shall be present.
SECTION 7. ORGANIZATION. At every meeting of the stockholders
the Chairman of the Board, or in the absence of the Chairman of the Board, a
director or an officer of the Corporation designated by the Board shall act as
Chairman. The Secretary, or, in his absence, an Assistant Secretary, shall act
as Secretary at all meetings of the stockholders. In the absence from any such
meeting of the Secretary and the Assistant Secretaries, the Chairman may
appoint any person to act as Secretary of the meeting.
SECTION 8. NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS.
(A) Annual Meetings of Stockholders. (1) Nominations of
persons for election to the Board of Directors of the Corporation and the
proposal of business to be considered by the stockholders may be made at an
annual meeting of stockholders (a) pursuant to the Corporation's notice of
meeting, (b) by or at the direction of the Board of Directors or (c) by any
stockholder of the Corporation who was a stockholder of record at the time of
giving of notice provided for in this by-law, who is entitled to vote at the
meeting and who complies with the notice procedures set forth in this by-law.
(2) For nominations or other business to be properly
brought before an annual meeting by a stockholder pursuant to clause (c) of
paragraph (A)(1) of this by-law, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation and such other business
must otherwise be a
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proper matter for stockholder action. To be timely, a stockholder's notice shall
be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 60th day nor earlier
than the close of business on the 90th day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the case of the
annual meeting to be held in 1998 or in the event that the date of the annual
meeting is more than 30 days before or more than 60 days after such anniversary
date, notice by the stockholder to be timely must be so delivered not earlier
than the close of business on the 90th day prior to such annual meeting and not
later than the close of business on the later of the 60th day prior to such
annual meeting or the 10th day following the day on which public announcement of
the date of such meeting is first made by the Corporation. In no event shall the
public announcement of an adjournment of an annual meeting commence a new time
period for the giving of a stockholder's notice as described above. Such
stockholder's notice shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or reelection as a director all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors in an election contest, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and Rule 14a-11 thereunder
(including such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected); (b) as to any other
business that the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the stockholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is made
(i) the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner and (ii) the class and number
of shares of the Corporation which are owned beneficially and of record by such
stockholder and such beneficial owner.
Notwithstanding anything in the second sentence of paragraph
(A)(2) of this by-law to the contrary, in
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the event that the number of directors to be elected to the Board of Directors
of the Corporation is increased and there is no public announcement by the
Corporation naming all of the nominees for director or specifying the size of
the increased Board of Directors at least 70 days prior to the first anniversary
of the preceding year's annual meeting, a stockholder's notice required by this
by-law shall also be considered timely, but only with respect to nominees for
any new positions created by such increase, if it shall be delivered to the
Secretary at the principal executive offices of the Corporation not later than
the close of business on the 10th day following the day on which such public
announcement is first made by the Corporation.
(B) Special Meetings of Stockholders. Only such business shall
be conducted at a special meeting of stockholders as shall have been brought
before the meeting pursuant to the Corporation's notice of meeting. Nominations
of persons for election to the Board of Directors may be made at a special
meeting of stockholders at which directors are to be elected pursuant to the
Corporation's notice of meeting (a) by or at the direction of the Board of
Directors or (b) provided that the Board of Directors has determined that
directors shall be elected at such meeting, by any stockholder of the
Corporation who is a stockholder of record at the time of giving of notice
provided for in this by-law, who shall be entitled to vote at the meeting and
who complies with the notice procedures set forth in this by-law. In the event
the Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the Corporation's notice of meeting, if the
stockholder's notice required by paragraph (A)(2) of this by-law shall be
delivered to the Secretary at the principal executive offices of the Corporation
not earlier than the close of business on the 90th day prior to such special
meeting and not later than the close of business on the later of the 60th day
prior to such special meeting or the 10th day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting. In no
event shall the public announcement of an adjournment of
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a special meeting commence a new time period for the giving of a stockholder's
notice as described above.
(C) General. (1) Only such persons who are nominated in
accordance with the procedures set forth in this by-law shall be eligible to
serve as directors and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this by-law. Except as otherwise provided by law,
the Certificate of Incorporation or these by-laws, the Chairman of the meeting
shall have the power and duty to determine whether a nomination or any business
proposed to be brought before the meeting was made or proposed, as the case may
be, in accordance with the procedures set forth in this by-law and, if any
proposed nomination or business is not in compliance with this by-law, to
declare that such defective proposal or nomination shall be disregarded.
(2) For purposes of this by-law, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the Corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this
by-law, a stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this by-law. Nothing in this by-law shall be deemed to
affect any rights (i) of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or
(ii) of the holders of any series of Preferred Stock to elect directors under
specified circumstances.
SECTION 9. BUSINESS AND ORDER OF BUSINESS. At each meeting of
the stockholders such business may be transacted as may properly be brought
before such meeting, except as otherwise provided by law or in these by-laws.
The order of business at all meetings of the stockholders shall be as determined
by the Chairman, unless otherwise determined by a majority in interest of
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the stockholders present in person or by proxy at such meeting and entitled to
vote thereat.
SECTION 10. VOTING. Except as otherwise provided by law, the
Certificate of Incorporation or these by-laws, each stockholder shall at every
meeting of the stockholders be entitled to one vote for each share of stock held
by such stockholder. Any vote on stock may be given by the stockholder entitled
thereto in person or by proxy appointed by an instrument in writing, subscribed
(or transmitted by electronic means and authenticated as provided by law) by
such stockholder or by the stockholder's attorney thereunto authorized, and
delivered to the Secretary; provided, however, that no proxy shall be voted
after three years from its date unless the proxy provides for a longer period.
Except as otherwise provided by law, the Certificate of Incorporation or these
by-laws, at all meetings of the stockholders, all matters shall be decided by
the vote (which need not be by ballot) of a majority in interest of the
stockholders present in person or by proxy and entitled to vote thereat, a
quorum being present.
ARTICLE III.
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The property, affairs and business
of the Corporation shall be managed by or under the direction of its Board of
Directors.
SECTION 2. NUMBER, QUALIFICATIONS, AND TERM OF OFFICE.
Subject to the rights of the holders of any series of Preferred Stock to elect
additional directors under specified circumstances, the number of directors of
the Corporation shall be fixed from time to time exclusively by the Board of
Directors pursuant to a resolution adopted by a majority of the whole Board.
A director need not be a stockholder.
The directors, other than those who may be elected by the holders of any series
of Preferred Stock or any other series or class of stock, as provided herein or
in any Preferred Stock Designation (as defined in the Certificate of
Incorporation), shall be divided into three classes, as nearly equal in number
as possible. One class of directors shall be initially elected for a term
expiring at the annual meeting of stockholders to be
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held in 1998, another class shall be initially elected for a term expiring at
the annual meeting of stockholders to be held in 1999, and another class shall
be initially elected for a term expiring at the annual meeting of stockholders
to be held in 2000. Members of each class shall hold office until their
successors are elected and shall have qualified. At each annual meeting of the
stockholders of the Corporation, commencing with the 1998 annual meeting, the
successors of the class of directors whose term expires at that meeting shall be
elected by a plurality vote of all votes cast for the election of directors at
such meeting to hold office for a term expiring at the annual meeting of
stockholders held in the third year following the year of their election.
SECTION 3. ELECTION OF DIRECTORS. At each meeting of the
stockholders for the election of directors, at which a quorum is present, the
directors shall be elected by a plurality vote of all votes cast for the
election of directors at such meeting.
SECTION 4. QUORUM AND MANNER OF ACTING. A majority of the
members of the Board of Directors shall constitute a quorum for the transaction
of business at any meeting, and the act of a majority of the directors present
at any meeting at which a quorum is present shall be the act of the Board of
Directors unless otherwise provided by law, the Certificate of Incorporation
or these by-laws. In the absence of a quorum, a majority of the directors
present may adjourn any meeting from time to time until a quorum shall be
obtained. Notice of any adjourned meeting need not be given. The directors
shall act only as a board and the individual directors shall have no power as
such.
SECTION 5. PLACE OF MEETINGS. The Board of Directors may hold
its meetings at such place or places within or without the State of Delaware as
the Board may from time to time determine or as shall be specified or fixed in
the respective notices or waivers of notice thereof.
SECTION 6. FIRST MEETING. Promptly after each annual election
of directors, the Board of Directors shall meet for the purpose of organization,
the election of officers and the transaction of other business, at the same
place as that at which the annual meeting of stockholders was held or as
otherwise determined by the
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Board. Notice of such meeting need not be given. Such meeting may be held at any
other time or place which shall be specified in a notice given as hereinafter
provided for special meetings of the Board of Directors.
SECTION 7. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at such places and at such times as the Board shall from
time to time determine. If any day fixed for a regular meeting shall be a legal
holiday at the place where the meeting is to be held, then the meeting which
would otherwise be held on that day shall be held at the same hour on the next
succeeding business day not a legal holiday. Notice of regular meetings need not
be given.
SECTION 8. SPECIAL MEETINGS; NOTICE. Special meetings of the
Board of Directors shall be held whenever called by the Chairman of the Board
and shall be called by the Chairman of the Board or the Secretary at the written
request of three directors. Notice of each such meeting stating the time and
place of the meeting shall be given to each director by mail, telephone, other
electronic transmission or personally. If by mail, such notice shall be given
not less than five days before the meeting; and if by telephone, other
electronic transmission or personally, not less than two days before the
meeting. A notice mailed at least two weeks before the meeting need not state
the purpose thereof except as otherwise provided in these by-laws. In all other
cases the notice shall state the principal purpose or purposes of the meeting.
Notice of any meeting of the Board need not be given to a director, however, if
waived by the director in writing before or after such meeting or if the
director shall be present at the meeting, except when the director attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened.
SECTION 9. ORGANIZATION. At each meeting of the Board of
Directors, the Chairman of the Board, or, in the absence of the Chairman of the
Board, a director or an officer of the Corporation designated by the Board shall
act as Chairman. The Secretary, or, in the Secretary's absence, any person
appointed by the Chairman, shall act as Secretary of the meeting.
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SECTION 10. ORDER OF BUSINESS. At all meetings of the Board of
Directors, business shall be transacted in the order determined by the Board.
SECTION 11. RESIGNATIONS. Any director of the Corporation may
resign at any time by giving written notice to the Chairman of the Board or the
Secretary of the Corporation. The resignation of any director shall take effect
at the time specified therein, and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 12. COMPENSATION. Each director shall be paid such
compensation, if any, as shall be fixed by the Board of Directors.
SECTION 13. INDEMNIFICATION OF DIRECTORS AND OFFICERS. (A) The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Corporation) by reason of the fact that such
person is or was a director, officer, employee or agent of the Corporation or is
or was serving at the request of the Corporation as a director, officer,
employee or agent (except in each of the foregoing situations to the extent any
agreement, arrangement or understanding of agency contains provisions that
supersede or abrogate indemnification under this section) of another corporation
or of any partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
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criminal action or proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
(B) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent (except
in each of the foregoing situations to the extent any agreement, arrangement or
understanding of agency contains provisions that supersede or abrogate
indemnification under this section) of another corporation or of any
partnership, joint venture, trust, employee benefit plan or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit
if such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the Corporation and
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery of Delaware
or the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery of Delaware or such
other court shall deem proper.
(C) To the extent that a director, officer, employee or agent
of the Corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (A) and (B), or in
defense of any claim, issue or matter therein, such person shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
or
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on behalf of such person in connection therewith. If any such person is not
wholly successful in any such action, suit or proceeding but is successful, on
the merits or otherwise, as to one or more but less than all claims, issues or
matters therein, the Corporation shall indemnify such person against all
expenses (including attorneys' fees) actually and reasonably incurred by or on
behalf of such person in connection with each claim, issue or matter that is
successfully resolved. For purposes of this subsection and without limitation,
the termination of any claim, issue or matter by dismissal, with or without
prejudice, shall be deemed to be a successful result as to such claim, issue or
matter.
(D) Notwithstanding any other provision of this section, to
the extent any person is a witness in, but not a party to, any action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that such person is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent (except in each of the foregoing situations
to the extent any agreement, arrangement or understanding of agency contains
provisions that supersede or abrogate indemnification under this section) of
another corporation or of any partnership, joint venture, trust, employee
benefit plan or other enterprise, such person shall be indemnified against all
expenses (including attorneys' fees) actually and reasonably incurred by or on
behalf of such person in connection therewith.
(E) Indemnification under subsections (A) and (B) (unless
ordered by a court) shall be made only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because such person has met the applicable
standard of conduct set forth in subsections (A) and (B). Such determination
shall be made (1) if a Change of Control (as hereinafter defined) shall not have
occurred, (a) by the Board of Directors by a majority vote of the Disinterested
Directors (as hereinafter defined), even though less than a quorum or (b) if
there are no Disinterested Directors or, even if there are Disinterested
Directors, a majority of such Disinterested Directors so directs, by (i)
Independent Counsel (as hereinafter defined) in a written opinion to the Board
of Directors, a copy of which shall be delivered to the claimant, or (ii) the
stockholders of the Corporation; or (2) if a Change of Control shall have
occurred, by Independent Counsel selected by the claimant in a written opinion
to the Board of Directors, a copy of which shall be delivered to the claimant,
unless the claimant shall request that such determination be made by or at the
direction of the Board of Directors, in which
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case it shall be made in accordance with clause (1) of this sentence. Any
claimant shall be entitled to be indemnified against the expenses (including
attorneys' fees) actually and reasonably incurred by such claimant in
cooperating with the person or entity making the determination of entitlement to
indemnification (irrespective of the determination as to the claimant's
entitlement to indemnification) and, to the extent successful, in connection
with any litigation or arbitration with respect to such claim or the enforcement
thereof.
(F) If a Change of Control shall not have occurred, or if a
Change of Control shall have occurred and a director, officer, employee or agent
requests pursuant to clause (2) of the second sentence in subsection (E) that
the determination whether the claimant is entitled to indemnification be made by
or at the direction of the Board of Directors, the claimant shall be
conclusively presumed to have been determined pursuant to subsection (E) to be
entitled to indemnification if (1)(a) within fifteen days after the next
regularly scheduled meeting of the Board of Directors following receipt by the
Corporation of the request therefor, the Board of Directors shall not have
resolved by majority vote of the Disinterested Directors to submit such
determination to (i) Independent Counsel for its determination or (ii) the
stockholders for their determination at the next annual meeting, or any special
meeting that may be held earlier, after such receipt, and (b) within sixty days
after receipt by the Corporation of the request therefor (or within ninety days
after such receipt if the Board of Directors in good faith determines that
additional time is required by it for the determination and, prior to expiration
of such sixty-day period, notifies the claimant thereof), the Board of Directors
shall not have made the determination by a majority vote of the Disinterested
Directors, or (2) after a resolution of the Board of Directors, timely made
pursuant to clause (1)(a)(ii) above, to submit the determination to the
stockholders, the stockholders meeting at which the determination is to be made
shall not have been held on or before the date prescribed (or on or before a
later date, not to exceed sixty days beyond the original date, to which such
meeting may have been postponed or adjourned on good cause by the Board of
Directors acting in good faith); provided, however, that this sentence shall not
apply if the claimant has
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misstated or failed to state a material fact in connection with his or her
request for indemnification. Such presumed determination that a claimant is
entitled to indemnification shall be deemed to have been made (I) at the end of
the sixty-day or ninety-day period (as the case may be) referred to in clause
(1)(b) of the immediately preceding sentence or (II) if the Board of Directors
has resolved on a timely basis to submit the determination to the stockholders,
on the last date within the period prescribed by law for holding such
stockholders meeting (or a postponement or adjournment thereof as permitted
above).
(G) Expenses (including attorneys' fees) incurred in defending
a civil, criminal, administrative or investigative action, suit or proceeding
shall be paid by the Corporation in advance of the final disposition of such
action, suit or proceeding to a director or officer, promptly after receipt of a
request therefor stating in reasonable detail the expenses incurred, and to an
employee or agent as authorized by the Board of Directors; provided that in each
case the Corporation shall have received an undertaking by or on behalf of the
director, officer, employee or agent to repay such amount if it shall ultimately
be determined that such person is not entitled to be indemnified by the
Corporation as authorized in this section.
(H) The Board of Directors shall establish reasonable
procedures for the submission of claims for indemnification pursuant to this
section, determination of the entitlement of any person thereto and review of
any such determination. Such procedures shall be set forth in an appendix to
these by-laws and shall be deemed for all purposes to be a part hereof.
(I) For purposes of this section,
(1) "Change of Control" means a change of control of the
Corporation at any time after the distribution of the shares of capital stock of
the Corporation to the holders of capital stock of Rockwell International
Corporation (the "Distribution") of a nature that would be required to be
reported in a proxy statement pursuant to Section 14(a) of the Exchange Act or
in a Form 8-K pursuant to Section 13 of the Exchange Act (or in any similar form
or schedule under either of those provisions or any successor provision),
whether or
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not the Corporation is then subject to such reporting requirement; provided,
however, that, without limitation, a Change of Control shall be deemed to have
occurred if (i) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 20% or more of the combined voting power of the
Corporation's then outstanding securities without the prior approval of at least
two-thirds of the members of the Board of Directors in office immediately prior
to such person attaining such percentage interest; (ii) the Corporation is a
party to a merger, consolidation, sale of assets or other reorganization, or a
proxy contest, as a consequence of which members of the Board of Directors in
office immediately prior to such transaction or event constitute less than a
majority of the Board of Directors immediately thereafter; or (iii) during any
period of two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors (including for this purpose any director
whose election became effective prior to or at the time of the Distribution and
any new director whose election or nomination for election by the Corporation's
stockholders was approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of such period) cease for
any reason to constitute at least a majority of the Board of Directors.
(2) "Disinterested Director" means a director of the
Corporation who is not and was not a party to an action, suit or proceeding in
respect of which indemnification is sought by a director, officer, employee or
agent.
(3) "Independent Counsel" means a law firm, or a member of a
law firm, that (i) is experienced in matters of corporation law; (ii) neither
presently is, nor in the past five years has been, retained to represent the
Corporation, the director, officer, employee or agent claiming indemnification
or any other party to the action, suit or proceeding giving rise to a claim for
indemnification under this section, in any matter material to the Corporation,
the claimant or any such other party; and (iii) would not, under applicable
standards of professional conduct then prevailing, have a conflict of interest
in representing either the
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Corporation or such director, officer, employee or agent in an action to
determine the Corporation's or such person's rights under this section.
