<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 3, 1997
FILE NO. 1-13093
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 4
TO
FORM 10/A
GENERAL FORM FOR
REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
------------------------
MERITOR AUTOMOTIVE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 38-3354643
(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
MERITOR AUTOMOTIVE, 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" and "Management's Discussion
and Analysis of Financial Condition and
Results of Operations -- Environmental
Matters".
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
ITEM
NO. CAPTION LOCATION IN INFORMATION STATEMENT
- ----- ------------------------------------------ ------------------------------------------
<S> <C> <C>
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".
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
Accountants 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]
September 3, 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 Meritor Automotive, 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 17, 1997.
Consummation of the Distribution is conditioned upon, among other things,
receipt of a favorable ruling of the Internal Revenue Service or an opinion of
tax counsel 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,
/s/ Donald R. Beall
Donald R. Beall
Chairman of the Board
and Chief Executive Officer
<PAGE> 5
[COMPANY NAME AND LOGO]
September 3, 1997
Dear Future Shareowner:
The enclosed Information Statement includes detailed information about Meritor
Automotive, Inc. (the "Company"), of which you will soon become a shareowner. 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 shareowner 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 shareowners and
provide new opportunities for our employees. We look forward to your
participation in our future.
Sincerely yours,
/s/ Larry D. Yost
Larry D. Yost
Chairman of the Board
and Chief Executive Officer
<PAGE> 6
INFORMATION STATEMENT
MERITOR AUTOMOTIVE, 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, Meritor Automotive, Inc. (the
"Company").
The Distribution is expected to be made on September 30, 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 17, 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). The Company Common Stock has been approved for listing,
subject to official notice of issuance, on the New York Stock Exchange, Inc.
(the "NYSE") under the trading symbol "MRA".
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 September 3, 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; Window Regulators; Trunk
Latches; Fuel Flap Latches; Door Latches and Actuators; Seat Adjusting Systems;
Steel Wheels; Remote Keyless Entry Controllers; Hood Latches; Stabilizer Bars;
Coil Springs; and Door Modules. Diagram also includes note that Torsion Bars
are 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............. 14
International Operations................. 14
Continued Implementation of the Company's
Operations Improvement Program......... 14
Absence of History as an Independent
Company; Future Capital Requirements... 14
No Prior Market For Company Common Stock;
Possibility of Substantial Sales of
Company Common Stock................... 15
Common Stock Dividend Policy............. 15
Certain Anti-takeover Effects............ 16
Certain Federal Income Tax
Considerations......................... 16
THE DISTRIBUTION............................. 17
Introduction............................. 17
Background and Reasons for the
Distribution........................... 17
Manner of Effecting the Distribution..... 17
Listing and Trading of Company Common
Stock.................................. 19
Dividend Policy.......................... 19
Certain Federal Income Tax Consequences
of the Distribution.................... 19
Conditions; Termination.................. 20
ARRANGEMENTS BETWEEN ROCKWELL AND THE COMPANY
RELATING TO THE DISTRIBUTION............... 21
Distribution Agreement................... 21
Employee Matters Agreement............... 22
Tax Allocation Agreement................. 24
Transition Agreement..................... 24
CREDIT FACILITY.............................. 25
HISTORICAL SELECTED FINANCIAL DATA........... 26
THE AUTOMOTIVE BUSINESS...................... 27
Industry Trends.......................... 28
Business Strategies...................... 29
Products................................. 30
Customers; Sales and Marketing........... 33
Competition.............................. 34
Raw Materials and Supplies............... 34
Joint Ventures........................... 34
Acquisitions and Dispositions............ 34
<CAPTION>
PAGE
----
<S> <C>
Research and Development................. 35
Patents and Trademarks................... 35
Employees................................ 35
Seasonality; Cyclicality................. 35
Properties............................... 36
Environmental Matters.................... 36
Legal Proceedings........................ 37
UNAUDITED PRO FORMA CONDENSED FINANCIAL
STATEMENTS OF THE COMPANY.................. 38
Unaudited Pro Forma Condensed Combined
Balance Sheet of the Company........... 38
Unaudited Pro Forma Condensed Combined
Statements of Income of the Company.... 39
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS................................. 40
Overview and Outlook..................... 40
Financial Condition...................... 40
Results of Operations.................... 42
Income Taxes............................. 43
Environmental Matters.................... 44
International Operations................. 44
Cautionary Statement..................... 45
MANAGEMENT OF THE COMPANY.................... 46
Directors of the Company................. 46
Committees of the Board of Directors..... 47
Compensation of Directors................ 48
Executive Officers of the Company........ 49
Historical Compensation of Executive
Officers............................... 50
Option Grants............................ 51
Aggregated Option Exercises and Fiscal
Year-End Values........................ 52
Long-Term Incentive Plan Awards.......... 52
Retirement Benefits...................... 53
Benefit Plans Following the
Distribution........................... 54
Ownership of Company Common Stock........ 61
DESCRIPTION OF COMPANY CAPITAL STOCK......... 63
Company Common Stock..................... 63
Company Preferred Stock.................. 63
Certain Provisions in the Company
Certificate and Company By-Laws........ 66
Company Rights Plan...................... 70
Anti-takeover Legislation................ 72
LIABILITY AND INDEMNIFICATION OF DIRECTORS
AND OFFICERS............................... 73
INDEX TO DEFINED TERMS....................... 74
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).
The Company Common Stock will be listed on the NYSE, and 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 Meritor Automotive, 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 74.
THE DISTRIBUTION
Distributing Company....... Rockwell International Corporation, a Delaware
corporation.
Shares to be Distributed... Approximately 70 million shares of Company Common
Stock, based on the number of shares of Rockwell
Common Stock outstanding as of July 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 initially will have their
ownership of Company Common Stock registered only
in book-entry form. 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 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. Following the Distribution Date, any
Company stockholder whose ownership of Company
Common Stock is registered in book-entry form may
obtain at any time without charge 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 (as defined below) and the
aggregate net proceeds will be distributed ratably
to those stockholders entitled to fractional
interests. The Distribution Agent is independent
from the Company. See "The Distribution -- Manner
of Effecting the Distribution". Although the
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.
5
<PAGE> 11
See "The Distribution -- Certain Federal Income Tax
Consequences of the Distribution".
Record Date................ The Record Date is the close of business on
September 17, 1997.
Distribution Date.......... The Distribution is expected to occur on September
30, 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.
Distribution Agent......... First Chicago Trust Company of New York will serve
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") or an opinion from
Chadbourne & Parke LLP or other nationally
recognized tax counsel (the "Tax Opinion") 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"). Although pursuant
to the terms of the Distribution Agreement (as
defined below) the conditions to the Distribution
set forth therein may be waived by Rockwell's Board
of Directors in its sole discretion, Rockwell does
not presently intend to waive the condition of
receipt of the Tax Ruling or the Tax Opinion. 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. The Company Common Stock has
been approved for listing, subject to official
notice of issuance, on the NYSE under the trading
symbol "MRA". See "The Distribution -- Listing and
Trading of Company Common Stock".
Conditions to the
Distribution............... The Distribution is subject to the satisfaction or
waiver of certain conditions, including receipt of
the Tax Ruling or the Tax Opinion and receipt of
all material consents required to effect the
Distribution. Regardless of whether the conditions
are 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.
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 corpo-
6
<PAGE> 12
rate 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.
See "Arrangements Between Rockwell and the Company
Relating to the Distribution".
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,
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 $146 million (after 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
7
<PAGE> 13
earnings per share growth and long-term debt to
capitalization of 45%, with a strong emphasis on
cash management. These goals have been recently
established by management of the Company on the
basis of the Company operating as an independent
public company after the Distribution. 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 Donald
R. Beall, Chairman and Chief Executive Officer of
Rockwell, will serve as a non-executive director of
the Company. (Mr. Beall will step down as Chief
Executive Officer of Rockwell on September 30, 1997
and as Chairman of the Board of Rockwell in
February 1998, but will continue as a director of
Rockwell and is expected to be named chairman of
the Executive Committee of Rockwell in February
1998.) 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) that the
Company has 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............ The Company has entered 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
$.42 per share and Rockwell initially will pay
quarterly cash dividends which, on an annual basis,
will equal $1.02 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 nine months ended June 30, 1996 and 1997 and the balance
sheet data as of June 30, 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 nine months ended June 30, 1997 are not necessarily indicative
of the results that may be expected for the entire year ending September 30,
1997.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED SEPTEMBER 30, JUNE 30,
-------------------------------------------------- -------------------
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 $2,397 $2,467
Operating earnings.............................. 71 100 91 178 146(1) 135(1) 164
As a percent of sales......................... 3.1% 4.2% 3.4% 5.7% 4.6% 5.6% 6.6%
Interest expense................................ $ 23 $ 13 $ 12 $ 11 $ 10 $ 8 $ 6
Income before income taxes...................... 60 102 88 185 182 148 168
Net income...................................... 30 57 51 123 114 94 100
BALANCE SHEET DATA: (at end of period)
Working capital(2).............................. $ 153 $ 185 $ 204 $ 216 $ 229 $ 243 $ 280
Property, net................................... 646 588 617 647 646 623 611
Total assets.................................... 1,608 1,488 1,638 1,766 1,833 1,816 1,897
Long-term debt.................................. 15 9 35 31 24 26 21
Minority interests.............................. 18 21 21 24 29 26 36
Equity.......................................... 496 468 509 561 599 595 631
OTHER DATA:
Cash provided by operating activities........... $ 113 $ 162 $ 156 $ 203 $ 197 $ 110 $ 99
Cash used for investing activities.............. 101 90 99 127 101 47 69
Cash used for financing activities.............. 11 64 41 80 84 48 36
Capital expenditures............................ 102 100 102 119 144 87 59
Depreciation and amortization................... 100 92 93 97 102 75 76
EBITDA(3)....................................... 183 207 193 293 294 231 250
Employees at year end........................... 16,500 16,300 17,200 16,700 15,300
</TABLE>
- ---------------
(1) Operating earnings for fiscal year 1996 and the nine months ended June 30,
1996 includes restructuring charges of $36 million and $6 million,
respectively.
(2) Working capital consists of all current assets and current liabilities,
including cash and short-term debt.
(3) EBITDA is defined as income before income taxes, plus interest expense,
depreciation and amortization. EBITDA should not be considered as a
substitute for operating earnings, net income, cash flow or other combined
statement of income or cash flow data computed in accordance with generally
accepted accounting principles or as a measure of a company's results of
operations or liquidity. Although EBITDA is not calculated in accordance
with generally accepted accounting principles, it is widely used as a
measure of a company's operating performance and its ability to service its
indebtedness because it assists in comparing performance on a consistent
basis across companies without regard to depreciation and amortization,
which can vary significantly depending on accounting methods (particularly
where acquisitions are involved) or non-operating factors such as historical
cost bases and capital structure.
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, the reduction of corporate costs from those allocated to
the Company by Rockwell to management's estimate of stand-alone corporate costs
and the restructuring charge of approximately $19 million before tax ($14
million after tax) to be recorded by the Automotive Business in the fourth
quarter ending September 30, 1997. 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 June 30, 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 NINE MONTHS NINE MONTHS
ENDED ENDED ENDED
SEPTEMBER 30, 1996 JUNE 30, 1996 JUNE 30, 1997
------------------ -------------- --------------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
STATEMENT OF INCOME DATA:
Sales................................ $3,144 $2,397 $2,467
Operating earnings................... 156(1) 143(1) 172
Interest expense..................... (37) (28) (26)
Income before income taxes........... 165 136 156
Net income........................... 102 86 93
Earnings per share(2)................ 1.41 1.19 1.29
BALANCE SHEET DATA: (at end of
period)
Working capital...................... 280
Property, net........................ 611
Total assets......................... 1,962
Long-term debt....................... 466
Minority interests................... 36
Equity............................... 172
OTHER DATA:
Cash provided by operating
activities......................... 185 102 92
Cash used for investing activities... 101 47 69
Cash used for financing
activities(3)...................... 40 19 9
Depreciation and amortization........ 102 75 76
EBITDA(4)............................ 304 239 258
</TABLE>
- ---------------
(1) Operating earnings for fiscal year 1996 and the nine months ended June 30,
1996 includes restructuring charges of $36 million and $6 million,
respectively.
(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 217.3 million and 215.7 million for the nine months
ended June 30, 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) Reflects the initial anticipated annual dividend to stockholders of the
Company of $.42 per share and the elimination of the net transfers to
Rockwell.
(4) EBITDA is defined as income before income taxes, plus interest expense,
depreciation and amortization. EBITDA should not be considered as a
substitute for operating earnings, net income, cash flow or other combined
statement of income or cash flow data computed in accordance with generally
accepted accounting principles or as a measure of a company's results of
operations or liquidity. Although EBITDA is not calculated in accordance
with generally accepted accounting principles, it is widely used as a
measure of a company's operating performance and its ability to service its
indebtedness because it assists in comparing performance on a consistent
basis across companies without regard to depreciation and amortization,
which can vary significantly depending on accounting methods (particularly
where acquisitions are involved) or non-operating factors such as historical
cost bases and capital structure.
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 June 30, 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 June 30, 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 JUNE 30, 1997
<TABLE>
<CAPTION>
AUTOMOTIVE
BUSINESS PRO FORMA COMPANY PRO
HISTORICAL ADJUSTMENTS FORMA
------------- ------------- -------------
(IN MILLIONS)
<S> <C> <C> <C>
Cash........................................ $ 68 $ 60(1) $ 128
========= ========= =========
Short-term debt............................. 23 23
========= ========= =========
Long-term debt.............................. 21 445(2) 466
Minority interests.......................... 36 36
Stockholders' equity:
Rockwell's net investment.............. 693 (693)(3) --
Common Stock........................... -- 70(3) 70
Additional paid-in capital............. -- 623(3) 164
(445)(2)
(14)(4)
Retained earnings...................... -- --
Currency translation................... (62) (62)
--------- --------- ---------
Total stockholders' equity............. 631 (459) 172
--------- --------- ---------
Total capitalization.............. $ 688 $ (14) $ 674
========= ========= =========
</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 70 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 June 30, 1997 of approximately 210 million
shares and the distribution ratio of one share of Company Common Stock for
every three shares of Rockwell Common Stock outstanding.
(4) In the fourth quarter ending September 30, 1997, the Automotive Business
will record a restructuring charge of approximately $19 million before tax
($14 million after tax) related to staff reductions and plant and product
line consolidations. These actions are expected to result in reduced
expenses of approximately $10 million (after tax) in fiscal 1998.
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". 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. Historically, such demand has
been somewhat lower in the Company's first and fourth fiscal quarters (third and
fourth calendar quarters) when OEM (as defined below) plants may close during
model changeovers and vacation and holiday periods. 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 North America, the major competitors of
HVS are Eaton Corporation and Dana Corporation. LVS has numerous competitors
across its various product lines worldwide. 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, loss of contracts, 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. 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. During fiscal 1996, Freightliner Corporation and
Mercedes-Benz AG (each of which is owned by Daimler-Benz A.G.) and Ford Motor
Company's heavy truck business (which Freightliner Corporation has agreed to
acquire pursuant to a definitive agreement entered into with Ford Motor Company
in May 1997) together accounted for approximately 16% of total sales of the
Automotive Business. See "The Automotive Business -- Customers; Sales and
Marketing".
13
<PAGE> 19
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. Globalization and increased outsourcing of product engineering and
manufacturing by OEMs have also contributed to this trend. 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 participate
in the industry consolidation or that it will not be disadvantaged as a result
of consolidation by other suppliers. See "The Automotive Business -- Industry
Trends", "-- 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.
The Company enters into foreign currency forward exchange contracts to
minimize risk of loss from currency exchange rate fluctuations on firm and
identifiable foreign currency commitments entered into in the ordinary course of
business. The Company has not experienced nor does it anticipate any material
adverse effect on its results of operations or financial condition related to
these foreign currency forward exchange contracts. The Company has not entered
into foreign currency forward exchange contracts for other purposes, and the
Company's financial condition and results of operations could be affected
(negatively or positively) by currency fluctuations.
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. In
addition, in the fourth quarter ending September 30, 1997, the Automotive
Business will record a restructuring charge of approximately $19 million before
tax ($14 million after tax) related to staff reductions and plant and product
line consolidations, which actions are expected to result in reduced expenses of
approximately $10 million (after tax) in fiscal 1998. 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 further
benefits will be achieved.
ABSENCE OF HISTORY AS AN INDEPENDENT COMPANY; FUTURE CAPITAL REQUIREMENTS
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
14
<PAGE> 20
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, although Rockwell
will provide to the Company certain transitional services which prior to the
Distribution have been provided to the Automotive Business by Rockwell, 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". The Company has
entered into the Credit Facility, which will be used to fund the
Pre-Distribution Payment of approximately $445 million and for working capital
and other general corporate purposes of the Company and its subsidiaries
following the Distribution. See "Credit Facility". Although the Company believes
that cash flows from operations and available borrowings under the Credit
Facility will be sufficient to satisfy its future working capital, research and
development, capital expenditure and other financing requirements, there can be
no assurance that such will be the case.
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. The Company Common Stock has been approved
for listing, subject to official notice of issuance, on the NYSE under the
trading symbol " MRA". 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. Although no formal action with
respect to dividends payable after the Distribution has been taken, it is
anticipated that cash dividends payable by Rockwell and the Company 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
15
<PAGE> 21
shares of Rockwell Common Stock), respectively, will initially equal the annual
rate of the cash dividend currently paid on Rockwell Common Stock of $1.16 per
share. 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 or the Tax
Opinion to the effect that the Distribution will qualify as a tax-free
reorganization within the meaning of Section 368(a)(1)(D) of the Code. See "The
Distribution -- Certain Federal Income Tax Consequences of the Distribution".
The Tax Ruling has been requested from the IRS but has not been received as of
the date hereof. While the Tax Ruling generally would be binding on the IRS, the
continuing validity of such a ruling is subject to certain factual
representations and assumptions. The Tax Opinion would not be binding on the IRS
and would also be 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 (if received) 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".
16
<PAGE> 22
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. The spin-off is intended to be effected through the
Distribution. The Distribution was formally declared by the Board of Directors
of Rockwell on September 3, 1997 (conditioned, among other things, upon receipt
of the Tax Ruling or the Tax Opinion). At the time of the Distribution, the
Company will own, directly or 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 is expected to 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 outstanding as of
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<PAGE> 23
July 31, 1997, approximately 70 million shares of Company Common Stock will be
distributed in the Distribution.
At the time of the Distribution, certificates for shares of Company Common
Stock will be delivered to the Distribution Agent. Company stockholders
initially will have their ownership of Company Common Stock registered only in
book-entry form. 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
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. 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 without charge 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 Automatic Dividend Reinvestment Service will
be 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 accounts. A comparable service will be established for the
Company effective at the time of the Distribution which will provide for
reinvestment of dividends on Company Common Stock and under which accounts will
be established for participants in the Rockwell Automatic Dividend Reinvestment
Service. Shares of Company Common Stock credited as a result of the Distribution
to participants in the Rockwell Automatic Dividend Reinvestment Service in
respect of the Rockwell Common Stock held in their accounts will be transferred
to the participants' accounts in the new service.
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.
18
<PAGE> 24
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 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".
The Company Common Stock has been approved for listing, subject to official
notice of issuance, on the NYSE under the trading symbol "MRA". The Company
initially will have approximately 63,300 stockholders of record, based on the
number of record holders of Rockwell Common Stock as of July 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 $.42 per
share and Rockwell initially will pay quarterly cash dividends which, on an
annual basis, will equal $1.02 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
The Distribution is conditioned upon receipt of the Tax Ruling or the Tax
Opinion 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. The Tax Ruling has been requested from the IRS but has not been received
as of the date hereof. 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;
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<PAGE> 25
(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;
(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.
While the Tax Ruling generally would be binding on the IRS, the continuing
validity of such a ruling is subject to certain factual representations and
assumptions. The Tax Opinion would not be binding on the IRS and would also be
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. If the Distribution were not to
qualify as a tax-free reorganization within the meaning of Section 368(a)(1)(D)
of the Code, Rockwell would recognize taxable gain equal to the excess of the
fair market value of the Company Common Stock distributed to Rockwell's
shareowners over Rockwell's tax basis in such Company Common Stock. In addition,
each Rockwell shareowner who receives Company Common Stock in the Distribution
would generally be treated as receiving a taxable distribution in an amount
equal to the fair market value of the Company Common Stock. See "Special
Factors -- Certain Federal Income Tax Considerations".
Although pursuant to the terms of the Distribution Agreement the conditions
to the Distribution set forth therein may be waived by Rockwell's Board of
Directors in its sole discretion, Rockwell does not presently intend to waive
the condition of receipt of the Tax Ruling or the Tax Opinion.
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 THE MATERIAL 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 (if received) 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 the satisfaction or waiver of 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".
20
<PAGE> 26
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 of the material
terms of these agreements are qualified 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, subsidiaries of the Company that are not
wholly-owned will retain their cash (expected to be approximately $33 million)
and 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 for a period of ten years 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 (which approvals have been provided) 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
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<PAGE> 27
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 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 or
the Tax Opinion; (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. Rockwell's Board of Directors granted final
approval of the Distribution on September 3, 1997 (conditioned, among other
things, upon receipt of the Tax Ruling or the Tax Opinion), the "no-action"
letter from the staff of the Commission has been received and the Company Common
Stock has been approved for listing, subject to official notice of issuance, on
the NYSE. 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
22
<PAGE> 28
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. 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 -- Benefit 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 July 31, 1997, the Rockwell Savings Plan is expected to hold approximately
14.5 million shares of Company Common Stock or
23
<PAGE> 29
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 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 (if received)
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
Automotive Business by Rockwell, including payroll and human resource services,
health and welfare benefit administration services, computing and
telecommunications services and research and development support services of the
Rockwell Science Center. Such services generally will be provided for periods of
one to three years.
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<PAGE> 30
CREDIT FACILITY
The Company has entered into a $1 billion five-year unsecured revolving
credit facility with a group of banks (the "Credit Facility"). 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. The Credit Facility has been filed as an exhibit to
the Registration Statement of which this Information Statement is a part and the
following summary of the material terms of the Credit Facility is qualified by
reference to the Credit Facility as so filed.
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 will 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 procedures set forth in the Credit Facility) 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 contains, 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 include certain restrictions on incurrence of indebtedness,
consolidations and mergers, sales of assets and creation of liens and
encumbrances. The Credit Facility also includes financial covenants requiring a
minimum net worth and a maximum leverage ratio based on earnings before
interest, taxes, depreciation and amortization.
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<PAGE> 31
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 nine months ended June 30, 1996 and 1997 and the balance
sheet data as of June 30, 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 nine months ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the entire year ending
September 30, 1997.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED SEPTEMBER 30, JUNE 30,
------------------------------------------------------------- ------------------
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 $2,397 $2,467
Annual sales growth rate......... 5.4% 3.5% 12.5% 17.8% 0.6%
Gross margin..................... $ 251 $ 282 $ 282 $ 381 $ 397 $ 299 $ 332
As a percent of sales.......... 11.0% 12.0% 10.6% 12.2% 12.6% 12.5% 13.5%
Operating earnings............... $ 71 $ 100 $ 91 $ 178 $ 146(1) $ 135(1) $ 164
As a percent of sales.......... 3.1% 4.2% 3.4% 5.7% 4.6%(1) 5.6%(1) 6.6%
Interest expense................. $ 23 $ 13 $ 12 $ 11 $ 10 $ 8 $ 6
Income before income taxes....... 60 102 88 185 182 148 168
Net income....................... 30 57 51 123 114 94 100
BALANCE SHEET DATA: (at end of period)
Working capital(2)............... $ 153 $ 185 $ 204 $ 216 $ 229 $ 243 $ 280
Property (at cost)............... 1,456 1,361 1,440 1,535 1,558 1,527 1,551
Accumulated depreciation......... (810) (773) (823) (888) (912) (904) (940)
Property, net.................... 646 588 617 647 646 623 611
Goodwill......................... 31 25 30 40 45 44 43
Total assets..................... 1,608 1,488 1,638 1,766 1,833 1,816 1,897
Short-term debt.................. 48 28 17 14 8 20 23
Long-term debt................... 15 9 35 31 24 26 21
Minority interests............... 18 21 21 24 29 26 36
Equity........................... 496 468 509 561 599 595 631
OTHER DATA:
Cash provided by operating
activities..................... $ 113 $ 162 $ 156 $ 203 $ 197 $ 110 $ 99
Cash used for investing
activities..................... 101 90 99 127 101 47 69
Cash used for financing
activities..................... 11 64 41 80 84 48 36
Capital expenditures............. 102 100 102 119 144 87 59
As a percent of sales.......... 4.5% 4.2% 3.8% 3.8% 4.6% 3.6% 2.4%
Depreciation and amortization.... $ 100 $ 92 $ 93 $ 97 $ 102 $ 75 $ 76
EBITDA(3)........................ 183 207 193 293 294 231 250
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 for fiscal year 1996 and the nine months ended June 30,
1996 includes restructuring charges of $36 million and $6 million,
respectively.
(2) Working capital consists of all current assets and current liabilities,
including cash and short-term debt.
(3) EBITDA is defined as income before income taxes, plus interest expense,
depreciation and amortization. EBITDA should not be considered as a
substitute for operating earnings, net income, cash flow or other combined
statement of income or cash flow data computed in accordance with generally
accepted accounting principles or as a measure of a company's results of
operations or liquidity. Although EBITDA is not calculated in accordance
with generally accepted accounting principles, it is widely used as a
measure of a company's operating performance and its ability to service its
indebtedness because it assists in comparing performance on a consistent
basis across companies without regard to depreciation and amortization,
which can vary significantly depending on accounting methods (particularly
where acquisitions are involved) or non-operating factors such as historical
cost bases and capital structure.
(4) Annual sales per employee is based on the average of the monthly ending
number of employees during the year.
26
<PAGE> 32
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 nine months ended June 30, 1996 and 1997 were as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS
ENDED SEPTEMBER 30, ENDED JUNE 30,
------------------------------ ------------------
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 $1,043 $1,038
Off-Highway, Specialty and
Military Vehicle Products..... 454 433 467 347 381
Light Vehicle Systems................ 900 1,188 1,317 1,007 1,048
------ ------ ------ ------ ------
Total........................... $2,653 $3,125 $3,144 $2,397 $2,467
====== ====== ====== ====== ======
</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.
27
<PAGE> 33
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 Systems - 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.
28
<PAGE> 34
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
29
<PAGE> 35
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
30
<PAGE> 36
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. See "-- Legal
Proceedings".
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.
31
<PAGE> 37
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.
32
<PAGE> 38
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.
33
<PAGE> 39
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 May 1997, Freightliner Corporation
entered into a definitive agreement with Ford Motor Company for the purchase of
Ford'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. In North America, the major competitors of HVS are Eaton Corporation
and Dana Corporation. LVS has numerous competitors across its various product
lines worldwide.
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. Joint ventures of the Automotive Business include its
50%-owned joint venture with WABCO for the manufacture and supply of ABS systems
for heavy-duty commercial vehicles and its 57%-owned joint venture with
Mitsubishi Steel Mfg. Co. for the manufacture and supply of suspension products
for passenger cars, light trucks and sport utility vehicles. See "-- Products --
Heavy Vehicle Systems -- Truck and Trailer Products -- Brakes" and
"-- Products -- Light Vehicle Systems -- Suspension Products".
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".
34
<PAGE> 40
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 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
recently introduced its new name and has initiated 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 for a period of ten years after the
Distribution.
EMPLOYEES
As of July 31, 1997, the Automotive Business had approximately 16,800
full-time employees. Approximately 3,200 Automotive Business employees
(including employees referred to in the following paragraph) 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.
A collective bargaining agreement with the United Automobile, Aerospace and
Agricultural Implement Workers of America covering approximately 1,200 employees
at the Company's Newark, Ohio and Oshkosh, Wisconsin facilities expired on July
19, 1997. Although a tentative agreement with the union had been reached prior
to the expiration, the tentative agreement was not ratified and negotiations
with the union are continuing.
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.
35
<PAGE> 41
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 (calendar year data)........ 16.1 15.5 15.6 15.6 16.8
</TABLE>
- ---------------
Source: Automotive industry publications and management estimates.
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...................................... 4,421 251 4,672
Canada............................................. 661 38 699
Europe............................................. 3,123 244 3,367
Asia-Pacific....................................... 322 392 714
Latin America...................................... 1,413 -- 1,413
----- --- ------
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.
36
<PAGE> 42
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Environmental Matters".
LEGAL PROCEEDINGS
On July 17, 1997 Eaton Corporation filed suit against Rockwell in the U.S.
District Court in Wilmington, Delaware asserting infringement of Eaton's U.S.
Patent No. 4850236, which covers certain aspects of heavy-duty truck
transmissions, by the Automotive Business's Engine Synchro Shift(TM)
transmission for heavy-duty trucks. Eaton seeks preliminary and permanent
injunctions and unspecified damages. Based on advice of Rockwell's Chief
Intellectual Property Counsel, James P. O'Shaughnessy, Esq., management believes
the Automotive Business's truck transmissions do not infringe Eaton's patent.
The Automotive Business intends to defend the suit vigorously.
Various other 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, based on its evaluation of matters which are pending or asserted and
after consulting with David W. Greenfield, Esq., General Counsel of the Company,
management believes the disposition of such matters 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.
37
<PAGE> 43
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 June 30,
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 nine months ended June 30, 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 June 30, 1997.
<TABLE>
<CAPTION>
JUNE 30, 1997
----------------------------------
AUTOMOTIVE
BUSINESS PRO FORMA COMPANY
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------- ----------
(IN MILLIONS)
<S> <C> <C> <C>
ASSETS
Cash........................................................ $ 68 $ 60(1) $ 128
Receivables................................................. 564 564
Inventories................................................. 302 302
Other current assets........................................ 140 5(2) 145
------ ------ ------
Total current assets.............................. 1,074 65 1,139
------ ------ ------
Property, net............................................... 611 611
Other assets................................................ 212 212
------ ------ ------
Total assets...................................... $1,897 $ 65 $1,962
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term debt............................................. $ 23 $ $ 23
Canadian income taxes payable............................... -- 60(1) 60
Accounts payable and accrued liabilities.................... 771 19(2) 790
------ ------ ------
Total current liabilities......................... 794 79 873
------ ------ ------
Long-term debt.............................................. 21 445(3) 466
Accrued retirement benefits................................. 392 392
Other liabilities........................................... 23 23
Minority interests.......................................... 36 36
Stockholders' equity:
Rockwell's net investment................................... 693 (693)(4) --
Common stock................................................ -- 70(4) 70
Additional paid-in capital.................................. -- 623(4) 164
(445)(3)
(14)(2)
Retained earnings........................................... -- --
Currency translation........................................ (62) (62)
------ ------ ------
Total stockholders' equity........................ 631 (459) 172
------ ------ ------
Total liabilities and stockholders' equity... $1,897 $ 65 $1,962
====== ====== ======
</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) In the fourth quarter ending September 30, 1997, the Automotive Business
will record a restructuring charge of approximately $19 million before tax
($14 million after tax) related to staff reductions and plant and product
line consolidations. These actions are expected to result in reduced
expenses of approximately $10 million (after tax) in fiscal 1998.
(3) Long-term debt incurred to finance the Pre-Distribution Payment to be made
by the Company to Rockwell.
(4) To reflect the Distribution as a reduction in Rockwell's net investment and
the issuance of an estimated 70 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 June 30, 1997 of approximately 210 million shares and
the distribution ratio of one share of Company Common Stock for every three
shares of Rockwell Common Stock outstanding.
38
<PAGE> 44
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 nine month periods ended June 30, 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>
NINE MONTHS ENDED JUNE 30, 1997
--------------------------------------
AUTOMOTIVE
BUSINESS PRO FORMA COMPANY
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------- ----------
(IN MILLIONS, EXCEPT PER SHARE AMOUNT)
<S> <C> <C> <C>
Sales................................................... $2,467 $ $2,467
Cost of sales........................................... 2,135 2,135
------ ------ ------
Gross margin....................................... 332 332
Selling, general and administrative..................... 168 (8)(1) 160
------ ------ ------
Operating earnings................................. 164 8 172
Other income - net...................................... 10 10
Interest expense........................................ (6) (20)(2) (26)
------ ------ ------
Income before income taxes.............................. 168 (12) 156
Provision for income taxes.............................. 68 (5)(3) 63
------ ------ ------
Net income......................................... $ 100 $ (7) $ 93
====== ====== ======
Earnings per share...................................... $ 1.29(4)
======
Average outstanding shares.............................. 71.9(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 6.0% for both the year ended September 30, 1996 and the
nine months ended June 30, 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
post-Distribution capital structure of the Company. These amounts are based
on average outstanding shares of Rockwell Common Stock of 215.7 million for
the nine months ended June 30, 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.
39
<PAGE> 45
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 (after restructuring charges of $36 million) grew to
$146 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 $29.4 million per
year or 42 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 restructuring charges of $36 million 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. In the fourth quarter of fiscal 1997, the Automotive
Business will record a restructuring charge of approximately $19 million before
tax ($14 million after tax) related to staff reductions and plant and product
line consolidations. These actions are expected to result in reduced expenses of
approximately $10 million (after tax) in fiscal 1998.
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. These goals have been recently established by management of the
Company on the basis of the Company operating as an independent public company
after the Distribution. 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
Cash provided by operating activities was $99 million in the first nine
months of fiscal 1997, which was lower than the $110 million provided by
operating activities in the comparable period of fiscal 1996, primarily due to
the funding of the 1996 restructuring costs and lower funds provided by the
factoring of trade accounts receivable in France. Asset and liability changes
included a $98 million increase in receivables at June 30, 1997 and a $50
million increase at June 30, 1996, which relate principally to higher sales
volume during the third quarters of each fiscal year as compared to the fourth
quarters of the preceding fiscal years, due to the seasonality of sales.
Accounts payable increased by $39 million at June 30, 1997 primarily as a result
of the higher sales and inventory activity during the third quarter.
Cash provided by operating activities was $197 million in fiscal 1996, $203
million in fiscal 1995 and $156 million in fiscal 1994. Sales growth, primarily
related to LVS products for fiscal 1994 through fiscal 1996 and in HVS products
for fiscal 1993 through fiscal 1995, resulted in an increase in receivables and
payables at the end of each fiscal year.
40
<PAGE> 46
These cash flows have allowed the Automotive Business to fund capital
expenditures of $59 million for the first nine 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. In
fiscal 1996, the $101 million of net cash used for investing activities
included, in addition to capital expenditures of $144 million, proceeds of $58
million from the disposition of property and businesses, primarily due to the
sale of Brazilian assets, and $15 million used for investments in joint
ventures. In fiscal 1995, the $127 million of net cash used for investing
activities included $19 million in cash used for acquisitions and investments,
relating primarily to the Automotive Business's acquisition of a window
regulator business.
Net cash used for financing activities was $84 million in fiscal 1996, $80
million in 1995, and $41 million in fiscal 1994. The financing activities were
due primarily to cash distributions to Rockwell.
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 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. The Automotive Business has entered 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 will be based on the Automotive
Business's ratio of Debt to EBITDA (such ratio and terms as defined in 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
June 30, 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 68 percent at June 30,
1997 with pro forma pre-tax interest coverage of 7.3x for the nine months ended
June 30, 1997.
41
<PAGE> 47
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 nine
months ended June 30, 1996 and 1997, and pro forma for the year ended September
30, 1996 (dollars in millions):
<TABLE>
<CAPTION>
PRO FORMA
NINE MONTHS ENDED YEAR ENDED
YEAR ENDED SEPTEMBER 30, JUNE 30, SEPTEMBER 30,
-------------------------- ------------------- ------------------
1994 1995 1996 1996 1997 1996
------ ------ ------ ------ ------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Sales:
Heavy Vehicle Systems....... $1,753 $1,937 $1,827 $1,390 $1,419 $1,827
Light Vehicle Systems....... 900 1,188 1,317 1,007 1,048 1,317
------ ------ ------ ------ ------ ------
Total sales................... $2,653 $3,125 $3,144 $2,397 $2,467 $3,144
====== ====== ====== ====== ====== ======
Gross margin.................. $ 282 $ 381 $ 397 $ 299 $ 332 $ 397
====== ====== ====== ====== ====== ======
Operating earnings............ $ 91 $ 178 $ 146(1) $ 135(1) $ 164 $ 156(1)
Other income-net.............. 9 18 46 21 10 46
Interest expense.............. (12) (11) (10) (8) (6) (37)
Provision for income taxes.... (37) (62) (68) (54) (68) (63)
------ ------ ------ ------ ------ ------
Net income.................... $ 51 $ 123 $ 114 $ 94 $ 100 $ 102
====== ====== ====== ====== ====== ======
Operating earnings as % of
sales....................... 3.4% 5.7% 4.6%(1) 5.6%(1) 6.6% 5.0%(1)
</TABLE>
- ---------------
(1) Operating earnings for fiscal year 1996 and the nine months ended June 30,
1996 includes restructuring charges of $36 million and $6 million,
respectively.
NINE MONTHS ENDED JUNE 30, 1997 COMPARED TO NINE MONTHS ENDED JUNE 30, 1996
Sales for the first nine months of fiscal 1997 increased $70 million, or
three percent, over the first nine months of fiscal 1996. HVS sales increased
$29 million, primarily due to an increase in aftermarket sales, which resulted
from the introduction of new products. An increase in vehicle production in
North America also contributed to increased HVS sales, more than offsetting a
decrease in HVS European sales as vehicle production in Europe declined. LVS
sales increased $41 million due to strong demand for LVS products in North
America, resulting in part from increased vehicle production in North America.
Gross margin for the first nine months of fiscal 1997 improved by $33
million, or 11 percent, and operating earnings increased $29 million, or 21
percent, from the comparable 1996 period. These improvements were in part a
result of higher sales of higher margin aftermarket products, continued
improvement in production processes, and the $6 million restructuring charge
recorded during the third quarter of fiscal 1996. These benefits more than
offset investments in new product development, continuing launch costs for seat
adjusting systems and higher engineering costs.
Other income decreased by $11 million for the first nine months of fiscal
1997 as compared to the first nine months of fiscal 1996, primarily due to a $14
million gain on the sale of Brazilian assets in fiscal 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 for 1996 decreased by 18 percent after
42
<PAGE> 48
restructuring charges of $36 million, referred to above. The $36 million
restructuring charges related to rationalizing manufacturing processes at
several locations, mostly outside the United States. The restructuring charges
include severance and other employee costs of $22 million, asset impairments of
$8 million, and other costs of $6 million. Such restructuring charges are
expected to result in reduced expenses of approximately $10 million (after tax)
in fiscal 1997. Operating earnings before the restructuring charges 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. The increased reserves for uncollectible receivables
were established for certain trailer OEM customers, due to the downturn in the
trailer industry and such customers' financial condition.
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 $15 million of
proceeds from the settlement of certain environmental insurance claims arising
in years prior to 1986.
On a pro forma basis, operating earnings for fiscal year 1996 would have
been $10 million higher than actual 1996 results, due to a reduction in
corporate costs from those allocated by Rockwell to management's estimate of
stand-alone corporate costs. Pro forma interest expense for 1996 would have been
$27 million higher than actual 1996 interest expense, due to additional interest
expense of approximately 6.0% on assumed borrowings of $445 million related to
the Pre-Distribution Payment to Rockwell.
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 21 percent, respectively, over 1994
levels. These increased levels more than offset a $62 million 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 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.
43
<PAGE> 49
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.
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. 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 Company
will assume all liabilities in respect of environmental matters related to
current and former operations of the Automotive Business.
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 fully 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 violation 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 and after consulting with David W. Greenfield,
Esq., General Counsel of the Company, 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.
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.
The Company's international operations are subject to a number of risks
inherent in operating abroad, including risks with respect to currency exchange
rate fluctuations. See "Special Factors -- International Operations". The
Company enters into foreign currency forward exchange contracts to minimize risk
of loss from currency exchange rate fluctuations on firm and identifiable
foreign currency commitments entered into in the ordinary course of business.
The Company has not experienced nor does it anticipate any material adverse
effect on its results of operations or financial condition related to these
foreign currency forward exchange contracts. The Company has not entered into
foreign currency forward exchange contracts for other
44
<PAGE> 50
purposes, and the Company's financial condition and results of operations could
be affected (negatively or positively) by currency fluctuations.
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.
45
<PAGE> 51
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
Meritor Automotive, 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, Karrington Health, Inc.,
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.
MARTIN D. WALKER -- Mr. Walker, age 65, retired as Chairman of the Board of
M.A. Hanna Company (specialty chemicals, plastics and rubber products) in June
1997. He joined Hanna in 1986 as Chairman of the Board and Chief Executive
Officer and served as Chief Executive Officer until December 1996. In 1972, Mr.
Walker joined Rockwell as a vice president and, after serving in a number of
increasingly responsible management positions, served as Senior Vice President
and President, Automotive of Rockwell from 1978 until 1982, as Executive Vice
President of Rockwell from 1982 until 1986 and as a director of Rockwell from
1979 until 1986. He is a director of Comerica, Inc., Goodyear Tire and Rubber
Co., M.A. Hanna Company, Lexmark International Group, Reynolds & Reynolds Co.,
Textron Inc. and The Timken Company. He is also a director, trustee or member of
a number of business, educational and civic organizations.
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.
46
<PAGE> 52
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
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. He is also a director,
trustee or member of a number of business, educational and civic organizations.
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 will step down as Chief Executive Officer of Rockwell on September 30,
1997 and as Chairman of the Board of Rockwell in February 1998, but will
continue as a director of Rockwell and is expected to be named chairman of the
Executive Committee of Rockwell in February 1998. 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 73, 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 and Management Development 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 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 principal functions of the Compensation and Management Development
Committee (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
47
<PAGE> 53
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 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 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 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.
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
immediately 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 effective
concurrently with the first grant of options under the 1997 LTIP (as defined
below) after the Distribution Date 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".
48
<PAGE> 54
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below are the name, age, position and office to be held with the
Company and principal occupations and employment during the past five years of
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
LAWRENCE J. LOCKWOOD -- Vice President and Controller. Vice President and Controller,
Automotive of Rockwell since August 1997; Vice President, Finance of Industrial
Control Group of Allen-Bradley Company, Inc. (automation), a subsidiary of Rockwell,
from April 1995 to August 1997; Vice President, Finance and Administration of
Operations Group of Allen-Bradley Company, Inc. prior thereto....................... 44
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............................................................................. 44
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...................................... 53
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....................................................................... 55
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>
49
<PAGE> 55
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. 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(3)
OTHER ------------ ---------- ---------------
NAME AND ANNUAL STOCK LONG- TERM
PRINCIPAL POSITION COMPEN- OPTIONS INCENTIVE
WITH THE COMPANY(2) YEAR SALARY BONUS SATION (SHARES) PAYOUTS
- ------------------------------ ------ ------------ ---------- ------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Larry D. Yost................. 1996 $250,000 $200,000 $6,937 15,000 $405,000 $14,044
Chairman of the Board and
Chief Executive Officer
Robert A. Calder.............. 1996 240,000 145,000 16,318 15,000 80,520 17,343
Senior Vice President and
President, Light Vehicle
Systems
Thomas A. Madden.............. 1996 173,333 110,000 11,781 -- -- 10,870
Senior Vice President and
Chief Financial Officer
Prakash R. Mulchandani........ 1996 191,667 133,700 8,997 -- 80,520 12,263
Senior Vice President and
President, Worldwide Truck
and Trailer Systems
Richard C. Quaid.............. 1996 200,000 107,000 13,360 -- 80,520 13,923
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.
(2) The positions reflected in the table are the positions to be held by the
Named Executive Officers with the Company at the time of the Distribution
and were not the positions held by the Named Executive Officers with
Rockwell during fiscal 1996, the period covered by the table. Compensation
reflected in the table for fiscal 1996 was paid by Rockwell to the Named
Executive Officers in the following capacities: Mr. Yost, President, Heavy
Vehicle Systems of Rockwell; Mr. Calder, President, Light Vehicle Systems of
Rockwell; Mr. Madden, Vice President, Corporate Development (September
1996), Vice President -- Finance & Administration, Light Vehicle Systems
(May 1996 to September 1996) and Vice President -- Finance & Administration,
Automotive (October 1995 to May 1996) of Rockwell; Mr. Mulchandani,
President -- Worldwide Truck and Trailer Systems, Heavy Vehicle Systems
(April 1996 to September 1996) and President -- North American Truck
Systems, Automotive (October 1995 to April 1996) of Rockwell; and Mr. Quaid,
President -- Off-Highway and Specialty Products, Heavy Vehicle Systems
(April 1996 to September 1996) and President -- Off-Highway Products,
Automotive (October 1995 to April 1996) of Rockwell.
(3) Amounts contributed or accrued for fiscal year 1996 for the Named Executive
Officers (other than Mr. Yost) under the Rockwell Savings Plan and the
related supplemental savings plan and amounts contributed or accrued for Mr.
Yost under Allen-Bradley's Employee Savings Plan for Salaried Employees and
the related supplemental savings plan.
Effective March 1997, Mr. Yost's annual salary was increased to $325,000 in
connection with his promotion to Senior Vice President and President, Automotive
of Rockwell. Effective September 1996, Mr. Madden's annual salary was increased
to $205,000 in connection with his promotion to Vice President, Corporate
Development of Rockwell. Effective October 1, 1997, the annual salaries of
Messrs. Yost, Calder, Madden, Mulchandani and Quaid are expected to be $475,000,
$260,000, $260,000, $231,000 and $215,000, respectively. It is anticipated that
options for shares of Company Common Stock will be granted to employees of the
Company, including the
50
<PAGE> 56
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.
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.
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>
INDIVIDUAL GRANTS
- ----------------------------------------------------------------------------------------------
PERCENTAGE
OF TOTAL
OPTIONS
NUMBER OF GRANTED GRANT DATE
SECURITIES TO VALUE
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).
51
<PAGE> 57
On or after December 9, 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".
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 UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ ----------- ---------- ------------- ----------- -------------
EXERCISABLE
-----------
<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(2)
UNITS OR OTHER MATURATION OR --------------------------------------
NAME RIGHTS(1) PAYOUT THRESHOLD TARGET(3) MAXIMUM(3)
- ------------------------------- ---------------- ------------------ --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Larry D. Yost.................. $200,000 3 years $ 0 $200,000 $600,000
Robert A. Calder............... 200,000 3 years 0 200,000 600,000
Thomas A. Madden............... 115,000 3 years 0 115,000 345,000
Prakash R. Mulchandani......... 249,000 3 years 0 249,000 747,000
Richard C. Quaid............... 249,000 3 years 0 249,000 747,000
</TABLE>
- ---------------
(1) Potential awards granted under the long-term incentive plans of Rockwell are
described in terms of target performance payouts expressed in cash amounts.
