SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------------
FORM 8-K
CURRENT REPORT
Pursuant To Section 13 or 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
December 6, 1996
The Boeing Company
(Exact name of registrant as specified in Charter)
Delaware 1-442 91-0425694
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
7755 East Marginal Way South, Seattle, Washington 98108
- ------------------------------------------------- --------
(Address of Principal Executive Offices) Zip Code
Registrant's telephone number,
including area code: (206) 655-2121
<PAGE>
Item 5. Other Events
On December 6, 1996, pursuant to an Agreement and Plan of
Merger ("the Merger Agreement") dated as of July 31, 1996, by and
among Rockwell International Corporation, a Delaware corporation
("Rockwell"), The Boeing Company, a Delaware corporation ("Boeing"),
and Boeing NA, Inc., a Delaware corporation and a wholly owned
subsidiary of Boeing ("Boeing NA"), Boeing NA merged with and into
Rockwell (the "Merger").
Immediately prior to the Merger, Rockwell effected a
tax-free reorganization pursuant to which (i) Rockwell contributed
(the "Contribution") substantially all of its businesses and assets,
except those related to its aerospace and defense businesses (with
certain additions and exclusions) (the "A&D Business"), to New
Rockwell International Corporation, a Delaware corporation and a newly
formed, wholly owned subsidiary of Rockwell which, following the
consummation of the Merger, was renamed "Rockwell International
Corporation" ("New Rockwell"), or to one of several entities that
became wholly owned operating subsidiaries of New Rockwell, (ii)
Rockwell made a pro rata distribution (the "Distribution") of all the
issued and outstanding shares of Common Stock, par value $1 per share,
of New Rockwell and Class A Common Stock, par value $1 per share, of
New Rockwell (collectively, "New Rockwell Shares"), including the
preferred share purchase rights associated with such New Rockwell
Shares, to the holders of shares of Common Stock, par value $1 per
share, of Rockwell ("Rockwell Common Stock") and Class A Common Stock,
par value $1 per share, of Rockwell ("Rockwell Class A Common Stock"),
respectively, on a share-for-share basis and (iii) effective
immediately following the Distribution, all issued and outstanding
shares of Rockwell Class A Common Stock were converted into shares of
Rockwell Common Stock on a share-for-share basis.
In the Merger, each share of Rockwell Common Stock
outstanding immediately prior to the Merger was converted into the
right to receive (i) 0.042 of a share of Common Stock, par value $5.00
per share, of Boeing (together with the associated rights to purchase
Series A Junior Participating Preferred Stock of Boeing, "Boeing
Common Stock"), and (ii) cash in lieu of any fractional share,
determined on the basis of $94.31 per share of Boeing Common Stock.
As a result of the Merger, Rockwell (then consisting of only
the A&D Business) became a wholly owned subsidiary of
<PAGE>
Boeing and was renamed "Boeing North American, Inc." ("Boeing North
American").
The aggregate market value on December 6, 1996 of the
9,191,739 shares of Boeing Common Stock expected to be issued in
connection with the Merger was approximately $878,960,000. In
addition, in connection with the Merger Boeing assumed approximately
$565 million of short-term indebtedness of Rockwell and guaranteed
$1.6 billion of long- term indebtedness of Rockwell that was retained
by Boeing North American.
The Contribution and the Distribution were effected pursuant
to an Agreement and Plan of Distribution dated as of December 6, 1996
among Rockwell, New Rockwell, Allen-Bradley Company, Inc., Rockwell
Collins, Inc., Rockwell Semiconductor Systems, Inc., Rockwell Light
Vehicle Systems, Inc. and Rockwell Heavy Vehicle Systems, Inc.
In addition, on December 6, 1996, Rockwell, New Rockwell and
Boeing executed a Tax Allocation Agreement (the "Tax Allocation
Agreement") and Rockwell, Boeing, Boeing NA and New Rockwell executed a
Post-Closing Covenants Agreement (the "Post-Closing Covenants
Agreement").
The First National Bank of Boston has been retained by
Boeing to serve as the Exchange Agent. As soon as reasonably
practicable, Boeing will cause the Exchange Agent to mail or deliver a
letter of transmittal to each person who was a holder of record of
Rockwell Common Stock at the effective time of the Merger. The letter
of transmittal will contain instructions for use in effecting the
surrender of certificates formerly representing shares of Rockwell
Common Stock in exchange for the certificates representing Boeing
Common Stock and cash in lieu of fractional shares that such holder
has the right to receive.
Copies of the Distribution Agreement, the Post-Closing
Covenants Agreement the Tax Allocation Agreement are attached hereto
as Exhibit 2.2, Exhibit 2.3 and Exhibit 2.4, respectively, and are
incorporated herein by reference.
A copy of the press release, dated December 5, 1996, issued
by Boeing relating to the consummation of the Merger is attached
hereto as Exhibit 99.1.
<PAGE>
The other information required by this item has been
previously reported by Boeing or Rockwell and is included or
incorporated by reference in the Proxy Statement/Prospectus which
constitutes part of Boeing's Registration Statement on Form S-4 (file
number 333-15001).
Item 7. Financial Statements and Exhibits
(c) Exhibits:
2.1 Agreement and Plan of Merger, dated as of July 31, 1996,
by and among Rockwell International Corporation, The
Boeing Company and Boeing NA, Inc. filed as Exhibit 2.1
to the Registration Statement on Form S-4 of the Boeing
Company (file number 333-15001) is hereby incorporated by
reference.
2.2 Agreement and Plan of Distribution dated as of
December 6, 1996, among Rockwell International
Corporation, New Rockwell International Corporation,
Allen-Bradley Company, Inc., Rockwell Collins, Inc.,
Rockwell Semiconductor Systems, Inc., Rockwell Light
Vehicle Systems, Inc., and Rockwell Heavy Vehicle
Systems, Inc.
2.3 Post-Closing Covenants Agreement dated as of December 6,
1996, among Rockwell International Corporation, The
Boeing Company, Boeing NA, Inc. and New Rockwell
International Corporation.
2.4 Tax Allocation Agreement dated as of December 6, 1996, by
and among Rockwell International Corporation, New
Rockwell International Corporation and The Boeing
Company.
99.1 Press release dated December 5, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
THE BOEING COMPANY
(Registrant)
December 20, 1996 BY /s/ Douglas P. Beighle
----------------------------
Name: Douglas P. Beighle
Title: Senior Vice President
<PAGE>
EXHIBIT INDEX
Sequentially
Exhibit Numbered
Number Description Page
- ------- ----------- --------
2.1 Agreement and Plan of Merger,
dated as of July 31, 1996, by and
among Rockwell International
Corporation, The Boeing Company
and Boeing NA, Inc. filed as
exhibit 2.1 to the Registration
Statement on Form S-4 of The
Boeing Company (file number 333-
15001) is hereby incorporated by
reference.
2.2 Agreement and Plan of
Distribution dated as of
December 6, 1996, among Rockwell
International Corporation, New
Rockwell International
Corporation, Allen-Bradley
Company, Inc., Rockwell Collins,
Inc., Rockwell Semiconductor
Systems, Inc., Rockwell Light
Vehicle Systems, Inc. and
Rockwell Heavy Vehicle Systems,
Inc.
2.3 Post-Closing Covenants Agreement
dated as of December 6, 1996,
among Rockwell International
Corporation, The Boeing Company,
Boeing NA, Inc. and New Rockwell
International Corporation.
2.4 Tax Allocation Agreement dated as
of December 6, 1996, by and among
Rockwell International
Corporation, New Rockwell
International Corporation and The
Boeing Company.
<PAGE>
99.1 Press release dated December 5,
1996.
CONFORMED COPY
- ---------------------------------------------------------------------
AGREEMENT AND PLAN OF DISTRIBUTION
dated as of December 6, 1996
among
ROCKWELL INTERNATIONAL CORPORATION,
NEW ROCKWELL INTERNATIONAL CORPORATION
ALLEN-BRADLEY COMPANY, INC.,
ROCKWELL COLLINS, INC.,
ROCKWELL SEMICONDUCTOR SYSTEMS, INC.,
ROCKWELL LIGHT VEHICLE SYSTEMS, INC.
and
ROCKWELL HEAVY VEHICLE SYSTEMS, INC.
- ---------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS.......................... 2
1.1. Definitions.......................... 2
ARTICLE II CONTRIBUTION AND ASSUMPTION.......... 13
2.1. Contribution......................... 13
2.2. Assumption of Liabilities............ 17
2.3. Transfer and Assumption
Documentation..................... 20
2.4. Nonassignable Contracts.............. 20
2.5. Intercompany Arrangements............ 21
ARTICLE III RECAPITALIZATION OF NEWCO; MECHANICS
OF DISTRIBUTION...................... 22
3.1. Newco Capitalization................. 22
3.2. Recapitalization of Newco............ 22
3.3. Mechanics of Distribution............ 22
3.4. Timing of Distribution............... 23
ARTICLE IV OTHER AGREEMENTS..................... 23
4.1. Employment........................... 23
4.2. Cross-License of Intellectual
Property.......................... 25
4.3. Use of Names, Trademarks, etc........ 26
4.4. Further Assurances................... 29
4.5. Cooperation.......................... 29
ARTICLE V TAX MATTERS.......................... 30
5.1. Tax Allocation....................... 30
5.2. Tax Matters ......................... 30
5.3. Transfer Taxes....................... 30
ARTICLE VI MUTUAL RELEASE....................... 30
6.1. Mutual Release, etc.................. 30
i
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Page
----
ARTICLE VII ACCESS TO INFORMATION....................... 32
7.1. Provision of Corporate Records....... 32
7.2. Access to Information................ 32
7.3. Production of Witnesses.............. 34
7.4. Retention of Records................. 35
7.5. Confidentiality...................... 35
ARTICLE VIII EMPLOYEE BENEFIT PLANS...................... 36
8.1. Employee Benefits Generally.......... 36
8.2. Retirement Plans..................... 36
8.3. Savings Plans........................ 43
8.4. Deferred Compensation Plans and
Nonqualified Retirement and
Savings Plans..................... 44
8.5. Employee Stock Options............... 46
8.6. Long-Term Incentive Plan............. 46
8.7. Welfare Benefit Plans................ 47
8.8. Retiree Medical and Life Insurance... 49
8.9. Retention and Severance
Obligations....................... 50
8.10. Free-Standing Plans ................ 51
8.11. Employment, Consulting and Severance
Agreements ...................... 51
8.12. Welfare Plan Funding................ 52
8.13. Indemnification..................... 54
8.14. Cooperation ........................ 55
8.15. Amendment, Modification or
Termination of Benefits Plan..... 55
ARTICLE IX CONDITIONS.................................. 55
9.1. Conditions to Obligations of the
Company........................... 55
ARTICLE X MISCELLANEOUS AND GENERAL................... 56
10.1. Modification or Amendment........... 56
10.2. Waiver; Remedies.................... 56
10.3. Counterparts........................ 57
10.4. Governing Law....................... 57
10.5. Notices............................. 57
10.6. Entire Agreement.................... 58
10.7. Certain Obligations................. 58
ii
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Page
----
10.8. Assignment........................... 58
10.9. Captions............................. 59
10.10. Specific Performance................. 59
10.11. Severability......................... 59
10.12. Third Party Beneficiaries............ 59
10.13. Schedules............................ 60
10.14. Consent to Jurisdiction.............. 60
iii
<PAGE>
AGREEMENT AND PLAN OF DISTRIBUTION, dated as of December 6,
1996 (this "Agreement"), among ROCKWELL INTERNATIONAL CORPORATION, a
Delaware corporation (the "Company"), NEW ROCKWELL INTERNATIONAL
CORPORATION, a Delaware corporation ("Newco"), ALLEN-BRADLEY COMPANY,
INC., a Wisconsin corporation ("A-B"), ROCKWELL COLLINS, INC., a
Delaware corporation ("Collins"), ROCKWELL SEMICONDUCTOR SYSTEMS,
INC., a Delaware corporation ("RSS"), ROCKWELL LIGHT VEHICLE SYSTEMS,
INC., a Delaware corporation ("LVS"), and ROCKWELL HEAVY VEHICLE
SYSTEMS, INC., a Delaware corporation ("HVS"; and together with A-B,
Collins, RSS and LVS, the "Operating Subsidiaries").
W I T N E S S E T H :
WHEREAS, the Company, The Boeing Company, a Delaware
corporation ("Acquiror"), and Boeing NA, Inc., a Delaware corporation
and a wholly-owned subsidiary of Acquiror ("Sub"), have entered into
an Agreement and Plan of Merger dated as of July 31, 1996 (the "Merger
Agreement"), providing for the Merger (as defined in the Merger
Agreement) of Sub with and into the Company;
WHEREAS, immediately prior to the Conversion (as defined in
the recitals to the Merger Agreement), the Company's Board of
Directors, subject to the approval of the Company's stockholders,
expects to distribute to the holders of Common Stock, par value $1.00
per share, of the Company ("Company Common Stock") and Class A Common
Stock, par value $1.00 per share, of the Company ("Company Class A
Common Stock"), other than shares held in the treasury of the Company,
on a pro rata basis all of the issued and outstanding shares of Common
Stock, par value $1.00 per share, of Newco ("Newco Common Stock") and
Class A Common Stock, par value $1.00 per share, of Newco ("Newco
Class A Common Stock"), in each case with the associated Rights (as
defined in Section 1.1) (the "Distribution");
WHEREAS, immediately prior to the Distribution, the
Company's Board of Directors, subject to the approval of the Company's
stockholders, expects to cause (i) the Company to contribute certain
assets to the Operating Subsidiaries as a capital contribution or in
exchange for shares of their stock, (ii) the Company to contribute the
stock of the Operating Subsidiaries and certain other assets to Newco
as a capital contribution and (iii) Newco and the Operating
Subsidiaries to assume certain liabilities of the Company,
<PAGE>
all as more specifically provided herein (the transactions described
in clauses (i), (ii) and (iii) are referred to collectively as the
"Contribution");
WHEREAS, the purpose of the Distribution is to make possible
the Merger by divesting the Company of the businesses and operations
to be conducted by Newco and the Operating Subsidiaries, which
Acquiror is unwilling to acquire;
WHEREAS, it is the intention of the parties to this
Agreement that the Contribution and Distribution will qualify as
transactions described in Sections 351 and Section 355 of the Internal
Revenue Code of 1986, as amended (the "Code") and/or a
"reorganization" within the meaning of Section 368(a)(1)(D) of the
Code; and
WHEREAS, this Agreement sets forth or provides for certain
agreements by and among the Company, Newco and the Operating
Subsidiaries in consideration of the separation of the ownership of
the Company and Newco;
NOW, THEREFORE, in consideration of the premises, and of the
respective covenants and agreements set forth herein, the parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. Capitalized terms used in this Agreement
and not otherwise defined herein shall have the meanings assigned to
such terms in the Merger Agreement. As used in this Agreement, the
following terms shall have the following respective meanings:
"A-B Business" shall mean the business heretofore and
currently engaged in by the Company and its Subsidiaries and their
respective predecessors of designing, building, selling, installing,
modifying, repairing, servicing and supporting automation products and
systems, including, without limitation, programmable controllers,
human/machine interface devices, communications networks, programming
and application software, AC/DC drives and drive systems, sensing and
motion control devices, machine vision products, computer numeric
control systems, data acquisition products, standard and engineered
motors, mechanical power
<PAGE>
transmission equipment, and support services for all of the foregoing,
and activities related thereto, and shall include any former or
discontinued operations primarily related to the A-B Business as
previously conducted.
"Accrued Interest" shall mean all accrued and unpaid
interest on the Company Debt to the Closing Date other than accretion
on commercial paper to the extent such accretion is included in
Company Debt.
"Additional Retained Facilities" shall mean the Company's
Seal Beach, California world headquarters, the Company's Systems
Development Center, the Company's Information Systems Center and the
Company's Government Affairs, Marketing and International Offices
located in Washington, D.C. (Arlington, VA) and related international
and field offices listed on Schedule 2.1(b)(i)(D).
"Aerospace Business" shall mean the business heretofore and
currently engaged in by the Company and its Subsidiaries and their
respective predecessors of designing, building, selling, installing,
modifying, repairing, servicing and supporting spacecraft,
liquid-fueled rocket engines, military and civilian aircraft, tactical
weapons, unmanned missiles, applied energy technologies (including,
without limitation, solar, kinetic and laser), and parts, components
and materials for the foregoing, contract work for the National
Aeronautics and Space Administration and the Company's interest in
United Space Alliance, LLC, and activities related thereto, and shall
include any former or discontinued operations primarily related to the
Aerospace Business as previously conducted, including, without
limitation, the former or discontinued operations listed on Schedule
1.1(a)(i); provided, however, that Aerospace Business does not include
any part of the Collins Business, any Contributed A&D Assets or any
Divested Business of the Aerospace Business, including, without
limitation, the Divested Businesses listed on Schedule 1.1(a)(ii).
"Affiliate" shall mean, with respect to any specified
Person, a Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control
with, such specified Person; provided, however, that for purposes of
this Agreement and the Post-Closing Covenants Agreement, from and
after the Time of Contribution, no member of either Group shall be
deemed to be an Affiliate of any member of the other Group.
<PAGE>
"Assets" shall mean any and all assets, properties and
rights, whether tangible or intangible, whether real, personal or
mixed, whether fixed, contingent or otherwise, and wherever located,
including, without limitation, the following:
(i) real property interests (including leases), land,
plants, buildings and improvements;
(ii) machinery, equipment, tooling, vehicles, furniture and
fixtures, leasehold improvements, repair parts, tools, plant,
laboratory and office equipment and other tangible personal
property, together with any rights or claims arising out of the
breach of any express or implied warranty by the manufacturers or
sellers of any of such assets or any component part thereof;
(iii) inventories, including raw materials, work-
in-process, finished goods, parts, accessories and supplies;
(iv) cash, bank accounts, notes, loans and accounts
receivable (whether current or not current), interests as
beneficiary under letters of credit, advances and performance and
surety bonds;
(v) certificates of deposit, banker's acceptances, shares of
stock, bonds, debentures, evidences of indebtedness, certificates
of interest or participation in profit-sharing agreements,
collateral-trust certificates, preorganization certificates or
subscriptions, transferable shares, investment contracts,
voting-trust certificates, puts, calls, straddles, options,
swaps, collars, caps and other securities or hedging arrangements
of any kind;
(vi) financial, accounting and operating data and records
including, without limitation, books, records, notes, sales and
sales promotional data, advertising materials, credit
information, cost and pricing information, customer and supplier
lists, reference catalogs, payroll and personnel records, minute
books, stock ledgers, stock transfer records and other similar
property, rights and information;
(vii) patents, patent applications, trademarks,
trademark applications and registrations, trade names,
<PAGE>
service marks, service names, copyrights and copyright
applications and registrations, commercial and technical
information including engineering, production and other
designs, drawings, specifications, formulae, technology,
computer and electronic data processing programs and
software, inventions, processes, trade secrets, know-how,
confidential information and other proprietary property,
rights and interests;
(viii) agreements, leases, contracts, sale orders, purchase
orders, open bids and other commitments and all rights therein;
(ix) prepaid expenses, deposits and retentions held by third
parties;
(x) claims, causes of action, choses in action, rights under
insurance policies, rights under express or implied warranties,
rights of recovery, rights of set- off, rights of subrogation and
all other rights of any kind;
(xi) licenses, franchises, permits, authorizations and
approvals; and
(xii) goodwill and going concern value.
"Collins Business" shall mean the business heretofore and
currently engaged in by the Company and its Subsidiaries and their
respective predecessors of designing, building, selling, installing,
modifying, repairing, servicing and supporting avionics, communication
and navigation products and systems and parts, components and
materials for the foregoing, including without limitation: electronic
equipment for flight control, cockpit display, navigation, voice and
data communication, cockpit management, radar, global positioning and
other systems for airlines, corporate aircraft, government and
military applications; call center products and systems; mobile
communication and information systems to the land transportation
market (including the Company's Automatic Vehicle Locating System and
Vision Sensor Initiatives Programs) and flat panel displays and other
optical components, and activities related thereto, and shall include
the Collins Avionics and Communications Division, Collins Commercial
Avionics, the Communication Systems Division and any former or
discontinued operations primarily related to the Collins Business as
previously conducted;
<PAGE>
provided, however, that Collins Business does not include Collins
International Service Company located at 3200 East Renner Road,
Richardson, Texas, Rockwell Australia Limited and its Subsidiaries or
any business thereof (which shall constitute part of the Defense
Business); provided, further, however, that the Collins Business shall
include the Tullamarine Service Center.
"Communication Systems Division" shall mean the business
heretofore and currently engaged in by the Company and its
Subsidiaries and their respective predecessors of designing, building,
selling, installing, modifying, repairing, servicing and supporting
information message handling and communication systems and products
that support command, control and communications for land, sea and air
applications, including without limitation: integrated command and
control systems for military and civilian agencies; fixed and airborne
VLF communications; multispectrum tactical HF through satellite
communications for fixed and transportable applications; satellite
communications through the EHF band; airborne communication systems
including platform integration; avionics and special mission systems
integration and aircraft modification; medical information systems;
global private networks; satellite-based air traffic management and
worldwide service and support for operations and maintenance,
construction and EF&I (engineer, furnish and install), and activities
related thereto, and shall include any former or discontinued
operations primarily related to the Communication Systems Division as
previously conducted; provided, however, that the Communication
Systems Division does not include Collins International Service
Company located at 3200 East Renner Road, Richardson, Texas, Rockwell
Australia Limited and its Subsidiaries or any business thereof (which
shall constitute part of the Defense Business).
"Company Debt" shall mean indebtedness of the Company in an
aggregate principal amount of $2,165,000,000, consisting of:
(i) Old Company Notes in the aggregate principal amount of
$1,600,000,000, as the same may be amended pursuant to the
Consent Solicitation;
(ii) commercial paper or other short-term borrowings in the
aggregate principal amount of $565,000,000 (with respect to
commercial paper issued at a discount, the accreted value at the
Closing Date
<PAGE>
shall be deemed to be the principal amount thereof), less the
aggregate principal amount of any outstanding Rockwell Australia
Debt (as defined below), or any indebtedness issued in
replacement thereof or in exchange therefor; and
(iii) bank borrowings of Rockwell Australia Limited in the
aggregate principal amount of not more than a United States
dollar equivalent of $30,000,000 (the "Rockwell Australia Debt")
(it being understood that it is the current intention of the
Company to repay the Rockwell Australia Debt prior to the Time of
Contribution);
provided that no short-term debt other than commercial paper shall
constitute "Company Debt" unless it is prepayable in full at any time
without premium or penalty and no commercial paper shall constitute
"Company Debt" unless it matures or is payable or prepayable in full
within 60 days after the Effective Time without premium or penalty.
For purposes of calculating the United States dollar equivalent of any
Rockwell Australia Debt, the New York foreign exchange selling rate
applicable to Australian dollars as published in The Wall Street
Journal, Eastern Edition, for the second business day preceding the
Closing Date shall be used.
"Company Group" shall mean the Company and its Subsidiaries,
other than Newco and its Subsidiaries (determined after giving effect
to the transfers contemplated by Article II of this Agreement).
"Contributed A&D Assets" shall have the meaning set forth in
Section 2.1(a)(vii).
"DOE" shall mean the United States Department of Energy or
any predecessor Governmental Entity.
"Defense Business" shall mean the business heretofore and
currently engaged in by the Company and its Subsidiaries (including,
without limitation, Collins International Service Company and Rockwell
Australia Limited but excluding the Tullamarine Service Center) and
their respective predecessors of designing, building, selling,
installing, modifying, repairing, servicing and supporting the
following for defense markets: aircraft electronic upgrades and
modifications, tactical weapons, space defense
<PAGE>
sensors and electronics, navigation and guidance systems for strategic
missiles, tactical weapons, ships and submarines, naval combat systems
for ships and submarines, proprietary programs, and parts, components
and materials for the foregoing, and activities related thereto, and
shall include any former or discontinued operations primarily related
to the Defense Business as previously conducted, including, without
limitation, the former or discontinued operations listed on Schedule
1.1(b)(i); provided, however, that the Defense Business does not
include any part of the Collins Business (including the Company's
Automatic Vehicle Locating System and Vision Sensor Initiatives
Programs heretofore conducted by the Autonetics & Missile Systems
Division of the Company), any Contributed A&D Assets or any Divested
Business of the Defense Business, including, without limitation, the
Divested Businesses listed on Schedule 1.1(b)(ii).
"Divested Business" shall mean any corporation, division or
other business unit (including any Assets and Liabilities comprising
the same) that has been sold, conveyed, assigned, transferred or
otherwise divested, in whole or in part, by the Company or any of its
Subsidiaries to any third party prior to the Time of Contribution, but
shall not include any corporation, division, other business unit,
product line or contract the operations or production of which has
been discontinued, completed or otherwise terminated by the Company or
any of its Subsidiaries, but not sold, conveyed, assigned, transferred
or otherwise divested to a third party.
"Environmental Law" shall mean any Federal, state, local or
foreign statute, law, regulation, rule or common law of, or any
judgment, injunction, order or decree of or settlement agreement with,
any Governmental Entity, relating to (x) the protection of the
environment or (y) the use, storage, treatment, generation,
transportation, processing, handling, release or disposal of Hazardous
Substances, in each case as in effect on the date hereof or in the
future.
"Environmental Liabilities" shall mean all Liabilities
relating to or arising out of any Environmental Law or contract or
agreement relating to environmental, health or safety matters
(including removal, remediation or cleanup costs, investigatory costs,
governmental response costs and administrative oversight costs,
environmental monitoring costs, natural resources damages, property
damages, personal injury damages, costs of medical
<PAGE>
monitoring, costs of compliance with any settlement, judgment or other
determination of Liability and indemnity, contribution or similar
obligations) irrespective of whether such Liabilities are asserted, in
the first instance, to be the responsibility of a Governmental Entity
or any other Person.
"Group" shall mean the Company Group or the Newco Group.
"HVS Business" shall mean the business heretofore and
currently engaged in by the Company and its Subsidiaries and their
respective predecessors of designing, building, selling, installing,
modifying, repairing, servicing and supporting drivetrain components
and systems for heavy- and medium-duty commercial trucks, trailers,
buses, off-highway commercial vehicles and government heavy-duty
wheeled vehicles, and activities related thereto, and shall include
any former or discontinued operations primarily related to the HVS
Business as previously conducted.
"Information" shall mean all records, books, contracts,
instruments, computer data and other data and information.