(J) The indemnification and advancement of expenses herein
provided, or granted pursuant hereto, shall not be deemed exclusive of any other
rights to which any of those indemnified or eligible for advancement of expenses
may be entitled under any agreement, vote of stockholders or Disinterested
Directors or otherwise, both as to action in such person's official capacity and
as to action in another capacity while holding such office, and shall continue
as to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of such
person. Notwithstanding any amendment, alteration or repeal of this section or
any of its provisions, or of any of the procedures established by the Board of
Directors pursuant to subsection (H) hereof, any person who is or was a
director, officer, employee or agent of the Corporation or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation or of any partnership, joint venture, employee benefit plan
or other enterprise shall be entitled to indemnification in accordance with the
provisions hereof and thereof with respect to any action taken or omitted prior
to such amendment, alteration or repeal except to the extent otherwise required
by law.
(K) No indemnification shall be payable pursuant to this
section with respect to any action against the Corporation commenced by an
officer, director, employee or agent unless the Board of Directors shall have
authorized the commencement thereof or unless and to the extent that this
section or the procedures established pursuant to subsection (H) shall
specifically provide for indemnification of expenses relating to the enforcement
of rights under this section and such procedures.
ARTICLE IV.
COMMITTEES
SECTION 1. APPOINTMENT AND POWERS. The Board of Directors may,
by resolution passed by a majority of the whole Board, designate one or more
committees, each
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committee to consist of two or more directors of the Corporation, which, to the
extent provided in said resolution or in these by-laws and not inconsistent with
Section 141 of the Delaware General Corporation Law, as amended, shall have and
may exercise the powers of the Board of Directors in the management of the
business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the Board of Directors.
SECTION 2. TERM OF OFFICE AND VACANCIES. Each member of a
committee shall continue in office until a director to succeed him or her shall
have been elected and shall have qualified, or until he or she ceases to be a
director or until he or she shall have resigned or shall have been removed in
the manner hereinafter provided. Any vacancy in a committee shall be filled by
the vote of a majority of the whole Board of Directors at any regular or special
meeting thereof.
SECTION 3. ALTERNATES. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee.
SECTION 4. ORGANIZATION. Unless otherwise provided by the
Board of Directors, each committee shall appoint a chairman. Each committee
shall keep a record of its acts and proceedings and report the same from time to
time to the Board of Directors.
SECTION 5. RESIGNATIONS. Any regular or alternate member of a
committee may resign at any time by giving written notice to the Chairman of the
Board or the Secretary of the Corporation. Such resignation shall take effect
at the time of the receipt of such notice or at any later time specified
therein, and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 6. REMOVAL. Any regular or alternate member of a
committee may be removed with or without cause at any time by resolution passed
by a majority of the whole Board of Directors at any regular or special meeting.
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SECTION 7. MEETINGS. Regular meetings of each committee, of
which no notice shall be necessary, shall be held on such days and at such
places as the chairman of the committee shall determine or as shall be fixed by
a resolution passed by a majority of all the members of such committee. Special
meetings of each committee will be called by the Secretary at the request of any
two members of such committee, or in such other manner as may be determined by
the committee. Notice of each special meeting of a committee shall be mailed to
each member thereof at least two days before the meeting or shall be given
personally or by telephone or other electronic transmission at least one day
before the meeting. Every such notice shall state the time and place, but need
not state the purposes of the meeting. No notice of any meeting of a committee
shall be required to be given to any alternate.
SECTION 8. QUORUM AND MANNER OF ACTING. Unless otherwise
provided by resolution of the Board of Directors, a majority of a committee
(including alternates when acting in lieu of regular members of such committee)
shall constitute a quorum for the transaction of business and the act of a
majority of those present at a meeting at which a quorum is present shall be the
act of such committee. The members of each committee shall act only as a
committee and the individual members shall have no power as such.
SECTION 9. COMPENSATION. Each regular or alternate member of a
committee shall be paid such compensation, if any, as shall be fixed by the
Board of Directors.
ARTICLE V.
OFFICERS
SECTION 1. OFFICERS. The officers of the Corporation shall be
a Chairman of the Board of Directors, who shall be chosen from the members of
the Board of Directors, one or more Vice Presidents (one or more of whom may be
Executive Vice Presidents, Senior Vice Presidents or otherwise as may be
designated by the Board), a Secretary and a Treasurer, all of whom shall be
elected by the Board of Directors. Any two or more offices may be held by the
same person. The Board of
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Directors may also from time to time elect such other officers as it deems
necessary.
SECTION 2. TERM OF OFFICE. Each officer shall hold office
until his or her successor shall have been duly elected and qualified in his or
her stead, or until his or her death or until he or she shall have resigned or
shall have been removed in the manner hereinafter provided.
SECTION 3. ADDITIONAL OFFICERS; AGENTS. The Chairman of the
Board may from time to time appoint and remove such additional officers and
agents as may be deemed necessary. Such persons shall hold office for such
period, have such authority, and perform such duties as in these by-laws
provided or as the Chairman of the Board may from time to time prescribe. The
Board of Directors or the Chairman of the Board may from time to time authorize
any officer to appoint and remove agents and employees and to prescribe their
powers and duties.
SECTION 4. SALARIES. Unless otherwise provided by resolution
passed by a majority of the whole Board, the salaries of all officers elected
by the Board of Directors shall be fixed by the Board of Directors.
SECTION 5. REMOVAL. Except where otherwise expressly provided
in a contract authorized by the Board of Directors, any officer may be removed,
either with or without cause, by the vote of a majority of the Board at any
regular or special meeting or, except in the case of an officer elected by the
Board, by any superior officer upon whom the power of removal may be conferred
by the Board or by these by-laws.
SECTION 6. RESIGNATIONS. Any officer elected by the Board of
Directors may resign at any time by giving written notice to the Chairman of the
Board or the Secretary. Any other officer may resign at any time by giving
written notice to the Chairman of the Board. Any such resignation shall take
effect at the date of receipt of such notice or at any later time specified
therein, and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 7. VACANCIES. A vacancy in any office because of
death, resignation, removal or otherwise,
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shall be filled for the unexpired portion of the term in the manner provided
in these by-laws for regular election or appointment to such office.
SECTION 8. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of
the Board of Directors shall be chief executive officer of the Corporation and,
subject to the control of the Board of Directors, shall have general and overall
charge of the business and affairs of the Corporation and of its officers. He
shall keep the Board of Directors appropriately informed on the business and
affairs of the Corporation. He shall preside at all meetings of the stockholders
and of the Board of Directors and shall enforce the observance of the rules
of order for the meetings of the Board and the stockholders and the by-laws of
the Corporation.
SECTION 9. EXECUTIVE AND SENIOR VICE PRESIDENTS. One or more
Executive or Senior Vice Presidents shall, subject to the control of the
Chairman of the Board, have lead accountability for components or functions of
the Corporation as and to the extent designated by the Chairman of the Board.
Each Executive or Senior Vice President shall keep the Chairman of the Board
appropriately informed on the business and affairs of the designated components
or functions of the Corporation.
SECTION 10. VICE PRESIDENTS. The Vice Presidents shall perform
such duties as may from time to time be assigned to them or any of them by the
Chairman of the Board.
SECTION 11. SECRETARY. The Secretary shall keep or cause to be
kept in books provided for the purpose the minutes of the meetings of the
stockholders, of the Board of Directors and of any committee constituted
pursuant to Article IV of these by-laws. The Secretary shall be custodian of the
corporate seal and see that it is affixed to all documents as required and
attest the same. The Secretary shall perform all duties incident to the office
of Secretary and such other duties as from time to time may be assigned to him
or her.
SECTION 12. ASSISTANT SECRETARIES. At the request of the
Secretary, or in his or her absence or disability, the Assistant Secretary
designated by him or her shall perform all the duties of the Secretary and,
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when so acting, shall have all the powers of, and be subject to all the
restrictions upon, the Secretary. The Assistant Secretaries shall perform
such other duties as from time to time may be assigned to them.
SECTION 13. TREASURER. The Treasurer shall have charge of and
be responsible for the receipt, disbursement and safekeeping of all funds and
securities of the Corporation. The Treasurer shall deposit all such funds in the
name of the Corporation in such banks, trust companies or other depositories as
shall be selected in accordance with the provisions of these by-laws. From time
to time and whenever requested to do so, the Treasurer shall render statements
of the condition of the finances of the Corporation to the Board of Directors.
The Treasurer shall perform all the duties incident to the office of Treasurer
and such other duties as from time to time may be assigned to him or her.
SECTION 14. ASSISTANT TREASURERS. At the request of the
Treasurer, or in his or her absence or disability, the Assistant Treasurer
designated by him or her shall perform all the duties of the Treasurer and, when
so acting, shall have all the powers of, and be subject to all the restrictions
upon, the Treasurer. The Assistant Treasurers shall perform such other duties as
from time to time may be assigned to them.
SECTION 15. CERTAIN AGREEMENTS. The Board of Directors shall
have power to authorize or direct the proper officers of the Corporation, on
behalf of the Corporation, to enter into valid and binding agreements in respect
of employment, incentive or deferred compensation, stock options, and similar or
related matters, notwithstanding the fact that a person with whom the
Corporation so contracts may be a member of its Board of Directors. Any such
agreement may validly and lawfully bind the Corporation for a term of more than
one year, in accordance with its terms, notwithstanding the fact that one of the
elements of any such agreement may involve the employment by the Corporation of
an officer, as such, for such term.
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ARTICLE VI.
AUTHORIZATIONS
SECTION 1. CONTRACTS. The Board of Directors, except as in
these by-laws otherwise provided, may authorize any officer, employee or agent
of the Corporation to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Corporation, and such authority
may be general or confined to specific instances.
SECTION 2. LOANS. No loan shall be contracted on behalf of the
Corporation and no negotiable paper shall be issued in its name, unless
authorized by the Board of Directors.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other
orders for the payment of money, notes or other evidences of indebtedness issued
in the name of the Corporation shall be signed by such officer or officers,
employee or employees, of the Corporation as shall from time to time be
determined in accordance with authorization of the Board of Directors.
SECTION 4. DEPOSITS. All funds of the Corporation shall be
deposited from time to time to the credit of the Corporation in such banks,
trust companies or other depositories as the Board of Directors may from time to
time designate, or as may be designated by any officer or officers of the
Corporation to whom such power may be delegated by the Board, and for the
purpose of such deposit the officers and employees who have been authorized to
do so in accordance with the determinations of the Board may endorse, assign and
deliver checks, drafts, and other orders for the payment of money which are
payable to the order of the Corporation.
SECTION 5. PROXIES. Except as otherwise provided in these
by-laws or in the Certificate of Incorporation, and unless otherwise provided by
resolution of the Board of Directors, the Chairman of the Board or any other
officer may from time to time appoint an attorney or attorneys or agent or
agents of the Corporation, in the name and on behalf of the Corporation to cast
the votes which the Corporation may be entitled to cast as a stockholder or
otherwise in any other corporation any of whose stock or other securities may be
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held by the Corporation, at meetings of the holders of the stock or other
securities of such other corporations, or to consent in writing to any action by
such other corporation, and may instruct the person or persons so appointed as
to the manner of casting such vote or giving such consent, and may execute or
cause to be executed in the name and on behalf of the Corporation and under its
corporate seal, or otherwise, all such written proxies or other instruments as
he may deem necessary or proper in the premises.
ARTICLE VII.
SHARES AND THEIR TRANSFER
SECTION 1. SHARES OF STOCK. The shares of the stock of the
Corporation shall be uncertificated shares, provided that the Board of Directors
may by resolution or resolutions provide that some or all of any or all classes
or series of the shares of stock of the Corporation shall be represented by
certificates. Notwithstanding the preceding sentence, every holder of
uncertificated shares, upon request, shall be entitled to receive from the
Corporation a certificate representing the number of shares registered in such
stockholder's name on the books of the Corporation. Certificates for shares of
the stock of the Corporation shall be in such form as shall be approved by the
Board of Directors. They shall be numbered in the order of their issue, by class
and series, and shall be signed by the Chairman of the Board or a Vice
President, and the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary, of the Corporation. If a transaction statement for
uncertificated shares or a share certificate is countersigned (1) by a
transfer agent other than the Corporation or its employee, or (2) by a
registrar other than the Corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
transaction statement or a certificate shall have ceased to be such officer,
transfer agent, or registrar before such transaction statement or certificate is
issued, it may be issued by the Corporation with the same effect as if such
person were such officer, transfer agent, or registrar at the date of issue.
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SECTION 2. RECORD OWNERSHIP. A record of the name and address
of each holder of the shares of the Corporation, the number of shares held by
such stockholder, the number or numbers of any share certificate or certificates
issued to such stockholder and the number of shares represented thereby, and the
date of issuance of the shares held by such stockholder shall be made on the
Corporation's books. The Corporation shall be entitled to treat the holder of
record of any share of stock as the holder in fact thereof and accordingly shall
not be bound to recognize any equitable or other claim to or interest in such
share on the part of any other person, whether or not it shall have express or
other notice thereof, except as required by law.
SECTION 3. TRANSFER OF STOCK. Shares of stock shall be
transferable on the books of the Corporation by the holder of record of such
stock in person or by such person's attorney or other duly constituted
representative, pursuant to applicable law and such rules and regulations as the
Board of Directors shall from time to time prescribe. Any shares represented by
a certificate shall be transferable upon surrender of such certificate with an
assignment endorsed thereon or attached thereto duly executed and with such
guarantee of signature as the Corporation may reasonably require.
SECTION 4. LOST, STOLEN AND DESTROYED CERTIFICATES. The
Corporation may issue a new certificate of stock or may register uncertificated
shares in the place of any certificate theretofore issued by it, alleged to have
been lost, stolen or destroyed, and the Corporation may require the owner of the
lost, stolen or destroyed certificate, or such person's legal representative, to
give the Corporation a bond sufficient to indemnify it against any claim that
may be made against it on account of the alleged loss, theft or destruction of
any such certificate, the issuance of such new certificate or the registration
of such uncertificated shares.
SECTION 5. TRANSFER AGENT AND REGISTRAR; REGULATIONS. The
Corporation shall, if and whenever the Board of Directors shall so determine,
maintain one or more transfer offices or agencies, each in charge of a transfer
agent designated by the Board of Directors, where the shares of the stock of the
Corporation shall be
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directly transferable, and also one or more registry offices, each in charge of
a registrar designated by the Board of Directors, where such shares of stock
shall be registered, and no transaction statement for uncertificated shares of
stock of the corporation or certificate for shares of the stock of the
Corporation, in respect of which a registrar and transfer agent shall have been
designated, shall be valid unless countersigned by such transfer agent and
registered by such registrar. The Board of Directors may also make such
additional rules and regulations as it may deem expedient concerning the issue,
transfer and registration of shares of stock of the Corporation and concerning
the registration of pledges of uncertificated shares.
SECTION 6. FIXING RECORD DATE. For the purpose of determining
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than sixty nor less than ten days before
the date of such meeting, nor more than sixty days prior to any other action. If
no record date is fixed (1) the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held and (2) the record date for determining
stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
SECTION 7. EXAMINATION OF BOOKS BY STOCKHOLDERS. The Board of
Directors shall, subject to the laws of the State of Delaware, have power to
determine from time to time, whether and to what extent and under what
conditions and regulations the accounts and books of the Corporation, or any of
them, shall be
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open to the inspection of the stockholders; and no stockholder shall have any
right to inspect any book or document of the Corporation, except as conferred
by the laws of the State of Delaware, unless and until authorized so to do by
resolution of the Board of Directors or of the stockholders of the Corporation.
ARTICLE VIII.
NOTICE
SECTION 1. MANNER OF GIVING WRITTEN NOTICE. Any notice in
writing required by law or by these by-laws to be given to any person may be
delivered personally, may be transmitted by electronic means or may be given by
depositing the same in the post office or letter box in a postpaid envelope
addressed to such person at such address as appears on the books of the
Corporation. Notice by mail shall be deemed to be given at the time when the
same shall be mailed, and notice by other means shall be deemed given when
actually delivered (and in the case of notice transmitted by electronic means,
when authenticated if and as required by law).
SECTION 2. WAIVER OF NOTICE. Whenever any notice is required
to be given to any person, a waiver thereof by such person in writing or
transmitted by electronic means (and authenticated if and as required by law),
whether before or after the time stated therein, shall be deemed equivalent
thereto.
ARTICLE IX.
SEAL
The corporate seal shall have inscribed thereon the name of
the Corporation, the year of its organization and the words "Corporate Seal" and
"Delaware".
ARTICLE X.
FISCAL YEAR
The fiscal year of the Corporation shall begin on the first day of October in
each year.
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APPENDIX
PROCEDURES FOR SUBMISSION AND
DETERMINATION OF CLAIMS FOR INDEMNIFICATION
PURSUANT TO ARTICLE III, SECTION 13 OF THE BY-LAWS.
SECTION 1. PURPOSE. The Procedures for Submission and
Determination of Claims for Indemnification Pursuant to Article III, Section 13
of the by-laws (the "Procedures") are to implement the provisions of Article
III, Section 13 of the by-laws of the Corporation (the "by-laws") in compliance
with the requirement of subsection (H) thereof.
SECTION 2. DEFINITIONS. For purposes of these Procedures:
(A) All terms that are defined in Article III, Section 13 of
the by-laws shall have the meanings ascribed to them therein when used in these
Procedures unless otherwise defined herein.
(B) "Expenses" include all reasonable attorneys' fees, court
costs, transcript costs, fees of experts, witness fees, travel expenses,
duplicating costs, printing and binding costs, telephone charges, postage,
delivery service fees, and all other disbursements or expenses of the types
customarily incurred in connection with prosecuting, defending, preparing to
prosecute or defend, investigating, or being or preparing to be a witness in, a
Proceeding; and shall also include such retainers as counsel may reasonably
require in advance of undertaking the representation of an indemnitee in a
Proceeding.
(C) "Indemnitee" includes any person who was or is, or is
threatened to be made, a witness in or a party to any Proceeding by reason of
the fact that such person is or was a director, officer, employee or agent of
the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent (except in each of the foregoing
situations to the extent any agreement, arrangement or understanding of agency
contains provisions that supersede or abrogate indemnification under Article
III, Section 13 of the by-laws) of another corporation or of any partnership,
joint venture, trust, employee benefit plan or other enterprise.
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(D) "Proceeding" includes any action, suit, arbitration,
alternative dispute resolution mechanism, investigation, administrative hearing
or any other proceeding, whether civil, criminal, administrative or
investigative, except one initiated by an Indemnitee unless the Board of
Directors shall have authorized the commencement thereof.
SECTION 3. SUBMISSION AND DETERMINATION OF CLAIMS.
(A) To obtain indemnification or advancement of Expenses under
Article III, Section 13 of the by-laws, an Indemnitee shall submit to the
Secretary of the Corporation a written request therefor, including therein or
therewith such documentation and information as is reasonably available to the
Indemnitee and is reasonably necessary to permit a determination as to whether
and what extent the Indemnitee is entitled to indemnification or advancement of
Expenses, as the case may be. The Secretary shall, promptly upon receipt of a
request for indemnification, advise the Board of Directors thereof in writing if
a determination in accordance with Article III, Section 13(E) of the by-laws is
required.