(2) A payout percentage of between 0% and 300%, based on actual performance over
the three-year performance period, as measured by sales growth, return on
average net assets (after tax) and return on sales (after tax), is applied
to the target performance payout amount.
(3) Does not include application of a stock price multiplier based on the
percentage change of the price of Rockwell Common Stock over the three-year
performance period, which can increase or decrease the final payout amount
actually paid.
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<PAGE> 58
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
approximately $400,000, $95,000, $155,000, $540,000 and $540,000, 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 $20.00 and $30.00 per share, the foregoing
Named Executive Officers would receive between 13,333 and 20,000, 3,166 and
4,750, 5,166 and 7,750, 18,000 and 27,000, and 18,000 and 27,000 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 estimated that Messrs. Yost, Calder, Mulchandani and Quaid will earn
approximately $285,000, $160,000, $280,000 and $230,000, respectively, for such
3-year performance cycle. (Mr. Madden is not a participant in such performance
cycle.) It is anticipated that such amounts will be paid in cash or in
restricted shares of Company Common Stock, or partly in cash and partly in such
restricted shares, as the Compensation Committee shall determine. Assuming such
amounts are paid entirely in restricted shares of Company Common Stock and
assuming the market value of Company Common Stock is between $20.00 and $30.00
per share, the foregoing Named Executive Officers would receive between 9,500
and 14,250, 5,333 and 8,000, 9,333 and 14,000, and 7,666 and 11,500 restricted
shares of Company Common Stock, respectively. In addition, in consideration of
the early termination of the 3-year performance cycle ending September 30, 1999,
it is anticipated that Company Options will be granted to participants in such
cycle, including the foregoing four 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
800,000................. 212,105 318,117 337,772 357,427 377,082 396,738
</TABLE>
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<PAGE> 59
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.
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") has been
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 permits 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 authorizes
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
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<PAGE> 60
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.
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 shall 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 authorizes the issuance or
transfer of an aggregate of 7 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 beginning after September 30, 1998 may not exceed
1.5% of the total outstanding and treasury shares of the Company.
Performance Plans. The 1997 LTIP authorizes 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 (beginning 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 for 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 cash may be
made in a lump sum, in installments or on a deferred basis. 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 (or the expiration date specified in the option if earlier)
even if it were not exercisable at such date. If a 1997 LTIP Participant holding
an
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<PAGE> 61
outstanding grant of options or SARs retires under a retirement plan of the
Company at any time after a portion of the options or SARs subject to a
particular grant has become exercisable, the options or SARs subject to that
grant may be exercised from and after the date upon which they are first
exercisable under that grant for five years after the date of retirement (or the
expiration date specified in the grant if earlier), even if any of them was not
exercisable at the date of retirement. 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 not less
than one year after the date of grant, 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
(unless the Grant Committee determines otherwise at the time of grant) dividends
thereon are delivered to and held by the Company for the grantee's account. 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 on any such cash dividends computed at the same
rate and in the same manner as interest credited from time to time under the
Company's deferred compensation plan, 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 Grants. It is anticipated that options to purchase 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. It is also expected that (i) options to purchase approximately 382,000
shares of Company Common Stock will be issued to employees of the Company,
including options for approximately 153,000 shares to be issued to the Named
Executive Officers, in replacement of certain Rockwell Options held by such
employees on the Distribution Date, and (ii) options to purchase shares of
Company Common Stock will be granted in respect of early termination of
long-term incentive plan awards for the 3-year performance cycle ending
September 30, 1999. In addition, restricted shares of Company Common Stock are
expected to be delivered in respect of amounts earned by the Named Executive
Officers under certain long-term incentive plan awards. See
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<PAGE> 62
"-- Long-Term Incentive Plan Awards" and "Arrangements Between Rockwell and the
Company Relating to the Distribution -- Employee Matters Agreement".
Tax Matters. The following is a brief summary of the material 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 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 mid-term capital gain or loss if the shares were
held for up to eighteen months or long-term capital gain or loss if the
shares were held for more than eighteen months. 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
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<PAGE> 63
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. This section of the Company By-Laws defines "change of control" as a
change of control of the Company at any time after 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 not the Company is then
subject to such reporting requirement; provided, however, that, under the
Company By-Laws a change of control will 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 Company representing
20% or more of the combined voting power of the Company's then outstanding
securities without the prior approval of at least two-thirds of the members of
the Board of Directors of the Company in office immediately prior to such person
attaining such percentage interest; (ii) the Company 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 of the Company 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 of the Company (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 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.
Amendment, Suspension or Termination of 1997 LTIP. The Compensation
Committee 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 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 Company's Board of Directors and the
Compensation Committee 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") has been 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 350,000 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.
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<PAGE> 64
Issuance of Shares. Under the Directors Plan grants of 500 shares of
Company Common Stock will be made to each non-employee Director immediately
after the Distribution 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 having served at least three years as a
director 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 effective concurrently with the first grant of options under the 1997
LTIP after the Distribution Date 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 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 (or until the expiration date specified in the option, if
earlier), 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 having served at least three years as a director, all
options then held will be exercisable even if they were not exercisable at such
retirement date, provided that such options shall expire at the earlier of five
years from the date of retirement or the expiration date specified in the
options. 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 delivery 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. The Company's Board of Directors also has
authority to terminate the Directors Plan at any time.
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Change of Control Benefits. In order to maintain the rights of
participants in the Directors Plan in the event of a change of control of the
Company, the Directors Plan provides that unless prior to the occurrence of such
change the Company's Board of Directors shall have determined otherwise by vote
of at least two-thirds of its members, all outstanding stock options shall
become fully exercisable whether or not then exercisable and the restrictions on
all restricted shares shall lapse. The Directors Plan further provides that
unexpired options held by a director who resigns or is removed as a director in
connection with a change of control of the Company shall not become void. 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. See "-- 1997 Long-Term
Incentives Plan -- Change of Control Benefits".
Tax Matters. The material 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-, mid- 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 material 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 material 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") has been 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 are to provide a reward and an incentive to
employees in managerial, staff or technical capacities who have contributed in
the then-current fiscal year 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.
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, within 35 days after the end of each fiscal year,
recommendations concerning awards for that fiscal year. In its discretion, the
Compensation Committee will annually following the close of the immediately
preceding fiscal year, 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. Any shares of
Company Common Stock delivered in payment, in whole or in part, of any award may
be subject to such restrictions as the Compensation Committee in its discretion
deems appropriate.
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 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
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not exceed 300,000, 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 has the power,
in its discretion, to amend, suspend or terminate the ICP at any time. It does
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).
Change of Control Benefits. In order to maintain rights of participants in
the ICP in the event of a change of control (as defined in the Company By-Laws)
of the Company, the ICP provides that unless prior to the occurrence of such
change the Company's Board of Directors shall have determined otherwise by a
vote of at least two-thirds of its members, all unpaid installments of awards
theretofore made under the ICP shall become due and payable and any restrictions
on any shares of Company Common Stock delivered in payment, in whole or in part,
of any awards theretofore made under the ICP shall lapse. See "-- 1997 Long-Term
Incentives Plan -- Change of Control Benefits".
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 July 31, 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> <C> <C>
Joseph B. Anderson, Jr........ -- --
Donald R. Beall............... 120,590(3)(4) 0.17
John J. Creedon............... 421 --
Charles H. Harff.............. 11,620 --
Harold A. Poling.............. -- --
Martin D. Walker.............. 3,500(5) --
Larry D. Yost................. 3,081(3) --
Robert A. Calder.............. 3,699(3)(6) --
Thomas A. Madden.............. 2,348(3) --
Prakash R. Mulchandani........ 3,711(3) --
Richard C. Quaid.............. 5,047(3)(6) --
All of the above and other
executive officers as a
group (17 persons).......... 161,012(3)(6) 0.23
</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.
(3) Includes shares expected to be beneficially owned in respect of shares of
Rockwell Common Stock held under Rockwell's savings plans.
(4) Includes shares, as to which beneficial ownership is disclaimed, as follows:
6,718 shares expected to be held for the benefit of family members and 3,333
shares expected to be owned by the Beall Family Foundation, of which Mr.
Beall is President and a director.
(5) Shares as to which beneficial ownership is disclaimed, and expected to be
owned by the Martin D. and Mary J. Walker Charitable Foundation, of which
Mr. Walker is a trustee.
(6) Includes shares held jointly, or in other capacities, as to which in some
cases beneficial ownership is disclaimed.
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".
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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 July 31, 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
- Senior Vice Presidents.................................. 3
- Other Executive Officers................................ 2
- Other Vice Presidents................................... 1.5
- Other executives 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 approximately 90 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. Non-U.S. based executives in each
category listed above would be subject to the multiple of base salary guideline
set forth in the next lower category (or, in the case of "Other executives
subject to the guidelines", a multiple of 0.5).
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<PAGE> 68
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 July 31, 1997)
approximately 70 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 of the material terms of the Company's capital stock
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 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
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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 material terms of the Company Junior Preferred Stock
contained herein is 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 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.
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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.
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
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<PAGE> 71
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
the material terms 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.
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
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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 July 31, 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 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
67
<PAGE> 73
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
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.
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<PAGE> 74
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 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
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<PAGE> 75
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 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.
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<PAGE> 76
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
statements in respect of shares of Company Common Stock registered in book-entry
or uncertificated 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 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
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<PAGE> 77
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 the material terms of the Company Rights 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.
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
72
<PAGE> 78
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
------
<S> <C>
1997 LTIP.............................. 54
1997 LTIP Participants................. 55
ABS.................................... 31
Acquiring Person....................... 70
Allen-Bradley.......................... 54
Automotive Business.................... 7
beneficial owner....................... 67
Business Combination................... 67
change of control...................... 58
Code................................... 6
Commission............................. 4
Common Stock........................... 1
Company................................ 5
Company By-Laws........................ 9
Company Certificate.................... 9
Company Common Stock................... 1
Company Junior Preferred Stock......... 63
Company Options........................ 23
Company Participants................... 22
Company Preferred Stock................ 63
Company Right.......................... 70
Company Rights Agreement............... 70
Compensation Committee................. 47
Continuing Director.................... 68
Credit Facility........................ 25
DGCL................................... 16
Directors Plan......................... 58
Distribution........................... 1
Distribution Agent..................... 6
Distribution Agreement................. 21
Distribution Date...................... 6
Dividend Payment Date.................. 65
Electronics Business................... 17
Employee Matters Agreement............. 22
Exchange Act........................... 4
Fair Price Provision................... 66
Final Expiration Date.................. 71
Financial Ratio........................ 41
freestanding SAR....................... 56
HVS.................................... 7
ICP.................................... 60
<CAPTION>
PAGE
------
<S> <C>
Interested Stockholder................. 67
interested stockholder................. 73
IRS.................................... 6
LIBOR.................................. 25
LVS.................................... 7
Named Executive Officers............... 50
NYSE................................... 1
OEMs................................... 13
Pre-Distribution Payment............... 8
Purchase Price......................... 70
Ratings Grid........................... 41
Record Date............................ 1
Redemption Price....................... 72
Registration Statement................. 4
restricted stock....................... 56
Retention Payment...................... 51
Rights Agent........................... 70
Rights Certificates.................... 71
Rights Distribution Date............... 70
Rockwell............................... 1
Rockwell 1988 LTIP..................... 23
Rockwell 1995 LTIP..................... 23
Rockwell By-Laws....................... 63
Rockwell Certificate................... 63
Rockwell Common Stock.................. 1
Rockwell Junior Preferred Stock........ 18
Rockwell Option Plans.................. 51
Rockwell Options....................... 23
Rockwell Savings Plan.................. 15
SARs................................... 54
Securities Act......................... 19
stock options.......................... 50
Stockholder Notice Procedure........... 69
tandem SAR............................. 56
Tax Allocation Agreement............... 24
Tax Opinion............................ 6
Tax Ruling............................. 6
Transfer Agent......................... 6
Transition Agreement................... 24
Voting Power........................... 66
WABCO.................................. 31
</TABLE>
74
<PAGE> 80
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AUTOMOTIVE BUSINESS
Independent Auditors' Report.......................................................... F-2
Combined Balance Sheet as of September 30, 1995 and 1996 and (Unaudited) June 30,
1997................................................................................ F-3
Combined Statement of Income for the years ended September 30, 1994, 1995 and 1996 and
(Unaudited) the nine months ended June 30, 1996 and 1997............................ F-4
Combined Statement of Cash Flows for the years ended September 30, 1994, 1995 and 1996
and (Unaudited) the nine months ended June 30, 1996 and 1997........................ F-5
Notes to Combined Financial Statements................................................ F-6
Independent Auditors' Report.......................................................... F-19
Schedule II -- Valuation and Qualifying Accounts...................................... F-20
MERITOR AUTOMOTIVE, INC.
Independent Auditors' Report.......................................................... F-21
Balance Sheet as of June 10, 1997 and Note to Balance Sheet........................... F-22
</TABLE>
F-1
<PAGE> 81
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> 82
AUTOMOTIVE BUSINESS
COMBINED BALANCE SHEET
(IN MILLIONS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------- JUNE 30,
1995 1996 1997
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS
Cash.............................................................. $ 62 $ 74 $ 68
Receivables (less allowance for doubtful accounts: 1995, $8; 1996,
$14; 1997, $9).................................................. 454 485 564
Inventories....................................................... 319 294 302
Other current assets.............................................. 107 140 140
------ ------ ------
Total current assets.................................... 942 993 1,074
------ ------ ------
PROPERTY
Property at cost.................................................. 1,535 1,558 1,551
Less accumulated depreciation..................................... 888 912 940
------ ------ ------
Property, net..................................................... 647 646 611
------ ------ ------
OTHER ASSETS...................................................... 177 194 212
------ ------ ------
TOTAL ASSETS............................................ $1,766 $1,833 $ 1,897
====== ====== ======
CURRENT LIABILITIES
Short-term debt................................................... $ 14 $ 8 $ 23
Accounts payable.................................................. 420 441 464
Accrued compensation and benefits................................. 116 124 134
Other current liabilities......................................... 176 191 173
------ ------ ------
Total current liabilities............................... 726 764 794
LONG-TERM DEBT.................................................... 31 24 21
ACCRUED RETIREMENT BENEFITS....................................... 395 391 392
OTHER LIABILITIES................................................. 29 26 23
MINORITY INTERESTS................................................ 24 29 36
ROCKWELL'S NET INVESTMENT......................................... 561 599 631
------ ------ ------
TOTAL LIABILITIES AND ROCKWELL'S NET INVESTMENT......... $1,766 $1,833 $ 1,897
====== ====== ======
</TABLE>
See notes to combined financial statements.
F-3
<PAGE> 83
AUTOMOTIVE BUSINESS
COMBINED STATEMENT OF INCOME
(IN MILLIONS)
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED SEPTEMBER 30, ENDED JUNE 30,
------------------------ ---------------
1994 1995 1996 1996 1997
------ ------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales................................................. $2,653 $3,125 $3,144 $2,397 $2,467
Cost of sales......................................... 2,371 2,744 2,747 2,098 2,135
------ ------ ------ ------ ------
GROSS MARGIN.......................................... 282 381 397 299 332
Selling, general, and administrative.................. 191 203 215 158 168
Restructuring......................................... -- -- 36 6 --
------ ------ ------ ------ ------
OPERATING EARNINGS.................................... 91 178 146 135 164
Other income - net.................................... 9 18 46 21 10
Interest expense...................................... (12) (11) (10) (8) (6)
------ ------ ------ ------ ------
INCOME BEFORE INCOME TAXES............................ 88 185 182 148 168
Provision for income taxes............................ 37 62 68 54 68
------ ------ ------ ------ ------
NET INCOME.................................. $ 51 $ 123 $ 114 $ 94 $ 100
====== ====== ====== ====== ======
</TABLE>
See notes to combined financial statements.
F-4
<PAGE> 84
AUTOMOTIVE BUSINESS
COMBINED STATEMENT OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED SEPTEMBER ENDED JUNE
30, 30,
--------------------- -----------
1994 1995 1996 1996 1997
----- ----- ----- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income................................................. $ 51 $ 123 $ 114 $ 94 $100
Adjustments to net income to arrive at cash provided by
operating activities:
Depreciation and amortization............................ 93 97 102 75 76
Loss (gain) on sale of property and businesses........... 4 (5) (19) (18) --
Restructuring, net of expenditures....................... -- -- 26 6 --
Deferred income taxes.................................... (13) (11) (20) (3) (4)
Net pension expense, net of contributions................ 19 26 23 19 18
Changes in assets and liabilities, excluding effects of
acquisitions, divestitures, and foreign currency
adjustments:
Receivables........................................... (51) (33) (32) (50) (98)
Inventories........................................... 4 (39) 19 8 (12)
Accounts payable...................................... 47 56 24 -- 39
Other assets and liabilities.......................... 2 (11) (40) (21) (20)
----- ----- ----- ---- ----
CASH PROVIDED BY OPERATING ACTIVITIES............ 156 203 197 110 99
----- ----- ----- ---- ----
INVESTING ACTIVITIES
Capital expenditures....................................... (102) (119) (144) (87) (59)
Acquisitions of businesses and investments................. (2) (19) (15) (10) (16)
Proceeds from the disposition of property and businesses... 5 11 58 50 6
----- ----- ----- ---- ----
CASH USED FOR INVESTING ACTIVITIES............... (99) (127) (101) (47) (69)
----- ----- ----- ---- ----
FINANCING ACTIVITIES
(Decrease) increase in short-term borrowings............... (14) -- (3) 7 17
Decrease in long-term debt................................. (3) (9) (7) (3) (3)
Net transfers to Rockwell.................................. (24) (71) (74) (52) (50)
----- ----- ----- ---- ----
CASH USED FOR FINANCING ACTIVITIES............... (41) (80) (84) (48) (36)
----- ----- ----- ---- ----
INCREASE (DECREASE) IN CASH................................ 16 (4) 12 15 (6)
CASH AT BEGINNING OF PERIOD................................ 50 66 62 62 74
----- ----- ----- ---- ----
CASH AT END OF PERIOD...................................... $ 66 $ 62 $ 74 $ 77 $ 68
===== ===== ===== ==== ====
</TABLE>
See notes to combined financial statements.
F-5
<PAGE> 85
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, Meritor Automotive, Inc. (formerly named 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
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 or an opinion of tax counsel to the effect 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 $23 million and $21 million for the nine-month
periods ended June 30, 1996 and 1997, respectively. 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 $21 million for each of the nine-month periods ended June 30,
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 $19 million as of September 30, 1995 and 1996 and
June 30, 1997, respectively, related to outstanding checks drawn on centralized
disbursement accounts.
F-6
<PAGE> 86
AUTOMOTIVE BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
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.
The results of operations for the nine months ended June 30, 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 nine months ended June 30, 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.
Impairment of Long-Lived Assets
The Automotive Business evaluates the carrying value of long-lived assets
for possible impairment in accordance with Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of ".
F-7
<PAGE> 87
AUTOMOTIVE BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Revenue Recognition
Revenues are generally recognized upon shipment of products to customers.
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 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,
----------- JUNE 30,
1995 1996 1997
---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
Finished goods............................................... $109 $114 $ 114
Work in process.............................................. 163 146 132
Raw materials, parts, and supplies........................... 100 88 110
---- ---- ----
Total........................................................ 372 348 356
Less allowance to adjust the carrying value of certain
inventories (1995, $144; 1996, $125) to a LIFO basis....... 53 54 54
---- ---- ----
Inventories.................................................. $319 $294 $ 302
==== ==== ====
</TABLE>
F-8
<PAGE> 88
AUTOMOTIVE BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
5. OTHER CURRENT ASSETS
Other current assets are summarized as follows (in millions):
<TABLE>
<CAPTION>
SEPTEMBER
30,
----------- JUNE 30,
1995 1996 1997
---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current deferred income taxes (see Note 13).................. $ 77 $ 95 $ 96
Customer tooling............................................. 16 21 20
Prepaid expenses............................................. 9 11 11
Other........................................................ 5 13 13
---- ---- ----
Other current assets......................................... $107 $140 $ 140
==== ==== ====
</TABLE>
6. PROPERTY
Property is summarized as follows (in millions):
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------- JUNE 30,
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................................. 947 950 978
Company-owned tooling................................... 178 188 193
Construction in progress................................ 78 106 67
------ ------ ------
Total..................................................... 1,535 1,558 1,551
Less accumulated depreciation............................. 888 912 940
------ ------ ------
Property, net............................................. $ 647 $ 646 $ 611
====== ====== ======
</TABLE>
7. OTHER ASSETS
Other assets are summarized as follows (in millions):
<TABLE>
<CAPTION>
SEPTEMBER
30,
----------- JUNE 30,
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, $21)...................................... 40 45 43
Investments in affiliates.................................... 37 38 46
Prepaid pension costs (see Note 11).......................... 24 26 28
Other........................................................ 16 19 26
---- ---- ----
Other assets................................................. $177 $194 $ 212
==== ==== ====
</TABLE>
F-9
<PAGE> 89
AUTOMOTIVE BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
8. OTHER CURRENT LIABILITIES
Other current liabilities are summarized as follows (in millions):
<TABLE>
<CAPTION>
SEPTEMBER
30,
----------- JUNE 30,
1995 1996 1997
---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
Accrued product warranties................................... $ 90 $ 99 $ 89
Accrued taxes other than income taxes........................ 26 24 28
Accrued restructuring........................................ -- 19 9
Other........................................................ 60 49 47
---- ---- ----
Other current liabilities.................................... $176 $191 $ 173
==== ==== ====
</TABLE>
The $18 million reduction in other current liabilities from September 1996
to June 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 June 30, 1997, the carrying 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 $129 million at September 30,
1995 and 1996, and June 30, 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>
F-10
<PAGE> 90
AUTOMOTIVE BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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.
F-11
<PAGE> 91
AUTOMOTIVE BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
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>
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.
F-12
<PAGE> 92
AUTOMOTIVE BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
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 combined non-U.S. income tax returns of Rockwell. Rockwell
intends to indemnify the Automotive Business for all income tax liabilities and
retain rights to all tax refunds relating to operations included in consolidated
or combined 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 consolidated or
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>
F-13
<PAGE> 93
AUTOMOTIVE BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
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>
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>
F-14
<PAGE> 94
AUTOMOTIVE BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
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>
YEAR ENDED SEPTEMBER
30, NINE MONTHS
---------------------- ENDED
1994 1995 1996 JUNE 30, 1997
---- ---- ---- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Beginning balance................................ $468 $509 $561 $ 599
Net income....................................... 51 123 114 100
Net transfers to Rockwell........................ (24) (71) (74) (50)
Currency translation gain (loss)................. 14 -- (2) (18)
---- ---- ---- ------
Ending balance................................... $509 $561 $599 $ 631
==== ==== ==== ==========
</TABLE>
The cumulative deferred currency translation loss was $42 million, $42
million, $44 million and $62 million as of September 30, 1994, 1995 and 1996 and
June 30, 1997, respectively.
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.
F-15
<PAGE> 95
AUTOMOTIVE BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
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.
The Company will assume all contingent liabilities (including those in
respect of environmental matters) related to current and former operations of
the Automotive Business.
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.
F-16
<PAGE> 96
AUTOMOTIVE BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
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
Restructuring charges..................................... -- -- (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>
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>
F-17
<PAGE> 97
AUTOMOTIVE BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Fourth quarter 1996 net income was reduced by a $30 million ($20 million
after-tax) charge related to restructuring, and increased by $15 million ($9
million after-tax) of proceeds from the settlement of certain environmental
insurance claims arising in years prior to 1986.
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-18
<PAGE> 98
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 Amendment No. 4 to Form 10/A. 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-19
<PAGE> 99
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-20
<PAGE> 100
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of Meritor Automotive, Inc.:
We have audited the accompanying balance sheet of Meritor Automotive, Inc.
(a wholly-owned subsidiary of Rockwell International Corporation formerly named
111 Holdings, Inc.) 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 Meritor Automotive, Inc. (a wholly-owned
subsidiary of Rockwell International Corporation formerly named 111 Holdings,
Inc.) as of June 10, 1997 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
June 10, 1997
F-21
<PAGE> 101
MERITOR AUTOMOTIVE, 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 Meritor Automotive, Inc. (formerly named 111 Holdings,
Inc.) (Meritor) consists of the accounts of an inactive wholly-owned subsidiary
of Rockwell International Corporation (Rockwell). Meritor 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 Meritor of
the assets and liabilities of the Automotive Business. The shares of Meritor
common stock (including the associated rights) will be distributed in a tax-free
spin-off, with each Rockwell shareowner receiving one share of Meritor common
stock (including the associated right) for every three shares of Rockwell common
stock owned.
F-22
<PAGE> 102
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 -- Credit Agreement dated as of August 21, 1997 among the Company, the lenders from
time to time party thereto, Morgan Guaranty Trust Company of New York, as
Administrative Agent and NBD Bank, as Documentation Agent
*10.6 -- Form of Incentive Compensation Plan
*27 -- Financial Data Schedule
</TABLE>
- ---------------
* Previously filed
II-1
<PAGE> 103
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.
MERITOR AUTOMOTIVE, INC.
By: /s/ THOMAS A. MADDEN
------------------------------------
Name: Thomas A. Madden
Title: Senior Vice President and
Chief Financial Officer
Date: September 3, 1997
II-2
<PAGE> 104
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 -- Credit Agreement dated as of August 21, 1997 among the Company, the lenders
from time to time party thereto, Morgan Guaranty Trust Company of New York,
as Administrative Agent and NBD Bank, as Documentation Agent................
*10.6 -- Form of Incentive Compensation Plan.........................................
*27 -- Financial Data Schedule.....................................................
</TABLE>
- ---------------
* Previously filed
<PAGE> 1
Exhibit 10.5
MERITOR AUTOMOTIVE, INC.
THE FOREIGN SUBSIDIARY BORROWERS
--------------------------------------
CREDIT AGREEMENT
DATED AS OF AUGUST 21, 1997
--------------------------------------
THE LENDERS PARTY HERETO
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, AS ADMINISTRATIVE AGENT
AND
NBD BANK, AS DOCUMENTATION AGENT
--------------------------------------
FIRST CHICAGO CAPITAL MARKETS, INC.,
AS SYNDICATION AGENT AND ARRANGER
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I - DEFINITIONS.....................................................
ARTICLE II - THE CREDITS....................................................
2.1. The Commitments..................................................
2.2. Repayment of Revolving Credit Loans; Evidence of Debt............
2.3. Procedures for Revolving Credit Borrowing........................
2.4. Borrowing of Revolving Credit Loans and Refunding of Loans.......
2.5. Termination or Reduction of Revolving Credit Commitment..........
2.6. Multicurrency Commitments........................................
2.7. Competitive Bid Loans............................................
2.8. Facility and Agent Fees..........................................
2.9. Optional and Mandatory Principal Payments on All Loans...........
2.10. Conversion and Continuation of Outstanding Advances..............
2.11. Interest Rates, Interest Payment Dates; Interest and Fee Basis...
2.12. Changes in Interest Rate, etc....................................
2.13. Rates Applicable After Default...................................
2.14. Pro Rata Payment, Method of Payment..............................
2.15. Telephonic Notices...............................................
2.16. Notification of Advances, Interest Rates, Prepayments and
Commitment Reductions............................................
2.17. Lending Installations............................................
2.18. Non-Receipt of Funds by the Administrative Agent.................
2.19. Facility Letters of Credit.......................................
2.20. Application of Payments with Respect to Defaulting Lenders.......
ARTICLE III - CHANGE IN CIRCUMSTANCES.......................................
3.1. Yield Protection.................................................
3.2. Changes in Capital Adequacy Regulations..........................
3.3. Availability of Types of Advances................................
3.4. Funding Indemnification..........................................
3.5. Lender Statements; Survival of Indemnity.........................
3.6. Taxes............................................................
3.7. Substitution of Lender...........................................
ARTICLE IV - CONDITIONS PRECEDENT...........................................
4.1. Closing Conditions ..............................................
4.2. Initial Advance..................................................
4.3. Each Advance.....................................................
ARTICLE V - REPRESENTATIONS AND WARRANTIES..................................
5.1. Corporate Existence and Standing.................................
5.2. Authorization and Validity.......................................
5.3. No Conflict; Government Consent..................................
5.4. Financial Statements.............................................
5.5. Material Adverse Change..........................................
<PAGE> 3
5.6. Taxes..............................................................
5.7. Litigation and Contingent Obligations..............................
5.8. Subsidiaries.......................................................
5.9. ERISA..............................................................
5.l0. Accuracy of Information............................................
5.11. Regulation U.......................................................
5.12. Material Agreements................................................
5.13. Compliance With Laws...............................................
5.14. Plan Assets; Prohibited Transactions...............................
5.15. Environmental Matters..............................................
5.16. Investment Company Act.............................................
5.17. Public Utility Holding Company Act.................................
5.18. Foreign Subsidiary Borrowers.......................................
ARTICLE VI - COVENANTS........................................................
6.1. Financial Reporting................................................
6.2. Use of Proceeds....................................................
6.3. Notice of Default..................................................
6.4. Conduct of Business................................................
6.5. Taxes..............................................................
6.6. Insurance..........................................................
6.7. Compliance with Laws...............................................
6.8. Maintenance of Properties..........................................
6.9. Inspection.........................................................
6.10. Subsidiary Indebtedness............................................
6.11. Merger.............................................................
6.12. Sale of Assets.....................................................
6.13. Investments and Acquisitions.......................................
6.14. Liens..............................................................
6.15. Affiliates.........................................................
6.16. Contingent Obligations.............................................
6.17. Debt Ratio.........................................................
6.18. Net Worth..........................................................
ARTICLE VII - DEFAULTS........................................................
ARTICLE VIII - ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES.................
8.1. Acceleration.......................................................
8.2. Amendments.........................................................
8.3. Preservation of Rights.............................................
ARTICLE IX - GUARANTY
9.1. Guarantee..........................................................
9.2. Right of Set-off...................................................
9.3. No Subrogation.....................................................
9.4. Amendments, etc. with respect to the Obligations; Waiver of Rights.
9.5. Guarantee Absolute and Unconditional...............................
9.6. Reinstatement......................................................
9.7. Payments...........................................................
ii
<PAGE> 4
ARTICLE X - GENERAL PROVISIONS................................................
10.1. Survival of Representations........................................
10.2. Governmental Regulation............................................
10.3. Taxes..............................................................
10.4. Headings...........................................................
10.5. Entire Agreement...................................................
10.6. Several Obligations; Benefits of this Agreement....................
10.7. Expenses; Indemnification..........................................
10.8. Numbers of Documents...............................................
10.9. Accounting.........................................................
10.10. Severability of Provisions.........................................
10.11. Nonliability of Lenders............................................
10.12. Confidentiality....................................................
10.13. Nonreliance........................................................
ARTICLE XI - THE AGENTS.......................................................
11.1. Appointment; Nature of Relationship................................
11.2. Powers
11.3. General Immunity...................................................
11.4. No Responsibility for Loans, Recitals, etc.........................
11.5. Action on Instructions of Lenders..................................
11.6. Employment of Agents and Counsel...................................
11.7. Reliance on Documents; Counsel.....................................
11.8. Agents' Reimbursement and Indemnification..........................
11.9. Notice of Default..................................................
11.10. Rights as a Lender.................................................
11.l1. Lender Credit Decision.............................................
11.12. Successor Agents...................................................
ARTICLE XII - SETOFF; RATABLE PAYMENTS........................................
12.1. Setoff
12.2. Ratable Payments...................................................
12.3. Loan Conversion/Participations.....................................
ARTICLE XIII - BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS..............
13.1. Successors and Assigns.............................................
13.2. Participations.....................................................
13.2.1. Permitted Participants; Effect............................
13.2.2. Voting Rights.............................................
13.2.3. Benefit of Setoff.........................................
13.3. Assignments........................................................
13.3.1. Permitted Assignments.....................................
13.3.2. Effect; Effective Date....................................
13.3.3. Additional Lenders........................................
13.4. Dissemination of Information.......................................
13.5. Tax Treatment......................................................
iii
<PAGE> 5
ARTICLE XIV - NOTICES.........................................................
14.1. Giving Notice......................................................
14.2. Change of Address..................................................
ARTICLE XV - COUNTERPARTS.....................................................
ARTICLE XVI - CHOICE OF LAW, CONSENT TO JURISDICTION, WAIVER
OF JURY TRIAL
16.1. Choice of Law......................................................
16.2. Waiver of Jury Trial...............................................
16.3. Submission to Jurisdiction; Waivers................................
16.4. Acknowledgments....................................................
16.5. Power of Attorney..................................................
16.6 Judgment...........................................................
16.7 Unification of Certain Currencies..................................
EXHIBITS
EXHIBIT A-1 - REVOLVING CREDIT NOTE...........................................
EXHIBIT A-2 - COMPETITIVE BID NOTE ...........................................
EXHIBIT B - PRICING SCHEDULE..................................................
EXHIBIT C - COMPLIANCE CERTIFICATE............................................
EXHIBIT D - COMPANY OPINION OF COUNSEL........................................
EXHIBIT E - ROCKWELL OPINION OF COUNSEL.......................................
EXHIBIT F - WRITTEN TRANSFER INSTRUCTIONS.....................................
EXHIBIT G - FOREIGN BORROWER OPINION OF COUNSEL...............................
EXHIBIT H - COMPETITIVE BID QUOTE............................................
EXHIBIT I - INVITATION FOR COMPETITIVE BID QUOTES.............................
EXHIBIT J - COMPETITIVE BID QUOTE REQUESTS....................................
EXHIBIT K - JOINDER AGREEMENT.................................................
EXHIBIT L - ROCKWELL INTERNATIONAL GUARANTY...................................
EXHIBIT M - ASSIGNMENT AGREEMENT..............................................
iv
<PAGE> 6
SCHEDULES
SCHEDULE 1 - COMMITMENTS
SCHEDULE 2 - EUROCURRENCY BASE RATE
SCHEDULE 3 - FOREIGN SUBSIDIARY BORROWERS
SCHEDULE 5.7 - LITIGATION
SCHEDULE 5.8 - SUBSIDIARIES
v
<PAGE> 7
THIS CREDIT AGREEMENT (this "Agreement"), dated as of August
21, 1997, among MERITOR AUTOMOTIVE, INC., a Delaware corporation (the
"Company"), the FOREIGN SUBSIDIARY BORROWERS (as hereinafter defined) from time
to time parties hereto (together with the Company, the "Borrowers"), the lenders
from time to time parties hereto (the "Lenders"), NBD BANK, a Michigan banking
corporation, as documentation agent for the Lenders (the "Documentation Agent")
and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a New York banking corporation,
as administrative agent for the Lenders (the "Administrative Agent").
NOW, THEREFORE, in consideration of the premises and the
mutual agreements contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Defined Terms. As used in this Agreement, the following terms shall
have the following meanings:
"Absolute Rate" means, with respect to an Absolute Rate Loan made by a
given Lender for the relevant Absolute Rate Interest Period, the rate of
interest per annum (rounded to the nearest 1/10,000 of 1%) offered by such
Lender and accepted by the Company pursuant to Section 2.7.6.
"Absolute Rate Advance" means a borrowing hereunder consisting of the
aggregate amount of the several Absolute Rate Loans made by some or all of the
Lenders to the Company at the same time and for the same Absolute Rate Interest
Period.
"Absolute Rate Auction" means a solicitation of Competitive Bid Quotes
setting forth Absolute Rates pursuant to Section 2.7.3.
"Absolute Rate Interest Period" means, with respect to an Absolute Rate
Advance or an Absolute Rate Loan, a period of not less than 7 days and not more
than 360 days commencing on a Business Day selected by the Company pursuant to
this Agreement. If such Absolute Rate Interest Period would end on a day which
is not a Business Day, such Absolute Rate Interest Period shall end on the next
succeeding Business Day.
"Absolute Rate Loan" means a loan made pursuant to Section 2.7 which
bears interest at an Absolute Rate.
"Acquisition" means any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by which the
Company or any of its Subsidiaries (i) acquires any going business or all or
substantially all of the assets of any firm, corporation or limited liability
company, or division thereof, whether through purchase of assets, merger or
otherwise or (ii) directly or indirectly acquires (in one transaction or as the
most recent transaction in a series of transactions) at least a majority (in
number of votes) of the securities of a corporation which have ordinary voting
power for the election of directors (other than securities having such power
only by reason of the happening of a contingency) or a majority (by percentage
or voting power) of the outstanding ownership interests of a partnership or
limited liability company.
<PAGE> 8
"Adjusted Aggregate Committed Outstandings" means with respect to each
Lender, the Aggregate Committed Outstandings of such Lender, plus the amount of
any participating interests purchased by such Lender pursuant to Section 12.3
minus the amount of any participating interests sold by such Lender pursuant to
Section 12.3.
"Administrative Agent" means Morgan Guaranty Trust Company of New York
in its capacity as administrative agent for the Lenders pursuant to Article XI,
and not in its individual capacity as a Lender, and any successor Administrative
Agent appointed pursuant to Article XI and, for purposes of any Multicurrency
Loan, any Person designated pursuant to Section 2.6.1(e) hereof.
"Advance" means an Absolute Rate Advance, a Competitive Bid Advance, a
Multicurrency Advance or a Revolving Credit Advance, as the case may be.
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 10% or
more of any class of voting securities (or other ownership interests) of the
controlled Person or possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies of the controlled Person,
whether through ownership of stock, by contract or otherwise.
"Agents" shall mean, collectively, the Administrative Agent and the
Documentation Agent.
"Agreement" means this credit agreement, as it may be amended or
modified and in effect from time to time.
"Agreement Accounting Principles" means generally accepted accounting
principles as in effect from time to time in the United States, applied in a
manner consistent with the most recent audited consolidated financial statements
of the Company and its Subsidiaries and delivered to the Lenders (or, prior to
the delivery of the first such audited consolidated financial statements,
consistent with the audited financial statements referred to in the first
sentence of Section 5.4); provided that, if the Company notifies the
Documentation Agent that the Company wishes to amend any covenant contained in
Article VI to eliminate the effect of any change in generally accepted
accounting principles on the calculation of such covenant (or if the
Documentation Agent notifies the Company that the Required Lenders wish to amend
Article VI for such purpose), then the Company's compliance with such covenant
shall be determined on the basis of generally accepted accounting principles in
effect immediately before the relevant change in generally accepted accounting
principles became effective, until either such notice is withdrawn or such
covenant is amended in a manner satisfactory to the Company and the Required
Lenders.
"Agreement Currency" is defined in Section 16.6.
"Aggregate Available Multicurrency Commitments" means at any date of
determination with respect to all Multicurrency Lenders, an amount equal to the
Available Multicurrency Commitments of all Multicurrency Lenders on such date.
"Aggregate Available Revolving Credit Commitments" means as at any date
of determination with respect to all Lenders, an amount equal to the Available
Revolving Credit Commitments of all Lenders on such date.
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<PAGE> 9
"Aggregate Committed Outstandings" means as at any date of
determination with respect to any Lender, an amount in U.S. Dollars equal to the
sum of (a) the Aggregate Revolving Credit Outstandings of such Lender on such
date and (b) the Aggregate Multicurrency Outstandings of such Lender on such
date.
"Aggregate Multicurrency Outstandings" means as at any date of
determination with respect to any Lender, the U.S. Dollar Equivalent of an
amount in the applicable Available Foreign Currencies equal to the sum of the
aggregate unpaid principal amount of such Lender's Multicurrency Loans on such
date and the amount of such Lender's Multicurrency Commitment Percentage of the
Multicurrency Facility Letter of Credit Obligations for all Borrowers.
"Aggregate Revolving Credit Commitments" means the aggregate amount of
the Revolving Credit Commitments of all of the Lenders.
"Aggregate Revolving Credit Outstandings" means as at any date of
determination with respect to any Lender, the sum of the aggregate unpaid
principal amount of such Lender's Revolving Credit Loans on such date and the
amount of such Lender's Funding Commitment Percentage of the U.S. Facility
Letter of Credit Obligations.
"Aggregate Total Outstandings" means at any date of determination with
respect to any Lender, an amount in U.S. Dollars equal to the sum of (a) the
Aggregate Revolving Credit Outstandings of such Lender on such date, (b) the
aggregate unpaid principal amount of such Lender's Competitive Bid Loans on such
date and (c) the Aggregate Multicurrency Outstandings of such Lender on such
date.
"Alternate Base Rate" means, for any day, a rate of interest per annum
equal to the higher of (a) the Corporate Base Rate for such day and (b) the sum
of the Federal Funds Effective Rate for such day plus 1/2% per annum.
"Applicable Margin" means the amounts set forth in the Pricing Schedule
on Exhibit B hereto.
"Article" means an article of this Agreement unless another document is
specifically referenced.
"Assignment" is defined in Section 13.3.1.
"Authorized Officer" means any of the Chairman of the Board of the
Company, the Senior Vice President and Chief Financial Officer of the Company or
any person designated by the Senior Vice President and Chief Financial Officer
or the Chairman of the Board of the Company in writing to the Agents from time
to time, acting singly.
"Available Foreign Currencies" means Pounds Sterling, French Francs,
Canadian Dollars, Japanese Yen, Australian Dollars, Italian Lira, Spanish
Pesetas and Deutsche Marks and any other available and freely-convertible
non-U.S. Dollar currency selected by the Company and approved by the Agents.
"Available Multicurrency Commitment" means at any date of determination
with respect to any Multicurrency Lender (after giving effect to the making and
payment of any Revolving Credit Loans required on such date pursuant to Section
2.4), the lesser of (a) the excess, if any, of (i) the U.S. Dollar Equivalent of
such Multicurrency Lender's Multicurrency Commitment in effect on such date over
(ii) the Aggregate Multicurrency Outstandings of such Multicurrency Lender on
such date and (b) the Available Revolving Credit Commitment of such Lender on
such date.
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<PAGE> 10
"Available Revolving Credit Commitment" means at any date of
determination with respect to any Lender (after giving effect to the making and
payment of any Revolving Credit Loans required on such date pursuant to Section
2.4), an amount in U.S. Dollars equal to the excess, if any, of (a) the amount
of such Lender's Revolving Credit Commitment in effect on such date over (b) the
Aggregate Committed Outstandings of such Lender on such date.
"Borrowers" is defined in the preamble hereto.
"Borrowing Date" means any Business Day specified in a notice pursuant
to Section 2.3, 2.6 or 2.19 as a date on which a Borrower requests the Lenders
to make Loans hereunder or, with respect to the issuance of any Facility Letter
of Credit, the date the applicable Issuer issues such Facility Letter of Credit.
"Business Day" means (a) when such term is used in respect of a day on
which a Loan denominated in an Available Foreign Currency is to be made, a
payment is to be made in respect of such Loan, an Exchange Rate is to be set in
respect of such Available Foreign Currency or any other dealing in such
Available Foreign Currency is to be carried out pursuant to this Agreement, such
term shall mean a London Banking Day which is also a day on which banks are open
for general banking business in the city which is the principal financial center
of the country of issuance of such Available Foreign Currency; (b) when such
term is used to describe a day on which a borrowing, payment or interest rate
determination is to be made in respect of a Eurodollar Loan or a Eurodollar Bid
Rate Loan, such day shall be a London Banking Day; and (c) when such term is
used in any context in this Agreement (including as described in the foregoing
clauses (a) and (b)), such term shall mean a day which, in addition to complying
with any applicable requirements set forth in the foregoing clauses (a) and (b),
is a day other than a Saturday, Sunday or other day on which commercial banks in
New York City are authorized or required by law to close.
"Capitalized Lease" of a Person means any lease of Property by such
Person as lessee which would be capitalized on a balance sheet of such Person
prepared in accordance with Agreement Accounting Principles.
"Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with
Agreement Accounting Principles.
"Change in Control" means any of the following events or circumstances:
(a) any Person or group of Persons (within the meaning of Section 13(d) or 14(d)
of the Securities Exchange Act of 1934, as amended) shall either (i) acquire
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934) of 40% or more of
the outstanding shares of voting stock of the Company or (ii) obtain the power
(whether or not exercised) to elect a majority of the Company's directors or (b)
Continuing Directors shall cease to constitute a majority of the board of
directors of the Company.
"Closing Date" means the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Collateral Shortfall Amount" is defined in Section 8.1.
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<PAGE> 11
"Commitment" means, for each Lender, such Lender's Revolving Credit
Commitment and Multicurrency Commitment and "Commitments" means the aggregate of
all the Lenders' Commitments.
"Committed Loans" means Revolving Credit Loans and Multicurrency Loans.
"Committed Outstandings Percentage" means as of any date with respect
to any Lender, the percentage which the Adjusted Aggregate Committed
Outstandings of such Lender constitutes of the Adjusted Aggregate Committed
Outstandings of all Lenders.
"Company" is defined in the preamble hereto.
"Company Guaranty" means the guarantee contained in Article IX.
"Competitive Bid Advance" means a borrowing hereunder consisting of the
aggregate amount of the several Competitive Bid Loans made by some or all of the
Lenders to the Company at the same time, at the same interest basis, and for the
same Interest Period.
"Competitive Bid Borrowing Notice" is defined in Section 2.7.6.
"Competitive Bid Loan" means a Eurodollar Bid Rate Loan or an Absolute
Rate Loan, as the case may be.
"Competitive Bid Margin" means the margin above or below the applicable
Eurodollar Base Rate offered for a Eurodollar Bid Rate Loan, expressed as a
percentage (rounded to the nearest 1/10,000 of 1%) to be added to or subtracted
from such Eurodollar Base Rate.
"Competitive Bid Note" is defined in Section 2.7.9.
"Competitive Bid Quote" means a Competitive Bid Quote substantially in
the form of Exhibit H hereto completed and delivered by a Lender to the
Administrative Agent in accordance with Section 2.7.4.
"Competitive Bid Quote Request" means a Competitive Bid Quote Request
substantially in the form of Exhibit J hereto completed and delivered by the
Company to the Agent in accordance with Section 2.7.2.
"Condemnation" is defined in Section 7.8.
"Contingent Obligation" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any comfort letter, operating
agreement or take-or-pay contract. The amount of any Contingent Obligation shall
be equal to the amount of the obligation that is so guarantied or supported that
is actually outstanding or otherwise due and payable from time to time, if a
fixed and determinable amount or if there is no fixed or determinable amount,
either (x) if a maximum amount is guaranteed, the maximum amount or (y) if there
is no maximum amount the amount of the obligation that is so guarantied or
supported.