"Liabilities" shall mean any and all debts, liabilities,
commitments and obligations, whether fixed, contingent or absolute,
matured or unmatured, liquidated or unliquidated, accrued or not
accrued, known or unknown, whenever or however arising and whether or
not the same would be required by generally accepted accounting
principles to be reflected in financial statements or disclosed in the
notes thereto.
"Litigation Matters" shall mean actual, threatened or future
litigations, investigations, proceedings (including arbitration
proceedings), claims or other legal matters that have been or may be
asserted by or against, or otherwise affect, the Company and/or Newco
(or members of either Group).
"LVS Business" shall mean the business heretofore and
currently engaged in by the Company and its Subsidiaries and their
respective predecessors of designing, building, selling, installing,
modifying, repairing, servicing and supporting sunroof, door access
control and seat adjusting systems, suspensions and wheels,
anti-squeeze windows, electronic controls and automobile global
positioning
<PAGE>
systems for passenger car and light truck industries, and activities
related thereto, and shall include any former or discontinued
operations primarily related to the LVS Business as previously
conducted.
"Newco Group" shall mean Newco and its Subsidiaries,
including the Operating Subsidiaries (determined after giving effect
to the transfers contemplated by Article II of this Agreement).
"Paydown Amount" shall be the excess, if any, of $2.165
billion over the aggregate principal amount of the Company Debt at the
Effective Time (calculated as set forth in the definition of Company
Debt).
"Person" shall mean an individual, a partnership, a joint
venture, a corporation, a limited liability entity, a trust, an
unincorporated organization or other entity or a government or any
department or agency thereof.
"Preexisting Environmental Conditions" shall mean conditions
of the environment (including ambient air, the ocean, natural
resources (including flora and fauna), soil, surface water,
groundwater (including potable water, navigable water and wetlands),
the land surface or subsurface strata or as otherwise defined in any
Environmental Law) existing at the Time of Contribution relating to or
arising from the presence, use, treatment, or Release or threatened
Release of any Hazardous Substance but does not include any Special
Liabilities. For purposes of the definition of the term "Preexisting
Environmental Condition", the term "Hazardous Substance" shall include
any waste, substance, material, pollutant or contaminant now, or in
the future, listed, defined, designated or classified as hazardous,
toxic or radioactive, or otherwise regulated, now or in the future,
under any Environmental Law, and any waste, material or substance
contaminated by, or alleged to be contaminated by, any Hazardous
Substance.
"Privileged Information" shall mean, with respect to either
Group, Information regarding a member of such Group, or any of its
operations, employees, Assets or Liabilities (whether in documents or
stored in any other form or known to its employees or agents) that is
or may be protected from disclosure pursuant to the attorney-client
privilege, the work product doctrine or other applicable privileges,
that a member of the other Group may come into
<PAGE>
possession of or obtain access to pursuant to this Agreement or
otherwise.
"Release" shall have the same meaning given such term in the
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), 42 U.S.C. ss. 9601(22).
"Representatives" shall mean directors, officers, employees,
agents, consultants, advisors, accountants, attorneys and
representatives.
"Retained Facilities" shall mean the Company's facilities
identified on Schedule 2.1(b)(i)(A) and all buildings, improvements
and fixtures at such facilities.
"Right" shall mean a preferred share purchase right issued
pursuant to the Rights Agreement dated as of November 30, 1996 between
Newco and ChaseMellon Shareholder Services, L.L.C., as Rights Agent.
"Science Center" shall mean the Company's Science Center
located at 1049 Camino Dos Rios, Thousand Oaks, California and other
related facilities located at Suite 400, 444 High Street, Palo Alto,
California and Building 241, 3370 Miraloma Avenue, Anaheim,
California.
"Semiconductor Systems Business" shall mean the business
heretofore and currently engaged in by the Company and its
Subsidiaries and their respective predecessors of designing, building,
selling, installing, modifying, repairing, servicing and supporting
semiconductors for fax, voice and data modems for fax machines,
personal computers and other uses, chipsets for cellular and cordless
phones, wireless modem devices for laptop computers and modules for
global positioning system receivers, and activities related thereto,
and shall include any former or discontinued operations primarily
related to the Semiconductor Systems Business as previously conducted.
"Special Liabilities" shall mean any Liabilities of the
Company or any of its Subsidiaries (including any Environmental
Liability) arising out of or relating to (i) the Rocky Flats Plant,
Golden, Colorado, (ii) the Hanford Nuclear Reservation, Hanford,
Washington, (iii) the INEL complex in Idaho, (iv) the Company's or any
of its Subsidiaries decontamination and decommissioning work at
various atomic or nuclear facilities throughout the United
<PAGE>
States (excluding, for purposes of the definition of Special
Liabilities only, Santa Susana and Canoga Park, California) and (v)
the Company's work relating to Interatom (Internationale
Atomreaktorbau GmbH), and any Liabilities of the Company or any of its
Subsidiaries (including any Environmental Liabilities), arising out of
or relating to any products manufactured or any services provided by
the Company or any of its Subsidiaries which involved the use,
storage, treatment, generation, transportation, processing, handling,
release or disposal of radioactive, fissionable or fusionable
materials or any waste products or by-products of any process
involving radioactive, fissionable or fusionable materials (other than
activities of the Company and its Subsidiaries at Santa Susana and
Canoga Park, California).
"Tax" or "Taxes" shall have the meaning assigned to such
term in the Tax Allocation Agreement.
"Time of Contribution" shall mean the time immediately prior
to the Time of Distribution as of which the Contribution is effective.
"Time of Distribution" shall mean the time as of which the
Distribution is effective.
"Transfer Agent" shall mean ChaseMellon Shareholder
Services, L.L.C., P.O. Box 444, Pittsburgh, Pennsylvania 15230-0444 or
120 Broadway, 33rd Floor, New York, New York 10271, telephone (800)
204-7800, the transfer agent for the Company Common Stock and Company
Class A Common Stock.
ARTICLE II
CONTRIBUTION AND ASSUMPTION
2.1. Contribution.
(a) Subject to Section 2.1(b) and effective as of the Time
of Contribution, the Company hereby contributes, grants, conveys,
assigns, transfers and delivers to Newco and the Operating
Subsidiaries all the Company's right, title and interest in and to any
and all Assets of the
<PAGE>
Company (collectively, the "Contributed Assets"), allocated as follows
or as Newco shall otherwise direct:
(i) all Assets of the Company that are used primarily or
that are held primarily for use in the A-B Business (other than
the capital stock of A-B) and all of the issued and outstanding
shares of capital stock of Reliance Electric Company, a Delaware
corporation, are contributed to A-B as a capital contribution;
(ii) all Assets of the Company that are used primarily or
that are held primarily for use in the Collins Business are
contributed to Collins in exchange for 1,000 shares of the Common
Stock, par value $1.00 per share, of Collins, constituting all of
the outstanding shares of Collins;
(iii) all Assets of the Company that are used primarily or
that are held primarily for use in the Semiconductor Systems
Business and all of the issued and outstanding shares of capital
stock of Brooktree Corporation, a California corporation, are
contributed to RSS in exchange for 1,000 shares of the Common
Stock, par value $1.00 per share, of RSS, constituting all of the
outstanding shares of RSS;
(iv) all Assets of the Company that are used primarily or
that are held primarily for use in the LVS Business are
contributed to LVS in exchange for 1,000 shares of the Common
Stock, par value $1.00 per share, of LVS, constituting all of the
outstanding shares of LVS;
(v) all Assets of the Company that are used primarily or
that are held primarily for use in the HVS Business are
contributed to HVS in exchange for 1,000 shares of the Common
Stock, par value $1.00 per share, of HVS, constituting all of the
outstanding shares of HVS;
(v [intentionally omitted];
(vii) the Company's properties at El Segundo, California,
Lakewood, California, and Building 37 at Canoga Park, California
more specifically identified on Schedule 2.1(a)(vii)
(collectively, the "Contributed A&D Assets") are contributed to
A-B as a capital contribution;
<PAGE>
(viii) the Science Center (other than physical assets
related to extrinsic silicon detectors and MEMS gyros located at
Building 241, 3370 Miraloma Avenue, Anaheim, California, which
shall constitute Retained Assets) is contributed to Newco as a
capital contribution;
(ix) all issued and outstanding shares of Atomics
International, Inc., Narland Corporation and Rockwell Aerospace &
Electronics, Inc. are contributed to Newco as a capital
contribution;
(x) the Health Care Claims (as defined in the Post-Closing
Covenants Agreement) are contributed to Newco as a capital
contribution; and
(xi) immediately following the contributions referred to in
clauses (i) through (x) above, all of the issued and outstanding
shares of Common Stock of A-B, Collins, RSS, LVS, HVS and all
other Assets of the Company (other than the Retained Assets) not
otherwise specifically contributed to an Operating Subsidiary
pursuant to this Section 2.1(a), including (x) all cash and cash
equivalents of the Company and its Subsidiaries (other than as
listed on Schedule 2.1(b)(i)(C) and other than cash (including
for this purpose cash held by Rockwell Australia Limited in an
amount not to exceed the aggregate outstanding principal amount
of the Rockwell Australia Debt) in an amount equal to the excess,
if any, of (A) the sum of (1) $4,320,000 and (2) the Accrued
Interest over (B) the Paydown Amount), and (y) the Company's
rights under Article II of the Merger Agreement, the last
sentence of Section 3.1 of the Merger Agreement, Section 4.2(j)
of the Merger Agreement, Section 4.2(d)(iii) of the Merger
Agreement, the second sentence of Section 5.9(a) of the Merger
Agreement, Section 5.13(a) of the Merger Agreement, Section 5.18
of the Merger Agreement and Section 8.17 of the Merger Agreement,
are contributed to Newco as a capital contribution.
If any Assets that are used primarily or that are held
primarily for use in the A-B Business, the Collins Business, the
Semiconductor Systems Business, the LVS Business or the HVS Business
are held in a Subsidiary of the Company that would not be owned
directly or indirectly by A-B, Collins, RSS, LVS or HVS,
respectively, as a result of
<PAGE>
the foregoing allocation, then, notwithstanding the foregoing
allocation, the Company shall cause each such Subsidiary to contribute
such Assets to the appropriate Operating Subsidiary or a Subsidiary
thereof or as Newco otherwise directs.
(b) Notwithstanding Section 2.1(a), the Company hereby
retains and does not contribute to Newco or the Operating Subsidiaries
all the Company's right, title and interest in and to the following
Assets (collectively, the "Retained Assets"):
(i) all the Company's right, title and interest (including
minority interests) in and to (A) all Assets of the Company or
any of its Subsidiaries that are used primarily in or that are
held primarily for use in or that are otherwise necessary for the
operation, as presently conducted, of (1) the Aerospace Business
and the Defense Business, including, without limitation, in the
Company's Autonetics and Missile Systems Division, the Company's
North American Aircraft Division, the Company's North American
Aircraft Modification Division, the Company's Rocketdyne
Division, the Company's Space Systems Division and the Company's
Airborne Laser Program (excluding the Communication Systems
Division, but including Collins International Service Company and
Rockwell Australia Limited), and including, without limitation,
the Retained Facilities, and (2) the Additional Retained
Facilities (other than miscellaneous furnishings, artwork,
computers and other equipment and personal property used by
Company employees who will become Newco Group Continuing
Employees following the Time of Contribution), (B) an undivided
one-half interest in the helicopters and corporate jet aircraft
included on Schedule 2.1(b)(i)(B), and (C) whether or not
included within the Assets set forth in clause (A) above, all
Assets (including, without limitation, capital stock and
partnership interests) reflected on the June 30 Balance Sheet, as
such Assets may have been added to, sold in the ordinary course
of business or otherwise changed since such date; provided,
however, that cash or cash equivalents (other than as listed on
Schedule 2.1(b)(i)(C) and cash (including for this purpose cash
held by Rockwell Australia Limited in an amount not to exceed the
aggregate outstanding principal amount of the Rockwell Australia
Debt) in an amount equal to the excess, if any, of (D) the sum of
<PAGE>
(1)$4,320,000 and (2) the Accrued Interest over (E) the Paydown
Amount), the Contributed A&D Assets, the assets associated with
services to be provided by Newco pursuant to Schedule 3.4 of the
Post-Closing Covenants Agreement and the assets associated with
the headquarters functions described in the Retained Business
Audited Financial Statements shall not constitute Retained
Assets;
(ii) all issued and outstanding shares of capital stock of
the Subsidiaries of the Company identified on Schedule 2.1(b)(ii)
(the "Retained Subsidiaries");
(iii) all rights in and use of the names "Autonetics",
"North American Aviation" and "Rocketdyne" and all derivatives
thereof;
(iv) all rights of the Company under the Reorganization
Agreements (including the Merger Agreement), except as otherwise
specifically provided therein and except that the Company's
rights under Section 2.1(a)(xi)(y) of this Agreement shall not
constitute Retained Assets; and
(v) the Environmental Coverage Claims.
If any Assets that are used primarily or that are held primarily for
use in or that are otherwise necessary for the operation, as presently
conducted, of the Aerospace Business, the Defense Business or the
Additional Retained Facilities (other than miscellaneous furnishings,
artwork, computers and other equipment and personal property used by
Company employees who will become Newco Group Continuing Employees
following the Time of Contribution and other than the assets excluded
from the definition of Retained Assets by the proviso to Section
2.1(b)(i)) are held in a Subsidiary of the Company that is not a
Retained Subsidiary, then the Company shall cause each such Subsidiary
to contribute such Assets to the appropriate Retained Subsidiary.
2.2. Assumption of Liabilities.
(a) Subject to Section 2.2(b) and effective as of the Time
of Contribution, Newco and the Operating Subsidiaries, in partial
consideration for the Contribution, hereby unconditionally assume and
undertake to pay, satisfy and discharge when due in accordance with
their terms the
<PAGE>
following Liabilities of the Company and any of its Subsidiaries
(collectively, the "Assumed Liabilities"), allocated as follows or as
Newco shall otherwise direct:
(i) all Liabilities relating primarily to or arising
primarily from the A-B Business are assumed by A- B and Newco;
(ii) all Liabilities relating primarily to or arising
primarily from the Collins Business are assumed by Collins and
Newco;
(iii) all Liabilities relating primarily to or arising
primarily from the Semiconductor Systems Business are assumed by
RSS and Newco;
(iv) all Liabilities relating primarily to or arising
primarily from the LVS Business are assumed by LVS and Newco;
(v) all Liabilities relating primarily to or arising
primarily from the HVS Business are assumed by HVS and Newco;
(vi) [intentionally omitted];
(vii) all Special Liabilities are assumed by Newco;
(viii) all Liabilities (including without limitation
indemnification obligations) relating primarily to or arising
primarily from (A) the reports, registration statements and other
documents filed by the Company with the SEC prior to the Time of
Contribution (including the Company's consolidated financial
statements for periods prior to the Time of Contribution included
or incorporated by reference therein) and (B) any breach or
alleged breach by any director of the Company of his fiduciary
duties to the Company and its stockholders occurring at or prior
to the Time of Contribution, in each case referred to in the
foregoing clauses (A) and (B) notwithstanding the fact that such
Liabilities may relate primarily to or arise primarily from the
Aerospace Business, the Defense Business or the Additional
Retained Facilities, are assumed by Newco, but excluding any
matter for which the Company would be required to provide
indemnification pursuant to Section 2.2(ii) of the Post-Closing
Covenants Agreement;
<PAGE>
(ix) all Liabilities relating primarily to or arising
primarily from any Divested Business of the Aerospace Business or
the Defense Business, including, without limitation, the Divested
Businesses listed on Schedules 1.1(a)(ii) and 1.1(b)(ii), are
assumed by Newco;
(x) all Liabilities relating primarily to or arising
primarily from Atomics International, Inc., Narland Corporation
and Rockwell Aerospace & Electronics, Inc. are assumed by Newco;
(xi) all Liabilities relating to the Contributed A&D Assets
are assumed by Newco;
(xii) all Liabilities in respect of indebtedness for
borrowed money (including any guarantees in respect of
indebtedness for borrowed money of any third party of the Company
and any of its Subsidiaries) other than the Company Debt are
assumed by Newco;
(xiii) all Liabilities that are contemplated by the
Reorganization Agreements as Liabilities to be retained by any
member of the Newco Group, and any agreements, obligations and
Liabilities of the Newco Group under the Reorganization
Agreements (including any Liabilities of the Company described in
Sections 4.1(p) and 5.13 of the Merger Agreement) are assumed by
Newco; and
(xiv) all other Liabilities, other than the Retained
Liabilities, are assumed by Newco.
The Liabilities referred to in clauses (i) - (xiii) above are referred
to collectively as the "Newco Liabilities". If any Liabilities
relating primarily to or arising primarily from the A-B Business, the
Collins Business, the Semiconductor Systems Business, the LVS Business
or the HVS Business are obligations of a Subsidiary of the Company
other than A-B, Collins, RSS, LVS or HVS, or a direct or indirect
Subsidiary thereof, as a result of the allocation of Assets of the
Company set forth in Section 2.1, then, notwithstanding the foregoing
allocation or the allocation of Assets of the Company set forth in
Section 2.1, the appropriate Operating Subsidiary or a Subsidiary
thereof shall assume each such Liability.
<PAGE>
(b) Notwithstanding Section 2.2(a), the Company hereby
retains, and Newco and the Operating Subsidiaries do not assume and
will have no liability with respect to, the following Liabilities
(collectively, the "Retained Liabilities"):
(i) the Company Debt, together with the Accrued Interest;
(ii) all Liabilities (A) relating primarily to or arising
primarily from the Aerospace Business or the Defense Business as
conducted at any time prior to, on or after the Time of
Contribution or any other Retained Assets or (B) associated with
the current and former operations of the Additional Retained
Facilities; provided, however, that the Retained Liabilities
shall not include any Newco Liabilities; and
(iii) all Liabilities that are contemplated by the
Reorganization Agreements (including the Schedules thereto)
(other than the Merger Agreement) as Liabilities to be retained
by any member of the Company Group, and any agreements,
obligations and Liabilities of the Company Group under the
Reorganization Agreements (other than the Merger Agreement),
except as otherwise specifically provided herein or therein and
except for obligations which are required or contemplated to be
performed prior to the Effective Time.
If any Liabilities relating primarily to or arising primarily from the
Aerospace Business, the Defense Business or the Additional Retained
Facilities are obligations of a Subsidiary of the Company other than a
Retained Subsidiary as a result of the allocation of Assets of the
Company set forth in Section 2.1, then, notwithstanding the foregoing
allocation or the allocation of Assets of the Company set forth in
Section 2.1, the Company shall, or shall cause the appropriate
Retained Subsidiary to, assume each such Liability.
2.3. Transfer and Assumption Documentation. In furtherance
of the contribution, grant, conveyance, assignment, transfer and
delivery of the Contributed Assets and the assumption of the Assumed
Liabilities set forth in this Article II, at the Time of Contribution
or as promptly as practicable thereafter (i) the Company shall execute
and deliver, and cause its Subsidiaries to execute and deliver,
<PAGE>
such deeds, bills of sale, stock powers, certificates of title,
assignments of leases and contracts and other instruments of
contribution, grant, conveyance, assignment, transfer and delivery
necessary to evidence such contribution, grant, conveyance,
assignment, transfer and delivery and (ii) Newco or the appropriate
member of the Newco Group shall execute and deliver such instruments
of assumption as and to the extent necessary to evidence such
assumption.
2.4 Nonassignable Contracts. Anything contained herein to
the contrary notwithstanding, this Agreement shall not constitute an
agreement to assign any lease, license agreement, contract, agreement,
sales order, purchase order, open bid or other commitment or Asset if
an assignment or attempted assignment of the same without the consent
of the other party or parties thereto would constitute a breach
thereof or in any way impair the rights of the Newco Group or the
Company Group thereunder. The Company shall, prior to the Time of
Contribution, use reasonable best efforts (it being understood that
such efforts shall not include any requirement of the Company Group to
expend money or offer or grant any financial accommodation) as
requested by Newco, and Newco shall cooperate in all reasonable
respects with the Company, to obtain all consents and waivers and to
resolve all impracticalities of assignments or transfers necessary to
convey to Newco and the Operating Subsidiaries the Contributed Assets.
If any such consent is not obtained or if an attempted assignment
would be ineffective or would impair either Group's rights under any
such lease, license agreement, contract, agreement, sales order,
purchase order, open bid or other commitment or Asset so that Newco or
the Operating Subsidiaries would not receive all such rights, then (x)
the Company shall use reasonable best efforts (it being understood
that such efforts shall not include any requirement of the Company
Group to expend money or offer or grant any financial accommodation)
to provide or cause to be provided to Newco or the appropriate
Operating Subsidiary, to the extent permitted by law, the benefits of
any such lease, license agreement, contract, agreement, sales order,
purchase order, open bid or other commitment or Asset and the Company
shall promptly pay or cause to be paid to Newco or the appropriate
Operating Subsidiary when received all moneys received by the Company
Group with respect to any such lease, license agreement, contract,
agreement, sales order, purchase order, open bid or other commitment
or Asset and (y) in consideration thereof Newco or the appropriate
Operating Subsidiary shall pay, perform and discharge on
<PAGE>
behalf of the Company Group all of the Company Group's debts,
liabilities, obligations and commitments thereunder in a timely manner
and in accordance with the terms thereof. In addition, the Company
shall take such other actions (at Newco's expense) as may reasonably
be requested by Newco in order to place Newco, insofar as reasonably
possible, in the same position as if such lease, license agreement,
contract, agreement, sales order, purchase order, open bid or other
commitment or Asset had been transferred as contemplated hereby and so
all the benefits and burdens relating thereto, including possession,
use, risk of loss, potential for gain and dominion, control and
command, shall inure to the Newco Group. If and when such consents and
approvals are obtained, the transfer of the applicable Asset shall be
effected in accordance with the terms of this Agreement.
2.5. Intercompany Arrangements. All agreements, contracts,
arrangements and commitments between the Retained Business or any
operating unit thereof, on the one hand, and the Company or any
operating unit thereof (other than the Retained Business or any
operating unit thereof), on the other hand, entered into prior to the
Closing Date for the purchase or sale of goods or services
("Intercompany Arrangements") including, without limitation, Rockwell
Internal Customer Agreements, shall remain in effect on and after the
Closing Date (subject to amendment as provided in the Transition
Agreement). All amounts under such Intercompany Arrangements which are
unbilled and have not been charged to the related prime contract as of
the Closing Date shall be billed and payable on and after the Closing
Date in accordance with the terms thereof. At or before the Closing,
the Company shall cause all intercompany indebtedness (which shall
include payables and receivables but which shall not include unbilled
amounts under Intercompany Arrangements) between the Retained Business
or any operating unit thereof, on the one hand, and the Company or any
operating unit thereof (other than the Retained Business or any
operating unit thereof), on the other hand, to be settled or otherwise
eliminated.
ARTICLE III
RECAPITALIZATION OF NEWCO; MECHANICS OF DISTRIBUTION
3.1. Newco Capitalization. The current equity capitalization
of Newco consists of 1,000 issued and outstanding shares of Newco
Common Stock (the "Existing
<PAGE>
Newco Common Stock"), all of which is outstanding and owned
beneficially and of record by the Company.
3.2. Recapitalization of Newco. Immediately prior to the
Time of Distribution, the Company shall cause Newco to amend its
Certificate of Incorporation to, among other things, (i) increase the
authorized number of shares of capital stock of Newco to 1,125,000,000
shares, consisting of 25,000,000 shares of Preferred Stock, without
par value, 1,000,000,000 shares of Newco Common Stock and 100,000,000
shares of Newco Class A Common Stock, and (ii) exchange the Existing
Newco Common Stock owned by the Company for a total number of shares
of Newco Common Stock and Newco Class A Common Stock, in each case
with the associated Rights, equal to the total number of shares of
Company Common Stock and Company Class A Common Stock, respectively
(other than Company Common Stock and Company Class A Common Stock held
in the treasury of the Company), outstanding as of the Record Date (as
defined below).
3.3. Mechanics of Distribution. The Distribution shall be
effected by the distribution to each holder of record of Company
Common Stock and Company Class A Common Stock, as of the record date
designated for the Distribution by or pursuant to the authorization of
the Board of Directors of the Company (the "Record Date"), of
certificates representing one share of Newco Common Stock and one
associated Right for each share of Company Common Stock and one share
of Newco Class A Common Stock and one associated Right for each share
of Company Class A Common Stock held by such holder.
3.4. Timing of Distribution. The Board of Directors of the
Company shall formally declare the Distribution and shall authorize
the Company to pay it immediately prior to the Effective Time, subject
to the satisfaction or waiver of the conditions set forth in Article
IX, by delivery of certificates for Newco Common Stock and Newco Class
A Common Stock to the Transfer Agent for delivery to the holders
entitled thereto. The Distribution shall be deemed to be effective
upon notification by the Company to the Transfer Agent that the
Distribution has been declared and that the Transfer Agent is
authorized to proceed with the distribution of Newco Common Stock and
Newco Class A Common Stock.
<PAGE>
ARTICLE IV
OTHER AGREEMENTS
4.1. Employment. Newco or one of its Subsidiaries shall
offer employment or continued employment from the Time of Contribution
(or such later time as Newco Inactive Employees (as defined herein)
first become eligible to return to employment, it being understood
that each Newco Inactive Employee will continue to be eligible to
receive from the Newco Group the same compensation and benefits
payable during the period prior to such Newco Inactive Employee's
return to employment that such Newco Inactive Employee is entitled to
receive during such Newco Inactive Employee's absence from employment
immediately prior to the Time of Contribution) to all employees of the
Company and its Subsidiaries (including employees not actively at work
at the Time of Contribution due to leave of absence, disability leave,
military leave or layoff with recall rights ("Newco Inactive
Employees")), except those to whom Acquiror or the Company Group has
an obligation to offer employment or continued employment pursuant to
Section 5.12(a) of the Merger Agreement (collectively "Company Group
Continuing Employees"), on terms that are substantially the same as
the terms on which they were employed by the Company or a Subsidiary
of the Company immediately prior to the Time of Contribution;
provided, however, that nothing contained in this Section 4.1 is
intended to confer upon any employee who so continues to be employed
or who accepts such an offer of employment by Newco or any of its
Subsidiaries ("Newco Group Continuing Employees") any right to
continued employment after the Time of Contribution. The Company
hereby consents to Newco or one of its Subsidiaries making such
offers. Newco shall recognize the service with the Company and its
Subsidiaries through the Time of Contribution of each Newco Group
Continuing Employee and, where applicable, each former employee of the
businesses which, at the Time of Contribution, comprise the Newco
Group (a "Newco Group Former Employee"), and shall credit, as of the
Time of Contribution, such service with Newco (i) for all plan
purposes under any employee benefit plan, arrangement or policy of the
Newco Group in effect as of the Time of Contribution in which they are
then participating and (ii) for eligibility and vesting purposes only
under any employee benefit plan, arrangement or policy for which they
become eligible on or following the Time of Contribution; provided,
however, that, except as otherwise required by law or by the terms of
any collective bargaining agreement,
<PAGE>
service will be recognized under clause (i) or (ii) only to the extent
such service was recognized under the Company's comparable plan or
program prior to the Time of Contribution. Newco shall, or shall cause
the applicable member of the Newco Group to, assume or maintain (as
applicable) as of the Time of Contribution and perform the obligations
of each of the Company and its Subsidiaries under the collective
bargaining agreements relating to Newco Group Continuing Employees and
Newco Group Former Employees and any and all collateral agreements
related thereto, including those affecting all terms and conditions of
employment, and to be bound by such agreements. The Company shall, or
shall cause the applicable member of the Company Group to, assume or
maintain (as applicable) as of the Time of Contribution and perform
the obligations of each of the Company and its Subsidiaries under the
collective bargaining agreements relating to Company Group Continuing
Employees and former employees of the businesses which, at the Time of
Contribution, comprise the Company Group ("Company Group Former
Employees"), and any and all collateral agreements related thereto,
including those affecting all terms and conditions of employment, and
to be bound by such agreements.