(B) Upon written request by an Indemnitee for indemnification
pursuant to Section 3(A) hereof, a determination with respect to the
Indemnitee's entitlement thereto in the specific case, if required by the
by-laws, shall be made in accordance with Article III, Section 13(E) of the
by-laws, and, if it is so determined that the Indemnitee is entitled to
indemnification, payment to the Indemnitee shall be made within ten days after
such determination. The Indemnitee shall cooperate with the person, persons or
entity making such determination, with respect to the Indemnitee's entitlement
to indemnification, including providing to such person, persons or entity upon
reasonable advance request any documentation or information which is not
privileged or otherwise protected from disclosure and which is reasonably
available to the Indemnitee and reasonably necessary to such determination.
(C) If entitlement to indemnification is to be made by
Independent Counsel pursuant to Article III, Section 13(E) of the by-laws, the
Independent Counsel shall be selected as provided in this Section 3(C). If a
Change of Control shall not have occurred, the
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Independent Counsel shall be selected by the Board of Directors, and the
Corporation shall give written notice to the Indemnitee advising the Indemnitee
of the identity of the Independent Counsel so selected. If a Change of Control
shall have occurred, the Independent Counsel shall be selected by the Indemnitee
(unless the Indemnitee shall request that such selection be made by the Board of
Directors, in which event the immediately preceding sentence shall apply), and
the Indemnitee shall give written notice to the Corporation advising it of the
identity of the Independent Counsel so selected. In either event, the Indemnitee
or the Corporation, as the case may be, may, within seven days after such
written notice of selection shall have been given, deliver to the Corporation or
to the Indemnitee, as the case may be, a written objection to such selection.
Such objection may be asserted only on the ground that the Independent Counsel
so selected does not meet the requirements of "Independent Counsel" as defined
in Article III, Section 13 of the by-laws, and the objection shall set forth
with particularity the factual basis of such assertion. If such written
objection is made, the Independent Counsel so selected may not serve as
Independent Counsel unless and until a court has determined that such objection
is without merit. If, within twenty days after the next regularly scheduled
Board of Directors meeting following submission by the Indemnitee of a written
request for indemnification pursuant to Section 3(A) hereof, no Independent
Counsel shall have been selected and not objected to, either the Corporation or
the Indemnitee may petition the Court of Chancery of the State of Delaware or
other court of competent jurisdiction for resolution of any objection which
shall have been made by the Corporation or the Indemnitee to the other's
selection of Independent Counsel and/or for the appointment as Independent
Counsel of a person selected by the Court or by such other person as the Court
shall designate, and the person with respect to whom an objection is favorably
resolved or the person so appointed shall act as Independent Counsel under
Article III, Section 13(E) of the by-laws. The Corporation shall pay any and all
reasonable fees and expenses (including without limitation any advance retainers
reasonably required by counsel) of Independent Counsel incurred by such
Independent Counsel in connection with acting pursuant to Article III, Section
13(E) of the by-laws, and the Corporation shall pay all reasonable fees and
expenses (including without limitation any advance retainers
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reasonably required by counsel) incident to the procedures of Article III,
Section 13(E) of the by-laws and this Section 3(C), regardless of the manner in
which Independent Counsel was selected or appointed. Upon the delivery of its
opinion pursuant to Article III, Section 13 of the by-laws or, if earlier, the
due commencement of any judicial proceeding or arbitration pursuant to Section
4(A)(3) of these Procedures, Independent Counsel shall be discharged and
relieved of any further responsibility in such capacity (subject to the
applicable standards of professional conduct then prevailing).
(D) If a Change of Control shall have occurred, in making a
determination with respect to entitlement to indemnification under the by-laws,
the person, persons or entity making such determination shall presume that an
Indemnitee is entitled to indemnification under the by-laws if the Indemnitee
has submitted a request for indemnification in accordance with Section 3(A)
hereof, and the Corporation shall have the burden of proof to overcome that
presumption in connection with the making by any person, persons or entity of
any determination contrary to that presumption.
SECTION 4. REVIEW AND ENFORCEMENT OF DETERMINATION.
(A) In the event that (1) advancement of Expenses is not
timely made pursuant to Article III, Section 13(G) of the by-laws, (2) payment
of indemnification is not made pursuant to Article III, Section 13(C) or (D) of
the by-laws within ten days after receipt by the Corporation of written request
therefor, (3) a determination is made pursuant to Article III, Section 13(E) of
the by-laws that an Indemnitee is not entitled to indemnification under the
by-laws, (4) the determination of entitlement to indemnification is to be made
by Independent Counsel pursuant to Article III, Section 13(E) of the by-laws and
such determination shall not have been made and delivered in a written opinion
within ninety days after receipt by the Corporation of the written request for
indemnification, or (5) payment of indemnification is not made within ten days
after a determination has been made pursuant to Article III, Section 13(E) of
the by-laws that an Indemnitee is entitled to indemnification or within ten days
after such determination is deemed to have been made pursuant to
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Article III, Section 13(F) of the by-laws, the Indemnitee shall be entitled to
an adjudication in an appropriate court of the State of Delaware, or in any
other court of competent jurisdiction, of the Indemnitee's entitlement to such
indemnification or advancement of Expenses. Alternatively, the Indemnitee, at
his or her option, may seek an award in arbitration to be conducted by a single
arbitrator pursuant to the rules of the American Arbitration Association. The
Indemnitee shall commence such proceeding seeking an adjudication or an award in
arbitration within one year following the date on which the Indemnitee first has
the right to commence such proceeding pursuant to this Section 4(A). The
Corporation shall not oppose the Indemnitee's right to seek any such
adjudication or award in arbitration.
(B) In the event that a determination shall have been made
pursuant to Article III, Section 13(E) of the by-laws that an Indemnitee is not
entitled to indemnification, any judicial proceeding or arbitration commenced
pursuant to this Section 4 shall be conducted in all respects as a de novo
trial, or arbitration, on the merits and the Indemnitee shall not be prejudiced
by reason of that adverse determination. If a Change of Control shall have
occurred, the Corporation shall have the burden of proving in any judicial
proceeding or arbitration commenced pursuant to this Section 4 that the
Indemnitee is not entitled to indemnification or advancement of Expenses, as the
case may be.
(C) If a determination shall have been made or deemed to have
been made pursuant to Article III, Section 13(E) or (F) of the by-laws that an
Indemnitee is entitled to indemnification, the Corporation shall be bound by
such determination in any judicial proceeding or arbitration commenced pursuant
to this Section 4, absent (1) a misstatement or omission of a material fact in
connection with the Indemnitee's request for indemnification, or (2) a
prohibition of such indemnification under applicable law.
(D) The Corporation shall be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to this Section 4 that the
procedures and presumptions of these Procedures are not valid, binding and
enforceable, and shall stipulate in any such judicial proceeding or arbitration
that the Corporation is bound by all the provisions of these Procedures.
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(E) In the event that an Indemnitee, pursuant to this Section
4, seeks to enforce the Indemnitee's rights under, or to recover damages for
breach of, Article III, Section 13 of the by-laws or these Procedures in a
judicial proceeding or arbitration, the Indemnitee shall be entitled to recover
from the Corporation, and shall be indemnified by the Corporation against, any
and all expenses (of the types described in the definition of Expenses in
Section 2 of these Procedures) actually and reasonably incurred in such judicial
proceeding or arbitration, but only if the Indemnitee prevails therein. If it
shall be determined in such judicial proceeding or arbitration that the
Indemnitee is entitled to receive part but not all of the indemnification or
advancement of Expenses sought, the expenses incurred by the Indemnitee in
connection with such judicial proceeding or arbitration shall be appropriately
prorated.
SECTION 5. AMENDMENTS. These Procedures may be amended at any
time and from time to time in the same manner as any by-law of the Corporation
in accordance with the Certificate of Incorporation; provided, however, that
notwithstanding any amendment, alteration or repeal of these Procedures or any
provision hereof, any Indemnitee shall be entitled to utilize these Procedures
with respect to any claim for indemnification arising out of any action taken or
omitted prior to such amendment, alteration or repeal except to the extent
otherwise required by law.
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Exhibit 4.4
- --------------------------------------------------------------------------------
[111 HOLDINGS, INC.]
and
FIRST CHICAGO TRUST COMPANY OF NEW YORK, as
Rights Agent
Rights Agreement
Dated as of [ ], 1997
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
Page
Section 1. Certain Definitions................................ 2
Section 2. Appointment of Rights Agent........................ 10
Section 3. Issue of Right Certificates........................ 10
Section 4. Form of Right Certificates......................... 16
Section 5. Countersignature and Registration.................. 16
Section 6. Transfer, Split Up, Combination and Exchange
of Right Certificates; Mutilated, Destroyed,
Lost or Stolen Right Certificates.................. 18
Section 7. Exercise of Rights; Purchase Price;
Expiration Date of Rights.......................... 20
Section 8. Cancellation and Destruction of Right
Certificates....................................... 23
Section 9. Availability of Preferred Shares................... 24
Section 10. Preferred Shares Record Date....................... 27
Section 11. Adjustment of Purchase Price, Number of
Shares or Number of Rights......................... 28
Section 12. Certificate of Adjusted Purchase Price or
Number of Shares................................... 48
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power............................ 48
Section 14. Fractional Rights and Fractional Shares............ 51
Section 15. Rights of Action................................... 55
<PAGE> 3
Section 16. Agreement of Right Holders......................... 56
Section 17. Right Holder Not Deemed a Stockholder.............. 57
Section 18. Concerning the Rights Agent........................ 58
Section 19. Merger or Consolidation or Change of Name of
Rights Agent....................................... 59
Section 20. Duties of Rights Agent............................. 61
Section 21. Change of Rights Agent............................. 66
Section 22. Issuance of New Right Certificates................. 69
Section 23. Redemption......................................... 69
Section 24. Exchange........................................... 71
Section 25. Notice of Certain Events........................... 75
Section 26. Notices ........................................... 77
Section 27. Supplements and Amendments......................... 79
Section 28. Successors......................................... 80
Section 29. Benefits of this Agreement......................... 81
Section 30. Severability....................................... 81
Section 31. Governing Law...................................... 81
Section 32. Counterparts....................................... 82
Section 33. Descriptive Headings............................... 82
Signatures........................................................ 83
Exhibit A - Form of Right Certificate
ii
<PAGE> 4
RIGHTS AGREEMENT
Agreement, dated as of ________, 1997, between [111 Holdings, Inc.],
a Delaware corporation (the "Company"), and First Chicago Trust Company of New
York, a limited-purpose trust company chartered under the laws of the State of
New York (the "Rights Agent").
The Board of Directors of the Company has authorized and declared a
dividend of one preferred share purchase right (a "Right") for each Common Share
(as hereinafter defined) of the Company to be issued in the distribution of
Common Shares of the Company (the "Spin-Off") by Rockwell International
Corporation, a Delaware corporation ("Rockwell"), to Rockwell's shareowners,
each Right representing the right to purchase one one-hundredth of a Preferred
Share (as hereinafter defined), upon the terms and subject to the conditions
herein set forth, and has further authorized and directed the issuance of one
Right with respect to each Common Share of the Company that shall become
outstanding between the effective date of the
<PAGE> 5
Spin-Off (the "Record Date") and the earliest of the Distribution Date, the
Redemption Date and the Final Expiration Date (as such terms are hereinafter
defined).
Accordingly, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this
Agreement, the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and
Associates (as such terms are hereinafter defined) of such Person, shall
be the Beneficial Owner (as such term is hereinafter defined) of 20% or
more of the Common Shares of the Company then outstanding, but shall not
include the Company, any Subsidiary (as such term is hereinafter defined)
of the Company, any employee benefit plan of Rockwell, the Company or any
Subsidiary of the Company, or any entity holding Common Shares for or
pursuant to
2
<PAGE> 6
the terms of any such plan; provided, however, that if after the Record
Date any employee benefit plan of Rockwell or any entity holding Common
Shares for or pursuant to the terms of any such plan acquires in one or
more transactions Beneficial Ownership of 1% or more of the Common
Shares of the Company then outstanding (other than an acquisition that
does not directly or indirectly increase the proportionate share of the
Common Shares of the Company beneficially owned by such Person) and,
after giving effect to such acquisition, is the Beneficial Owner of 20%
or more of the Common Shares of the Company then outstanding, then such
Person shall be deemed to be an "Acquiring Person". Notwithstanding the
foregoing, no Person shall become an "Acquiring Person" as the result
of an acquisition of Common Shares by the Company which, by reducing
the number of shares outstanding, increases the proportionate number of
shares beneficially owned by such Person to 20% or more of the Common
Shares of the Company then outstanding; provided, however, that if a
3
<PAGE> 7
Person shall become the Beneficial Owner of 20% or more of the Common
Shares of the Company then outstanding by reason of share purchases by
the Company and shall, after such share purchases by the Company,
become the Beneficial Owner of any additional Common Shares of the
Company (other than an acquisition that does not directly or indirectly
increase the proportionate share of the Common Shares of the Company
beneficially owned by such Person), then such Person shall be deemed to
be an "Acquiring Person". Notwithstanding the foregoing, if the Board
of Directors of the Company determines in good faith that a Person who
would otherwise be an "Acquiring Person", as defined pursuant to the
foregoing provisions of this paragraph (a), has become such
inadvertently, and such Person divests as promptly as practicable a
sufficient number of Common Shares so that such Person would no longer
be an "Acquiring Person", as defined pursuant to the foregoing
provisions of this paragraph (a), then such Person
4
<PAGE> 8
shall not be deemed to be an "Acquiring Person" for any purposes of
this Agreement.
(b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as in effect on the date of this Agreement.
(c) A Person shall be deemed the "Beneficial Owner" of and
shall be deemed to have "Beneficial Ownership" of and to "beneficially
own" any securities:
(i) which such Person or any of such Person's
Affiliates or Associates beneficially owns, directly or
indirectly;
(ii) which such Person or any of such Person's
Affiliates or Associates has (A) the right to acquire (whether
such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement or
understanding (other than customary agreements
5
<PAGE> 9
with and between underwriters and selling group members with
respect to a bona fide public offering of securities), or upon
the exercise of conversion rights, exchange rights, rights
(other than the Rights), warrants or options, or otherwise;
provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, securities
tendered pursuant to a tender or exchange offer made by or on
behalf of such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for
purchase or exchange; or (B) the right to vote pursuant to any
agreement, arrangement or understanding; provided, however,
that a Person shall not be deemed the Beneficial Owner of, or
to beneficially own, any security if the agreement,
arrangement or understanding to vote such security (1) arises
solely from a revocable proxy or consent given to such Person
in response to a public proxy or consent solicitation
6
<PAGE> 10
made pursuant to, and in accordance with, the applicable rules
and regulations promulgated under the Exchange Act and (2) is
not also then reportable on Schedule 13D under the Exchange
Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person with which such Person or any of such
Person's Affiliates or Associates has any agreement,
arrangement or understanding (other than customary agreements
with and between underwriters and selling group members with
respect to a bona fide public offering of securities) for the
purpose of acquiring, holding, voting (except to the extent
contemplated by the proviso to Section l(c)(ii)(B)) or
disposing of any securities of the Company.
Notwithstanding anything in this definition of Beneficial Ownership to the
contrary, the phrase "then outstanding", when used with reference to a
Person's
7
<PAGE> 11
Beneficial Ownership of securities of the Company, shall mean the
number of such securities then issued and outstanding together with the
number of such securities not then actually issued and outstanding
which such Person would be deemed to own beneficially hereunder.
(d) "Business Day" shall mean any day other than a Saturday, a
Sunday, or a day on which banking institutions in New York are
authorized or obligated by law or executive order to close.
(e) "Close of business" on any given date shall mean 5:00
P.M., New York City time, on such date; provided, however, that if such
date is not a Business Day it shall mean 5:00 P.M., New York City time,
on the next succeeding Business Day.
(f) "Common Shares" when used with reference to the Company
shall mean the shares of Common Stock (as such term is hereinafter
defined). "Common Shares" when used with reference to any Person other
than the Company shall mean the capital stock (or equity
8
<PAGE> 12
interest) with the greatest voting power of such other Person or, if
such other Person is a Subsidiary of another Person, the Person or
Persons which ultimately control such first-mentioned Person.
(g) "Common Stock" shall mean the Common Stock, par value $1
per share, of the Company.
(h) "Distribution Date" shall have the meaning
set forth in Section 3 hereof.
(i) "Final Expiration Date" shall have the meaning set forth
in Section 7 hereof.
(j) "Person" shall mean any individual, firm, corporation or
other entity, and shall include any successor (by merger or otherwise)
of such entity.
(k) "Preferred Shares" shall mean shares of Series A Junior
Participating Preferred Stock, without par value, of the Company having
the rights and preferences set forth in the Certificate of
Incorporation of the Company.
(l) "Redemption Date" shall have the meaning set
forth in Section 7 hereof.
9
<PAGE> 13
(m) "Shares Acquisition Date" shall mean the first date of
public announcement by the Company or an Acquiring Person that an
Acquiring Person has become such.
(n) "Subsidiary" of any Person shall mean any corporation or
other entity of which a majority of the voting power of the voting
equity securities or equity interest is owned, directly or indirectly,
by such Person.
Section 2. Appointment of Rights Agent. The Company hereby
appoints the Rights Agent to act as agent for the Company and the holders of the
Rights (who, in accordance with Section 3 hereof, shall prior to the
Distribution Date also be the registered holders of the Common Shares) in
accordance with the terms and conditions hereof, and the Rights Agent hereby
accepts such appointment. The Company may from time to time appoint such
co-Rights Agents as it may deem necessary or desirable.