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<PAGE> 12
"Continuing Director" means any member of the Company's board of
directors who either (i) is a member of such board as of the Closing Date or
(ii) is thereafter elected to such board, or nominated for election by
stockholders, by a vote of at least two-thirds of the directors who are
Continuing Directors at the time of such vote; provided that an individual who
is so elected or nominated in connection with a merger, consolidation,
acquisition or similar transaction (but excluding the Spin-Off) shall not be a
Continuing Director unless such individual was a Continuing Director prior
thereto.
"Controlled Group" means (i) prior to the Distribution Date, the
Company and (ii) thereafter, all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with the Company or any of its Subsidiaries, are treated as a
single employer under Section 414 of the Code.
"Conversion/Continuation Notice" is defined in Section 2.10.1.
"Conversion Date" means any date on which either (a) a Default under
Sections 7.6 or 7.7 has occurred or (b) the Commitments shall have been
terminated and/or the Loans shall have been declared immediately due and payable
pursuant to Section 8.1(b).
"Conversion Sharing Percentage" means on any date with respect to any
Lender and any Loans of such Lender outstanding in any currency other than U.S.
Dollars, the percentage of such Loans such that, after giving effect to the
conversion of such Loans to U.S. Dollars and the purchase and sale by such
Lender of participating interests as contemplated by Section 12.3, the Committed
Outstandings Percentage of such Lender will equal such Lender's Revolving Credit
Committed Percentage on such date (calculated immediately prior to giving effect
to any termination or expiration of the Revolving Credit Commitments on the
Conversion Date).
"Converted Loans" is defined in Section 12.3(a).
"Corporate Base Rate" means a rate per annum equal to the corporate
base rate of interest announced by Morgan from time to time, changing when and
as said corporate base rate changes.
"Debt Ratio" means, as of the last day of any fiscal quarter commencing
with the fiscal quarter ending December 31, 1997, the ratio of (a) Total Debt to
(b) EBITDA for the four consecutive fiscal quarters ended on such date, provided
that EBITDA as calculated in determining the Debt Ratio for (i) the last day of
the fiscal quarter ending December 31, 1997, shall be equal to the sum of EBITDA
for the fiscal quarter ending December 31, 1997 plus the pro forma EBITDA for
the automotive operations of Rockwell International for the three fiscal
quarters immediately preceding such fiscal quarter, (ii) the last day of the
fiscal quarter ending March 31, 1998, shall be equal to the sum of EBITDA for
the two consecutive fiscal quarters ending March 31, 1998 plus the pro forma
EBITDA for the automotive operations of Rockwell International for the two
fiscal quarters immediately preceding such two fiscal quarters, and (iii) the
last day of the fiscal quarter ending June 30, 1998, shall be equal to the sum
of EBITDA for the three fiscal quarters ending June 30, 1998 plus the pro forma
EBITDA for the automotive operations of Rockwell International for the fiscal
quarter immediately preceding such three fiscal quarters, in each case as
approved by the Documentation Agent.
"Default" means an event described in Article VII.
"Defaulting Lender" means any Lender that (a) on any Borrowing Date
fails to make available to the Administrative Agent such Lender's Loans required
to be made to a Borrower on such Borrowing Date
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<PAGE> 13
or (b) shall not have made a payment to the Issuer pursuant to Section 2.19.5.
Once a Lender becomes a Defaulting Lender, such Lender shall continue as a
Defaulting Lender until such time as such Defaulting Lender makes available to
the Administrative Agent, the amount of such Defaulting Lender's Loans and/or to
an Issuer, such payments requested by an Issuer together with all other amounts
required to be paid to the Administrative Agent and/or the Issuers pursuant to
this Agreement.
"Designated Financial Officer" means, with respect to any Borrower, its
chief financial officer, treasurer or controller.
"Designated Multicurrency Lender" means, with respect to any
Multicurrency Loan to any Borrower, a Multicurrency Lender that is designated by
the Company, and accepted by such Lender, as a Multicurrency Lender with respect
to such Borrower pursuant to Section 2.6.4.
"Designated Office" has the meaning set forth in the definition of
Multicurrency Lender.
"Distribution" is defined in the Form 10.
"Distribution Agreement" is defined in the Form 10.
"Distribution Date" is defined in the Form 10.
"Documentation Agent" means NBD Bank in its capacity as documentation
agent for the Lenders pursuant to Article XI, and not in its individual capacity
as a Lender, and any successor Documentation Agent appointed pursuant to Article
XI.
"Dollars", "U.S. Dollars" and "$" means dollars in lawful currency of
the United States of America.
"Domestic Reference Lenders" means NBD Bank, Morgan Guaranty Trust
Company of New York and The Chase Manhattan Bank, NA in their capacities as
Lenders.
"EBITDA" means for any period, the sum of (a) the consolidated net
income (or loss) of the Company and its Subsidiaries for such period determined
in conformity with Agreement Accounting Principles, plus (b) to the extent
deducted in determining net income, income taxes, depreciation and amortization
expense and Interest Expenses.
"Effective Date" means the date on which the conditions precedent set
forth in Sections 4.1, 4.2 and 4.3 are satisfied.
"Environmental Laws" means, with respect to any Borrower, any and all
federal, state, local and foreign statutes, laws, judicial decisions,
regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions,
permits, concessions, grants, franchises, licenses, agreements and other
governmental restrictions relating to (a) the protection of the environment, (b)
the effect of the environment on human health, (c) emissions, discharges or
releases of pollutants, contaminants, hazardous substances or wastes into
surface water, ground water or land, or (d) the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, hazardous substances or wastes or the clean-up or
other remediation thereof, in each case, applicable to such Borrower or its
Property.
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<PAGE> 14
"ERISA" means the Employee Retirement Income Security Act of l974, as
amended from time to time, and any rule or regulation issued thereunder.
"Eurocurrency Advance" means a Multicurrency Advance which bears
interest at the Eurocurrency Rate.
"Eurocurrency Base Rate" means, with respect to each Interest Period
pertaining to a Multicurrency Loan, the Eurocurrency Base Rate determined for
such Interest Period and the Available Foreign Currency in which such
Multicurrency Loan is denominated in the manner set forth in Schedule 2, as such
Schedule 2 is amended or modified from time to time in accordance with the
provisions of Schedule 2.
"Eurocurrency Loan" means a Multicurrency Loan which bears interest at
the Eurocurrency Rate.
"Eurocurrency Rate" means with respect to a Multicurrency Advance for
the relevant Interest Period, the sum of (a) the quotient of (i) the
Eurocurrency Base Rate applicable to such Interest Period, divided by (ii) one
minus the Reserve Requirement (expressed as a decimal) applicable to such
Interest Period, plus (b) the Applicable Margin. The Eurocurrency Rate shall be
rounded upwards to the next 1/100 of 1% if the rate is not such a multiple.
"Eurodollar Advance" means a Revolving Credit Advance which bears
interest at a Eurodollar Rate.
"Eurodollar Auction" means a solicitation of Competitive Bid Quotes
setting forth Competitive Bid Margins pursuant to Section 2.7.
"Eurodollar Base Rate" means, with respect to a Eurodollar Loan for the
relevant Interest Period, the rate determined by the Administrative Agent to be
the arithmetic average of the rates reported to the Administrative Agent by each
Domestic Reference Lender as the rate at which each Domestic Reference Lender
offers to place deposits in U.S. Dollars with first-class banks in the London
interbank market at approximately 11 a.m. (London time) two Business Days prior
to the first day of such Eurodollar Interest Period, in the approximate amount
of such Domestic Reference Lender's relevant Eurodollar Loan and having a
maturity approximately equal to such Eurodollar Interest Period. If any Domestic
Reference Lender fails to provide such quotation to the Administrative Agent,
then the Administrative Agent shall determine the Eurodollar Base Rate on the
basis of the quotations of the remaining Domestic Reference Lender(s).
"Eurodollar Bid Rate" means, with respect to a Loan made by a given
Lender for the relevant Interest Period, the sum of (a) the Eurodollar Base Rate
and (b) the Competitive Bid Margin offered by such Lender and accepted by the
Company pursuant to Section 2.8.6.
"Eurodollar Bid Rate Advance" means a Competitive Bid Advance which
bears interest at a Eurodollar Bid Rate.
"Eurodollar Bid Rate Loan" means a Competitive Bid Loan which bears
interest at a Eurodollar Bid Rate.
"Eurodollar Interest Period" means with respect to any Eurodollar Loan,
Eurodollar Bid Rate Loan or Multicurrency Loan:
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<PAGE> 15
(a) initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to such Eurodollar
Loan, Eurodollar Bid Rate Loan or Multicurrency Loan and ending one,
two, three, or six months thereafter, as selected by the relevant
Borrower in its notice of borrowing or notice of conversion, as the
case may be, given with respect thereto; and
(b) thereafter, each period commencing on the last day of the
next preceding Eurodollar Interest Period applicable to such Eurodollar
Loan, Eurodollar Bid Rate Loan or Multicurrency Loan and ending one,
two, three or six months thereafter, as selected by the relevant
Borrower by irrevocable notice to the Administrative Agent not less
than three Business Days prior to the last day of the then current
Eurodollar Interest Period with respect thereto;
provided that, all of the foregoing provisions relating to Eurodollar
Interest Periods are subject to the following:
(i) if any Eurodollar Interest Period pertaining to a
Eurodollar Loan, Eurodollar Bid Rate Loan or Multicurrency
Loan would otherwise end on a day that is not a Business Day,
such Eurodollar Interest Period shall be extended to the next
succeeding Business Day unless the result of such extension
would be to carry such Eurodollar Interest Period into another
calendar month in which event such Eurodollar Interest Period
shall end on the immediately preceding Business Day;
(ii) any Eurodollar Interest Period applicable to a
Eurodollar Loan, Eurodollar Bid Rate Loan or Multicurrency
Loan that would otherwise extend beyond the Facility
Termination Date shall end on the Facility Termination Date;
(iii) any Eurodollar Interest Period pertaining to a
Eurodollar Loan, Eurodollar Bid Rate Loan or Multicurrency
Loan that begins on the last Business Day of a calendar month
(or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Eurodollar
Interest Period) shall end on the last Business Day of a
calendar month; and
(iv) any Eurodollar Interest Period pertaining to a
Multicurrency Loan denominated in an Available Foreign
Currency being replaced by the currency of the European
Monetary Union that would otherwise extend beyond the date on
which such replacement becomes effective shall end on such
date.
"Eurodollar Loan" means a Revolving Credit Loan which bears interest at
a Eurodollar Rate.
"Eurodollar Rate" means, with respect to a Eurodollar Loan for the
relevant Eurodollar Interest Period, the sum of (a) the quotient of (i) the
Eurodollar Base Rate applicable to such Interest Period, divided by (ii) one
minus the Reserve Requirement (expressed as a decimal) applicable to such
Interest Period, plus (b) the Applicable Margin. The Eurodollar Rate shall be
rounded to the next higher multiple of 1/100 of 1% if the rate is not such a
multiple.
"Exchange Rate" means with respect to any non-U.S. Dollar currency on
any date, the rate at which such currency may be exchanged into U.S. Dollars, as
set forth on such date on the relevant Reuters currency page at or about 11:00
A.M., New York time, on such date. In the event that such rate does not appear
on any Reuters currency page, the "Exchange Rate" with respect to such non-U.S.
Dollar currency
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<PAGE> 16
shall be determined by reference to such other publicly available service for
displaying exchange rates as may be agreed upon by the Administrative Agent and
the Company or, in the absence of such agreement, such "Exchange Rate" shall
instead be the Administrative Agent's spot rate of exchange in the interbank
market where its foreign currency exchange operations in respect of such
non-U.S. Dollar currency are then being conducted, at or about 10:00 A.M., New
York time, on such date for the purchase of U.S. Dollars with such non-U.S.
Dollar currency, for delivery two Business Days later; provided, that if at the
time of any such determination, no such spot rate can reasonably be quoted, the
Administrative Agent may use any reasonable method as it deems applicable to
determine such rate, and such determination shall be conclusive absent manifest
error.
"Facility Letter of Credit" means a Letter of Credit issued by an
Issuer pursuant to Section 2.19.
"Facility Letter of Credit Obligations" means, as at the time of
determination thereof, all liabilities, whether actual or contingent, of a
Borrower with respect to the Facility Letters of Credit, including the sum of
(a) Reimbursement Obligations and, without duplication, (b) the aggregate
undrawn face amount of the outstanding Facility Letters of Credit.
"Facility Termination Date" means the earliest to occur of (a) August
21, 2002, (b) if the Spin-Off has not been completed by December 31, 1997 in all
material respects as described in the Form 10, December 31, 1997, (c) the date
on which Rockwell International sends notice that it is terminating the Rockwell
International Guaranty pursuant to Section 16 of the Rockwell International
Guaranty, or (d) the date on which the Commitments are terminated pursuant to
Article VIII.
"Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10:00 a.m. (New
York City time) on such day on such transactions received by the Administrative
Agent from three Federal funds brokers of recognized standing selected by the
Administrative Agent in its sole discretion.
"Financial Contract" of a Person means (a) any exchange-traded or
over-the-counter futures, forward, swap or option contract or other financial
instrument with similar characteristics or (b) any Rate Hedging Agreement.
"Fixed Rate" means the Eurodollar Rate, the Eurocurrency Rate, the
Eurodollar Bid Rate or the Absolute Rate.
"Fixed Rate Advance" means an Advance which bears interest at a Fixed
Rate.
"Fixed Rate Loan" means a Loan which bears interest at a Fixed Rate.
"Floating Rate" means, for any day, a rate per annum (based on a year
of 365 or 366 days as appropriate) equal to the Alternate Base Rate for such
day, in each case changing when and as the Alternate Base Rate changes.
"Floating Rate Advance" means a Revolving Credit Advance which bears
interest at the Floating Rate.
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<PAGE> 17
"Floating Rate Loan" means a Revolving Credit Loan which bears interest
at the Floating Rate.
"Foreign Subsidiary Borrower" means each Subsidiary of the Company
organized under the laws of a jurisdiction outside the United States listed as a
Foreign Subsidiary Borrower in Schedule 3 as amended from time to time in
accordance with Section 8.2.2.
"Foreign Subsidiary Opinion" means with respect to any Foreign
Subsidiary Borrower, a legal opinion of counsel to such Foreign Subsidiary
Borrower addressed to the Documentation Agent and the Lenders concluding that
such Foreign Subsidiary Borrower and the Loan Documents to which it is a party
substantially comply with the matters listed on Exhibit G, with such
assumptions, qualifications and deviations therefrom as the Documentation Agent
shall approve (such approval not to be unreasonably withheld).
"Form 10" is defined in Section 4.2.
"Funding Commitment Percentage" means at any date of determination
(after giving effect to the making and payment of any Loans made on such date
pursuant to Section 2.4), with respect to any Lender, that percentage which the
Available Revolving Credit Commitment of such Lender then constitutes of the
Aggregate Available Revolving Credit Commitments.
"Governmental Authority" means any nation or government, any state, or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guarantor" means each of the Company and, for as long as the Rockwell
International Guaranty is in effect, Rockwell International and collectively
means both of them.
"Indebtedness" of a Person means, without duplication, such Person's
(a) obligations for borrowed money, (b) obligations representing the deferred
purchase price of Property or services (other than accounts payable arising in
the ordinary course of such Person's business payable on terms customary in the
trade), (c) obligations, whether or not assumed, secured by Liens on property
now or hereafter owned or acquired by such Person, (d) obligations which are
evidenced by notes, acceptances, or other instruments (other than Financial
Contracts), to the extent of the amounts actually borrowed, due, payable or
drawn, as the case may be, (e) Capitalized Lease Obligations, (f) all
obligations in respect of Letters of Credit, whether drawn or undrawn,
contingent or otherwise, and (g) Contingent Obligations with respect to any of
the foregoing to the extent (and only to the extent) that (i) such Contingent
Obligation relates to other Indebtedness that is not consolidated Indebtedness
of the Company and its Subsidiaries and (ii) the other Indebtedness to which
such Contingent Obligation relates is outstanding and then only as to principal
or like amounts actually borrowed, due, payable or drawn, as the case may be.
"Interest Expenses" means, with respect to any period, the aggregate of
all interest expense reported by the Company and its Subsidiaries in accordance
with Agreement Accounting Principles during such period, net of any interest
income received by the Company and its Subsidiaries during such period from
Investments. As used in this definition, the term "interest" shall include,
without limitation, all interest, fees and costs payable with respect to the
obligations under this Agreement (other than fees and costs which may be
capitalized as transaction costs in accordance with Agreement Accounting
Principles), any discount in respect of sales of accounts receivable and/or
related contract rights and the interest portion
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<PAGE> 18
of Capitalized Lease payments during such period, all as determined in
accordance with Agreement Accounting Principles.
"Interest Period" means a Eurodollar Interest Period or an Absolute
Rate Interest Period.
"Investment" of a Person means any loan, advance (other than
commission, travel and similar advances to officers and employees made in the
ordinary course of business), extension of credit (other than accounts
receivable arising in the ordinary course of business on terms customary in the
trade and loans to employees in the ordinary course of business) or contribution
of capital by such Person; stocks, bonds, mutual funds, partnership interests,
notes, debentures or other securities owned by such Person; any deposit accounts
and certificate of deposits owned by such Person; and structured notes,
derivative financial instruments and other similar instruments or contracts
owned by such Person (other than Financial Contracts).
"Invitation for Competitive Bid Quotes" means an Invitation for
Competitive Bid Quotes substantially in the form of Exhibit I hereto, completed
and delivered by the Administrative Agent to the Lenders in accordance with
Section 2.7.3.
"Issuer" means (i) NBD or Morgan, as selected by a Borrower from time
to time, and (ii) any Lending Installation or Affiliate of NBD or Morgan as may
be agreed upon as the issuer for any Facility Letter of Credit pursuant to
Section 2.19.1 hereof.
"Joinder Agreement" means the Joinder Agreement to be entered into by
each Foreign Subsidiary Borrower subsequent to the date hereof pursuant to
Section 8.2.2, substantially in the form of Exhibit K hereto.
"Judgment Currency" is defined in Section 16.6.
"Lenders" means the lending institutions listed on the signature pages
of this Agreement and their respective successors and, to the extent permitted
by Section 13.3, assigns.
"Lending Installation" means, with respect to a Lender or the
Administrative Agent, any office, branch, subsidiary or affiliate of such Lender
or the Administrative Agent.
"Letter of Credit" of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable.
"Letter of Credit Collateral Account" is defined in Section 2.19.7.
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, the interest of a vendor or
lessor under any conditional sale, Capitalized Lease or other title retention
agreement).
"Loan" means, with respect to a Lender, such Lender's Revolving Credit
Loans, Competitive Bid Loans and Multicurrency Loans.
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"Loan Documents" means this Agreement, the Notes and the other
documents and agreements contemplated hereby and executed by any Borrower in
favor of the Administrative Agent or any Lender.
"Loans to be Converted" is defined in Section 12.3.
"London Banking Day" means any day on which banks in London are open
for general banking business, including dealings in foreign currency and
exchange.
"Margin Stock" means margin stock as defined in Regulations G, T, U or
X.
"Material Adverse Effect" means a material adverse effect on (i) the
business, Property, condition (financial or otherwise) or results of operations
of the Company and its Subsidiaries taken as a whole, or, so long as Rockwell
International is a Guarantor, of Rockwell International and its Subsidiaries
taken as a whole, (ii) the ability of the Company to pay the Obligations under
the Loan Documents, or (iii) the validity or enforceability of any of the Loan
Documents or the rights or remedies of the Agents or the Lenders thereunder.
"Moody's Bond Rating" means for any day, the rating of the Company's
senior long-term unsecured debt by (i) Moody's Investors Service, Inc.
("Moody's") in effect at 11:00 A.M., New York City time, on such day or (ii) if
Moody's shall cease to publish such a rating in respect of the Company, either
of Duff & Phelps Credit Rating Co. or Fitch Investors Service LLP, as determined
by the Administrative Agent and the Documentation Agent.
"Morgan" means Morgan Guaranty Trust Company of New York, in its
individual capacity as a Lender and not in its capacity as Administrative Agent.
"Multicurrency Advance" means a borrowing hereunder (or continuation or
a conversion thereof) consisting of the several Multicurrency Loans made on the
same Borrowing Date (or date of conversion or continuation) by the Lenders to a
Borrower of the same Type and for the same Interest Period.
"Multicurrency Commitment" means, as to any Multicurrency Lender at any
time, its obligation to make Multicurrency Loans to the Borrowers agreed to by
such Multicurrency Lender and the Company pursuant to Section 2.6.4 in an
aggregate amount in Dollars or in Available Foreign Currencies as designated on
Schedule 1 (or otherwise established pursuant to Section 13.3) of which the U.S.
Dollar Equivalent does not exceed at any time outstanding the amount set forth
opposite such Multicurrency Lender's name in Schedule 1 under the heading
"Multicurrency Commitment" or as otherwise established pursuant to Section 13.3,
as such amount may be reduced from time to time as provided in Section 2.6.3,
13.3 and the other applicable provisions hereof.
"Multicurrency Commitment Percentage" means as to any Designated
Multicurrency Lender and any Multicurrency Loan or Multicurrency Facility Letter
of Credit to any Borrower at any time, the percentage which such Designated
Multicurrency Lender's Multicurrency Commitment then constitutes of the
aggregate Multicurrency Commitments of all Designated Multicurrency Lenders with
respect to such Borrower (or, if the Multicurrency Commitments have terminated
or expired, the percentage which (a) the Aggregate Multicurrency Outstandings of
such Designated Multicurrency Lender at such time constitutes of (b) the
Aggregate Multicurrency Outstandings of all Designated Multicurrency Lenders
with respect to such Borrower at such time).
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"Multicurrency Facility Letter of Credit" means any Facility Letter of
Credit for the account of a Foreign Subsidiary Borrower.
"Multicurrency Facility Letter of Credit Obligations" means Facility
Letter of Credit Obligations with respect to Multicurrency Facility Letters of
Credit.
"Multicurrency Lender" means each Lender having an amount greater than
zero set forth opposite such Lender's name on Schedule 1 hereto under the
heading "Multicurrency Commitment"; provided, however, that upon written request
of the Company (given by notice to the Administrative Agent), each Multicurrency
Lender which has agreed to be a Designated Multicurrency Lender with respect to
any Borrower shall promptly cause a subsidiary, branch or affiliate of such
Multicurrency Lender legally authorized to make Multicurrency Loans to such
Borrower (a "Designated Office") to become a party to this Agreement as a
Multicurrency Lender with respect to such Foreign Subsidiary Borrower, in each
case if and to the extent required under applicable law to assure that
Non-Excluded Taxes are not required to be withheld or paid by such Borrower in
respect of Multicurrency Loans made to such Borrower and shall furnish to such
Borrower such forms, certifications, opinions and statements as may be
reasonably requested by such Borrower (and any material expense of such
Multicurrency Lender in connection with such forms, certifications, opinions and
statements shall be paid by such Borrower) to confirm that such Designated
Office is entitled to receive payments from such Borrower under this Agreement
without deduction or withholding of any Non-Excluded Taxes. The identification
of a Designated Office shall be effected by delivering a letter to the
Administrative Agent, the applicable Foreign Subsidiary Borrower and the Company
signed by such Multicurrency Lender and such Designated Office and referring to
this Agreement and naming such Designated Office and listing the address and
contact information for such Designated Office and the applicable Foreign
Subsidiary Borrower, whereupon such Designated Office shall, on behalf of such
Multicurrency Lender, fulfill such Multicurrency Lender's obligations and enjoy
such Multicurrency Lender's rights, as a Multicurrency Lender with respect to
Multicurrency Loans and Multicurrency Letters of Credit to such Foreign
Subsidiary Borrower, and the term "Multicurrency Lender" shall, when the context
requires, be deemed to refer to and include such Designated Office; provided,
however, that such designation shall not relieve any Multicurrency Lender of its
obligations under this Agreement, and in the event of any failure by the
Designated Office to make Multicurrency Loans to such Borrower (or to issue or
honor drawings on Multicurrency Facility Letters of Credit) in accordance with
the terms of this Agreement, such Multicurrency Lender shall make, or shall
cause another Designated Office of such Multicurrency Lender to make,
Multicurrency Loans to such Borrower (or to issue or honor drawings on
Multicurrency Facility Letters of Credit) in accordance with its Multicurrency
Commitment hereunder, in either case, only if and to the extent it can legally
and reasonably do so, pursuant to arrangements which enable payments in respect
of such Multicurrency Loans to be made without deduction or withholding of any
Non-Excluded Taxes and provided that doing so shall not impose on any such
Multicurrency Lender any additional costs or legal or regulatory burdens deemed
by such Multicurrency Lender in its reasonable judgment to be material.
"Multicurrency Loans" means, with respect to a Multicurrency Lender,
such Lender's loan made pursuant to Section 2.6.
"Multicurrency Reference Lenders" means Morgan, NBD and Deutsche Bank
AG, or any branch or affiliate designated by any of the foregoing.
"Multiemployer Plan" means a plan defined in Section 4001(a)(3) of
ERISA to which the Company or any member of the Controlled Group has an
obligation to contribute.
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"NBD" means NBD Bank, in its individual capacity as a Lender and not in
its capacity as Documentation Agent.
"Net Worth" means the consolidated shareholder's equity of the Company
and its Subsidiaries, including minority interests, calculated in accordance
with Agreement Accounting Principles, provided that the amount of the foreign
currency translation shall be deemed equal at all times to the amount described
in the pro forma financial statements included in the Form 10 for purposes of
determining Net Worth under this Agreement.
"Non-Excluded Taxes" is defined in Section 3.6.1.
"Non-Multicurrency Lender" means each Lender which is not a
Multicurrency Lender.
"Non-Available Foreign Currency Lender" means, with respect to any
Multicurrency Loan to any Borrower, each Lender which is not a Designated
Multicurrency Lender with respect to such Borrower pursuant to Section 2.6.
"Notes" means the collective reference to the Revolving Credit Notes
and the Competitive Bid Notes.
"Notice of Assignment" is defined in Section 13.3.1.
"Obligations" means collectively, the unpaid principal of and interest
on the Loans and all other obligations and liabilities of the Company and each
Foreign Subsidiary Borrower under this Agreement and the other Loan Documents
(including, without limitation, interest accruing at the then applicable rate
provided in this Agreement or any other applicable Loan Document after the
maturity of the Loans and interest accruing at the then applicable rate provided
in this Agreement or any other applicable Loan Document after the filing of any
petition in bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding, relating to the Company or any Foreign Subsidiary Borrower, as
the case may be, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding), whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which
may arise under, out of, or in connection with, this Agreement, the other Loan
Documents or any other document made, delivered or given in connection
therewith, in each case whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise (including, without
limitation, all fees and disbursements of counsel to either Agent or to the
Lenders that are required to be paid by any Borrower pursuant to the terms of
this Agreement or any other Loan Document).
"Participants" is defined in Section 13.2.1.
"Payment Date" means the last Business Day of each March, June,
September and December occurring after the date hereof, commencing September 30,
1997.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"Person" means any natural person, corporation, firm, joint venture,
limited liability company, partnership, association, enterprise, trust or other
entity or organization, or any government or political subdivision or any
agency, department or instrumentality thereof.
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"Plan" means an employee pension benefit plan which is covered by Title
IV of ERISA or subject to the minimum funding standards under Section 412 of the
Code as to which the Company or any member of the Controlled Group has any
obligation to contribute to on or after the Distribution Date.
"Property" of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets owned,
leased or operated by such Person.
"Purchasers" is defined in Section 13.3.1.
"Rate Hedging Agreement" means an agreement, device or arrangement
providing for payments which are related to fluctuations of interest rates,
exchange rates or forward rates, including, but not limited to,
dollar-denominated or cross-currency interest rate exchange agreements, forward
currency exchange agreements, interest rate cap or collar protection agreements,
forward rate currency or interest rate options, puts and warrants.
"Rate Hedging Obligations" of a Person means any and all obligations of
such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (a) any and all Rate
Hedging Agreements, and (b) any and all cancellations, buy backs, reversals,
terminations or assignments of any Rate Hedging Agreement.
"Reference Lenders" means the collective reference to the Domestic
Reference Lenders and the Multicurrency Reference Lenders.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor thereto
or other regulation or official interpretation of said Board of Governors
relating to reserve requirements applicable to member banks of the Federal
Reserve System.
"Regulation G" means Regulation G of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors.
"Regulation T" means Regulation T of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors.
"Regulation X" means Regulation X of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors.
"Reimbursement Obligations" means, at any time, the aggregate of the
obligations of the Borrowers to the Lenders and the Issuers in respect of all
unreimbursed payments or disbursements made by the Issuers and the Lenders under
or in respect of the Facility Letters of Credit.
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"Reportable Event" means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such section occurring after the
Distribution Date, with respect to a Plan, excluding, however, such events as to
which the PBGC by regulation waived the requirement of Section 4043(a) of ERISA
that it be notified within 30 days of the occurrence of such event, provided,
however, that a failure to meet the minimum funding standard of Section 412 of
the Code and of Section 302 of ERISA shall be a Reportable Event regardless of
the issuance of any such waiver of the notice requirement in accordance with
either Section 4043(a) of ERISA or Section 412(d) of the Code.
"Requested Multicurrency Loans" is defined in Section 2.4(a).
"Required Lenders" means (a) at any time prior to the termination of
the Revolving Credit Commitments, Lenders the Revolving Credit Commitment
Percentages of which aggregate at least 51%; and (b) at any time after the
termination of the Revolving Credit Commitments, Lenders whose Aggregate Total
Outstandings aggregate at least 51% of the Aggregate Total Outstandings of all
Lenders; provided that for purposes of this definition the Aggregate Total
Outstandings of each Lender shall be adjusted up or down so as to give effect to
any participations purchased or sold pursuant to Section 12.3.
"Requirement of Law" means as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its Property or to which such Person or
any of its Property is subject.
"Reserve Requirement" means, with respect to an Interest Period for
Eurodollar Loans or Eurocurrency Loans, the maximum aggregate reserve
requirement (including all basic, supplemental, marginal and other reserves)
under any regulations of the Board of Governors of the Federal Reserve System or
other Governmental Authority having jurisdiction with respect thereto dealing
with reserve requirements prescribed for eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D) maintained by a
member bank of such System.
"Revolving Credit Advance" means a borrowing hereunder (or continuation
or conversion thereof) consisting of the several Revolving Credit Loans made on
the same Borrowing Date (or date of conversion or continuation) by the Lenders
to the Company of the same Type and in the case of Fixed Rate Advances, for the
same Interest Period.
"Revolving Credit Commitment" means, as to any Lender at any time, its
obligation to make Revolving Credit Loans to the Company in an aggregate amount
not to exceed at any time outstanding the U.S. Dollar amount set forth opposite
such Lender's name in Schedule 1 under the heading "Revolving Credit Commitment"
or as otherwise established pursuant to Section 13.3, as such amount may be
reduced from time to time pursuant to Section 2.5, 13.3 and the other applicable
provisions hereof.
"Revolving Credit Committed Percentage" means as to any Lender at any
time, the percentage which such Lender's Revolving Credit Commitment then
constitutes of the aggregate Revolving Credit Commitments of all Lenders (or, if
the Revolving Credit Commitments have terminated or expired, the percentage
which (a) the Aggregate Revolving Credit Outstandings of such Lender at such
time then constitutes of (b) the Aggregate Revolving Credit Outstandings of all
Lenders at such time).
"Revolving Credit Loans" means, with respect to a Lender, such Lender's
loan made pursuant to Section 2.1.
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"Revolving Credit Note" is defined in Section 2.2.5.
"Rockwell International" means Rockwell International Corporation, a
Delaware corporation.
"Rockwell International Guaranty" means the guaranty in the form of
Exhibit L hereto, executed by Rockwell International in favor of the
Administrative Agent and the Lenders, as amended or modified from time to time.
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" within the meaning of Rule 1-02 of the Securities and
Exchange Commission's Regulation S-X.
"Single Employer Plan" means a Plan which is maintained on or after the
Distribution Date by the Company or any member of the Controlled Group for
employees of the Company or any member of the Controlled Group.
"S&P Bond Rating" means for any day, the rating of the Company's senior
long term unsecured debt by (a) Standard & Poor's Rating Group ("S&P") in effect
at 11:00 A.M., New York City time, on such day or (b) if S&P shall cease to
publish such a rating in respect of the Company, either Duff & Phelps Credit
Rating Co. or Fitch Investors Service LLP, as determined by the Administrative
Agent and the Documentation Agent.
"Spin-Off" means the transfer to the Company of substantially all of
the assets, liabilities and operations which comprise Rockwell International's
automotive business, and the dividending of the stock in the Company to the
shareholders of Rockwell International in a tax free distribution, as described
in the Form 10.
"Subsidiary" of a Person means (a) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(b) any partnership, limited liability company, association, joint venture or
similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.
Unless otherwise expressly provided, all references herein to a "Subsidiary"
shall mean a Subsidiary of the Company.
"Substantial Portion" means, with respect to the Property of the
Company and its Subsidiaries, Property which (a) represents more than 15% of the
consolidated assets of the Company and its Subsidiaries as would be shown in the
consolidated financial statements of the Company and its Subsidiaries as at the
beginning of the twelve-month period ending with the month in which such
determination is made, or (b) is responsible for more than 15% of the
consolidated net sales or of the consolidated net income of the Company and its
Subsidiaries as reflected in the financial statements referred to in clause (a)
above.
"Total Debt" means, as of the end of any fiscal quarter of the Company,
all Indebtedness of the Company and its Subsidiaries as at such date, determined
on a consolidated basis.
"Transferee" is defined in Section 13.4.
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"Type" means, with respect to any Advance, its nature as a Floating
Rate Advance, Eurocurrency Advance, Eurodollar Advance or Competitive Bid
Advance.
"Unfunded Liabilities" means the amount (if any) by which the actuarial
present value of all benefit liabilities under all Single Employer Plans exceeds
the fair market value of all such Plan assets allocable to such benefit
liabilities, all determined as of the then most recent valuation date for such
Plans using FASB actuarial assumptions for single employer plan terminations.
"Unmatured Default" means an event which but for the lapse of time or
the giving of notice, or both, would constitute a Default.
"U.S. Dollar Equivalent" means with respect to an amount denominated in
any currency other than U.S. Dollars, the equivalent in U.S. Dollars of such
amount determined at the Exchange Rate on the date of determination of such
equivalent. In making any determination of the U.S. Dollar Equivalent for
purposes of calculating the amount of Loans to be borrowed from the respective
Lenders on any Borrowing Date, the Administrative Agent shall use the relevant
Exchange Rate in effect on the date on which the interest rate for such Loans is
determined pursuant to the provisions of this Agreement and the other Loan
Documents.
"U.S. Facility Letter of Credit" means any Letter of Credit for the
account of the Company.
"U.S. Facility Letter of Credit Obligations" means Facility Letter of
Credit Obligations with respect to U.S. Facility Letters of Credit.
"Wholly-Owned Subsidiary" of a Person means (a) any Subsidiary all of
the outstanding voting securities of which shall at the time be owned or
controlled, directly or indirectly, by such Person or one or more Wholly-Owned
Subsidiaries of such Person, or by such Person and one or more Wholly-Owned
Subsidiaries of such Person, or (b) any partnership, limited liability company,
association, joint venture or similar business organization 100% of the
ownership interests having ordinary voting power of which shall at the time be
so owned or controlled.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms.
ARTICLE II
THE CREDITS
2.1 Commitments. From and including the date of this Agreement and
prior to the Facility Termination Date, each Lender severally agrees, on the
terms and conditions set forth in this Agreement, to make Revolving Credit Loans
to the Company from time to time so long as after giving effect thereto and to
any concurrent repayment of Loans (i) the Available Revolving Credit Commitment
of each Lender is greater than or equal to zero and (ii) the Aggregate Total
Outstandings of all Lenders do not exceed the Aggregate Revolving Credit
Commitments. Each Lender may also, in its sole discretion, make bids to make
Competitive Bid Loans in U.S. Dollars in accordance with Section 2.8 provided
that at no time may the Aggregate Total Outstandings exceed the Aggregate
Revolving Credit Commitment. Subject to the terms of this Agreement, the Company
may borrow, repay and reborrow at any time prior to the Facility
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Termination Date. The Revolving Credit Loans may be Floating Rate Loans or
Eurodollar Loans, or a combination thereof selected in accordance with Section
2.3 and 2.10. The Commitments to lend hereunder shall expire on the Facility
Termination Date.
2.2 Repayment of Revolving Credit Loans; Evidence of Debt.
2.2.1 The Company hereby unconditionally promises to pay to the
Administrative Agent for the account of each Lender in U.S. Dollars the then
unpaid principal amount of each Revolving Credit Loan of such Lender on the
Facility Termination Date and on such other dates and in such other amounts as
may be required from time to time pursuant to this Agreement. The Company hereby
further agrees to pay to the Administrative Agent for the account of each Lender
interest in U.S. Dollars on the unpaid principal amount of the Revolving Credit
Loans from time to time outstanding until payment thereof in full at the rates
per annum, and on the dates, set forth in Section 2.11.
2.2.2 Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing indebtedness of the Company to such Lender
resulting from each Revolving Credit Loan of such Lender from time to time,
including the amounts of principal and interest payable thereon and paid to such
Lender from time to time under this Agreement.
2.2.3 The Administrative Agent shall maintain an account in its books
and records with a subaccount for each Lender, in which shall be recorded (a)
the amount of each Revolving Credit Loan made hereunder, the Type thereof and
each Interest Period applicable thereto, (b) the amount of any principal or
interest due and payable or to become due and payable from the Company to each
Lender hereunder in respect of the Revolving Credit Loans and (c) both the
amount of any sum received by the Administrative Agent hereunder from the
Company in respect of the Revolving Credit Loans and each Lender's share
thereof.
2.2.4 The books and records of the Administrative Agent and of each
Lender maintained pursuant to Section 2.2.2 and 2.2.3 shall, to the extent
permitted by applicable law, be prima facie evidence of the existence and
amounts of the obligations of the Company therein recorded; provided, however,
that the failure of any Lender or the Administrative Agent to maintain any such
books and records or any error therein, shall not in any manner affect the
obligation of the Company to repay (with applicable interest) the Revolving
Credit Loans made to the Company by such Lender in accordance with the terms of
this Agreement.
2.2.5 The Company agrees that, upon the request to the Administrative
Agent by any Lender, the Company will execute and deliver to such Lender a
promissory note of the Company evidencing the Revolving Credit Loans of such
Lender, substantially in the form of Exhibit A-1 with appropriate insertions as
to date and principal amount (each, a "Revolving Credit Note"); provided, that
the delivery of such Revolving Credit Notes shall not be a condition precedent
to the Closing Date.
2.3 Procedures for Revolving Credit Borrowing. The Company may borrow
under the Revolving Credit Commitments from time to time prior to the Facility
Termination Date on any Business Day, provided that the Company shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 10:00 A.M., New York City time) (a) three Business
Days prior to the requested Borrowing Date, if all or any part of the requested
Revolving Credit Loans are to be initially Eurodollar Loans, or (b) on the
requested Borrowing Date, otherwise, specifying in each case (i) the amount to
be borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing is
to be of Eurodollar Loans, Floating Rate Loans or a combination thereof and (iv)
if the borrowing is to be entirely
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or partly of Eurodollar Loans, the amount of such Type of Loan and the length of
the initial Interest Periods therefor. Each borrowing under the Revolving Credit
Commitments (other than a borrowing under Section 2.4) shall be in an amount
equal to (A) in the case of Floating Rate Loans, $5,000,000 or a whole multiple
of $5,000,000 in excess thereof (or, if the then Aggregate Available Revolving
Credit Commitments are less than $5,000,000, such lesser amount) and (B) in the
case of Eurodollar Loans, $10,000,000 or a whole multiple of $5,000,000 in
excess thereof. Upon receipt of any such notice from the Company, the
Administrative Agent shall promptly notify each Lender thereof. Not later than
11:00 A.M., New York City time, on each requested Borrowing Date each Lender
shall make an amount equal to its Funding Commitment Percentage of the principal
amount of the Revolving Credit Loans requested to be made on such Borrowing Date
available to the Administrative Agent at its New York office specified in
Section 14.1 in U.S. Dollars and in immediately available funds. Except as
otherwise provided in Section 2.4, the Administrative Agent shall on such date
credit the account of the Company on the books of such office with the aggregate
of the amounts made available to the Administrative Agent by the Lenders and in
like funds as received by the Administrative Agent.
2.4 Borrowing of Revolving Credit Loans and Refunding of Loans. (a) If
on any Borrowing Date on which a Borrower has requested any Designated
Multicurrency Lenders to make Multicurrency Loans to such Borrower (the
"Requested Multicurrency Loans"), (i) the aggregate principal amount of the
Requested Multicurrency Loans to such Borrower exceeds the Aggregate Available
Multicurrency Commitments of all such Designated Multicurrency Lenders with
respect to such Borrower on such Borrowing Date (before giving effect to the
making and payment of any Loans required to be made pursuant to this Section 2.4
on such Borrowing Date) and (ii) the U.S. Dollar Equivalent of the amount of
such excess is less than or equal to the Aggregate Available Revolving Credit
Commitments of all such Designated Multicurrency Lenders (before giving effect
to the making and payment of any Loans pursuant to this Section 2.4 on such
Borrowing Date), each Non-Available Foreign Currency Lender with respect to such
Borrower shall make a Committed Loan to the Company on such Borrowing Date, and
the proceeds of such Committed Loans shall be simultaneously applied to repay
outstanding Committed Loans of such Designated Multicurrency Lenders, which
Loans may be Loans denominated in U.S. Dollars or Loans denominated in an
Available Foreign Currency other than such Available Foreign Currency of such
Requested Multicurrency Loans, as determined by the Administrative Agent, in
each case in amounts such that, after giving effect to (1) such borrowings and
repayments and (2) the borrowing from such Designated Multicurrency Lenders of
the Requested Multicurrency Loans, the Committed Outstandings Percentage of each
Lender will equal (as nearly as possible) its Revolving Credit Commitment
Percentage. To effect such borrowings and repayments, (x) not later than 11:00
A.M., New York City time, on such Borrowing Date, the proceeds of such Committed
Loans shall be made available by each such Non-Available Foreign Currency Lender
to the Administrative Agent at its office specified in Section 14.1 in
immediately available funds in the appropriate currency and the Administrative
Agent shall apply the proceeds of such Committed Loans toward repayment of
outstanding Committed Loans of such Designated Multicurrency Lenders and (y)
concurrently with the repayment of such Loans on such Borrowing Date, (1) such
Designated Multicurrency Lenders shall, in accordance with the applicable
provisions hereof, make the Requested Multicurrency Loans in an aggregate amount
equal to the amount so requested by such Borrower (but not in any event greater
than the Aggregate Available Multicurrency Commitments after giving effect to
the making of such repayment of any Loans on such Borrowing Date) and (2) the
relevant Borrower shall pay to the Administrative Agent for the account of the
Lenders whose Loans to such Borrower are repaid on such Borrowing Date pursuant
to this Section 2.4 all interest accrued on the amounts repaid to the date of
repayment, together with any amounts payable pursuant to Section 3.4 in
connection with such repayment.
(b) If any borrowing of Committed Loans is required pursuant to this
Section 2.4, the Company shall notify the Administrative Agent in the manner
provided for Committed Loans in Section
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2.3, except that the minimum borrowing amounts set forth in subsection 2.3 shall
not be applicable with respect to Floating Rate Loans to the extent that such
minimum borrowing amounts exceed the amounts of Revolving Credit Loans required
to be made pursuant to this Section 2.4.
2.5 Termination or Reduction of Revolving Credit Commitment. The
Company may permanently reduce the Revolving Credit Commitments, in whole or in
part, ratably among the Lenders in integral multiples of $10,000,000, upon at
least three Business Days' written notice to the Administrative Agent, which
notice shall specify the amount of any such reduction, provided, however, that
the aggregate amount of the Revolving Credit Commitments may not be reduced
below the aggregate principal amount of the outstanding Revolving Credit Loans,
Multicurrency Loans and Facility Letters of Credit, and the reduction of any
Lender's Revolving Credit Commitment shall also reduce such Lender's
Multicurrency Commitment by a like amount. In addition, all accrued facility
fees shall be payable on the effective date of any termination of the Revolving
Credit Commitments.
2.6 Multicurrency Commitments. Subject to the terms and conditions
hereof, each Designated Multicurrency Lender with respect to any Borrower
severally agrees to make revolving credit loans (each a "Multicurrency Loan") in
any Available Foreign Currency or U.S. Dollars, as the case may be, to such
Borrower from time to time prior to the Facility Termination Date so long as
after giving effect thereto and any concurrent repayment or prepayment of Loans
(a) the Available Multicurrency Commitment of each Multicurrency Lender is
greater than or equal to zero, (b) the Aggregate Multicurrency Outstandings of
all Lenders does not exceed an amount of which the U.S. Dollar Equivalent (as at
the date of such Multicurrency Loan) is $500,000,000 and (c) the Aggregate Total
Outstandings of all Lenders do not exceed the Aggregate Revolving Credit
Commitments. Prior to the Facility Termination Date, any Borrower may use the
Multicurrency Commitments by borrowing, repaying the Multicurrency Loans in
whole or in part, and reborrowing, all in accordance with the terms and
conditions hereof.
2.6.1 Repayment of Multicurrency Loans, Evidence of Debt. (a) Each
Borrower hereby unconditionally promises to pay to the Administrative Agent (at
a funding or payment office as may be specified by the Administrative Agent, in
consultation with the Company) for the account of each Designated Multicurrency
Lender (or, at the option of the Administrative Agent, in consultation with the
Company, directly to each relevant Designated Multicurrency Lender with prior
notice to such Designated Multicurrency Lender), in the applicable Available
Foreign Currency or U.S. Dollars, as the case may be, for such Multicurrency
Loan, the then unpaid principal amount of each Multicurrency Loan of such
Designated Multicurrency Lender to such Borrower on the Facility Termination
Date and on such other date(s) and in such other amounts as may be required from
time to time pursuant to this Agreement. Each Borrower hereby further agrees to
pay interest in the applicable Available Foreign Currency or U.S. Dollars, as
the case may be, on the unpaid principal amount of the Multicurrency Loans
advanced to it and from time to time outstanding until payment thereof in full
at the rates per annum, and on the dates, set forth in Section 2.11.
(b) Each Multicurrency Lender shall maintain in accordance with its
usual practice an account or accounts evidencing indebtedness of each Borrower
to such Multicurrency Lender resulting from each Multicurrency Loan of such
Multicurrency Lender from time to time, including the amounts of principal and
interest payable thereon and paid to such Multicurrency Lender from time to time
under this Agreement.