4.2. Cross-License of Intellectual Property. (a) Effective
as of the Time of Distribution, the Company on behalf of itself and
its Subsidiaries, in consideration for the rights granted by Newco and
its Subsidiaries pursuant to Section 4.2(b), hereby grants to the
Newco Group a royalty-free, world-wide, irrevocable, non-exclusive
license, under all intellectual property rights (including, without
limitation, patents, patent applications, trade secrets, copyrights or
other similar industrial property rights, except for trademarks, trade
names, service marks, trade dress or any other form of trade identity)
which are owned by the Company Group as Retained Assets immediately
after the Time of Contribution or under which the Company Group has a
right to license as Retained Assets immediately after the Time of
Contribution, and which are used in the conduct of the businesses of
the Company other than the Aerospace Business or the Defense Business
(whether or not such rights are also used in the conduct of the
Aerospace Business or the Defense Business) at the Time of
Contribution to make, have made, use, import, sell or otherwise
dispose of products, or to practice any process in connection
therewith, in the businesses of the Newco Group as conducted by the
Company at the Time of Contribution; said non-exclusive license being
transferable only in
<PAGE>
connection with the sale of all or any part of the Newco Group's
business to which such intellectual property rights relate. To the
extent that the Newco Group does not have copies of any information or
materials relating to such intellectual property rights, the Company
shall upon reasonable request supply to the Newco Group copies of any
such information or materials relating to such intellectual property
rights. The Company makes no representations or warranties of any kind
with respect to the validity, scope or enforceability of any such
intellectual property rights licensed hereunder and the Company has no
obligation to file or prosecute any patent applications or maintain
any patents in force in connection therewith. The Company will, at no
cost to Newco, promptly execute or cause a member of the Company Group
promptly to execute such further documents as Newco may reasonably
request as necessary or desirable to carry out the terms of this
Section 4.2(a).
(b) Effective as of the Time of Distribution, Newco on
behalf of itself and its Subsidiaries, in consideration for the rights
granted by the Company and its Subsidiaries pursuant to Section
4.2(a), hereby grants to the Company Group a royalty-free, world-wide,
irrevocable, non-exclusive license, under all intellectual property
rights (including, without limitation, patents, patent applications,
trade secrets, copyrights or other similar industrial property rights,
except for trademarks, trade names, service marks, trade dress or any
other form of trade identity), which are owned by the Newco Group as
Contributed Assets immediately after the Time of Contribution or under
which the Newco Group has a right to license as Contributed Assets
immediately after the Time of Contribution, and which are used in the
conduct of the Aerospace Business or the Defense Business (whether or
not such rights are also used in the conduct of the other businesses
of the Company) at the Time of Contribution to make, have made, use,
import, sell or otherwise dispose of products, or to practice any
process in connection therewith, in the Aerospace Business and the
Defense Business as conducted by the Company at the Time of
Contribution; said non-exclusive license being transferable only in
connection with the sale of all or any part of the Company Group's
business to which such intellectual property rights relate. To the
extent that the Company Group does not have copies of any information
or materials relating to such intellectual property rights, Newco
shall upon reasonable request supply to the Company Group copies of
any such information or materials relating to such intellectual
property rights. Newco makes no
<PAGE>
representations or warranties of any kind with respect to the
validity, scope or enforceability of any such intellectual property
rights licensed hereunder and Newco has no obligation to file or
prosecute any patent applications or maintain any patents in force in
connection therewith. Newco will, at no cost to the Company, promptly
execute or cause a member of the Newco Group promptly to execute such
further documents as the Company may reasonably request as necessary
or desirable to carry out the terms of this Section 4.2(b).
(c) No provision in the Reorganization Agreements shall be
construed to permit any transfer of intellectual property relating to
the Airborne Laser Program from any member of the Company Group to
Acquiror or any other Subsidiary of Acquiror prior to award of a
Government Contract for the Airborne Laser Program.
4.3. Use of Names, Trademarks, etc. (a) From and after the
Effective Time, Newco shall have all rights in and, except as provided
in Section 4.3(b), use of the names "Rockwell", "Rockwell
International", and "Collins" and all other names, marks, scripts,
type fonts, forms, styles, logos, designs, devices, trade dress,
symbols and other forms of trade identity constituting Contributed
Assets, and all derivatives thereof. From and after the Effective
Time, the Company shall have all rights in and, except as provided in
Section 4.3(c), use of the names "Autonetics", "North American
Aviation" and "Rocketdyne" and all other names, marks, scripts, type
fonts, forms, styles, logos, designs, devices, trade dress, symbols
and other forms of trade identity constituting Retained Assets, and
all derivatives thereof. Prior to or promptly after the Effective
Time, the Company shall change the name of any Subsidiary or other
Person under its control to eliminate therefrom the names "Rockwell",
"Rockwell International" and "Collins" and all derivatives thereof,
and Newco shall change the name of any Subsidiary or other Person
under its control to eliminate therefrom the names "Autonetics",
"North American Aviation" and "Rocketdyne" and all derivatives
thereof.
(b) From and after the Effective Time, except as permitted
in this Section 4.3(b), the Company Group shall not use or have any
rights to the names "Rockwell", "Rockwell International" and "Collins"
or any derivatives thereof or any trademark, trade name, service mark
or logo of the Newco Group constituting a Contributed Asset, including
the trademarks, trade names and service marks
<PAGE>
"Rockwell", "Rockwell International" and "Collins", or any
corporate symbol related thereto or any thereof or any name or mark
which includes the words "Rockwell", "Rockwell International" or
"Collins" or any other Contributed Asset or any derivative thereof or
name or mark confusingly similar thereto or special script, type font,
form, style, logo, design, device, trade dress, or symbol used or
possessed by the Company before the Effective Time or Newco after the
Effective Time which contains the trademark, trade name or service
mark "Rockwell", "Rockwell International" or "Collins" or any other
Contributed Asset or any derivative thereof or name or mark
confusingly similar thereto and the Company Group will not hold itself
out as having any affiliation with the Newco Group. However, the
Company Group may utilize without obligation to pay royalties to Newco
the trademarks or trade names "Rockwell", "Rockwell International" or
"Collins" or any corporate symbol related thereto or any thereof in
connection with stationery, supplies, labels, catalogs, vehicles,
signs, finished goods inventory and work-in-process constituting
Retained Assets as of the Time of Contribution, subject to the terms
and conditions of this Section 4.3:
(i) All documents constituting Retained Assets as of the
Time of Contribution within the following categories may be used
for the duration of the periods following the Effective Time
indicated below or until the supply is exhausted, whichever is
the first to occur:
Maximum Period of
Permitted Use
Following the
Category of Documents Effective Time
--------------------- -----------------
A. Stationery 4 months
B. Invoices, purchase orders,
debit and credit memos and
other similar documents of a
transactional nature 4 months
C. Business cards 3 months
D. Other outside forms such as
packing lists, labels,
packing materials and 4 months
cartons, etc.
E. Forms for internal use only 12 months
<PAGE>
F. Product literature 12 months;
provided, however, that no document within any of the above
categories A, B or F may be used by the Company Group for any
purpose within the stated period unless such document clearly and
prominently displays a statement, the form of which is approved
by Newco, to the effect that the Aerospace Business or the
Defense Business, as the case may be, is no longer affiliated
with Newco.
(ii) All vehicles constituting Retained Assets as of the
Time of Contribution may continue to be used without re-marking
(except as to legally required permit numbers, license numbers,
etc.) for a period not to exceed six months following the
Effective Time or the date of disposition of the vehicle,
whichever is the first to occur. The Company shall cause all
markings on such vehicles to be removed or permanently obscured
prior to disposition of such vehicles.
(iii) Within three months following the Effective Time, the
Company shall cause to be removed from display at all facilities
constituting Retained Assets as of the Time of Contribution all
demountable displays which contain the trademarks or trade names
"Rockwell", "Rockwell International" or "Collins" or any
corporate symbol related thereto or any thereof constituting
Contributed Assets and the Company shall remove, or shall cause
the removal of all signs displaying any such trademark, trade
name or corporate symbol constituting Contributed Assets at all
such facilities no later than six months following the Effective
Time.
(iv) Products in finished goods inventory and
work-in-process constituting Retained Assets as of the Time of
Contribution may be disposed of by the Company Group following
the Effective Time without re-marking.
(c) From and after the Effective Time, the Newco Group will
not hold itself out as having an affiliation with the Company Group.
However, the Newco Group shall have rights to use trademarks or trade
names or corporate symbols related thereto or any thereof constituting
Retained Assets of the Company Group in connection with stationery,
supplies, labels, catalogs, vehicles, signs and finished goods
inventory constituting Contributed Assets as of the
<PAGE>
Time of Contribution on the same terms and subject to the same
conditions as are set forth in Section 4.3(b).
4.4. Further Assurances. Each of the parties hereto, at its
own cost and expense, promptly shall execute such documents and other
instruments and take such further actions as may be reasonably
required or desirable to carry out the provisions hereof and to
consummate the transactions contemplated hereby.
4.5. Cooperation. The parties shall cooperate with each
other in all reasonable respects to ensure the transfer to Newco or to
one of the Operating Subsidiaries of the Contributed Assets, the
Assumed Liabilities and the businesses related thereto, and the
retention by the Company of the Retained Business, including, without
limitation, (i) allocating rights and obligations under contracts,
agreements and other arrangements, if any, of the Company that relate
to both the Retained Business and the businesses contributed to Newco
or the Operating Subsidiaries and (ii) determining whether to enter
into any service or other sharing agreements on a mutually acceptable
arms-length basis that may be necessary to assure a smooth and orderly
transition.
ARTICLE V
TAX MATTERS
5.1. Tax Allocation. Prior to the Time of Distribution,
Newco, Acquiror and the Company shall enter into a Tax Allocation
Agreement in substantially the form attached as Annex B to the Merger
Agreement.
5.2. Tax Matters. Notwithstanding anything to the contrary
in this Agreement, liabilities of the parties for Taxes are subject to
the terms of the Tax Allocation Agreement. All obligations of Newco
under the Tax Allocation Agreement shall be treated as Assumed
Liabilities and not as Retained Liabilities under this Agreement and
all obligations of the Company under the Tax Allocation Agreement
shall be treated as Retained Liabilities and not as Assumed
Liabilities under this Agreement. The Contribution and Distribution
are intended to qualify as transactions described in Sections 351 and
355 of the Code and/or a "reorganization" within the meaning of
Section 368(a)(1)(D) of the Code and the Merger is intended
<PAGE>
to qualify as a "reorganization" within the meaning of Section
368(a)(1)(B) of the Code.
5.3. Transfer Taxes. Newco (or, if actually paid prior to
the Effective Time, the Company) shall pay or cause to be paid any
Transfer Taxes (as defined in the Tax Allocation Agreement) imposed in
connection with or as a result of the Contribution or the
Distribution.
ARTICLE VI
MUTUAL RELEASE
6.1. Mutual Release, etc. Effective as of the Time of
Distribution and except as otherwise specifically set forth in the
Reorganization Agreements or the Transition Agreement, each of Newco,
on the one hand, and the Company, on the other hand, on its own behalf
and on behalf of each of its respective Subsidiaries, releases and
forever discharges the other and its Subsidiaries, and its and their
respective officers, directors, agents, Affiliates, record and
beneficial security holders (including, without limitation, trustees
and beneficiaries of trusts holding such securities), advisors and
Representatives (in their respective capacities as such) and their
respective heirs, executors, administrators, successors and assigns,
of and from all debts, demands, actions, causes of action, suits,
accounts, covenants, contracts, agreements, damages, claims and
Liabilities whatsoever of every name and nature, both in law and in
equity, which the releasing party has or ever had, which arise out of
or relate to events, circumstances or actions taken by such other
party occurring or failing to occur or any conditions existing on or
prior to the Time of Distribution; provided, however, that the
foregoing general release shall not apply to (i) any Liabilities
(including Liabilities with respect to indemnification) under the
Transition Agreement or assumed, transferred, assigned, allocated or
arising under any of the Reorganization Agreements and shall not
affect any party's right to enforce the Reorganization Agreements or
the Transition Agreement in accordance with their terms, (ii) any
Liability arising from or relating to Intercompany Arrangements to the
extent such Liabilities are not required pursuant to Section 2.5 to be
settled or otherwise eliminated at or before the Closing, (iii) any
Liability the release of which would result in the release of any
Person other than a Person released pursuant to this Section 6.1
(provided that the parties agree not to
<PAGE>
bring suit or permit any of their Subsidiaries to bring suit against
any Person with respect to any Liability to the extent such Person
would be released with respect to such Liabilities by this Section 6.1
but for the proviso to this clause (iii)) or (iv) any matter set forth
on Schedule 6.1. Each party understands and agrees that, except as
otherwise specifically provided in the Reorganization Agreements,
neither Group is, in the Reorganization Agreements or otherwise,
representing or warranting in any way as to the Assets, business or
Liabilities transferred, assumed or retained as contemplated hereby or
as to any consents or approvals required in connection with the
consummation of the transactions contemplated by the Reorganization
Agreements, it being agreed and understood that each party shall take
or keep all of its Assets "as is" and that it shall bear the economic
and legal risk that conveyance of such Assets shall prove to be
insufficient or that the title to any Assets shall be other than good
and marketable and free from encumbrances of any nature whatsoever.
ARTICLE VII
ACCESS TO INFORMATION
7.1. Provision of Corporate Records. Prior to or as promptly
as practicable after the Time of Contribution the Company shall
deliver to Newco all minute books and other records of meetings of the
Board of Directors, committees of the Board of Directors, stockholders
and security owners of the Company and its predecessors, all
stockholder and security owner records of the Company and its
predecessors, all corporate books and records of the Newco Group in
its possession and the relevant portions (or copies thereof) of all
corporate books and records of the Company Group relating directly and
primarily to the Contributed Assets or the Assumed Liabilities,
including, in each case, all active agreements, active litigation
files and government filings. From and after the Time of Contribution,
all such books, records and copies shall be the property of Newco.
Prior to or as promptly as practicable after the Time of Contribution,
Newco shall deliver to the Company all corporate books and records of
the Retained Subsidiaries in Newco's possession and the relevant
portions (or copies thereof) of all corporate books and records of the
Newco Group relating directly and primarily to the Retained Assets,
the Aerospace Business, the Defense Business, the Additional Retained
Facilities
<PAGE>
(except to the extent relating primarily to the business of
the Newco Companies) or the Retained Liabilities, including, in each
case, all active agreements, active litigation files and government
filings. From and after the Time of Contribution, all such books,
records and copies shall be the property of the Company.
7.2. Access to Information. From and after the Time of
Contribution, each of the Company and Newco shall afford to the other
and to the other's Representatives reasonable access and duplicating
rights (at the requesting party's expense) during normal business
hours and upon reasonable advance notice to all Information within the
possession or control of any member of the Company Group or the Newco
Group, as the case may be, relating to the business, Assets or
Liabilities as they existed prior to the Time of Contribution or
relating to or arising in connection with the relationship between the
constituent elements of the Groups on or prior to the Time of
Contribution, insofar as such access is reasonably required for a
reasonable purpose, subject to the provisions below regarding
Privileged Information. Without limiting the foregoing, Information
may be requested under this Section 7.2 for audit, accounting, claims,
litigation and Tax purposes, as well as for purposes of fulfilling
disclosure and reporting obligations. In furtherance of the foregoing:
(a) Each party hereto acknowledges that (i) each of the
Company and Newco (and the members of the Company Group and the
Newco Group, respectively) has or may obtain Privileged
Information; (ii) there are a number of Litigation Matters
affecting each or all of the Company, Newco and the Operating
Subsidiaries; (iii) the Company, Newco and the Operating
Subsidiaries have a common legal interest in Litigation Matters,
in the Privileged Information, and in the preservation of the
confidential status of the Privileged Information, in each case
relating to the business of the Company Group or the Newco Group
as it existed prior to the Time of Contribution or relating to or
arising in connection with the relationship between the
constituent elements of the Groups on or prior to the Time of
Contribution; and (iv) both the Company and Newco intend that the
transactions contemplated by the Reorganization Agreements and
any transfer of Privileged Information in connection therewith
shall not operate as a waiver of any potentially applicable
privilege.
<PAGE>
(b) Each of the Company and Newco agrees, on behalf of
itself and each member of the Group of which it is a member, not
to disclose or otherwise waive any privilege attaching to any
Privileged Information relating to the business of the Newco
Group or the Company Group as it existed prior to the Time of
Contribution, respectively, or relating to or arising in
connection with the relationship between the Groups on or prior
to the Time of Contribution, without providing prompt written
notice to and obtaining the prior written consent of the other,
which consent shall not be unreasonably withheld and shall not be
withheld if the other party certifies that such disclosure is to
be made in response to a likely threat of suspension or debarment
or similar action; provided, however, that the Company and Newco
may make such disclosure or waiver with respect to Privileged
Information if such Privileged Information relates solely to the
business of the Company Group as it existed prior to the Time of
Contribution in the case of the Company or the business of the
Newco Group as it existed prior to the Time of Contribution in
the case of Newco. In the event of a disagreement between any
member of the Company Group and any member of the Newco Group
concerning the reasonableness of withholding such consent, no
disclosure shall be made prior to a final, nonappealable
resolution of such disagreement by a court of competent
jurisdiction.
(c) Upon any member of the Company Group or any member of
the Newco Group receiving any subpoena or other compulsory
disclosure notice from a court, other governmental agency or
otherwise which requests disclosure of Privileged Information, in
each case relating to the business of the Newco Group or the
Company Group, respectively, as it existed prior to the Time of
Contribution or relating to or arising in connection with the
relationship between the constituent elements of the Groups on or
prior to the Time of Contribution, the recipient of the notice
shall promptly provide to the other Group (following the notice
provisions set forth herein) a copy of such notice, the intended
response, and all materials or information relating to the other
Group that might be disclosed. In the event of a disagreement as
to the intended response or disclosure, unless and until the
disagreement is resolved as provided in subsection (b), the
parties shall cooperate to assert all defenses to
<PAGE>
disclosure claimed by either Group, at the cost and expense of
the Group claiming such defense to disclosure, and shall not
disclose any disputed documents or information until all legal
defenses and claims of privilege have been finally determined.
7.3. Production of Witnesses. Subject to Section 7.2, after
the Time of Contribution, each of the Company and Newco shall, and
shall cause each member of the Company Group and the Newco Group,
respectively, to, make available to Newco or any member of the Newco
Group or to the Company or any member of the Company Group, as the
case may be, upon written request, such Group's directors, officers,
employees and agents as witnesses to the extent that any such Person
may reasonably be required in connection with any Litigation Matters,
administrative or other proceedings in which the requesting party may
from time to time be involved and relating to the business of the
Newco Group or the Company Group as it existed prior to the Time of
Contribution or relating to or in connection with the relationship
between the constituent elements of the Groups on or prior to the Time
of Contribution, provided that the same shall not unreasonably
interfere with the conduct of business by the Group of which the
request is made. The Group requesting such assistance shall reimburse
the other Group for all reasonable out-of-pocket expenses incurred by
the other Group in complying with any such request.
7.4. Retention of Records. Except as provided in the
Reorganization Agreements or as otherwise agreed in writing, if any
Information relating to the business, Assets or Liabilities of a
member of a Group as they existed prior to the Time of Contribution is
retained by a member of the other Group, each of the Company and Newco
shall, and shall cause the members of the Group of which it is a
member to, retain all such Information in such Group's possession or
under its control until such Information is at least ten years old
except that if, prior to the expiration of such period, any member of
either Group wishes to destroy or dispose of any such Information that
is at least three years old, prior to destroying or disposing of any
of such Information, (1) Newco or the Company, on behalf of the member
of its Group that is proposing to dispose of or destroy any such
Information, shall provide no less than 30 days' prior written notice
to the other party, specifying the Information proposed to be
destroyed or disposed of, and (2) if, prior to the scheduled date for
such destruction or disposal, the other party requests in writing that
any of
<PAGE>
the Information proposed to be destroyed or disposed of be delivered
to such other party, the party whose Group is proposing to dispose of
or destroy such Information promptly shall arrange for the delivery of
the requested Information to a location specified by, and at the
expense of, the requesting party.
7.5. Confidentiality. Subject to Section 7.2, which shall
govern Privileged Information, from and after the Time of
Contribution, each of the Company and Newco shall hold, and shall use
reasonable efforts to cause its Affiliates and Representatives to
hold, in strict confidence all Information concerning the other
party's Group obtained by it prior to the Time of Contribution or
furnished to it by such other party's Group pursuant to the
Reorganization Agreements and shall not release or disclose such
Information to any other Person, except its Affiliates and
Representatives, who shall be bound by the provisions of this Section
7.5, and each party shall be responsible for a breach of this Section
7.5 by any of its Affiliates or Representatives; provided, however,
that any member of the Company Group or the Newco Group may disclose
such Information to the extent that (a) disclosure is compelled by
judicial or administrative process or, in the opinion of such Person's
counsel, by other requirements of law, or (b) such Person can show
that such Information was (i) available to such Person on a
nonconfidential basis (other than from a member of the other party's
Group) prior to its disclosure by such Person, (ii) in the public
domain through no fault of such Person or (iii) lawfully acquired by
such Person from another source after the time that it was furnished
to such Person by the other party's Group, and not acquired from such
source subject to any confidentiality obligation on the part of such
source, or on the part of the acquiror, known to the acquiror.
Notwithstanding the foregoing, each of the Company and Newco shall be
deemed to have satisfied its obligations under this Section 7.5 with
respect to any Information (other than Privileged Information) if it
exercises the same care with regard to such Information as it takes to
preserve confidentiality for its own similar Information.
<PAGE>
ARTICLE VIII
EMPLOYEE BENEFIT PLANS
8.1. Employee Benefits Generally. All obligations of the
Newco Group under this Article VIII with respect to employee benefit
plans, arrangements or policies for the benefit of employees and
former employees (and their beneficiaries) of the Company and its
Subsidiaries in place immediately prior to the Time of Contribution
shall be treated as Assumed Liabilities and not as Retained
Liabilities under this Agreement. All obligations of the Company Group
under this Article VIII with respect to the employee benefit plans,
arrangements or policies for the benefit of employees and former
employees (and their beneficiaries) of the Company and its
Subsidiaries in place immediately prior to the Time of Contribution
shall be treated as Retained Liabilities and not as Assumed
Liabilities under this Agreement.
8.2. Retirement Plans.
(a) Rockwell Retirement Plan for Eligible Employees.
(i) Prior to the Time of Contribution, the Company shall
have established a new group trust under the Rockwell Retirement
Plan, which shall be exempt from taxation under Section 501(a) of
the Code (the "Newco Group Trust") and the purpose of which shall
be to hold, as provided below, certain assets of the Rockwell
Retirement Plan and assets attributable to the liabilities under
the defined benefit pension plans set forth in Schedule 8.2(b)
hereto (the "Reliance Retirement Plans"). Prior to the Time of
Contribution, an amount of assets equal to the sum of (A) the
accumulated benefit obligation ("ABO") (as determined in the
following sentence) of the current and former employees of the
Company and its Subsidiaries who are expected to be, as of the
Time of the Contribution, Newco Group Transferred Participants
(as defined in Section 8.2(a)(ii) hereof) and (B) $200,000,000
shall have been transferred from the Rockwell Group Trust to the
Newco Group Trust in the amounts, form and manner described in
Section 8.2(c) below. Such ABO shall have been determined as of
December 31, 1995 in accordance with the Statement of Financial
Accounting Standards No. 87 ("FAS 87") utilizing a discount rate
of 7% and
<PAGE>
actuarial assumptions (other than such discount rate) specified
in the actuarial valuation for the Rockwell Retirement Plan
prepared as of January 1, 1996 (the "January 1, 1996 Actuarial
Valuation"). Such ABO shall have been determined by an enrolled
actuary appointed by Newco (the "Newco Actuary") and shall be
binding and conclusive upon Newco, the Company and Acquiror other
than as provided in Sections 8.2(a)(iv) and 8.2(a)(v) hereof.
(ii) Prior to the Time of Contribution, the Company or Newco
shall have established a defined benefit pension plan which shall
be qualified under Section 401(a) of the Code (the "Newco
Retirement Plan") effective as of the Time of Contribution
covering (A) Newco Group Continuing Employees and (B) former
employees of the Company and its Subsidiaries who terminated
employment on or after January 1, 1996 (other than Company Group
Former Employees) (such Newco Group Continuing Employees and such
former employees are hereinafter referred to as "Newco Group
Transferred Participants"). The Newco Retirement Plan shall
contain provisions comparable in all material respects to and no
less favorable in the aggregate than those of the Rockwell
Retirement Plan immediately prior to the time of adoption of the
Newco Retirement Plan. As soon as practicable following the
establishment of the Newco Retirement Plan, but in no event later
than 30 days prior to the Time of Contribution, the Company and
Newco shall have filed with the IRS proper notice on IRS Forms
5310-A regarding the transfer of assets and liabilities from the
Rockwell Retirement Plan to the Newco Retirement Plan.