Section 3. Issue of Right Certificates. (a) Until the earlier
of (i) the tenth day after the Shares
10
<PAGE> 14
Acquisition Date or (ii) the tenth Business Day (or such later date as may be
determined by action of the Board of Directors prior to such time as any Person
becomes an Acquiring Person) after the date of the commencement by any Person
(other than the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company or any entity holding
Common Shares for or pursuant to the terms of any such plan) of, or of the first
public announcement of the intention of any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company or any entity holding Common Shares for or pursuant to
the terms of any such plan) to commence, a tender or exchange offer the
consummation of which would result in any Person becoming the Beneficial Owner
of Common Shares aggregating 20% or more of the then outstanding Common Shares
(the earlier of such dates being herein referred to as the "Distribution Date"),
(x) the Rights will be attached to (subject to the provisions of Section 3(b)
hereof) the Common Shares (whether in book-
11
<PAGE> 15
entry or certificate form) issued and outstanding and the Rights will be owned
by the registered holders of the Common Shares and will not be evidenced by
separate Right Certificates, and (y) any transfer of Common Shares (or any
interest therein, including the creation of a security interest) will also
effect a transfer of the associated Rights (or the equivalent interest therein)
and neither the Rights nor any interest therein may be transferred otherwise
than by transfer of the associated Common Shares (or the equivalent interest
therein). As soon as practicable after the Distribution Date, the Company will
prepare and execute, the Rights Agent will countersign, and the Company will
send or cause to be sent (and the Rights Agent will, if requested, send) by
first-class, insured, postage-prepaid mail, to each record holder of Common
Shares as of the close of business on the Distribution Date, at the address of
such holder shown on the records of the Company, a Right Certificate, in
substantially the form of Exhibit A hereto (a "Right Certificate"), evidencing
one Right for each Common Share so held, subject, in the case of Common Shares
12
<PAGE> 16
held in book-entry form on the Distribution Date, to the rights provided by law
to a registered pledgee whose security interest has been duly registered with
the Company. As of the Distribution Date, the Rights will be evidenced solely by
such Right Certificates.
(b) Until the earliest of the Distribution Date, the
Redemption Date or the Final Expiration Date, certificates for Common Shares
shall have impressed on, printed on, written on or otherwise affixed to them the
following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement between [111
Holdings, Inc.] and First Chicago Trust Company of New York, dated as
of___________________________ , 1997 (the "Rights Agreement"), the
terms of which are hereby incorporated herein by reference and a copy
of which is on file at the principal executive offices of [111
Holdings, Inc.] Under certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate certificates and
will no longer be evidenced by this certificate. [111 Holdings, Inc.]
will mail to the holder of this certificate a copy of the Rights
Agreement without charge after receipt of a written request therefor.
Under certain circumstances, as set forth in the Rights Agreement,
Rights issued to any Person who becomes an Acquiring Person (as defined
in the Rights Agreement) may become null and void.
13
<PAGE> 17
With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Shares represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby.
(c) Until the earliest of the Distribution Date, the
Redemption Date or the Final Expiration Date, initial transaction statements
relating to the registration, pledge or release of Common Shares shall have
impressed on, printed on, written on or otherwise affixed to them the following
legend:
The shares of the Common Stock, par value $1 per share, of [111
Holdings, Inc.] to which this statement relates also evidence and
entitle the holder thereof to certain Rights as set forth in a Rights
Agreement between [111 Holdings, Inc.] and First Chicago Trust Company
of New York, dated as of ____________, 1997 (the "Rights Agreement"),
the terms of which are hereby incorporated herein by reference and a
copy of which is on file at the principal executive offices of [111
Holdings, Inc.] Under certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate certificates and
will no longer be evidenced by the shares to which this statement
relates. [111 Holdings, Inc.] will mail to the holder of the shares to
which
14
<PAGE> 18
this statement relates and any registered pledgee a copy of the Rights
Agreement without charge after receipt of a written request therefor.
Under certain circumstances, as set forth in the Rights Agreement,
Rights issued to any Person who becomes an Acquiring Person (as defined
in the Rights Agreement) may become null and void.
With respect to Common Shares for which there has been sent an initial
transaction statement containing the foregoing legend, until the Distribution
Date, the Rights associated with such Common Shares shall be evidenced by such
Common Shares alone, and the registration of transfer or pledge, or the release
from pledge, of any such Common Shares shall also constitute the registration of
transfer or pledge, or the release from pledge, as the case may be, of the
Rights associated with such Common Shares.
(d) In the event that the Company purchases or acquires any
Common Shares after the Record Date but prior to the Distribution Date, any
Rights associated with such Common Shares shall be deemed cancelled and retired
so that the Company shall not be entitled to exercise any Rights
15
<PAGE> 19
associated with the Common Shares which are no longer outstanding.
Section 4. Form of Right Certificates. Subject to the
provisions of Section 22 hereof, the Right Certificates (and the forms of
election to purchase Preferred Shares and of assignment to be printed on the
reverse thereof) shall be substantially the same as Exhibit A hereto and may
have such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the Rights
may from time to time be listed, or to conform to usage.
Section 5. Countersignature and Registration. The Right
Certificates shall be executed on behalf of the Company by its Chairman of the
Board, its President, any of
16
<PAGE> 20
its Vice Presidents, or its Treasurer, either manually or by facsimile
signature, shall have affixed thereto the Company's seal or a facsimile thereof,
and shall be attested by the Secretary or an Assistant Secretary of the Company,
either manually or by facsimile signature. The Right Certificates shall be
manually countersigned by the Rights Agent and shall not be valid for any
purpose unless countersigned. In case any officer of the Company who shall have
signed any of the Right Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and delivery by
the Company, such Right Certificates, nevertheless, may be countersigned by the
Rights Agent and issued and delivered by the Company with the same force and
effect as though the person who signed such Right Certificates had not ceased to
be such officer of the Company; and any Right Certificate may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Right Certificate, shall be a proper officer of the Company to sign such
Right
17
<PAGE> 21
Certificate, although at the date of the execution of this Rights Agreement any
such person was not such an officer.
Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office, books for registration and transfer
of the Rights issued hereunder. Such books shall show the names and addresses of
the respective holders of the Rights, the number of Rights evidenced on its face
by each of the Right Certificates and the date of each of the Right
Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of
Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.
Subject to the provisions of Section 14 hereof, at any time after the close of
business on the Distribution Date, and at or prior to the close of business on
the earlier of the Redemption Date or the Final Expiration Date, any Right
Certificate or Right Certificates (other than Right Certificates representing
Rights that have become void pursuant to Section 11(a)(ii) hereof or that have
been exchanged pursuant to Section 24 hereof) may be transferred, split up,
combined or exchanged for another
18
<PAGE> 22
Right Certificate or Right Certificates, entitling the registered holder of the
Rights evidenced thereby to purchase a like number of one one-hundredths of a
Preferred Share as the Right Certificate or Right Certificates surrendered then
entitled such holder to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Right Certificate or Right Certificates shall
make such request in writing delivered to the Rights Agent, and shall surrender
the Right Certificate or Right Certificates to be transferred, split up,
combined or exchanged at the principal office of the Rights Agent. Thereupon the
Rights Agent shall countersign and deliver to the person entitled thereto a
Right Certificate or Right Certificates, as the case may be, as so requested.
The Company may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Right Certificates.
Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss,
19
<PAGE> 23
theft, destruction or mutilation of a Right Certificate, and, in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to them,
and, at the Company's request, reimbursement to the Company and the Rights Agent
of all reasonable expenses incidental thereto, and upon surrender to the Rights
Agent and cancellation of the Right Certificate if mutilated, the Company will
make and deliver a new Right Certificate of like tenor to the Rights Agent for
delivery to the registered holder in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date
of Rights. (a) Each Right (other than Rights that have become void pursuant to
Section 11(a)(ii) hereof or that have been exchanged pursuant to Section 24
hereof) shall initially entitle the registered holder thereof to purchase one
one-hundredth of a Preferred Share, subject to adjustment from time to time as
provided in Section 11 or 13 hereof. The purchase price (the "Purchase Price")
for each one one-hundredth of a Preferred Share
20
<PAGE> 24
purchasable pursuant to the exercise of a Right shall initially be $[ ], and
shall be subject to adjustment from time to time as provided in Section 11 or 13
hereof and shall be payable in lawful money of the United States of America in
accordance with paragraph (c) below.
(b) The registered holder of any Rights may exercise such
Rights (except as otherwise provided herein) in whole or in part at any time
after the Distribution Date upon surrender of the Right Certificate evidencing
such Rights, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the principal office of the Rights Agent,
together with payment of the Purchase Price for each one one-hundredth of a
Preferred Share as to which the Rights are exercised, at or prior to the
earliest of (i) the close of business on the tenth anniversary of the Record
Date (the "Final Expiration Date"), (ii) the time at which the Rights are
redeemed as provided in Section 23 hereof (the "Redemption Date"), or (iii) the
time at which such Rights are exchanged as provided in Section 24 hereof.
21
<PAGE> 25
(c) Upon receipt of a Right Certificate representing
exercisable Rights, with the form of election to purchase duly executed,
accompanied by payment of the Purchase Price for the shares to be purchased and
an amount equal to any applicable transfer tax required to be paid by the holder
of the Rights evidenced by such Right Certificate in accordance with Section 9
hereof by certified check, cashier's check or money order payable to the order
of the Company, the Rights Agent shall thereupon promptly (i) (A) requisition
from any transfer agent of the Preferred Shares certificates for the number of
Preferred Shares to be purchased and the Company hereby irrevocably authorizes
its transfer agent to comply with all such requests, or (B) requisition from the
depositary agent depositary receipts representing such number of one
one-hundredths of a Preferred Share as are to be purchased (in which case
certificates for the Preferred Shares represented by such receipts shall be
deposited by the transfer agent with the depositary agent) and the Company
hereby directs the depositary agent to comply with such request, (ii) when
22
<PAGE> 26
appropriate, requisition from the Company the amount of cash to be paid in lieu
of issuance of fractional shares in accordance with Section 14 hereof, (iii)
after receipt of such certificates or depositary receipts, cause the same to be
delivered to or upon the order of the registered holder of the Rights evidenced
by such Right Certificate, registered in such name or names as may be designated
by such holder and (iv) when appropriate, after receipt, deliver such cash to or
upon the order of the registered holder of the Rights evidenced by such Right
Certificate.
(d) In case the registered holder of the Rights evidenced by
any Right Certificate shall exercise less than all the Rights evidenced thereby,
a new Right Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent to the registered holder of such
Rights or to his duly authorized assigns, subject to the provisions of Section
14 hereof.
Section 8. Cancellation and Destruction of Right Certificates.
All Right Certificates surrendered for the purpose of exercise,
transfer, split up, combination or
23
<PAGE> 27
exchange shall, if surrendered to the Company or to any of its agents, be
delivered to the Rights Agent for cancellation or in cancelled form, or, if
surrendered to the Rights Agent, shall be cancelled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Rights Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all cancelled Right Certificates to the Company, or shall, at the written
request of the Company, destroy such cancelled Right Certificates, and in such
case shall deliver a certificate of destruction thereof to the Company.
Section 9. Availability of Preferred Shares. The Company
covenants and agrees that it will cause to be reserved and kept available out of
its authorized and unissued Preferred Shares or any Preferred Shares held in its
treasury, the number of Preferred Shares that will be
24
<PAGE> 28
sufficient to permit the exercise in full of all outstanding Rights in
accordance with Section 7. The Company covenants and agrees that it will take
all such action as may be necessary to ensure that all Preferred Shares
delivered upon exercise of Rights shall, at the time of delivery of the
certificates for such Preferred Shares (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and
nonassessable shares.
The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges which
may be payable in respect of the issuance or delivery of the Rights or the Right
Certificates or of any Preferred Shares upon the exercise of Rights. The Company
shall not, however, be required to pay any transfer tax which may be payable in
respect of any transfer or delivery of Rights or Right Certificates to a person
other than, or the issuance or delivery of certificates or depositary receipts
for the Preferred Shares in a name other than that of, the registered holder of
the Rights evidenced by Right Certificates surrendered for
25
<PAGE> 29
exercise or to issue or to deliver any certificates or depositary receipts for
Preferred Shares upon the exercise of any Rights until any such tax shall have
been paid (any such tax being payable by the holder of such Rights at the time
of surrender of the related Right Certificate) or until it has been established
to the Company's reasonable satisfaction that no such tax is due.
26
<PAGE> 30
Section 10. Preferred Shares Record Date. Each person in whose
name any Preferred Shares are issued upon the exercise of Rights shall for all
purposes be deemed to have become the holder of record of such Preferred Shares,
and the date of issuance of such Preferred Shares and the date of any
certificate for such Preferred Shares shall be, the date upon which the Right
Certificate evidencing such Rights was duly surrendered and payment of the
Purchase Price (and any applicable transfer taxes) was made; provided, however,
that if the date of such surrender and payment is a date upon which the
Preferred Shares transfer books of the Company are closed, such person shall be
deemed to have become the record holder of such shares on, and the date of
issuance of such Preferred Shares and the date of any such certificate shall be,
the next succeeding Business Day on which the Preferred Shares transfer books of
the Company are open. Prior to the exercise of any Rights, the holder shall not
be entitled to any rights of a holder of Preferred Shares for which the Rights
shall be exercisable, including, without limitation, the right to vote, to
receive
27
<PAGE> 31
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares or
Number of Rights. The Purchase Price, the number of Preferred Shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the
Record Date (A) declare a dividend on the Preferred Shares payable in Preferred
Shares, (B) subdivide the outstanding Preferred Shares, (C) combine the
outstanding Preferred Shares into a smaller number of Preferred Shares or (D)
issue any shares of its capital stock in a reclassification of the Preferred
Shares (including any such reclassification in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a), the Purchase Price in effect
28
<PAGE> 32
at the time of the record date for such dividend or of the effective date of
such subdivision, combination or reclassification, and the number and kind of
shares of capital stock issuable on such date, shall be proportionately
adjusted so that the holder of any Right exercised after such time shall be
entitled to receive the aggregate number and kind of shares of capital stock
which, if such Right had been exercised immediately prior to such date and at a
time when the Preferred Shares transfer books of the Company were open, he
would have owned upon such exercise and been entitled to receive by virtue of
such dividend, subdivision, combination or reclassification; provided, however,
that in no event shall the consideration to be paid upon the exercise of one
Right be less than the aggregate par value of the shares of capital stock of
the Company issuable upon exercise of one Right.
(ii) Subject to Section 24 of this Agreement, in the event any Person
becomes an Acquiring Person, each registered holder of a Right shall thereafter
have a right to receive, upon exercise thereof at a price equal to the
29
<PAGE> 33
then current Purchase Price multiplied by the number of one one-hundredths of a
Preferred Share for which a Right is then exercisable, in accordance with the
terms of this Agreement and in lieu of Preferred Shares, such number of shares
of Common Stock of the Company as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the number of one one-hundredths
of a Preferred Share for which a Right is then exercisable and dividing that
product by (y) 50% of the then current per share market price of the Company's
Common Stock (determined pursuant to Section 11(d) hereof) on the date of the
occurrence of such event. In the event that any Person shall become an Acquiring
Person and the Rights shall then be outstanding, the Company shall not take any
action which would eliminate or diminish the benefits intended to be afforded by
the Rights.
From and after the occurrence of such event, any Rights that
are or were acquired or beneficially owned by any Acquiring Person (or any
Associate or Affiliate of such Acquiring Person) shall be void and any holder of
such
30
<PAGE> 34
Rights shall thereafter have no right to exercise such Rights under any
provision of this Agreement. No Right Certificate shall be issued pursuant to
Section 3 that evidences Rights beneficially owned by an Acquiring Person whose
Rights would be void pursuant to the preceding sentence or any Associate or
Affiliate thereof and any Right Certificate evidencing Rights beneficially owned
by any such Acquiring Person shall be void; no Right Certificate shall be issued
at any time upon the transfer of any Rights to an Acquiring Person whose Rights
would be void pursuant to the preceding sentence or any Associate or Affiliate
thereof or to any nominee of such Acquiring Person, Associate or Affiliate; and
any Right Certificate delivered to the Rights Agent for transfer to an Acquiring
Person whose Rights would be void pursuant to the preceding sentence shall be
cancelled.
(iii) In the event that there shall not be sufficient shares
of Common Stock issued but not outstanding or authorized but unissued to permit
the exercise in full of the Rights in accordance with the foregoing subparagraph
31
<PAGE> 35
(ii), the Company shall take all such action as may be necessary to authorize
additional shares of Common Stock for issuance upon exercise of the Rights. In
the event the Company shall, after good faith effort, be unable to take all such
action as may be necessary to authorize such additional shares of Common Stock,
the Company shall substitute, for each share of Common Stock that would
otherwise be issuable upon exercise of a Right, a number of Preferred Shares or
fraction thereof such that the current per share market price of one Preferred
Share multiplied by such number or fraction is equal to the current per share
market price of one share of Common Stock as of the date of issuance of such
Preferred Shares or fraction thereof.
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Preferred Shares
entitling them (for a period expiring within 45 calendar days after such record
date) to subscribe for or purchase Preferred Shares (or shares having the same
rights, privileges and preferences as the Preferred Shares ("equivalent
preferred shares")) or securities
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<PAGE> 36
convertible into Preferred Shares or equivalent preferred shares at a price per
Preferred Share or equivalent preferred share (or having a conversion price per
share, if a security convertible into Preferred Shares or equivalent preferred
shares) less than the then current per share market price of the Preferred
Shares (as defined in Section 11(d)) on such record date, the Purchase Price to
be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the number of Preferred Shares outstanding on
such record date plus the number of Preferred Shares which the aggregate
offering price of the total number of Preferred Shares and/or equivalent
preferred shares so to be offered (and/or the aggregate initial conversion price
of the convertible securities so to be offered) would purchase at such current
market price and the denominator of which shall be the number of Preferred
Shares outstanding on such record date plus the number of additional Preferred
Shares and/or equivalent preferred shares to be offered for subscription
33
<PAGE> 37
or purchase (or into which the convertible securities so to be offered are
initially convertible); provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent. Preferred Shares owned by or held for the account
of the Company shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever such a record
date is fixed; and in the event that such rights, options or warrants are not so
issued, the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
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<PAGE> 38
(c) In case the Company shall fix a record date for the making
of a distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend or a dividend payable in
Preferred Shares) or subscription rights or warrants (excluding those referred
to in Section 11(b) hereof), the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the then current per share market price of the Preferred Shares on such
record date, less the fair market value (as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent) of the portion of the assets or evidences
of indebtedness so to be distributed or of such subscription rights or warrants
applicable to one Preferred Share and the denominator of which shall be such
35
<PAGE> 39
current per share market price of the Preferred Shares; provided, however, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the Company
to be issued upon exercise of one Right. Such adjustments shall be made
successively whenever such a record date is fixed; and in the event that such
distribution is not so made, the Purchase Price shall again be adjusted to be
the Purchase Price which would then be in effect if such record date had not
been fixed.