(c) The Administrative Agent shall maintain an account in its books
and records with a subaccount therein for each Multicurrency Lender, in which
shall be recorded (i) the amount of each Multicurrency Loan made hereunder, (ii)
the amount of any principal or interest due and payable or to
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become due and payable from each Borrower to each Multicurrency Lender hereunder
in respect of the Multicurrency Loans and (iii) both the amount of any sum
received by the Administrative Agent hereunder from each Borrower in respect of
the Multicurrency Loans and each Multicurrency Lender's share thereof.
(d) The entries made on the Administrative Agent's books and records
and the accounts of each Multicurrency Lender maintained pursuant to Section
2.6.2 shall, to the extent permitted by applicable law, be prima facie evidence
of the existence and amounts of the obligations of each Borrower therein
recorded; provided, however, that the failure of any Multicurrency Lender or the
Administrative Agent to maintain any such account, or any error therein, shall
not in any manner affect the obligation of such Borrower to repay (with
applicable interest) the Multicurrency Loans made to such Borrower by such
Multicurrency Lender in accordance with the terms of this Agreement.
(e) The Administrative Agent agrees, in consultation with the Company
and to the extent it may lawfully do so, to designate a subsidiary, branch or
affiliate of the Administrative Agent to act as the administrative agent in
connection with any Multicurrency Loan (including as a funding or payment
office), to the extent required under applicable law to assure that Non-Excluded
Taxes are not required to be withheld or paid by any Borrower in respect of
Multicurrency Loans made to such Borrower and shall furnish to the Company such
forms, certifications, opinions and statements as may be reasonably requested by
the Company (and any material expense of the Administrative Agent in connection
with such forms, certifications, opinions and statements shall be paid by the
Company) to confirm that such subsidiary, branch or affiliate is entitled to
fund Multicurrency Loans and receive payments in respect of Multicurrency Loans,
for itself and on behalf of any Designated Multicurrency Lender, without
deduction or withholding of any Non-Excluded Taxes. Any such subsidiary, branch
or affiliate designated pursuant to this section shall for all such purposes be
deemed to be the Administrative Agent as such term is used in this Agreement.
2.6.2 Procedure for Multicurrency Borrowing. Any Borrower may request
the applicable Designated Multicurrency Lenders to make Multicurrency Loans
during the Revolving Credit Commitment Period on any Business Day in accordance
with the terms of this Agreement; provided that such Borrower shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 10:00 A.M., New York time, five Business Days
prior to the requested Borrowing Date) specifying in each case (i) the amount
and currency to be borrowed, (ii) the requested Borrowing Date and (iii) the
length of the initial Interest Period therefor. Each borrowing under the
Multicurrency Commitments shall be in an amount in U.S. Dollars equal to, or an
amount in an Available Foreign Currency of which the U.S. Dollar Equivalent is
equal to, at least $5,000,000 (or, if the then Aggregate Available Multicurrency
Commitments are less than $5,000,000, such lesser amount). Upon receipt of any
such notice from any Borrower, the Administrative Agent shall promptly notify
each Designated Multicurrency Lender with respect to such Borrower. Not later
than 2:00 P.M., London time, on the requested Borrowing Date, each such
Designated Multicurrency Lender shall make an amount equal to its Multicurrency
Commitment Percentage of the principal amount of Multicurrency Loans requested
to be made on such Borrowing Date available to the Administrative Agent at the
Administrative Agent's funding office for such Borrower specified by the
Administrative Agent from time to time by notice to such Designated
Multicurrency Lenders and in immediately available or other same day funds
customarily used for settlement in such Available Foreign Currency. The amounts
made available by each such Designated Multicurrency Lender will then be made
available to the relevant Borrower at the funding office for such Borrower and
in like funds as received by the Administrative Agent.
2.6.3 Termination or Reduction of Multicurrency Commitments. The
Company shall have the right, upon not less than three Business Days' notice to
the Administrative Agent, to terminate the
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Multicurrency Commitments or, from time to time, to reduce the amount of the
Multicurrency Commitments; provided that no such termination or reduction shall
be permitted if, after giving effect thereto and to any prepayments of the Loans
made on the effective date thereof, the Available Multicurrency Commitment of
any Multicurrency Lender would be less than zero. Any such reduction shall be in
an amount equal to $5,000,000 or a whole multiple of $1,000,000 in excess
thereof and shall reduce permanently the Multicurrency Commitments then in
effect.
2.6.4 Designated Multicurrency Lenders. Each Multicurrency Lender
designated by the Company in writing to the Administrative Agent as a Designated
Multicurrency Lender with respect to any Borrower shall be deemed a Designated
Multicurrency Lender with respect to such Borrower when such designation by the
Company is accepted in writing to the Administrative Agent by such proposed
Designated Multicurrency Lender in its discretion. Such designation for any
Designated Multicurrency Lender may be revoked at any time by mutual agreement
between such Designated Multicurrency Lender and the Company.
2.7 Competitive Bid Loans
2.7.1 Competitive Bid Option. In addition to Revolving Credit Advances
pursuant to Section 2.1, but subject to the terms and conditions of this
Agreement (including, without limitation, the limitation set forth in Section
2.1) as to the maximum aggregate principal amount of all outstanding Revolving
Credit Advances hereunder, the Company may, as set forth in this Section 2.7,
request the Lenders, prior to the Facility Termination Date, to make offers to
make Competitive Bid Advances to the Company. Each Lender may, but shall have no
obligation to, make such offers and the Company may, but shall have no
obligation to, accept any such offers in the manner set forth in this Section
2.7.
2.7.2 Competitive Bid Quote Request. When the Company wishes to request
offers to make Competitive Bid Loans under Section 2.7.1, it shall transmit to
the Administrative Agent by telex or telecopy a Competitive Bid Quote Request so
as to be received no later than (i) 10:00 a.m. (New York City time) at least
five Business Days prior to the Borrowing Date proposed therein, in the case of
a Eurodollar Auction or (ii) 10:00 a.m. (New York City time) at least one
Business Day prior to the Borrowing Date proposed therein, in the case of an
Absolute Rate Auction, and in each case specifying:
(a) the proposed Borrowing Date, which shall be a Business Day,
for the proposed Competitive Bid Advance;
(b) the aggregate principal amount of such Competitive Bid
Advance, which shall be $5,000,000 or a larger multiple of
$1,000,000;
(c) whether the Competitive Bid Quotes requested are to set
forth a Competitive Bid Margin or an Absolute Rate, or
both; and
(d) the Interest Period applicable thereto (which may not end
after the Facility Termination Date).
The Company may request offers to make Competitive Bid Loans for more than one
Interest Period and for a Eurodollar Auction and an Absolute Rate Auction in a
single Competitive Bid Quote Request. No Competitive Bid Quote Request shall be
given within three Business Days (or upon reasonable prior notice to the
Lenders, such other number of days as the Company and the Administrative Agent
may agree) of any other Competitive Bid Quote Request. Each Competitive Bid
Quote Request shall be in a minimum
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amount of $5,000,000 (and in integral multiples of $1,000,000 in excess
thereof). A Competitive Bid Quote Request that does not conform substantially to
the format of Exhibit J hereto (other than in respect of the Company's name)
shall be rejected, and the Administrative Agent shall promptly notify the
Company of such rejection by telex or telecopy.
2.7.3 Invitation for Competitive Bid Quotes. Promptly and in any event
before 12:00 p.m. (New York City time) on the same Business Day of receipt of a
Competitive Bid Quote Request that is not rejected pursuant to Section 2.7.2,
the Administrative Agent shall send to each of the Lenders by telex or telecopy
an Invitation for Competitive Bid Quotes which shall constitute an invitation by
the Company to each Lender to submit Competitive Bid Quotes offering to make the
Competitive Bid Loans to which such Competitive Bid Quote Request relates in
accordance with Section 2.7.
2.7.4 Submission and Contents of Competitive Bid Quotes. (i) Each
Lender may, in its sole discretion, submit a Competitive Bid Quote containing an
offer or offers to make Competitive Bid Loans in response to any Invitation for
Competitive Bid Quotes. Each Competitive Bid Quote must comply with the
requirements of this Section 2.7.4 and must be submitted to the Administrative
Agent by telex or telecopy at its offices specified in or pursuant to Article
XIV not later than (a) (I) 1:45 p.m. (New York City time) in the case of Morgan
and (II) 2:00 p.m. (New York City time) in the case of each other Lender, at
least four Business Days prior to the proposed Borrowing Date, in the case of a
Eurodollar Auction or (b) (I) 8:45 a.m. (New York City time) in the case of
Morgan and (II) 9:00 a.m. (New York City time) in the case of each other Lender
on the proposed Borrowing Date, in the case of an Absolute Rate Auction (or, in
either case upon reasonable prior notice to the Lenders, such other time and
date as the Company and the Administrative Agent may agree, provided that Morgan
shall always be required to submit its Competitive Bid Quotes not less than
fifteen minutes prior to the other Lenders). Subject to Articles IV and VIII,
any Competitive Bid Quote so made shall be irrevocable except with the written
consent of the Administrative Agent given on the instructions of the Company.
(ii) Each Competitive Bid Quote shall in any case specify:
(a) the proposed Borrowing Date, which shall be the same as
that set forth in the applicable Invitation for Competitive Bid Quotes;
(b) the principal amount of the Competitive Bid Loan for which
each such offer is being made, which principal amount (1) may be
greater than, less than or equal to the Commitment of the quoting
Lender, (2) must be at least $5,000,000 and an integral multiple of
$1,000,000 in excess thereof, and (3) may not exceed the principal
amount of Competitive Bid Loans for which offers were requested;
(c) in the case of a Eurodollar Auction, the Competitive Bid
Margin offered for each such Competitive Bid Loan, expressed as a
percentage (specified to the nearest 1/10,000th of 1%);
(d) the minimum or maximum amount, if any, of the Competitive
Bid Loan which may be accepted by the Company and/or the limit, if any,
as to the aggregate principal amount of the Competitive Bid Loans from
such Lender which may be accepted by the Company;
(e) in the case of an Absolute Rate Auction, the Absolute Rate
offered for each such Competitive Bid Loan, expressed as a percentage
(specified to the nearest 1/10,000th of 1%);
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(f) the applicable Interest Period (which shall be the same as
that set forth in the applicable Invitation for Competitive Bid
Quotes); and
(g) the identity of the quoting Lender.
(iii) The Administrative Agent shall reject any Competitive Bid Quote
that:
(a) is not substantially in the form of Exhibit H hereto or
does not specify all of the information required by Section 2.7.4;
(b) contains qualifying, conditional or similar language,
other than any such language contained in Exhibit H hereto;
(c) proposes terms other than or in addition to those set
forth in the applicable Invitation for Competitive Bid Quotes; or
(d) arrives after the time set forth in Section 2.7.4.
If any Competitive Bid Quote shall be rejected pursuant to this Section 2.7.4,
then the Administrative Agent shall notify the relevant Lender of such rejection
as soon as practical.
2.7.5 Notice to the Borrower. The Administrative Agent shall promptly
notify the Company of the terms (i) of any Competitive Bid Quote submitted by a
Lender that is in accordance with Section 2.7.4 and (ii) of any Competitive Bid
Quote that is in accordance with Section 2.7.4 and amends, modifies or is
otherwise inconsistent with a previous Competitive Bid Quote submitted by such
Lender with respect to the same Competitive Bid Quote Request. Any such
subsequent Competitive Bid Quote shall be disregarded by the Administrative
Agent unless such subsequent Competitive Bid Quote specifically states that it
is submitted solely to correct a manifest error in such former Competitive Bid
Quote. The Administrative Agent's notice to the Company shall specify the
aggregate principal amount of Competitive Bid Loans for which offers have been
received for each Interest Period specified in the related Competitive Bid Quote
Request and the respective principal amounts and Competitive Bid Margins or
Absolute Rates, as the case may be, so offered.
2.7.6 Acceptance and Notice by the Company. Subject to the receipt of
the notice from the Administrative Agent referred to in Section 2.7.5, not later
than (i) 10:00 a.m. (New York City time) at least three Business Days prior to
the proposed Borrowing Date, in the case of a Eurodollar Auction or (ii) 10:00
a.m. (New York City time) on the proposed Borrowing Date, in the case of an
Absolute Rate Auction, the Company shall notify the Administrative Agent of its
acceptance or rejection of the offers so notified to it pursuant to Section
2.7.5; provided, however, that the failure by the Company to give such notice to
the Administrative Agent shall be deemed to be a rejection of all such offers.
In the case of acceptance, such notice (a "Competitive Bid Borrowing Notice")
shall specify the aggregate principal amount of offers for each Interest Period
that are accepted. The Company may accept or reject any Competitive Bid Quote in
whole or in part (subject to the terms of Section 2.7.4(ii)(d)); provided that:
(a) the aggregate principal amount of each Competitive Bid
Advance may not exceed the applicable amount set forth in the related
Competitive Bid Quote Request;
(b) acceptance of offers may only be made on the basis of
ascending Competitive Bid Margins or Absolute Rates, as the case may
be;
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(c) the Company may not accept any offer of the type described
in Section 2.7.4(iii) or that otherwise fails to comply with the
requirements of this Agreement for the purpose of obtaining a
Competitive Bid Loan under this Agreement; and
(d) the principal amount of each Competitive Bid Advance must
be $5,000,000 or a larger multiple of $1,000,000.
2.7.7 Allocation by the Administrative Agent. If offers are made by two
or more Lenders with the same Competitive Bid Margins or Absolute Rates, as the
case may be, for a greater aggregate principal amount than the amount in respect
of which offers are permitted to be accepted for the related Interest Period,
the principal amount of Competitive Bid Loans in respect of which such offers
are accepted shall be allocated by the Administrative Agent among such Lenders
as nearly as possible (in such multiples, not greater than $ 1,000,000, as the
Administrative Agent may deem appropriate) in proportion to the aggregate
principal amount of such offers; provided, however, that no Lender shall be
allocated a portion of any Competitive Bid Advance which is less than the
minimum amount which such Lender has indicated that it is willing to accept.
Allocations by the Administrative Agent of the amounts of Competitive Bid Loans
shall be conclusive in the absence of manifest error. The Administrative Agent
shall promptly, but in any event on the same Business Day in the case of
Eurodollar Bid Rate Advances, and by 11:00 a.m. (New York City time) on the same
Business Day in the case of Absolute Rate Advances, notify each Lender of its
receipt of a Competitive Bid Borrowing Notice and the aggregate principal amount
of such Competitive Bid Advance allocated to each participating Lender.
2.7.8 Administration Fees. The Company hereby agrees to pay to the
Administrative Agent, for its sole account, administration fees for Competitive
Bid Quote Requests in such amounts as are from time to time agreed upon by the
Company and the Administrative Agent.
2.7.9 Evidence of Competitive Bid Loans. Each Lender shall maintain in
accordance with its usual practice an account or accounts evidencing
indebtedness of the Company to such Lender resulting from each Competitive Bid
Loan of such Lender from time to time, including the amounts of principal and
interest payable thereon and paid to such Lender from time to time under this
Agreement.
The Administrative Agent shall maintain on its books and records, with
a subaccount for each Lender, in which books and records shall be recorded (i)
the amount of each Competitive Bid Loan made hereunder, and each Interest Period
applicable thereto, (ii) the amount of any principal or interest due and payable
or to become due and payable from the Company to each Lender hereunder in
respect of its Competitive Bid Loans and (iii) the amount of any sum received by
the Administrative Agent hereunder from the Company in respect of each
Competitive Bid Loan of such Lender and each applicable Lender's share thereof.
The books and records of the Administrative Agent and of each Lender
maintained pursuant to this Section shall, to the extent permitted by applicable
law, be prima facie evidence of the existence and amounts of the obligations of
the Company therein recorded; provided, however, that the failure of any Lender
or the Administrative Agent to maintain any such books and records or any error
therein, shall not in any manner affect the obligation of the Company to repay
(with applicable interest) the Competitive Bid Loans made to the Company by such
Lender in accordance with the terms of this Agreement.
The Company agrees that, upon the request to the Administrative Agent
by any Lender, the Company will execute and deliver to such Lender a promissory
note of the Company evidencing the
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Competitive Bid Loans of such Lender, substantially in the form of Exhibit A-2
with appropriate insertions as to date and principal amount (each, a
"Competitive Bid Note"); provided, that the delivery of such Competitive Bid
Notes shall not be a condition precedent to the Closing Date.
2.8 Facility and Agent Fees. (a) The Company agrees to pay to the
Administrative Agent for the account of each Lender a facility fee at the rate
per annum set forth in the Pricing Schedule on Exhibit B attached hereto, on the
average daily amount of such Lender's Revolving Credit Commitment, whether used
or unused, from and including the Effective Date to but excluding the Facility
Termination Date, payable on each Payment Date hereafter and on the Facility
Termination Date.
(b) The Company agrees to pay to the Administrative Agent for the
account of each Lender an additional facility fee at the rate per annum equal to
0.05%, on the average daily amount of such Lender's Revolving Credit Commitment,
whether used or unused, from the Closing Date to but excluding the date the
initial Advance is made, payable on each Payment Date hereafter and on the date
the initial Advance is made.
(c) The Company agrees to pay to the Administrative Agent and the
Documentation Agent, in each case for their own account, such other fees as
agreed to between the Company and the Administrative Agent and between the
Company and the Documentation Agent.
2.9 Optional and Mandatory Principal Payments on All Loans.
2.9.1 The Company may at any time and from time to time prepay Floating
Rate Loans, in whole or in part, without penalty or premium, upon at least one
Business Day's irrevocable notice to the Administrative Agent, specifying the
date and amount of prepayment. If any such notice is given, the amount specified
in such notice shall be due and payable on the date specified therein. Partial
prepayment of Floating Rate Loans shall be in a minimum aggregate amount of
$5,000,000 or any integral multiple of $1,000,000 in excess thereof.
2.9.2 Each Borrower may at any time and from time to time prepay,
without premium or penalty but upon payment of any amount payable pursuant to
Section 3.4, its Eurodollar Loans and its Multicurrency Loans in whole or in
part, upon at least three Business Days' irrevocable notice to the
Administrative Agent specifying the date and amount of prepayment. Partial
prepayments of Multicurrency Loans shall be in an aggregate principal amount of
which the U.S. Dollar Equivalent is at least $5,000,000 or any integral multiple
of $1,000,000 in excess thereof, or such lesser principal amount as may equal
the outstanding Multicurrency Loans.
2.9.3 A Competitive Bid Rate Advance may not be paid prior to the last
day of the applicable Interest Period, except as provided in Sections 2.9.4,
2.9.5 and 2.9.6, subject to Section 3.4.
2.9.4 If at any time, for any reason, the Aggregate Total Outstandings
of all Lenders exceed the Aggregate Revolving Credit Commitments then in effect,
(a) the Company shall, without notice or demand, immediately prepay the
Revolving Credit Loans and/or (b) each Borrower shall, without notice or demand,
immediately prepay its Multicurrency Loans such that the sum of (i) the
aggregate principal amount of Revolving Credit Loans so prepaid and (ii) the
U.S. Dollar Equivalent of the aggregate principal amount of Multicurrency Loans
so prepaid, at least equals the amount of such excess.
2.9.5 If, at any time for any reason, either (a) the Aggregate Total
Outstandings of all Multicurrency Lenders exceed the aggregate Revolving Credit
Commitments of the Multicurrency Lenders
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or (b) the Aggregate Multicurrency Outstandings exceed the aggregate
Multicurrency Commitments, (i) the Company shall, without notice or demand,
immediately prepay the Revolving Credit Loans and/or (ii) each Borrower shall,
without notice or demand, immediately prepay its Multicurrency Loans in amounts
such that the sum of (A) the aggregate principal amount of the Revolving Credit
Loans so prepaid and (B) the U.S. Dollar Equivalent of the Multicurrency Loans
so prepaid at least equals the amount of such excess.
2.9.6 If at any time, for any reason, either (a) the Aggregate
Multicurrency Outstandings of all Multicurrency Lenders exceed $500,000,000 or
(b) the Aggregate Multicurrency Outstandings of any Multicurrency Lender exceeds
its Multicurrency Commitment, each Borrower shall, without notice or demand,
immediately prepay its Multicurrency Loans in amounts such that the U.S. Dollar
Equivalent of the Multicurrency Loans so prepaid at least equals the amount of
such excess.
2.9.7 Each prepayment and conversion pursuant to this Section 2.9
shall be accompanied by accrued and unpaid interest on the amount prepaid to the
date of prepayment and any amounts payable under Section 3.4 in connection with
such payment.
2.9.8 Notwithstanding the foregoing, mandatory prepayments of
Revolving Credit Loans or Multicurrency Loans that would otherwise be required
pursuant to this Section 2.9 solely as a result of fluctuations in Exchange
Rates from time to time shall only be required to be made pursuant to this
Section 2.9 on the last Business Day of each month on the basis of the Exchange
Rate in effect on such Business Day.
2.9.9 Prepayments pursuant to this Section 2.9 shall be applied as
follows: (a) in the case of prepayments made by the Company, first to prepay
Floating Rate Loans and second to prepay Eurodollar Loans then outstanding in
such order as the Company may direct and (b) in the case of prepayments made by
a Borrower of Multicurrency Loans, to prepay Multicurrency Loans made to such
Borrower in such order as the Company may direct.
2.9.10 Notwithstanding anything herein to the contrary, all Commitments
shall be terminated, and all outstanding Obligations shall be due and payable,
on December 31, 1997 if the Spin-Off has not been completed by December 31,
1997. Without limiting the foregoing, upon termination of the Commitments under
this Section 2.9.10, all Facility Letters of Credit outstanding shall be cash
collateralized in accordance with Section 8.1.
2.9.11 Except as provided in Section 2.9.10, all amounts prepaid may be
reborrowed and successively repaid and reborrowed, subject to the other terms
and conditions in this Agreement.
2.10 Conversion and Continuation of Outstanding Advances.
2.10.1 Revolving Credit Advances. Floating Rate Advances shall continue
as Floating Rate Advances unless and until such Floating Rate Advances are
converted into Eurodollar Advances. Each Eurodollar Advance shall continue as a
Eurodollar Advance until the end of the then applicable Interest Period
therefor, at which time such Fixed Rate Advance shall be automatically converted
into a Floating Rate Advance unless the Company shall have given the
Administrative Agent a Conversion/Continuation Notice requesting that, at the
end of such Interest Period, such Eurodollar Advance either continue as a
Eurodollar Advance for the same or another Interest Period or be converted into
a Floating Rate Advance. Subject to the terms hereof, the Company may elect from
time to time to convert all or any part of a Revolving Credit Advance of any
Type into any other Type or Types of Revolving Credit Advances; provided that
any conversion of any Eurodollar Advance shall be made on, and only on, the last
day of the
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Interest Period applicable thereto. Notwithstanding anything herein to the
contrary, no Loan may be converted to a Eurodollar Loan, and no Eurodollar Loan
may be continued as such, if any Default or Unmatured Default has occurred and
is continuing. The Company shall give the Administrative Agent irrevocable
notice (a "Conversion/Continuation Notice") of each conversion of an Advance or
continuation of a Eurodollar Advance not later than 10:00 a.m. (New York City
time) at least one Business Day, in the case of a conversion into a Floating
Rate Advance or three Business Days, in the case of a conversion into or
continuation of a Eurodollar Advance, prior to the date of the requested
conversion or continuation, specifying:
(i) the requested date, which shall be a Business Day, of such
conversion or continuation,
(ii) the aggregate amount and Type of the Revolving Credit
Advance which is to be converted or continued, and
the amounts and Type(s) of Revolving Credit Advance(s) into which such Revolving
Credit Advance is to be converted or continued and, in the case of a conversion
into or continuation of a Eurodollar Advance, the duration of the Interest
Period applicable thereto.
2.10.2 Multicurrency Advances. Any Multicurrency Advances may be
continued as such upon the expiration of the then current Interest Period with
respect thereto by the relevant Borrower giving the Administrative Agent at
least five Business Days' prior irrevocable notice of such election, provided,
that if the relevant Borrower shall fail to give such notice, such Multicurrency
Advance shall be automatically continued for an Interest Period of one month
provided that such continuation would not extend the Interest Period beyond the
Facility Termination Date.
2.11 Interest Rates, Interest Payment Dates; Interest and Fee Basis.
(a) Each Floating Rate Loan shall bear interest on the outstanding principal
amount thereof, for each day from and including the date such Loan is made or is
converted from a Fixed Rate Loan into a Floating Rate Loan pursuant to Section
2.10 to but excluding the date it becomes due or is converted into a Fixed Rate
Loan pursuant to Section 2.10 hereof, at a rate per annum equal to the Floating
Rate for such day. Each Eurodollar Loan shall bear interest for each day during
each Interest Period with respect thereto at a rate per annum equal to the
Eurodollar Rate determined for such Interest Period. Each Floating Rate Loan
shall bear interest for each day that it is outstanding at a rate per annum
equal to the Floating Rate for such day. Each Multicurrency Loan shall bear
interest for each day during each Interest Period with respect thereto at a rate
per annum equal to the applicable Eurocurrency Rate determined for such Interest
Period. Each Competitive Bid Loan shall bear interest for each day during each
Interest Period that it is outstanding at the rate per annum for such Interest
Period accepted by the Company pursuant to Section 2.7.6.
(b) Interest accrued on each Floating Rate Advance shall be payable
on each Payment Date, commencing with the first such date to occur after the
date hereof and at maturity. Interest accrued on each Fixed Rate Advance shall
be payable on the last day of its applicable Interest Period, on any date on
which the Fixed Rate Advance is prepaid, whether by acceleration or otherwise,
and at maturity. Interest accrued on each Fixed Rate Advance having an Interest
Period longer than three months shall also be payable on the last day of each
three-month interval during such Interest Period.
(c) Interest shall be payable for the day an Advance is made but not
for the day of any payment on the amount paid if payment is received prior to
noon (local time) at the place of payment. If any payment of principal of or
interest on an Advance shall become due on a day which is not a Business
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Day, except as otherwise provided in the definition of Eurodollar Interest
Period, such payment shall be made on the next succeeding Business Day and, in
the case of a principal payment, such extension of time shall be included in
computing interest in connection with such payment.
(d) All interest and fees shall be computed on the basis of the
actual number of days (including the first day but excluding the last day)
occurring during the period such interest or fee is payable over a year
comprised of 360 days (or in the case of interest on Floating Rate Loans, 365
days or, if appropriate, 366 days), except if otherwise specified on Schedule 2
with respect to the Eurocurrency Base Rate.
(e) For the purposes of the Interest Act (Canada) hereunder (i)
whenever interest payable pursuant to this Agreement is calculated with respect
to any monetary Obligation relating to Loans to Canadian Borrowers on the basis
of a period other than a calendar year (the "Calculation Period"), each rate of
interest determined pursuant to such calculation expressed as an annual rate is
equivalent to such rate as so determined, multiplied by the actual number of
days in the calendar year in which the same is to be ascertained and divided by
the number of days in the Calculation Period; (ii) the principal of deemed
reinvestment of interest with respect to any monetary Obligation relating to
Loans in Canadian dollars shall not apply to any interest calculation under this
agreement, and (iii) the rates of interest with respect to any monetary
Obligation relating to Loans to Canadian Borrowers stipulated in this Agreement
are intended to be nominal rates and not effective rates or yields.
2.12 Changes in Interest Rate, etc. Changes in the rate of interest
on that portion of any Advance maintained as a Floating Rate Advance will take
effect simultaneously with each change in the Alternate Base Rate. Each Fixed
Rate Advance shall bear interest on the outstanding principal amount thereof
from and including the first day of the Interest Period applicable thereto to
(but not including) the last day of such Interest Period at the interest rate
determined as applicable to such Fixed Rate Advance. No Interest Period may end
after the Facility Termination Date.
2.13 Rates Applicable After Default. Notwithstanding anything to the
contrary contained in this Article II, during the continuance of a Default the
Required Lenders may, at their option, by notice to the Borrowers (which notice
may be revoked at the option of the Required Lenders notwithstanding any
provision of Section 8.2 requiring unanimous consent of the Lenders to changes
in interest rates), declare that no Advance may be made as, converted into or
continued (after the expiration of the current Interest Period or Absolute Rate
Interest Period) as a Fixed Rate Advance. If any Advance is not paid at
maturity, whether by acceleration or otherwise, the Required Lenders may, at
their option, by notice to the Company (which notice may be revoked at the
option of the Required Lenders notwithstanding any provision of Section 8.2
requiring unanimous consent of the Lenders as to changes and interest rates)
declare that (i) each Fixed Rate Advance shall bear interest for the remainder
of the applicable Interest Period at the rate otherwise applicable to such
Interest Period plus 2% per annum and (ii) each Floating Rate Advance shall bear
interest at a rate per annum equal to the Floating Rate otherwise applicable to
the Floating Rate Advance plus 2% per annum.
2.14 Pro Rata Payment, Method of Payment.
2.14.1 Except as provided in Section 2.4, each borrowing of Revolving
Credit Loans by the Company from the Lenders shall be made pro rata according to
the Funding Commitment Percentages of the Lenders in effect on the date of such
borrowing. Each payment by the Company on account of any facility fee shall be
allocated by the Administrative Agent among the Lenders in accordance with the
respective amounts which such Lenders are entitled to receive pursuant to
Section 2.8. Any reduction of the Revolving Credit Commitments of the Lenders
shall be allocated by the Administrative Agent among
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the Lenders pro rata according to the Revolving Credit Commitment Percentages of
the Lenders. Except as provided in Section 2.9, each payment (other than any
optional prepayment) by the Company on account of principal of the Revolving
Credit Loans or the Competitive Bid Loans shall be allocated by the
Administrative Agent pro rata according to the respective outstanding principal
amounts thereof then due and owing to each Lender. Except as provided in Section
2.9, each optional prepayment by the Company on account of principal or interest
on the Revolving Credit Loans shall be allocated by the Administrative Agent pro
rata according to the respective outstanding principal amounts thereof. All
payments (including prepayments) to be made by the Company hereunder in respect
of amounts denominated in Dollars, whether on account of principal, interest,
fees or otherwise, shall be made, without setoff, deduction, or counterclaim, in
immediately available funds to the Administrative Agent at the Administrative
Agent's address specified pursuant to Article XIV, or at any other Lending
Installation of the Administrative Agent specified in writing by the
Administrative Agent to the Company, by 12:00 P.M. (New York City time) on the
date. Except as otherwise provided in Sections 2.6.1, 2.14.2 and 16.6 all
payments hereunder shall be made in U.S. Dollars. Each payment delivered to the
Administrative Agent for the account of any Lender shall be delivered promptly
by the Administrative Agent to such Lender in the same type of funds that the
Administrative Agent received at its address specified pursuant to Article XIV
or at any Lending Installation specified in a notice received by the
Administrative Agent from such Lender. The Administrative Agent is hereby
authorized to charge the account of the Company maintained with Morgan for each
payment of principal, interest and fees as it becomes due hereunder.
2.14.2 Each borrowing of Multicurrency Loans by any Borrower in any
Available Foreign Currency or U.S. Dollars, as the case may be, shall be
allocated by the Administrative Agent pro rata according to the Multicurrency
Commitment Percentages of the Designated Multicurrency Lenders with respect to
such Borrower in effect on the date of such Loan. Any reduction of the
Multicurrency Commitments shall be allocated by the Administrative Agent pro
rata according to the Multicurrency Commitment Percentages of the Designated
Multicurrency Lenders in effect on the date of such Loan. Except as provided in
Section 2.9, each payment (including each prepayment) by a Borrower on account
of principal of and interest on Multicurrency Loans shall be allocated by the
Administrative Agent pro rata according to the respective principal amounts of
the Multicurrency Loans then due and owing by such Borrower to each Designated
Multicurrency Lender that made such Multicurrency Loans. All payments (including
prepayments) to be made by a Borrower on account of Multicurrency Loans, whether
on account of principal, interest, fees or otherwise, shall be without setoff,
deduction, or counterclaim and shall be made prior to 12:00 P.M., London time,
on the due date thereof to the Administrative Agent for the account of the
Designated Multicurrency Lenders that made such Loans, at the payment office for
such Multicurrency Loans specified from time to time by the Administrative Agent
by notice to the Borrowers, in the currency of such Multicurrency Loan and in
immediately available funds. The Administrative Agent shall distribute such
payment to the Designated Multicurrency Lenders entitled to receive the same
promptly upon receipt in like funds as received.
2.15 Telephonic Notices. Each Borrower hereby authorizes the Lenders
and the Administrative Agent to extend, convert or continue Advances, effect
selections of Types of Advances and to transfer funds based on telephonic
notices made by any person or persons the Administrative Agent or any Lender
reasonably and in good faith believes to be an Authorized Officer. Each Borrower
agrees to deliver promptly to the Administrative Agent a written confirmation,
if such confirmation is requested by the Administrative Agent or any Lender, of
each telephonic notice signed by an Authorized Officer. If the written
confirmation differs in any material respect from the action taken by the
Administrative Agent and the Lenders, the records of the Administrative Agent
and the Lenders shall govern absent manifest error.
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2.16 Notification of Advances, Interest Rates, Prepayments and
Commitment Reductions. Promptly after receipt thereof, the Administrative Agent
will notify each Lender of the contents of each Revolving Credit Commitment
reduction notice, Multicurrency Commitment reduction notice, Borrowing notice,
Conversion/Continuation Notice, and repayment notice received by it hereunder.
The Administrative Agent will notify each Lender of the interest rate applicable
to each Fixed Rate Advance promptly upon determination of such interest rate and
will give each Lender prompt notice of each change in the Alternate Base Rate.
Each Domestic Reference Lender and each Multicurrency Reference Lender agrees to
furnish timely information for the purpose of determining the applicable
interest rates.
2.17 Lending Installations. Each Lender may book its Loans at any
Lending Installation selected by such Lender and may change its Lending
Installation from time to time. All terms of this Agreement shall apply to any
such Lending Installation and the Notes, if any, shall be deemed held by each
Lender for the benefit of such Lending Installation. Each Lender may, by written
or telex notice to the Administrative Agent and the applicable Borrower,
designate a Lending Installation through which Loans will be made by it and for
whose account Loan payments are to be made.
2.18 Non-Receipt of Funds by the Administrative Agent. Unless a
Borrower or a Lender, as the case may be, notifies the Administrative Agent
prior to the date on which it is scheduled to make payment to the Administrative
Agent of (a) in the case of a Lender, the proceeds of a Loan or (b) in the case
of a Borrower, a payment of principal, interest or fees to the Administrative
Agent for the account of the Lenders, that it does not intend to make such
payment, the Administrative Agent may assume that such payment has been made.
The Administrative Agent may, but shall not be obligated to, make the amount of
such payment available to the intended recipient in reliance upon such
assumption. If such Lender or Borrower, as the case may be, has not in fact made
such payment to the Administrative Agent, the recipient of such payment shall,
on demand by the Administrative Agent, repay to the Administrative Agent the
amount so made available together with interest thereon in respect of each day
during the period commencing on the date such amount was so made available by
the Administrative Agent until the date the Administrative Agent recovers such
amount at a rate per annum equal to (i) in the case of payment by a Lender, the
Federal Funds Effective Rate for such day or (ii) in the case of payment by a
Borrower, the interest rate applicable to the relevant Loan.
2.19 Facility Letters of Credit.
2.19.1 Obligation to Issue. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of the Company
herein set forth, the Issuers hereby agree to issue for the account of a
Borrower through such of the Issuer's Lending Installations or Affiliates as the
Issuer and a Borrower may jointly agree, one or more Facility Letters of Credit
in accordance with this Section 2.19, from time to time during the period,
commencing on the Closing Date and ending five Business Days prior to the
Facility Termination Date.
2.19.2 Conditions for Issuance. In addition to being subject to the
satisfaction of the conditions contained in Sections 4.1, 4.2 and 4.3, the
obligation of an Issuer to issue any Facility Letter of Credit is subject to the
satisfaction in full of the following conditions:
(a) the aggregate maximum amount then available for drawing under
Facility Letters of Credit issued by the Issuers, after giving effect to the
Facility Letter of Credit requested hereunder, shall not exceed any limit
imposed by law or regulation upon the Issuer;
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(b) the requested Facility Letter of Credit has an expiration date
at least five Business Days prior to the Facility Termination Date;
(c) after giving effect to the Facility Letter of Credit requested
hereunder, the aggregate maximum amount then available for drawing under
Facility Letters of Credit issued by the Issuers, shall not exceed an amount of
which the U.S. Dollar Equivalent is $100,000,000, the Available Revolving Credit
Commitment of each Lender is greater than or equal to zero and the Available
Multicurrency Commitment of each Multicurrency Lender is greater than or equal
to zero;
(d) the applicable Borrower shall have delivered to the applicable
Issuer at such times and in such manner as such Issuer may reasonably prescribe
such documents and materials as may be required pursuant to the terms of the
proposed Letter of Credit and the proposed Letter of Credit shall be reasonably
satisfactory to such Issuer as to form and content; and
(e) as of the date of issuance, no order, judgment or decree of any
Court, arbitrator or governmental authority shall purport by its terms to enjoin
or restrain such Issuer from issuing the Facility Letter of Credit and no law,
rule or regulation applicable to such Issuer and no request or directive
(whether or not having the force of law) from any governmental authority with
jurisdiction over such Issuer shall prohibit or request that such Issuer refrain
from the issuance of Letters of Credit generally or the issuance of that
Facility Letter of Credit.
2.19.3 Procedure for Issuance of Facility Letters of Credit. (a) The
applicable Borrower shall give one of the Issuers and the Administrative Agent
five Business Days' prior written notice of any requested issuance of a Facility
Letter of Credit under this Agreement (except that, in lieu of such written
notice, a Borrower may give an Issuer (i) notice of such request by tested telex
or other tested arrangement satisfactory to such Issuer or (ii) telephonic
notice of such request if confirmed in writing by delivery to such Issuer (A)
immediately (x) of a telecopy of the written notice required hereunder which has
been signed by an authorized officer of the Company or (y) of a telex containing
all information required to be contained in such written notice and (B) promptly
(but in no event later than the requested time of issuance) of a copy of the
written notice required hereunder containing the original signature of an
authorized officer of the Borrower); such notice shall be irrevocable and shall
specify the stated amount and Available Foreign Currency or U.S. Dollars of the
Facility Letter of Credit requested, the effective date (which day shall be a
Business Day) of issuance of such requested Facility Letter of Credit, the date
on which such requested Facility Letter of Credit is to expire (which date shall
be a Business Day and shall in no event be later than the fifth day prior to
Facility Termination Date), the purpose for which such Facility Letter of Credit
is to be issued, and the Person for whose benefit the requested Facility Letter
of Credit is to be issued. The Administrative Agent shall give notice to each
Lender of the issuance of each Facility Letter of Credit reasonably promptly
after such Facility Letter of Credit is issued. At the time such request is
made, the requesting Borrower shall also provide the applicable Issuer with a
copy of the form of the Facility Letter of Credit it is requesting be issued.
Such notice, to be effective, must be received by such Issuer not later than
2:00 p.m. (New York City time) or the time agreed upon by such Issuer and such
Borrower on the last Business Day on which notice can be given under this
Section 2.19.3.
(b) Subject to the terms and conditions of this Section 2.19.3 and
provided that the applicable conditions set forth in Sections 4.1, 4.2 and 4.3
hereof have been satisfied, the Issuer shall, on the requested date, issue a
Facility Letter of Credit on behalf of the applicable Borrower in accordance
with such Issuer's usual and customary business practices.
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(c) The Issuers shall not extend or amend any Facility Letter of
Credit unless the requirements of this Section 2.19 are met as though a new
Facility Letter of Credit was being requested and issued.
2.19.4 Reimbursement Obligations. (a) Each Borrower agrees to pay to
the Issuer the amount of all Reimbursement Obligations, interest and other
amounts payable to the Issuer under or in connection with any Facility Letter of
Credit issued on behalf of such Borrower immediately when due, irrespective of
any claim, set-off, defense or other right which the Borrower, the Company or
any Subsidiary may have at any time against the Issuer or any other Person,
under all circumstances, including without limitation, any of the following
circumstances:
(i) any lack of validity or enforceability of this Agreement or any
of the other Loan Documents;
(ii) the existence of any claim, setoff, defense or other right which
any Borrower or any Subsidiary may have at any time against a beneficiary named
in a Facility Letter of Credit or any transferee of any Facility Letter of
Credit (or any Person for whom any such transferee may be acting), any Issuer,
any Lender, or any other Person, whether in connection with this Agreement, any
Facility Letter of Credit, the transactions contemplated herein or any unrelated
transactions (including any underlying transactions between any Borrower or any
Subsidiary and the beneficiary named in any Facility Letter of Credit);
(iii) any draft, certificate or any other document presented under the
Facility Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or inaccurate
in any respect;
(iv) the surrender or impairment of any security for the performance
or observance of any of the terms of any of the Loan Documents;
(v) the occurrence of any Default or Unmatured Default.
(b) The Issuer shall promptly notify the applicable Borrower of any
draw under a Facility Letter of Credit. Such Borrower shall reimburse the
applicable Issuer for drawings under a Facility Letter of Credit issued by it on
behalf of such Borrower promptly after the payment by the Issuer. Any
Reimbursement Obligation with respect to any Facility Letter of Credit shall
bear interest from the date of the relevant drawings under the pertinent
Facility Letter of Credit at the interest rate for Floating Rate Loans.
2.19.5 Participation. (a) Immediately upon issuance by an Issuer of any
Facility Letter of Credit in accordance with the procedures set forth in Section
2.19.3, (i) with respect to each U.S. Facility Letter of Credit, each Lender
shall be deemed to have irrevocably and unconditionally purchased and received
from such Issuer, without recourse or warranty, an undivided interest and
participation equal to its Funding Commitment Percentage in such U.S. Facility
Letter of Credit (including, without limitation, all obligations of the
applicable Borrower with respect thereto) and any security therefor or guaranty
pertaining thereto and (ii) with respect to each Multicurrency Facility Letter
of Credit, each Designated Multicurrency Lender with respect to the Borrower for
the account of which such Multicurrency Facility Letter of Credit is issued
shall be deemed to have irrevocably and unconditionally purchased and received
from such Issuer, without recourse or warranty, an undivided interest and
participation equal to its Multicurrency Commitment Percentage in such
Multicurrency Facility Letter of Credit (including, without limitation, all
obligations of the applicable Borrower with respect thereto), any security
therefor or guaranty pertaining thereto; provided, that a Letter of Credit
issued by an Issuer shall not be deemed to be a Facility Letter of Credit for
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purposes of this Section 2.19 if such Issuer shall have received written notice
from any Lender on or before one Business Day prior to the date of its issuance
of such Letter of Credit that one or more of the conditions contained in
Sections 4.1, 4.2 or 4.3 are not then satisfied, and, in the event an Issuer
receives such a notice, it shall have no further obligation to issue any Letter
of Credit until such notice is withdrawn by that Lender or such condition has
been effectively waived in accordance with the provisions of this Agreement.
(b) In the event that an Issuer makes any payment under any Facility
Letter of Credit and the applicable Borrower shall not have repaid such amount
to the Issuer pursuant to Section 2.19.4, the Issuer shall promptly notify the
Administrative Agent and each Lender participating in such Letter of Credit of
such failure, and each Lender participating in such Letter of Credit shall
promptly and unconditionally pay to the Administrative Agent for the account of
such Issuer the amount of such Lender's Funding Commitment Percentage or
Multicurrency Commitment Percentage, as the case may be, of the unreimbursed
amount of any such payment. If any Lender participating in such Facility Letter
of Credit fails to make available to such Issuer, any amounts due to such Issuer
pursuant to this Section 2.19.5(b), such Issuer shall be entitled to recover
such amount, together with interest thereon at the Federal Funds Effective Rate,
for the first three Business Days after such Lender receives such notice and
thereafter, at the Floating Rate, payable (i) on demand, (ii) by setoff against
any payments made to such Issuer for the account of such Lender or (iii) by
payment to such Issuer by the Administrative Agent of amounts otherwise payable
to such Lender under this Agreement. The failure of any Lender to make available
to the Administrative Agent its Funding Commitment Percentage or Multicurrency
Commitment Percentage, as the case may be, of the unreimbursed amount of any
such payment shall not relieve any other Lender of its obligation hereunder to
make available to the Administrative Agent its Funding Commitment Percentage or
Multicurrency Commitment Percentage, as the case may be, of the unreimbursed
amount of any payment on the date such payment is to be made, but no Lender
shall be responsible for the failure of any other Lender to make available to
the Administrative Agent its Funding Commitment Percentage or Multicurrency
Commitment Percentage, as the case may be, of the unreimbursed amount of any
payment on the date such payment is to be made.
(c) Whenever the Issuer receives a payment on account of a
Reimbursement Obligation, including any interest thereon, it shall promptly pay
to each Lender which has funded its participating interest therein, in
immediately available funds, an amount equal to such Lender's Funding Commitment
Percentage or Multicurrency Commitment Percentage, as the case may be, thereof.
(d) The obligations of a Lender to make payments to the Administrative
Agent with respect to a Facility Letter of Credit shall be absolute,
unconditional and irrevocable, not subject to any counterclaim, set-off,
qualification or exception whatsoever and shall be made in accordance with the
terms and conditions of this Agreement under all circumstances.
(e) In the event any payment by a Borrower received by the
Administrative Agent with respect to a Facility Letter of Credit and distributed
by the Administrative Agent to the Lenders on account of their participations is
thereafter set aside, avoided or recovered from the Administrative Agent in
connection with any receivership, liquidation, reorganization or bankruptcy
proceeding, each Lender which received such distribution shall, upon demand by
the Agent, contribute such Lender's Funding Commitment Percentage or
Multicurrency Commitment Percentage, as the case may be, of the amount set
aside, avoided or recovered together with interest at the rate required to be
paid by the Administrative Agent upon the amount required to be repaid by it.
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2.19.6 Compensation for Facility Letters of Credit. The Issuer of a
Facility Letter of Credit shall have the right to receive, solely for its own
account, an issuance fee and fronting fee to be agreed upon by the Issuer and
the applicable Borrower as well as the Issuer's reasonable and customary costs
of issuing and servicing the Facility Letters of Credit. In addition, such
Borrower shall pay to the Administrative Agent for the account of each Lender
participating in such Facility Letter of Credit a non-refundable fee at a per
annum rate in the amount shown on the Pricing Schedule on Exhibit B applied to
the face amount of the Facility Letter of Credit, payable quarterly in advance
to all Lenders participating in such Facility Letter of Credit (including the
Issuers) ratably from the date such Facility Letter of Credit is issued until
its stated expiry date.