(iii) Effective as of the Time of Contribution, Newco shall
sponsor the Newco Retirement Plan and assume the Newco Group
Trust. Effective as of the Time of Contribution, the Company
shall continue to sponsor the Rockwell Retirement Plan and
Rockwell Group Trust, and shall change the name of the Rockwell
Retirement Plan and Rockwell Group Trust to eliminate any
reference to "Rockwell". The Company and Newco shall take such
further actions as may be necessary or appropriate to (A)
establish Newco as the sponsor of the Newco Retirement Plan and
provide for the assumption of the Newco Group Trust by Newco and
(B) provide for the continued sponsorship of the
<PAGE>
Rockwell Retirement Plan and the Rockwell Group Trust by the
Company. As soon as practicable following the latest of (A) the
Time of Contribution, (B) the expiration of the applicable
waiting period without receiving an adverse response from the
appropriate government agencies and (C) receipt by the Company of
an opinion of Newco's counsel, in a form reasonably satisfactory
to the Company, that the form of the Newco Retirement Plan meets
the requirements of Section 401(a) of the Code, the Rockwell
Retirement Plan shall transfer to the Newco Retirement Plan (1)
all accrued benefits and other liabilities attributable to Newco
Group Transferred Participants (collectively, the "Transferred
Benefits") and (2) the assets attributable thereto (the
"Transferred Amount") in the amounts, form and manner described
in this Section 8.2(a) and Section 8.2(c) below. Following the
transfers of the Transferred Amount and the Transferred Benefits
from the Rockwell Retirement Plan and Rockwell Group Trust to the
Newco Retirement Plan and Newco Group Trust as provided herein,
the Company Group shall have no further liability whatsoever
(either under this Agreement or otherwise) with respect to the
Newco Group Transferred Participants for benefits under the
Rockwell Retirement Plan and, except as otherwise provided in
Section 8.2(a)(vi), the Newco Group shall have no further
liability whatsoever (either under this Agreement or otherwise)
with respect to the participants under the Rockwell Retirement
Plan. The Rockwell Retirement Plan shall retain liability for the
Newco Group Former Employees who were participants in the
Rockwell Retirement Plan and who terminated employment with the
Company or any of its Subsidiaries prior to January 1, 1996.
(iv) Within 150 days following the Time of Contribution,
Newco shall cause the Newco Actuary to prepare and deliver to
Newco an actuarial valuation (the "Actuarial Valuation") which
shall: (A) certify the ABO for Newco Group Transferred
Participants and the ABO for all other participants in the
Rockwell Retirement Plan and the Newco Retirement Plan as of the
Time of Contribution, each of which ABO shall be determined in
accordance with FAS 87, utilizing a discount rate of 8% and
actuarial assumptions (other than such discount rate) specified
in the January 1, 1996 Actuarial Valuation; (B) set forth the
fair market value of the assets for the Rockwell Retirement Plan
<PAGE>
and the Newco Retirement Plan as of the Time of Contribution and
(C) set forth the calculation of the Transferred Amount (equal to
the product of (A) multiplied by (B) as defined in Section
8.2(a)(v)), which amount shall be calculated in accordance with
Section 414(l) of the Code, the Treasury Regulations thereunder
and this Section 8.2(a)(iv). Newco shall deliver to the Company
the Actuarial Valuation. Within 60 days of receipt of the
Actuarial Valuation, the Company shall (A) cause an enrolled
actuary selected by the Company (the "Company Actuary") to
confirm the accuracy (based upon the assumptions referred to in
clause (A) of this Section 8.2(a)(iv)) of the Actuarial Valuation
(including the underlying data used by the Newco Actuary to
prepare such Actuarial Valuation) and (B) provide to Newco a
written statement of whether the Company Actuary has confirmed
the accuracy of such Actuarial Valuation. In the event that the
Company Actuary disputes the accuracy of the Actuarial Valuation
within such 60-day period, Newco and the Company shall, within 30
days following the end of the 60-day period described in the
preceding sentence, make all reasonable efforts to cause the
Newco Actuary and the Company Actuary to resolve the dispute or,
if such dispute cannot be resolved, select an actuarial firm of
national repute (the "Third Actuary") to determine the amounts
referred to in clauses (A), (B) and (C) of the first sentence of
this Section 8.2(a)(iv), which determination shall be final and
binding upon Newco, the Company and the Acquiror. In the event
that Newco and the Company are unable to select a Third Actuary
within such 30-day period, an arbitrator shall appoint such Third
Actuary, which determination shall be final and binding upon
Newco, the Company and the Acquiror. Such arbitrator shall be
appointed in accordance with the rules of the New York, New York
office of the American Arbitration Association. The Company shall
pay the cost of the Company Actuary, Newco shall pay the cost of
the Newco Actuary and, to the extent necessary, the cost of the
Third Actuary and arbitrator shall be shared equally by the
Company and Newco. The use of a Third Actuary and arbitrator and
the allocation of the costs thereof shall be referred to as the
"Actuarial Dispute Resolution Process".
(v) As soon as practicable following the satisfaction of the
conditions set forth in Section 8.2(a)(iv), an amount determined
in accordance with
<PAGE>
this Section 8.2(a)(v) shall be transferred from the Rockwell
Retirement Plan to the Newco Retirement Plan (or from the Newco
Retirement Plan to the Rockwell Retirement Plan, as the case may
be). For purposes of this Section 8.2(a)(v), (A) is the fraction,
the numerator of which is the ABO for the Newco Group Transferred
Participants as of the Time of Contribution, and the denominator
of which is the total ABO for all participants covered under the
Rockwell Retirement Plan and Newco Retirement Plan as of the Time
of Contribution, (B) is the total combined fair market value of
the assets of the Rockwell Retirement Plan and Newco Retirement
Plan as of the Time of Contribution, (C) is the fair market value
of the assets in the Newco Retirement Plan as of the Time of
Contribution and (D) is an amount equal to the product of (A)
multiplied by (B). For all purposes of this Section 8.2(a)(v),
the amount of ABO shall be determined in accordance with Section
8.2(a)(iv). If (D) is greater than (C), then an amount equal to
the excess of (D) over (C) shall be transferred from the Rockwell
Retirement Plan to the Newco Retirement Plan. If (D) is less than
(C), then an amount equal to the excess of (C) over (D) shall be
transferred from the Newco Retirement Plan to the Rockwell
Retirement Plan. Any amount to be transferred pursuant to this
Section 8.2(a)(v) shall bear interest from the Time of
Contribution to the date of payment (calculated based on actual
days elapsed in a 365-day year) at a rate of 8% per annum and, to
the extent applicable, shall be decreased by the amount of any
benefit payments and normal expenses of administration not
attributable to participants in the plan from which the amount is
transferable.
(vi) Newco shall reimburse the Company, on an annual
plan-year basis, for any additional amounts paid to or in respect
of Newco Group Former Employees who are not Newco Group
Transferred Participants and their beneficiaries under the
Rockwell Retirement Plan as a result of any increase in the
benefits provided to such Newco Group Former Employees and their
beneficiaries over the benefits payable to such persons at the
Time of Contribution which increase is implemented by the Company
upon the written request of Newco. Such increase for each year
shall be the aggregate amount actually paid under the Rockwell
Retirement Plan to or in respect of the Newco Group Former
Employees who are
<PAGE>
not Newco Group Transferred Participants and their beneficiaries
during such plan year over the aggregate amount payable to such
persons under the Rockwell Retirement Plan as in effect at the
Time of Contribution. The determination of the amount to be
reimbursed to the Company by Newco shall be made by the Company
Actuary and shall be subject to review by the Newco Actuary. If
the Company Actuary and the Newco Actuary shall disagree as to
the amount to be reimbursed, the Company and Newco shall use the
Actuarial Dispute Resolution Process to determine the amount of
reimbursement.
(b) Reliance Retirement Plans.
(i) Prior to the Time of Contribution, the assets
attributable to the liabilities under the Reliance Retirement
Plans shall have been transferred from the Rockwell Group Trust
to the Newco Group Trust. The assets transferred from the
Rockwell Group Trust to the Newco Group Trust to fund the
liabilities under the Reliance Retirement Plans shall have been
determined in the manner set forth in Section 8.2(c).
(ii) Effective as of the Time of Contribution, Newco shall
cause the appropriate member or members of the Newco Group to
continue sponsorship of the Reliance Retirement Plans. Prior to,
on and after the Time of Contribution, the Company and Newco and
the appropriate member of the Newco Group each shall have taken
and shall take such actions as may be necessary or appropriate to
establish the appropriate member of the Newco Group to continue
the sponsorship of the Reliance Retirement Plans.
(c) Selection of Assets.
(i) The assets that shall have been transferred from the
Rockwell Group Trust to the Newco Group Trust pursuant to
Sections 8.2(a)(i) and 8.2(b) shall have been selected as
hereinafter set forth in this Section 8.2(c)(i). First, assets
invested in insurance and annuity contracts that were
attributable specifically to the subplans and groups of Newco
Group Transferred Participants or participants in the Reliance
Retirement Plans (the "Earmarked Investments") shall have been
transferred to the Newco Group Trust. Second, the remaining
assets transferred from the
<PAGE>
Rockwell Group Trust to the Newco Group Trust shall have been
comprised of assets invested by each such investment manager set
forth on Schedule 8.2(c) (each, an "Investment Manager"). The
amount of assets managed by each Investment Manager that shall
have been allocated to the Newco Group Trust from the Rockwell
Group Trust shall be an amount equal to the product of (A)
multiplied by (B), where (A) equals a fraction, the numerator of
which is the fair market value of the assets managed by such
individual Investment Manager as of the close of business on the
day immediately preceding the date of transfer and the
denominator of which is the aggregate fair market value of the
assets as of the close of business on the day immediately
preceding the date of transfer managed by all of the Investment
Managers, and where (B) equals the amount of assets transferred
to the Newco Group Trust pursuant to Section 8.2(a)(i) and 8.2(b)
minus the amount of Earmarked Assets. The selection of specific
assets managed by each Investment Manager transferred to the
Newco Group Trust or liquidated to fund such transfer, in the
amount determined in accordance with the immediately preceding
sentence, shall have been made on a pro rata basis among the
assets managed by such Investment Manager. Notwithstanding the
foregoing, if the total fair market value of the assets managed
by the Investment Managers as of the close of business on the day
immediately preceding the date of the transfer was less than the
amount set forth in clause (B) of the preceding sentence, then
the remaining assets that shall have been transferred to the
Newco Group Trust shall have been determined on a basis mutually
agreed upon by the Company and Newco.
(ii) The assets to be transferred from the Rockwell Group
Trust to the Newco Group Trust or from the Newco Group Trust to
the Rockwell Group Trust, as the case may be, pursuant to Section
8.2(a)(v) shall be in cash and marketable securities as mutually
agreed upon by the Company and Newco.
(d) The Company and Newco shall use and shall have used
their reasonable best efforts to effectuate the actions contemplated
under this Section 8.2 on a timely basis as provided herein.
<PAGE>
8.3. Savings Plans.
(a) Rockwell International Corporation Savings Plan.
Effective as of the Time of Contribution, Newco shall assume
sponsorship of the Rockwell International Corporation Savings Plan
(the "Rockwell Savings Plan") and trust related thereto and shall
cause each Company Group Continuing Employee to have a fully
nonforfeitable right to such Continuing Employee's account balances,
if any, under the Rockwell Savings Plan. The account balances of each
Company Group Continuing Employee shall be maintained under the
Rockwell Savings Plan until distributed in accordance with the terms
of the Rockwell Savings Plan and applicable law.
(b) Rockwell Hourly Savings Plans. Effective as of the Time
of Contribution, Newco shall, or shall cause one or more of its
Subsidiaries to, assume sponsorship of the Rockwell Retirement Savings
Plan for Certain Employees (the "Rockwell Hourly Savings Plan") and
the trust related thereto and shall cause each Company Group
Continuing Employee to have a fully nonforfeitable right to such
Company Group Continuing Employee's account balances, if any, under
the Rockwell Hourly Savings Plan. The account balances of each Company
Group Continuing Employee shall be maintained under the Rockwell
Hourly Savings Plan until distributed in accordance with the terms of
the Rockwell Hourly Savings Plan and applicable law.
(c) Plant Savings Plans. Effective as of the Time of
Contribution, Newco shall, or shall cause one or more of its
Subsidiaries to, assume sponsorship of the Asheville Employees
Retirement Savings Plan Truck Axle Division, the Rockwell
International Corporation Gordonsville, Tennessee Employees Savings
Plan, the Rockwell International Corporation Retirement Plan for
Hourly Employees, Gordonsville, Tennessee and the York Employees
Retirement Savings Plan Truck Axle Division and the respective trusts
related thereto.
(d) Rockwell Savings Plan for Certain Eligible Employees. If
the Rockwell Savings Plan for Certain Eligible Employees has not been
merged into and with the Rockwell International Corporation Savings
Plan as of the Time of Contribution, then effective as of the Time of
Contribution, the Company shall, or shall cause a member of the
Company Group to, assume sponsorship of the Rockwell Savings Plan for
Certain Eligible Employees and the trust related thereto and shall
cause each Newco Group Continuing
<PAGE>
Employee to have a fully nonforfeitable right to such Newco Group
Continuing Employee's account balances, if any, under the Rockwell
Savings Plan for Certain Eligible Employees. The account balances of
each Newco Group Continuing Employee shall be maintained under the
Rockwell Savings Plan for Certain Eligible Employees until distributed
in accordance with the terms thereof and applicable law.
8.4. Deferred Compensation Plans and Nonqualified Retirement
and Savings Plans.
(a) Deferred Compensation Plans. Effective as of the Time of
Contribution, Newco shall assume liability for and shall pay when due
all benefits accrued as of the Time of Contribution (including, in the
case of Company Group Continuing Employees and, if any, Company Group
Former Employees, such individuals' vested and nonvested benefits
which are accrued as of the Time of Contribution) by, and attributable
to, all employees and former employees of the Company and its
Subsidiaries and all present and former non-employee directors of the
Company under the Rockwell International Corporation Deferred
Compensation Plan as amended and restated effective July 1, 1995, the
Rockwell International Corporation Annual Incentive Compensation Plan
for Senior Executive Officers effective as of October 1, 1995 and the
Rockwell International Corporation Deferred Compensation Policy for
Non-Employee Directors (the "Deferred Compensation Plans"), and shall
perform, pay and discharge fully all of the Company's and its
Subsidiaries' duties, liabilities or obligations thereunder with
respect to such employees, former employees and present and former
non-employee directors of the Company and its Subsidiaries. Effective
as of the Time of Contribution, Newco shall cause each Company Group
Continuing Employee and Company Group Former Employee to have a fully
nonforfeitable right to such individual's entire account balance, if
any, under the Deferred Compensation Plans.
(b) Nonqualified Retirement Plans. Effective as of the Time
of Contribution, Newco shall assume liability for and shall pay when
due all benefits accrued as of the Time of Contribution by, and
attributable to, employees and former employees of the Company and its
Subsidiaries (other than Company Group Continuing Employees and
Company Group Former Employees) under the Rockwell International
Corporation Supplemental Retirement Plan for Highly Compensated
Employees, the Rockwell International Corporation Excess Benefit
Retirement Plan and the Rockwell
<PAGE>
International Corporation Excess Benefit Plan (the "Nonqualified
Retirement Plans"), and shall perform, pay and discharge fully all of
the Company's and its Subsidiaries' duties, liabilities or obligations
thereunder with respect to such employees and former employees.
Effective as of the Time of Contribution, the Company shall assume
liability for and shall pay when due all benefits accrued as of the
Time of Contribution by, and attributable to, Company Group Continuing
Employees and Company Group Former Employees (including such
individual's vested and nonvested benefits which are accrued as of the
Time of Contribution) under the Nonqualified Retirement Plans and
shall perform, pay and discharge fully all of the Company's and its
Subsidiaries' duties, liabilities or obligations with respect thereto.
(c) Nonqualified Savings Plans. Effective as of the Time of
Contribution, Newco shall assume liability for and shall pay when due
all benefits accrued as of the Time of Contribution (including, in the
case of Company Group Continuing Employees and, if any, Company Group
Former Employees, such individuals' vested and nonvested benefits
which are accrued as of the Time of Contribution) by, and attributable
to, all employees and former employees of the Company and its
Subsidiaries under the Rockwell International Corporation Supplemental
Savings Plan for Highly Compensated Employees and the Rockwell
International Corporation Excess Benefit Savings Plan (the
"Nonqualified Savings Plans"), and shall perform, pay and discharge
fully all of the Company's and its Subsidiaries' duties, liabilities
or obligations thereunder with respect thereto. Effective as of the
Time of Contribution, Newco shall cause each Company Group Continuing
Employee and Company Group Former Employee to have a fully
nonforfeitable right to such individual's entire account balance, if
any, under the Nonqualified Savings Plans.
8.5. Employee Stock Options. Effective as of the Time of
Contribution, Newco shall assume the Company Stock Plans. The Board of
Directors of the Company shall amend the Company Stock Plans, make
adjustments and take actions (and Newco shall take such actions as are
reasonably required to implement the same) with respect to options to
acquire shares of Company Common Stock or Company Class A Common
Stock, as the case may be, pursuant to any Company Stock Plan
("Company Options") which are outstanding immediately prior to the
Time of Distribution to provide that, pursuant to the equitable
adjustment provisions of the
<PAGE>
applicable Company Stock Plan under which such Company Options were
granted, effective as of the Time of Distribution such Company Options
will be converted into and represent the right to acquire shares of
Newco Common Stock and Newco Class A Common Stock, in each case with
the associated Rights, with such other amendments and adjustments as
are reasonable and appropriate, including such amendments as are
reasonable and appropriate to ensure that any optionholder who becomes
a Company Group Continuing Employee or a Company Group Former Employee
as of the Time of Contribution will not forfeit any such converted
options on such date under the termination of employment provisions of
such plans as a result of not becoming a Newco Group Continuing
Employee or a Newco Group Former Employee, and will be entitled to
vesting and exercisability rights comparable to those that such
optionholder has immediately prior to the Time of Contribution to the
extent that such optionholder remains in continuous employment with
any member of the Company Group.
8.6. Long-Term Incentive Plan. Effective as of the Time of
Contribution, (i) the Company shall retain liability for all amounts
due under the Rockwell International Business Unit Long-Term Incentive
Plan (the "LTIP") with respect to the Company Group Continuing
Employees and Company Group Former Employees and (ii) Newco shall
assume liability for all amounts due under the LTIP with respect to
the Newco Group Continuing Employees and Newco Group Former Employees.
The amounts payable under clause (i) of the preceding sentence shall
be determined by the Company on the basis that (x) the target award
for each uncompleted cycle will be prorated to reflect the portion of
such cycle completed as of the Time of Contribution and (y) where
payment is based, in whole or in part, on the trading price of the
Company Common Stock, such price shall be the average closing price
per share of Company Common Stock reported on the NYSE for each full
trading day during the months of August and September immediately
preceding the Time of Contribution. The amount due each participant
under the LTIP who is a Company Group Continuing Employee shall be
paid by the Company within 90 days following the Time of Contribution.
Newco shall promptly reimburse the Company, upon written request from
the Company therefor, for any amount paid by the Company under the
LTIP as a result of this Section 8.6 the expense of which is not
reimbursed by the United States of America under applicable Government
Contracts, provided, however, that Newco shall have the opportunity to
participate in any negotiations with the
<PAGE>
applicable Governmental Entity with respect to such reimbursement or
to designate counsel or a representative reasonably satisfactory to
the Company to so participate on Newco's behalf unless such
participation by Newco (or its counsel or representative) is barred by
such agency, in which case, the Company shall consult with Newco and
keep Newco apprised of any developments with respect to such
negotiations. The Company shall not establish, or cause to be
established, any new performance cycles under the LTIP with respect to
Company Group Continuing Employees and Company Group Former Employees
prior to the Time of Contribution.
8.7. Welfare Benefit Plans.
(a) Effective as of the Time of Contribution, the Company
shall, or shall cause a member of the Company Group to, maintain each
"employee welfare benefit plan", as defined in Section 3(1) of ERISA,
and each other employee welfare benefit or fringe benefit arrangement
(collectively, "Company Group Welfare Benefit Plans") sponsored or
maintained by the Company or any of its Subsidiaries immediately prior
to the Time of Contribution for the benefit of Company Group
Continuing Employees and Company Group Former Employees (including but
not limited to those plans set forth on Schedule 8.7(a)). The Company
shall credit the dollar amount of all expenses incurred by Company
Group Continuing Employees and Company Group Former Employees and
their respective eligible dependents during the applicable plan year
in which occurs the Time of Contribution for purposes of satisfying
such plan year's deductible and co-payment limitations and shall
credit service with the Company and its Subsidiaries earned prior to
the Time of Contribution under the relevant welfare benefit plans of
the Company Group. The Company shall credit each Company Group
Continuing Employee with the unused vacation days and any personal and
sickness days accrued in accordance with the vacation and personnel
policies and labor agreements of the Company and its Subsidiaries
applicable to such employees in effect as of the Time of Contribution.
(b) Effective as of the Time of Contribution, Newco shall,
or shall cause a member of the Newco Group to, establish or maintain
"employee welfare benefit plans", as defined in Section 3(1) of ERISA,
and other employee welfare benefit or fringe benefit arrangements
(collectively, "Newco Group Welfare Benefit Plans") which are
comparable in the
<PAGE>
aggregate to the "employee welfare benefit plans" and other employee
benefit welfare or fringe benefit arrangements which had been
maintained by the Company and its Subsidiaries immediately prior to
the Time of Contribution for the benefit of Newco Group Continuing
Employees and Newco Group Former Employees. Newco shall credit the
dollar amount of all expenses incurred by Newco Group Continuing
Employees and Newco Group Former Employees and their respective
eligible dependents during the applicable plan year in which occurs
the Time of Contribution for purposes of satisfying such plan year's
deductible and co-payment limitations and shall credit service with
the Company and its Subsidiaries earned prior to the Time of
Contribution under the relevant welfare benefit plans of the Newco
Group. Newco shall credit each Newco Group Continuing Employee with
the unused vacation days and any personal and sickness days accrued in
accordance with the vacation and personnel policies and labor
agreements of the Company and its Subsidiaries applicable to such
employees in effect as of the Time of Contribution.
(c) As of the Time of Contribution, the Company shall retain
and continue to be responsible for all welfare benefit programs
(including, but not limited to, medical, dental, life, travel
accident, short- and long-term disability, hospitalization and other
insurance benefits) under which claims have been incurred for expenses
prior to the Time of Contribution by Company Group Continuing
Employees, Company Group Former Employees and their dependents and
such reimbursement for such medical and dental expenses associated
with such claims (including claims submitted on behalf of disabled
employees and their dependents) shall be determined in accordance with
the terms of the welfare benefit programs of the Company Group as in
effect immediately prior to the Time of Contribution. As of the Time
of Contribution, Newco shall assume and be responsible for all welfare
benefit programs (including, but not limited to, medical, dental,
life, travel accident, short- and long-term disability,
hospitalization and other insurance benefits) under which claims have
been incurred for expenses incurred prior to the Time of Contribution
by Newco Group Continuing Employees, Newco Group Former Employees and
their dependents and such reimbursement for such medical and dental
expenses associated with such claims (including claims submitted on
behalf of disabled employees and their dependents) shall be determined
in accordance with the terms of the welfare benefit programs of the
Company
<PAGE>
Group as in effect immediately prior to the Time of Contribution.
8.8. Retiree Health and Life Insurance.
(a) The Company and the Company Group, or where appropriate,
the Company Group Welfare Benefit Plans, shall retain liability for
all retiree health benefits and retiree life insurance which were
payable prior to the Time of Contribution and/or are payable on or
after the Time of Contribution to (i) all eligible Company Group
Continuing Employees (and their beneficiaries) and (ii) all eligible
Company Group Former Employees (and their beneficiaries). The Company
shall credit the dollar amount of all expenses incurred by Company
Group Continuing Employees and Company Group Former Employees and
their respective eligible dependents during the applicable plan year
in which occurs the Time of Contribution for purposes of satisfying
such plan year's deductible and co-payment limitations and shall
credit service with the Company and its Subsidiaries earned prior to
the Time of Contribution under the relevant retiree welfare benefit
plans of the Company Group.
(b) Newco and the Newco Group, or where appropriate, the
Newco Group Welfare Benefit Plans, shall assume liability for all
retiree health benefits and retiree life insurance benefits which were
payable prior to the Time of Contribution and/or are payable on or
after the Time of Contribution to (i) all eligible Newco Group
Continuing Employees (and their beneficiaries) and (ii) all eligible
Newco Group Former Employees (and their beneficiaries). Newco shall
credit the dollar amount of all expenses incurred by Newco Group
Continuing Employees and Newco Group Former Employees and their
respective eligible dependents during the applicable plan year in
which occurs the Time of Contribution for purposes of satisfying such
plan year's deductible and co-payment limitations and shall credit
service with the Company and its Subsidiaries earned prior to the Time
of Contribution under the relevant retiree welfare benefit plans of
the Newco Group.
(c) As of the Time of Contribution, the Company shall retain
and continue to be responsible for all retiree welfare benefit
programs (including, but not limited to, medical, dental, life, travel
accident, short- and long-term disability, hospitalization and other
insurance benefits) under which claims have been incurred for expenses
prior to the Time of Contribution by Company Group Continuing
<PAGE>
Employees, Company Group Former Employees and their dependents and
such reimbursement for such medical and dental expenses associated
with such claims (including claims submitted on behalf of disabled
employees and their dependents) shall be determined in accordance with
the terms of the welfare benefit programs of the Company and its
Subsidiaries as in effect immediately prior to the Time of
Contribution. As of the Time of Contribution, Newco shall assume and
be responsible for all retiree welfare benefit programs (including,
but not limited to, medical, dental, life, travel accident, short- and
long-term disability, hospitalization and other insurance benefits)
under which claims have been incurred for expenses incurred prior to
the Time of Contribution by Newco Group Continuing Employees, Newco
Group Former Employees and their dependents and such reimbursement for
such medical and dental expenses associated with such claims
(including claims submitted on behalf of disabled employees and their
dependents) shall be determined in accordance with the term of the
retiree welfare benefit programs of the Company and its Subsidiaries
as in effect immediately prior to the Time of Contribution.
8.9. Retention and Severance Obligations. The Company and
Newco agree that the transactions contemplated by this Agreement shall
not constitute a severance of employment of any Company Group
Continuing Employee and Newco Group Continuing Employee prior to or as
a result of the consummation of the transactions contemplated hereby,
and that such employees will have continuous and uninterrupted
employment with the Company Group or Newco Group, as applicable,
before and immediately after the Time of Contribution. Without
limiting the generality of Section 8.9, effective as of the Time of
Contribution, the Company shall retain liability for and shall pay
when due all amounts which may become payable under the Rockwell
Retention and Severance Arrangement.