(d) (i) For the purpose of any computation hereunder, the
"current per share market price" of any security (a "Security" for the purpose
of this Section 11(d)(i)) on any date shall be deemed to be the average of the
daily closing prices per share of such Security for the 30 consecutive Trading
Days (as such term is hereinafter defined) immediately prior to such date;
provided, however, that in the event that the current per share market price of
the Security is determined during a period following the announcement by the
issuer of such Security of (A) a
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<PAGE> 40
dividend or distribution on such Security payable in shares of such Security or
securities convertible into such shares, or (B) any subdivision, combination or
reclassification of such Security and prior to the expiration of 30 Trading Days
after the ex-dividend date for such dividend or distribution, or the record date
for such subdivision, combination or reclassification, then, and in each such
case, the current per share market price shall be appropriately adjusted to
reflect the current market price per share equivalent of such Security; and
provided, further, that in the event that the current per share market price of
the shares of Common Stock is determined as of a date prior to the expiration of
30 Trading Days following the Record Date, the current per share market price of
the Common Stock shall be deemed to be the average of the daily closing prices
per share of Common Stock for the period of Trading Days commencing with the
Record Date and ending immediately prior to such date. The closing price for
each day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the
37
<PAGE> 41
closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the Security
is not listed or admitted to trading on the New York Stock Exchange, as reported
in the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
Security is listed or admitted to trading or, if the Security is not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then
in use, or, if on any such date the Security is not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Security selected by the Board
of Directors of the Company. The term "Trading Day" shall mean
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<PAGE> 42
a day on which the principal national securities exchange on which the Security
is listed or admitted to trading is open for the transaction of business or, if
the Security is not listed or admitted to trading on any national securities
exchange, a Business Day.
(ii) For the purpose of any computation hereunder, the
"current per share market price" of the Preferred Shares shall be determined in
accordance with the method set forth in Section 11(d)(i). If the Preferred
Shares are not publicly traded, the "current per share market price" of the
Preferred Shares shall be conclusively deemed to be the current per share market
price of the Common Stock as determined pursuant to Section 11(d)(i)
(appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof), multiplied by one hundred. If
neither the shares of Common Stock nor the Preferred Shares are publicly held or
so listed or traded, "current per share market price" shall mean the fair value
per share as determined in good faith by the Board of Directors of the Company,
whose
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<PAGE> 43
determination shall be described in a statement filed with the Rights Agent.
(e) No adjustment in the Purchase Price shall be required
unless such adjustment would require an increase or decrease of at least 1% in
the Purchase Price; provided, however, that any adjustments which by reason of
this Section 11(e) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 11 shall be made to the nearest cent or to the nearest one one-millionth
of a Preferred Share or one ten-thousandth of any other share or security as the
case may be. Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section 11 shall be made no later than the earlier
of (i) three years from the date of the transaction which requires such
adjustment or (ii) the date of the expiration of the right to exercise any
Rights.
(f) If as a result of an adjustment made pursuant to Section
11(a) hereof, the holder of any Right thereafter exercised shall become entitled
to receive any shares of
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<PAGE> 44
capital stock of the Company other than Preferred Shares, thereafter the number
of such other shares so receivable upon exercise of any Right shall be subject
to adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Shares contained in
Section 11(a) through (c), inclusive, and the provisions of Sections 7, 9, 10
and 13 with respect to the Preferred Shares shall apply on like terms to any
such other shares.
(g) All Rights originally issued by the Company subsequent to
any adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding
41
<PAGE> 45
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Purchase Price, that number of one
one-hundredths of a Preferred Share (calculated to the nearest one one-millionth
of a Preferred Share) obtained by (i) multiplying (x) the number of one
one-hundredths of a share covered by a Right immediately prior to this
adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in substitution
for any adjustment in the number of one one-hundredths of a Preferred Share
purchasable upon the exercise of a Right. Each of the Rights outstanding after
such adjustment of the number of Rights shall be exercisable for the number of
one one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
42
<PAGE> 46
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one ten-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if known at the
time, the amount of the adjustment to be made. This record date may be the date
on which the Purchase Price is adjusted or any day thereafter, but, if the Right
Certificates have been issued, shall be at least 10 days later than the date of
the public announcement. If Right Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(i), the Company
shall, as promptly as practicable, cause to be distributed to registered holders
of Rights on such record date Right Certificates evidencing, subject to Section
14 hereof, the additional Rights to which such holders shall be entitled as a
result of such adjustment, or, at the option of the
43
<PAGE> 47
Company, shall cause to be distributed to such registered holders in
substitution and replacement for the Right Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Right Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Right Certificates so to be distributed
shall be issued, executed and countersigned in the manner provided for herein
and shall be registered in the names of the registered holders of the Rights on
the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of one one-hundredths of a Preferred Share issuable upon the
exercise of the Rights, the Right Certificates theretofore and thereafter issued
may continue to express the Purchase Price and the number of one one-hundredths
of a Preferred Share which were expressed in the initial Right Certificates
issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below one one-
44
<PAGE> 48
hundredth of the then par value, if any, of the Preferred Shares issuable upon
exercise of the Rights, the Company shall take any corporate action which may,
in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable Preferred Shares at such
adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the registered holder of any Right exercised after such
record date of the Preferred Shares and other capital stock or securities of the
Company, if any, issuable upon such exercise over and above the Preferred Shares
and other capital stock or securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such
adjustment; provided, however, that the Company shall deliver to such holder a
due bill or other appropriate instrument evidencing such
45
<PAGE> 49
holder's right to receive such additional shares upon the occurrence of the
event requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that it in its sole discretion shall determine
to be advisable in order that any consolidation or subdivision of the Preferred
Shares, issuance wholly for cash of any Preferred Shares at less than the
current market price, issuance wholly for cash of Preferred Shares or securities
which by their terms are convertible into or exchangeable for Preferred Shares,
dividends on Preferred Shares payable in Preferred Shares or issuance of rights,
options or warrants referred to hereinabove in Section 11(b), hereafter made by
the Company to holders of its Preferred Shares shall not be taxable to such
stockholders.
(n) In the event that at any time after the Record Date and
prior to the Distribution Date, the Company shall (i) declare or pay any
dividend on the Common Shares
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<PAGE> 50
payable in Common Shares or (ii) effect a subdivision, combination or
consolidation of the Common Shares (by reclassification or otherwise than by
payment of dividends in Common Shares) into a greater or lesser number of Common
Shares, then in any such case (A) the number of one one-hundredths of a
Preferred Share purchasable after such event upon proper exercise of each Right
shall be determined by multiplying the number of one one-hundredths of a
Preferred Share so purchasable immediately prior to such event by a fraction,
the numerator of which is the number of Common Shares outstanding immediately
before such event and the denominator of which is the number of Common Shares
outstanding immediately after such event, and (B) each Common Share outstanding
immediately after such event shall have issued with respect to it that number of
Rights which each Common Share outstanding immediately prior to such event had
issued with respect to it. The adjustments provided for in this Section 11(n)
shall be made successively whenever such a dividend is declared or paid or
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<PAGE> 51
such a subdivision, combination or consolidation is effected.
Section 12. Certificate of Adjusted Purchase Price or Number
of Shares. Whenever an adjustment is made as provided in Section 11 or 13
hereof, the Company shall promptly (a) prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such adjustment,
(b) file with the Rights Agent and with each transfer agent for the Common
Shares or the Preferred Shares a copy of such certificate and (c) mail a brief
summary thereof to each registered holder of a Right in accordance with Section
25 hereof.
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power. In the event, directly or indirectly, at any time after
a Person has become an Acquiring Person, (a) the Company shall consolidate with,
or merge with and into, any other Person, (b) any Person shall consolidate with
the Company, or merge with and into the Company and the Company shall be the
continuing or surviving corporation of such merger and, in connection with such
48
<PAGE> 52
merger, all or part of the Common Shares shall be changed into or exchanged for
stock or other securities of any other Person (or the Company) or cash or any
other property, or (c) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person other than the Company or one or more of its wholly-owned
Subsidiaries, then, and in each such case, proper provision shall be made so
that (i) each registered holder of a Right (except as otherwise provided herein)
shall thereafter have the right to receive, upon the exercise thereof at a price
equal to the then current Purchase Price multiplied by the number of one
one-hundredths of a Preferred Share for which a Right is then exercisable, in
accordance with the terms of this Agreement and in lieu of Preferred Shares,
such number of Common Shares of such other Person (including the Company as
successor thereto or as the surviving corporation) as shall
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<PAGE> 53
equal the result obtained by (A) multiplying the then current Purchase Price by
the number of one one-hundredths of a Preferred Share for which a Right is then
exercisable and dividing that product by (B) 50% of the then current per share
market price of the Common Shares of such other Person (determined pursuant to
Section 11(d) hereof) on the date of consummation of such consolidation, merger,
sale or transfer; (ii) the issuer of such Common Shares shall thereafter be
liable for, and shall assume, by virtue of such consolidation, merger, sale or
transfer, all the obligations and duties of the Company pursuant to this
Agreement; (iii) the term "Company" shall thereafter be deemed to refer to such
issuer; and (iv) such issuer shall take such steps (including, but not limited
to, the reservation of a sufficient number of its Common Shares in accordance
with Section 9 hereof) in connection with such consummation as may be necessary
to assure that the provisions hereof shall thereafter be applicable, as nearly
as reasonably may be, in relation to the Common Shares thereafter deliverable
upon the exercise of the Rights. The
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Company shall not consummate any such consolidation, merger, sale or transfer
unless prior thereto the Company and such issuer shall have executed and
delivered to the Rights Agent a supplemental agreement so providing. The Company
shall not enter into any transaction of the kind referred to in this Section 13
if at the time of such transaction there are any rights, warrants, instruments
or securities outstanding or any agreements or arrangements which, as a result
of the consummation of such transaction, would eliminate or substantially
diminish the benefits intended to be afforded by the Rights. The provisions of
this Section 13 shall similarly apply to successive mergers or consolidations or
sales or other transfers.
Section 14. Fractional Rights and Fractional Shares. (a) The
Company shall not be required to issue fractions of Rights or to distribute
Right Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Rights with regard
to which such fractional Rights would otherwise be issuable, an amount in cash
equal
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to the same fraction of the current market value of a whole Right. For the
purposes of this Section 14(a), the current market value of a whole Right shall
be the closing price of the Rights for the Trading Day immediately prior to the
date on which such fractional Rights would have been otherwise issuable. The
closing price for any day shall be the last sale price, regular way, or, in case
no such sale takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Rights are not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are listed or
admitted to trading or, if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter
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<PAGE> 56
market, as reported by NASDAQ or such other system then in use or, if on any
such date the Rights are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in the Rights selected by the Board of Directors of the Company. If on
any such date no such market maker is making a market in the Rights, the fair
value of the Rights on such date as determined in good faith by the Board of
Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of
Preferred Shares (other than fractions which are integral multiples of one
one-hundredth of a Preferred Share) upon exercise of the Rights or to distribute
certificates which evidence fractional Preferred Shares (other than fractions
which are integral multiples of one one-hundredth of a Preferred Share).
Fractions of Preferred Shares in integral multiples of one one-hundredth of a
Preferred Share may, at the election of the Company, be evidenced by depositary
receipts, pursuant to an appropriate agreement between the Company and a
depositary selected by
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it; provided, that such agreement shall provide that the holders of such
depositary receipts shall have all the rights, privileges and preferences to
which they are entitled as beneficial owners of the Preferred Shares represented
by such depositary receipts. In lieu of fractional Preferred Shares that are not
integral multiples of one one-hundredth of a Preferred Share, the Company shall
pay to the registered holders of Rights at the time such Rights are exercised as
herein provided an amount in cash equal to the same fraction of the current
market value of one Preferred Share. For the purposes of this Section 14(b), the
current market value of a Preferred Share shall be the closing price of a
Preferred Share (as determined pursuant to the second sentence of Section
11(d)(i) hereof) for the Trading Day immediately prior to the date of such
exercise.
(c) The holder of a Right by the acceptance of the Right
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right (except as provided above).
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Section 15. Rights of Action. All rights of action in respect
of this Agreement, excepting the rights of action given to the Rights Agent
under Section 18 hereof, are vested in the respective registered holders of the
Rights and any registered holder of any Right, without the consent of the Rights
Agent or of the holder of any other Right, may, in his own behalf and for his
own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, his
right to exercise the Rights registered in his name in the manner provided in
the Right Certificates and in this Agreement. Without limiting the foregoing or
any remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific performance of the
obligations under, and injunctive relief against actual or threatened violations
of the obligations of any Person subject to, this Agreement.
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Section 16. Agreement of Right Holders. Every holder of a
Right, by accepting the same, consents and agrees with the Company and the
Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Rights are transferable
only on the registry books of the Rights Agent upon surrender of the
Right Certificate evidencing such Rights at the principal office of the
Rights Agent, duly endorsed or accompanied by a proper instrument of
transfer; and
(c) the Company and the Rights Agent may deem and treat the
person in whose name the Right is registered as the absolute owner
thereof (notwithstanding any notations of ownership or writing on the
Right Certificates evidencing such Rights or any certificate for the
associated Common Shares made by anyone other than the Company or the
Rights Agent) for all purposes
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<PAGE> 60
whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary, except as required by law.
Section 17. Right Holder Not Deemed a Stockholder. No holder,
as such, of any Right shall be entitled to vote, receive dividends or be deemed
for any purpose the holder of the Preferred Shares or any other securities of
the Company which may at any time be issuable on the exercise of such Rights,
nor shall anything contained herein or in any Right Certificate be construed to
confer upon the holder of any Right, as such, any of the rights of a stockholder
of the Company or any right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting stockholders (except as provided in Section 25 hereof), or to
receive dividends or subscription rights, or otherwise, until such Right or
Rights shall have been exercised in accordance with the provisions hereof.
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Section 18. Concerning the Rights Agent. The Company agrees to
pay to the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
The Rights Agent shall be protected and shall incur no
liability for, or in respect of any action taken, suffered or omitted by it in
connection with, its administration of this Agreement in reliance upon any Right
Certificate or certificate for the Preferred Shares or
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Common Shares or for other securities of the Company, instrument of assignment
or transfer, power of attorney, endorsement, affidavit, letter, instruction,
notice, direction, consent, certificate, statement, or other paper or document
believed by it to be genuine and to be signed, executed and, where necessary,
verified or acknowledged, by the proper person or persons, or otherwise upon the
advice of counsel as set forth in Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of
Rights Agent. Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the stock transfer or corporate trust powers of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto; provided, that such corporation would be
eligible for
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appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Right Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Right
Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right Certificates
and in this Agreement.
In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Right Certificates so
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countersigned; and in case at that time any of the Right Certificates shall not
have been countersigned, the Rights Agent may countersign such Right
Certificates either in its prior name or in its changed name; and in all such
cases such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Rights, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may
be legal counsel for the Company), and the opinion of such counsel
shall be full and complete authorization and protection to the Rights
Agent as to any action taken or omitted by it in good faith and in
accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that
any fact or matter be
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proved or established by the Company prior to taking or suffering any
action hereunder, such fact or matter (unless other evidence in respect
thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate signed by any one
of the Chairman of the Board, the President, any Vice President, the
Treasurer or the Secretary of the Company and delivered to the Rights
Agent; and such certificate shall be full authorization to the Rights
Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company
and any other Person only for its own negligence, bad faith or willful
misconduct.
(d) The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement or
in the Right Certificates (except its countersignature thereof) or be
required to verify the same, but all such statements
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and recitals are and shall be deemed to have been made by the Company
only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery
hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Right Certificate (except
its countersignature thereof); nor shall it be responsible for any
breach by the Company of any covenant or condition contained in this
Agreement or in any Right Certificate; nor shall it be responsible for
any change in the exercisability of the Rights (including the Rights
becoming void pursuant to Section 11(a)(ii) hereof) or any adjustment in
the terms of the Rights (including the manner, method or amount thereof)
provided for in Section 3, 11, 13, 23 or 24, or the ascertaining of the
existence of facts that would require any such change or adjustment
(except with respect to the exercise of Rights evidenced by Right
Certificates after actual notice
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that such change or adjustment is required); nor shall it by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Preferred Shares to be issued
pursuant to this Agreement or any Right Certificate or as to whether any
Preferred Shares will, when issued, be validly authorized and issued,
fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged
and delivered all such further and other acts, instruments and
assurances as may reasonably be required by the Rights Agent for the
carrying out or performing by the Rights Agent of the provisions of this
Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties
hereunder from any one of the Chairman of the Board, the President, any
Vice President, the Secretary or the Treasurer of the
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<PAGE> 68
Company, and to apply to such officers for advice or instructions in
connection with its duties, and it shall not be liable for any action
taken or suffered by it in good faith in accordance with instructions of
any such officer or for any delay in acting while waiting for those
instructions.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights
or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with
or lend money to the Company or otherwise act as fully and freely as
though it were not Rights Agent under this Agreement. Nothing herein
shall preclude the Rights Agent from acting in any other capacity for
the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder
either itself or by or through its
65
<PAGE> 69
attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such
attorneys or agents or for any loss to the Company resulting from any
such act, default, neglect or misconduct, provided reasonable care was
exercised in the selection and continued employment thereof.
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days' notice in writing mailed to the Company and to each
transfer agent of the Common Shares or Preferred Shares by registered or
certified mail, and to the registered holders of the Rights by first-class mail.
The Company may remove the Rights Agent or any successor Rights Agent upon 30
days' notice in writing, mailed to the Rights Agent or successor Rights Agent,
as the case may be, and to each transfer agent of the Common Shares or Preferred
Shares by registered or certified mail, and to the registered holders of the
Rights by first-class mail. If the Rights Agent shall resign or be
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<PAGE> 70
removed or shall otherwise become incapable of acting, the Company shall appoint
a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of 30 days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the registered holder of a Right
(who shall, with such notice, submit his Right Certificate, if any, or his
certificate, if any, for the associated Common Shares for inspection by the
Company), then the registered holder of any Right Certificate may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be a corporation, or an affiliate of such a corporation, organized and
doing business under the laws of the United States or of the State of New York
(or of any other state of the United States so long as such corporation is
authorized to do business as a banking institution in the State of New York), in
good standing, having an office in the State of New York, which is
67
<PAGE> 71
authorized under such laws to exercise corporate trust or stock transfer powers
and is subject to supervision or examination by federal or state authority and
which has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $50 million. After appointment, the successor Rights Agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Shares or Preferred Shares, and mail a notice thereof in writing to
the registered holders of the Rights. Failure to give any notice provided for in
this Section 21, however, or any defect therein, shall not affect the legality
or validity of the resignation or removal of the
68
<PAGE> 72
Rights Agent or the appointment of the successor Rights Agent, as the case may
be.
Section 22. Issuance of New Right Certificates.
Notwithstanding any of the provisions of this Agreement or of the Right
Certificates to the contrary, the Company may, at its option, issue new Right
Certificates evidencing Rights in such form as may be approved by its Board of
Directors to reflect any adjustment or change in the Purchase Price and the
number or kind or class of shares or other securities or property purchasable
upon exercise of a Right made in accordance with the provisions of this
Agreement.