2.19.7 Letter of Credit Collateral Account. Each Borrower hereby agrees
that it will, until the final expiration date of any Facility Letter of Credit
and thereafter as long as any amount is payable to the Lenders in respect of any
Facility Letter of Credit, maintain a special collateral account (the "Letter of
Credit Collateral Account") at the Administrative Agent's office at the address
specified pursuant to Article XIV, in the name of such Borrower but under the
sole dominion and control of the Administrative Agent, for the benefit of the
Lenders and in which such Borrower shall have no interest other than as set
forth in Section 8.1. The Administrative Agent will invest any funds on deposit
from time to time in the Letter of Credit Collateral Account in certificates of
deposit of the Administrative Agent having a maturity not exceeding 30 days.
Nothing in this Section 2.19.7 shall either obligate the Administrative Agent to
require any Borrower to deposit any funds in the Letter of Credit Collateral
Account or limit the right of the Administrative Agent to release any funds held
in the Letter of Credit Collateral Account other than as required by Section
8.1, and the Borrower's obligations to deposit funds in the Letter of Credit
Collateral Account are limited to the circumstances required by Section 8.1.
2.19.8 Nature of Obligations. (a) As among the Borrowers, the Issuers
and the Lenders, each Borrower assumes all risks of the acts and omissions of,
or misuse of the Facility Letters of Credit by, the respective beneficiaries of
the Facility Letters of Credit requested by it. In furtherance and not in
limitation of the foregoing, the Issuers and the Lenders shall not be
responsible for (i) the forms, validity, sufficiency, accuracy, genuineness or
legal effect of any document submitted by any party in connection with the
application for and issuance of any Facility Letter of Credit, even if it should
in fact prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (ii) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign a Facility Letter
of Credit or the rights or benefits thereunder or proceeds thereof, in whole or
in part, which may prove to be invalid or ineffective for any reason; (iii)
failure of the beneficiary of a Facility Letter of Credit to comply fully with
conditions required in order to draw upon such Facility Letter of Credit; (iv)
errors, omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise; (v) errors in
interpretation of technical terms; (vi) misapplication by the beneficiary of a
Facility Letter of Credit of the proceeds of any drawing under such Facility
Letter of Credit; or (vii) any consequences arising from causes beyond the
control of the Issuers or the Lenders. In addition to amounts payable as
elsewhere provided in this Subsection 2.19, such Borrower hereby agrees to
protect, indemnify, pay and save the Agents, each Issuer and each Lender
harmless from and against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including reasonable attorneys' fees)
arising from the claims of third parties against the Agents or such Issuer in
respect of any Facility Letter of Credit requested by such Borrower.
(b) In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth, any action taken or omitted by the
Issuers or any Lender under or in connection with the Facility Letters of Credit
or any related certificates, if taken or omitted in good faith, shall not put
such Issuer or
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such Lender under any resulting liability to any Borrower or relieve any
Borrower of any of its obligations hereunder to the Issuers, the Administrative
Agent or any Lender.
(c) Notwithstanding anything to the contrary contained in this
subsection 2.19, a Borrower shall not have any obligation to indemnify an Issuer
under this subsection 2.19 in respect of any liability incurred by such Issuer
arising primarily out of the reckless or willful misconduct of such Issuer, as
determined by a court of competent jurisdiction, or out of the wrongful dishonor
by such Issuer of a proper demand for payment made under the Facility Letters of
Credit issued by such Issuer as determined by a court of competent jurisdiction,
unless such dishonor was made at the request of such Borrower, or out of the
wrongful honor by such Issuer of a demand for payment made under the Facility
Letters of Credit issued by such Issuer which demand for payment does not comply
with the conditions required in order to draw upon such Facility Letter of
Credit as determined by a court of competent jurisdiction, unless such honor was
made at the request of such Borrower.
2.20 Application of Payments with Respect to Defaulting Lenders. No
payments of principal, interest or fees delivered to the Administrative Agent
for the account of any Defaulting Lender shall be delivered by the
Administrative Agent to such Defaulting Lender. Instead, such payments shall,
for so long as such Defaulting Lender shall be a Defaulting Lender, be held by
the Administrative Agent, and the Administrative Agent is hereby authorized and
directed by all parties hereto to hold such funds in escrow and apply such funds
as follows:
(i) First, if applicable to any payments due to an Issuer pursuant to
Section 2.19.5; and
(ii) Second, to Loans required to be made by such Defaulting Lender on
any Borrowing Date to the extent such Defaulting Lender fails to make such
Loans.
Notwithstanding the foregoing, upon the termination of the Revolving Credit
Commitments and the payment and performance of all of the Obligations (other
than those owing to a Defaulting Lender), any funds then held in escrow by the
Administrative Agent pursuant to the preceding sentence shall be distributed to
each Defaulting Lender, pro rata in proportion to amounts that would be due to
each Defaulting Lender but for the fact that it is a Defaulting Lender.
ARTICLE III
CHANGE IN CIRCUMSTANCES, TAXES
3.1 Yield Protection. If after the date hereof any law or any
governmental or quasi-governmental rule, regulation, policy, guideline or
directive (whether or not having the force of law), or any change or
modification thereof, or any interpretation thereof, or the compliance of any
Lender therewith,
(a) subjects any Lender or any applicable Lending Installation
to any tax, duty, charge or withholding on or from payments
due from any Borrower or changes the basis of taxation of
payments to any Lender in respect of its Loans or other
amounts due it hereunder (excluding income taxes and
franchise taxes (imposed in lieu of income taxes) imposed on
the Administrative Agent or any Lender as a result of a
present or former connection between the Administrative
Agent or such
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Lender and the jurisdiction of the Governmental Authority
imposing such tax or any political subdivision or taxing
authority thereof or therein, other than any such connection
arising solely from the Administrative Agent or such Lender
having executed, delivered or performed its obligations or
received a payment under, or enforced, this Agreement or any
other Loan Document), or
(b) imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar
requirement against assets of, deposits with or for the
account of, or credit extended by, any Lender or any
applicable Lending Installation (other than reserves and
assessments taken into account in determining the interest
rate applicable to Fixed Rate Advances), or
(c) imposes any other condition the result of which is to
increase the cost to any Lender or any applicable Lending
Installation of making, funding or maintaining loans or
reduces any amount receivable by any Lender or any
applicable Lending Installation in connection with loans, or
requires any Lender or any applicable Lending Installation
to make any payment calculated by reference to the amount of
loans held or interest received by it, by an amount deemed
material by such Lender,
then, within 15 days of demand by such Lender, the affected Borrower shall pay
such Lender that portion of such increased expense incurred or reduction in an
amount received which such Lender determines is attributable to making, funding
and maintaining its Loans, its Revolving Credit Commitment or its Multicurrency
Commitment.
3.2 Changes in Capital Adequacy Regulations. If a Lender determines the
amount of capital required or expected to be maintained by such Lender, any
Lending Installation of such Lender or any corporation controlling such Lender
is increased as a result of a Change, then, within 15 days of demand by such
Lender, the Company shall pay such Lender the amount necessary to compensate for
any shortfall in the rate of return on the portion of such increased capital
which such Lender determines is attributable to this Agreement, its Loans or its
obligation to make Loans hereunder (after taking into account such Lender's
policies as to capital adequacy). "Change" means (a) any change after the date
of this Agreement in the Risk-Based Capital Guidelines or (b) any adoption of or
change in any other law, governmental or quasi-governmental rule, regulation,
policy, guideline, interpretation, or directive (whether or not having the force
of law) after the date of this Agreement which affects the amount of capital
required or expected to be maintained by any Lender or any Lending Installation
or any corporation controlling any Lender. "Risk-Based Capital Guidelines" means
(i) the risk-based capital guidelines in effect in the United States on the date
of this Agreement, including transition rules, and (ii) the corresponding
capital regulations promulgated by regulatory authorities outside the United
States implementing the July 1988 report of the Basle Committee on Banking
Regulation and Supervisory Practices Entitled "International Convergence of
Capital Measurements and Capital Standards," including transition rules, and any
amendments to such regulations adopted prior to the date of this Agreement.
3.3 Availability of Types of Advances. If any Lender determines that
maintenance of its Eurodollar Loans or Multicurrency Loans at a suitable Lending
Installation would violate any applicable law, rule, regulation, or directive,
whether or not having the force of law, or if the Required Lenders with respect
to Eurodollar Loans or Requested Multicurrency Lenders with respect to
Multicurrency Loans determine that (i) deposits of a type and maturity
appropriate to match fund Eurodollar or Eurocurrency Rate Loans are not
available or (ii) the interest rate applicable to a Eurocurrency Rate Loan or
Eurodollar
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<PAGE> 46
Rate Loan does not accurately reflect the cost of making or maintaining such
Loans, then the Administrative Agent shall suspend the availability of the
affected Type of Loans and require any Loans of the affected Type to be repaid
at the end of the Interest Period for the affected Loan.
3.4 Funding Indemnification. If any payment of a Fixed Rate Advance
occurs on a date which is not the last day of the applicable Interest Period,
whether because of acceleration, prepayment or otherwise, or a Fixed Rate
Advance is not made on the date specified by a Borrower for any reason other
than default by the Lenders, such Borrower will indemnify each Lender for any
loss or cost incurred by it resulting therefrom, including, without limitation,
any loss or cost in liquidating or employing deposits acquired to fund or
maintain the Fixed Rate Advance.
3.5 Lender Statements; Survival of Indemnity. To the extent reasonably
possible, each Lender shall designate an alternate Lending Installation with
respect to its Eurodollar Rate Loans and Multicurrency Rate Loans to reduce any
liability of a Borrower to such Lender under Sections 3.1 and 3.2 or to avoid
the unavailability of a Type of Advance under Section 3.3, so long as such
designation is not disadvantageous to such Lender in any material respect. Each
Lender shall deliver a written statement of such Lender to the applicable
Borrower (with a copy to the Administrative Agent) as to the amount due, if any,
under Section 3.1, 3.2 or 3.4. Such written statement shall set forth in
reasonable detail the calculations upon which such Lender determined such amount
and shall state that amounts determined in accordance with such procedures are
being charged by such Lender to other borrowers with credit facilities similar
to this Agreement and credit characteristics comparable to the Company as
determined by such Lender and shall be final, conclusive and binding on the
Borrowers in the absence of manifest error. Determination of amounts payable
under such sections in connection with a Eurodollar Rate Loans and Multicurrency
Rate Loans shall be calculated as though each Lender funded such Loans through
the purchase of a deposit of the type and maturity corresponding to the deposit
used as a reference in determining the interest rate applicable to such Loan,
whether in fact that is the case or not. Unless otherwise provided herein, the
amount specified in the written statement of any Lender shall be payable on
demand after receipt by the applicable Borrower of such written statement. The
obligations of the Borrowers under Sections 3.1, 3.2, 3.4 and 3.6 shall survive
payment of the Obligations and termination of this Agreement. The Borrowers
shall have no obligation to compensate any Lender with respect to amounts
provided in Sections 3.1, 3.2, 3.4 or 3.6 with respect to any period prior to
the date which is 120 days prior to the date such Lender delivers its written
statement hereunder requesting compensation.
3.6 Taxes.
3.6.1 All payments of principal and interest made by the Borrowers
under this Agreement and any Note, if any, and all reimbursement obligations
with respect to Facility Letters of Credit shall be made free and clear of, and
without deduction or withholding for or on account of, any present or future
income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions
or withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any Governmental Authority, excluding income taxes and franchise
taxes (imposed in lieu of income taxes) imposed on the Administrative Agent or
any Lender as a result of a present or former connection between the
Administrative Agent or such Lender and the jurisdiction of the Governmental
Authority imposing such tax or any political subdivision or taxing authority
thereof or therein (other than any such connection arising solely from the
Administrative Agent or such Lender having executed, delivered or performed its
obligations or received a payment under, or enforced, this Agreement or any
other Loan Document). If any such non-excluded taxes, levies, imposts, duties,
charges, fees, deductions or withholdings ("Non-Excluded Taxes") are required to
be withheld from any amounts payable to the Administrative Agent, any Issuer or
any Lender hereunder or under any Note or Facility Letter of Credit, the amounts
so payable to the Administrative Agent, such Issuer or such
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Lender shall be increased to the extent necessary to yield to the Administrative
Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any
such other amounts payable hereunder at the rates and in the amounts specified
in this Agreement provided, however, that (i) with respect to any Loan or
Facility Letter of Credit in U.S. Dollars to the Company, the Company shall not
be required to increase any such amounts payable to any Lender that is not
organized under the laws of the United States of America or a state thereof if
such Lender fails to comply with the requirements of Section 3.6.2, (ii) with
respect to any Loan or Facility Letter of Credit in any Available Foreign
Currency, a Borrower shall not be required to increase any such amounts payable
to any Lender if such Lender fails to comply with the requirements of Section
3.6.3 and (iii) with respect to any Multicurrency Loan or any Multicurrency
Facility Letter of Credit, the Foreign Subsidiary Borrower shall not be required
to increase any such amounts payable to any Lender or the Administrative Agent
to the extent caused by such Lender or the Administrative Agent failing to act
through its Designated Office with respect to such Foreign Subsidiary Borrower.
Whenever any Non-Excluded Taxes are payable by a Borrower, as promptly as
possible thereafter such Borrower shall send to the Administrative Agent for its
own account or for the account of such Lender, as the case may be, a certified
copy of an original official receipt received by such Borrower showing payment
thereof. If a Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the Administrative Agent the
required receipts or other required documentary evidence, such Borrower shall
indemnify the Administrative Agent and the Lenders for any incremental taxes,
interest or penalties that may become payable by the Administrative Agent or any
Lender as a result of any such failure. The agreements in this Section shall
survive the termination of this Agreement and the payment of the Loans and all
other amounts payable hereunder.
3.6.2 Each Lender that is not incorporated under the laws of the United
States of America or a state thereof shall:
(a) at least five Business Days before the date of the initial
payment to be made by the Company under this Agreement to such Lender,
deliver to the Company and the Administrative Agent (A) two duly
completed copies of United States Internal Revenue Service Form 1001 or
4224, or successor applicable form, as the case may be, certifying that
it is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes and
(B) an Internal Revenue Service Form W-8 or W-9, or successor
applicable form, as the case may be, certifying that it is entitled to
an exemption from United States backup withholding tax;
(b) deliver to the Company and the Administrative Agent two
further copies of any such form or certification at least five Business
Days before the date that any such form or certification expires or
becomes obsolete and after the occurrence of any event requiring a
change in the most recent form previously delivered by it to the
Administrative Agent and the Company;
(c) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by the Company
or the Administrative Agent; and
(d) file amendments to such forms as and when required; and each
Lender (or Transferee) that is incorporated or organized under the laws
of the United States of America or a State thereof shall provide two
properly completed and duly executed copies of Form W-9, or successor
applicable form, at the times specified for delivery of forms under
this Section 3.6.2 unless an event (including, without limitation, any
change in treaty, law or regulation) has occurred after the date such
Person becomes a Lender hereunder which renders all such forms
inapplicable or which would prevent such Lender from duly completing
and delivering any such form with
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respect to it and such Lender so advises the Company and the
Administrative Agent; provided, however, that the Company may rely upon
such forms provided to the Company for all periods prior to the
occurrence of such event. Each Person that shall become a Lender or a
Participant pursuant to Section 13.2 shall, upon the effectiveness of
the related transfer, be required to provide all of the forms,
certifications and statements required pursuant to this Section,
provided that in the case of such Participant, the obligations of such
Participant pursuant to this Section 3.6.2 shall be determined as if
such Participant were a Lender, except that such Participant shall
furnish all such required forms, certifications and statements to the
Lender from which the related participation shall have been purchased.
3.6.3 Each Lender that is not incorporated or organized under the laws
of the jurisdiction under which a Foreign Subsidiary Borrower is incorporated or
organized shall, upon request by such Foreign Subsidiary Borrower, within a
reasonable period of time after such request, deliver to such Foreign Subsidiary
Borrower or the applicable governmental or taxing authority, as the case may be,
any form or certificate required in order that any payment by such Foreign
Subsidiary Borrower under this Agreement or any Notes to such Lender may be made
free and clear of, and without deduction or withholding for or on account of any
Non-Excluded Tax (or to allow any such deduction or withholding to be at a
reduced rate) imposed on such payment under the laws of the jurisdiction under
which such Foreign Subsidiary Borrower is incorporated or organized, provided
that such Lender is legally entitled to complete, execute and deliver such form
or certificate and such completion, execution or submission would not materially
prejudice the legal position of such Lender.
3.6.4 Each Lender agrees to use reasonable efforts to avoid or to
minimize any amounts which might otherwise be payable pursuant to this Section
3.6, provided that such effort shall not impose on any such Lender any
additional costs or legal or regulatory burdens deemed by such Lender in its
reasonable judgment to be material. In the event that any Lender determines that
any event or circumstance that will lead to a claim by it under this Section 3.6
has occurred or will occur, such Lender will use its best efforts to so notify
the Company in writing, provided that any failure to provide such notice shall
in no way impair the rights of any Lender to demand and receive compensation
under this Section 3.6.
3.7 Substitution of Lender. If (a) the obligation of any Lender to
make or maintain Eurodollar Loans has been suspended pursuant to Section 3.3
when not all Lenders' obligations have been suspended, (b) any Lender has
demanded compensation under Sections 3.1 or 3.2 when all Lenders have not done
so or (c) any Lender is a Defaulting Lender, the Company shall have the right,
if no Default then exists, to replace such Lender (a "Replaced Lender") with one
or more other lenders (collectively, the "Replacement Lender") acceptable to the
Agents, provided that (i) at the time of any replacement pursuant to this
Section 3.7, the Replacement Lender shall enter into one or more Assignments
pursuant to which the Replacement Lender shall acquire the Commitments and
outstanding Loans and other obligations of the Replaced Lender and, in
connection therewith, shall pay to the Replaced Lender in respect thereof an
amount equal to the sum of (A) the amount of principal of, and all accrued
interest on, all outstanding Loans of the Replaced Lender, (B) the amount of all
accrued, but theretofore unpaid, fees owing to the Replaced Lender hereunder and
(C) the amount which would be payable by the Borrowers to the Replaced Lender
pursuant to Section 3.4, if any, if the Borrowers prepaid at the time of such
replacement all of the Loans of such Replaced Lender outstanding at such time
and (ii) all obligations of the Borrowers then owing to the Replaced Lender
(other than those specifically described in clause (i) above in respect of which
the assignment purchase price has been, or is concurrently being, paid) shall be
paid in full to such Replaced Lender concurrently with such replacement. Upon
the execution of the respective Assignments, the payment of amounts referred to
in clauses (i) and (ii) above and, if so requested by the Replacement Lender,
delivery to the Replacement Lender of the appropriate Note or Notes executed by
the Borrowers, the Replacement Lender
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shall become a Lender hereunder and the Replaced Lender shall cease to
constitute a Lender hereunder. The provisions of this Agreement (including
without limitation Sections 3.4 and 10.7) shall continue to govern the rights
and obligations of a Replaced Lender with respect to any Loans made or any other
actions taken by such lender while it was a Lender. Nothing herein shall release
any Defaulting Lender from any obligation it may have to any Borrower, either
Agent or any other Lender.
ARTICLE IV
CONDITIONS PRECEDENT
4.1 Closing Conditions. On the Closing Date, the Borrowers shall
furnish to the Documentation Agent, with sufficient copies for the Lenders, each
of the following:
(a) Copies of the articles of incorporation or similar
organizational documents of each Borrower and of Rockwell
International, together with all amendments thereto, and a
certificate of good standing or similar governmental evidence
of corporate existence, all certified by the Secretary or an
Assistant Secretary of each Borrower and Rockwell
International, respectively.
(b) Copies, certified by the Secretary or an Assistant Secretary
or other duly authorized representative of each Borrower and
of Rockwell International, of its by-laws and of its Board of
Directors' resolutions (and resolutions of other bodies, if
any are deemed necessary by counsel for any Lender)
authorizing the execution of the Loan Documents or, in the
case of Rockwell International, the Rockwell International
Guaranty.
(c) An incumbency certificate, executed by the Secretary or an
Assistant Secretary of each Borrower and of Rockwell
International, which shall identify by name and title and bear
the signature of the officers of such Borrower and of Rockwell
International authorized to sign the applicable Loan Documents
and to make borrowings hereunder, upon which certificate the
Agents and the Lenders shall be entitled to rely until
informed of any change in writing by such Borrower or Rockwell
International.
(d) A certificate, signed by any Designated Financial Officer of
the Company, stating that on the Closing Date no Default or
Unmatured Default has occurred and is continuing.
(e) A written opinion of the Company's counsel, addressed to the
Lenders in substantially the form of Exhibit D hereto.
(f) A written opinion of Rockwell International's counsel,
addressed to the Lenders in substantially the form of Exhibit
E hereto.
(g) Written money transfer instructions, in substantially the form
of Exhibit F hereto, addressed to the Administrative Agent and
signed by an Authorized Officer,
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together with such other related money transfer authorizations
as the Administrative Agent may have reasonably requested.
(h) The Rockwell International Guaranty, duly executed by Rockwell
International.
(i) Such other documents as the Documentation Agent or its counsel
may have reasonably requested.
4.2 Initial Advance. The Lenders shall not be required to make the
initial Advance hereunder unless the Borrowers shall furnish to the
Documentation Agent, with sufficient copies for the Lenders, a certificate,
signed by any Designated Financial Officer of the Company, stating that the
Spin-Off is expected to be completed within 10 days in all material respects as
described in the Registration Statement on Form 10, as amended through Amendment
No. 2 ("Form 10") filed with the Securities and Exchange Commission (File No.
1-13093) in connection with the Spin-Off together with evidence satisfactory to
the Documentation Agent that the Form 10 has been filed and all necessary
approvals and authorizations from any applicable regulatory and other government
authorities and other applicable entities and all other necessary approvals to
be obtained by Rockwell International and the Company in connection with the
Spin-Off have been received and that all other conditions to the Distribution as
described in the Form 10, have been satisfied and completed, provided that if
the Tax Ruling (as defined in the Form 10) is not received on a timely basis, a
satisfactory favorable tax opinion may be substituted in place thereof.
4.3 Each Advance. The Lenders shall not be required to make any Loans
nor shall any Issuer be required to issue any Letter of Credit, unless on the
applicable Borrowing Date:
(a) There exists no Default or Unmatured Default.
(b) The representations and warranties contained in Article V (except
Section 5.5) are true and correct as of such Borrowing Date except to the extent
any such representation or warranty is stated to relate solely to an earlier
date, in which case such representation or warranty shall be true and correct on
and as of such earlier date.
(c) All legal matters incident to the making of such Loans or the
issuance of such Facility Letter of Credit shall be satisfactory to the Agents
and their counsel.
(d) If such Loan is an initial Loan to a Foreign Subsidiary Borrower,
the Documentation Agent shall have received a Foreign Subsidiary Opinion in
respect of such Foreign Subsidiary Borrower and such other documents reasonably
requested by the Documentation Agent.
Each Borrowing notice with respect to each borrowing by a Borrower
hereunder or each request for an issuance of a Facility Letter of Credit shall
constitute a representation and warranty by the Company and such Borrower that
the conditions contained in Sections 4.1(a) and (b) have been satisfied.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
Each of the Company and the Foreign Subsidiary Borrowers (insofar as
the representations and warranties set forth below relate solely to such Foreign
Subsidiary Borrower) represents and warrants to the Lenders that:
5.1 Corporate Existence and Standing. Each of the Company and its
Subsidiaries is a corporation, partnership, limited liability company or other
organization, duly organized and validly existing under the laws of its
jurisdiction of organization and has all requisite corporate, partnership,
company or similar authority to conduct its business as presently conducted.
5.2 Authorization and Validity. Each Borrower has the corporate or
other power and authority and legal right to execute and deliver the Loan
Documents and to perform its obligations thereunder. The execution and delivery
by each of the Borrowers of the Loan Documents and the performance of their
obligations thereunder have been duly authorized by proper corporate
proceedings, and the Loan Documents to which they are a party constitute legal,
valid and binding obligations of the Borrowers enforceable against the Borrowers
in accordance with their terms, except as enforceability may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally and by equitable principles affecting the availability of
specific performance and other remedies.
5.3 No Conflict; Government Consent. Neither the execution and delivery
by the Borrowers of the Loan Documents, nor the consummation of the transactions
therein contemplated, nor compliance with the provisions thereof will violate
any law, rule, regulation, order, writ, judgment, injunction, decree or award
binding on the Company or any of its Subsidiaries or the Company's or any
Subsidiary's articles of incorporation or by-laws or the provisions of any
indenture, instrument or agreement to which the Company or any of its
Subsidiaries is a party or is subject, or by which it, or its Property, is
bound, or conflict with or constitute a default thereunder, or result in the
creation or imposition of any Lien (other than any Lien permitted by Section
6.14) in, of or on the Property of the Company or a Subsidiary pursuant to the
terms of any such indenture, instrument or agreement, except for any such
violation, conflict or default as would not reasonably be expected to have a
Material Adverse Effect. No order, consent, approval, license, authorization, or
validation of, or filing, recording or registration with, or exemption by, or
other action in respect of any governmental or public body or authority, or any
subdivision thereof, is required to authorize, or is required in connection with
the execution, delivery and performance of, or the legality, validity, binding
effect or enforceability of, any of the Loan Documents.
5.4 Financial Statements. The September 30, 1996 consolidated financial
statements of Rockwell International and its Subsidiaries heretofore delivered
to the Lenders were prepared in accordance with generally accepted accounting
principles in effect on the date such statements were prepared and fairly
present the consolidated financial condition and operations of Rockwell
International and its Subsidiaries at such date and the consolidated results of
their operations for the period then ended. The pro forma consolidated financial
statements of the Company and its Subsidiaries included in the Form 10
heretofore delivered to the Lenders fairly present the pro forma consolidated
financial condition of the Company and its Subsidiaries after giving effect to
the Spin-Off in accordance with generally accepted accounting principles and
were prepared in accordance with the applicable requirements of Rule 11-02 of
the Securities and Exchange Commission's Regulation S-X, including without
limitation containing reasonable assumptions and giving appropriate effect to
those assumptions. The projected statements of income and cash flows of the
Company contained in the Confidential Information Memorandum dated July 1997
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delivered to the Lenders (the "Projections") are based on estimates and
assumptions considered reasonable by the Company's management and the best
information available to the Company's management at the time made, and use
information consistent with the plans of the Company. However, the Projections
are inherently subject to significant business, economic and competitive
uncertainties and contingencies, all of which are difficult to predict and many
of which are beyond the control of the Company. Accordingly, there can be no
assurance that the projected results will be realized or that actual results
will not be significantly lower or higher than those projected.
5.5 Material Adverse Change. As of the Closing Date, since September
30, 1996, there has been no change in the business, Property, prospects,
condition (financial or otherwise) or results of operations of the Company and
its Subsidiaries, the Automotive Business (as described in the Form 10) or, so
long as Rockwell International is a Guarantor, of Rockwell International and its
subsidiaries which could reasonably be expected to have a Material Adverse
Effect.
5.6 Taxes. The Company and its Subsidiaries have filed all United
States federal tax returns and all other tax returns which are required to be
filed and have paid all taxes shown as due pursuant to said returns or pursuant
to any assessment received by the Company or any of its Subsidiaries, except
such taxes, if any, as are being contested in good faith and as to which
adequate reserves have been provided in accordance with Agreement Accounting
Principles and as to which no Lien (other than as permitted by Section 6.14)
exists and such failures to file or pay, if any, as would not reasonably be
expected to have a Material Adverse Effect. No tax liens have been filed and no
claims are being asserted with respect to any such taxes, other than as
permitted by Section 6.14. The charges, accruals and reserves on the books of
the Company and its Subsidiaries in respect of any taxes or other governmental
charges are adequate.
5.7 Litigation and Contingent Obligations. Except as set forth on
Schedule 5.7 hereto, there is no litigation, arbitration or proceeding pending
or, to the knowledge of any of their executive officers, any governmental
investigation or inquiry pending or any litigation, arbitration, governmental
investigation, proceeding or inquiry threatened against or affecting the Company
or any of its Subsidiaries which could reasonably be expected to have a Material
Adverse Effect or which seeks to prevent, enjoin or delay the making of the
Loans or Advances. Other than any liability incident to such litigation,
arbitration or proceedings, the Company and its Subsidiaries have no material
contingent obligations not provided for or disclosed in the financial statements
referred to in Section 5.4.
5.8 Subsidiaries. Schedule 5.8 hereto contains an accurate list of all
Subsidiaries of the Company as of the date of this Agreement, setting forth
their respective jurisdictions of incorporation and the percentage of their
respective capital stock owned by the Company or other Subsidiaries. All of the
issued and outstanding shares of capital stock of such Subsidiaries held by the
Company have been duly authorized and issued and are fully paid and
non-assessable.
5.9 ERISA. Each member of the Controlled Group has fulfilled its
obligations under the minimum funding standards of ERISA and the Code with
respect to each Plan. Each member of the Controlled Group is in compliance with
the applicable provisions of ERISA and the Code with respect to each Plan except
where such non compliance would not have a Material Adverse Effect. Each Plan
complies in all material respects with all applicable requirements of law and
regulations, no Reportable Event which has or may result in any material
liability has occurred with respect to any Plan, and no steps have been taken to
reorganize or terminate any Single Employer Plan. No member of the Controlled
Group has (i) sought a waiver of the minimum funding standard under Section 412
of the Code in respect of any Plan, (ii) failed to make any contribution or
payment to any Single Employer Plan or Multiemployer Plan, or made any amendment
to any Plan, which has resulted or could result in the imposition of a Lien or
the
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posting of a bond or other security under ERISA or the Code or (iii) incurred
any material, actual liability under Title IV of ERISA other than a liability to
the PBGC for premiums under Section 4007 of ERISA.
5.10 Accuracy of Information. No information, exhibit or report
furnished by the Company or any of its Subsidiaries in writing to the
Administrative Agent or to any Lender in connection with the negotiation of the
Loan Documents, including without limitation the Form 10, contained any material
misstatement of fact or omitted to state a material fact or any fact necessary
to make the statements contained therein not misleading in light of the
circumstances in which made, as of the date thereof.
5.11 Regulation U. Margin Stock constitutes less than 25% of those
assets of the Company and its Subsidiaries which are subject to any limitation
on sale, pledge, or other restriction hereunder.
5.12 Material Agreements. Neither the Company nor any Subsidiary is a
party to any agreement or instrument or subject to any charter or other
corporate restriction which could reasonably be expected to have a Material
Adverse Effect. Neither the Company nor any Subsidiary is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement to which it is a party (including any
agreement or instrument evidencing or governing Indebtedness), which default
could reasonably be expected to have a Material Adverse Effect.
5.13 Compliance With Laws. The Company and its Subsidiaries have
complied with all applicable statutes, rules, regulations, orders and
restrictions of any domestic or foreign government or any instrumentality or
agency thereof, having jurisdiction over the conduct of their respective
businesses or the ownership of their respective Property if failure to comply
could reasonably be expected to have a Material Adverse Effect.
5.14 Plan Assets; Prohibited Transactions. The Company and its
Subsidiaries have not engaged in any prohibited transaction within the meaning
of Section 4.06 of ERISA or Section 4975 of the Code which could result in any
material liability; and neither the execution of this Agreement nor the making
of Loans (assuming that the Lenders do not fund any of the Loans with any "plan
assets" as defined above) hereunder give rise to a non-exempt prohibited
transaction within the meaning of Section 406 of ERISA or Section 4975 of the
Code.
5.15 Environmental Matters. In the ordinary course of its business, the
officers of the Company consider the effect of Environmental Laws on the
business of the Company and its Subsidiaries, in the course of which they
identify and evaluate potential risks and liabilities accruing to the Company
and its Subsidiaries due to Environmental Laws. On the basis of this
consideration, the Company has reasonably concluded that Environmental Laws
cannot reasonably be expected to have a Material Adverse Effect. Neither the
Company nor any Subsidiary has received any notice to the effect that its
operations are not in material compliance with any of the requirements of
applicable Environmental Laws or are the subject of any federal or state
investigation evaluating whether any remedial action is needed to respond to a
release of any toxic or hazardous waste or substance into the environment, which
non-compliance or remedial action could reasonably be expected to have a
Material Adverse Effect.
5.16 Investment Company Act. No Borrower is an "investment company" or
a company "controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
5.17 Public Utility Holding Company Act. No Borrower is a "holding
company" or a "subsidiary company" of a "holding company", or an "affiliate" of
a "holding company" or of a "subsidiary
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company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
5.18 Foreign Subsidiary Borrowers. (a) Upon completion of the Spin-Off,
each Foreign Subsidiary Borrower will be a direct or indirect Wholly-Owned
Subsidiary of the Company (excluding director qualifying shares); and
(b) Each Foreign Subsidiary Borrower will have, upon becoming a
party hereto, all right and authority to enter into this Agreement and each
other Loan Document to which it is a party, and to perform all of its
obligations under this and each other Loan Document to which it is a party; all
of the foregoing actions will have been taken prior to any request for Loans by
such Borrower, duly authorized by all necessary action on the part of such
Borrower, and when such Foreign Subsidiary Borrower becomes a party hereto, this
Agreement and each other Loan Document to which it is a party will constitute
valid and binding obligations of such Borrower enforceable in accordance with
their respective terms except as such terms may be limited by the application of
bankruptcy, moratorium, insolvency and similar laws affecting the rights of
creditors generally and by equitable principles affecting the availability of
specific performance and other remedies.
ARTICLE VI
COVENANTS
During the term of this Agreement, unless the Required Lenders shall
otherwise consent in writing:
6.1 Financial Reporting. The Company will maintain, for itself and each
Subsidiary, a system of accounting enabling it to provide consolidated financial
statements for the Company and each Subsidiary in accordance with Agreement
Accounting Principles and furnish to the Lenders:
(i) Within 120 days after the close of each of its fiscal years, an
unqualified (except for qualifications relating to changes in
accounting principles or practices reflecting changes in generally
accepted accounting principles and required or approved by the
Company's independent certified public accountants) audit report
certified by nationally recognized independent certified public
accountants certifying that the Company's consolidated financial
statements are fairly stated in all material respects, in accordance
with Agreement Accounting Principles for itself and the Subsidiaries,
including balance sheets as of the end of such period, related income
statements, and statements of cash flows, accompanied by a certificate
of said accountants that, in the course of their examination necessary
for their certification of the foregoing, they have obtained no
knowledge of any Default or Unmatured Default, or if, in the opinion of
such accountants, any Default or Unmatured Default shall exist, stating
the nature and status thereof.
(ii) Within 60 days after the close of the first three quarterly
periods of each of its fiscal years, for itself and the Subsidiaries,
consolidated unaudited balance sheets as at the close of each such
period and related income statement and a statement of cash flows for
the period from the beginning of such fiscal year to the end of such
quarter, all certified by a Designated Financial Officer of the
Company.
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(iii) Together with the financial statements required under
Sections 6.1(i) and (ii), a compliance certificate in substantially the
form of Exhibit C hereto signed by a Designated Financial Officer of
the Company showing the calculations necessary to determine compliance
with this Agreement and stating that no Default or Unmatured Default
exists, or if any Default or Unmatured Default exists, stating the
nature and status thereof. The Company may, at its option, satisfy its
obligations to deliver financial statements under Section 6.1(i) and
(ii) hereof by delivery of its Form 10-K and 10-Q, respectively, for
any relevant fiscal year or quarterly period, as filed by the Company
with the Securities and Exchange Commission.
(iv) As soon as possible and in any event within 10 days after (x)
receipt by the Company, and (y) a determination is made by the Company
concerning a Material Adverse Effect with respect thereto, a copy of
(a) any notice or claim to the effect, that the Company or any of its
Subsidiaries is or may be liable to any Person as a result of the
release by the Company, any of its Subsidiaries, or any other Person of
any toxic or hazardous waste or substance into the environment, (b) any
notice alleging any violation of any federal, state or local
environmental, health or safety law or regulation by the Company or any
of its Subsidiaries, and (c) any notice of occurrence of any Reportable
Event, which, in each case, could reasonably be expected to have a
Material Adverse Effect.
(v) Promptly upon the furnishing thereof to the shareholders of the
Company, copies of all financial statements, reports and proxy
statements so furnished.
(vi) Promptly upon the filing thereof, copies of all registration
statements and annual, quarterly, monthly or other reports which the
Company or any of its Subsidiaries files with the Securities and
Exchange Commission, including without limitation all reports on Form
10-K, 10-Q and 8-K, and which are not otherwise delivered to the
Lenders hereunder.
(vii) Such other information (including non-financial information)
concerning the Company and its Subsidiaries as the Administrative Agent
or any Lender may from time to time reasonably request.
6.2 Use of Proceeds. The Company will, and will cause each Subsidiary
to, use the proceeds of the Advances to make a special payment or distribution
to Rockwell International in the approximate amount of $450,000,000 in
connection with the Spin-Off as described in the Form 10, for working capital or
general corporate purposes (including Acquisitions and Investments), and to
repay outstanding Advances. None of the proceeds of any of the Advances made
under this Agreement will be used, whether directly or indirectly, in violation
of any applicable law or regulation, including without limitation Regulations G,
T, U or X.
6.3 Notice of Default. The Company will give prompt notice in writing
to the Agents of the occurrence of any Default or Unmatured Default.
6.4 Conduct of Business. The Company will, and will cause each
Subsidiary to, carry on and conduct its business in substantially the same
fields of enterprise as it is presently conducted and to do all things necessary
to remain duly incorporated, validly existing and in good standing in its
jurisdiction of organization (subject to Sections 6.11, 6.12 and 6.13) and
maintain all requisite authority to conduct its business in each jurisdiction in
which its business is conducted, except in any such case where such failure
would not reasonably be expected to have a Material Adverse Effect.
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6.5 Taxes. The Company will, and will cause each Subsidiary to, timely
file complete and correct United States federal and applicable foreign, state
and local tax returns required by law and pay when due all taxes, assessments
and governmental charges and levies upon it or its income, profits or Property,
except those which are being contested in good faith by appropriate proceedings
and with respect to which adequate reserves have been set aside in accordance
with Agreement Accounting Principles and those which the failure to file or pay
would not reasonably be expected to have a Material Adverse Effect.
6.6 Insurance. The Company will, and will cause each Subsidiary to,
maintain with financially sound and reputable insurance companies insurance on
their Property in such amounts (with such customary deductibles, exclusions and
self insurance) and covering such risks as management of the Company reasonably
considers consistent with sound business practice, and the Company will furnish
to any Lender upon request such information as to the insurance carried as may
be reasonably requested by either Agent on behalf of such Lender.
6.7 Compliance with Laws. The Company will, and will cause each
Subsidiary to, comply with all laws, rules, regulations, orders, writs,
judgments, injunctions, decrees or awards to which it may be subject except for
such noncompliance as would not reasonably be expected to have a Material
Adverse Effect.
6.8 Maintenance of Properties. The Company will, and will cause each
Subsidiary to, do all things reasonably necessary to maintain, preserve, protect
and keep its material Property in good repair, working order and condition
(ordinary wear and tear excepted), and make all reasonably necessary and proper
repairs, renewals and replacements.
6.9 Inspection. The Company will, and will cause each Subsidiary to,
permit the Administrative Agent and the Documentation Agent, by their respective
representatives and agents, and any reasonable number of representatives of the
Lenders, to inspect (at no cost to any Borrower) any of the Property, corporate
books and financial records of the Company and each Subsidiary, to examine and
make copies of the books of accounts and other financial records of the Company
and each Subsidiary, and to discuss the affairs, finances and accounts of the
Company and each Subsidiary with, and to be advised as to the same by, their
respective officers at such reasonable times and intervals as the Administrative
Agent or the Documentation Agent, as the case may be, may designate.
6.10 Subsidiary Indebtedness. The Company will not permit any
Subsidiary to create, incur or suffer to exist any Indebtedness, except:
(i) The Loans.
(ii) Indebtedness existing as of the Distribution Date in an
aggregate principal outstanding amount not to exceed $50,000,000.
(iii) Indebtedness of any Subsidiary to the Company or any other
Subsidiary.
(iv) Indebtedness of any Person that becomes a Subsidiary after
the date hereof; provided that such Indebtedness existed at the time
such Person becomes a Subsidiary and is not created in contemplation of
or in connection with such Person becoming a Subsidiary.
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(v) any refunding or refinancing of any Indebtedness referred to
in clauses (i) through (iv) above, provided that any such refunding or
refinancing of Indebtedness referred to in clause (ii) or (iv) does not
increase the principal amount thereof.
(vi) Other Indebtedness; provided that, at the time of the
creation, incurrence or assumption of such other Indebtedness and after
giving effect thereto, the aggregate amount of all such other
Indebtedness of the Subsidiaries does not exceed an amount equal to 50%
of Net Worth at such time.
6.11 Merger. The Company will not, nor will it permit any Subsidiary
to, merge or consolidate with or into any other Person, except that, provided
that no Default or Unmatured Default shall have occurred and be continuing or
would result therefrom on a pro forma basis reasonably acceptable to the Agents,
the Company may merge or consolidate with any other U.S. corporation and each
Subsidiary may merge or consolidate with any other Person, provided, further,
that (i) in the case of any such merger or consolidation involving the Company,
the Company is the surviving corporation and (ii) in the case of any such merger
or consolidation involving a Foreign Subsidiary Borrower, the surviving
corporation assumes all of such Borrower's obligations under this Agreement and
remains or becomes a Foreign Subsidiary Borrower.
6.12 Sale of Assets. The Company will not, nor will it permit any
Subsidiary to, lease, sell or otherwise dispose of its Property, to any other
Person (other than the Company or a Wholly-Owned Subsidiary), except:
(i) Sales of inventory, marketable securities and cash equivalents
in the ordinary course of business and sales or other dispositions of
Margin Stock at any time.
(ii) Sales or other dispositions of accounts receivable payable
within 90 days of the date of sale.
(iii) Sales, leases or other dispositions of obsolete Property or
Property no longer used or useful in the business of the Company or its
Subsidiaries.
(iv) Sales or other dispositions of Property that is replaced
within eighteen months of such sale or other disposition with other
Property which has a fair market value not materially less than the
Property sold or otherwise disposed of.
(v) Sales or other dispositions of motor vehicles, office or other
equipment in the ordinary course of business and not material in
aggregate amount.
(vi) Sales of financial instruments of the Company and its
Subsidiaries existing as of the Distribution Date that do not in the
aggregate have a value in excess of $30,000,000.
(vii) Other leases, sales or other dispositions of its Property
that, together with all other Property of the Company and its
Subsidiaries previously leased, sold or disposed of (other than as
provided in clauses (i) through (vi) above) as permitted by this
Section during the twelve-month period ending with the month prior to
the month in which any such lease, sale or other disposition occurs, do
not constitute a Substantial Portion of the Property of the Company and
its Subsidiaries.
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6.13 Investments and Acquisitions. The Company will not, nor will it
permit any Subsidiary to, make or suffer to exist any Investments (including
without limitation, loans and advances to, and other Investments in,
Subsidiaries which are not Wholly-Owned Subsidiaries), or commitments therefor,
or make any Acquisition of any Person, if, after giving effect to such
Investment or Acquisition, on a pro forma basis (a) any Default or Unmatured
Default shall have occurred and be continuing or (b) more than 30% of the
projected consolidated net income of the Company and its Subsidiaries
(determined in accordance with Agreement Accounting Principles) for the twelve
month period following such Investment or Acquisition will be derived from
fields of enterprise which are not substantially the same as those conducted by
the Automotive Business (as defined in the Form 10) operations of Rockwell
International as of the Distribution Date.
6.14 Liens. The Company will not, nor will it permit any Subsidiary to,
create, incur, or suffer to exist any Lien in, of or on the Property of the
Company or any of its Subsidiaries, except:
(i) Liens for taxes, assessments or governmental charges or levies
on its Property if the same shall not at the time be delinquent or
thereafter can be paid without penalty, or are being contested in good
faith and by appropriate proceedings and for which adequate reserves in
accordance with Agreement Accounting Principles shall have been set
aside on its books.
(ii) Liens imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the ordinary course
of business which secure payment of obligations not more than 90 days
past due or which are being contested in good faith by appropriate
proceedings and for which adequate reserves shall have been set aside
on its books.
(iii) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions, or other
social security or retirement benefits, or similar legislation.
(iv) Utility easements, building restrictions and such other
encumbrances or charges against real property as are of a nature
generally existing with respect to properties of a similar character
and which do not in any material way affect the marketability of the
same or interfere with the use thereof in the business of the Company
or the Subsidiaries.
(v) Liens existing on the Distribution Date on assets of
Subsidiaries of the Company, in the case of any Person that becomes a
Subsidiary on the Distribution Date, and not created in contemplation
of the Spin-Off, provided that no increase in the principal amount
secured thereby shall be permitted.
(vi) Liens in favor of the Company or any Lien granted by any
Subsidiary in favor of a Wholly-Owned Subsidiary.
(vii) Liens existing on such Property at the time of its
acquisition (directly or indirectly) (other than any such Lien created
in contemplation of such acquisition).
(viii) Liens on the Property of a Person that is merged with or
into the Company or a Subsidiary or of a Person that becomes a
Subsidiary after the Closing Date (in each case to the extent such
merger, Acquisition or Investment is otherwise permitted by this
Agreement), provided that (A) such Liens existed at the time such
Person was so merged or became a Subsidiary and were not created in
anticipation of any such transaction, (B) any such Lien does not by its
terms
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cover any additional property or assets acquired after the time such
Person was so merged or became a Subsidiary, and (C) any such Lien does
not by its terms secure any Indebtedness other than Indebtedness
existing immediately prior to the time such Person was so merged or
became a Subsidiary.
(ix) Liens resulting from the deposit of funds or evidences of
Indebtedness in trust for the purpose of defeasing Indebtedness of the
Company or any Subsidiary.
(x) Bank setoff rights arising in the ordinary course of business.
(xi) Deposits or Liens to secure the performance (and not securing
any Indebtedness) of statutory obligations, surety and appeal bonds,
performance bonds and other obligations of like nature incurred in the
ordinary course of business.
(xii) Judgment or other similar Liens arising in connection with
legal proceedings so long as the execution or other enforcement thereof
is effectively stayed and the claims secured thereby are being
contested in good faith by appropriate proceedings and the Company or
such Subsidiary, as the case may be, has established appropriate
reserves against such claims in accordance with Agreement Accounting
Principles.
(xiii) Any interest or title of a lessor in the property subject
to any Capitalized Lease Obligation (to the extent such Capitalized
Lease Obligation is otherwise permitted by this Agreement) or operating
lease.
(xiv) Liens arising under the Loan Documents, including Section
2.19.7.
(xv) Liens arising in connection with sales or other dispositions
of accounts receivable permitted by Section 6.12(ii).