8.10. Free-Standing Plans. Effective as of the Time of
Contribution, Newco shall assume, or shall cause the Newco Group to
assume, all liabilities and obligations under each employee benefit
plan, arrangement or policy which, prior to the Time of Contribution,
is exclusively for the benefit of Newco Group Continuing Employees,
Newco Group Former Employees, and their eligible beneficiaries (the
"Newco Group Free-Standing Plans"). Effective as of the Time of
Contribution, the Company shall retain, or shall cause the Company
Group to retain, all liabilities and obligations under each employee
benefit plan, arrangement or
<PAGE>
policy which, prior to the Time of Contribution, is exclusively for
the benefit of Company Group Continuing Employees, Company Group
Former Employees, and their eligible beneficiaries (the "Company Group
Free-Standing Plans"). The Company and Newco shall take, or cause to
be taken, all such action as may be necessary or appropriate to
establish the Newco Group as successor to the Company or its
Subsidiaries as to all rights, assets, duties, liabilities and
obligations under, or with respect to, the Newco Group Free-Standing
Plans and to establish the Company Group as successor to the Company
or its Subsidiaries as to all rights, assets, duties, liabilities and
obligations with respect to the Company Group Free-Standing Plans.
8.11. Employment, Consulting and Severance Agreements.
Effective as of the Time of Contribution, Newco shall assume, or cause
the Newco Group to assume, all liabilities and obligations
attributable to Newco Group Continuing Employees and Newco Group
Former Employees under their respective employment, consulting and
severance agreements with the Company or its Subsidiaries, as the same
are in effect immediately prior to the Time of Contribution.
Effective as of the Time of Contribution, the Company shall
retain, or cause the Company Group to retain, all
liabilities and obligations attributable to Company Group
Continuing Employees and Company Group Former Employees
under their respective employment, consulting and severance
agreements with the Company or its Subsidiaries, as the same
are in effect immediately prior to the Time of Contribution.
8.12. Welfare Plan Funding.
(a) Non-Collectively Bargained Voluntary Employees'
Beneficiary Association. Prior to the Time of Contribution, Newco
shall have established a voluntary employees' beneficiary association
(the "Newco VEBA") under Section 501(c)(9) of the Code covering Newco
Group Continuing Employees and Newco Group Former Employees who are
covered under the Trust for Employee Welfare Benefit Programs of
Rockwell International Corporation (the "Rockwell VEBA"). The Newco
VEBA shall contain provisions comparable in all material respects to
and no less favorable in the aggregate to its participants than those
of the Rockwell VEBA. Prior to the Time of Contribution, the Rockwell
VEBA shall have transferred to the Newco VEBA assets attributable to
the Newco Group Continuing Employees and Newco Group Former Employees
covered under the Rockwell VEBA. The amount of assets transferred from
the Rockwell
<PAGE>
VEBA to the Newco VEBA pursuant to this Section 8.12(a) shall have
been based upon the value of the assets in the applicable employee
group insurance plan as of the date of the transfer multiplied by the
ratio that the costs allocated for the Newco Group Continuing
Employees and Newco Group Former Employees bear to the total costs
allocated under the Rockwell VEBA for the Company's government
accounting fiscal year in which such transfer occurs to the date of
the transfer. The Company and Newco agree to adjust the initial asset
allocation set forth in the preceding sentence, based upon actual
claims cost experience at such time as the actual experience is known
pursuant to the Company's practices existing on the date hereof.
Effective as of the Time of Contribution, Newco shall continue to
sponsor the Newco VEBA. Effective as of the Time of Contribution, the
Company shall continue to sponsor the Rockwell VEBA and shall change
the name of the Rockwell VEBA to eliminate any reference to
"Rockwell".
(b) Collectively Bargained Voluntary Employees' Beneficiary
Association. Prior to the Time of Contribution, Newco shall have
established a voluntary employees' beneficiary association (the "Newco
Collectively Bargained VEBA") under Section 501(c)(9) covering Newco
Group Continuing Employees and Newco Group Former Employees who are
covered under the Agreement of Trust for Certain Collectively
Bargained Welfare Benefit Plans of Rockwell International Corporation
(the "Rockwell Collectively Bargained VEBA"). The Newco Collectively
Bargained VEBA shall contain provisions comparable in all material
respects to and no less favorable in the aggregate to its participants
than those of the Rockwell Collectively Bargained VEBA. Prior to the
Time of Contribution, the Rockwell Collectively Bargained VEBA shall
have transferred to the Newco Collectively Bargained VEBA assets
attributable to the Newco Group Continuing Employees and Newco Group
Former Employees covered under the Rockwell Collectively Bargained
VEBA. The amount of assets transferred from the Rockwell Collectively
Bargained VEBA to the Newco Collectively Bargained VEBA pursuant to
this Section 8.12(b) shall have been based upon the value of the
assets in the Rockwell Collectively Bargained VEBA as of the date of
the transfer multiplied by the ratio that the costs allocated for the
Newco Group Continuing Employees and Newco Group Former Employees bear
to the total costs allocated under the applicable employee group
insurance plan for the Company's government accounting fiscal year in
which such transfer occurs to the date of the transfer. Effective as
of the
<PAGE>
Time of Contribution, Newco shall continue to sponsor the Newco
Collectively Bargained VEBA. Effective as of the Time of Contribution,
the Company shall continue to sponsor the Rockwell Collectively
Bargained VEBA and shall change the name of the Rockwell Collectively
Bargained VEBA to eliminate any reference to "Rockwell".
(c) Continued Life Insurance Reserve Fund. Prior to the Time
of Contribution, Newco shall have established a continued life
insurance reserve fund (the "Newco CLIR Fund") covering Newco Group
Continuing Employees and Newco Group Former Employees who are covered
under the Continued Life Insurance Reserve Fund (the "Rockwell CLIR
Fund"). The Newco CLIR Fund shall contain provisions comparable in all
material respects to and no less favorable in the aggregate to its
participants than those of the Rockwell CLIR Fund. Prior to the Time
of Contribution, the Rockwell CLIR Fund shall have transferred to the
Newco CLIR Fund assets attributable to the Newco Group Continuing
Employees and Newco Group Former Employees covered under the Rockwell
CLIR Fund. The amount of assets transferred from the Rockwell CLIR
Fund to the Newco CLIR Fund pursuant to this Section 8.12(c) shall
have been based upon the proportionate values of the assets in the
Rockwell CLIR Fund attributable to Newco Group Continuing Employees
and Newco Group Former Employees as of the most recent actuarial
valuation for the Rockwell CLIR Fund prepared by the Newco Actuary,
subject to review by the Company Actuary. In the event of a dispute
between the Newco Actuary and the Company Actuary, the Actuarial
Dispute Resolution Process shall be used to determine the amount of
assets to be transferred. Effective as of the Time of Contribution,
Newco shall continue to sponsor the Newco CLIR Fund. Effective as of
the Time of Contribution, the Company shall continue to sponsor the
Rockwell CLIR Fund and shall change the name of the Rockwell CLIR Fund
to eliminate any reference to "Rockwell".
(d) Additional Action. Prior to, on and after the Time of
Contribution, the Company and Newco each shall take and shall have
taken such further actions as may be necessary or appropriate to (i)
establish Newco as the sponsor of the Newco VEBA, Newco Collectively
Bargained VEBA and Newco CLIR Fund, (ii) provide for the continued
sponsorship by the Company of the Rockwell VEBA, Rockwell Collectively
Bargained VEBA and Rockwell CLIR Fund and (iii) cause the transfers
described in this Section 8.12 to be made in accordance with
applicable law and the terms of any applicable collective bargaining
agreement.
<PAGE>
8.13. Indemnification. Except as otherwise provided in this
Article VIII, Newco shall indemnify, defend and hold harmless the
Company Group from and against, and pay or reimburse the Company Group
for, any claims made by any Newco Group Continuing Employee or Newco
Group Former Employee for severance or other separation benefits, any
claims based on breach of contract and any other claims arising out of
or in connection with the employment or the failure to offer
employment to, or the termination of employment of, any Newco Group
Continuing Employee or Newco Group Former Employee. The Company shall
indemnify, defend and hold harmless the Newco Group from and against,
and pay or reimburse the Newco Group for, any claims made by any
Company Group Continuing Employee or Company Group Former Employee for
severance or other separation benefits, any claims based on breach of
contract and any other claims arising out of or in connection with the
employment or the failure to offer employment to, or the termination
of employment of, any Company Group Continuing Employee or Company
Group Former Employee. Newco shall indemnify, defend and hold harmless
the Company Group from and against, and pay or reimburse the Company
Group for, all liabilities resulting from any failure to file a
determination letter request with the IRS within the remedial
amendment period prescribed under Section 401(b) of the Code with
respect to compliance with the Tax Reform Act of 1986 for any Company
Pension Plan that is intended to be tax-qualified under Section 401(a)
of the Code.
8.14. Cooperation. Without limiting the generality of
Article VII hereof, the Company Group and Newco Group agree to
promptly furnish each other with such information concerning employees
and employee benefit plans, arrangements or policies as is necessary
and appropriate to effect the transactions contemplated by this
Article VIII.
8.15. Amendment, Modification or Termination of Benefit
Plans. From and after the Time of Contribution, (i) the Company Group
expressly reserves the right, in accordance with applicable law and
the terms of any applicable collective bargaining agreement, to amend,
modify or terminate any Benefit Plan it sponsors or maintains for
Company Group Continuing Employees and Company Group Former Employees
and (ii) the Newco Group expressly reserves the right, in accordance
with applicable law and the terms of any applicable collective
bargaining agreement, to amend, modify or terminate any Benefit Plan
it sponsors or
<PAGE>
maintains for Newco Group Continuing Employees or Newco Group Former
Employees.
ARTICLE IX
CONDITIONS
9.1. Conditions to Obligations of the Company. The
obligations of the Company to consummate the Distribution hereunder
shall be subject to the fulfillment of each of the following
conditions:
(a) All of the transactions contemplated by Article II shall
have been consummated.
(b) The recapitalization of Newco in accordance with Section
3.2 shall have been consummated.
(c) Each condition to the Closing of the Merger Agreement
set forth in Article VI thereof, other than (i) the condition set
forth in Sections 6.1(f) thereof as to the consummation of the
Contribution and the Distribution and (ii) the condition to the
Acquiror's obligations set forth in Section 6.3(d) thereof as to the
satisfaction of conditions contained in this Agreement, shall have
been fulfilled or waived by the party for whose benefit such condition
exists.
(d) The Board of Directors of the Company shall be
reasonably satisfied that, after giving effect to the Contribution,
(i) the Company will not be insolvent and will not have unreasonably
small capital with which to engage in its businesses and (ii) the
Company's surplus would be sufficient to permit, without violation of
Section 170 of the DGCL, the Distribution.
(e) Acquiror, the Company and Newco shall each have
received, in form and substance reasonably satisfactory to each, the
advance agreements and approvals of Governmental Entities concerning
the matters described on Schedule 9.1(e).
<PAGE>
ARTICLE X
MISCELLANEOUS AND GENERAL
10.1. Modification or Amendment. The parties hereto may
modify or amend this Agreement only by written agreement executed and
delivered by duly authorized officers of the respective parties.
10.2. Waiver; Remedies. The conditions to the Company's
obligation to consummate the Distribution are for the sole benefit of
the Company and may be waived in writing by the Company in whole or in
part to the extent permitted by applicable law. No delay on the part
of any party hereto in exercising any right, power or privilege
hereunder will operate as a waiver thereof, nor will any waiver on the
part of any party hereto of any right, power or privilege hereunder
operate as a waiver of any other right, power or privilege hereunder,
nor will any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder. Unless
otherwise provided, the rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies which the
parties may otherwise have at law or in equity.
10.3. Counterparts. For the convenience of the parties, this
Agreement may be executed in any number of separate counterparts, each
such counterpart being deemed to be an original instrument, and all
such counterparts shall together constitute the same agreement.
10.4. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New
York applicable to contracts made and to be performed entirely within
such State, without regard to the conflicts of law principles of such
State.
10.5. Notices. Any notice, request, instruction or other
communication to be given hereunder by any party to any other party
shall be in writing and shall be deemed to have been duly given (i) on
the date of delivery if delivered personally, or by telecopy or
telefacsimile, upon confirmation of receipt, (ii) on the first
business day following the date of dispatch if delivered by Federal
Express or other nationally reputable next-day courier service, or
(iii) on the third business day following the date of mailing if
delivered by registered or certified
<PAGE>
mail, return receipt requested, postage prepaid. All notices hereunder
shall be delivered as set forth below, or pursuant to such other
instructions as may be designated in writing by the party to receive
such notice:
(a) If to Newco or the Operating Subsidiaries:
New Rockwell International Corporation
2201 Seal Beach Boulevard
Seal Beach, California 90740-8250
Attention: William J. Calise, Jr., Esq.
Senior Vice President, General
Counsel and Secretary
Telecopy: (310) 797-5687
with copies to:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Peter R. Kolyer, Esq.
Telecopy: (212) 541-5369
and
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Eric S. Robinson, Esq.
Telecopy: (212) 403-2000
(b) If to the Company:
Boeing NA, Inc.
c/o The Boeing Company
P.O. Box 3707
M/S 13-08
Seattle, Washington 98124-2207
Attention: Theodore J. Collins, Esq.
Vice President & General Counsel
Telecopy: (206) 544-4900
and
<PAGE>
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Allen Finkelson, Esq.
Telecopy: (212) 474-3700
10.6. Entire Agreement. The Reorganization Agreements
(including the Annexes and Schedules thereto), the Transition
Agreement and the Confidentiality Agreement constitute the entire
agreement, and supersede all other prior agreements, understandings,
representations and warranties, both written and oral, among the
parties, with respect to the subject matter hereof and thereof.
10.7. Certain Obligations. Whenever this Agreement requires
any of the Subsidiaries of any party to take any action, this
Agreement will be deemed to include an undertaking on the part of such
party to cause such Subsidiary to take such action.
10.8. Assignment. No party to this Agreement shall convey,
assign or otherwise transfer any of its rights or obligations under
this Agreement without the express written consent of the other
parties hereto in their sole and absolute discretion, except that any
party hereto may assign any of its rights hereunder to a successor to
all or any part of its business. Except as aforesaid, any such
conveyance, assignment or transfer without the express written consent
of the other parties shall be void ab initio. No assignment of this
Agreement shall relieve the assigning party of its obligations
hereunder.
10.9. Captions. The Article, Section and paragraph captions
herein are for convenience of reference only, do not constitute part
of this Agreement and shall not be deemed to limit or otherwise affect
any of the provisions hereof.
10.10. Specific Performance. In the event of any actual or
threatened default in, or breach of, any of the terms, conditions and
provisions of this Agreement, the party or parties who are or are to
be thereby aggrieved shall have the right of specific performance and
injunctive relief giving effect to its or their rights under this
Agreement, in addition to any and all other rights and remedies at law
or in equity, and all such rights and
<PAGE>
remedies shall be cumulative. The parties agree that the remedies at
law for any breach or threatened breach, including monetary damages,
are inadequate compensation for any loss and that any defense in any
action for specific performance that a remedy at law would be adequate
is waived.
10.11. Severability. If any provision of this Agreement or
the application thereof to any person or circumstance is determined by
a court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provisions hereof, or the application of
such provision to persons or circumstances other than those as to
which it has been held invalid or unenforceable, shall remain in full
force and effect and shall in no way be affected, impaired or
invalidated thereby, so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner adverse
to any party. Upon any such determination, the parties shall negotiate
in good faith in an effort to agree upon a suitable and equitable
substitute provision to effect the original intent of the parties.
10.12. Third Party Beneficiaries. Acquiror shall be a third
party beneficiary of this Agreement. Nothing contained in this
Agreement is intended to confer upon any Person or entity other than
the parties hereto and their respective successors and permitted
assigns (other than Acquiror), any benefit, right or remedies under or
by reason of this Agreement, except that the provisions of Sections
6.1 and 8.13 hereof shall inure to the benefit of the persons referred
to therein.
10.13. Schedules. All Schedules attached hereto or referred
to herein are hereby incorporated in and made a part of this Agreement
as if set forth in full herein. Matters reflected on the Schedules are
not necessarily limited to matters required by this Agreement to be
reflected on such Schedules. Such additional matters are set forth for
informational purposes only and do not necessarily include other
matters of a similar nature. Capitalized terms used in any Schedule
but not otherwise defined therein shall have the respective meanings
assigned to such terms in this Agreement.
10.14. Consent to Jurisdiction. Each of the parties hereto
irrevocably submits to the exclusive jurisdiction of (i) the Superior
Court of the State of
<PAGE>
California, San Francisco County and (ii) the United States District
Court for the Northern District of California for the purposes of any
suit, action or other proceeding arising out of this Agreement or any
transaction contemplated hereby (and agrees not to commence any
action, suit or proceeding relating hereto except in such courts).
Each of the parties hereto further agrees that service of any process,
summons, notice or document hand delivered or sent by registered mail
to such party's respective address set forth in Section 10.5 will be
effective service of process for any action, suit or proceeding in
California with respect to any matters to which it has submitted to
jurisdiction as set forth in the immediately preceding sentence. Each
of the parties hereto irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding
arising out of this Agreement or the transactions contemplated hereby
in (i) the Superior Court of the State of California, San Francisco
County or (ii) the United States District Court for the Northern
District of California, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such
court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed
and delivered by the duly authorized officers of the parties hereto as
of the date first hereinabove written.
ROCKWELL INTERNATIONAL CORPORATION
By: /s/ WILLIAM J. CALISE, JR.
--------------------------------
Name: William J. Calise, Jr.
Title: Senior Vice President
NEW ROCKWELL INTERNATIONAL
CORPORATION
By: /s/ WILLIAM J. CALISE, JR.
--------------------------------
Name: William J. Calise, Jr.
Title: Senior Vice President
ALLEN-BRADLEY COMPANY, INC.
By: /s/ WILLIAM J. CALISE, JR.
--------------------------------
Name: William J. Calise, Jr.
Title: Vice President
ROCKWELL COLLINS, INC.
By: /s/ WILLIAM J. CALISE, JR.
--------------------------------
Name: William J. Calise, Jr.
Title: Vice President
ROCKWELL SEMICONDUCTOR SYSTEMS,
INC.
By: /s/ WILLIAM J. CALISE, JR.
--------------------------------
Name: William J. Calise, Jr.
Title: Vice President
<PAGE>
ROCKWELL LIGHT VEHICLE SYSTEMS,
INC.
By: /s/ WILLIAM J. CALISE, JR.
--------------------------------
Name: William J. Calise, Jr.
Title: Vice President
ROCKWELL HEAVY VEHICLE SYSTEMS,
INC.
By: /s/ WILLIAM J. CALISE, JR.
--------------------------------
Name: William J. Calise, Jr.
Title: Vice President
CONFORMED COPY
- ---------------------------------------------------------------------
POST-CLOSING COVENANTS AGREEMENT
dated as of December 6, 1996,
among
ROCKWELL INTERNATIONAL CORPORATION,
THE BOEING COMPANY
BOEING NA, INC.
and
NEW ROCKWELL INTERNATIONAL CORPORATION
- ---------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
1.1. Definitions ......................................... 2
ARTICLE II
INDEMNIFICATION
2.1. Indemnification by Newco ........................... 3
2.2. Indemnification by the Company ..................... 6
2.3. Procedures Relating to Indemnification ............. 7
2.4. Certain Limitations ................................ 12
2.5. Limitation on Newco's Indemnification
Obligation under Section 2.1(a)(iv) ................ 13
2.6. Exclusivity of Tax Allocation Agreement ............ 14
ARTICLE III
OTHER AGREEMENTS
3.1. Transfer Taxes ..................................... 15
3.2. Conduct of Environmental Insurance Coverage
Claims .......................................... 15
3.3. Agreements with Respect to Acquiror Common
Stock Received by Newco Savings Plans ........... 17
3.4. Transitional Arrangements .......................... 18
3.5. Insurance .......................................... 18
3.6. DOE Contracts ...................................... 19
3.7. Reorganization Expenses ............................ 19
3.8. Conduct of Health Care Claims Audit ................ 19
3.9. Guaranty of Acquiror ............................... 21
3.10. Payments Adjustments to Contribution ............... 21
i
<PAGE>
ARTICLE IV
MISCELLANEOUS AND GENERAL
4.1. Modification or Amendment .......................... 22
4.2. Waiver; Remedies ................................... 22
4.3. Counterparts ....................................... 22
4.4. Governing Law ...................................... 22
4.5. Notices ............................................ 22
4.6. Entire Agreement ................................... 23
4.7. Certain Obligations ................................ 23
4.8. Assignment ......................................... 23
4.9. Captions ............................................ 24
4.10. Severability ....................................... 24
4.11. No Third Party Beneficiaries ....................... 24
4.12. Consent to Jurisdiction ............................ 24
ii
<PAGE>
POST-CLOSING COVENANTS AGREEMENT dated as of December 6,
1996 (this "Agreement"), among ROCKWELL INTERNATIONAL CORPORATION, a
Delaware corporation (the "Company"), THE BOEING COMPANY, a Delaware
corporation ("Acquiror"), BOEING NA, INC., a Delaware corporation and
a wholly-owned subsidiary of Acquiror ("Sub"), and NEW ROCKWELL
INTERNATIONAL CORPORATION, a Delaware corporation ("Newco").
W I T N E S S E T H :
WHEREAS, the Company, Acquiror and Sub have entered into an
Agreement and Plan of Merger dated as of July 31, 1996 (the "Merger
Agreement"), providing for the Merger (as defined in the Merger
Agreement) of Sub with and into the Company;
WHEREAS, the Board of Directors of the Company has approved
an agreement and plan of distribution in the form attached as Annex A
to the Merger Agreement (the "Distribution Agreement"), which will be
entered into prior to the Effective Time (as defined in the Merger
Agreement), pursuant to which (a) all the assets of the Company, other
than the Retained Assets (as defined in the Distribution Agreement),
will be contributed to Newco and/or to one or more of the Operating
Subsidiaries (as defined in the Distribution Agreement) and all of the
liabilities of the Company, other than the Retained Liabilities (as
defined in the Distribution Agreement), will be assumed by Newco
and/or by one or more of the Operating Subsidiaries, all as provided
in the Distribution Agreement (the "Contribution"), and (b) all of the
issued and outstanding shares of Common Stock, par value $1.00 per
share, of Newco ("Newco Common Stock") and Class A Common Stock, par
value $1.00 per share, of Newco ("Newco Class A Common Stock"), in
each case with the associated Rights, will be distributed on a pro
rata basis to the Company's stockholders as provided in the
Distribution Agreement (the "Distribution");
WHEREAS, the execution and delivery of this Agreement by the
parties hereto is a condition to the obligations of the parties to the
Merger Agreement to consummate the Merger;
WHEREAS, the execution and delivery of this Agreement by the
parties hereto is a condition to the
<PAGE>
obligations of the parties to the Distribution Agreement to
consummate the Distribution; and
WHEREAS, the parties to this Agreement have determined that
it is necessary and desirable to set forth certain agreements that
will govern certain matters that may arise following the Contribution,
the Distribution and the Merger.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements set forth
herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. Capitalized terms used in this Agreement
and not otherwise defined herein shall have the meanings assigned to
such terms in the Merger Agreement or the Distribution Agreement, as
the case may be. As used in this Agreement, the following terms shall
have the following respective meanings:
"Acquiror Indemnitees" shall mean Acquiror, each Affiliate
of Acquiror, including any of its direct or indirect Subsidiaries
(including, after the Effective Time, the Retained Companies), and
each of their respective Representatives and each of the heirs,
executors, successors and assigns of any of the foregoing.
"Environmental Law" shall have the meaning ascribed thereto
in the Distribution Agreement.
"Environmental Proceeding" means any judicial,
administrative or regulatory proceeding (including, without
limitation, any investigation or inquiry) by or before any
Governmental Entity that has been instituted or commenced against an
Acquiror Indemnitee by a party other than an Acquiror Indemnitee based
on a violation of, or to enforce compliance with, any Environmental
Law.
"Filings" shall mean the Registration Statements, the Proxy
Statement-Prospectus, the Form 8-A and any other document filed or
required to be filed with the SEC in connection with the transactions
contemplated by the
<PAGE>
Reorganization Agreements, or any preliminary or final form thereof
or any amendment or supplement thereto.
"Indemnifiable Losses" shall mean, subject to Section 2.4,
all losses, liabilities, damages, deficiencies, obligations, fines,
expenses, claims, demands, actions, suits, proceedings, judgments or
settlements, whether or not resulting from Third Party Claims (as
defined in Section 2.3(a)), including interest and penalties recovered
by a third party with respect thereto and out-of-pocket expenses and
reasonable attorneys' and accountants' fees and expenses incurred in
the investigation or defense of any of the same or in asserting,
preserving or enforcing any of the Indemnitee's rights hereunder,
suffered by an Indemnitee.
"Indemnitee" shall mean any of the Acquiror Indemnitees or
the Newco Indemnitees who or which may seek indemnification under this
Agreement.
"Newco Indemnitees" shall mean Newco, each Affiliate of
Newco, including any of its direct or indirect Subsidiaries, and each
of their respective Representatives and each of the heirs, executors,
successors and assigns of any of the foregoing.