Section 23. Redemption. (a) The Board of Directors of the
Company may, at its option, at any time prior to such time as any Person becomes
an Acquiring Person, redeem all but not less than all the then outstanding
Rights at a redemption price of $.01 per Right, appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring after
the date hereof (such redemption price being hereinafter referred to
69
<PAGE> 73
as the "Redemption Price"). The redemption of the Rights by the Board of
Directors may be made effective at such time, on such basis and with such
conditions as the Board of Directors in its sole discretion may establish.
(b) Immediately upon the action of the Board of Directors of
the Company ordering the redemption of the Rights pursuant to paragraph (a) of
this Section 23, and without any further action and without any notice, the
right to exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price. The Company shall
promptly give public notice of any such redemption; provided, however, that the
failure to give, or any defect in, any such notice shall not affect the validity
of such redemption. Within 10 days after such action of the Board of Directors
ordering the redemption of the Rights, the Company shall mail a notice of
redemption to all the registered holders of the then outstanding Rights at their
last addresses as they appear upon the registry books of the Rights Agent or,
prior to the Distribution Date, on the registry books of the transfer
70
<PAGE> 74
agent for the Common Shares. Any notice which is mailed in the manner herein
provided shall be deemed given, whether or not the holder receives the notice.
Each such notice of redemption will state the method by which the payment of the
Redemption Price will be made. Neither the Company nor any of its Affiliates or
Associates may redeem, acquire or purchase for value any Rights at any time in
any manner other than that specifically set forth in this Section 23 or in
Section 24 hereof, and other than in connection with the purchase of Common
Shares prior to the Distribution Date.
Section 24. Exchange. (a) The Board of Directors of the
Company may, at its option, at any time after any Person becomes an Acquiring
Person, exchange all or part of the then outstanding and exercisable Rights
(which shall not include Rights that have become void pursuant to the provisions
of Section 11(a)(ii) hereof) for shares of Common Stock at an exchange ratio of
one share of Common Stock per Right, appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof
(such exchange ratio being
71
<PAGE> 75
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing,
the Board of Directors shall not be empowered to effect such exchange at any
time after the Record Date if any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of Rockwell (unless such plan is
deemed an "Acquiring Person" in accordance with the proviso to the first
sentence of Section 1(a)), the Company or any such Subsidiary, or any entity
holding Common Shares for or pursuant to the terms of any such plan), together
with all Affiliates and Associates of such Person, becomes the Beneficial Owner
of 50% or more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors of
the Company ordering the exchange of any Rights pursuant to paragraph (a) of
this Section 24 and without any further action and without any notice, the right
to exercise such Rights shall terminate and the only right thereafter of a
holder of such Rights shall be to receive that number of shares of Common Stock
equal to the number of such Rights held by such holder multiplied by the
Exchange Ratio. The
72
<PAGE> 76
Company shall promptly give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company promptly shall mail a notice
of any such exchange to all of the registered holders of such Rights at their
last addresses as they appear upon the registry books of the Rights Agent. Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange will
state the method by which the exchange of the shares of Common Stock for Rights
will be effected and, in the event of any partial exchange, the number of Rights
which will be exchanged. Any partial exchange shall be effected pro rata based
on the number of Rights (other than Rights which have become void pursuant to
the provisions of Section 11(a)(ii) hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient shares of
Common Stock issued but not outstanding or authorized but unissued to permit any
exchange of Rights
73
<PAGE> 77
as contemplated in accordance with this Section 24, the Company shall take all
such action as may be necessary to authorize additional shares of Common Stock
for issuance upon exchange of the Rights. In the event the Company shall, after
good faith effort, be unable to take all such action as may be necessary to
authorize such additional shares of Common Stock, the Company shall substitute,
for each share of Common Stock that would otherwise be issuable upon exchange of
a Right, a number of Preferred Shares or fraction thereof such that the current
per share market price of one Preferred Share multiplied by such number or
fraction is equal to the current per share market price of one share of Common
Stock as of the date of issuance of such Preferred Shares or fraction thereof.
(d) The Company shall not be required to issue fractions of
shares of Common Stock or to distribute certificates which evidence fractional
shares of Common Stock. In lieu of such fractional shares of Common Stock, the
Company shall pay to the registered holders of the Rights with regard to which
such fractional shares of Common
74
<PAGE> 78
Stock would otherwise be issuable an amount in cash equal to the same fraction
of the current market value of a whole share of Common Stock. For the purposes
of this paragraph (d), the current market value of a whole share of Common Stock
shall be the closing price of a share of Common Stock (as determined pursuant to
the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately
prior to the date of exchange pursuant to this Section 24.
Section 25. Notice of Certain Events. (a) In case at any time
after the Record Date the Company shall propose (i) to pay any dividend payable
in stock of any class to the holders of its Preferred Shares or to make any
other distribution to the holders of its Preferred Shares (other than a regular
quarterly cash dividend), (ii) to offer to the holders of its Preferred Shares
rights or warrants to subscribe for or to purchase any additional Preferred
Shares or shares of stock of any class or any other securities, rights or
options, (iii) to effect any reclassification of its Preferred Shares (other
than a reclassification involving only the subdivision of
75
<PAGE> 79
outstanding Preferred Shares), (iv) to effect any consolidation or merger into
or with, or to effect any sale or other transfer (or to permit one or more of
its Subsidiaries to effect any sale or other transfer), in one or more
transactions, of 50% or more of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to, any other Person, (v) to effect the
liquidation, dissolution or winding up of the Company, or (vi) to declare or pay
any dividend on the Common Shares payable in Common Shares or to effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares),
then, in each such case, the Company shall give to each registered holder of a
Right, in accordance with Section 26 hereof, a notice of such proposed action,
which shall specify the record date for the purposes of such stock dividend, or
distribution of rights or warrants, or the date on which such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution, or winding up
is to take place and the date of
76
<PAGE> 80
participation therein by the holders of the Common Shares and/or Preferred
Shares, if any such date is to be fixed, and such notice shall be so given in
the case of any action covered by clause (i) or (ii) above at least 10 days
prior to the record date for determining holders of the Preferred Shares for
purposes of such action, and in the case of any such other action, at least 10
days prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the Common Shares and/or Preferred
Shares, whichever shall be the earlier.
(b) In case the event set forth in Section 11(a)(ii) hereof
shall occur, then the Company shall as soon as practicable thereafter give to
each registered holder of a Right, in accordance with Section 26 hereof, a
notice of the occurrence of such event, which notice shall describe such event
and the consequences of such event to holders of Rights under Section 11(a)(ii)
hereof.
Section 26. Notices. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any Right
to or on the
77
<PAGE> 81
Company shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing with the Rights
Agent) as follows:
[111 Holdings, Inc.]
2135 West Maple Road
Troy, Michigan 48084-7186
Attention: Corporate Secretary
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right to or on the Rights Agent shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Company) as follows:
First Chicago Trust Company of New York
525 Washington Boulevard
Suite 4660
Jersey City, New Jersey 07310
Attention: Tender & Exchanges Administration
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right shall be sufficiently
given or made if sent by first-class mail, postage prepaid, addressed to such
holder
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<PAGE> 82
at the address of such holder as shown on the registry books of the Company or
the registry books of the holders of the Rights maintained by the Rights Agent
after the Distribution Date as herein provided. Any notice or demand given prior
to the Distribution Date by the Company or the Rights Agent to the holders of
the Rights shall also be given to any registered pledgee of any uncertificated
Common Share by first-class mail, postage prepaid, addressed to such registered
pledgee at the address of such registered pledgee as shown on the registry books
of the Company.
Section 27. Supplements and Amendments. The Company may from
time to time supplement or amend this Agreement without the approval of any
holders of Rights in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any other
provisions herein, or to make any other provisions with respect to the Rights
which the Company may deem necessary or desirable, any such supplement or
amendment to be evidenced by a writing signed by the Company and the Rights
Agent; provided, however, that from
79
<PAGE> 83
and after such time as any Person becomes an Acquiring Person, this Agreement
shall not be amended in any manner which would adversely affect the interests of
the holders of Rights. Without limiting the foregoing, the Company may at any
time prior to such time as any Person becomes an Acquiring Person amend this
Agreement to lower the thresholds set forth in Sections 1(a) and 3(a) to not
less than the greater of (i) the sum of .001% and the largest percentage of the
outstanding Common Shares then known by the Company to be beneficially owned by
any Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of Rockwell (unless such plan is deemed an "Acquiring Person" in
accordance with the proviso to the first sentence of Section 1(a)), the Company
or any Subsidiary of the Company, or any entity holding Common Shares for or
pursuant to the terms of any such plan) and (ii) 10%.
Section 28. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the
80
<PAGE> 84
benefit of their respective successors and assigns hereunder.
Section 29. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any person or corporation other than the
Company, the Rights Agent and the registered holders of the Rights any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights.
Section 30. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Section 31. Governing Law. This Agreement and each Right
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware
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<PAGE> 85
and for all purposes shall be governed by and construed in accordance with the
laws of such State applicable to contracts to be made and performed entirely
within such State.
Section 32. Counterparts. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 33. Descriptive Headings. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
82
<PAGE> 86
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
[111 HOLDINGS, INC.]
Attest:
By ____________________________ By ________________________________________
Title: Title:
FIRST CHICAGO TRUST COMPANY
OF NEW YORK, AS RIGHTS AGENT
Attest:
By ____________________________ By ________________________________________
Title: Title:
83
<PAGE> 87
Exhibit A
Form of Right Certificate
Certificate No. R- _____ Rights
NOT EXERCISABLE AFTER ________, 2007 OR EARLIER IF REDEMPTION
OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT
$.01 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE
RIGHTS AGREEMENT.
Right Certificate
[111 HOLDINGS, INC.]
This certifies that ________________, or registered assigns,
is the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of ________________, 1997 (the "Rights
Agreement"), between [111 Holdings, Inc.], a Delaware corporation (the
"Company"), and First Chicago Trust Company of New York (the "Rights Agent"), to
purchase from the Company at any time after the Distribution Date (as such term
is defined in the Rights Agreement) and prior to 5:00 P.M., New York City time,
on _________________, 2007 at the principal office of the Rights Agent, or at
the office of its successor as Rights Agent, one one-hundredth of a fully paid
non-assessable share of Series A Junior Participating Preferred Stock, without
par value (the "Preferred Shares"), of the Company, at a purchase price of $[ ]
per one one-hundredth of a Preferred Share (the "Purchase Price"), upon
presentation and surrender of this Right Certificate with the Form of Election
to Purchase duly executed. The number
A-1
<PAGE> 88
of Rights evidenced by this Right Certificate (and the number of one
one-hundredths of a Preferred Share which may be purchased upon exercise
thereof) set forth above, and the Purchase Price set forth above, are the number
and Purchase Price as of __________, 1997, based on the Preferred Shares as
constituted at such date. As provided in the Rights Agreement, the Purchase
Price and the number of one one- hundredths of a Preferred Share which may be
purchased upon the exercise of the Rights evidenced by this Right Certificate
are subject to modification and adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and immunities hereunder
of the Rights Agent, the Company and the holders of the Rights. Copies of the
Rights Agreement are on file at the principal executive offices of the Company
and the above-mentioned offices of the Rights Agent.
This Right Certificate, with or without other Right
Certificates, upon surrender at the principal office of the Rights Agent, may be
exchanged for another Right Certificate or Right Certificates of like tenor and
date evidencing Rights entitling the holder to purchase a like aggregate number
of Preferred Shares as the Rights evidenced by the Right Certificate or Right
Certificates surrendered shall have entitled such holder to purchase. If the
Rights evidenced by this Right Certificate shall be exercised in part, the
holder shall be entitled to receive upon surrender hereof another Right
Certificate or Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Right Certificate (i) may be redeemed by the Company at a
redemption price of $.01 per
A-2
<PAGE> 89
Right or (ii) may be exchanged in whole or in part for Preferred Shares or
shares of the Company's Common Stock, par value $1 per share.
No fractional Preferred Shares will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one one-hundredth of a Preferred Share, which may, at the
election of the Company, be evidenced by depositary receipts), but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of Rights evidenced by this Right Certificate shall
be entitled to vote or receive dividends or be deemed for any purpose the holder
of the Preferred Shares or of any other securities of the Company which may at
any time be issuable on the exercise thereof, nor shall anything contained in
the Rights Agreement or herein be construed to confer upon the holder of any
Rights evidenced hereby, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold consent
to any corporate action, or to receive notice of meetings or other actions
affecting stockholders (except as provided in the Rights Agreement), or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by this Right Certificate shall have been exercised as provided
in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal.
Dated as of ____________.
A-3
<PAGE> 90
ATTEST: [111 HOLDINGS, INC.]
____________________ By:______________________
Countersigned:
First Chicago Trust Company of New York,
as Rights Agent
By:__________________________
Authorized Signature
A-4
<PAGE> 91
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights evidenced by this
Right Certificate.)
FOR VALUE RECEIVED ___________________________________________
hereby sells, assigns and transfers unto _______________________________________
___________________________________________________________________ Rights
(Please print name and address of transferee)
evidenced by this Right Certificate, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint __________________
attorney, to transfer the said Rights on the books of the within-named Company,
with full power of substitution.
Dated:________________
_______________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
...............................................................................
The undersigned hereby certifies that the Rights evidenced by
this Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
A-5
<PAGE> 92
______________________________
Signature
A-6
<PAGE> 93
Form of Reverse Side of Right Certificate -- continued
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights evidenced by the Right Certificate.)
To: [111 Holdings, Inc.]
The undersigned hereby irrevocably elects to exercise
___________________ Rights evidenced by this Right Certificate to purchase the
Preferred Shares issuable upon the exercise of such Rights and requests that
certificates for such Preferred Shares be issued in the name of:
Please insert social security
or other identifying number
_______________________________________________________________________________
(Please print name and address)
_______________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced
by this Right Certificate, a new Right Certificate for the balance remaining of
such Rights shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
_______________________________________________________________________________
(Please print name and address)
_______________________________________________________________________________
Dated: ____________
_________________________
Signature
Signature Guaranteed:
A-7
<PAGE> 94
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
A-8
<PAGE> 95
Form of Reverse Side of Right Certificate -- continued
...............................................................................
The undersigned hereby certifies that the Rights evidenced by
this Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
___________________________________
Signature
...............................................................................
NOTICE
The signature in the Form of Assignment or Form of Election to
Purchase, as the case may be, must conform to the name as written upon the face
of this Right Certificate in every particular, without alteration or enlargement
or any change whatsoever.
In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, the Company and the Rights Agent will deem the beneficial owner of
the Rights evidenced by this Right Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and such
Assignment or Election to Purchase will not be honored.
A-9
<PAGE> 1
Exhibit 10.3
- --------------------------------------------------------------------------------
EMPLOYEE MATTERS AGREEMENT
by and between
ROCKWELL INTERNATIONAL CORPORATION
and
[111 HOLDINGS, INC.]
- --------------------------------------------------------------------------------
[ ], 1997
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS .................................................... 1
Section 1.01 General .............................................. 1
ARTICLE II EMPLOYEES ..................................................... 5
Section 2.01 Employees ............................................ 5
Section 2.02 Employee Benefits Generally .......................... 6
Section 2.03 Collective Bargaining Agreements ..................... 6
ARTICLE III PENSION PLANS ................................................ 7
Section 3.01 U.S. Pension Plan .................................... 7
Section 3.02 U.S. Nonqualified Pension Plans ...................... 8
Section 3.03 U.K. Executive Pension Plan .......................... 10
Section 3.04 U.K. Stand-Alone Pension Plans ....................... 11
Section 3.05 Canadian Stand-Alone Pension Plans ................... 12
Section 3.06 Canadian Joint Venture Plan .......................... 13
Section 3.07 Australian Stand-Alone Pension Plans ................. 14
Section 3.08 German Stand-Alone Pension Plan ...................... 14
Section 3.09 Gordonsville Retirement Plan ......................... 15
ARTICLE IV SAVINGS PLANS ................................................. 16
Section 4.01 U.S. Savings Plan .................................... 16
Section 4.02 Stand-Alone Savings Plans ............................ 17
Section 4.03 Nonqualified Savings Plans ........................... 18
ARTICLE V STOCK PLANS .................................................... 19
Section 5.01 Stock Plans .......................................... 19
ARTICLE VI OTHER EMPLOYEE PLANS AND MATTERS .............................. 20
Section 6.01 Welfare Plans ........................................ 21
Section 6.02 Long-Term Incentive Plan and Incentive
Compensation Plans ............................. 22
Section 6.03 Deferred Compensation Plans .......................... 23
Section 6.04 Severance Pay ........................................ 23
Section 6.05 Employment, Consulting and Other Employee
Related Agreements ............................. 24
Section 6.06 Rockwell VEBA ........................................ 24
<PAGE> 3
Section 6.07 Other Liabilities .................................... 24
ARTICLE VII MISCELLANEOUS ............................................... 25
Section 7.01 Indemnification ...................................... 25
Section 7.02 Sharing of Information ............................... 25
Section 7.03 Entire Agreement; Construction ....................... 25
Section 7.04 Survival of Agreements ............................... 26
Section 7.05 Governing Law ........................................ 26
Section 7.06 Notices .............................................. 26
Section 7.07 Amendments ........................................... 26
Section 7.08 Assignment ........................................... 26
Section 7.09 Captions; Currency ................................... 27
Section 7.10 Severability ......................................... 27
Section 7.11 Parties in Interest .................................. 27
Section 7.12 Schedules ............................................ 28
Section 7.13 Termination .......................................... 28
Section 7.14 Change of Name ....................................... 28
Section 7.15 Waivers; Remedies .................................... 28
Section 7.16 Counterparts ......................................... 28
Section 7.17 Performance .......................................... 29
SCHEDULES
Schedule 2.01 - Employees
Schedule 2.03 - Collective Bargaining Agreements
ii
<PAGE> 4
EMPLOYEE MATTERS AGREEMENT
EMPLOYEE MATTERS AGREEMENT (this "Agreement"), dated as of
____________, 1997, by and between ROCKWELL INTERNATIONAL CORPORATION, a
Delaware corporation ("Rockwell"), and [111 HOLDINGS, INC.], a Delaware
corporation and, as of the date hereof, a wholly-owned subsidiary of Rockwell
("Automotive").
WHEREAS, the Rockwell Board has determined that it is appropriate
and desirable to distribute all outstanding shares of Automotive Common Stock on
a pro rata basis to the holders of Rockwell Common Stock (the "Distribution");
and
WHEREAS, Rockwell and Automotive 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
Automotive 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 Rockwell 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):
<PAGE> 5
"Australian Stand-Alone Pension Plans" shall have the meaning
ascribed thereto in Section 3.06.
"Automotive Employee" means any individual who will be employed by a
member of the Automotive Group as of the Time of Distribution pursuant to
Section 2.01.