(xvi) Any extension, renewal or replacement (or successive
extension, renewal, or replacement) in whole or in part, of any Lien
referred to in the foregoing clauses (i) through (xv) inclusive;
provided, however, that the principal amount of Indebtedness secured
thereby shall not exceed the principal amount of Indebtedness so
secured at the time of such extension, renewal or replacement, and that
such extension, renewal or replacement shall be limited to all or a
part of the property which secured the Lien so extended, renewed or
replaced (plus improvements on such property).
(xvii) Liens securing Indebtedness which are not otherwise
permitted by the foregoing clauses of this Section 6.14, provided that
the aggregate outstanding principal amount of the Indebtedness secured
by all such Liens shall not exceed 50% of Net Worth:
provided, however, that the restrictions set forth in this Section 6.14 shall
not apply to Margin Stock if and to the extent that the value of the Margin
Stock with respect to which the rights of the Company and its Subsidiaries are
restricted by this Section 6.14 would otherwise exceed 25% of the value of all
assets with respect to which the rights of the Company and its Subsidiaries are
restricted by this Section 6.14.
6.15 Affiliates. The Company will not, and will not permit any
Subsidiary to, enter into any transaction (including, without limitation, the
purchase or sale of any Property or service) with, or make any payment or
transfer to, any Affiliate except in the ordinary course of business and
pursuant to the
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reasonable requirements of the Company's or such Subsidiary's business and upon
fair and reasonable terms (taken as a whole) no less favorable to the Company or
such Subsidiary than the Company or such Subsidiary would obtain in a comparable
arms-length transaction.
6.16 Contingent Obligations. The Company will not, nor will it permit
any Subsidiary to, make or suffer to exist any Contingent Obligation (including,
without limitation, any Contingent Obligation with respect to the obligations of
a Subsidiary) in respect of any Indebtedness, except (i) by endorsement of
instruments for deposit or collection in the ordinary course of business; (ii)
Contingent Obligations of any Subsidiary with respect to Indebtedness of another
Subsidiary or the Company and Contingent Obligations of the Company with respect
to Indebtedness of a Subsidiary; (iii) Contingent Obligations of the Company
under Article IX; (iv) Contingent Obligations existing on the Distribution Date;
(v) Contingent Obligations with respect to the Facility Letters of Credit; (vi)
Contingent Obligations under Rate Hedging Agreements; (vii) Contingent
Obligations with respect to customary indemnifications and purchase price
adjustment obligations incurred in connection with mergers, Acquisitions,
Investments and sales of assets (in each case to the extent such merger,
Acquisition, Investment or sale of assets is otherwise permitted by this
Agreement); (viii) Contingent Obligations with respect to Indebtedness permitted
by Section 6.10; (ix) Contingent Obligations with respect to customary product
and service warranties; (x) Contingent Obligations with respect to director's,
officer's and other indemnities set forth in any Borrower's or Subsidiary's
organizational documents as in effect from time to time; and (xi) other
Contingent Obligations, provided that the Indebtedness and other liabilities
guaranteed or supported thereby does not exceed in the aggregate for the Company
and all of its Subsidiaries an amount equal to 50% of Net Worth.
6.17 Debt Ratio. The Company shall not permit its Debt Ratio,
calculated on a consolidated basis for the Company and its Subsidiaries, to
exceed 3.0 to 1.0 on the last day of any fiscal quarter.
6.18 Net Worth. The Company shall maintain, on the last day of each
month after the Distribution Date, a Net Worth at least equal to the greater of
(a) 70% of the Net Worth of the Company and its Subsidiaries on the date the
Spin-Off is completed (after giving effect thereto) and (b) $150,000,000.
ARTICLE VII
DEFAULTS
The occurrence of any one or more of the following events shall
constitute a Default:
7.1 Any representation or warranty made or deemed made by or on behalf
of the Company or its Subsidiaries to the Lenders or the Agents in any Loan
Document, in connection with any Loan or Facility Letter of Credit, or in any
certificate or information delivered in writing in connection with any Loan
Document or a representation or warranty made or deemed made by or on behalf of
Rockwell International to the Lenders or the Agents in the Rockwell
International Guaranty or in any certificate or information delivered in writing
in connection with any Loan Document shall be false in any material respect on
the date as of which made.
7.2 Nonpayment of principal of any Loan when due, or nonpayment of
interest on any Loan or of any facility fee within three Business Days after the
same becomes due, or nonpayment of any other obligations under any of the Loan
Documents within ten days after the same becomes due.
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7.3 The breach by any Borrower of any of the terms or provisions of
Sections 6.3, 6.10, 6.11, 6.12, 6.13, 6.15, 6.16, 6.17 or 6.18.
7.4 The breach by any Borrower (other than a breach which constitutes a
Default under Section 7.1, 7.2 or 7.3) of any of the terms or provisions of this
Agreement or any other Loan Document which is not remedied within 30 days after
written notice from any Agent.
7.5 Failure of the Company or any of its Subsidiaries or any Guarantor
to pay when due any Indebtedness or Rate Hedging Obligations aggregating in
excess of $20,000,000 ("Material Indebtedness"); or the default by the Company
or any of its Subsidiaries or any Guarantor in the performance of any term,
provision or condition (other than such a term, provision or condition to or for
the benefit of a Lender or Affiliate thereof restricting the sale, pledge or
other disposition by the Company or any Subsidiary of Margin Stock having a
value in excess of 25% of the value of the assets referred to in Section
221.2(g)(2)(i) of Regulation U unless the Board of Governors of the Federal
Reserve System or its staff advises the Agents in writing that the existence of
this Section 7.5 without this parenthetical exception would not in such
circumstances render this Agreement "secured directly or indirectly by margin
stock" within the meaning of its Regulation U) contained in any agreement under
which any such Material Indebtedness was created or is governed, or any other
event shall occur or condition exist, the effect of which is to cause, or to
permit the holder or holders of such Material Indebtedness to cause, such
Material Indebtedness to become due prior to its stated maturity; or any
Material Indebtedness of the Company or any of its Subsidiaries or any Guarantor
shall be declared to be due and payable or required to be prepaid or repurchased
(other than by a regularly scheduled payment) prior to the stated maturity
thereof; or the Company or any of its Subsidiaries or any Guarantor shall not
pay, or admit in writing its inability to pay, its debts generally as they
become due.
7.6 The Company, any of its Significant Subsidiaries, any other
Borrower or any Guarantor shall (i) have an order for relief entered with
respect to it under the Federal bankruptcy laws as now or hereafter in effect,
(ii) make an assignment for the benefit of creditors, (iii) apply for, seek,
consent to, or acquiesce in, the appointment of a receiver, custodian, trustee,
examiner, liquidator or similar official for it or any Substantial Portion of
its Property, (iv) institute any proceeding seeking an order for relief under
the Federal bankruptcy laws as now or hereafter in effect or seeking to
adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up,
liquidation, reorganization, arrangement, adjustment or composition of it or its
debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors or fail to file an answer or other pleading denying the
material allegations of any such proceeding filed against it, (v) take any
corporate action to authorize or effect any of the foregoing actions set forth
in this Section 7.6 or (vi) fail to contest in good faith any appointment or
proceeding described in Section 7.7.
7.7 Without its application, approval or consent, a receiver, trustee,
examiner, liquidator or similar official shall be appointed for the Company, any
of its Significant Subsidiaries, any other Borrower or any Guarantor or any
Substantial Portion of their respective Property, or a proceeding described in
Section 7.6(iv) shall be instituted against the Company, any of its Significant
Subsidiaries, any other Borrower or any Guarantor and such appointment continues
undischarged or such proceeding continues undismissed or unstayed for a period
of 60 consecutive days.
7.8 Any court, government or governmental agency shall without
appropriate compensation condemn, seize or otherwise appropriate, or take
custody or control of (each a "Condemnation"), all or any portion of the
Property of the Company and its Subsidiaries or any Guarantor which, when taken
together with all other Property of the Company and its Subsidiaries or any
Guarantor so condemned, seized,
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appropriated, or taken custody or control of, during the twelve-month period
ending with the month in which any such Condemnation occurs, constitutes a
Substantial Portion and is reasonably likely to have a Material Adverse Effect.
7.9 The Company or any of its Subsidiaries shall fail within 90 days
to pay, bond or otherwise discharge any judgment or order for the payment of
money in excess of $20,000,000, which is not stayed on appeal.
7.10 Any member of the Controlled Group shall fail to pay when due an
amount or amounts aggregating in excess of $20,000,000 which it shall have
become liable to pay under Title IV of ERISA; or notice of intent to terminate a
Single Employer Plan with Unfunded Liabilities in excess of $20,000,000 (a
"Material Plan") shall be filed under Section 4041(c) of ERISA by any member of
the Controlled Group, any plan administrator or any combination of the
foregoing; or PBGC shall institute proceedings under which it is likely to
prevail under Title IV of ERISA to terminate, to impose liability (other than
for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee
to be appointed to administer any Material Plan; or a condition shall exist by
reason of which the PBGC would be entitled to obtain a decree adjudicating that
any Material Plan must be terminated; or there shall occur a complete or partial
withdrawal from, or a default, within the meaning of Section 4219(c)(5) of
ERISA, with respect to, one or more Multiemployer Plans which causes one or more
members of the Controlled Group to incur a current payment obligation in excess
of $20,000,000.
7.11 The Company or any of its Subsidiaries shall be the subject of any
proceeding or investigation pertaining to the release by the Company or any of
its Subsidiaries, or any other Person of any toxic or hazardous waste or
substance into the environment, or any violation of any federal, state or local
environmental, health or safety law or regulation, which, in either case, could
reasonably be expected to have a Material Adverse Effect.
7.12 The Company Guaranty or the Rockwell International Guaranty shall
fail to remain in full force or effect or any action shall be taken to
discontinue or to assert the invalidity or unenforceability of the Company
Guaranty or the Rockwell International Guaranty, or any Guarantor shall fail to
observe or comply with any of the terms or provisions of any guaranty to which
it is a party, or any Guarantor denies that it has any further liability under
any guaranty to which it is a party, or gives notice to such effect; provided,
however, that this Section 7.12 shall not apply to the Rockwell International
Guaranty or to Rockwell International as a Guarantor after termination of the
Rockwell International Guaranty in accordance with the terms thereof.
7.13 The occurrence of any Change in Control.
7.14 Unless the Borrowers have complied with the provisions of Section
2.9.10 on or before December 31, 1997, the Spin-Off shall not be completed in
all material respects on or before December 31, 1997 substantially in accordance
with the terms of the Spin-Off described in the Form 10, including without
limitation the transfer of substantially all assets to the Company as described
in the Form 10 and the satisfaction of substantially all conditions precedent to
the Distribution as provided in the Distribution Agreement, a copy of which has
previously been delivered to the Lenders prior to the Closing Date, provided
that if the Tax Ruling (as defined in the Form 10) is not received on a timely
basis a satisfactory favorable tax opinion may be substituted in place thereof.
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ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1 Acceleration. (a) If any Default described in Section 7.6 or 7.7
occurs, (i) the obligations of the Lenders to make Loans hereunder and the
obligations of the Issuers to issue Facility Letters of Credit shall
automatically terminate and the Obligations shall immediately become due and
payable without presentment, demand, protest or notice of any kind, all of which
the Borrowers hereby expressly waive and without any election or action on the
part of either Agent or any Lender and (ii) each Borrower will be and become
thereby unconditionally obligated, without the need for demand or the necessity
of any act or evidence, to deliver to the Administrative Agent, at its address
specified pursuant to Article XIV, for deposit into the Letter of Credit
Collateral Account, an amount (the "Collateral Shortfall Amount") equal to the
excess, if any, of
(A) 100% of the sum of the aggregate maximum amount remaining available
to be drawn under the Facility Letters of Credit requested by such Borrower
(assuming compliance with all conditions for drawing thereunder) issued by an
Issuer and outstanding as of such time, over
(B) the amount on deposit for such Borrower in the Letter of Credit
Collateral Account at such time that is free and clear of all rights and claims
of third parties (other than the Agents and the Lenders) and that has not been
applied by the Lenders against the Obligations of such Borrower.
(b) If any Default occurs and is continuing (other than a Default
described in Section 7.6 or 7.7), (i) the Required Lenders may terminate or
suspend the obligations of the Lenders to make Loans and the obligation of the
Issuers to issue Facility Letters of Credit hereunder, or declare the
Obligations to be due and payable, or both, whereupon (if so declared) the
Obligations shall become immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which the Borrowers hereby
expressly waive and (ii) the Required Lenders may, upon notice delivered to the
Borrowers with outstanding Facility Letters of Credit and in addition to the
continuing right to demand payment of all amounts payable under this Agreement,
make demand on each such Borrower to deliver (and each such Borrower will,
forthwith upon demand by the Required Lenders and without necessity of further
act or evidence, be and become thereby unconditionally obligated to deliver), to
the Administrative Agent, at its address specified pursuant to Article XIV, for
deposit into the Letter of Credit Collateral Account an amount equal to the
Collateral Shortfall Amount payable by such Borrower.
(c) If at any time while any Default is continuing, the Administrative
Agent determines that the Collateral Shortfall Amount at such time is greater
than zero, the Administrative Agent may make demand on the Borrowers with
outstanding Facility Letters of Credit to deliver (and each such Borrower will,
forthwith upon demand by the Administrative Agent and without necessity of
further act or evidence, be and become thereby unconditionally obligated to
deliver), to the Administrative Agent as additional funds to be deposited and
held in the Letter of Credit Collateral Account an amount equal to such
Collateral Shortfall Amount payable by such Borrower at such time.
(d) The Administrative Agent may at any time or from time to time after
funds are deposited in the Letter of Credit Collateral Account, apply such funds
to the payment of the Obligations of the relevant Borrowers and any other
amounts as shall from time to time have become due and payable by the relevant
Borrowers to the Lenders under the Loan Documents.
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(e) Neither the Borrowers nor any Person claiming on behalf of or
through the Borrowers shall have any right to withdraw any of the funds held in
the Letter of Credit Collateral Account. After all of the Obligations have been
indefeasibly paid in full, any funds remaining in the Letter of Credit
Collateral Account shall be returned by the Administrative Agent to the
applicable Borrower(s) or paid to whoever may be legally entitled thereto at
such time.
(f) The Administrative Agent shall exercise reasonable care in the
custody and preservation of any funds held in the Letter of Credit Collateral
Account and shall be deemed to have exercised such care if such funds are
accorded treatment substantially equivalent to that which the Administrative
Agent accords its own property, it being understood that the Administrative
Agent shall not have any responsibility for taking any necessary steps to
preserve rights against any Persons with respect to any such funds.
8.2 Amendments.
8.2.1 Subject to the provisions of this Article VIII, the Required
Lenders (or the Documentation Agent with the consent in writing of the Required
Lenders) and the Borrowers may enter into agreements supplemental hereto for the
purpose of adding or modifying any provisions to the Loan Documents or changing
in any manner the rights of the Lenders or the Borrowers hereunder or waiving
any Default hereunder; provided, however, that no such supplemental agreement
shall, without the consent of each Lender affected thereby:
(a) Extend the final maturity of any Loan, Note or Reimbursement
Obligation or forgive all or any portion of the principal amount thereof, or
reduce the rate or extend the time of payment of interest or fees thereon.
(b) Reduce the percentage specified in the definition of Required
Lenders.
(c) Extend the Facility Termination Date, or reduce the amount or
extend the payment date for, the mandatory payments required under Section 2.9,
or increase the amount of the Multicurrency Commitment or Revolving Credit
Commitment of any Lender hereunder, or permit any Borrower to assign its rights
under this Agreement.
(d) Amend this Section 8.2.1.
(e) Release any Guarantor or reduce any obligation of any Guarantor
in its capacity as a guarantor of the Obligations, other than the release of
Rockwell International from the Rockwell International Guaranty in accordance
with the provisions of the Rockwell International Guaranty.
8.2.2 In addition to amendments effected pursuant to the foregoing,
Schedule 3 may be amended as follows:
(i) Schedule 3 will be amended to add Subsidiaries of the Company
as additional Foreign Subsidiary Borrowers upon (A) execution and
delivery by the Company, any such Foreign Subsidiary Borrower and the
Documentation Agent, of a Joinder Agreement providing for any such
Subsidiary to become a Foreign Subsidiary Borrower, and (B) delivery to
the Documentation Agent of (a) a Foreign Subsidiary Opinion in respect
of such additional Foreign Subsidiary Borrower and (b) such other
documents with respect thereto as the Documentation Agent shall
reasonably request.
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(ii) Schedule 3 will be amended to remove any Subsidiary as a
Foreign Subsidiary Borrower upon (A) written notice by the Company to
the Administrative Agent to such effect and (B) repayment in full of
all outstanding Loans of such Foreign Subsidiary Borrower.
8.2.3 No amendment of any provision of this Agreement relating to
either Agent shall be effective without the written consent of such Agent. The
Administrative Agent may waive payment of the fee required under Section 13.3.2
without obtaining the consent of any other party to this Agreement.
8.3 Preservation of Rights. No delay or omission of the Lenders or
either Agent to exercise any right under the Loan Documents shall impair such
right or be construed to be a waiver of any Default or an acquiescence therein,
and the making of a Loan notwithstanding the existence of a Default or the
inability of the Borrowers to satisfy the conditions precedent to such Loan
shall not constitute any waiver or acquiescence. Any single or partial exercise
of any such right shall not preclude other or further exercise thereof or the
exercise of any other right, and no waiver, amendment or other variation of the
terms, conditions or provisions of the Loan Documents whatsoever shall be valid
unless in writing signed by the Lenders required pursuant to Section 8.2, and
then only to the extent in such writing specifically set forth. All remedies
contained in the Loan Documents or by law afforded shall be cumulative and all
shall be available to either Agent and the Lenders until the Obligations have
been paid in full.
ARTICLE IX
GUARANTEE
9.1 Guarantee. (a) The Company hereby unconditionally and irrevocably
guarantees to the Agents and the Lenders and their respective successors,
endorsees, transferees and assigns, the prompt and complete payment and
performance by the Foreign Subsidiary Borrowers when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations.
(b) The Company further agrees to pay any and all expenses
(including, without limitation, all reasonable fees and disbursements of
counsel) which may be paid or incurred by either Agent, or any Lender in
enforcing, or obtaining advice of counsel in respect of, any rights with respect
to, or collecting, any or all of the Obligations and/or enforcing any rights
with respect to, or collecting against, the Company under this Section. This
Section shall remain in full force and effect until the Obligations are paid in
full and the Commitments are terminated, notwithstanding that from time to time
prior thereto the Borrowers may be free from any Obligations.
(c) No payment or payments made by any Borrower or any other Person
or received or collected by either Agent or any Lender from any Borrower or any
other Person by virtue of any action or proceeding or any set-off or
appropriation or application, at any time or from time to time, in reduction of
or in payment of the Obligations shall be deemed to modify, reduce, release or
otherwise affect the liability of the Company hereunder which shall,
notwithstanding any such payment or payments, remain liable hereunder for the
Obligations until the Obligations are paid in full and the Commitments are
terminated.
(d) The Company agrees that whenever, at any time, or from time to
time, it shall make any payment to either Agent or any Lender on account of its
liability under this Section, it will notify the Agents and such Lender in
writing that such payment is made under this Section for such purpose.
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9.2 No Subrogation. Notwithstanding any payment or payments made by the
Company hereunder, or any set-off or application of funds of the Company by
either Agent or any Lender, the Company shall not be entitled to be subrogated
to any of the rights of either Agent or any Lender against the Borrowers or
against any collateral security or guarantee or right of offset held by either
Agent or any Lender for the payment of the Obligations, nor shall the Company
seek or be entitled to seek any contribution or reimbursement from the Borrowers
in respect of payments made by the Company hereunder, until all amounts owing to
the Agents and the Lenders by the Borrowers on account of the Obligations are
paid in full and the Commitments are terminated. If any amount shall be paid to
the Company on account of such subrogation rights at any time when all of the
Obligations shall not have been paid in full, such amount shall be held by the
Company in trust for the Agents and the Lenders, segregated from other funds of
the Company, and shall, forthwith upon receipt by the Company, be turned over to
the Administrative Agent in the exact form received by the Company (duly
endorsed by the Company to the Administrative Agent, if required), to be applied
against the Obligations, whether matured or unmatured, in such order as
Administrative Agent may determine. The provisions of this paragraph shall
survive the termination of this Agreement and the payment in full of the
Obligations and the termination of the Commitments.
9.3 Amendments, etc. with respect to the Obligations; Waiver of Rights.
The Company shall remain obligated hereunder notwithstanding that, without any
reservation of rights against the Company, and without notice to or further
assent by the Company, any demand for payment of any of the Obligations made by
either Agent or any Lender may be rescinded by such Agent or such Lender, and
any of the Obligations continued, and the Obligations, or the liability of any
other party upon or for any part thereof, or any collateral security or
guarantee therefor or right of offset with respect thereto, may, from time to
time, in whole or in part be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by either Agent or any Lender, and
any Loan Documents and any other documents executed and delivered in connection
therewith may be amended, modified, supplemented or terminated, in whole or in
part, in accordance with the provisions thereof as either Agent (or the
requisite Lenders, as the case may be) may deem advisable from time to time, and
any collateral security, guarantee or right of offset at any time held by either
Agent or any Lender for the payment of the Obligations may be sold, exchanged,
waived, surrendered or released. None of either Agent or any Lender shall have
any obligation to protect, secure, perfect or insure any Lien at any time held
by it as security for the Obligations or for this Agreement or any property
subject thereto. When making any demand hereunder against the Company, either
Agent or any Lender may, but shall be under no obligation to, make a similar
demand on the Borrowers or any other guarantor, and any failure by either Agent
or any Lender to make any such demand or to collect any payments from the
Borrowers or any such other guarantor or any release of the Borrowers or such
other guarantor shall not relieve the Company of its obligations or liabilities
hereunder, and shall not impair or affect the rights and remedies, express or
implied, or as a matter of law, of either Agent or any Lender against the
Company. For the purposes hereof "demand" shall include the commencement and
continuance of any legal proceedings.
9.4 Guarantee Absolute and Unconditional. The Company waives any and
all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by either Agent or any Lender
upon this Agreement or acceptance of this Agreement; the Obligations, and any of
them, shall conclusively be deemed to have been created, contracted or incurred,
or renewed, extended, amended or waived, in reliance upon this Agreement; and
all dealings between the Borrowers and the Company, on the one hand, and the
Agents and the Lenders, on the other, shall likewise be conclusively presumed to
have been had or consummated in reliance upon this Agreement. The Company waives
diligence, presentment, protest, demand for payment and notice of default or
nonpayment to or upon the Borrowers and the Company with respect to the
Obligations. This Article IX shall be construed as a
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continuing, absolute and unconditional guarantee of payment without regard to
(a) the validity, regularity or enforceability of this Agreement, any other Loan
Document, any of the Obligations or any other collateral security therefor or
guarantee or right of offset with respect thereto at any time or from time to
time held by either Agent or any Lender, (b) any defense, set-off or
counterclaim (other than a defense of payment or performance by the Borrowers)
which may at any time be available to or be asserted by the Borrowers against
either Agent or any Lender, or (c) any other circumstance whatsoever (with or
without notice to or knowledge of the Borrowers or the Company) which
constitutes, or might be construed to constitute, an equitable or legal
discharge of the Borrowers for the Obligations, or of the Company under this
Section 9.4, in bankruptcy or in any other instance (other than a defense of
payment or performance by the Borrowers). When pursuing its rights and remedies
hereunder against the Company, either Agent and any Lender may, but shall be
under no obligation to, pursue such rights and remedies as it may have against
the Borrowers or any other Person or against any collateral security or
guarantee for the Obligations or any right of offset with respect thereto, and
any failure by either Agent or any Lender to pursue such other rights or
remedies or to collect any payments from the Borrowers or any such other Person
or to realize upon any such collateral security or guarantee or to exercise any
such right of offset, or any release of the Borrowers or any such other Person
or of any such collateral security, guarantee or right of offset, shall not
relieve the Company of any liability hereunder, and shall not impair or affect
the rights and remedies, whether express, implied or available as a matter of
law, of either Agent or any Lender against the Company. This Article IX shall
remain in full force and effect and be binding in accordance with and to the
extent of its terms upon the Company and its successors and assigns, and shall
inure to the benefit of the Agents and the Lenders, and their respective
successors, indorsees, transferees and assigns, until all the Obligations and
the obligations of the Company under this Agreement shall have been satisfied by
payment in full and the Commitments shall be terminated, notwithstanding that
from time to time during the term of this Agreement the Borrowers may be free
from any Obligations.
9.5 Reinstatement. This Article IX shall continue to be effective, or
be reinstated, as the case may be, if at any time payment, or any part thereof,
of any of the Obligations is rescinded or must otherwise be restored or returned
by either Agent or any Lender upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of any Borrower or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, any Borrower or any substantial part of its property, or otherwise,
all as though such payments had not been made.
9.6 Payments. The Company hereby agrees that all payments required to
be made by it hereunder will be made to the Administrative Agent without set-off
or counterclaim in accordance with the terms of the Obligations, including,
without limitation, in the currency in which payment is due.
ARTICLE X
GENERAL PROVISIONS
10.1 Survival of Representations. All representations and warranties of
the Borrowers contained in this Agreement shall survive delivery of the Loan
Documents and the making of the Loans herein contemplated.
10.2 Governmental Regulation. Anything contained in this Agreement to
the contrary notwithstanding, no Lender shall be obligated to extend credit to a
Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.
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10.3 Taxes. Any taxes (excluding income taxes and franchise taxes
(imposed in lieu of income taxes) imposed on the Administrative Agent or any
Lender as a result of a present or former connection between the Administrative
Agent or such Lender and the jurisdiction of the Governmental Authority imposing
such tax or any political subdivision or taxing authority thereof or therein
(other than any such connection arising solely from the Administrative Agent or
such Lender having executed, delivered or performed its obligations or received
a payment under, or enforced, this Agreement or any other Loan Document)) or
other similar assessments or charges made by any governmental or revenue
authority in respect of the Loan Documents shall be paid by the Company,
together with interest and penalties, if any.
10.4 Headings. Section headings in the Loan Documents are for
convenience of reference only, and shall not govern the interpretation of any of
the provisions of the Loan Documents.
10.5 Entire Agreement. The Loan Documents embody the entire agreement
and understanding among the Borrowers, the Agents and the Lenders and supersede
all prior agreements and understandings among the Borrower, the Agents and the
Lenders relating to the subject matter thereof other than any fee letters among
any Borrowers and either of the Agents and any other agreements of any of the
Borrowers with either Agent which survive the execution of the Loan Documents.
10.6 Several Obligations; Benefits of this Agreement. The respective
obligations of the Lenders hereunder are several and not joint and no Lender
shall be the partner or agent of any other (except to the extent to which either
Agent is authorized to act as such). The failure of any Lender to perform any of
its obligations hereunder shall not relieve any other Lender from any of its
obligations hereunder. This Agreement shall not be construed so as to confer any
right or benefit upon any Person other than the parties to this Agreement and
their respective successors and assigns.
10.7 Expenses; Indemnification. The Company shall reimburse each Agent
for any reasonable costs and out-of-pocket expenses (including reasonable fees
and time charges of attorneys for such Agent, which attorneys may be employees
of such Agent) paid or incurred by such Agent in connection with the
preparation, negotiation, execution, delivery, review, amendment, modification
and administration of the Loan Documents, except as otherwise agreed in writing
from time to time. The Company also agrees to reimburse the Agents and the
Lenders for any reasonable costs, and out-of-pocket expenses (including
reasonable fees and time charges of attorneys for the Agents and the Lenders,
which attorneys may be employees of the Agents or the Lenders) paid or incurred
by either Agent or any Lender in connection with the collection and enforcement
of the Loan Documents subject to the limitations set forth below. The Company
further agrees to indemnify each Agent and each Lender, and their respective
directors, officers and employees against all losses, claims, damages,
penalties, judgments, liabilities and expenses (including, without limitation,
all expenses of litigation or preparation therefor whether or not either Agent
or any Lender is a party thereto) which any of them may pay or incur arising out
of or relating to this Agreement, the other Loan Documents, the transactions
contemplated hereby or the direct or indirect application or proposed
application of the proceeds of any Loan subject to the limitations set forth
below, provided that the Company shall have no obligation to indemnify any
person in respect of any present or future income, stamp or other taxes, levies,
imposts, duties, charges, fees, deductions or withholdings except as (and to the
extent) provided in Section 3.6 and Section 10.3 hereof. The Company shall have
no obligation to indemnify any Agent or Lender (or their respective directors,
officers and employees) to the extent that any losses, claims, damages,
penalties, judgments, liabilities and expenses are determined by a court of
competent jurisdiction in a final, non-appealable order to have resulted from
the gross negligence or wilful misconduct of, or violation of applicable laws or
any of the Loan Documents by, any such Person. The obligations of the Company
under this Section shall survive the termination of this Agreement.
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10.8 Numbers of Documents. All statements, notices, closing documents,
and requests hereunder shall be furnished to the appropriate Agent with
sufficient counterparts so that each Agent may furnish one to each of the
Lenders.
10.9 Accounting. Except as provided to the contrary herein, all
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with Agreement Accounting
Principles.
10.10 Severability of Provisions. Any provision in any Loan Document
that is held to be inoperative, unenforceable, or invalid in any jurisdiction
shall, as to that jurisdiction, be inoperative, unenforceable, or invalid
without affecting the remaining provisions in that jurisdiction or the
operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan Documents are declared
to be severable.
10.11 Nonliability of Lenders. The relationship between the Borrowers
and the Lenders and the Agents shall be solely that of borrower and lender.
Neither either Agent nor any Lender shall have any fiduciary responsibilities to
any Borrower. Neither either Agent nor any Lender undertakes any responsibility
to any Borrower to review or inform any Borrower of any matter in connection
with any phase of such Borrower's business or operations. Each Borrower agrees
that neither either Agent nor any Lender shall have liability to any Borrower
(whether sounding in tort, contract or otherwise) for losses suffered by any
Borrower in connection with, arising out of, or in any way related to, the
transactions contemplated and the relationship established by the Loan
Documents, or any act, omission or event occurring in connection therewith,
unless it is determined by a court of competent jurisdiction in a final and
non-appealable order that such losses resulted from the gross negligence or
willful misconduct of, or violation of applicable laws or any of the Loan
Documents by, the party from which recovery is sought. Neither either Agent nor
any Lender shall have any liability with respect to, and each Borrower hereby
waives, releases and agrees not to sue for, any special, indirect or
consequential damages suffered by the Borrowers in connection with, arising out
of, or in any way related to the Loan Documents or the transactions contemplated
thereby.
10.12 Confidentiality. Each Lender agrees to hold any confidential
information which it may receive from any Borrower pursuant to this Agreement in
confidence, and will not disclose or use for any purpose other than its credit
evaluation under this Agreement such confidential information, except for
disclosure; (i) to any Transferee or prospective Transferee to the extent
provided in Section 13.4; (ii) to legal counsel, accountants and other
professional advisors to that Lender to the extent necessary to advise that
Lender concerning its rights or obligations in respect of this Agreement;
provided that such professional advisor agrees to hold any confidential
information which it may receive in confidence and not to disclose or use such
confidential information for any purpose other than advising that Lender with
respect to its rights and obligations under this Agreement; (iii) to regulatory
officials to the extent required by applicable law, rule, regulations, order,
policy or directive (whether or not any such policy or directive has the force
of law); and (iv) pursuant to any order of any court, arbitrator or Governmental
Authority of competent jurisdiction (or as otherwise required by law); provided,
however, that the Lender (or other Person given confidential information by such
Lender) shall provide the Company with prompt notice of any such required
disclosure so that the Company may seek a protective order or other appropriate
remedy, and in the event that such protective order or other remedy is not
obtained, such Lender (or such other Person) will furnish only that portion of
the confidential information which is legally required.
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10.13 Nonreliance. Each Lender hereby represents that it is not relying
on or looking to any margin stock (as defined in Regulation U of the Board of
Governors of the Federal Reserve System) for the repayment of the Loans provided
for herein.
ARTICLE XI
THE AGENTS
11.1 Appointment; Nature of Relationship. Morgan Guaranty Trust
Company of New York is hereby appointed by the Lenders as the Administrative
Agent hereunder and under each other Loan Document, and each of the Lenders
irrevocably authorizes the Administrative Agent to act as the contractual
representative of such Lender with the rights and duties expressly set forth
herein and in the other Loan Documents. NBD Bank is hereby appointed by the
Lenders as the Documentation Agent hereunder and under each other Loan Document,
and each of the Lenders irrevocably authorizes the Documentation Agent to act as
the contractual representative of such Lender with the rights and duties
expressly set forth herein and any other Loan Documents. Each Agent agrees to
act as such contractual representative upon the express conditions contained in
this Article XI. Notwithstanding the use of the defined terms "Administrative
Agent," "Documentation Agent", and "Agents", it is expressly understood and
agreed that neither Agent shall have any fiduciary responsibilities to any
Lender by reason of this Agreement or any other Loan Document and that each
Agent is merely acting as the representative of the Lenders with only those
duties as are expressly set forth in this Agreement and the other Loan
Documents. In its capacity as the Lenders' contractual representative, each
Agent (i) does not hereby assume any fiduciary duties to any of the Lenders,
(ii) is a "representative" of the Lenders within the meaning of Section 9-105 of
the Uniform Commercial Code and (iii) is acting as an independent contractor,
the rights and duties of which are limited to those expressly set forth in this
Agreement and the other Loan Documents. Each of the Lenders hereby agrees to
assert no claim against either Agent on any agency theory or any other theory of
liability for breach of fiduciary duty, all of which claims each Lender hereby
waives.
11.2 Powers. Each Agent shall have and may exercise such powers under
the Loan Documents as are specifically delegated to such Agent by the terms of
each thereof, together with such powers as are reasonably incidental thereto.
Neither Agent shall have any implied duties to the Lenders, or any obligation to
the Lenders to take any action thereunder except any action specifically
provided by the Loan Documents to be taken by such Agent.
11.3 General Immunity. Neither Agent nor any of their respective
directors, officers, agents or employees shall be liable to the Borrowers, the
Lenders or any Lender for (a) any action taken or omitted to be taken by it or
them hereunder or under any other Loan Document or in connection herewith or
therewith except for its or their own gross negligence or willful misconduct; or
(b) any determination by either Agent that compliance with any law or any
governmental or quasi-governmental rule, regulation, order, policy, guideline or
directive (whether or not having the force of law) requires the Advances and
Commitments hereunder to be classified as being part of a "highly leveraged
transaction".
11.4 No Responsibility for Loans, Recitals, etc. Neither Agent nor any
of their directors, officers, agents or employees shall be responsible for or
have any duty to ascertain, inquire into, or verify (i) any statement, warranty
or representation made in connection with any Loan Document or any borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements of any
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obligor under any Loan Document, including, without limitation, any agreement by
an obligor to furnish information directly to each Lender; (iii) the
satisfaction of any condition specified in Article IV; (iv) the validity,
enforceability, effectiveness, sufficiency or genuineness of any Loan Document
or any other instrument or writing furnished in connection therewith; or (v) the
value, sufficiency, creation, perfection or priority of any interest in any
collateral security. Neither Agent shall have any duty to disclose to the
Lenders information that is not required to be furnished by the Borrowers to
such Agent at such time, but is voluntarily furnished by the Borrowers to such
Agent (either in its capacity as an Agent or in its individual capacity).
11.5 Action on Instructions of Lenders. Each Agent shall in all cases
be fully protected in acting, or in refraining from acting, hereunder and under
any other Loan Document in accordance with written instructions signed by the
Required Lenders or all Lenders if required under Section 8.2.1), and such
instructions and any action taken or failure to act pursuant thereto shall be
binding on all of the Lenders and on all holders of the Obligations. The Lenders
hereby acknowledge that neither Agent shall be under any duty to take any
discretionary action permitted to be taken by it pursuant to the provisions of
this Agreement or any other Loan Document unless it shall be requested in
writing to do so by the Required Lenders. Each Agent shall be fully justified in
failing or refusing to take any action hereunder and under any other Loan
Document unless it shall first be indemnified to its satisfaction by the Lenders
pro rata against any and all liability, cost and expense that it may incur by
reason of taking or continuing to take any such action.
11.6 Employment of Agents and Counsel. Each Agent may execute any of
its duties as an Agent hereunder and under any other Loan Document by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. Each Agent shall be entitled to advice of
counsel concerning all matters pertaining to the agency hereby created and its
duties hereunder and under any other Loan Document.
11.7 Reliance on Documents; Counsel. Each Agent shall be entitled to
rely upon any Note, notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper person or persons, and, in respect to
legal matters, upon the opinion of counsel selected by such Agent, which counsel
may be employees of such Agent.
11.8 Agents' Reimbursement and Indemnification. The Lenders agree to
reimburse and indemnify (to the extent not reimbursed by a Borrower and without
limiting the obligation of any Borrower to do so) each Agent ratably in
proportion to their respective Commitments (or, if the Commitments have been
terminated, in proportion to their Commitments immediately prior to such
termination) (i) for any amounts not reimbursed by the Company for which such
Agent is entitled to reimbursement by the Company or the other Borrowers under
the Loan Documents, (ii) for any other expenses incurred by such Agent on behalf
of the Lenders, in connection with the preparation, execution, delivery,
administration and enforcement of the Loan Documents and (iii) for any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind and nature whatsoever which may be
imposed on, incurred by or asserted against such Agent in any way relating to or
arising out of the Loan Documents or any other document delivered in connection
therewith or the transactions contemplated thereby, or the enforcement of any of
the terms thereof or of any such other documents, provided that no Lender shall
be liable for any of the foregoing to the extent they arise from the gross
negligence or willful misconduct of such Agent. The obligations of the Lenders
under this Section 11.8 shall survive payment of the Obligations and termination
of this Agreement.
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11.9 Notice of Default. Neither Agent shall be deemed to have
knowledge or notice of the occurrence of any Default or Unmatured Default
hereunder unless such Agent has received written notice from a Lender or a
Borrower referring to this Agreement describing such Default or Unmatured
Default and stating that such notice is a "notice of default". In the event that
either Agent receives such a notice, such Agent shall give prompt notice thereof
to the Lenders.
11.10 Rights as a Lender. In the event either Agent is a Lender, such
Agent shall have the same rights and powers hereunder and under any other Loan
Document as any Lender and may exercise the same as though it were not an Agent,
and the term "Lender" or "Lenders" shall, at any time when such Agent is a
Lender, unless the context otherwise indicates, include such Agent in its
individual capacity. Either Agent may accept deposits from, lend money to, and
generally engage in any kind of trust, debt, equity or other transaction, in
addition to those contemplated by this Agreement or any other Loan Document, the
Company or any of its Subsidiaries in which the Company or such Subsidiary is
not restricted hereby from engaging with any other Person.
11.11 Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon either Agent or any other Lender and
based on the financial statements prepared by the Borrowers and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and the other Loan Documents.
Each Lender also acknowledges that it will, independently and without reliance
upon either Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement and the
other Loan Documents.
11.12 Successor Agents. Either Agent may resign at any time by giving
written notice thereof to the Lenders and the Company, such resignation to be
effective upon the appointment of such a successor Agent or, if no such
successor Agent has been appointed, forty-five days after the retiring Agent
gives notice of its intention to resign. Either Agent may be removed at any time
with or without cause by written notice received by such Agent from the Required
Lenders, such removal to be effective on the date specified by the Required
Lenders. Upon any such resignation or removal, the Required Lenders shall have
the right to appoint, on behalf of the Borrowers and the Lenders, a successor
Agent to such Agent. If no such successor Agent shall have been so appointed by
the Required Lenders within thirty days after such resigning Agent's giving
notice of its intention to resign, then such resigning Agent may appoint, on
behalf of the Company and the Lenders, a successor Agent for itself. If either
Agent has resigned or been removed and no successor Agent has been appointed,
the Lenders may perform all the duties of such Agent hereunder and the Company
shall make all payments in respect of the Obligations to the applicable Lender
and for all other purposes shall deal directly with the Lenders. No successor
Agent shall be deemed to be appointed hereunder until such successor Agent has
accepted the appointment. Any such successor Agent shall be a commercial bank
having capital and retained earnings of at least $50,000,000. Upon the
acceptance of any appointment as an Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the resigning or removed Agent. Upon
the effectiveness of the resignation or removal of either Agent, the resigning
or removed Agent shall be discharged from its duties and obligations hereunder
and under the Loan Documents. After the effectiveness of the resignation or
removal of an Agent, the provisions of this Article XI shall continue in effect
for the benefit of such Agent in respect of any actions taken or omitted to be
taken by it while it was acting as an Agent hereunder and under the other Loan
Documents.
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ARTICLE XII
SETOFF; ADJUSTMENTS AMONG LENDERS
12.1 Setoff. In addition to, and without limitation of, any rights of
the Lenders under applicable law, if any Default described in Sections 7.2, 7.6
or 7.7 occurs or the Loans are accelerated pursuant to Section 8.1, any and all
deposits (including all account balances, whether provisional or final and
whether or not collected or available) and any other Indebtedness at any time
held or owing by any Lender to or for the credit or account of any Borrower may
be offset and applied toward the payment of the Obligations owing to such Lender
by such Borrower.
12.2 Ratable Payments. If any Lender, whether by setoff or otherwise,
has payment made to it upon its Loans to a Borrower (other than payments
received pursuant to Section 3.1, 3.2, 3.4, 3.6 or 10.7) in a greater proportion
than that received by any other Lender from such Borrower or its Loans, such
Lender agrees, promptly upon demand, to purchase a portion of the Loans to such
Borrower held by the other Lenders so that after such purchase each Lender will
hold its ratable proportion of Loans to such Borrower. If any Lender, whether in
connection with setoff or amounts which might be subject to setoff or otherwise,
receives collateral or other protection for its Obligations or such amounts
which may be subject to setoff, such Lender agrees, promptly upon demand, to
take such action necessary such that all Lenders share in the benefits of such
collateral ratably in proportion to their Loans. In case any such payment is
disturbed by legal process, or otherwise, appropriate further adjustments shall
be made.
12.3 Loan Conversion/Participations. (a)(i) On any Conversion Date, to
the extent not otherwise prohibited by a Requirement of Law or otherwise, all
Loans outstanding in any currency other than U.S. Dollars ("Loans to be
Converted") shall be converted into U.S. Dollars (calculated on the basis of the
relevant Exchange Rates as of the Business Day immediately preceding the
Conversion Date) ("Converted Loans") and (ii) on the Conversion Date (with
respect to Loans described in the foregoing clause (i)) (A) each Lender
severally, unconditionally and irrevocably agrees that it shall purchase in U.S.
Dollars a participating interest in such Converted Loans in an amount equal to
its Conversion Sharing Percentage of the outstanding principal amount of the
Converted Loans and (B) to the extent necessary to cause the Committed
Outstandings Percentage of each Lender to equal its Revolving Credit Commitment
Percentage (calculated immediately prior to the termination or expiration of the
Revolving Credit Loans), each Lender severally, unconditionally and irrevocably
agrees that it shall purchase or sell a participating interest in Revolving
Credit Loans then outstanding. Each Lender will immediately transfer to the
Administrative Agent in immediately available funds, the amounts of its
participation(s), and the proceeds of such participation(s) shall be distributed
by the Administrative Agent to each Lender from which a participating interest
is being purchased in the amount(s) provided for in the preceding sentence. All
Converted Loans shall bear interest at the rate which would otherwise be
applicable to Floating Rate Loans.
(b) If, for any reason, the Loans to be Converted may not be converted
into U.S. Dollars in the manner contemplated by paragraph (a) of this Section
12.3, (i) effective on such Conversion Date, each Lender severally,
unconditionally and irrevocably agrees that it shall purchase a participating
interest in such Loans to be Converted, in an amount equal to its Conversion
Sharing Percentage of such Loans to be Converted, and (ii) each Lender shall
purchase or sell participating interests as provided in clause (a)(ii)(B) of
this Section 12.3. Each Lender will immediately transfer to the Administrative
Agent in immediately available funds, the amount(s) of its participation(s), and
the proceeds of such participation(s) shall be distributed by the Administrative
Agent to each relevant Lender in the amount(s) provided for in the preceding
sentence.
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(c) To the extent any Non-Excluded Taxes are required to be withheld
from any amounts payable by a Lender to another Lender in connection with its
participating interest in any Converted Loan, each Borrower, with respect to the
relevant Loans made to it, shall be required to pay increased amounts to the
Lender receiving such payments to the same extent they would be required under
Section 3.6 if such Borrower were making payments directly to such Lender.
(d) At any time after the actions contemplated by clause (a) or (b)
of this Section 12.3 have been taken, upon the notice of any Lender to the
Borrowers the following shall occur: (i) the Company (through the Guaranty
contained in Article IX) shall automatically be deemed to have assumed the
Converted Loans in which such Lender holds a participation, and (ii) such Loans
shall be assigned by the relevant Lender holding such Loans or obligations to
the Lender who gave the notice requesting such assumption by the Company.
ARTICLE XIII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
13.1 Successors and Assigns. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Borrowers and
the Lenders and their respective successors and assigns, except that (i) the
Borrowers shall not have the right to assign their rights or obligations under
the Loan Documents and (ii) any assignment by any Lender must be made in
compliance with Section 13.3. Notwithstanding clause (ii) of this Section, any
Lender may at any time, without the consent of the Borrowers or either Agent,
assign all or any portion of its rights under this Agreement, the Loan Documents
to a Federal Reserve Bank; provided, however, that no such assignment to a
Federal Reserve Bank shall release the transferor Lender from its obligations
hereunder. The Administrative Agent may treat the payee of any Loan Document as
the owner thereof for all purposes hereof unless and until such payee complies
with Section 13.3 in the case of an assignment thereof or, in the case of any
other transfer, a written notice of the transfer is filed with the
Administrative Agent. Any assignee or transferee of any of the Loans or a Note
agrees by acceptance thereof to be bound by all the terms and provisions of the
Loan Documents. Any request, authority or consent of any Person, who at the time
of making such request or giving such authority or consent is the owner of any
of the Loans or a holder of any Note, shall be conclusive and binding on any
subsequent holder, transferee or assignee of such Note or of any Note or Notes
issued in exchange therefor.
13.2 Participations.
13.2.1 Permitted Participants; Effect. Any Lender may, in the ordinary
course of its business and in accordance with applicable law, at any time sell
to one or more banks or other entities ("Participants") participating interests
in any Loan owing to such Lender, any Note held by such Lender, any Commitment
of such Lender or any other interest of such Lender under the Loan Documents. In
the event of any such sale by a Lender of participating interests to a
Participant, such Lender's obligations under the Loan Documents shall remain
unchanged, such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, such Lender shall remain the
holder of any such Loan or Note for all purposes under the Loan Documents, all
amounts payable by the Borrowers under this Agreement shall be determined as if
such Lender had not sold such participating interests (including without
limitation payments with respect to Non-Excluded Taxes), and the Borrowers and
the Agents shall continue to deal
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<PAGE> 75
solely and directly with such Lender in connection with such Lender's rights and
obligations under the Loan Documents.