ARTICLE II
INDEMNIFICATION
2.1. Indemnification by Newco. (a) Except as otherwise
specifically provided in any Reorganization Agreement and subject to
the provisions of this Article II, Newco shall indemnify, defend and
hold harmless the Acquiror Indemnitees from and against, and pay or
reimburse the Acquiror Indemnitees for, all Indemnifiable Losses, as
incurred:
(i) relating to or arising from the Contributed Assets
or the Assumed Liabilities, including without limitation the
Special Liabilities (including the failure by Newco or any member
of the Newco Group to pay, perform or otherwise discharge such
Assumed Liabilities in accordance with their terms), whether such
Indemnifiable Losses relate to or arise from events, occurrences,
actions, omissions, facts or circumstances occurring, existing or
asserted before, at or after the Effective Time;
<PAGE>
(ii) arising from or based upon any untrue statement or
alleged untrue statement of a material fact contained in any of
the Filings or in the Consent Statement, or any omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading; but only in each case with respect to information
provided by the Company relating to the Newco Group or the
Company contained in or omitted from the Filings or the Consent
Statement;
(iii) relating to or arising from the breach by any
member of the Newco Group of any agreement or covenant contained
in a Reorganization Agreement which does not by its express terms
expire at the Effective Time or which is not by its express terms
required to be performed prior to the Effective Time;
(iv) relating to or arising from any breach of or
inaccuracy in any representation or warranty of the Company
contained in the Merger Agreement;
(v) relating to or arising from any Preexisting
Environmental Condition relating to the Aerospace Business, the
Defense Business or the Additional Retained Facilities;
(vi) relating to or arising from any actual or alleged
criminal violation of any law, rule or regulation of any
Governmental Entity by the Company or any of its Subsidiaries or
any director, officer, employee or agent of the Company or any of
its Subsidiaries ("Criminal Matters") occurring or alleged to
have occurred prior to the Time of Contribution;
(vii) relating to or arising from any breach of any
covenant or agreement of the Company contained in the Merger
Agreement assumed by Newco pursuant to the Distribution
Agreement;
(viii) relating to or arising from any claim that the
execution, delivery or performance by the Company of each
Reorganization Agreement to which it is or will be a party or the
consummation of the transactions contemplated thereby results in
a violation or breach of, or constitutes a default or
impermissible transfer under, or gives rise to any
<PAGE>
right of termination, first refusal or consent under or gives
rise to any right of amendment, cancellation or acceleration of
any material benefit under, any Designated Contract listed on
Schedule 2.1(a)(viii);
(ix) relating to or arising from fines and penalties
and reasonable attorneys' and accountants' fees and expenses in
connection with any of the alleged safety violations or alleged
improper storage and/or disposal of hazardous waste claims
referred to in item 5(a) of Section 4.1(n) of the Company
Disclosure Schedule pertaining to the explosion at Santa Susana,
California in 1994; or
(x) incurred in connection with the enforcement by the
Acquiror Indemnitees of their rights to be indemnified, defended
and held harmless under this Agreement.
(b) RAN Contract. The Retained Assets include a Contract
(Contract R1000) (the "RAN Contract") between Rockwell Australia
Limited and the Australian Submarine Corporation. Newco shall
indemnify, defend and hold harmless the Acquiror Indemnitees for 80%
of any decrease in the profit before tax realized by Rockwell
Australia Limited on the RAN Contract below 40.0 million Australian
dollars (A$40,000,000) as well as 80% of any loss in respect of the
RAN Contract. Likewise, the Company shall pay to Newco 80% of any
increase in the profit before tax realized by Rockwell Australia
Limited on the RAN Contract above 40.0 million Australian dollars
(A$40,000,000). The determination of profit before tax or loss for
purposes of this Section 2.1(b) shall be based upon the next quarterly
Estimate at Completion ("EAC") for the RAN Contract prepared after
expiration of three (3) years from the Effective Time. The
determination of Rockwell Australia Limited's profit before tax or
loss shall be determined by the Company using the same accounting
methods, policies, practices, procedures, classifications, judgments,
estimation methodologies and accounting standards as were utilized in
the preparation of the Retained Business Audited Financial Statements.
All payments made pursuant to this Section 2.1(b) shall be computed on
a tax-effected basis to take into account the benefit of any
reduction, or detriment of any increase, in Taxes payable by Rockwell
Australia Limited attributable to the decrease in the profit before
tax (including any loss) or increase in the profit before tax realized
by Rockwell Australia Limited below or above
<PAGE>
A$40,000,000. All determinations of the amount (and timing) of any
such benefit or detriment shall be determined using principles
analogous to those contained in Section 6.6 of the Tax Allocation
Agreement, and all payments made pursuant to this Section 2.1(b) shall
be governed by Section 2.3 of this Agreement and by Section 6.6(a) of
the Tax Allocation Agreement. The obligations of Newco and the Company
to pay the amounts set forth in this Section 2.1(b) shall be
determined without regard to the acts or omissions of the Company or
any Subsidiary with respect to performance of the RAN Contract prior
to, at or after the Effective Time. The Company will provide Newco
with copies of all quarterly EAC's in respect of the RAN Contract and
access to such books and records (including but not limited to
accountants' work papers) and personnel familiar with the RAN Contract
and the accounting therefor as Newco shall reasonably request. To the
extent Newco disputes the EAC, the designees of the chief financial
officers of Acquiror and Newco shall attempt a good faith resolution
of such dispute. To the extent not so resolved within 90 days
following Newco's receipt of the determination of such profit or loss,
such dispute will be referred for resolution to the chief financial
officers of Acquiror and Newco, and failing their resolution of such
dispute within 90 days after such referral, to the chief executive
officers of Acquiror and Newco. To the extent the dispute is not so
resolved within 90 days following such referral, Acquiror and Newco
will submit such dispute to mediation using the procedures of the
Center for Public Resources, before commencing litigation to resolve
such dispute.
2.2. Indemnification by the Company. Except as otherwise
specifically provided in any Reorganization Agreement and subject to
the provisions of this Article II, the Company shall indemnify, defend
and hold harmless the Newco Indemnitees from and against, and pay or
reimburse the Newco Indemnitees for, all Indemnifiable Losses, as
incurred:
(i) relating to or arising from the Retained Assets or
the Retained Liabilities (including the failure by the Company or
any member of the Company Group to pay, perform or otherwise
discharge such Retained Liabilities in accordance with their
terms), whether such Indemnifiable Losses relate to or arise from
events, occurrences, actions, omissions, facts or circumstances
occurring, existing or asserted before, at or after the Effective
Time;
<PAGE>
(ii) arising from or based upon any untrue statement or
alleged untrue statement of a material fact contained in any of
the Filings or in the Consent Statement, or any omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading; but only in each case with respect to information
provided by Acquiror relating to Acquiror or any of its
Subsidiaries other than the Company Group contained in or omitted
from the Filings or the Consent Statement;
(iii) relating to or arising from the breach by
Acquiror or any member of the Company Group of any agreement or
covenant contained in a Reorganization Agreement (other than, in
the case of the Company Group, an agreement or covenant contained
in the Merger Agreement assumed by Newco pursuant to the
Distribution Agreement) which does not by its express terms
expire at the Effective Time or which is not by its express terms
required to be performed prior to the Effective Time; or
(iv) incurred in connection with the enforcement by the
Newco Indemnitees of their rights to be indemnified, defended and
held harmless under this Agreement.
2.3. Procedures Relating to Indemnification. (a) In order
for an Indemnitee to be entitled to any indemnification provided for
under this Agreement in respect of, arising out of or involving a
claim made by any Person who is not an Indemnitee against the
Indemnitee (a "Third Party Claim"), such Indemnitee must notify the
party who may become obligated to provide indemnification hereunder
(the "indemnifying party") in writing, and in reasonable detail, of
the Third Party Claim reasonably promptly, and in any event within 20
business days after receipt by such Indemnitee of written notice of
the Third Party Claim; provided, however, that failure to give such
notification shall not affect the indemnification provided hereunder
except to the extent the indemnifying party shall have been actually
prejudiced as a result of such failure (except that the indemnifying
party shall not be liable for any expenses incurred during the period
in which the Indemnitee failed to give such notice); and provided
further, however, that with respect to any matter for which Newco is
the indemnifying
<PAGE>
party, Newco shall be deemed to have received notice with respect to
all matters by or against any member of the Company Group that were
concluded or initiated prior to, or otherwise pending at, the Time of
Contribution. After any required notification (if applicable), the
Indemnitee shall deliver to the indemnifying party, promptly after the
Indemnitee's receipt thereof, copies of all notices and documents
(including court papers) received by the Indemnitee relating to the
Third Party Claim.
(b) If a Third Party Claim is made against an Indemnitee,
the indemnifying party will be entitled to participate in the defense
thereof and, if it so chooses, to assume the defense thereof (at the
expense of the indemnifying party) with counsel selected by the
indemnifying party and reasonably satisfactory to the Indemnitee;
provided, however, that in case of a claim made by any person against
an Indemnitee relating to a Special Liability (a "Special Liability
Claim"), Newco (at Newco's expense) shall assume the defense thereof
with counsel selected by Newco. Should the indemnifying party so elect
(or, in the case of a Special Liability Claim, be obligated) to assume
the defense of a Third Party Claim, the indemnifying party will not be
liable to the Indemnitee for any legal expenses subsequently incurred
(or, in the case of a Special Liability Claim, incurred) by the
Indemnitee in connection with the defense thereof (unless, in case of
a Special Liability Claim, Newco breaches its obligation to assume the
defense thereof). If the indemnifying party assumes (or, in the case
of a Special Liability Claim, is obligated to assume) such defense,
the Indemnitee shall have the right to participate in the defense
thereof and to employ counsel, at its own expense, separate from the
counsel employed by the indemnifying party, it being understood that
the indemnifying party shall control such defense. The indemnifying
party shall be liable for the fees and expenses of counsel employed by
the Indemnitee for any period during which the indemnifying party has
not assumed (or, in the case of a Special Liability Claim, is in
breach of its obligation to assume) the defense thereof (other than
during any period in which the Indemnitee shall have failed to give
notice of the Third Party Claim as provided above). If the
indemnifying party chooses (or, in the case of a Special Liability
Claim, is obligated) to defend or prosecute a Third Party Claim, all
the parties hereto shall cooperate in the defense or prosecution
thereof, which cooperation shall include the retention in accordance
with the Distribution Agreement and (upon the
<PAGE>
indemnifying party's request) the provision to the indemnifying party
of records and information which are reasonably relevant to such Third
Party Claim, and making employees available on a mutually convenient
basis to provide additional information and explanation of any
material provided hereunder. If the indemnifying party chooses (or, in
the case of a Special Liability Claim, is obligated) to defend or
prosecute any Third Party Claim, the Indemnitee will agree to any
settlement, compromise or discharge of such Third Party Claim which
the indemnifying party may recommend and which by its terms obligates
the indemnifying party to pay the full amount of liability in
connection with such Third Party Claim; provided, however, that,
without the Indemnitee's consent, the indemnifying party shall not
consent to entry of any judgment or enter into any settlement (w) that
provides for injunctive or other nonmonetary relief affecting the
Indemnitee, (x) that does not include as an unconditional term thereof
the giving by each claimant or plaintiff to such Indemnitee of a
release from all liability with respect to such claim, (y) in the case
of a Criminal Matter or (z) that involves an allegation of conduct
which could result in the suspension or debarment of the Indemnitee
from contracting with the United States Government. Whether or not the
indemnifying party shall have assumed the defense of a Third Party
Claim, the Indemnitee shall not admit any liability with respect to,
or settle, compromise or discharge, such Third Party Claim without the
indemnifying party's prior written consent (which consent shall not be
unreasonably withheld). Notwithstanding the foregoing, Newco shall be
solely responsible for, and shall pay directly, the fees and expenses
of its counsel in connection with any Special Liability Claim and
shall reimburse the Company on a monthly basis for any support or
other services provided at Newco's request in respect of any Special
Liability Claim in an amount equal to the Company's costs thereof
determined in accordance with the cost accounting standards applicable
to Government Contracts.
(c) In order for an Indemnitee to be entitled to any
indemnification provided for under this Agreement in respect of a
claim that does not involve a Third Party Claim, the Indemnitee shall
deliver notice of such claim with reasonable promptness to the
indemnifying party. The failure by any Indemnitee so to notify the
indemnifying party shall not relieve the indemnifying party from any
liability which it may have to such Indemnitee under this Agreement,
except to the extent that the indemnifying party
<PAGE>
shall have been actually prejudiced by such failure. Any notice
pursuant to this Section 2.3(c) shall contain a statement, in
prominent and conspicuous type, that if the indemnifying party does
not dispute its liability to the Indemnitee with respect to the claim
made in such notice by notice to the Indemnitee prior to the
expiration of a 30-calendar-day period following the indemnifying
party's receipt of the second notice of such claim, the claim shall be
conclusively deemed a liability of the indemnifying party. If the
Indemnitee has provided the indemnifying party two such notices not
less than 30 days apart and the indemnifying party does not notify the
Indemnitee prior to the expiration of a 30-calendar-day period
following its receipt of the second such notice that the indemnifying
party disputes its liability to the Indemnitee under this Agreement,
such claim specified by the Indemnitee in such notice shall be
conclusively deemed a liability of the indemnifying party under this
Agreement and the indemnifying party shall pay the amount of such
liability to the Indemnitee on demand or, in the case of any notice in
which the amount of the claim (or any portion thereof) is estimated,
on such later date when the amount of such claim (or such portion
thereof) becomes finally determined. If the indemnifying party has
timely disputed its liability with respect to such claim, as provided
above, the indemnifying party and the Indemnitee shall proceed in good
faith to negotiate a resolution of such dispute and, if not resolved
through negotiations, such dispute shall be resolved by litigation in
an appropriate court of competent jurisdiction.
(d) Unless the Company or the appropriate Retained
Subsidiary shall have made a good faith determination that a
particular Indemnifiable Loss relating to or arising from a
Preexisting Environmental Condition is not eligible for treatment as
an allowable overhead cost or other allowable cost (in which case, the
Company or the appropriate Retained Subsidiary may request Newco to
indemnify, defend and hold it harmless without complying with the
following additional procedures), Newco shall have no obligation to
indemnify, defend or hold harmless any Acquiror Indemnitee hereunder
in respect of an Indemnifiable Loss arising from or relating to a
Preexisting Environmental Condition unless (i) the Company or the
appropriate Retained Subsidiary has submitted a claim for such
Indemnifiable Loss as an allowable overhead cost or other allowable
cost in connection with relevant Government Contracts and used its
reasonable best efforts to obtain a favorable determination
<PAGE>
of such claim, (ii) such claim has been disallowed based on an act or
omission by the Company or any of its Subsidiaries prior to the
Effective Time, (iii) the Company or the appropriate Retained
Subsidiary has given Newco timely notice of such disallowance and (iv)
Newco has been permitted, at its own expense, to direct and control
the appeal of such disallowance until finally determined pursuant to
one or more final and nonappealable orders, decrees or judgments or by
one or more settlement agreements approved by Newco and the Company,
such approval not to be unreasonably withheld by the Company.
Notwithstanding anything in this Agreement to the contrary,
Indemnifiable Losses relating to or arising from Preexisting
Environmental Conditions shall be limited to costs and expenses of
containing, removing, responding to, remediating, cleaning-up and
abating Preexisting Environmental Conditions, natural resource damage
claims, penalties and fines, and any administrative oversight costs
incurred by any Governmental Entity actually paid by an Acquiror
Indemnitee following the Time of Contribution relating to or arising
from the presence, use, treatment, Release or threatened Release of
any Hazardous Substance on or originating from a facility of the
Retained Business prior to the Time of Contribution, provided that any
such containment, removal, response, remediation, clean-up or
abatement shall be (i) required by an enforcement order or decree
entered by a Governmental Entity as a result of an Environmental
Proceeding; (ii) necessary to comply with an Environmental Law in
response to an Environmental Proceeding or threatened Environmental
Proceeding; or (iii) in response to a condition which in the Company's
reasonable judgment is likely to result in an Environmental Proceeding
if no responsive action is taken. The costs and expenses for which
Newco shall be obligated to indemnify, defend and hold harmless the
Acquiror Indemnitees shall be limited to those costs and expenses
which are necessary to achieve compliance with the minimum
requirements of Environmental Law based upon a reasonable low cost
approach under the circumstances. Without prejudice to the rights and
obligations of the parties under Section 2.3(a), (b) or (c), the
Company shall provide Newco with all information reasonably requested
by Newco to allow Newco to evaluate all proposed responsive actions in
connection with any Preexisting Environmental Condition. Newco shall
have no obligation to indemnify, defend or hold harmless an Acquiror
Indemnitee in respect of any Preexisting Environmental Condition for
(i) any cost or expense incurred in connection with the normal,
day-to-day
<PAGE>
operation, including maintenance, of the facilities of the Retained
Business (except for groundwater monitoring costs or other maintenance
expenses related to any investigation or remediation), and including
any discharges pursuant to, and any closure or post-closure
obligations under any permit or authorization granted by a
Governmental Entity unless such post-closure obligation is related to
or gives rise to an obligation to investigate, monitor or remediate
under Environmental Law, or (ii) any cost or expense relating to or
arising from any change in use of a facility of the Retained Business
or acts or omissions of any Acquiror Indemnitee or other person who is
not a member of the Newco Group after the Time of Contribution which
increase the scope of any required containment, removal, response,
remediation, clean-up or abatement or otherwise increase the liability
of Newco hereunder.
(e) Unless the Company or the appropriate Retained
Subsidiary shall have made a good faith determination that a
particular Indemnifiable Loss relating to or arising from a Criminal
Matter is not eligible for treatment as an allowable overhead cost or
other allowable cost (in which case, the Company or the appropriate
Retained Subsidiary may request Newco to indemnify, defend and hold it
harmless without complying with the following additional procedures),
Newco shall have no obligation to indemnify, defend or hold harmless
any Acquiror Indemnitee hereunder in respect of an Indemnifiable Loss
arising from or relating to a Criminal Matter unless (i) the Company
or the appropriate Retained Subsidiary has submitted a claim for such
Indemnifiable Loss as an allowable overhead cost or other allowable
cost in connection with relevant Government Contracts and used its
reasonable best efforts to obtain a favorable determination of such
claim, (ii) such claim has been disallowed based on an act or omission
by the Company or its Subsidiaries prior to the Effective Time, (iii)
the Company or the appropriate Retained Subsidiary has given Newco
prompt notice of such disallowance and (iv) Newco has been permitted,
at its own expense, to direct and control the appeal of such
disallowance until finally determined pursuant to one or more final
and nonappealable orders, decrees or judgments or by one or more
settlement agreements approved by Newco and the Company, such approval
not to be unreasonably withheld by the Company. Newco's obligation to
indemnify Acquiror Indemnitees for Criminal Matters pursuant to
Section 2.1(a)(vi) shall be limited to amounts paid for fines or
penalties and reasonable attorneys' and accountants' fees and expenses
that are not allowable or
<PAGE>
that are not allowed as an overhead cost or other allowable cost in
connection with a Government Contract. Any Criminal Matter for which
indemnification may be sought pursuant to Section 2.1(a)(vi) shall be
a Third Party Claim for purposes of this Agreement.
2.4. Certain Limitations. (a) The amount of any
Indemnifiable Losses or other liability for which indemnification is
provided under this Agreement shall be net of any amounts actually
recovered by the Indemnitee from third parties (including, without
limitation, amounts actually recovered under insurance policies) with
respect to such Indemnifiable Losses or other liability. Any
indemnifying party hereunder shall be subrogated to the rights of the
Indemnitee upon payment in full of the amount of the relevant
Indemnifiable Loss. An insurer who would otherwise be obligated to pay
any claim shall not be relieved of the responsibility with respect
thereto or, solely by virtue of the indemnification provisions hereof,
have any subrogation rights with respect thereto. If any Indemnitee
recovers an amount from a third party in respect of an Indemnifiable
Loss for which indemnification is provided in this Agreement after the
full amount of such Indemnifiable Loss has been paid by an
indemnifying party or after an indemnifying party has made a partial
payment of such Indemnifiable Loss and the amount received from the
third party exceeds the remaining unpaid balance of such Indemnifiable
Loss, then the Indemnitee shall promptly remit to the indemnifying
party the excess (if any) of (A) the sum of the amount theretofore
paid by the indemnifying party in respect of such Indemnifiable Loss
plus the amount received from the third party in respect thereof, less
(B) the full amount of such Indemnifiable Loss or other liability.
(b) The amount of any Indemnifiable Losses or other
Liability for which indemnification is provided under this Agreement
or any other amounts payable or reimbursable by one party to another
under this Agreement shall be increased or decreased to take account
of any net Tax (as defined in the Tax Allocation Agreement) cost or
any net Tax benefit in a manner analogous to that described in Section
6.6 of the Tax Allocation Agreement.
2.5. Limitation on Newco's Indemnification Obligation under
Section 2.1(a)(iv). (a) Newco shall not have any liability under
Section 2.1(a)(iv) unless the aggregate of all Indemnifiable Losses
for which Newco would, but for this Section 2.5, be liable under
Section 2.1(a)(iv)
<PAGE>
exceeds on a cumulative pre-tax basis an amount equal to $20,000,000
(the "Basket Amount"); provided, however, that (i) if Indemnifiable
Losses for which Newco would, but for this Section 2.5, be liable
under Section 2.1(a)(iv) as a result of the breach of or the
inaccuracy in any representation or warranty which arises from a
particular state of facts or event exceed $5,000,000 on a pre-tax
basis, Newco shall be liable under Section 2.1(a)(iv) for the entire
amount of such Indemnifiable Losses, and such Indemnifiable Losses
shall not be taken into account in calculating whether Newco's
cumulative liability under Section 2.1(a)(iv) had exceeded the Basket
Amount or the Threshold Amount (as defined below), and (ii) if the
aggregate of all Indemnifiable Losses for which Newco would, but for
this Section 2.5, be liable under Section 2.1(a)(iv) exceeds on a
cumulative pre-tax basis the Basket Amount, Newco's liability under
Section 2.1(a)(iv) shall be equal to $10,000,000 (the "Threshold
Amount") plus any Indemnifiable Losses under Section 2.1(a)(iv) in
excess of $20,000,000.
(b) Newco shall not have any liability under Section
2.1(a)(iv) with respect to the breach of or inaccuracy in any
representation or warranty which arises from a particular state of
facts or event if the Indemnifiable Losses resulting therefrom are
less than $250,000 on a pre-tax basis, and such Indemnifiable Losses
shall not be taken into account in calculating whether Newco's
cumulative liability under Section 2.1(a)(iv) had exceeded the Basket
Amount or the Threshold Amount.
(c) No Indemnifiable Losses actually paid by Newco pursuant
to any provision other than Section 2.1(a)(iv) and no Indemnifiable
Losses relating to or arising from a Preexisting Environmental
Condition or a Criminal Matter for which Newco is not yet obligated to
provide indemnity pursuant to Section 2.1(a)(v) or Section 2.1(a)(vi)
shall be deemed to be an Indemnifiable Loss relating to or arising
from a breach of or inaccuracy in a representation or warranty of the
Company contained in the Merger Agreement for purposes of determining
whether the aggregate amount of Indemnifiable Losses relating to or
arising from breaches of or inaccuracies in such representations or
warranties exceeds the Basket Amount or the Threshold Amount. Newco
shall not have any liability under Section 2.1(a)(iv) with respect to
the breach of or inaccuracy in any representation or warranty unless
notice of any such breach or inaccuracy is given pursuant to Section
2.3 prior to the expiration of the survival period
<PAGE>
provided in the Merger Agreement for the relevant representation or
warranty.
2.6 Exclusivity of Tax Allocation Agreement. Notwithstanding
anything in this Agreement to the contrary, the Tax Allocation
Agreement shall be the exclusive agreement among the parties with
respect to all Tax matters, including indemnification in respect of
Tax matters.
ARTICLE III
OTHER AGREEMENTS
3.1. Transfer Taxes. Newco and Acquiror shall comply with
Section 2.2(h) of the Merger Agreement.
3.2. Conduct of Environmental Insurance Coverage Claims. (a)
Pursuant to the Distribution Agreement, the Company will retain as
part of the Retained Assets the Environmental Coverage Claims (as
defined below) to the extent that they have not been resolved prior to
the time of Contribution. As used herein, "Environmental Coverage
Claims" shall mean all existing and future claims, as the same may be
amended from time to time, by the Company against any and all
insurance companies that have provided (or that the Company or Newco
alleges have provided) to the Company, its predecessors or its or
their affiliates, insurance coverage in respect of environmental
matters as the same may relate to the businesses of the Company, its
predecessors or its or their affiliates as now or previously owned or
operated (including without limitation any discontinued or divested
operations, including Divested Businesses) at any time prior to the
Effective Time, including without limitation the claims asserted in
the action against Aetna Casualty et al. filed in the Superior Court
of California for Los Angeles County and any other claims that may be
asserted by or on behalf of the Company against any provider or
alleged provider of insurance coverage for such environmental matters
for any period prior to the Effective Time. The Company agrees to use
diligent efforts to prosecute the Environmental Coverage Claims in
accordance with this Section 3.2 until the same are finally determined
pursuant to one or more final and nonappealable orders, decrees or
judgments by a court of competent jurisdiction or by one or more
settlement agreements approved by Newco in its sole discretion. The
Company agrees (i) that Newco and such legal counsel as Newco may
<PAGE>
from time to time designate shall have the exclusive right to control
and to direct the prosecution of all Environmental Coverage Claims (it
being understood and agreed that in connection with the prosecution or
settlement of any Environmental Coverage Claims, Newco may in its sole
discretion agree on behalf of the Company to surrender, cancel or
otherwise limit any related insurance policies or coverages thereunder
in whole or in part or as to any particular business, property, period
or event), (ii) to make available such personnel, records and other
resources in its possession or reasonably accessible to it as shall be
reasonably required by Newco or its counsel to support the prosecution
of the Environmental Coverage Claims, and (iii) except as may
otherwise be required by law or judicial process, not to make any
admission in respect of the Environmental Coverage Claims or take any
action in respect thereof without the prior written consent of Newco.
The Company shall pay to Newco any and all amounts received by it in
respect of the Environmental Coverage Claims as and when the same are
received, provided that the Company shall be entitled to retain that
portion of the amount, if any, received in respect of the
Environmental Coverage Claims as the Company shall be required to pay
and/or credit to the United States Government in accordance with the
agreement to be entered into between the Company and the appropriate
United States Government contracting officer referred to in Section
3.2(b).
(b) If, at the Time of Contribution, the Company has reached
an agreement with the appropriate government contracting officer on
the amount required to be paid to the United States Government in
respect of the Environmental Coverage Claims but such amount has not
been paid and/or credited in full by the Company, then Newco shall
remit the unpaid balance to the Company on or before the date that
payment is required to be made and/or credited by the Company to the
United States Government. The Company agrees that if, at the Time of
Contribution, the Company has not entered into such an agreement with
the appropriate government contracting officer, Newco and such legal
counsel as Newco may from time to time designate shall have the
exclusive right to control and to direct the negotiation of such
agreement. The Company shall enter into any such agreement with the
appropriate United States Government contracting officer which Newco
may recommend, provided that Newco pays to the Company on or before
the date that payment is required to be made and/or credited by the
Company to the United States Government an amount equal to the excess,
if
<PAGE>
any, of the amount that the Company is required to pay and/or credit
to the United States Government over the amount received by the
Company after the Effective Time in respect of the Environmental
Coverage Claims that has not previously been remitted to Newco.