"Automotive 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 an Automotive Employee, and whose most recent active
employment with such member of the Pre-Distribution Group was with the
Automotive Business.
"Automotive Nonqualified Pension Plans" shall have the meaning
ascribed thereto in Section 3.02.
"Automotive Nonqualified Savings Plans" shall have the meaning
ascribed thereto in Section 4.03.
"Automotive Option" means an option to purchase from Automotive
shares of Automotive Common Stock provided to an Automotive Participant
pursuant to Section 5.01(b).
"Automotive Option Ratio" means the amount obtained by dividing (i)
the Average Price of Automotive Common Stock by (ii) the average of the
daily closing prices per share of Rockwell Common Stock as reported on the
NYSE Composite Transactions reporting system for the five consecutive full
NYSE trading days preceding the ex-dividend date for the Distribution.
"Automotive Participants" means Automotive Employees, Automotive
Former Employees and their respective beneficiaries.
"Automotive Pension Plan" shall have the meaning ascribed thereto in
Section 3.01.
"Automotive Savings Plan" shall have the meaning ascribed thereto in
Section 4.01.
"Automotive U.K. Executive Plan" shall have the meaning ascribed
thereto in Section 3.03.
2
<PAGE> 6
"Automotive Welfare Plans" shall have the meaning ascribed thereto
in Section 6.01.
"Average Price of Automotive Common Stock" means the average of the
daily closing prices per share of Automotive Common Stock as reported on
the New York Stock Exchange ("NYSE") Composite Transactions reporting
system for the five consecutive full NYSE trading days preceding the
Distribution Date, assuming that "when-issued" trading in Automotive
Common Stock occurs during that period. If such trading does not occur
during the five consecutive full NYSE trading days preceding the
Distribution Date or if the trading volume for any day during such period
is less than 10,000 shares, then the "Average Price of Automotive Common
Stock" will mean the average of the daily closing prices per share of
Automotive Common Stock for the five full NYSE trading days following the
Distribution Date (or, if "when-issued" trading with sufficiently large
volume occurs for only part of the five consecutive full trading days
preceding the Distribution Date, the average of the daily closing prices
per share of Automotive Common Stock for a combination of five full NYSE
trading days before the Distribution Date on which trading with
sufficiently large volume occurs and after the Distribution Date).
"Canadian Stand-Alone Pension Plans" shall have the meaning ascribed
thereto in Section 3.05.
"Canadian Joint Venture Plan" shall have the meaning ascribed
thereto in Section 3.06.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, or any successor legislation.
"German Stand-Alone Pension Plan" shall have the meaning ascribed
thereto in Section 3.07.
"Incentive Compensation Plan" means the Rockwell International
Corporation Incentive Compensation Plan, including all amendments thereto.
"LTIP" shall have the meaning ascribed thereto in Section 6.02.
3
<PAGE> 7
"Pre-1997 Rockwell Option" means an option to purchase from Rockwell
shares of Rockwell Common Stock granted prior to October 1, 1996 pursuant
to one of the Rockwell Stock Plans.
"Rockwell Employee" means any individual who is employed by Rockwell
or any of its Subsidiaries (including members of the Automotive Group) as
of the Time of Distribution and who is not an Automotive Employee.
"Rockwell Nonqualified Pension Plans" shall have the meaning
ascribed thereto in Section 3.02.
"Rockwell Nonqualified Savings Plans" shall have the meaning
ascribed thereto in Section 4.03.
"Rockwell 1997 Option" means an option to purchase from Rockwell
shares of Rockwell Common Stock granted after September 30, 1996 pursuant
to one of the Rockwell Stock Plans.
"Rockwell Option Ratio" means the amount obtained by dividing (i)
the average of the daily closing prices per share of Rockwell Common Stock
as reported on the NYSE Composite Transactions reporting system for the
five consecutive full NYSE trading days commencing on the ex-dividend date
for the Distribution by (ii) the average of the daily closing prices per
share of Rockwell Common Stock as reported on the NYSE Composite
Transactions reporting system for the five consecutive full NYSE trading
days preceding the ex-dividend date for the Distribution.
"Rockwell Pension Plan" means the Rockwell International Corporation
Retirement Plan for Eligible Employees, including all amendments thereto.
"Rockwell Savings Plan" means the Rockwell International Corporation
Savings Plan, including all amendments thereto.
"Rockwell Stock Plans" means, collectively, the Rockwell 1995
Long-Term Incentives Plan and the Rockwell 1988 Long-Term Incentives Plan,
in each case, including all amendments thereto.
4
<PAGE> 8
"Rockwell U.K. Executive Plan" means the Rockwell U.K. Executive
Plan, including all amendments thereto.
"Rockwell Welfare Plans" shall have the meaning ascribed thereto in
Section 6.01.
"Stand-Alone Savings Plans" shall have the meaning ascribed thereto
in Section 4.02.
"U.K. Stand-Alone Pension Plans" shall have the meaning ascribed
thereto in Section 3.04.
"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. Each individual (other than those engaged
primarily in the businesses of Rockwell and its Subsidiaries other than the
Automotive Business) who is employed by any member of the Automotive 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 Automotive Group as of the Time of Distribution
and will be an Automotive Employee. In addition, each individual who is employed
by Rockwell or any of its Subsidiaries (other than by members of the Automotive
Group) immediately prior to the Time of Distribution and (x) who is engaged
primarily in the Automotive Business or (y) who Rockwell consents to becoming an
Automotive Employee, which individuals are 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
Automotive Group as of the Time of Distribution and will be an Automotive
Employee. Nothing contained in this Section 2.01 is intended to confer upon any
employee of the Rockwell
5
<PAGE> 9
Group or the Automotive Group any right to continued employment after the
Distribution Date.
Section 2.02 Employee Benefits Generally. For a period of at least
one year after the Time of Distribution, the Automotive Group will provide to
Automotive Participants employee benefits that are substantially similar in all
material respects to the employee benefits provided to such Automotive
Participants by Rockwell and its Subsidiaries (including members of the
Automotive Group) immediately prior to the Time of Distribution.
Section 2.03 Collective Bargaining Agreements. Effective as of the
Time of Distribution, Automotive will, or will cause one or more Automotive
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 Automotive Participants
under each of the collective bargaining agreements of the Pre-Distribution Group
relating to the Automotive Business and collateral agreements related thereto,
including, without limitation, those listed on Schedule 2.03. From and after the
Time of Distribution, none of Rockwell, the Rockwell Subsidiaries or their
Affiliates will have any Liabilities with respect to Automotive Participants
under collective bargaining agreements relating to the Automotive Business or
collateral agreements relating thereto. Rockwell and Automotive 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, Automotive and the
Automotive 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. Rockwell and
Automotive 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 2.03.
6
<PAGE> 10
ARTICLE III
PENSION PLANS
Section 3.01 U.S. Pension Plan.
(a) As of the Time of Distribution, Automotive will have
established, and will cover Automotive Employees who participated in the
Rockwell Pension Plan immediately prior to the Time of Distribution under, a
defined benefit pension plan (the "Automotive 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
Automotive Pension Plan will be substantially similar in all material respects
to the Rockwell Pension Plan as of the Time of Distribution, and will provide a
benefit formula for Automotive Employees which will be substantially similar in
all material respects to the benefit formula that the Rockwell Pension Plan
provides as of the Time of Distribution. The Automotive Pension Plan will be
maintained in such form for a period of at least one year following the Time of
Distribution. The Automotive Pension Plan will credit each Automotive Employee
for purposes of eligibility to participate, vesting, benefit accruals and all
other plan purposes with all service which had been credited to such Automotive
Employee for such purposes under the Rockwell Pension Plan immediately prior to
the Time of Distribution (excluding any such service which was not counted under
the Rockwell Pension Plan by operation of its "break in service" rules);
provided, however, that service with Rockwell and Automotive will not be
aggregated under the Automotive Pension Plan for any periods following the time
at which the plan participant commences the receipt of benefits under the
Rockwell Pension Plan if the plan participant is not also retired under the
Automotive Pension Plan. Notwithstanding the above, the Automotive Pension Plan
will provide that the benefit of each Automotive Employee under the Automotive
Pension Plan will be reduced by the amount of the benefit to which the
Automotive Employee would be entitled under the Rockwell Pension Plan if the
Automotive Employee commenced receipt of benefits from the Rockwell Pension Plan
at the same time as from the Automotive Pension Plan based on the Automotive
Employee's service and salary history under the Rockwell Pension Plan at the
Time of Distribution. Rockwell will provide Automotive with prompt notice if an
Automotive Employee
7
<PAGE> 11
commences receipt of benefits under the Rockwell Pension Plan.
(b) Effective as of the Time of Distribution, the Automotive
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 a benefit, if any, 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, Automotive Employees who participated in the Rockwell Pension Plan
immediately prior to the Time of Distribution will have a nonforfeitable right
to their benefit under the Rockwell Pension Plan. None of Automotive or the
Automotive Subsidiaries, the Affiliates thereof, the Automotive Pension Plan or
the trust thereunder 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 thereof, the
Rockwell Pension Plan or the trust thereunder will have any Liabilities with
respect to benefits and entitlements of Automotive Employees under the Rockwell
Pension Plan, except with respect to benefits accrued under the Rockwell Pension
Plan prior to the Time of Distribution.
(c) Automotive 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 U.S. Nonqualified Pension Plans. (a) As of the Time of
Distribution, Automotive will establish nonqualified pension plans (the
"Automotive Nonqualified Pension Plans") and will cover thereunder Automotive
Participants who participated immediately prior to the Time of Distribution in,
or retired from Rockwell prior to the Time of Distribution and are currently
8
<PAGE> 12
receiving benefits from, 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").
The Automotive Nonqualified Pension Plans will be substantially similar in all
material respects to the Rockwell Nonqualified Pension Plans as of the Time of
Distribution, and will provide the same benefit formula for Automotive
Participants as the Rockwell Nonqualified Pension Plans as of the Time of
Distribution. The Automotive Nonqualified Pension Plans will be maintained in
such form for a period of at least one year following the Time of Distribution.
The Automotive Nonqualified Pension Plans will credit each Automotive
Participant for purposes of eligibility to participate, vesting, benefit
accruals and all other plan purposes with all service which had been credited to
such Automotive Participant for such purposes under the Rockwell Nonqualified
Pension Plans immediately prior to the Time of Distribution (excluding any such
service which was not counted under the Rockwell Nonqualified Pension Plans by
operation of their "break in service" rules); provided, however, that service
with Rockwell and Automotive will not be aggregated under the Automotive
Nonqualified Pension Plans for any periods following the time at which the plan
participant commences the receipt of benefits under the Automotive Nonqualified
Pension Plans as a result of retirement under the Rockwell Pension Plan if the
plan participant is not also retired under the Automotive Nonqualified Pension
Plans.
(b) Automotive will assume and fully perform, pay and discharge all
of Rockwell's and its Subsidiaries' Liabilities under the Rockwell Nonqualified
Pension Plans with respect to Automotive Participants. From and after the Time
of Distribution, none of Rockwell or the Rockwell Subsidiaries or their
Affiliates will have any Liabilities under the Rockwell Nonqualified Pension
Plans with respect to Automotive Participants. It is the intention of the
parties that Automotive will satisfy its obligations to assume all Liabilities
under the Rockwell Nonqualified Pension Plans with respect to Automotive
Participants by granting to such participants the credit under the Automotive
Nonqualified Pension Plans provided for under paragraph 3.02(a) hereof.
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<PAGE> 13
(c) Rockwell and Automotive will cooperate in making all appropriate
filings required by law, implementing all appropriate communications with
participants, transferring appropriate records and taking all other actions as
may be necessary or appropriate to implement the provisions of this Section
3.02.
Section 3.03 U.K. Executive Pension Plan.
(a) As of the Time of Distribution, Automotive will have
established, and will cover Automotive Employees who participated in the
Rockwell U.K. Executive Plan immediately prior to the Time of Distribution
under, a defined benefit pension plan (the "Automotive U.K. Executive Plan"),
[which will be tax qualified pursuant to applicable law], and will have
established a related trust. The Automotive U.K. Executive Plan will be
substantially similar in all material respects to the Rockwell U.K. Executive
Plan as of the Time of Distribution, and will provide the same benefit formula
for Automotive Employees as the Rockwell U.K. Executive Plan provides as of the
Time of Distribution. The Automotive U.K. Executive Plan will be maintained in
such form for a period of at least one year following the Time of Distribution.
The Automotive U.K. Executive Plan will credit each Automotive Employee for
purposes of eligibility to participate, vesting, benefit accruals and all other
plan purposes with all service which had been credited to such Automotive
Employee for such purposes under the Rockwell U.K. Executive Plan immediately
prior to the Time of Distribution (excluding any such service which was not
counted under the U.K. Executive Plan by operation of its "break in service"
rules), provided, however, that service with Rockwell and Automotive will not be
aggregated under the Automotive U.K. Executive Plan for any periods following
the time at which the plan participant commences the receipt of benefits under
the Rockwell U.K. Executive Plan if the plan participant is not also retired
under the Automotive U.K. Executive Plan. Notwithstanding the above, the
Automotive U.K. Executive Plan will provide that the accrued benefit of each
Automotive Employee under the Automotive U.K. Executive Plan will be reduced by
the amount of the benefit to which the Automotive Employee would be entitled
under the Rockwell U.K. Executive Plan if the Automotive Employee commenced
receipt of benefits from the Rockwell U.K. Executive Plan at the same time as
from the Automotive U.K. Executive Plan based on the Automotive Employee's
service and salary history under the Rockwell U.K. Executive Plan at the Time of
Distribution. Rockwell
10
<PAGE> 14
will provide Automotive with prompt notice if an Automotive Employee commences
receipt of benefits under the Rockwell U.K. Executive Plan.
(b) Effective as of the Time of Distribution, the Automotive
Employees who participated in the Rockwell U.K. Executive 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.
Executive Plan and will have the right to receive a benefit, if any, under the
Rockwell U.K. Executive Plan accrued as of the Time of Distribution in
accordance with the terms of the Rockwell U.K. Executive Plan; provided,
however, that, effective as of the Time of Distribution, Automotive Employees
who participated in the Rockwell U.K. Executive Plan immediately prior to the
Time of Distribution will have a nonforfeitable right to their benefit under the
Rockwell U.K. Executive Plan. None of Automotive or the Automotive Subsidiaries,
the Affiliates thereof, the Automotive U.K. Executive Plan or the trust
thereunder, will have or acquire any interest in or right to any of the assets
of the Rockwell U.K. Executive Plan, and Rockwell and the Rockwell Subsidiaries
will retain full power and authority with respect to the amendment and
termination of the Rockwell U.K. Executive Plan and the investment and
disposition of assets held in the Rockwell U.K. Executive Plan to the extent
permitted by law. From and after the Time of Distribution, none of Rockwell or
the Rockwell Subsidiaries, the Affiliates thereof, the Rockwell U.K. Executive
Plan or the trust thereunder will have any Liabilities with respect to benefits
and entitlements of Automotive Employees under the Rockwell U.K. Executive Plan,
except with respect to benefits accrued under the Rockwell U.K. Executive Plan
prior to the Time of Distribution.
(c) Automotive and Rockwell will cooperate in making all appropriate
filings required under applicable 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 3.03.
Section 3.04 U.K. Stand-Alone Pension Plan. Effective as of the Time
of Distribution, Automotive will or will cause one or more Automotive
Subsidiaries to (i) assume sponsorship of and adopt the Rockwell Automotive U.K.
Pension Plan, as amended through the Time of Distribution (the "U.K. Stand-Alone
Pension Plan"), the respective trust
11
<PAGE> 15
related thereto and all assets and Liabilities related thereto, and (ii) fully
succeed to and perform, pay and discharge all of the Pre-Distribution Group's
Liabilities with respect to the U.K. Stand-Alone Pension Plan and the respective
trust related thereto as a successor employer thereunder, subject to the Inland
Revenue's consent and the governing provisions of the U.K. Stand-Alone Pension
Plan. The U.K. Stand-Alone Pension Plan will be maintained in a form
substantially similar in all material respects to the form in which it existed
immediately prior to the Time of Distribution for a period of at least one year
following the Time of Distribution. Effective as of the Time of Distribution,
Automotive will or will cause the applicable Automotive Subsidiary to nominate
(i) an organization which is a member of the Investment Management Regulatory
Organization as investment manager of the U.K. Stand-Alone Pension Plan and (ii)
an organization registered in the United Kingdom as custodian of the assets of
the U.K. Stand-Alone Pension Plan. Effective as of the Time of Distribution,
Automotive will or will cause the applicable Automotive Subsidiary to execute a
deed of substitution relating to the U.K. Stand-Alone Pension Plan, assume all
Liabilities thereunder and take all actions as described therein. 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 U.K. Stand-Alone
Pension Plan and the respective trust related thereto. Rockwell and Automotive
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, Automotive
and the Automotive Subsidiaries as successors to Rockwell and the Rockwell
Subsidiaries as to all rights, assets, duties and Liabilities under, or with
respect to, the U.K. Stand-Alone Pension Plan and to establish Automotive or the
applicable Automotive Subsidiary as the principal company of the U.K.
Stand-Alone Pension Plan for the purposes of any applicable laws. Rockwell and
Automotive will cooperate in making all appropriate filings required by law,
implementing all appropriate communications with participants, transferring
appropriate records, replacing the trustees under the U.K. Stand-Alone Pension
Plan with trustees designated by Automotive and taking all other actions as may
be necessary or appropriate to implement the provisions of this Section 3.04.
Section 3.05 Canadian Stand-Alone Pension Plans. Effective as of the
Time of Distribution, Automotive will or will cause one or more Automotive
Subsidiaries to (i) retain
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<PAGE> 16
sponsorship of (A) the Pension Plan for Non-Union Salaried Employees of Rockwell
International of Canada Ltd., (B) the Pensioners' Plan of Rockwell International
of Canada, (C) the Pension Plan for Non-Union Salaried Employees of Rockwell
International Suspension Systems Company, (D) the Rockwell International of
Canada Tilbury Plan, and (E) the Rockwell International of Canada Bracebridge
Plan, in each case as amended through the Time of Distribution (the plans
referred to in clauses (A)-(E) above are referred to herein collectively as the
"Canadian Stand-Alone Pension Plans"), the respective trusts related to the
Canadian Stand-Alone Pension Plans and all assets and Liabilities related to the
Canadian Stand-Alone Pension Plans, and (ii) fully perform, pay and discharge
all of the Pre-Distribution Group's Liabilities with respect to the Canadian
Stand-Alone Pension Plans and the respective trusts related thereto. The
Canadian Stand-Alone Pension Plans will be maintained in forms substantially
similar in all material respects to the forms in which they existed immediately
prior to the Time of Distribution for a period of at least one year following
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 the Canadian Stand-Alone Pension Plans and the
respective trusts related thereto. Rockwell and Automotive 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, Automotive and the Automotive
Subsidiaries as successors to Rockwell and the Rockwell Subsidiaries as to all
rights, assets, duties and Liabilities under, or with respect to, the Canadian
Stand-Alone Pension Plans. Rockwell and Automotive will cooperate in making all
appropriate filings required by law, implementing all appropriate communications
with participants, transferring appropriate records, replacing the trustees
under each Canadian Stand-Alone Pension Plan with trustees designated by
Automotive and taking all other actions as may be necessary or appropriate to
implement the provisions of this Section 3.05.