13.2.2 Voting Rights. Each Lender shall retain the sole right to
approve, without the consent of any Participant, any amendment, modification or
waiver of any provision of the Loan Documents other than any amendment,
modification or waiver with respect to any Loan or Commitment in which such
Participant has an interest which would require the consent of all Lenders under
Section 8.2.1.
13.2.3 Benefit of Setoff. The Borrowers agrees that each Participant
shall be deemed to have the right of setoff provided in Section 12.1 in respect
of its participating interest in amounts owing under the Loan Documents to the
same extent as if the amount of its participating interest were owing directly
to it as a Lender under the Loan Documents, provided that each Lender shall
retain the right of setoff provided in Section 12.1 with respect to the amount
of participating interests sold to each Participant. The Lenders agree to share
with each Participant, and each Participant, by exercising the right of setoff
provided in Section 12.1, agrees to share with each Lender, any amount received
pursuant to the exercise of its right of setoff, such amounts to be shared in
accordance with Section 12.2 as if each Participant were a Lender.
13.3 Assignments.
13.3.1 Permitted Assignments. Any Lender may, in the ordinary course of
its business and in accordance with applicable law, at any time assign to one or
more banks, finance companies, insurance companies or other financial
institutions or funds that are engaged in making, purchasing or otherwise
investing in commercial loans in the ordinary course of its business or, after
the occurrence of any Default, any other entity ("Purchasers") all or any part
of its rights and obligations under the Loan Documents. Such assignment shall be
substantially in the form of Exhibit M hereto (an "Assignment") or in such other
form as may be agreed to by the parties thereto. The consent of the Company, the
Documentation Agent, the Administrative Agent and any Issuer shall be required
prior to an assignment becoming effective with respect to a Purchaser which is
not a Lender or an Affiliate thereof; provided, however, that if a Default has
occurred and is continuing, the consent of the Company shall not be required.
Such consent by the Company shall not be unreasonably withheld or delayed. Each
such assignment shall be in an amount not less than the lesser of (i)
$10,000,000 and in integral multiples of $5,000,000 thereafter, or (ii) the
remaining amount of the assigning Lender's Commitment (calculated as at the date
of such assignment). If any Lender assigns a part of its rights and obligations
in respect of Revolving Credit Loans and/or Revolving Credit Commitment under
this Agreement to a Purchaser, such Lender shall assign proportionate interests
in its respective Multicurrency Loans and Multicurrency Commitment and other
related rights and obligations hereunder to such Purchaser, and if any Lender
assigns a part of its rights and obligations under this Agreement in respect of
its Multicurrency Loans and/or Multicurrency Commitments to a Purchaser, such
Lender shall assign proportionate interests in its Revolving Credit Loans and
Revolving Credit Commitments to such Purchaser.
13.3.2 Effect; Effective Date. Upon (i) delivery to the Agents of a
notice of assignment, substantially in the form attached as Exhibit I to Exhibit
M hereto (a "Notice of Assignment"), together with any consents required by
Section 13.3.1, and (ii) payment of a $2,500 fee to the Administrative Agent for
processing such assignment (provided that such fee shall not be required if such
assignment is to an existing Lender or an Affiliate thereof, such assignment
shall become effective on the effective date specified in such Notice of
Assignment. The Notice of Assignment shall contain a representation by the
Purchaser to the effect that none of the consideration used to make the purchase
of the Commitment and Loans under the applicable assignment agreement are "plan
assets" as defined under ERISA and that the rights and interests of the
Purchaser in and under the Loan Documents will not be "plan assets" under
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ERISA. On and after the effective date of such assignment, such Purchaser shall
for all purposes be a Lender party to this Agreement and any other Loan Document
executed by the Lenders and shall have all the rights and obligations of a
Lender under the Loan Documents, to the same extent as if it were an original
party hereto, and no further consent or action by the Company, the Lenders or
the Agents shall be required to release the transferor Lender with respect to
the percentage of the Aggregate Commitment and Loans assigned to such Purchaser.
Upon the consummation of any assignment to a Purchaser pursuant to this Section
13.3.2, the transferor Lender, the Documentation Agent and the Company shall
make appropriate arrangements so that replacement Notes, if applicable, are
issued to such transferor Lender and new Notes or, as appropriate, replacement
Notes, are issued to such Purchaser, in each case in principal amounts
reflecting their Commitment, as adjusted pursuant to such assignment.
13.4 Dissemination of Information. Each Borrower authorizes each Lender
to disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a "Transferee") and any
prospective Transferee any and all information in such Lender's possession
concerning the creditworthiness of the Company and its Subsidiaries provided
that each Transferee and prospective Transferee agrees to be bound by Section
10.12.
13.5 Tax Treatment. If any interest in any Loan Document is transferred
to any Transferee which is organized under the laws of any jurisdiction other
than the United States or any State thereof, the transferor Lender shall cause
such Transferee, concurrently with the effectiveness of such transfer, to comply
with the provisions of Section 3.6.
ARTICLE XIV
NOTICES
14.1 Notices. Except as otherwise permitted by Article II with respect
to borrowing notices, all notices, requests and other communications to any
party hereunder shall be in writing (including bank wire, facsimile transmission
or similar writing) and shall be given to such party: (x) in the case of a
Borrower or an Agent, at its address or facsimile number set forth on the
signature pages hereof, (y) in the case of any Lender, at its address or
facsimile number set forth in Schedule 1 hereto or otherwise established
pursuant to an Assignment or (z) in the case of any party, such other address or
facsimile number as such party may hereafter specify for the purpose by notice
to the Administrative Agent and the Company. Each such notice, request or other
communication shall be effective (i) if given by facsimile transmission, when
transmitted to the facsimile number specified in this Section and confirmation
of receipt is received, (ii) if given by mail, 72 hours after such communication
is deposited in the mails with first class postage prepaid, addressed as
aforesaid or (iii) if given by any other means, when delivered at the address
specified in this Section; provided that notices to the Agents under Article II
shall not be effective until received.
14.2 Change of Address. Any Borrower, either Agent and any Lender may
each change the address for service of notice upon it by a notice in writing to
the other parties hereto.
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ARTICLE XV
COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one agreement, and any of the parties
hereto may execute this Agreement by signing any such counterpart. This
Agreement shall be effective when it has been executed by the Borrowers, the
Agents and the Lenders and each party has notified the Documentation Agent by
telex or telephone, that it has taken such action.
ARTICLE XVI
CHOICE OF LAW, CONSENT TO JURISDICTION,
WAIVER OF JURY TRIAL, JUDGMENT CURRENCY
16.1 CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A
CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF NEW YORK, BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
16.2 WAIVER OF JURY TRIAL. EACH BORROWER, EACH AGENT AND EACH LENDER
HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE
RELATIONSHIP ESTABLISHED THEREUNDER.
16.3 Submission To Jurisdiction; Waivers. (a) Each of the Company and
the Foreign Subsidiary Borrowers hereby irrevocably and unconditionally:
(i) submits for itself and its property in any legal action
or proceeding relating to this Agreement and the other Loan
Documents to which it is a party, or for recognition and
enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the courts of the State of
New York in New York County, the courts of the United States of
America for the Southern District of New York, and appellate
courts from any thereof;
(ii) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in
any such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered
or certified mail (or any substantially similar form of mail),
postage prepaid, to the Company or such Foreign Subsidiary
Borrower, as the case may be, at the address specified in Section
14.1, or at such other address of which the Administrative Agent
shall have been notified pursuant thereto;
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(iv) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or
shall limit the right to sue in any other jurisdiction; and
(v) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or
proceeding referred to in this subsection any special, exemplary,
punitive or consequential damages.
(b) Each Foreign Subsidiary Borrower hereby irrevocably appoints the
Company as its agent for service of process in any proceeding referred to in
Section 16.3(i) and agrees that service of process in any such proceeding may be
made by mailing or delivering a copy thereof to it care of Company at its
address for notices set forth in Section 14.1.
16.4 Acknowledgments. Each Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution
and delivery of this Agreement and the other Loan Documents;
(b) none of either Agent or any Lender has any fiduciary
relationship with or duty to such Borrower arising out of or in
connection with this Agreement or any of the other Loan Documents, and
the relationship between the Agents and the Lenders, on the one hand,
and the Borrowers, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Lenders or among the Borrowers and the
Lenders.
16.5 Power of Attorney. Each Foreign Subsidiary Borrower hereby grants
to the Company an irrevocable power of attorney to act as its attorney-in-fact
with regard to matters relating to this Agreement and each other Loan Document,
including, without limitation, execution and delivery of any amendments,
supplements, waivers or other modifications hereto or thereto, receipt of any
notices hereunder or thereunder and receipt of service of process in connection
herewith or therewith. Each Foreign Subsidiary Borrower hereby explicitly
acknowledges that each Agent and each Lender have executed and delivered this
Agreement and each other Loan Document to which it is a party, and has performed
its obligations under this Agreement and each other Loan Document to which it is
a party, in reliance upon the irrevocable grant of such power of attorney
pursuant to this subsection. The power of attorney granted by each Foreign
Subsidiary Borrower hereunder is coupled with an interest.
16.6 Judgment. (a) If for the purpose of obtaining judgment in any
court it is necessary to convert a sum due hereunder in one currency into
another currency, the parties hereto agree, to the fullest extent that they may
effectively do so, under applicable law that the rate of exchange used shall be
that at which in accordance with normal banking procedures the Administrative
Agent could purchase the first currency with such other currency in the city in
which it normally conducts its foreign exchange operation for the first currency
on the Business Day preceding the day on which final judgment is given.
(b) The obligation of each Borrower in respect of any sum due from it
to any Lender hereunder shall, notwithstanding any judgment in a currency (the
"Judgment Currency") other than that in
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which such sum is denominated in accordance with the applicable provisions of
this Agreement (the "Agreement Currency"), be discharged only to the extent that
on the Business Day following receipt by such Lender of any sum adjudged to be
so due in the Judgment Currency such Lender may in accordance with normal
banking procedures purchase the Agreement Currency with the Judgment Currency;
if the amount of Agreement Currency so purchased is less than the sum originally
due to such Lender in the Agreement Currency, such Borrower agrees
notwithstanding any such judgment to indemnify such Lender against such loss,
and if the amount of the Agreement Currency so purchased exceeds the sum
originally due to any Lender, such Lender agrees to remit to such Borrower such
excess.
16.7 Unification of Certain Currencies. If the "Euro" (or some other
similar unit of account) becomes a currency in its own right in connection with
European monetary union contemplated by the Maastricht Treaty, then each of the
Borrowers, the Lenders and the Agents agrees to negotiate in good faith an
amendment to this Agreement satisfactory in form and substance to the Borrowers,
the Lenders and the Documentation Agent to account therefor.
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IN WITNESS WHEREOF, the Borrowers, the Lenders and the Agents have
executed this Agreement as of the date first above written.
MERITOR AUTOMOTIVE, INC.
By: /s/ Thomas J. Joyce
----------------------------
Print Name: Thomas J. Joyce
Title: Vice President and Treasurer
2135 West Maple Road
Troy, Michigan 48084-7186
Attention: Chief Financial Officer
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NBD BANK, as Documentation Agent and as a
Lender
By: /s/ Richard H. Huttenlocher
-------------------------------
Print Name: Richard H. Huttenlocher
-----------------------
Title: First Vice President
----------------------------
611 Woodward Avenue
Detroit, Michigan 48226
Attention: Ric Huttenlocher
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MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Administrative Agent and as a Lender
By: /s/ Diana H. Imhof
-------------------------------
Print Name: Diana H. Imhof
-----------------------
Title: Vice President
----------------------------
60 Wall Street, 22nd Floor
New York, New York 10260
Attention: Diana Imhof
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BANK OF AMERICA NT & SA
By: /s/ Lynn W. Stetson
-------------------------------
Print Name: Lynn W. Stetson
-----------------------
Title: Managing Director
----------------------------
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BANK OF TOKYO - MITSUBISHI TRUST COMPANY
By: /s/ F.N. Wilms
-------------------------------
Print Name: F.N. Wilms
-----------------------
Title: Vice President
----------------------------
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CITIBANK, N.A.
By: /s/ William G. McKnight
-------------------------------
Print Name: William G. McKnight
-----------------------
Title: Vice President
----------------------------
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COMERICA BANK
By: /s/ Lana Anderson
-------------------------------
Print Name: Lana Anderson
-----------------------
Title: Vice President
----------------------------
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DEUTSCHE BANK AG, New York Branch
and/or Cayman Islands Branch
By: /s/ Hans-Josef Thiele
-------------------------------
Print Name: Hans-Josef Thiele
-----------------------
Title: Director
----------------------------
By: /s/ Belinda J. Wheeler
-------------------------------
Print Name: Belinda J. Wheeler
-----------------------
Title: Vice President
----------------------------
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MELLON BANK N.A.
By: /s/ Robert W. Goode
-------------------------------
Print Name: Robert W. Goode
-----------------------
Title: Senior Vice President
----------------------------
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THE CHASE MANHATTAN BANK
By: /s/ Andris G. Kalnins
-------------------------------
Print Name: Andris G. Kalnins
-----------------------
Title: Vice President
----------------------------
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BANQUE NATIONALE DE PARIS
By: /s/ Frederick H. Moryl, Jr.
-------------------------------
Print Name: Frederick H. Moryl, Jr.
-----------------------
Title: Senior Vice President
----------------------------
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CIBC INC.
By: /s/ Stephanie E. Johnson
-------------------------------
Print Name: Stephanie E. Johnson
-----------------------
Title: Director, CIBC Wood Gundy
Securities Corp., As Agent
----------------------------
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CREDIT ITALIANO SpA
By: /s/ Harmon P. Butler
-------------------------------
Print Name: Harmon P. Butler
-----------------------
Title: FVP & Deputy Manager
----------------------------
By: /s/ Pierluigi Mainardi
-------------------------------
Print Name: Pierluigi Mainardi
-----------------------
Title: Assistant Vice President
----------------------------
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<PAGE> 93
CREDIT LYONNAIS CHICAGO BRANCH
By: /s/ Sandra E. Horwitz
-------------------------------
Print Name: Sandra E. Horwitz
-----------------------
Title: Senior Vice President
Branch Manager
----------------------------
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SWISS BANK CORPORATION, NEW YORK BRANCH
By: /s/ Thomas Eggenschwiler
-------------------------------
Print Name: Thomas Eggenschwiler
-----------------------
Title: Executive Director
Credit Risk Management
----------------------------
By: /s/ Dorothy L. McKinley
-------------------------------
Print Name: Dorothy L. McKinley
-----------------------
Title: Associate Director
Banking Finance
Support, N.A.
----------------------------
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THE BANK OF NOVA SCOTIA
By: /s/ F.C.H. Ashby
---------------------------------
Print Name: F.C.H. Ashby
-------------------------
Title: Senior Manager Loan Operations
------------------------------
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TORONTO DOMINION (TEXAS), INC.
By: /s/ Frederic B. Hawley
-------------------------------
Print Name: Frederic B. Hawley
-----------------------
Title: Vice President
----------------------------
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WELLS FARGO BANK, N.A.
By: /s/ Frieda Youlios
-------------------------------
Print Name: Frieda Youlios
-----------------------
Title: Vice President
----------------------------
By: /s/ David B. Hollingsworth
-------------------------------
Print Name: David B. Hollingsworth
-----------------------
Title: Vice President
----------------------------
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ISTITUTO BANCARIO SAN PAOLO DI
TORINO, SpA
By: /s/ Carlo Persico
-------------------------------
Print Name: Carlo Persico
-----------------------
Title: Deputy General Manager
----------------------------
By: /s/ William DeAngelo
-------------------------------
Print Name: William DeAngelo
-----------------------
Title: First Vice President
----------------------------
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WESTPAC BANKING
By: /s/ Craig L. Jones
-------------------------------
Print Name: Craig L. Jones
-----------------------
Title: Vice President
----------------------------
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EXHIBIT A-1
REVOLVING CREDIT NOTE
$__________ __________, l997
Meritor Automotive, Inc., a Delaware corporation ("Company"), promises
to pay to the order of ______________ ("Lender") on or before the Facility
Termination Date (as defined in the Agreement hereinafter referred to) for the
account of its Applicable Lending Installation the principal sum of
__________________ Dollars ($___________) or the aggregate unpaid principal
amount of all Revolving Credit Loans made by the Lender to the Company pursuant
to Section 2.1 of the Agreement whichever is less, in immediate available funds
at the main office of Morgan Guaranty Trust Company of New York, the
Administrative Agent, in New York, New York, together with interest on the
unpaid principal amount hereof at the rates and on the dates set forth in the
Agreement.
The Lender shall, and is hereby authorized to, record in accordance
with its usual practice, the date and amount of each Revolving Credit Loan, the
date and amount of each principal payment and the date to which payment of this
Note has been extended, provided, however, that failure to do so shall not
affect the Company's obligation to pay amounts due hereunder.
The Company expressly waives any presentments, demand, protest or
notice in connection with this Revolving Credit Note now, or hereafter, required
by applicable law.
This Revolving Credit Note is one of the Revolving Credit Notes issued
pursuant to the provisions of the Credit Agreement dated as of August 21, 1997
among the Company, the Foreign Subsidiary Borrowers, the Lenders party thereto,
NBD Bank as Documentation Agent and Morgan Guaranty Trust Company of New York as
Administrative Agent to which Agreement, as it may be amended from time to time,
reference is hereby made for a statement of the terms and conditions under which
this Revolving Credit Note may be prepaid or its maturity date extended or
accelerated.
The Revolving Credit Note shall be construed in accordance with and
governed by the laws of New York applicable to contracts made and performed in
New York by a New York borrower and a national banking association located in
New York, as lender.
Meritor Automotive, Inc.
By:_______________________________
Title:____________________________
<PAGE> 101
EXHIBIT A-2
COMPETITIVE BID NOTE
__________, 1997
Meritor Automotive, Inc., a Delaware corporation (the "Company"),
promises to pay, on or before the Facility Termination Date, to the order of
____________________ (the "Lender") the aggregate unpaid principal amount of all
Competitive Bid Loans made by the Lender to the Company pursuant to Section 2.7
of the Credit Agreement hereinafter referred to (as the same may be amended or
modified, the "Agreement"), in lawful money of the United States in immediately
available funds at the main office of Morgan Guaranty Trust Company of New York,
as Administrative Agent, in New York, New York or as otherwise directed by the
Administrative Agent pursuant to the terms of the Agreement, together with
interest, in like money and funds, on the unpaid principal amount hereof at the
rates and on the dates determined in accordance with the Agreement. The Company
shall pay each Competitive Bid Loan in full on the last day of such Competitive
Bid Loan's applicable Interest Period.
The Lender shall, and is hereby authorized to, record in accordance
with its usual practice, the date and amount of each Competitive Bid Loan and
the date and amount of each principal payment hereunder, provided, however, that
any failure to so record shall not affect the Company's obligations under any
Loan Document.
This Competitive Bid Note is one of the Competitive Bid Notes issued
pursuant to, and is entitled to the benefits of, the Credit Agreement dated as
of August 21, 1997 among the Company, the Foreign Subsidiary Borrowers, the
Lenders party thereto, NBD Bank, as Documentation Agent and Morgan Guaranty
Trust Company of New York as Administrative Agent, to which Agreement, as it may
be amended from time to time, reference is hereby made for a statement of the
terms and conditions under which this Competitive Bid Note may be prepaid or its
maturity date accelerated. Capitalized terms used herein and not otherwise
defined herein are used with the meanings attributed to them in the Agreement.
Meritor Automotive, Inc.
By:_______________________________
Title:____________________________
<PAGE> 102
EXHIBIT B
PRICING SCHEDULE
(A) The Applicable Margin for Eurodollar Loans and Multicurrency Loans, the
Facility Fee payable pursuant to Section 2.8 and the Letter of Credit Fee
payable pursuant to Section 2.19.6 shall, subject to paragraph (B) below, be
determined in accordance with the Financial Ratio Grid set forth below based on
the Company's Debt Ratio in effect from time to time.
(B) If at any time the Company has both a Moody's Bond Rating and an S&P Bond
Rating, the Applicable Margin for Eurodollar Loans and Multicurrency Loans,
Facility Fee and Letter of Credit Fee shall be determined in accordance with the
Ratings Grid set forth below. The Ratings Grid will become effective five (5)
days after the Company has received both a Moody's Bond Rating and an S&P Bond
Rating and any change will be effective five (5) days after a change in any such
rating.
Financial Ratio Grid (in basis points)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Debt Ratio: less than .75 equal to or equal to or equal to or equal to or
greater than greater than greater than greater than 2.5
.75 but less 1.25 but less 2 but less
than 1.25 than 2 than 2.5
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Facility Fee: 7.0 8.0 10.0 12.5 20.0
- -----------------------------------------------------------------------------------------------------------------
Applicable Margin over 15.5 17.0 20.0 25.0 35.0
Eurocurrency or Eurodollar Rate:
- -----------------------------------------------------------------------------------------------------------------
Letter of Credit Fee: 15.5 17.0 20.0 25.0 35.0
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Ratings Grid (in basis points)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Ratings: S&P Bond Rating/ A- or BBB+ or BBB or BBB- or less than BBB-
Moody's Bond Rating A3 Baa1 Baa2 Baa3 and Baa3
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Facility Fee: 7.0 8.0 10.0 12.5 20.0
- -------------------------------------------------------------------------------------------------------------------
Applicable Margin over 15.5 17.0 20.0 25.0 35.0
Eurocurrency or Eurodollar Rate:
- -------------------------------------------------------------------------------------------------------------------
Letter of Credit Fee: 15.5 17.0 20.0 25.0 35.0
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
When the Financial Ratio Grid is in effect, the Applicable Margin, the
Facility Fee and the Letter of Credit Fee shall be adjusted quarterly (upward or
downward), if necessary, five (5) days after the date the Company's financial
statements are required to be delivered for such quarter pursuant to Section
6.1. the initial pricing shall be based on the Financial Ratio Grid and based
upon a Debt Ratio greater than or equal to 1.25 but less than 2, and such
pricing shall not be adjusted until the first applicable date after the
Distribution Date.
When the Ratings Grid is in effect, the Applicable Margin for
Eurodollar Loans or Eurocurrency Loans, Facility Fee and Letter of Credit Fee
will be adjusted (upward or downward), if necessary, five (5) days after a
change in any such rating. In the event the ratings fall within different levels
identified in the Ratings Grid, the higher rating shall be applicable unless the
ratings differential between the S&P Bond Rating and the Moody's Bond Rating is
greater than one rating grade. If the differential is greater than one
<PAGE> 103
rating grade, the Applicable Margin for Eurodollar Loans or Eurocurrency Loans,
Facility Fee and Letter of Credit Fee shall be determined as if the applicable
rating were one (1) rating's grade below the higher of the then effective S&P
Bond Rating and the Moody's Bond Rating.
<PAGE> 104
EXHIBIT C
COMPLIANCE CERTIFICATE
To: The Lenders parties to the
Credit Agreement Described Below
This Compliance Certificate is furnished pursuant to that certain
Credit Agreement dated as of ________________, 1997 (as amended, modified,
renewed or extended from time to time, the "Agreement") among the Meritor
Automotive, Inc. (the "Company "), the Foreign Subsidiary Borrowers, the Lenders
party thereto, NBD Bank, as Documentation Agent and Morgan Guaranty Trust
Company of New York as Administrative Agent for the Lenders. Unless otherwise
defined herein, capitalized terms used in this Compliance Certificate have the
meanings ascribed thereto in the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected ____________________________ of the Company;
2. I have reviewed the terms of the Agreement and I have made, or have
caused to be made under my supervision, a detailed review of the transactions
and conditions of the Company and its Subsidiaries during the accounting period
covered by the attached financial statements;
3. The examinations described in paragraph 2 did not disclose, and I
have no knowledge of, the existence of any condition or event which constitutes
a Default or Unmatured Default during or at the end of the accounting period
covered by the attached financial statements or as of the date of this
Certificate, except as set forth below; and
4. Schedule I attached hereto sets forth financial data and
computations evidencing the Company's compliance with certain covenants of the
Agreement, all of which data and computations are true, complete and correct.
5. Schedule II attached hereto sets forth the determination of the
Applicable Margin, Facility Fees and Letter of Credit Fees to be applicable
commencing the fifth day following the delivery hereof.
6. Schedule III attached hereto sets forth the various reports and
deliveries which are required under the Credit Agreement, and the status of
compliance.
Described below are the exceptions, if any, to paragraph 3 by listing,
in detail, the nature of the condition or event, the period during which it has
existed and the action which the Borrower has taken, is taking, or proposes to
take with respect to each such condition or event:
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
<PAGE> 105
The foregoing certifications, together with the computations set forth
in Schedule I and Schedule II hereto and the financial statements delivered with
this Certificate in support hereof, are made and delivered this ____ day of
___________, 1997.
Meritor Automotive, Inc.
By:_______________________________
Its:______________________________
<PAGE> 106
SCHEDULE I TO COMPLIANCE CERTIFICATE
Compliance as of _________, 199_ with
Provisions of 6.17 and 6.18 of
the Agreement
<PAGE> 107
SCHEDULE II TO COMPLIANCE CERTIFICATE
Rate Determination
<PAGE> 108
SCHEDULE III TO COMPLIANCE CERTIFICATE
Reports and Deliveries
<PAGE> 109
EXHIBIT D
FORM OF OPINION OF COMPANY COUNSEL
August __, 1997
The Agents and the Lenders who are parties
to the Credit Agreement described below.
Gentlemen/Ladies:
We are counsel for 111 Holdings, Inc. (the "Company"), and have
represented the Company in connection with its execution and delivery of a
Credit Agreement dated as of August __, 1997 (the "Agreement") among the
Company, the Foreign Subsidiary Borrowers and Lenders named therein, Morgan
Guaranty Trust Company of New York, as Administrative Agent, and NBD Bank, as
Documentation Agent, and providing for Advances in an aggregate principal amount
not exceeding $1,000,000,000 at any one time outstanding. All capitalized terms
used in this opinion and not otherwise defined herein shall have the meanings
attributed to them in the Agreement.
We have examined the Company's articles of incorporation, by-laws,
resolutions, the Loan Documents and such other matters of fact and law which we
deem necessary in order to render this opinion. Based upon the foregoing, it is
our opinion that:
l. The Company and each Subsidiary organized under the laws of the
United States or any political subdivision thereof (each defined as a "Domestic
Subsidiary") are corporations duly incorporated, validly existing and in good
standing under the laws of their states of incorporation and have all requisite
authority to conduct their business in each jurisdiction in which their business
is conducted.
2. The execution and delivery of the Loan Documents by the Company and
the performance by the Company of the Obligations have been duly authorized by
all necessary corporate action and proceedings on the part of the Company and
will not:
(a) require any consent of the Company's shareholders;
(b) violate any law, rule, regulation, order, writ, judgment,
injunction, decree or award binding on the Company or any of its
Subsidiaries or the Company's or any Subsidiary's articles of
incorporation or by-laws or any indenture, instrument or agreement
binding upon the Company or any of its Subsidiaries; or
(c) result in, or require, the creation or imposition of any
Lien pursuant to the provisions of any indenture, instrument or
agreement binding upon the Company or any of its Subsidiaries.
3. The Loan Documents have been duly executed and delivered by the
Company and constitute legal, valid and binding obligations of the Company
enforceable in accordance with their terms except to the extent the enforcement
thereof may be limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally and subject also to the availability
of equitable remedies if equitable remedies are sought.
<PAGE> 110
4. There is no litigation or proceeding against the Company or any of
its Subsidiaries which, if adversely determined, could reasonably be expected to
have a Material Adverse Effect.
5. No approval, authorization, consent, adjudication or order of any
governmental authority, which has not been obtained by the Company or any of its
Subsidiaries, is required to be obtained by the Company or any of its
Subsidiaries in connection with the execution and delivery of the Loan
Documents, by the Company, the borrowings under the Agreement by the Company or
in connection with the payment by the Company of the Obligations.
This opinion may be relied upon by the Agents, the Lenders and their
participants, assignees and other transferees.
Very truly yours,
__________________________________
<PAGE> 111
EXHIBIT E
Opinion of counsel for Rockwell International Corporation
August 21, 1997
The Agents and the Lenders who are parties
to the Credit Agreement described below
Ladies and Gentlemen:
I am Senior Vice President, General Counsel and Secretary of Rockwell
International Corporation, a Delaware corporation (the "Guarantor"). In that
capacity, I have acted as counsel for the Guarantor in connection with its
execution and delivery of a Guaranty (the "Rockwell International Guaranty")
dated as of August 21, 1997 pursuant to a Credit Agreement (the "Credit
Agreement") dated as of August 21, 1997 among Meritor Automotive, Inc., the
Foreign Subsidiary Borrowers and Lenders named therein, Morgan Guaranty Trust
Company of New York, as Administrative Agent, and NBD Bank, as Documentation
Agent, and providing for Advances to the Borrowers in an aggregate principal
amount not exceeding $1,000,000,000 at any one time outstanding. All capitalized
terms used in this opinion and not otherwise defined herein shall have the
meanings attributed to them in the Credit Agreement. This opinion is being
rendered to you at the request of the Company and the Guarantor pursuant to
Section 4.1(f) of the Credit Agreement.
I have examined originals or copies, certified or otherwise identified to my
satisfaction, of such documents, corporate records, certificates of public
officials and other instruments and have conducted such other investigations of
fact and law as I have deemed necessary or advisable for purposes of this
opinion. As to questions of fact material to this opinion, I have, when relevant
facts were not independently established, relied upon certifications of
appropriate officers of the Guarantor. In rendering this opinion, I have assumed
the genuineness of all signatures (except the signature on behalf of the
Guarantor on the Rockwell International Guaranty), the authenticity of all
documents submitted to me as originals and the conformity to authentic original
documents of all documents submitted to me as certified, conformed or
photostatic copies.
Upon the basis of the foregoing, I am of the opinion that:
1. The Guarantor is a corporation duly incorporated, validly
existing and in good standing under the laws of Delaware, and
has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to
carry on its business as now conducted.
2. The execution, delivery and performance by the Guarantor of
the Rockwell International Guaranty are within the Guarantor's
corporate powers; have been duly authorized by all necessary
corporate action, require no action by or in respect of, or
filing with, any governmental body, agency or official of the
State of New York or Delaware or the United States of America;
do not contravene, or constitute a default under, a provision
of
<PAGE> 112
The Agents and the Lenders who are parties
to the Credit Agreement described below
August 21, 1997
Page 2
applicable law or regulation or of the certificate of
incorporation or by-laws of the Guarantor; do not contravene,
constitute a default under, and are not subject to any
requirement to obtain a consent under, any agreement,
judgment, injunction, order, decree or other instrument known
to me and binding upon the Guarantor or any of its
Subsidiaries; and do not result in the creation or imposition
of any Lien on any asset of the Guarantor or any of its
Subsidiaries under any such provision.
3. The Rockwell International Guaranty constitutes a valid and
binding agreement of the Guarantor, enforceable in accordance
with its terms, except as the same may be limited by
bankruptcy, insolvency or similar laws affecting creditors'
rights generally and by general principles of equity
(regardless whether enforcement is sought in a proceeding in
equity or at law).
4. Except as disclosed in the Guarantor's reports pursuant to
Section 13 of the Securities Exchange Act of 1934, as amended,
there is no action, suit or proceeding pending against, or to
the best of my knowledge threatened against or affecting, the
Guarantor or any of its Subsidiaries before any court or
arbitrator or any governmental body, agency or official, in
which there is a reasonable probability of an adverse decision
which could materially adversely affect the business,
consolidated financial position or consolidated results of
operations of the Guarantor and its consolidated Subsidiaries
considered as a whole or which in any manner draws into
question the validity of the Rockwell International Guaranty.
I am a member of the Bar of the State of New York and do not for purposes of
this opinion purport to be an expert on the laws of any other jurisdiction
except the federal laws of the United States and, to the extent applicable to
the opinions hereinabove expressed, the General Corporation Law of the State of
Delaware. Accordingly, the foregoing opinion is limited to such matters as
depend upon the application of those laws.
This opinion is rendered solely to you in connection with the above matter and
may not be relied upon by you for any other purpose, or by any other Person,
other than your successors and permitted assignees, without my prior written
consent.
Very truly yours,
William J. Calise, Jr.
Senior Vice President,
General Counsel & Secretary
<PAGE> 113
EXHIBIT F
Money Transfer Instructions
<PAGE> 114
EXHIBIT G
OPINIONS FOR
FOREIGN SUBSIDIARY BORROWERS
1. The Foreign Subsidiary Borrower is duly organized, validly existing
and in good standing under the laws of _______________ [specify the jurisdiction
of its organization] (the "Jurisdiction").
2. The Foreign Subsidiary Borrower has the power and authority, and the
legal right, to make, deliver and perform its obligations under the Credit
Agreement and to borrow under the Credit Agreement. The Foreign Subsidiary
Borrower has taken all necessary corporate action to authorize the performance
of its obligations as a "Foreign Subsidiary Borrower" under the Credit Agreement
and to authorize the execution, delivery and performance of the Credit
Agreement.
3. Except for consents, authorizations, approvals, notices and filings
described on an attached schedule, all of which have been obtained, made or
waived and are in full force and effect, no consent or authorization of,
approval by, notice to, filing with or other act by or in respect of, any
Governmental Authority is required in connection with the borrowings by the
Foreign Subsidiary Borrower under the Credit Agreement or with the execution,
delivery, performance, validity or enforceability of the Credit Agreement.
4. The Credit Agreement has been duly executed and delivered on behalf
of the Foreign Subsidiary Borrower.
5. The execution and delivery of the Credit Agreement by the Foreign
Subsidiary Borrower, the performance of its obligations thereunder, the
consummation of the transactions contemplated thereby, the compliance by the
Foreign Subsidiary Borrower with any of the provisions thereof, the borrowings
under the Credit Agreement and the use of proceeds thereof, all as provided
therein, (a) will not violate, or constitute a default under, any Requirement of
Law applicable to the Foreign Subsidiary Borrower and (b) will not result in, or
require, the creation or imposition of any Lien on any of its properties or
revenues pursuant to any such Requirement of Law.
6. There are no taxes imposed by the Jurisdiction (a) on or by virtue
of the execution, delivery, enforcement or performance of the Credit Agreement
or (b) on any payment to be made by the Foreign Subsidiary Borrower pursuant to
the Credit Agreement other than any Non-Excluded Taxes payable by the Foreign
Subsidiary Borrower as provided in Section 3.6 of the Credit Agreement.
7. To ensure the legality, validity, enforceability or admissibility in
evidence of the Credit Agreement, it is not necessary that the Credit Agreement
or any other Loan Documents or any other document be filed, registered or
recorded with, or executed or notarized before, any court of other authority of
the Jurisdiction or that any registration charge or stamp or similar tax be paid
on or in respect of the Credit Agreement.
8. The Credit Agreement is in proper legal form under the laws of the
Jurisdiction for the enforcement thereof against the Foreign Subsidiary Borrower
under the laws of the Jurisdiction.
<PAGE> 115
9. In any action or proceeding arising out of or relating to the Credit
Agreement in any court in the Jurisdiction, such court would recognize and give
effect to the choice of law provisions in the Credit Agreement wherein the
parties thereto agree that the Credit Agreement shall be governed by, and
construed and interpreted in accordance with, the laws of the State of New York.
10. It is not necessary under the laws of the Jurisdiction (a) in order
to enable the Agents and the Lenders or any of them to enforce their respective
rights of the Credit Agreement or (b) by reason of the execution of the Credit
Agreement or the Joinder Agreement to which the Foreign Subsidiary Borrower is a
party or the performance of the Credit Agreement that any of them should be
licensed, qualified or entitled to carry on business in the Jurisdiction.
11. Neither any of the Agents nor any of the Lenders will be deemed to
be resident, domiciled, carrying on business or subject to taxation in the
Jurisdiction merely by reason of the execution of the Credit Agreement or
Joinder Agreement to which the Foreign Subsidiary Borrower is a party or the
performance or enforcement of any thereof. The performance by the Agents and the
Lenders or any of them of any action required or permitted under the Credit
Agreement will not violate any law or regulation, or be contrary to the public
policy, of the Jurisdiction.
12. If any judgment of a competent court outside the Jurisdiction were
rendered against the Foreign Subsidiary Borrower in connection with any action
arising out of or relating to the Credit Agreement, such judgment would be
recognized and could be sued upon in the courts of the Jurisdiction, and such
courts could grant a judgment which would be enforceable against the Foreign
Subsidiary Borrower in the Jurisdiction without any retrial unless it is shown
that (a) the foreign court did not have jurisdiction in accordance with its
jurisdictional rules, (b) the party against whom the judgment of such foreign
court was obtained had no notice of the proceedings or (c) the judgment of such
foreign court was obtained through collusion or fraud or was based upon clear
mistake of fact or law.
2
<PAGE> 116
EXHIBIT H
COMPETITIVE BID QUOTE
To: Morgan Guaranty Trust Company of New York, as Administrative Agent
Re: Competitive Bid Quote to Meritor Automotive, Inc. (the "Company")
In response to your invitation on behalf of the Company dated ____________,
199_, we hereby make the following Competitive Bid Quote pursuant to Section
2.7.4 of the Credit Agreement hereinafter referred to and on the following
terms:
1. Quoting Lender:
2. Person to contact at Quoting Lender:
3. Borrowing Date: ___________, 19__(1)
4. We hereby offer to make Competitive Bid Loan(s) in the following principal
amounts, for the following Interest Periods and at the following rates:
Principal Interest Competitive [Absolute Minimum
Amount(2) Period(3) Bid Margin(4) Rate](5) Amount(6)
$
- ----------
(1) As specified in the related Invitation For Competitive Bid Quotes.
(2) Principal amount bid for each Interest Period may not exceed the principal
amount requested. Bids must be made for at least $5,000,000 and an integral
multiple of $1,000,000.
(3) One, two, three or six months or at least 7 and up to 360 days, as specified
in the related Invitation For Competitive Bid Quotes.
(4) Competitive Bid Margin over or under the Eurodollar Base Rate determined for
the applicable Interest Period. Specify percentage (rounded to the nearest
1/10,000 of 1%) and specify whether "PLUS" or "MINUS".
(5) Specify rate of interest per annum (rounded to the nearest 1/10,000 of 1%).
(6) Specify minimum or maximum amount, if any, which the Company may accept
and/or limit, if any, as to the aggregate principal amount of the
Competitive Bid Loans of the quoting Lender which the Company may accept
(see Section 2.7.4(ii)(d)).
<PAGE> 117
We understand and agree that the offer(s) set forth above, subject to the
satisfaction of the applicable conditions set forth in the Credit Agreement
dated as of August 21, 1997 among the Company, the Foreign Subsidiary Borrowers,
the Lenders party thereto, NBD Bank as Documentation Agent and yourselves, as
Administrative Agent (the "Credit Agreement"), irrevocably obligates us to make
the Competitive Bid Loan(s) for which any offer(s) are accepted, in whole or in
part. Capitalized terms used herein and not otherwise defined herein shall have
their meanings as defined in the Credit Agreement.
Very truly yours,
[NAME OF LENDER]
By:_______________________________
Authorized Officer
<PAGE> 118
EXHIBIT I
INVITATION FOR COMPETITIVE BID QUOTES
(Section 2.7.3)
To: [Name of Lender]
Re: Invitation for Competitive Bid Quotes to
Meritor Automotive, Inc. (the "Company")
Pursuant to Section 2.7.3 of the Credit Agreement dated as of _________
(the "Agreement") among the Borrower, the Foreign Subsidiary Borrowers, the
Lenders party thereto, NBD Bank, as Documentation Agent and Morgan Guaranty
Trust Company of New York, as Administrative Agent, we are pleased on behalf of
the Company to invite you to submit Competitive Bid Quotes to the Company for
the following proposed Competitive Bid Advance(s):
Borrowing Date:____________________, 19__
Principal Amount
$
Such Competitive Bid Quotes should offer [a Competitive Bid Margin] [an
Absolute Rate]. Your Competitive Bid Quote must comply with Section 2.7.4 of the
Agreement and the foregoing. Capitalized terms used herein have the meanings
assigned to them in the Agreement.
Please respond to this invitation by no later than [1:00 p.m.] [9:00
a.m.] New York time on _____________, 19__.
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
as Administrative Agent
By:_______________________________
Authorized Officer
<PAGE> 119
EXHIBIT J
COMPETITIVE BID QUOTE REQUEST
(Section 2.7.2)
To: Morgan Guaranty Trust Company of New York
as Administrative Agent (the "Administrative Agent")
From: Meritor Automotive, Inc. (the "Company")
Re: Credit Agreement (the "Agreement") dated as of August 21, 1997 among
the Company, the Foreign Subsidiary Borrowers, the Lenders party thereto, NBD
Bank, as Documentation Agent and Morgan Guaranty Trust Company of New York as
Administrative Agent
We hereby give notice pursuant to Section 2.7.2 of the Agreement that
we request Competitive Bid Quotes for the following proposed Competitive Bid
Advance(s):
Borrowing Date: _________, 19__
Principal Amount(1) Interest Period(2)
$
Such Competitive Bid Quotes should offer [a Competitive Bid Margin] [an
Absolute Rate].
Upon acceptance by the undersigned of any or all of the Competitive Bid
Advances offered by Lenders in response to this request, the undersigned shall
be deemed to affirm as of the Borrowing Date thereof the representations and
warranties made in the Agreement to the extent specified in Article IV thereof.
Capitalized terms used herein have the meanings assigned to them in the
Agreement.
Meritor Automotive, Inc.
By:_______________________________
Title:____________________________
- ----------
(1) Amount must be at least $5,000,000 and an integral multiple of $1,000,000.
(2) One, two, three or six months (Eurodollar Auction) or at least 7 and up to
360 days (Absolute Rate Auction), subject to the provisions of the
definitions of Interest Period and Absolute Rate Interest Period.
<PAGE> 120
EXHIBIT K
JOINDER AGREEMENT
THIS JOINDER AGREEMENT, dated as of _______________, is entered into
pursuant to the Credit Agreement, dated as of August 21, 1997 (as amended or
modified from time to time, the "Agreement"), among Meritor Automotive, Inc.
(the "Company"), the Foreign Subsidiary Borrowers party thereto, the Lenders
party thereto, Morgan Guaranty Trust Company of New York, as Administrative
Agent, and NBD Bank, as Documentation Agent.
WITNESETH:
WHEREAS, the parties to this Joinder Agreement wish to amend Schedule 3
to the Credit Agreement to add Foreign Subsidiary Borrowers to the Credit
Agreement in the manner hereinafter set forth; and
WHEREAS, this Joinder Agreement is entered into pursuant to subsection
8.2.2 of the Credit Agreement;
NOW, THEREFORE, in consideration of the premises, the parties hereto
hereby agree as follows:
1. Each of the undersigned Subsidiaries of the Company hereby
acknowledges that it has received and reviewed a copy of the Credit Agreement
and the other Loan Documents and unconditionally agrees to: (a) join the Credit
Agreement and the other Loan Documents as a Foreign Subsidiary Borrower, (b) be
bound by, and hereby ratifies and confirms, all covenants, agreements, consents,
submissions, appointments, acknowledgments and other terms and provisions
attributable to a Foreign Subsidiary Borrower in the Credit Agreement and the
other Loan Documents; and (c) perform all obligations required of it as a
Foreign Subsidiary Borrower by the Credit Agreement and the other Loan
Documents.
2. Each of the undersigned Subsidiaries of the Company hereby
represents and warrants that the representations and warranties with respect to
it contained in, or made or deemed made by it in, the Credit Agreement and any
other Loan Document are true and correct on the date hereof.
3. The address and jurisdiction of incorporation of each undersigned
Subsidiary of the Company is set forth in Schedule A to this Joinder Agreement.
4. The Company agrees that its guarantee contained in Article IX of the
Credit Agreement shall remain in full force and effect after giving effect to
this Joinder Agreement.
5. This Joinder Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the state of New York.
<PAGE> 121
6. Capitalized terms used but not defined herein shall have the
meanings ascribed thereto in the Credit Agreement.
IN WITNESS WHEREOF, each of the undersigned has caused this Joinder
Agreement to be duly executed and delivered as of the day and year set forth
above.
[NAME OF FOREIGN SUBSIDIARY],
as a Foreign Subsidiary Borrower
By:_______________________________
Print Name:____________________
Title:_________________________
Meritor Automotive, Inc.
By:_______________________________
Print Name:____________________
Title:_________________________
Accepted and Acknowledged:
NBD BANK,
as Documentation Agent
By:_______________________________
Print Name:____________________
Title:_________________________
2
<PAGE> 122
SCHEDULE A
ADMINISTRATIVE INFORMATION
[Insert administrative information concerning Foreign Subsidiary Borrower]
3
<PAGE> 123
EXHIBIT L
GUARANTY
THIS GUARANTY (this "Guaranty") is made as of the 21st day of August,
1997, by ROCKWELL INTERNATIONAL CORPORATION, a Delaware corporation
("Guarantor") in favor of the Documentation Agent, for the ratable benefit of
the Agents and the Lenders, under the Credit Agreement referred to below;
WITNESSETH:
WHEREAS, 111 Holdings, Inc., a Delaware corporation (the "Company"),
the Foreign Subsidiary Borrowers party thereto from time to time (the "Foreign
Subsidiary Borrowers"), the Lenders party thereto from time to time (the
"Lenders"), Morgan Guaranty Trust Company of New York, as Administrative Agent
("Administrative Agent") and NBD Bank, as Documentation Agent (the
"Documentation Agent"), are entering into a certain Credit Agreement dated as of
even date herewith (as the same may be amended or modified from time to time,
the "Credit Agreement"), providing, subject to the terms and conditions thereof,
for extensions of credit to be made by the Lenders to the Borrowers;
WHEREAS, it is a condition precedent to the Agents and the Lenders
executing the Credit Agreement that the Guarantor executes and delivers this
Guaranty whereby the Guarantor shall guarantee (subject to termination as
described in Section 5 below) the payment when due of all principal, interest
and other amounts that shall be at any time payable by the Borrowers under the
Credit Agreement, the Notes and the other Loan Documents; and
WHEREAS, the Company is a subsidiary of the Guarantor and the Guarantor
has requested that the Agents and the Lenders enter into the Credit Agreement in
order to facilitate the Spin-Off and the transactions contemplated pursuant
thereto, each of which will benefit the Guarantor, and in order to induce the
Lenders and the Agents to enter into the Credit Agreement, the Guarantor is
willing to guarantee (subject to termination as described in Section 5 below)
the obligations of the Borrowers under the Credit Agreement, the Notes and the
other Loan Documents;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein.