(c) Newco shall be solely responsible for and shall pay
directly the fees and expenses (including legal fees and expenses) of
pursuing the Environmental Coverage Claims and shall reimburse the
Company periodically for any support or other services provided at
Newco's request in respect of the Environmental Coverage Claims in an
amount equal to the Company's costs thereof determined in accordance
with cost accounting standards applicable to Government Contracts.
(d) Taxes on amounts received and Tax benefits and Tax costs
in respect of amounts paid and/or credited with respect to the
Environmental Coverage Claims and the related agreement with the
United States Government shall be allocated between the Company and
Newco in the manner set forth in Section 5.5 of the Tax Allocation
Agreement.
3.3. Agreements with Respect to Acquiror Common Stock
Received by Newco Savings Plans. (a) Acquiror and the Newco Savings
Plan and any other savings plan sponsored or maintained by Newco or
any of its Affiliates (the "Savings Plans") shall cooperate with each
other in supplying such information as may be necessary for any of
such parties to complete and file any information reporting forms
presently or hereafter required by the SEC or any commissioner or
other authority administering the "blue sky" or securities laws of any
jurisdiction where the shares of Acquiror Common Stock received by the
Savings Plans in the Merger (the "Shares") are proposed to be sold
which are required to be filed as a condition to the availability of
an exemption from registration or qualification of an offer or sale of
the Shares under the Securities Act, or any such "blue sky" or
securities laws.
(b) Until the earlier of two years from the Effective Time
or the sale by the Savings Plans of all Shares, Acquiror shall file in
a timely manner all reports contemplated by Rule 144 (c)(1) under the
Securities Act as satisfying the condition that adequate public
information with respect to Acquiror is available.
<PAGE>
(c) The provisions of this Section 3.3 shall not be
applicable if Newco or the Company has obtained a "No-Action" letter
or other written advice from the staff of the SEC that the Savings
Plans may sell the Shares publicly at any time after the Effective
Time without limitation in terms of the volume of Shares that may be
sold, the manner in which the Shares may be sold and the information
that must be publicly available with respect to Acquiror in order to
permit such sale and without any requirement that the Savings Plans
file any notice of sale of Shares or intention to sell Shares with the
SEC other than any filings required pursuant to Section 13(d) of the
Exchange Act in respect of the beneficial ownership by the Savings
Plans of Acquiror Common Stock. Newco agrees to use its reasonable
best efforts to obtain such "No-Action" letter or other written
advice.
3.4. Transitional Arrangements. Concurrently herewith Newco,
the Company and Acquiror will enter into an agreement with respect to
certain transitional arrangements (the "Transition Agreement") in
conformity with the Outline of Terms set forth as Schedule 3.4 and
such other transitional arrangements as shall be mutually agreed upon.
3.5. Insurance. (a) Except as otherwise specifically
provided in any Reorganization Agreement or the Transition Agreement,
with respect to any loss, liability or damage with respect to the
Retained Assets arising out of events occurring prior to the Time of
Contribution (other than any loss, liability or damage arising out of
or relating to any Environmental Coverage Claims) for which Newco or
any of its Subsidiaries would be entitled to assert a claim for
recovery under any third-party "occurrence basis" policy of insurance
maintained prior to the Time of Contribution ("Occurrence Basis
Insurance") in accordance with the terms thereof, at the request of
Acquiror, Newco will use reasonable efforts in asserting, or to assist
Acquiror in asserting, claims under such Occurrence Basis Insurance
with respect to such loss, liability or damage; provided that (i) all
of Newco's costs and expenses incurred in connection with the
foregoing are promptly paid by Acquiror, (ii) Newco and its
Subsidiaries may, at any time, without liability or obligation to
Acquiror, amend, buy-out, extinguish liability under or otherwise
modify any Occurrence Basis Insurance (and such claims shall be
subject to any such amendments, buy-outs, extinguishments and
modifications) and (iii) such claims shall be subject to (and recovery
thereon shall be reduced by the amount of) any
<PAGE>
applicable deductibles, retentions, self-insurance provisions or any
payment or reimbursement obligations of Newco or any of its
Subsidiaries or Affiliates in respect thereof.
(b) Except as otherwise specifically provided in any
Reorganization Agreement or the Transition Agreement, with respect to
any loss, liability or damage with respect to the Contributed Assets
arising out of events occurring prior to the Time of Contribution
(other than any loss, liability or damage arising out of or relating
to any Environmental Coverage Claims) for which the Company or any of
the Retained Subsidiaries would be entitled to assert a claim for
recovery under any Occurrence Basis Insurance in accordance with the
terms thereof, at the request of Newco, Acquiror will use reasonable
efforts in asserting, or to assist Newco in asserting, claims under
such Occurrence Basis Insurance with respect to such loss, liability
or damage; provided that (i) all of Acquiror's costs and expenses
incurred in connection with the foregoing are promptly paid by Newco,
(ii) Acquiror and its Subsidiaries may, at any time, without liability
or obligation to Newco, amend, buy-out, extinguish liability under or
otherwise modify any Occurrence Basis Insurance (and such claims shall
be subject to any such amendments, buy-outs, extinguishments and
modifications) and (iii) such claims shall be subject to (and recovery
thereon shall be reduced by the amount of) any applicable deductibles,
retentions, self-insurance provisions or any payment or reimbursement
obligations of Acquiror or any of its Subsidiaries or Affiliates in
respect thereof.
3.6. DOE Contracts. As soon as practicable following the
Effective Time, Newco and the Company shall take such actions as shall
be consistent with the advance agreements referred to in Section
9.1(e) of the Distribution Agreement.
3.7. Reorganization Expenses. Except as otherwise expressly
provided in the Reorganization Agreements (including but not limited
to the last sentence of Section 2.2(b) of the Merger Agreement and
Sections 2.2(h), 4.1(p), 4.2(j) and 5.13 of the Merger Agreement and
Section 5.3 of the Distribution Agreement), Acquiror and Newco (and
not the Company) shall be responsible for and agree to pay all
reorganization expenses of the Company directly related to the
Contribution, the Distribution and the Merger in accordance with
Schedule 3.7
<PAGE>
hereto, provided that the Company may, prior to the Effective Time,
pay any such expenses that are otherwise the responsibility of Newco.
3.8. Conduct of Health Care Claims Audit. (a) Pursuant to
the Distribution Agreement, Newco will receive as part of the
Contributed Assets the Health Care Claims (as defined below). As used
herein, "Health Care Claims" shall mean all existing and future claims
arising out of audits of health care claims paid by the Company for
any period prior to the Effective Time made by the Company (or if
after the Effective Time, Newco) against any and all health care
administrators ("Health Care Administrators") that have provided to
the Company, its predecessors or its or their affiliates, health care
administration services in respect of the employees of the Company,
its predecessors or its or their affiliates as now or previously owned
or operated (including without limitation any discontinued or divested
operations, including Divested Businesses) at any time prior to the
Effective Time, including, without limitation, the claims asserted in
the pending audits of Metropolitan Insurance Company for the years
1993-1994 and Value Rx Pharmacy Program, Inc. for the years 1993-1995
and any other claims that may be asserted by or on behalf of the
Company (or if after the Effective Time, Newco) against any Health
Care Administrator for any period prior to the Effective Time. Newco
agrees to use diligent efforts to prosecute the Health Care Claims in
accordance with this Section 3.8 until the same are finally settled by
Newco in its sole discretion. The Company agrees (i) that Newco shall
have the exclusive right to control and to direct the audit of the
Health Care Administrators and the negotiation of all settlements of
the Health Care Claims, (ii) to make available such personnel, records
and other resources in its possession or reasonably accessible to it
as shall be reasonably required by Newco to support the prosecution of
the Health Care Claims and (iii) not to make any admission or
settlement in respect of the Health Care Claims or take any action in
respect thereof without the prior written consent of Newco. Newco
shall pay to the Company as and when the same are received by Newco an
equitable allocation of the net proceeds from settlement of the Health
Care Claims.
(b) Newco shall be solely responsible for and shall pay
directly the fees and expenses (including legal fees and expenses) of
pursuing the Health Care Claims and
<PAGE>
shall reimburse the Company periodically for any support or other
services provided at Newco's request in respect of the Health Care
Claims in an amount equal to the Company's costs thereof determined in
accordance with cost accounting standards applicable to Government
Contracts.
(c) Taxes on amounts received and Tax benefits and Tax costs
in respect of amounts paid and/or credited with respect to the Health
Care Claims and the related agreement with the United States
Government shall be allocated between the Company and Newco in the
manner set forth in Section 5.5 of the Tax Allocation Agreement.
3.9. Guaranty of Acquiror. Acquiror, for itself and its
successors in interest and assigns, hereby unconditionally and
irrevocably guarantees to Newco and its successors in interest and
assigns the full and faithful performance and observation by the
Company under the Reorganization Agreements (other than the Merger
Agreement) and the Transition Agreement of all covenants, conditions
and agreements (other than any indemnification obligations of the
Company in respect of Retained Assets or Retained Liabilities) in the
Reorganization Agreements (other than the Merger Agreement) and the
Transition Agreement to be performed and observed by the Company after
the Effective Time without requiring any notice of nonpayment,
nonperformance or nonobservance or proof of notice or demand whereby
to charge Acquiror therefor, all of which Acquiror hereby expressly
waives. This is a continuing guaranty and shall remain in effect
notwithstanding any bankruptcy, reorganization or insolvency of the
Company, or any successor in interest or assignee thereof, or any
disaffirmance or abandonment by a trustee thereof. Acquiror hereby
waives notice of acceptance of this Guaranty. Acquiror hereby agrees
to indemnify, defend and hold harmless Newco for all Indemnifiable
Losses, as incurred, relating to or arising from any breach or
inaccuracy in the representations and warranties contained in Sections
4.2(j) and 4.2(d)(iii) of the Merger Agreement. Effective as of the
Effective Time, Acquiror will execute and deliver guarantees of the
Company's performance and obligations under the Designated Contracts
set forth in Schedule 2.1(a)(viii) to the counterparties on such
Contracts.
3.10. Payments Adjustments to Contribution. It is the
intention of the parties to this Agreement that payments and asset
transfers made by the parties to each
<PAGE>
other after the Effective Time pursuant to the Reorganization
Agreements are to be treated as relating back to the Contribution as
an adjustment to the assets and liabilities contributed thereunder,
and the parties shall take positions consistent with such intention
with any Taxing Authority (as defined in the Tax Allocation
Agreement), unless with respect to any payment any party receives an
opinion of counsel to the effect that there is no substantial
authority for such a position.
ARTICLE IV
MISCELLANEOUS AND GENERAL
4.1. Modification or Amendment. The parties hereto may
modify or amend this Agreement only by written agreement executed and
delivered by duly authorized officers of the respective parties.
4.2. Waiver; Remedies. No delay on the part of any party
hereto in exercising any right, power or privilege hereunder will
operate as a waiver thereof, nor will any waiver on the part of any
party hereto of any right, power or privilege hereunder operate as a
waiver of any other right, power or privilege hereunder, nor will any
single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder. No waiver will be effective
hereunder unless it is in writing. Unless otherwise provided, the
rights and remedies herein provided are cumulative and are not
exclusive of any rights or remedies which the parties may otherwise
have at law or in equity.
4.3. Counterparts. For the convenience of the parties, this
Agreement may be executed in any number of separate counterparts, each
such counterpart being deemed to be an original instrument, and all
such counterparts shall together constitute the same agreement.
4.4. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New
York applicable to contracts made and to be performed entirely within
such State, without regard to the conflicts of law principles of such
State.
4.5. Notices. Any notice, request, instruction or other
communication to be given hereunder by any party to
<PAGE>
any other shall be in writing and shall be deemed to have been duly
given (i) on the date of delivery if delivered personally, or by
telecopy or telefacsimile, upon confirmation of receipt, (ii) on the
first business day following the date of dispatch if delivered by
Federal Express or other nationally reputable next-day courier
service, or (iii) on the third business day following the date of
mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid. All notices hereunder shall be delivered
as set forth below, or pursuant to such other instructions as may be
designated in writing by the party to receive such notice:
(a) If to Newco:
NEW ROCKWELL INTERNATIONAL CORPORATION
2201 Seal Beach Boulevard
Seal Beach, California 90740-8250
Attention: William J. Calise, Jr., Esq.
Senior Vice President,
General Counsel and Secretary
Telecopy: (310) 797-5687
(b) if to Acquiror, the Company or Sub:
BOEING NA, INC.
c/o The Boeing Company
P.O. Box 3707
M/S 13-08
Seattle, WA 98124-2207
Attention: Theodore J. Collins, Esq.
Vice President & General
Counsel
Telecopy: (206) 544-4900
4.6. Entire Agreement. The Reorganization Agreements
(including the Annexes and Schedules thereto), the Transition
Agreement and the Confidentiality Agreement constitute the entire
agreement, and supersede all other prior agreements, understandings,
representations and warranties, both written and oral, among the
parties, with respect to the subject matter hereof and thereof.
4.7. Certain Obligations. Whenever this Agreement requires
any of the Subsidiaries of any party to take any action, this
Agreement will be deemed to include an undertaking on the part of such
party to cause such Subsidiary to take such action.
<PAGE>
4.8. Assignment. No party to this Agreement shall convey,
assign or otherwise transfer any of its rights or obligations under
this Agreement without the express written consent of the other
parties hereto in their sole and absolute discretion, except that any
party hereto may assign any of its rights hereunder to a successor to
all or any part of its business. Except as aforesaid, any such
conveyance, assignment or transfer without the express written consent
of the other parties shall be void ab initio. No assignment of this
Agreement shall relieve the assigning party of its obligations
hereunder.
4.9. Captions. The Article, Section and paragraph captions
herein are for convenience of reference only, do not constitute part
of this Agreement and shall not be deemed to limit or otherwise affect
any of the provisions hereof.
4.10. Severability. If any provision of this Agreement or
the application thereof to any person or circumstance is determined by
a court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provisions hereof, or the application of
such provision to persons or circumstances other than those as to
which it has been held invalid or unenforceable, shall remain in full
force and effect and shall in no way be affected, impaired or
invalidated thereby, so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner adverse
to any party. Upon any such determination, the parties shall negotiate
in good faith in an effort to agree upon a suitable and equitable
substitute provision to effect the original intent of the parties.
4.11. No Third Party Beneficiaries. Nothing contained in
this Agreement is intended to confer upon any person or entity other
than the parties hereto and their respective successors and permitted
assigns, any benefit, right or remedies under or by reason of this
Agreement, except that the provisions of Article II hereof shall inure
to the benefit of Indemnitees and the provisions of Section 3.3 shall
inure to the benefit of the Savings Plans.
4.12. Consent to Jurisdiction. Each of the Company, Acquiror
and Newco irrevocably submits to the exclusive jurisdiction of (i) the
Superior Court of the State of California, San Francisco County and
(ii) the United States District Court for the Northern District of
California for the purposes of any suit, action or other proceeding
<PAGE>
arising out of this Agreement or any transaction contemplated hereby
(and agrees not to commence any action, suit or proceeding relating
hereto except in such courts). Each of the Company, Acquiror and Newco
further agrees that service of any process, summons, notice or
document hand delivered or sent by registered mail to such party's
respective address set forth in Section 4.5 will be effective service
of process for any action, suit or proceeding in California with
respect to any matters to which it has submitted to jurisdiction as
set forth in the immediately preceding sentence. Each of the Company,
Acquiror and Newco irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding
arising out of this Agreement or the transactions contemplated hereby
in (i) the Superior Court of the State of California, San Francisco
County or (ii) the United States District Court for the Northern
District of California, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such
court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed
and delivered by the duly authorized officers of the parties hereto on
the date first hereinabove written.
ROCKWELL INTERNATIONAL CORPORATION
By: /s/ WILLIAM J. CALISE, JR.
--------------------------------
Name: William J. Calise, Jr.
Title: Senior Vice President
THE BOEING COMPANY
By: /s/ PHILIP M. CONDIT
--------------------------------
Name: Philip M. Condit
Title: President and Chief
Executive Officer
NEW ROCKWELL INTERNATIONAL
CORPORATION
By: /s/ WILLIAM J. CALISE, JR.
--------------------------------
Name: William J. Calise, Jr.
Title: Senior Vice President
BOEING NA, INC.
By: /s/ BOYD E. GIVAN
-------------------------------
Name: Boyd E. Givan
Title: Director
CONFORMED COPY
- -------------------------------------------------------------------------
TAX ALLOCATION AGREEMENT
dated as of December 6, 1996,
by and among
ROCKWELL INTERNATIONAL CORPORATION,
NEW ROCKWELL INTERNATIONAL CORPORATION
and
THE BOEING COMPANY
- -------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS..................................................... 2
1.1. Definitions.......................................... 2
ARTICLE II
FILING OF TAX RETURNS........................................... 9
2.1. Preparation of Tax Returns........................... 9
2.2. Pre-Merger Tax Returns............................... 10
2.3. Post-Merger Tax Returns.............................. 10
ARTICLE III
PAYMENT OF TAXES................................................ 11
3.1. Allocation of Tax Liabilities........................ 11
3.2. Tax Refunds, Carrybacks and California Tax
Credits.............................................. 12
ARTICLE IV
ALLOCATION AND CALCULATION OF TAXES............................. 13
4.1. Straddle Period Taxes................................ 13
4.2. Share of Allowable Taxes............................. 14
4.3. Calculations and Determinations...................... 14
4.4. Principles of Determination.......................... 15
4.5. Change in Law........................................ 15
ARTICLE V
NEWCO OPTIONS; COMPENSATION PAYMENTS; CERTAIN CONTRACTS;
GUNSHIP CLAIMS; ENVIRONMENTAL COVERAGE CLAIMS; HEALTH CARE
CLAIMS; B-1B CONTRACTS; FOREIGN SUBSIDIARIES;
CONSENT SOLICITATION............................................ 16
5.1. Tax Deductions Arising in Respect of Newco
Options.............................................. 16
5.2. Compensation Payments................................ 18
5.3. Percentage Completion Contracts...................... 19
5.4. Gunship Claims....................................... 20
5.5. Environmental Coverage Claims and Health
Care Claims.......................................... 20
5.6. B-1B Contracts....................................... 21
5.7. Research and Experimentation Credit.................. 21
5.8. Foreign Subsidiaries................................. 22
i
<PAGE>
5.9. Consent Solicitation; Repayment of Short-
Term Debt........................................... 22
ARTICLE VI
TAX INDEMNIFICATION; TAX CONTESTS.............................. 23
6.1. Indemnification..................................... 23
6.2. Notice of Indemnity................................. 26
6.3. Tax Contests........................................ 26
6.4. Timing Adjustments.................................. 27
6.5. Certain Post-Distribution Transactions.............. 28
6.6. Payments Net of Taxes............................... 30
ARTICLE VII
COOPERATION AND EXCHANGE OF INFORMATION........................ 31
7.1. Preparation of Returns.............................. 31
7.2. Cooperation and Exchange of Information............. 31
7.3. Record Retention.................................... 32
7.4. Notification of Certain Dispositions................ 33
ARTICLE VIII
MISCELLANEOUS.................................................. 33
8.1. Entire Agreement.................................... 33
8.2. Modification or Amendment........................... 33
8.3. Notices............................................. 33
8.4. No Third Party Beneficiaries........................ 34
8.5. Assignment.......................................... 35
8.6. Term................................................ 35
8.7. Captions............................................ 35
8.8. Severability........................................ 35
8.9. Specific Performance................................ 35
8.10. Counterparts........................................ 36
8.11. Governing Law....................................... 36
8.12. Agent............................................... 36
ii
<PAGE>
TAX ALLOCATION AGREEMENT
This TAX ALLOCATION AGREEMENT (this "Agreement"), dated as
of December 6, 1996, among ROCKWELL INTERNATIONAL CORPORATION, a
Delaware corporation (the "Company"), NEW ROCKWELL INTERNATIONAL
CORPORATION, a Delaware corporation and a wholly owned subsidiary of
the Company ("Newco"), and THE BOEING COMPANY, a Delaware corporation
("Acquiror").
W I T N E S S E T H:
WHEREAS, the Company, Acquiror and Boeing NA, Inc., a wholly
owned subsidiary of Acquiror ("Sub"), have entered into an Agreement
and Plan of Merger dated as of July 31, 1996 (the "Merger Agreement"),
providing for the Merger (as defined in the Merger Agreement) of Sub
with and into the Company;
WHEREAS, the Board of Directors of the Company has approved
an agreement and plan of distribution in the form attached as Annex A
to the Merger Agreement (the "Distribution Agreement");
WHEREAS, the execution and delivery of this Agreement by the
parties hereto is a condition to the obligations of the parties to the
Merger Agreement to consummate the Merger;
WHEREAS, the execution and delivery of this Agreement by the
parties hereto is a condition to the obligations of the parties to the
Distribution Agreement to consummate the Distribution (as defined in
the Distribution Agreement);
WHEREAS, Acquiror and the Company, on behalf of each of them
and the Company Group (as defined herein) and Newco, on behalf of
itself and the Newco Group (as defined herein), wish to provide for
the allocation between the Company Group and the Newco Group of all
responsibilities, liabilities and benefits relating to or affecting
Taxes (as hereinafter defined) paid or payable by either of them for
all taxable periods, whether beginning before, on or after the
Distribution Date (as hereinafter defined) and to provide for certain
other matters; and
<PAGE>
NOW, THEREFORE, in consideration of the premises and of the
respective covenants and agreements set forth herein, the parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. Capitalized terms used in this Agreement
and not otherwise defined herein shall have the meanings assigned to
such terms in the Merger Agreement or the Distribution Agreement, as
the case may be. As used in this Agreement, the following terms shall
have the following respective meanings:
"Acquiror Tax Opinion" means the opinion received by
Acquiror from Cravath, Swaine & Moore pursuant to Section 6.3(c) of
the Merger Agreement.
"Acquiror's Tax Representation Letter" means the
representation letter delivered by Acquiror substantially in the form
of Annex D to the Merger Agreement.
"Actually Realized" or "Actually Realizes" means, for
purposes of determining the timing of any Taxes (or related Tax cost
or benefit) relating to any payment, transaction, occurrence or event
(including any Tax Refund), the time at which the amount of Taxes
payable by such person is increased above or reduced below, as the
case may be, the amount of Taxes that such person would be required to
pay but for such payment, transaction, occurrence or event.
"Affiliated Group" means the affiliated group of which the
Company is the common parent.
"Allowable Tax" means any Tax of the Company Group which is
an allowable cost under the Federal Acquisition Regulation, 48 C.F.R.
Chapter 1, and associated regulations and agreements between the
Company and any U.S. governmental entity, which agreements are
described on Schedule 1.
"B-1B Contracts" means the B-1B Full Scale Development
Contract (No. F33657-81-C-0208) and the B-1B Production Contract (No.
F33657-81-C-0201).
"Business Acquisition Agreement" means the Business
Acquisition Agreement dated November 22, 1996 among
<PAGE>
Rockwell Australia Limited, ACN 004 471 078 Pty Ltd and New Rockwell
Australia Pty Limited, as amended by Amending Agreement dated December
4, 1996.
"California Tax Credits" means any California Tax credits
for manufacturing and research property resulting from qualified costs
paid or incurred on or before the Distribution Date by any member of
the Company Group or the Newco Group.
"California Tax Deficiency" means any Tax Deficiency with
respect to California Taxes.
"Code" means the Internal Revenue Code of 1986, as amended,
and shall include corresponding provisions of any subsequently enacted
Federal Tax laws.
"Combined Taxes" means all Taxes due with respect to any
combined, consolidated or unitary state, local or foreign corporate
Tax liability for all Pre-Merger Taxable Periods and Straddle Periods
with respect to Joint Tax Returns.
"Company Employees and Former Employees" means individuals
who were employees of the Company Group on or before the Distribution
Date and who do not become employees of the Newco Group between the
Distribution Date and the date of the event giving rise to a deduction
in respect of any Newco Options held by such individuals or
Compensation Payments made to such individuals or who become employees
of the Newco Group on or after the Distribution Date but are employees
of the Company Group when any such Newco Options are exercised or
Compensation Payments are made.
"Company Group" means, solely for purposes of this Agreement
and not for purposes of any other Reorganization Agreement, the
Company and its affiliates, other than Newco and its affiliates
(determined after giving effect to the transfers contemplated by
Article II of the Distribution Agreement) and, for Post-Tax
Indemnification Periods, shall include Acquiror and its affiliates.
"Company Tax Item" means a Tax Item that is attributable to
the Company Group and is not a Newco Tax Item.
"Company Tax Opinions" means the opinions received by the
Company from Chadbourne & Parke LLP and Wachtell,
<PAGE>
Lipton, Rosen & Katz pursuant to Section 6.2(c) of the Merger
Agreement.
"Compensation Payments" means all payments made by any
member of the Newco Group under Sections 8.4 and 8.6 of the
Distribution Agreement, to the extent that such payments relate to
benefits accrued as of the Time of Contribution (as defined in the
Distribution Agreement).
"Contract Profitability" as of the Distribution Date shall
mean (i) in the case of any long-term contract a portion of which is
accounted for on the "percentage completion method" of accounting and
a portion of which is accounted for on the "completed contract method"
of accounting, in each case for Federal Income Tax purposes, the
excess of (A) the aggregate amount of taxable income that would have
been reportable for Federal Income Tax purposes for all Tax
Indemnification Periods with respect to such contract if the contract
had been accounted for in its entirety on the percentage completion
method of accounting for Federal Income Tax purposes over (B) the
actual amount of taxable income reportable for Federal Income Tax
purposes for all Tax Indemnification Periods with respect to such
contract, and (ii) in the case of any other long-term contract
accounted for on the completed contract or percentage of completion
method of accounting for Federal Income Tax purposes, the deferred
contract profitability with respect to such contract as of the
Distribution Date as calculated for financial accounting purposes.
"Debt Refinancing" has the meaning set forth in Section 5.9.
"Distribution Date" means the later of (i) the date on which
the Distribution occurs or is deemed to occur for Federal Income Tax
purposes and (ii) the date on which the Merger occurs or is deemed to
occur for Federal Income Tax purposes. Solely for purposes of this
Agreement, the Distribution or the Merger, as the case may be, shall
be deemed effective as of the close of business on the Distribution
Date.
"Environmental Coverage Claims" shall have the meaning
ascribed thereto in the Post-Closing Covenants Agreement.
"Group" means either the Company Group or the Newco Group,
as the context provides.
<PAGE>
"Health Care Claims" shall have the meaning ascribed thereto
in Section 3.8 of the Post-Closing Covenants Agreement.