Section 3.06. Canadian Joint Venture Plan. Effective as of the Time
of Distribution, Automotive will cause one or more Automotive Subsidiaries to
assume all Liabilities of the Pre-Distribution Group under the Agreement and
Pension Plan for Hourly Employees of Rockwell International Suspension Systems
Company - C.A.W. Local No. 127 (Chatham, Ontario), No. 1067 (Milton, Ontario)
and No. 35 (Chatham, Ontario) (the "Canadian Joint Venture Plan").
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<PAGE> 17
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
Canadian Joint Venture Plan and the respective trust related thereto. Rockwell
and Automotive will cooperate in making all appropriate filings required by law
and taking all other actions as may be necessary or appropriate to implement the
provisions of this Section 3.06.
Section 3.07 Australian Stand-Alone Pension Plans. Effective as of
the Time of Distribution, Automotive will or will cause one or more Automotive
Subsidiaries to (i) assume sponsorship of the Rockwell Standard of Australia
Superannuation Plan and the Rockwell A.B.S. Australia Superannuation Plan, in
each case as amended through the Time of Distribution (the "Australian
Stand-Alone Pension Plans"), the respective trusts related thereto and all
assets and Liabilities related thereto, and (ii) fully perform, pay and
discharge all of the Pre-Distribution Group's Liabilities with respect to the
Australian Stand-Alone Pension Plans and the respective trusts related thereto.
The Australian Stand-Alone Pension Plans will be maintained in forms
substantially similar in all material respects to the forms in which they
existed immediately prior to the Time of Distribution for a period of at least
one year following 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 the Australian Stand-Alone Pension
Plans and the respective trusts related thereto. Rockwell and Automotive 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, Automotive and the
Automotive Subsidiaries as successors to Rockwell and the Rockwell Subsidiaries
as to all rights, assets, duties and Liabilities under, or with respect to, the
Australian Stand-Alone Pension Plans. Rockwell and Automotive will cooperate in
making all appropriate filings required by law, implementing all appropriate
communications with participants, transferring appropriate records, replacing
the trustees under each Australian Stand-Alone Pension Plan with trustees
designated by Automotive and taking all other actions as may be necessary or
appropriate to implement the provisions of this Section 3.07.
Section 3.08 German Stand-Alone Pension Plan. Effective as of the
Time of Distribution, Automotive will or will cause one or more Automotive
Subsidiaries to (i) assume
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sponsorship of the Pension Plan for the Employees of Rockwell-Golde GmbH, 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. The German Stand-Alone Pension Plan will be
maintained in a form substantially similar in all material respects to the form
in which it existed immediately prior to the Time of Distribution for a period
of at least one year following 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 the German Stand-Alone
Pension Plan. Rockwell and Automotive 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, Automotive and the Automotive 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
Automotive will cooperate in making all appropriate filings required by law,
implementing all appropriate communications with participants, transferring
appropriate records, replacing the trustees under the German Stand-Alone Pension
Plan with trustees designated by Automotive and taking all other actions as may
be necessary or appropriate to implement the provisions of this Section 3.08.
Section 3.09 Gordonsville Retirement Plan. Effective as of the Time
of Distribution, Automotive will or will cause one or more Automotive
Subsidiaries to (i) assume sponsorship of the Rockwell International Corporation
Retirement Plan for Hourly Employees, Gordonsville, Tennessee (the "Gordonsville
Retirement Plan"), the respective trust related thereto and all assets and
Liabilities related thereto, and (ii) fully perform, pay and discharge all of
the Pre-Distribution Group's Liabilities with respect to the Gordonsville
Retirement Plan and the respective trust related thereto. The Gordonsville
Retirement Plan will be maintained in a form substantially similar in all
material respects to the form in which it existed immediately prior to the Time
of Distribution for a period of at least one year following the Time of
Distribution. From and after the Time of Distribution, none of Rockwell, the
Rockwell Subsidiaries or their Affiliates will have any Liabilities with respect
to the Gordonsville Retirement Plan and the respective trust related thereto.
15
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Rockwell and Automotive 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, Automotive and the Automotive Subsidiaries as successors to
Rockwell and the Rockwell Subsidiaries as to all rights, assets, duties and
Liabilities under, or with respect to, the Gordonsville Retirement Plan.
Rockwell and Automotive will cooperate in making all appropriate filings
required by law, implementing all appropriate communications with participants,
transferring appropriate records, replacing the trustees under the Gordonsville
Retirement Plan with trustees designated by Automotive and taking all other
actions as may be necessary or appropriate to implement the provisions of this
Section 3.09.
ARTICLE IV
SAVINGS PLANS
Section 4.01 U.S. Savings Plan.
(a) As of the Time of Distribution, Automotive will have
established, and will cover the Automotive Employees who participated in the
Rockwell Savings Plan immediately prior to the Time of Distribution under, a
defined contribution plan (the "Automotive Savings Plan"), which will be
qualified pursuant 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 Automotive Savings Plan will be substantially similar in
all material respects to the Rockwell Savings Plan as of the Time of
Distribution, except that Automotive Common Stock will be substituted for all
plan purposes for Rockwell Common Stock and the other investment vehicles
offered by the Automotive Savings Plan will not be identical to the investment
vehicles offered by the Rockwell Savings Plan. The Automotive Savings Plan will
provide the same employer contribution formula for Automotive Employees as the
Rockwell Savings Plan provides as of the Time of Distribution. The Automotive
Savings Plan will be maintained in such form for a period of at least one year
following the Time of Distribution. The Automotive Savings Plan will credit each
Automotive Employee for purposes of vesting and eligibility with all service
which had been credited to such Automotive Employee for such purposes under the
Rockwell Savings Plan immediately prior to the Time of Distribution (excluding
any such service
16
<PAGE> 20
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, Automotive 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 Automotive Employees. Effective
as of the Time of Distribution, Automotive Employees will cease to be eligible
to contribute to, or receive contributions in respect of, their Rockwell Savings
Plan accounts. None of Automotive or the Automotive Subsidiaries, the Affiliates
thereof, the Automotive 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 thereof, the Rockwell Savings Plan or the
trust thereunder will have any Liabilities with respect to benefits and
entitlements of Automotive Employees under the Rockwell Savings Plan, except
with respect to benefits accrued under the Rockwell Savings Plan prior to the
Time of Distribution.
(c) Automotive 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.
Section 4.02 Stand-Alone Savings Plans. Effective as of the Time of
Distribution, Automotive will or will cause one or more Automotive Subsidiaries
to (i) assume sponsorship of the Asheville Employees Retirement Savings Plan
Truck Axle Division, the Rockwell International Corporation Gordonsville,
Tennessee Employee Savings Plan, and the York Employees Retirement Savings Plan
Truck Axle Division, in each case as amended through the Time of Distribution
(collectively, the "Stand-Alone Savings
17
<PAGE> 21
Plans"), the respective trusts related thereto and all assets and Liabilities
related thereto, and (ii) fully perform, pay and discharge all of the
Pre-Distribution Group's Liabilities with respect to the Stand-Alone Savings
Plans and the respective trusts related thereto. The Stand-Alone Savings Plans
will be maintained in forms substantially similar in all material respects to
the forms in which they existed immediately prior to the Time of Distribution
for a period of at least one year following the Time of Distribution. From and
after the Time of Distribution, none of Rockwell, the Rockwell Subsidiaries or
their Affiliates will have any Liabilities with respect to the Stand-Alone
Savings Plans and the respective trusts related thereto. Rockwell and Automotive
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, Automotive
and the Automotive Subsidiaries as successors to Rockwell and the Rockwell
Subsidiaries as to all rights, assets, duties and Liabilities under, or with
respect to, the Stand-Alone Savings Plans. Rockwell and Automotive will
cooperate in making all appropriate filings required by law, implementing all
appropriate communications with participants, transferring appropriate records,
replacing the trustees under each Stand-Alone Savings Plan with trustees
designated by Automotive and taking all other actions as may be necessary or
appropriate to implement the provisions of this Section 4.02.
Section 4.03 Nonqualified Savings Plans.
(a) Rockwell will retain all Liabilities for and will pay when due
all benefits accrued as of the Time of Distribution by, and attributable to,
Automotive 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 thereof or the Rockwell Nonqualified Savings Plans
will have any Liabilities with respect to benefits and entitlements of
Automotive 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.
18
<PAGE> 22
(b) As of the Time of Distribution, Automotive will have established
and will cover Automotive Employees who participated in the Rockwell
Nonqualified Savings Plans immediately prior to the Time of Distribution under
nonqualified savings plans (the "Automotive Nonqualified Savings Plans"). The
Automotive Nonqualified Savings Plans will be substantially similar in all
material respects to the Rockwell Nonqualified Savings Plans. The Automotive
Nonqualified Savings Plans will be maintained in such form for a period of at
least one year following the Time of Distribution. The Automotive Nonqualified
Savings Plans will credit each Automotive Employee for purposes of eligibility
to participate and for vesting purposes with all service which had been credited
to such Automotive Employee for such purposes under the Rockwell Nonqualified
Savings Plans immediately prior to the Time of Distribution (excluding any such
service which was not counted under the Rockwell Nonqualified Savings Plans by
operation of their "break in service" rules), but shall not grant past service
credit to Automotive Employees for benefit accruals and any other plan purposes.
ARTICLE V
STOCK PLANS
Section 5.01 Stock Plans.
(a) Rockwell and Automotive will take all action necessary or
appropriate so that each Pre-1997 Rockwell Option held by an Automotive Employee
that is outstanding as of the Time of Distribution is adjusted pursuant to the
equitable adjustment provisions of the applicable Rockwell Stock Plan under
which such Pre-1997 Rockwell Option was granted (in the case of adjustment of
any such Pre-1997 Rockwell Option that is accompanied by a tandem stock
appreciation right, accompanied by a corresponding adjustment to such tandem
stock appreciation right) so that the number of shares subject to the adjusted
Pre-1997 Rockwell Option will equal the number of shares subject to such
Pre-1997 Rockwell Option immediately prior to the Time of Distribution and prior
to such adjustment, multiplied by the reciprocal of the Rockwell Option Ratio,
and then, if any resultant fractional share of Rockwell Common Stock exists,
rounded down to the nearest whole share. The adjusted Pre-1997 Rockwell Option
will have a per-share exercise price equal to the per-share exercise price of
such
19
<PAGE> 23
Pre-1997 Rockwell Option immediately prior to the Time of Distribution and prior
to such adjustment, multiplied by the Rockwell Option Ratio. Such adjusted
Pre-1997 Rockwell Option (and, if applicable, tandem stock appreciation right)
will otherwise have the same terms and conditions as those in effect prior to
the adjustment.
(b) Rockwell and Automotive will take all action necessary or
appropriate so that each Rockwell 1997 Option held by an Automotive Employee
that is outstanding as of the Time of Distribution will be replaced with an
Automotive Option (in the case of replacement of any such Rockwell 1997 Option
that is accompanied by a tandem stock appreciation right, with a tandem
Automotive stock appreciation right) pursuant to the equitable adjustment
provisions of the applicable Rockwell Stock Plan under which such Rockwell 1997
Option was granted. The number of shares of Automotive Common Stock subject to
the Automotive Option will equal the number of shares subject to such Rockwell
1997 Option being replaced immediately prior to the Time of Distribution,
multiplied by the reciprocal of the Automotive Option Ratio, and then, if any
resultant fractional share of Automotive Common Stock exists, rounded down to
the nearest whole share. The Automotive Option shall have a per-share exercise
price equal to the per-share exercise price of such Rockwell 1997 Option being
replaced immediately prior to the Time of Distribution, multiplied by the
Automotive Option Ratio. Such Automotive Option (and, if applicable, tandem
stock appreciation right) will otherwise have the same terms and conditions as
the corresponding Rockwell 1997 Option (and, if applicable, tandem stock
appreciation right) being replaced, except that references to Rockwell will be
changed to refer to Automotive.
ARTICLE VI
OTHER EMPLOYEE PLANS AND MATTERS
Section 6.01 Welfare Plans. As of the Time of Distribution,
Automotive will have established, and will cover Automotive Participants under,
Welfare Plans and other employee welfare benefit and fringe benefit arrangements
(collectively, "Automotive Welfare Plans") that are substantially similar in all
material respects to the Welfare Plans and other employee welfare benefit and
fringe benefit arrangements maintained by Rockwell and its Subsidiaries
(including members of the Automotive Group)
20
<PAGE> 24
immediately prior to the Time of Distribution for the benefit of Automotive
Participants ("Rockwell Welfare Plans"). The Automotive Welfare Plans will be
maintained in such form for a period of at least one year following the Time of
Distribution.
(b) The Automotive Welfare Plans will provide for the immediate
participation of those Automotive Participants who participated in the Rockwell
Welfare Plans immediately prior to the Time of Distribution. The Automotive
Welfare Plans will credit each Automotive Participant for all Automotive Welfare
Plan purposes with all service and any other item which had been credited to or
otherwise accumulated for the benefit of such Automotive Participant under the
Rockwell Welfare Benefit Plans immediately prior to the Time of Distribution.
The transition from the Rockwell Welfare Plans to the Automotive Welfare Plans
will not, in and of itself, adversely affect the Automotive Participants.
Without limiting the generality of the foregoing, each Automotive 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 Automotive 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 Automotive Participants under the corresponding Rockwell Welfare
Plan; (iii) will not impose any limitations on coverage of pre-existing
conditions of Automotive Participants except to the extent such limitations
applied to such Automotive Participants under the corresponding Rockwell Welfare
Plan immediately before such Automotive Welfare Plan became effective; and (iv)
will not impose any other conditions (such as proof of good health, evidence of
insurability or a requirement of a physical examination) upon the participation
by Automotive Participants who were participating in the corresponding Rockwell
Welfare Plan immediately before such Automotive Welfare Plan became effective.
(c) Automotive and the Automotive Subsidiaries will credit each
Automotive 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 Automotive
Group) applicable to such
21
<PAGE> 25
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, Automotive and the Automotive 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 Automotive
Participants (and claims by or relating to Automotive 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 Automotive 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.
Without limiting the generality of the foregoing, from and after the Time of
Distribution, Automotive and the Automotive Subsidiaries (or where appropriate,
the Automotive Welfare Plans) will assume all Liabilities in respect of
Automotive Participants with respect to retiree health benefits and retiree life
insurance benefits, whether under the Rockwell Welfare Plans, the Automotive
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.
(e) Automotive 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, Automotive will assume all
Liabilities (including but not limited to liability for earned but unpaid
incentive payments) for and will pay when due all amounts due to or attributable
to Automotive 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 Automotive Group) in effect at or prior
to the Time of
22
<PAGE> 26
Distribution. Rockwell and Automotive 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
appropriate to reflect the Distribution. From and after the Time of
Distribution, none of Rockwell or the Rockwell Subsidiaries or the Affiliates
thereof will have any Liabilities with respect to benefits of Automotive
Participants under the LTIP, the Incentive Compensation Plan and such other
incentive compensation plans. Rockwell and Automotive will cooperate in making
all appropriate filings required by law, implementing all appropriate
communications with participants, transferring 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, Automotive will or will cause one or more Automotive
Subsidiaries to assume all Liabilities relating to, including the obligation to
pay when due, all benefits accrued and not paid as of the Time of Distribution
by, and attributable to, Automotive Participants under the Rockwell
International Corporation Deferred Compensation Plan, as in effect immediately
prior to the Time of Distribution.
Section 6.04 Severance Pay.
(a) Rockwell and Automotive acknowledge and agree that the
transactions contemplated by the Transaction Agreements will not constitute a
severance of employment of any Automotive Employee prior to or as a result of
the transactions contemplated thereby, and that individuals who, in connection
with the Distribution, cease to be Rockwell Employees and, pursuant to this
Agreement, become Automotive Employees will not be deemed to have experienced a
termination, layoff or severance of employment from Rockwell and its
Subsidiaries, in each case for purposes of any policy, plan, program or
agreement of Rockwell or any of its Subsidiaries (including members of the
Automotive Group) that provides for the payment of severance, salary
continuation or similar benefits.
(b) Automotive and the Automotive Subsidiaries will assume and be
solely responsible for, and will fully perform, pay and discharge, all
Liabilities in connection
23
<PAGE> 27
with claims made by or on behalf of Automotive 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, Automotive will or will
cause one or more Automotive Subsidiaries to assume or retain (as applicable)
all Liabilities relating to Automotive 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.
Section 6.06 Rockwell VEBA. As of and after the Time of
Distribution, Rockwell will retain all assets of the Trust for Employee Welfare
Benefit Programs of Rockwell International Corporation.
Section 6.07 Other Liabilities. From and after the Time of
Distribution, except as specifically set forth in this Agreement, Automotive and
the Automotive 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 Automotive 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.
24
<PAGE> 28
ARTICLE VII
MISCELLANEOUS
Section 7.01 Indemnification. All Liabilities retained or assumed by
or allocated to Automotive or any Automotive Subsidiary pursuant to this
Agreement will be deemed to be Automotive 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 Automotive
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 Automotive
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 it 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
25
<PAGE> 29
the contrary, in the event and to the extent that there will be a 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
Automotive.
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.
26
<PAGE> 30
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. Except as expressly stated
herein, no provision of this Agreement will be construed (a) to limit the right
of Rockwell, any Rockwell Subsidiary, Automotive or any Automotive Subsidiary to
amend any plan or terminate any plan; provided, however, that Automotive and the
Automotive Subsidiaries will be obligated to maintain employee benefit plans and
arrangements for a period of at least one year from the Time of Distribution
which are substantially similar in all material respects to those which had been
maintained or provided by the Pre-Distribution Group immediately prior to the
Time of Distribution, or (b) to create any right or entitlement
27
<PAGE> 31
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
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 Automotive 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, Automotive 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" or any
derivative thereof.
Section 7.15 Waivers; Remedies. No failure or delay on the part of
either Rockwell or Automotive 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 Automotive 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.
28
<PAGE> 32
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:____________________________________
Name:
Title:
[111 HOLDINGS, INC.]
By:____________________________________
Name:
Title:
29
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE BALANCE SHEET AS OF JUNE 10, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-10-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> (1)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