SECTION 2. Representations and Warranties. The Guarantor represents and
warrants (which representations and warranties shall be deemed to have been
renewed upon each Borrowing Date under the Credit Agreement so long as this
Guaranty is in effect) that:
<PAGE> 124
(a) it (i) is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation; (ii)
has all requisite corporate power, and has all material governmental licenses,
authorizations, consents and approvals necessary to own its assets and carry on
its business as now being or as proposed to be conducted; and (iii) is qualified
to do business in all jurisdictions in which the nature of the business
conducted by it makes such qualification necessary and where failure so to
qualify would have a Material Adverse Effect.
(b) it has all necessary corporate power and authority to
execute, deliver and perform its obligations under this Guaranty; the execution,
delivery and performance of this Guaranty have been duly authorized by all
necessary corporate action; and this Guaranty has been duly and validly executed
and delivered by it and constitutes its legal, valid and binding obligation,
enforceable in accordance with its terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency, reorganization, or moratorium or other
similar laws relating to the enforcement of creditors' rights generally and by
general equitable principles.
(c) neither the execution and delivery by it of this Guaranty
nor compliance with the terms and provisions hereof will conflict with or result
in a breach of, or require any consent under, its certificate of incorporation
or by-laws or any applicable law or regulation, or any order, writ, injunction
or decree of any court or governmental authority or agency, or any agreement or
instrument to which it is a party or by which it is bound or to which it is
subject, or constitute a default under any such agreement or instrument which
could reasonably be expected to have a Material Adverse Effect, or result in the
creation or imposition of any Lien upon any of its revenues or assets pursuant
to the terms of any such agreement or instrument which could reasonably be
expected to have a Material Adverse Effect.
SECTION 3. The Guaranty. Subject to Section 5 hereof, the Guarantor
hereby unconditionally guarantees the full and punctual payment (whether at
stated maturity, upon acceleration or otherwise) of the principal of and
interest on each Loan made pursuant to the Credit Agreement, and the full and
punctual payment of all other amounts payable by the Borrowers or any of them
under the Credit Agreement and the other Loan Documents including, without
limitation, the Obligations (all of the foregoing being referred to collectively
as the "Guaranteed Obligations"). Upon failure by any Borrower to pay punctually
any such amount, the Guarantor agrees that it shall forthwith on demand pay the
amount not so paid at the place and in the manner specified in the Credit
Agreement, any Note or the relevant Loan Document, as the case may be.
SECTION 4. Guaranty Unconditional. The obligations of the Guarantor
hereunder shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(i) any extension, renewal, settlement, compromise, waiver or release
in respect of any obligation of any Borrower under the Credit
Agreement, any Note, or any other Loan Document (other than a waiver or
release of any Obligations consented to in writing by the Agents and
the Lenders) by operation of law or otherwise or any obligation of any
other guarantor of any of its Obligations;
(ii) any modification or amendment of or supplement to the Credit
Agreement, any Note, or any other Loan Document;
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<PAGE> 125
(iii) any release, nonperfection or invalidity of any direct or
indirect security for any obligation of any Borrower under the Credit
Agreement, any Note, any Loan Document, or any obligations of any other
guarantor of any of the Obligations;
(iv) any change in the corporate existence, structure or ownership of
any Borrower or any other guarantor of any of the Obligations, or any
insolvency, bankruptcy, reorganization or other similar proceeding
affecting any Borrower, or any other guarantor of the Obligations, or
its assets or any resulting release or discharge of any obligation of
any Borrower, or any other guarantor of any of the Obligations;
(v) the existence of any claim, setoff or other rights which the
Guarantor may have at any time against any Borrower, any other
guarantor of any of the Obligations, either Agent, any Lender or any
other Person, whether in connection herewith or any unrelated
transactions;
(vi) any invalidity or unenforceability relating to or against any
Borrower, or any other guarantor of any of the Obligations, for any
reason related to the Credit Agreement, any other Loan Document, or any
provision of applicable law or regulation purporting to prohibit the
payment by any Borrower, or any other guarantor of the Obligations, of
the principal of or interest on any Loan or any other amount payable by
any Borrower under the Credit Agreement, the Notes, or any other Loan
Document; or
(vii) any other act or omission to act or delay of any kind by any
Borrower, any other guarantor of the Obligations, either Agent, any
Lender or any other Person or any other circumstance whatsoever which
might, but for the provisions of this paragraph, constitute a legal or
equitable discharge of the Guarantor's obligations hereunder, other
than irrevocable payment in full of the Obligations.
SECTION 5. Discharge; Reinstatement In Certain Circumstances. The
Guarantor's obligations hereunder shall remain in full force and effect until
the earlier of the date (a) all Guaranteed Obligations shall have been paid in
full in cash and the Commitments under the Credit Agreement shall have
terminated or expired or (b) on which each of the following is satisfied (i) the
Spin-Off shall be completed in all material respects on or before December 31,
1997 substantially in accordance with the terms of the Spin-Off described in the
Form 10, including without limitation the transfer of substantially all assets
to the Company described in the Form 10 and the satisfaction of substantially
all conditions precedent to the Distribution as provided in the Distribution
Agreement (as such terms are defined in the Form 10, a copy which has been
previously delivered to the Lenders prior to the Closing Date), provided that if
the Tax Ruling (as defined in the Form 10) is not received on a timely basis, a
satisfactory favorable tax opinion may be substituted in place thereof, (ii) the
Guarantor and the Company shall deliver a certificate (the "Termination
Certificate") from their Authorized Officers addressed to the Agents and the
Lenders stating that the Spin-Off is completed in accordance with the foregoing
clause (i), that the representations and warranties in the second sentence of
Section 5.4 of the Credit Agreement are true and correct on such date as if made
on and as of such date after giving effect to the consummation of the Spin-Off,
and that the Company is in compliance with the financial covenants contained in
Sections 6.17 and 6.18 as of such date after giving effect to the consummation
of the Spin-Off and as if such covenants were calculated and effective as of
such date, provided that the Debt Ratio shall be based on the pro forma Debt
Ratio of the Automotive Business (as defined in the Form 10) for the four most
recently ended fiscal quarters, and (iii) no Default or Unmatured Default under
Sections 7.2, 7.6, 7.7 or 7.14 of the Credit Agreement shall have occurred and
be continuing as of such date after giving effect to the Spin-Off. After the
earlier of the events specified in clauses (a) and (b) of the prior sentence,
this Guaranty shall terminate and cease to have
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<PAGE> 126
any force or effect and the Guarantor shall cease to have any obligations of any
kind hereunder, other than any liability for any inaccuracy in the Termination
Certificate, without further notice or actions of any kind to, by or on behalf
of any Person. If at any time any payment made prior to the termination of this
Guaranty of the principal of or interest on any Note or any other amount paid
prior to the termination of this Guaranty by any Borrower or any other party
under the Credit Agreement or any other Loan Document is rescinded or must be
otherwise restored or returned upon the insolvency, bankruptcy or reorganization
of any Borrower or otherwise, the Guarantor's obligations hereunder with respect
to such payment shall be reinstated as though such payment had been due but not
made at such time.
SECTION 6. Waiver of Notice. The Guarantor irrevocably waives
acceptance hereof, presentment, demand, protest and, to the fullest extent
permitted by law, any notice not provided for herein, as well as any requirement
that at any time any action be taken by any Person against any Borrower, any
other guarantor of the Obligations, or any other Person.
SECTION 7. Subrogation. The Guarantor hereby agrees not to assert any
right, claim or cause of action, including, without limitation, a claim for
subrogation, reimbursement, indemnification or otherwise, against any Borrower
arising out of or by reason of this Guaranty or the Guaranteed Obligations
hereunder unless and until the Guaranteed Obligations are paid in full and any
Commitment to lend under the Credit Agreement and the other Loan Documents is
terminated.
SECTION 8. Stay of Acceleration. Subject to Section 5 hereof, if
acceleration of the time for payment of any amount payable by the Borrowers
under the Credit Agreement, any Note or any other Loan Document is stayed upon
the insolvency, bankruptcy or reorganization of the Company, all such amounts
otherwise subject to acceleration under the terms of the Credit Agreement, any
Note or any other Loan Document shall nonetheless be payable by the Guarantor
hereunder forthwith on demand by the Documentation Agent made at the request of
the Required Lenders.
SECTION 9. Notices. All notices, requests and other communications to
any party hereunder shall be given or made by telecopier or other writing and
telecopied, or mailed or delivered to the intended recipient at its address or
telecopier number set forth on the signature pages hereof or such other address
or telecopy number as such party may hereafter specify for such purpose by
notice to the Documentation Agent in accordance with the provisions of Section
14.1 of the Credit Agreement. Except as otherwise provided in this Guaranty, all
such communications shall be deemed to have been duly given when transmitted by
telecopier, or personally delivered or, in the case of a mailed notice sent by
certified mail return-receipt requested, on the date set forth on the receipt
(provided, that any refusal to accept any such notice shall be deemed to be
notice thereof as of the time of any such refusal), in each case given or
addressed as aforesaid.
SECTION 10. No Waivers. No failure or delay by either Agent or any
Lenders in exercising any right, power or privilege hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies provided in this Guaranty, the Credit
Agreement, the Notes, and the other Loan Documents shall be cumulative and not
exclusive of any rights or remedies provided by law.
SECTION 11. Successors and Assigns. This Guaranty is for the benefit of
the Agents and the Lenders and their respective successors and permitted assigns
and in the event of a permitted assignment of any amounts payable under the
Credit Agreement, the Notes, or the other Loan Documents, the rights hereunder,
to the extent applicable to the indebtedness so assigned, may be transferred
with such
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<PAGE> 127
indebtedness. This Guaranty shall be binding upon each of the Guarantor and its
successors and permitted assigns.
SECTION 12. Changes in Writing. Neither this Guaranty nor any provision
hereof may be changed, waived, discharged or terminated orally, but only in
writing signed by the Guarantor and the Documentation Agent with the consent of
the Required Lenders or, in the case of any release of the Guarantor or any
reduction in any of its obligations hereunder, all the Lenders.
SECTION 13. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAW OF THE STATE OF NEW YORK. THE GUARANTOR HEREBY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK COUNTY FOR PURPOSES
OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS GUARANTY (INCLUDING,
WITHOUT LIMITATION, ANY OF THE OTHER LOAN DOCUMENTS) OR THE TRANSACTIONS
CONTEMPLATED HEREBY. THE GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT
ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. THE GUARANTOR, AND THE AGENTS AND THE LENDERS ACCEPTING THIS GUARANTY,
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
SECTION 15. Taxes, etc. All payments required to be made by the
Guarantor hereunder shall be made without setoff or counterclaim and free and
clear of and without deduction or withholding for or on account of, any present
or future taxes, levies, imposts, duties or other charges of whatsoever nature
imposed by any government or any political or taxing authority thereof
(excluding income taxes and franchise taxes (imposed in lieu of income taxes)
imposed on the Agents or any Lender as a result of a present or former
connection between such Person and the jurisdiction of such government or
political or taxing authority imposing such tax or any political subdivision or
taxing authority thereof or therein), provided, however, that if the Guarantor
is required by law to make such deduction or withholding, the Guarantor shall
forthwith pay to either Agent or any Lender, as applicable, such additional
amount as results in the net amount received by either Agent or any Lender, as
applicable, equaling the full amount which would have been received by either
Agent or any Lender, as applicable, had no such deduction or withholding been
made.
SECTION 16. Termination. The Guarantor may at any time terminate this
Guaranty on not less than 10 days prior written notice to the Agents, which sets
forth the effective date for such termination (which effective date shall not be
earlier than 10 days after the date such notice is given). On and after the
effective date specified in such notice; this Guaranty shall terminate and the
Guarantor shall cease to have any obligations of any kind hereunder, except that
termination shall not affect the Guarantor's obligation in respect of any
Guaranteed Obligations actually outstanding on the effective date of such
termination plus all interest and fees accruing thereon after such effective
date and all indemnification obligations relating to any such Guaranteed
Obligations.
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IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed by its authorized officer as of the day and year first above written.
ROCKWELL INTERNATIONAL CORPORATION
By:
--------------------------------------
Dennis J. Popovec
Title: Vice President and Treasurer
Address for Notices:
Rockwell International Corporation
2201 Seal Beach Boulevard
Seal Beach, CA 90740-8250
Attention: William J. Calise, Jr., Esq.
Senior Vice President, General
Counsel and Secretary
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<PAGE> 129
EXHIBIT M
ASSIGNMENT-AGREEMENT
This Assignment Agreement (this "Assignment Agreement") between
___________ (the "Assignor") and (the "Assignee") is dated as of 19-. The
parties hereto agree as follows:
1. PRELIMINARY STATEMENT. The Assignor is a party to a Credit Agreement
(which, as it may be amended, modified, renewed or extended from time to time is
herein called the "Credit Agreement") described in Item I of Schedule I attached
hereto ("Schedule I"). Capitalized terms used herein and not otherwise defined
herein shall have the meanings attributed to them in the Credit Agreement.
2. ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and assigns to
the Assignee, and the Assignee hereby purchases and assumes from the Assignor,
an interest in and to the Assignor's rights and obligations under the Credit
Agreement such that after giving effect to such assignment the Assignee shall
have purchased pursuant to this Assignment Agreement the percentage interest
specified in Item 3 of Schedule I of all outstanding rights and obligations
under the Credit Agreement relating to the facilities listed in Item 3 of
Schedule I and the other Loan Documents. The aggregate Commitment (or Loans and
participations in Facility Letters of Credit if the applicable Commitment has
been terminated) purchased by the Assignee hereunder is set forth in Item 4 of
Schedule 1.
3. EFFECTIVE DATE. The effective date of this Assignment Agreement (the
"Effective Date") shall be the later of the date specified in Item 5 of Schedule
I or two Business Days (or such shorter period agreed to by the Agents) after a
Notice of Assignment substantially in the form of Exhibit "I" attached hereto
has been delivered to the Agents. Such Notice of Assignment must include any
consents required to be delivered to the Agents by Section 13.3.1 of the Credit
Agreement. In no event will the Effective Date occur if the payments required to
be made by the Assignee to the Assignor on the Effective Date under Sections 4
and 5 hereof are not made on the proposed Effective Date. The Assignor will
notify the Assignee of the proposed Effective Date no later than the Business
Day prior to the proposed Effective Date. As of the Effective Date, (i) the
Assignee shall have the rights and obligations of a Lender under the Loan
Documents with respect to the rights and obligations assigned to the Assignee
hereunder and (ii) the Assignor shall relinquish its rights and be released from
its corresponding obligations under the Loan Documents with respect to the
rights and obligations assigned to the Assignee hereunder.
4. PAYMENTS OBLIGATIONS. On and after the Effective Date, the Assignee
shall be entitled to receive from the Administrative Agent all payments of
principal, interest and fees with respect to the interest assigned hereby. The
Assignee shall advance funds directly to the
<PAGE> 130
Administrative Agent with respect to all Loans and reimbursement payments made
on or after the Effective Date with respect to the interest assigned hereby. [In
consideration for the sale and assignment of Loans and participations in
Facility Letters of Credit hereunder, (i) the Assignee shall pay the Assignor,
on the Effective Date, an amount equal to the principal amount of the portion of
all Floating Rate Loans assigned to the Assignee hereunder and (ii) with respect
to each Fixed Rate Loan made by the Assignor and assigned to the Assignee
hereunder which is outstanding on the Effective Date, (a) on the last day of the
Interest Period therefor or (b) on such earlier date agreed to by the Assignor
and the Assignee or (c) on the date on' which any such Fixed Rate Loan either
becomes due (by acceleration or otherwise) or is prepaid (the date as described
in the foregoing clauses (a), (b) or (c) being hereinafter referred to as the
"Payment Date'), the Assignee shall pay the Assignor an amount equal to the
principal amount of the portion of such Fixed Rate Loan assigned to the Assignee
which is outstanding on the Payment Date. If the Assignor and the Assignee agree
that the Payment Date for such Fixed Rate Loan shall be the Effective Date, they
shall agree to the interest rate applicable to the portion of such Loan assigned
hereunder for the period from the Effective Date to the end of the existing
Interest Period applicable to such Fixed Rate Loan (the "Agreed Interest Rate")
and any interest received by the Assignee in excess of the Agreed Interest Rate
shall be remitted to the Assignor. In the event interest for the period from the
Effective Date to but not including the Payment. Date is not paid by a Borrower
with respect to any Fixed Rate Loan sold by the Assignor to the Assignee
hereunder, the Assignee shall pay to the Assignor interest for such period on
the portion of such Fixed Rate Loan sold by the Assignor to the Assignee
hereunder at the applicable rate provided by the Credit Agreement. In the event
a prepayment of any Fixed Rate Loan which is existing on the Payment Date and
assigned by the Assignor to the Assignee hereunder occurs after the Payment Date
but before the end of the Interest Period applicable to such Fixed Rate Loan,
the Assignee shall remit to the Assignor the excess of the prepayment penalty
paid with respect to the portion of such Fixed Rate Loan assigned to the
Assignee hereunder over the amount which would have been paid if such prepayment
penalty was calculated based on the Agreed Interest Rate. The Assignee will also
promptly remit to the Assignor (i) any principal payments received from the
Administrative Agent with respect to Fixed Rate Loans prior to the Payment Date
and (ii) any amounts of interest on Loans and fees received from the
Administrative Agent which relate to the portion of the Loans assigned to the
Assignee hereunder for periods prior to the Effective Date, in the case of
Floating Rate Loans or fees, or the Payment Date, in the case of Fixed Rate
Loans, and not previously paid by the Assignee to the Assignor.] In the event
that either party hereto receives any payment to which the other party hereto is
entitled under this Assignment Agreement then the party receiving such amount
shall promptly remit it to the other party hereto.
*Each Assignor may insert its standard payment provisions in lieu of the payment
terms included in this Exhibit.
5. FEES PAYABLE BY THE ASSIGNEE. The Assignee shall pay to the Assignor
a fee on each day on which a payment of interest or facility or letter of credit
fees is made under the Credit Agreement with respect to the amounts assigned to
the Assignee hereunder (other than a payment of interest or commitment fees for
the period prior to the Effective Date or, in the case
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of Fixed Rate Loans, the Payment Date, which the Assignee is obligated to
deliver to the Assignor pursuant to Section 4 hereof). The amount of such fee
shall be the difference between (i) the interest or fees, as applicable, paid
with respect to the amounts assigned to the Assignee hereunder and (ii) the
interest or fees, as applicable, which would have been paid with respect to the
amounts assigned to the Assignee hereunder if each interest rate was __ of 1%
less than the interest rate paid by the applicable Company, if the facility fee
was __ of 1% less than the facility fee paid by the Borrower (or if the letter
of credit fee was of 1% less than the letter of credit fee paid by the Company),
as applicable. In addition, the Assignee agrees to pay __% of the recordation
fee required to be paid to the Administrative Agent in connection with this
Assignment Agreement.
6. REPRESENTATIONS OF THE ASSIGNOR: LIMITATIONS ON THE ASSIGNOR'S
LIABILITY. The Assignor represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim created by the Assignor. It is
understood and agreed that the assignment and assumption hereunder are made
without recourse to the Assignor and that the Assignor makes no other
representation or warranty of any kind to the Assignee. Neither the Assignor nor
any of its officers, directors, employees, agents or attorneys shall be
responsible for (i) the due execution, legality, validity, enforceability,
genuineness, sufficiency or collectability of any Loan Document, including
without limitation, documents granting the Assignor and the other Lenders a
security interest in assets of the Company, any Foreign Subsidiary Borrower or
any guarantor, (ii) any representation, warranty or statement made in or in
connection with any of the Loan Documents, (iii) the financial condition or
creditworthiness of the Company, any Foreign Subsidiary Borrower or any
guarantor, (iv) the performance of or compliance with any of the terms or
provisions of any of the Loan Documents, (v) inspecting any of the Property,
books or records of the Company, any Foreign Subsidiary Borrower, (vi) the
validity, enforceability, perfection, priority, condition, value or sufficiency
of any collateral securing or purporting to secure the Loans or (vii) any
mistake, error of judgment or action taken or omitted to be taken in connection
with the Loans or the Loan Documents.
7. REPRESENTATIONS OF THE ASSIGNEE. The Assignee (i) confirms that it
has received a copy of the Credit Agreement together with copies of the.
financial statements requested by the Assignee and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment Agreement, (ii) agrees that it will,
independently and without reliance upon the either Agent, the Assignor or any
other Lender and based on such documents and information at it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Loan Documents, (iii) appoints and authorizes the
Administrative Agent and the Documentation Agent to take such action as agent on
its behalf and to exercise such powers under the Loan Documents as are delegated
to such Agents by the terms thereof, together with such powers as are reasonably
incidental thereto, (iv) agrees that it will perform in accordance with their
terms all of the obligations which by the terms of the Loan Documents are
required to be performed by it as a Lender, (v) agrees that its payment
instructions and notice instructions are as set forth in the
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attachment to Schedule 1, (vi) confirms that none of the funds, monies, assets
or other consideration being used to make the purchase and assumption hereunder
are "plan assets" as defined under ERISA and that its rights, benefits and
interests in and under the Loan Documents will not be 'plan assets" under ERISA,
and (vii) attaches the forms prescribed by the Internal Revenue Service of the
United States certifying that the Assignee is entitled to receive payments under
the Loan Documents without deduction or withholding of any United States federal
income taxes].*
*to be inserted if the Assignee is not incorporated under the laws of the United
States, or a state thereof.
8. INDEMNITY. The Assignee agrees to indemnify and hold the Assignor
harmless against any and all losses, costs and expenses (including, without
limitation, reasonable attorneys' fees) and liabilities incurred by the Assignor
in connection with or arising in any manner from the Assignee's non-performance
of the obligations assumed under this Assignment Agreement.
9. SUBSEQUENT ASSIGNMENTS. After the Effective Date, the Assignee shall
have the right pursuant to Section 13.3.1 of the Credit Agreement to assign the
rights which are assigned to the Assignee hereunder to any entity or person,
provided that (i) any such subsequent assignment does not violate any of the
terms and conditions of the Loan Documents or any law, rule, regulation, order,
writ, judgment, injunction or decree and that any consent required under the
terms of the Loan Documents has been obtained and (ii) unless the prior written
consent of the Assignor is obtained, the Assignee is not thereby released from
its obligations to the Assignor hereunder, if any remain unsatisfied, including,
without limitation, its obligations under Sections 4, 5 and 8 hereof.
10. REDUCTIONS OF AGGREGATE REVOLVING CREDIT COMMITMENTS. If any
reduction in the Aggregate Revolving Credit Commitments occurs between the date
of this Assignment Agreement and the Effective Date, the percentage interest
specified in Item 3 of Schedule I shall remain the same, but the dollar amount
purchased shall be recalculated based on the reduced Aggregate Revolving Credit
Commitments.
11. ENTIRE AGREEMENT. This Assignment Agreement and the attached Notice
of Assignment embody the entire agreement and understanding between the parties
hereto and supersede all prior agreements and understandings between the-parties
hereto relating to the subject matter hereof.
12. GOVERNING LAW. This Assignment Agreement shall be governed by the
internal law, and not the law of conflicts, of the State of New York.
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13. NOTICES. Notices shall be given under this Assignment Agreement in
the manner set forth in the Credit Agreement. For the purpose hereof, the
addresses of the parties hereto (until notice of a change is delivered) shall be
the address set forth in the attachment to Schedule 1.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
Agreement by their duly authorized officers as of the date first above written.
[NAME OF ASSIGNOR]
By:_______________________________
Title:____________________________
____________________________
____________________________
[NAME OF ASSIGNEE]
By:_______________________________
Title:____________________________
____________________________
____________________________
5
<PAGE> 134
SCHEDULE 1
to Assignment Agreement
1. Description and Date of Credit Agreement: Credit Agreement dated as of
August 21, 1997 among Meritor Automotive, Inc., the Foreign Subsidiary
Borrowers, the Lenders party thereto, NBD Bank, as Documentation Agent and
Morgan Guaranty Trust Company of New York, as Administrative Agent:
2. Date of Assignment Agreement:_______________, 19
3. Amounts (As of Date of Item 2 above):
Revolving Multi-
Credit currency
Facility Facility
a. Total of Commitments
(Loans)** under
Credit Agreement $_______ $_______
b. Assignee's Percentage
of each Facility purchased
under the Assignment
Agreement*** ______% ______%
c. Amount of Assigned Share in
each Facility purchased under
the Assignment
Agreement $_______ $_______
4. Assignee's Aggregate (Loan
Amount)** Commitment Amount
Purchased Hereunder: $_______
5. Proposed Effective Date: ________
Accepted and Agreed:
[NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
By:_____________________ By:_____________________
Title:__________________ Title:__________________
* Insert specific facility names per Credit Agreement
** If a Commitment has been terminated, insert outstanding Loans in place of
Commitment
*** Percentage taken to 10 decimal places
<PAGE> 135
Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT
Attach Assignor's Administrative Information Sheet, which must
include notice address for the Assignor and the Assignee
<PAGE> 136
EXHIBIT "I"
to Assignment Agreement
NOTICE
OF ASSIGNMENT
__________, 19
To: MERITOR AUTOMOTIVE, INC.
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent
NBD BANK, as Documentation Agent
From: [NAME OF ASSIGNOR] (the "Assignor")
[NAME OF ASSIGNEE] (the "Assignee")
1. We refer to that Credit Agreement (the "Credit Agreement") described
in Item 1 of Schedule 1 attached hereto ("Schedule 1"). Capitalized terms used
herein and not otherwise defined herein shall have the meanings attributed to
them in the Credit Agreement.
2. This Notice of Assignment (this "Notice") is given and delivered to
****[the Borrower and]**** the Agent pursuant to Section [12.3.2] of the Credit
Agreement.
3. The Assignor and the Assignee have entered into an Assignment
Agreement, dated as of , 19 (the "Assignment"), pursuant to which, among other
things, the Assignor has sold, assigned, delegated and transferred to the
Assignee, and the Assignee has purchased, accepted and assumed from the Assignor
the percentage interest specified in Item 3 of Schedule 1 of all outstandings,
rights and obligations under the Credit Agreement relating to the facilities
listed in Item 3 of Schedule 1. The Effective Date of the Assignment shall be
the later of the date specified in Item 5 of Schedule 1 or two Business Days (or
such shorter period as agreed to by the Agent) after this Notice of Assignment
and any consents and fees required by Sections [13.3.1 and 13.3.2] of the Credit
Agreement have been delivered to the Agent, provided that the Effective Date
shall not occur if any condition precedent agreed to by the Assignor and the
Assignee has not been satisfied.
4. The Assignor and the Assignee hereby give to the Borrower and the
Agent notice of the assignment and delegation referred to herein. The Assignor
will confer with the Agent before the date specified in Item 5 of Schedule 1 to
determine if the Assignment Agreement will become effective on such date
pursuant to Section 3 hereof, and will confer with the Agent to determine the
Effective Date pursuant to Section 3 hereof if it occurs thereafter. The
Assignor shall notify the Agent if the Assignment Agreement does not become
effective on any proposed Effective Date as a result of the failure to satisfy
the conditions precedent agreed to by the Assignor and the Assignee. At the
request of the Agent, the Assignor will give the Agent written confirmation of
the satisfaction of the conditions precedent.
5. The Assignor or the Assignee shall pay to the Agent on or before the
Effective Date the processing fee of $2,500 required by Section 13.3.2 of the
Credit Agreement.
6. If Notes are outstanding on the Effective Date, the Assignor and the
Assignee request and direct that the Agent prepare and cause the Borrower to
execute and deliver new Notes or, as appropriate, replacements notes, to the
Assignor and the Assignee. The Assignor and, if applicable, the Assignee each
agree to deliver to the Agent the original Note received by it from the Borrower
upon its receipt of a new Note in the appropriate amount.
<PAGE> 137
7. The Assignee advises the Agent that notice and payment instructions
are set forth in the attachment to Schedule 1.
8. The Assignee hereby represents and warrants that none of the funds,
monies, assets or other consideration being used to make the purchase pursuant
to the Assignment are "plan assets" as defined under ERISA and that its rights,
benefits, and interests in and under the Loan Documents will not be "plan
assets" under ERISA.
9. The Assignee authorizes the Agent to act as its agent under the Loan
Documents in accordance with the terms thereof. The Assignee acknowledges that
the Agent has no duty to supply information with respect to the Borrower or the
Loan Documents to the Assignee until the Assignee becomes a party to the Credit
Agreement.*
*May be eliminated if Assignee is a party to the Credit Agreement prior to the
Effective Date.
NAME OF ASSIGNOR NAME OF ASSIGNEE
By:____________________________ By:____________________________
Title:_________________________ Title:_________________________
ACKNOWLEDGED AND CONSENTED TO BY:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent
By:____________________________
Title:_________________________
NBD BANK, as Documentation Agent
By:____________________________
Title:_________________________
MERITOR AUTOMOTIVE, INC. *
By:____________________________
Title:_________________________
[Attach photocopy of Schedule 1 to Assignment]
*To be included only if consent must be obtained from the Borrower pursuant to
Section 12.3.1 of the Credit Agreement.
<PAGE> 138
SCHEDULE 1
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
NAME OF LENDER ADDRESS *** REVOLVING MULTICUR- AVAILABLE FOREIGN
CREDIT RENCY CURRENCY APPLICABLE TO
COMMIT- COMMIT- MULTICURRENCY
MENT MENT COMMITMENT
(IN MILLIONS) (IN
MILLIONS)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Morgan Guaranty Trust 60 Wall St. 110 110 Pounds, Marks, Francs, Yen
Company of New York 22nd Floor
New York, New York 10260
Attn: Dianna Imhof
Fax No. 212-648-5018
- -----------------------------------------------------------------------------------------------------------------------
NBD Bank 611 Woodward Avenue 110 110 Cdn, Aus, Pounds, Marks,
Detroit, MI 48226 Francs & Yen
Attn: Ric Huttenlocher
Fax No. 313-225-2290
- -----------------------------------------------------------------------------------------------------------------------
Bank of America NT & SA 231 S. LaSalle St. 65 65 Cdn, Aus, Pounds, Marks,
Floor 9J Francs, Yen, Lira & Pesetas
Chicago, IL 60697
Attn: Lynn Stetson
Fax No. 312-987-0303
- -----------------------------------------------------------------------------------------------------------------------
Bank of Tokyo - 1251 Avenue of the 65 65 Francs & Marks
Mitsubishi Americas
12th Floor
New York, NY 10020
Attn. Fred Wilms
Fax No. 212-782-6445
- -----------------------------------------------------------------------------------------------------------------------
Citibank, N.A. 399 Park Avenue, 8th 65 65 Cdn, Aus, Pounds, Marks,
Floor, Zone 12 Francs, Yen Lira & Pesetas
New York, NY 10043
Attn: Brian Ike
Fax No. 212-826-2375
- -----------------------------------------------------------------------------------------------------------------------
Comerica Bank 500 Woodward Ave. 65 32.5 Marks & Francs
Detroit, MI 48226
Attn: Lana Anderson
Fax No. 313-222-3776
- -----------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG, New 31 West 52n St. 65 65 Cdn. Aus, Pounds, Marks,
York Branch and/or 24th Floor Francs, Yen, Lira & Pesetas
Cayman Islands Branch New York, NY 10019
Attn. Rolf-Peter
Mikolyczyk
Fax No. 212-469-8212
- -----------------------------------------------------------------------------------------------------------------------
Mellon Bank N.A. One Mellon Bank Center 65 40 None
Suite 4530
5th Ave. & Grant Street
Pittsburgh, PA 15258
Attn. Robert Goode
Fax No. 412-236-1914
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 139
SCHEDULE 1(Continued)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
NAME OF LENDER ADDRESS *** REVOLVING MULTICUR- AVAILABLE FOREIGN
CREDIT RENCY CURRENCY APPLICABLE TO
COMMIT- COMMIT- MULTICURRENCY
MENT MENT COMMITMENT
(IN MILLIONS) (IN
MILLIONS)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Chase Manhattan 270 Park Avenue 65 65 Lira, Pounds, Marks & Francs
Bank 47th Floor
New York, NY
Attn. Andris Kalnins
Fax No. 212-270-5127
- -----------------------------------------------------------------------------------------------------------------------
Banque Nationale de 209 S. LaSalle St. 35 35 Cdn, Aus, Pounds, Marks, Yen,
Paris Suite 500 Lira & Pesetas
Chicago, IL 60604
Attn. Fred Moryl
Fax No. 312-977-1380
- -----------------------------------------------------------------------------------------------------------------------
Canadian Imperial Bank 200 W. Madison St., 35 35 Pounds, Cdn, Marks & Francs
of Commerce Suite 2300
Chicago, IL 60606
Attn. Mike Whitted
Fax No. 312-750-0927
- -----------------------------------------------------------------------------------------------------------------------
Credit Italiano SpA 375 Park Avenue 35 35 Lira, Pounds, Marks & Francs
New York, NY 10152
Attn. Harmon P. Butler
Fax No. 212-546-9675
- -----------------------------------------------------------------------------------------------------------------------
Credit Lyonnais 227 W. Monroe 35 35 Cdn, Pounds, Francs & Lira
Ste. 3800
Chicago, IL 60606
Attn. Kent Davis
Fax No. 312-641-0527
- -----------------------------------------------------------------------------------------------------------------------
Swiss Bank 222 Broadway, 35 35 Pounds, Marks, & Francs
Corporation, New York 2nd Floor
Branch New York, NY 10038
Attn. Daniel Nolan
Fax No. 212-574-3092
- -----------------------------------------------------------------------------------------------------------------------
The Bank of Nova Scotia 181 West Madison 35 35 Cdn., Pounds, Marks, & Francs
Suite 3700
Chicago, Illinois 60606
Attn. David Scott
Fax No. 312-201-4108
- -----------------------------------------------------------------------------------------------------------------------
Toronto-Dominion 909 Fannin Street 35 35 Pounds, Yen, Aus, Cdn,
(Texas), Inc. Houston, Texas 77010
Attn. Fred Hawley (sig
pgs)
Fax No. 713-951-9921
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 140
SCHEDULE 1(Continued)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
NAME OF LENDER ADDRESS *** REVOLVING MULTICUR- AVAILABLE FOREIGN
CREDIT RENCY CURRENCY APPLICABLE TO
COMMIT- COMMIT- MULTICURRENCY
MENT MENT COMMITMENT
(IN MILLIONS) (IN
MILLIONS)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Wells Fargo Bank, N. A. 707 Wilshire Blvd., 35 0 None
16th Floor
MAC 2818-165
Los Angeles, CA 90017
Attn. Frieda Youlios
Fax No. 213-614-2305
- -----------------------------------------------------------------------------------------------------------------------
Istituto Bancario San 245 Park Avenue 25 25 Lira, Pounds
Paolo DiTorino, SpA 35th Floor
New York, NY 10167
Attn. William Coleman
Fax No. 212-599-5303
- -----------------------------------------------------------------------------------------------------------------------
Westpac Banking Corp. 575 Fifth Avenue 20 20 Aus
Level 39
New York, NY 10017
Attn. Craig Jones
Fax No. 212-551-1995
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
*Pounds: Pounds Sterling
Francs: French Francs
Marks: Deutsche Marks
Cdn: Canadian Dollars
Aus: Australian Dollars
Pesetas: Spanish Pesetas
Lira: Italian Lira
Yen: Japanese Yen
** The Multicurrency Commitments are part of the Revolving Credit Commitments,
and the aggregate of the Revolving Credit Loans and Multicurrency Loans of any
Lender may not exceed its Revolving Credit Commitment, as further described in
the Credit Agreement.
*** Any Multicurrency Lender may designate an affiliate or branch for
Multicurrency Loans pursuant to the Credit Agreement, and shall designate an
address for any such affiliate or branch to the Administrative Agent and the
Company.
3
<PAGE> 141
SCHEDULE 2
Eurocurrency Base Rate
"Eurocurrency Base Rate" means, with respect to each Interest Period for a
Multicurrency Loan:
(a) the rate per annum quoted at or about 11:00 a.m. (London time)
on the Quotation Date for such period on that page of the
Telerate Screen which displays British Bankers Association
Interest Settlement Rates for deposits in the relevant
Available Foreign Currency for such period or, if such page or
service shall cease to be available, such other page or such
other service (as the case may be) for the purpose of
displaying British Bankers Association Interest Settlement
Rates for such currency as the Administrative Agent, after
consultation with the Company, shall select.
(b) If no such rate is displayed for the relevant currency and the
relevant period and there is no Available Foreign Currency
alternative service on which two or more such quotations for
the Available Foreign Currency are displayed, "Eurocurrency
Base Rate" will be the rate at which deposits in the Available
Foreign Currency of that amount are offered by the
Administrative Agent for that period to prime banks in the
London inter bank market at or about 11:00 a.m. (London time)
on the Quotation Date for such period. If the Administrative
Agent is not offering a rate to prime banks in the London
inter-bank market for deposits in the Available Foreign
Currency of the amount for the necessary period, this method
of determining "Eurocurrency Base Rate" will not be used,
then:
(i) the Administrative Agent shall give notice thereof
(an "alternative interest rate notice") to the
Company and the Lenders. In such circumstances the
Company and the Administrative Agent (on behalf of,
and after consultation with, the Lenders) shall then
negotiate in good faith in order to agree on a
mutually satisfactory interest rate or rates (which
shall be binding on all of the Lenders) to be
substituted for the Eurocurrency Base Rate which
would otherwise have applied and/or an alternative
basis acceptable to the Lenders for funding further
Multicurrency Loans in such Available Foreign
Currency or continuing to fund the Multicurrency
Loans in such Available Foreign Currency in respect
of which such notice was given.
(ii) If the Company and the Administrative Agent are
unable to agree upon an interest rate or rates and/or
an alternative basis as aforesaid within a period of
fourteen (14) days from the date of the notice
referred to in paragraph (i), the Administrative
Agent shall promptly set a Eurocurrency Base Rate in
respect of the Loan in such Available Foreign
Currency of each Lender (which shall be binding on
such Lender), to take effect from the commencement of
the Interest Period in respect of which the
Administrative Agent gave such alternative interest
rate notice, which Eurocurrency Base Rate shall be
the cost to each Lender of funding its participation
in such Loan for the Interest Period (as determined
by the Administrative Agent). The Company shall pay
to the Administrative Agent for the account of the
Lenders making or maintaining Multicurrency Loans in
such Available Foreign Currency interest on the
amount of such Loan for the Interest Period and with
interest calculated based upon such
<PAGE> 142
SCHEDULE 2 (Continued)
Eurocurrency Base Rate so agreed or set and the
Administrative Agent shall not be liable to the
Company or any of the Lenders for any failure on its
part to determine a rate that accurately reflects the
cost to any Lender of funding its participation in
the relevant Loan.
Plus, in each case where the Loan is to be in Pounds Sterling , the
Cost Rate.
As used in this Schedule 2:
"Quotation Date" in relation to any period for which a
Eurocurrency Base Rate is to be determined hereunder, means the date on which
quotations would ordinarily be given by prime Lenders in the London inter-bank
market for deposits in the Available Foreign Currency in relation to which such
rate is to be determined for delivery on the first day of that period, provided
that, if, for such period, quotations would ordinarily be given on more than one
date, the Quotation Date for that period shall be the last of those dates.
"Cost Rate" means
(a) The Cost Rate for a Loan in Pounds Sterling for each of its Interest
Periods is calculated in accordance with the following formula: -
BY+L(Y-X)+S(Y-Z) % per annum = Cost Rate
----------------
100-(B+S)
where on the date of application of the formula:-
B is the percentage of the Administrative Agent's eligible
liabilities which the Bank of England requires the
Administrative Agent to hold on a non-interest-bearing deposit
account in accordance with its cash ratio requirements;
Y is the interest rate per annum at which Pounds Sterling
deposits are offered by the Administrative Agent to leading
Lenders in the London interbank market at or about 11:00 a.m.
(London time) on that day for the relevant period;
L is the percentage of eligible liabilities which the Bank of
England requires the Administrative Agent to maintain as
secured money with members of the London Discount Market
Association and/or as secured call money with certain money
brokers and gilt-edged primary market makers;
X is the interest rate per annum at which secured Pounds
Sterling deposits may be placed by the Administrative Agent
with members of the London Discount Market Association and/or
as secured call money with certain money brokers and
gilt-edged primary market makers at or about 11:00 a.m.
(London time) on that day for the relevant period;
2
<PAGE> 143
SCHEDULE 2 (Continued)
S is the percentage of the Administrative Agent's eligible
liabilities which the Bank of England requires the
Administrative Agent to place as a special deposit with the
Bank of England; and
Z is the interest rate per annum allowed by the Bank of England
on special deposits.
(b) For the purposes of this Schedule 2:-
(i) "eligible liabilities" and "special deposits" have the
meanings given to them at the time of application of the
formula by the Bank of England; and
(ii) "relevant period" in relation to each Interest Period, means:-
(A) if it is 3 months or less, that Interest Period (or,
as the case may be, the remainder of such Interest
Period); or
(B) if it is more than 3 months, each successive period
of 3 months and any necessary shorter period
comprised in that Interest Period (or, as the case
may be, the remainder of such Interest Period).
(c) In the application of the formula, B, Y, L, X, S and Z are included in
the formulas as figures and not as percentages, e.g. if B=0.5% and
Y=15%, BY is calculated as 0.5 x 15. A negative result obtained by
subtracting X from Y or Z from Y, shall be taken as zero.
(d) The formula is applied on the first day of each relevant period
comprised in the relevant Interest Period and the percentage used for
B, L, S, and Z shall be those required or in effect on such first day.
(e) If the Administrative Agent determines that a change in circumstances
after the date of this Agreement has rendered, or will render, the
formula inappropriate, the Administrative Agent (after consultation
with the Company and the Lenders) shall notify all parties in
reasonable detail of the manner in which the Cost Rate will
subsequently be calculated. The manner of calculation must be such as
to put the Company and the Lenders in no better or worse position than
they are in at the date of this Agreement. The calculation so notified
by the Administrative Agent shall be prima facie evidence and shall be
binding on all parties.
Interest at the rate determined pursuant to this Schedule 2 will be calculated
on the basis of actual days elapsed and a 360 day year ( or a 365 day year where
(having regard for the currency in which the Advance is to be denominated) in
the Administrative Agent's opinion it is market practice to do so.
3
<PAGE> 144
SCHEDULE 3
FOREIGN SUBSIDIARY BORROWERS
1. Rockwell International of Canada Ltd.*, to be renamed
2. Meritor Automotive Limited*
3. Rockwell Light Vehicle Systems Italiana SPA*, to be renamed
*It being understood that as of the Closing Date such company shall not be a
Subsidiary of the Company.
<PAGE> 145
SCHEDULE 5.7
LITIGATION
See Form 10.
<PAGE> 146
SCHEDULE 5.8
SUBSIDIARIES*
Unless otherwise indicated, all Subsidiaries will be directly or indirectly 100%
owned by the Company.
United States
Amforge, Inc. (Illinois)
RIC Management Corp. (Delaware)
RISS Holdings U.S., Inc. (Delaware)
Rockwell Brake Systems, Inc. (Delaware)
Rockwell Clutch Co. (Delaware) (60%)
Rockwell Heavy Vehicle Suspension Systems, Inc. (Ohio) (80%)
Meritor Heavy Vehicle Systems, Inc. (Delaware and Nevada)
Meritor Heavy Vehicle Systems (Singapore) Pte. Ltd. (Delaware)
Rockwell International Suspension Systems Company, Inc.
(Delaware)
Rockwell International Suspension Systems Company, U.S.
(Delaware) (57.15%)
Meritor Light Vehicle Systems, Inc. (Delaware and Nevada)
Rockwell Standard Corporation (Nevada)
Argentina
A light vehicle entity to be formed
Australia
Rockwell Light Vehicle Systems Australia Pty. Limited
Rockwell Standard of Australia Limited (74.99%)
Barbados
Rockwell Finance (Barbados) Limited
Brazil
Rockwell do Brasil Ltda.
Rockwell Participacoes Ltda.
Canada
RISS Holdings, Ltd.
Rockwell International of Canada Ltd.
Rockwell International Suspension Systems Co. (57.15%)
<PAGE> 147
China (Peoples Republic of)
Rockwell LVS Zhenjiang Co. Ltd. (70%)
Xuzhou Rockwell Axle Co., Ltd. (51%)
Czech Republic
Rockwell LVS Liberec a.s. (97.71%)
England
Rockwell Automotive (U.K.) Limited
Meritor Automotive Limited
Rockwell Light Vehicle Systems (UK) Limited
ROR Rockwell (Manufacturing) Limited
ROR Rockwell Limited
Tyseley Estates Limited
Wilmot Breeden (Holdings) Limited
Wilmot Breeden Group Properties Limited (in liquidation)
France
Rockwell Finance SNC
Rockwell France S.A.
Rockwell Light Vehicle Systems-France S.A.
Rockwell SVI S.A.
ROR Rockwell S.A.
Societe Industrielle de Rupt
Germany
Rockwell Golde GmbH
Rockwell Automotive GmbH
India
Autarky Auto Products Private Limited
Ireland
ROR Rockwell (Ireland) Limited
Italy
Rockwell Body and Chassis Systems Cassino S.r.l. (in liquidation)
Rockwell CVC S.P.A.
ROR Rockwell Italia S.r.l.
Rockwell Light Vehicle Systems - Avellino S.r.l.
<PAGE> 148
Rockwell Light Vehicle Systems - Como S.P.A.
Rockwell Light Vehicle Systems Italiana S.P.A.
Japan
Meritor Automotive Japan K.K.
Nippon Automotive Body Systems Corporation (65%)
Korea
Meritor Light Vehicle Systems Korea Limited
Mexico
Rockwell Fumagalli, S.A. de C.V.
Rockwell Mexicana Holdings, S.A. de C.V.
Rockwell Mexicana, S.A. de C.V.
Netherlands (The)
Rockwell Finance Netherlands B.V.
ROR Rockwell B.V.
Portugal
Rockwell Golde Portugal Lda.
Spain
ROR Rockwell Espana S.A.
Rockwell Light Vehicle Systems-Espana, S.A.
* It being understood that the entities listed herein shall not be Subsidiaries
of the Company as of the Closing Date. Such entities may become
Subsidiaries of the Company following the Closing Date and prior to the
Time of Distribution (as defined in the Distribution Agreement). Such
entities shall be Subsidiaries of the Company as of the Time of
Distribution and certain shall be renamed.