"Income Tax Benefit" means for any taxable period the excess
of (i) the hypothetical Income Tax liability of the taxpayer for the
taxable period calculated as if the Timing Difference or Reverse
Timing Difference, as the case may be, had not occurred but with all
other facts unchanged, over (ii) the actual Income Tax liability of
the taxpayer for the taxable period, calculated taking into account
the Timing Difference or Reverse Timing Difference, as the case may be
(treating an Income Tax Refund as a negative Income Tax liability for
purposes of such calculation).
"Income Tax Detriment" means for any taxable period the
excess of (A) the actual Income Tax liability of the taxpayer for the
taxable period, calculated taking into account the Timing Difference
or Reverse Timing Difference, as the case may be, over (B) the
hypothetical Income Tax liability of the taxpayer for the taxable
period, calculated as if the Timing Difference or Reverse Timing
Difference, as the case may be, had not occurred but with all other
facts unchanged (treating an Income Tax Refund as a negative Income
Tax liability for purposes of such calculation).
"Income Taxes" means any Tax based upon, measured by, or
calculated with respect to (i) net income or profits (including, but
not limited to, any capital gains, minimum Tax and any Tax on items of
Tax preference, but not including sales, use, real property gains,
real or personal property, gross or net receipts, transfer or similar
Taxes) or (ii) multiple bases (including, but not limited to,
corporate franchise, doing business or occupation Taxes) if one or
more of the bases upon which such Tax may be based upon, measured by,
or calculated with respect to, is described in clause (i) above.
"Indemnitee" has the meaning set forth in Section 6.2.
"Indemnitor" has the meaning set forth in Section 6.2.
"Indemnity Issue" has the meaning set forth in Section 6.2.
"IRS" means the Internal Revenue Service.
<PAGE>
"Joint Tax Return" means any Tax Return that includes a
member of the Company Group and a member of the Newco Group.
"Newco Group" means Newco and its affiliates, determined
immediately after the Distribution and the Merger.
"Newco Options" means those options to purchase Newco Common
Stock or Newco Class A Common Stock, as the case may be, resulting
from the conversion of Company Options in accordance with the
Distribution Agreement.
"Newco Tax Item" means a Tax Item solely attributable to the
Newco Group.
"Newco's Tax Representation Letter" means the representation
letter delivered by Newco and the Company substantially in the form of
Annex E to the Merger Agreement.
"Other Individuals" means individuals other than Company
Employees and Former Employees.
"Other Taxes" has the meaning set forth in Section 3.1(c).
"Post-Merger Taxable Period" means a taxable period
beginning after the Distribution Date.
"Post-Tax Indemnification Period" means any Post-Merger
Taxable Period and that portion of any Straddle Period that begins on
the day after the Distribution Date.
"Pre-Merger Taxable Period" means a taxable period ending on
or before the Distribution Date.
"Prior Arrangement" means the Company's existing finance
policy for allocation of Taxes (including disclosed practices) a copy
of which finance policy (in effect as of the date hereof) is attached
hereto as Schedule 2 and the advance agreements between the Company
and any U.S. governmental entity a copy of which is attached hereto as
Schedule 1.
"Responsible Party" has the meaning set forth in Section 6.3.
<PAGE>
"Reverse Timing Difference" means an increase in income,
gain or recapture, or a decrease in deduction, loss or credit, as
calculated for Income Tax purposes, of the taxpayer for the Tax
Indemnification Period coupled with an increase in deduction, loss or
credit, or a decrease in income, gain or recapture, of the taxpayer
for any Post-Tax Indemnification Period.
"Rockwell Australia" has the meaning set forth in Section
5.8(a).
"Straddle Period" means a taxable period that includes but
does not end on the Distribution Date.
"Tax" or "Taxes" means all forms of taxation, whenever
created or imposed, and whether of the United States or elsewhere, and
whether imposed by a local, municipal, governmental, state, foreign,
federal or other body, and without limiting the generality of the
foregoing, shall include income, sales, use, ad valorem, gross
receipts, license, value added, franchise, transfer, recording,
withholding, payroll, wage withholding, employment, excise,
occupation, unemployment insurance, social security, business license,
business organization, stamp, environmental, premium and property
taxes, together with any related interest (including the actual
interest that would have accrued if there were no netting of Taxes),
penalties and additions to any such tax, or additional amounts imposed
by any Taxing Authority (domestic or foreign) upon the Company Group,
the Newco Group, the Acquiror or any of their respective members or
divisions or branches or affiliates.
"Tax Audit Proceeding" means any audit or other examination,
judicial or administrative proceeding relating to liability for or
refunds or adjustments with respect to Taxes.
"Tax Deficiency" means a net increase in Taxes payable as a
result of a Tax Audit Proceeding or an amendment of a Tax Return or an
event having a similar effect.
"Tax Indemnification Period" means any Pre-Merger Taxable
Period and that portion of any Straddle Period that ends on the
Distribution Date.
<PAGE>
"Tax Item" means any item of income, gain, loss, deduction,
credit, provisions for reserves, recapture of credits or any other
item which is taken into account in determining taxable income or is
otherwise taken into account in determining Taxes paid or payable,
including an adjustment under Section 481 of the Code resulting from a
change in accounting method.
"Tax Opinions" means the Acquiror Tax Opinion and the
Company Tax Opinions.
"Tax Records" has the meaning set forth in Section 7.3.
"Tax Refund" means a refund of Taxes (including a reduction
in Taxes as a result of any credit or any offset against Taxes or Tax
Items) reduced (but not below zero) by any net increase in Taxes
Actually Realized by the recipient (or its affiliate) thereof as a
result of the receipt thereof; provided, however, that for purposes of
determining any net increase in Taxes resulting from the refund of
1994 Australian Taxes of Rockwell Australia, any reduction of foreign
tax credits for U.S. Tax purposes attributable to the receipt of such
refund shall not be taken into account.
"Tax Return" means any return, filing, questionnaire,
information return or other document required to be filed, including
requests for extensions of time, filings made with respect to
estimated tax payments, claims for refund and amended returns that may
be filed, for any period with any Taxing Authority (whether domestic
or foreign) in connection with any Tax or Taxes (whether or not a
payment is required to be made with respect to such filing).
"Taxing Authority" means any governmental or
quasi-governmental body exercising any Taxing authority or Tax
regulatory authority.
"Timing Difference" means an increase in income, gain or
recapture, or a decrease in deduction, loss or credit, as calculated
for Income Tax purposes, of the taxpayer for any Post-Tax
Indemnification Period coupled with an increase in deduction, loss or
credit, or a decrease in income, gain or recapture, of the taxpayer
for the Tax Indemnification Period.
<PAGE>
"Transfer Taxes" means all transfer, documentary, sales,
use, registration, value-added and other similar Taxes (including all
applicable real estate transfer Taxes and real property transfer gains
Taxes) and related amounts (including any penalties, interest and
additions to Tax) arising as a result of or otherwise incurred in
connection with any of the transactions contemplated by the
Reorganization Agreements.
ARTICLE II
FILING OF TAX RETURNS
2.1. Preparation of Tax Returns.
(a) Consistent with Agreements. Each of the parties to this
Agreement agrees to, and to cause each of its relevant affiliates to,
report the Contribution and Distribution as transactions described in
Sections 351 and 355 of the Code and/or a "reorganization" under
Section 368(a)(1)(D) of the Code and the Merger as a "reorganization"
under Section 368(a)(1)(B) of the Code on all Tax Returns and other
filings, to take no position inconsistent therewith or with the
consummation of such transactions as set forth in the Merger
Agreement, the Distribution Agreement, the Acquiror's Tax
Representation Letter, Newco's Tax Representation Letter and the Tax
Opinions (in the absence of a controlling change in law or
circumstance), and to file or cause to be filed all such Tax Returns
on a timely basis (including extensions).
(b) Consistent with Past Practice. All Tax Returns described
in Section 2.2 hereof filed after the date of this Agreement, in the
absence of a controlling change in law or circumstances, shall be
prepared on a basis consistent with the elections, accounting methods,
conventions and principles of taxation used for the most recent
taxable periods for which Tax Returns involving similar Tax Items have
been filed and in a manner that does not unreasonably accelerate
deductions or defer income between Tax Indemnification Periods and
Post-Tax Indemnification Periods to the extent that a failure to do so
would result in an increase in Tax payable by, or a reduction in Tax
attributes of, a member of the Company Group in a Post-Tax
Indemnification Period. Subject to the provisions of this Agreement,
all decisions relating to the preparation of Tax Returns shall be made
in the sole
<PAGE>
discretion of the party responsible under this Agreement for
such preparation.
(c) Newco Obligations. Newco agrees to cooperate in good
faith with the Company to determine the appropriate amount of Tax
Items attributable to the Company Group to be reflected on any Tax
Returns for Pre-Merger Taxable Periods or Straddle Periods to be
prepared and filed by Newco in accordance with Section 2.2. Newco
further agrees to provide the Company with a copy of each such Tax
Return at least three weeks before it is filed and to follow the
procedures in Section 4.3 relating to the calculation of Taxes and to
not file any such Tax Returns without the prior written consent of the
Company, which consent shall not be unreasonably withheld. If such
consent is withheld, the Company shall so notify Newco at least two
weeks prior to the due date for filing such Tax Returns. Newco will
promptly provide the Company with copies of all such Tax Returns after
filing.
2.2. Pre-Merger Tax Returns.
(a) Consolidated Federal Tax Returns. The Affiliated Group
consolidated Federal Tax Returns (including amendments thereto)
required to be filed or actually filed for any Pre-Merger Taxable
Period after the date hereof shall be prepared and filed or caused to
be prepared and filed by Newco, and the Company hereby irrevocably
designates, and agrees to cause each of its affiliates to so
designate, Newco as its agent to take any and all actions necessary or
incidental to the preparation and filing of such Tax Returns.
(b) Other Pre-Merger Taxable Period and Straddle Period Tax
Returns. All Tax Returns (including amendments thereto) other than
those described in Section 2.2(a) which include a member of the Newco
Group or the Company Group that are required to be filed or are
actually filed for any Pre-Merger Taxable Period or Straddle Period
shall be prepared and filed or caused to be prepared and filed by
Newco. The Company hereby irrevocably designates and agrees to cause
each of its affiliates to designate Newco as its agent to take any and
all actions necessary or incidental to the preparation and filing of
such other Tax Returns.
2.3. Post-Merger Tax Returns. All Tax Returns for all
Post-Merger Taxable Periods shall be the responsibility of the Newco
Group if such Tax Returns relate
<PAGE>
to a member or members of the Newco Group or their respective assets
or businesses, and shall be the responsibility of the Company Group if
such Tax Returns relate to a member or members of the Company Group or
their respective assets or businesses.
ARTICLE III
PAYMENT OF TAXES
3.1. Allocation of Tax Liabilities.
(a) Consolidated Federal Tax Liabilities. Except as
otherwise provided in this Agreement, Newco shall pay or cause to be
paid, on a timely basis, all Taxes due with respect to the
consolidated Federal Tax liability for all Pre-Merger Taxable Periods
of the Affiliated Group. The Company and Acquiror on behalf of the
Company Group hereby assume and agree to pay directly to or at the
direction of Newco, at least two days prior to the date payment
(including estimated payment) thereof is due, the Company Group's
allocable share of those Federal Taxes which are Allowable Taxes for
all Pre-Merger Taxable Periods which have not been paid on or before
the Distribution Date.
(b) Combined, Consolidated and Unitary Corporate Taxes.
Except as otherwise provided in this Agreement, Newco or a member of
the Newco Group shall pay or caused to be paid, on a timely basis, all
Combined Taxes. The Company and Acquiror on behalf of the Company
Group hereby assume and agree to pay directly to or at the direction
of Newco, at least two days prior to the date payment (including
estimated payment) thereof is due, (i) the Company Group's allocable
share of those Combined Taxes which are Allowable Taxes for all
Pre-Merger Taxable Periods and the portion of any Straddle Period
ending on the Distribution Date which have not been paid on or before
the Distribution Date and (ii) the Company Group's allocable share of
those Combined Taxes for the portion of any Straddle Period commencing
on the day after the Distribution Date which have not been paid on or
before the Distribution Date.
(c) Other Taxes. Except as otherwise provided in this
Agreement, Newco shall pay or caused to be paid all Taxes of the
Company Group and the Newco Group other than those described in
Sections 3.1(a) and 3.1(b) ("Other Taxes") for all Pre-Merger Taxable
Periods and Straddle
<PAGE>
Periods. The Company and Acquiror on behalf of the Company Group
hereby assume and agree to pay directly to or at the direction of
Newco, at least two days prior to the date payment (including
estimated payment) thereof is due, (i) the Company Group's allocable
share of those Other Taxes which are Allowable Taxes for all
Pre-Merger Taxable Periods and the portion of any Straddle Period
ending on the Distribution Date and which have not been paid on or
before the Distribution Date and (ii) the Company Group's allocable
share of those Other Taxes for the portion of any Straddle Period
commencing on the day after the Distribution Date which have not been
paid on or before the Distribution Date.
(d) Post-Merger Taxes. Except as provided otherwise in this
Agreement, all Taxes for all Post-Merger Taxable Periods shall be paid
or caused to be paid by the party responsible under this Agreement for
filing the Tax Return pursuant to which such Taxes are due or, if no
such Tax Returns are due, by the party liable for such Taxes.
3.2. Tax Refunds, Carrybacks and California Tax Credits.
(a) Retention and Payment of Tax Refunds. Except as
otherwise provided in this Agreement, Newco shall be entitled to
retain, and to receive within ten days after Actually Realized by the
Company Group, the portion of all Tax Refunds (including without
limitation Tax Refunds of Australian Taxes) of Taxes for which the
Newco Group is liable pursuant to Section 3.1 or Section 6.1(a), and
the Company shall be entitled to retain, and to receive within ten
days after Actually Realized by the Newco Group, the portion of all
Tax Refunds of Taxes for which the Company Group is liable pursuant to
Section 3.1 or Section 6.1(b). Notwithstanding the foregoing, all Tax
Refunds (i) of Allowable Taxes or (ii) resulting from the carryback of
any Company Tax Item arising in a Post-Tax Indemnification Period to a
Tax Indemnification Period (determined in a manner analogous to the
determination of an Income Tax Benefit) shall be for the account and
benefit of the Company Group.
(b) Carrybacks. Except as otherwise provided in this
Agreement, any Tax Refund (other than a Refund of Allowable Taxes)
resulting from the carryback of any Newco Tax Item arising in a
Post-Tax Indemnification Period to a Tax Indemnification Period
(determined in a manner analogous to the determination of an Income
Tax Benefit) shall be for
<PAGE>
the account of Newco, and the Company shall pay over to Newco any such
Tax Refund within ten days after it is Actually Realized by the
Company.
(c) Refund Claims. Newco shall be permitted to file at
Newco's sole expense, and the Company shall reasonably cooperate with
Newco in connection with, any claims for Tax Refund to which Newco is
entitled pursuant to this Section 3.2 or any other provision of this
Agreement. Newco shall reimburse the Company for any reasonable
out-of-pocket costs and expenses incurred by any member of the
Company Group in connection with such cooperation. The Company shall
be permitted to file at the Company's sole expense, and Newco shall
reasonably cooperate with the Company in connection with, any claims
for Tax Refund to which the Company is entitled pursuant to this
Section 3.2 or any other provision of this Agreement. The Company
shall reimburse Newco for any reasonable out-of-pocket costs and
expenses incurred by any member of the Newco Group in connection with
such cooperation.
Any claim for a Tax Refund to which Newco is entitled under
this Agreement shall be subject to the Company Group's consent (such
consent not to be unreasonably withheld), to be exercised in a manner
analogous to that set forth in Section 2.1(c). Any claim for a Tax
Refund to which the Company Group is entitled under this Agreement
shall be subject to the Newco Group's consent (such consent not to be
unreasonably withheld), to be exercised in a manner analogous to that
set forth in Section 2.1(c).
(d) California Tax Credits. Notwithstanding anything to the
contrary in this Agreement, Newco shall be entitled to receive, within
ten days after Actually Realized by the Company Group, any Tax Refund
attributable to any California Tax Credits.
ARTICLE IV
ALLOCATION AND CALCULATION OF TAXES
4.1. Straddle Period Taxes. In the case of any Straddle
Period:
(i) the periodic Taxes of the Company Group and the
Newco Group that are not based on income or receipts (e.g., property
Taxes) for the portion of any Straddle
<PAGE>
Period ending on the Distribution Date shall be computed based on the
ratio of the number of days in such portion of the Straddle Period and
the number of days in the entire taxable period;
(ii) Taxes of the Company Group and the Newco Group for
the portion of any Straddle Period ending on the Distribution Date
(other than Taxes described in Section 4.1(i) above) shall be computed
as if such taxable period ended as of the close of business on the
Distribution Date, and, in the case of any Taxes of the Company Group
and the Newco Group attributable to the ownership by any member of the
Company Group and the Newco Group of any equity interest in any
partnership or other "flowthrough" entity, as if a taxable period of
such partnership or other "flowthrough" entity ended as of the close
of business on the Distribution Date; and
(iii) with respect to any Joint Tax Return for a
Straddle Period, the allocation of Tax liability between the Company
Group, on the one hand, and the Newco Group, on the other hand, shall
be determined in a manner analogous to that set forth in Treasury
Regulation Section 1.1552-1(a)(2).
4.2. Share of Allowable Taxes. The Company Group's and the
Newco Group's allocable share of Tax liability which is attributable
to Allowable Taxes for all Pre-Merger Taxable Periods and the portion
of any Straddle Period ending on the Distribution Date shall be
determined in accordance with the Prior Arrangement.
4.3. Calculations and Determinations. All calculations and
determinations required to be made pursuant to this Agreement shall be
made in good faith by Newco on a basis consistent with prior years and
in a manner that does not unreasonably accelerate deductions or defer
income between Tax Indemnification Periods and Post-Tax
Indemnification Periods, and such calculations and determinations
shall be subject to the written approval of the Company, which
approval shall not be unreasonably withheld. Whenever Newco is
required to make any of the calculations or determinations referred to
in the prior sentence, Newco shall provide the Company with (i)
preliminary drafts of any material calculations (including
calculations of the amount for which the Company Group will be liable
under this Agreement) or determinations as early as practicable, and
final copies of such
<PAGE>
calculations (including calculations of the amount for which the
Company Group will be liable under this Agreement) or determinations
no later than nine weeks prior to the date on which applicable Tax
Returns are to be filed, and such other information as the Company
shall reasonably request and (ii) if requested by the Company, access
(during reasonable business hours and upon reasonable advance notice)
to copies of the relevant portions of any Tax Returns, reports or
other statements. If the Company's written approval of such
calculations and determinations is withheld, the Company shall so
notify Newco no later than six weeks prior to the date on which the
applicable Tax Returns are to be filed.
4.4. Principles of Determination. In implementing this
Agreement, except as otherwise specifically provided, the parties
shall make any adjustments that are necessary to ensure that, with
respect to Taxes for Straddle Periods or Pre-Merger Taxable Periods,
payments and reimbursements between the parties reflect the principles
that the Company is to bear responsibility for Taxes for the Company
Group (and any affiliates) that (i) are attributable to the portion of
any Straddle Period after the Distribution Date (calculated by
treating the day after the Distribution Date as the first day of a
taxable period) or (ii) are Allowable Taxes for any Pre-Merger Taxable
Period or for any Straddle Period, and that Newco is to bear
responsibility for all other Taxes for Straddle Periods and Pre-Merger
Taxable Periods.
4.5. Change in Law. Notwithstanding the agreement with
respect to reporting of Tax Items attributable to Newco Options,
Compensation Payments, Environmental Coverage Claims and Health Care
Claims set forth in Sections 5.1(a), 5.2(a) and 5.5(a) of this
Agreement, respectively, neither the Company Group nor the Newco Group
shall have any obligation to report any such Tax Items as set forth in
such Sections in the event that either such party determines that
there is no substantial authority to support reporting such Tax Items
on a Tax Return filed by such party as a result of a change in or
amendment to any law or regulation, or any change in the official
interpretation thereof, effective or occurring after the date of this
Agreement, and such Group provides prompt notice to the other Group of
any such determination.
<PAGE>
ARTICLE V
NEWCO OPTIONS; COMPENSATION PAYMENTS; CERTAIN CONTRACTS;
GUNSHIP CLAIMS; ENVIRONMENTAL COVERAGE CLAIMS; HEALTH CARE
CLAIMS; B-1B CONTRACTS; FOREIGN SUBSIDIARIES;
CONSENT SOLICITATION.
5.1. Tax Deductions Arising in Respect of Newco Options.
(a) Tax Deductions. Notwithstanding anything to the contrary
in this Agreement, unless the IRS issues a contrary private letter
ruling to the Company or Newco, or Newco and the Company otherwise
agree in writing, (x) the Company Group (and not the Newco Group)
shall claim the post-Distribution Date Tax deductions in respect of
Newco Options held by Company Group Employees and Former Employees
(e.g., due to an option cash-out, an exercise of non-incentive stock
options or a disqualifying disposition) and shall pay to Newco the
amount of any Tax Refund (such Tax Refund not to include, or be
tax-effected for any Tax Refund of the Company's allocable share of
Allowable Taxes) arising in respect of such deductions within ten days
after such Tax Refund is Actually Realized by the Company Group
(including the time estimated Tax payments are due), and (y) the Newco
Group shall claim any post-Distribution Date Tax deductions in respect
of Newco Options held by any Other Individuals. Notwithstanding
anything to the contrary contained herein, to the extent that any Tax
deductions of the Company Group in respect of Newco Options held by
Company Group Employees and Former Employees are carried back from a
Post-Tax Indemnification Period to a Tax Indemnification Period, the
Company shall pay to Newco any resulting Tax Refunds to the extent
required pursuant to this Section 5.1(a), but the Company shall have
no obligation to pay to Newco any additional amounts under any other
provision of this Agreement (other than Section 6.6(a)) with respect
to such Tax Refunds.
(b) Notices, Withholding, Reporting. Newco shall promptly
notify the Company of any post-Distribution Date event giving rise to
income to any Company Employees and Former Employees in connection
with the Newco Options and, if required by law, the Company shall
withhold applicable Taxes and satisfy applicable Tax reporting
obligations in connection therewith. Newco shall within 10 days of
demand thereof reimburse the Company for all reasonable out-of-
<PAGE>
pocket expenses incurred in connection with the Newco Options,
including with respect to incremental Tax reporting obligations and
any incremental employment Tax obligations; provided that the Company
shall use reasonable efforts to collect any such amounts required to
be paid by Company Employees and Former Employees.
(c) Tax Audit Adjustments. Notwithstanding the provisions of
Section 5.1(a), in the event a Tax Audit Proceeding shall determine
(by settlement or otherwise), or the parties otherwise determine
pursuant to Section 4.5, that all or a portion of the Tax deductions
in respect of Newco Options held by Company Employees and Former
Employees was not available to the Company Group, Newco shall pay to
the Company the amount of the resulting Tax Deficiency (such Tax
Refund not to include, or be tax-effected for, any Tax Refund of the
Company's allocable share of Allowable Taxes) within 10 days after the
Company Group has notified the Newco Group that such Tax Deficiency
has been Actually Realized. In the event a Tax Audit Proceeding shall
determine (by settlement or otherwise), or the parties otherwise
determine pursuant to Section 4.5, that all or a portion of the Tax
deductions in respect of Newco Options held by Other Individuals
should have been claimed by the Company Group, the Company shall claim
such Tax deductions (by an amended Tax Return or otherwise) and shall
pay to Newco the amount of any Tax Refund (such Tax Refund not to
include, or be tax-effected for, any Tax Refund of the Company's
allocable share of Allowable Taxes) arising in respect of such Tax
deduction, in each case within 10 days after such Tax Refund is
Actually Realized by the Company Group (including at the time
estimated Tax payments are due). In the event that any Tax Audit
Proceeding shall determine (by settlement or otherwise) that the
Company Group realized taxable income directly or indirectly as a
result of the exercise or settlement (including payment by Newco in
cash or stock) of the Newco Options or the disqualifying disposition
of any stock received upon exercise thereof (determined in a manner
analogous to the determination of an Income Tax Detriment), Newco
shall pay to the Company the amount of any resulting Tax Deficiency
(such Tax Refund not to include, or be tax-effected for, any Tax
Refund of the Company's allocable share of Allowable Taxes) within 10
days after the Company Group has notified the Newco Group that such
Tax Deficiency has been Actually Realized.
<PAGE>
(d) IRS Ruling Request. At Newco's request and sole expense,
Newco and the Company shall jointly seek a private letter ruling from
the IRS regarding the proper party to claim the post-Distribution Date
Tax deductions in respect of Newco Options.
5.2. Compensation Payments.
(a) Tax Deductions. Notwithstanding anything to the contrary
in this Agreement, unless Newco and the Company otherwise agree in
writing, (x) the Company Group (and not the Newco Group) shall claim
the post-Distribution Date Tax deductions in respect of Compensation
Payments paid to Company Group Employees and Former Employees and
shall pay to Newco the amount of any Tax Refund (such Tax Refund not
to include, or be tax-effected for, any Tax Refund of the Company's
allocable share of Allowable Taxes) arising in respect of such Tax
deductions within ten days after such Tax Refund is Actually Realized
by the Company Group (including the time estimated Tax payments are
due) and (y) the Newco Group shall claim any post-Distribution Date
Tax deductions in respect of Compensation Payments paid to Other
Individuals. Notwithstanding anything to the contrary contained
herein, to the extent that any Tax deductions of the Company Group in
respect of Compensation Payments are carried back from a Post-Tax
Indemnification period to a Tax Indemnification Period, the Company
shall pay to Newco any resulting Tax Refunds to the extent required
pursuant to this Section 5.2(a), but the Company shall have no
obligation to pay to Newco any additional amounts under any other
provision of this Agreement (other than Section 6.6(a)) with respect
to such Tax Refunds.
(b) Notices, Withholding, Reporting. The Company shall
withhold applicable Taxes and satisfy applicable Tax reporting
obligations in connection with the Compensation Payments made to
Company Group Employees and Former Employees. Newco shall within 10
days of demand thereof reimburse the Company for all reasonable
out-of-pocket expenses incurred in connection with the Compensation
Payments, including with respect to incremental Tax reporting
obligations and any incremental employment Tax obligations resulting
from such Compensation Payments; provided that the Company shall use
reasonable efforts to collect any such amounts required to be paid by
Company Employees and Former Employees.
<PAGE>
(c) Tax Audit Adjustments. Notwithstanding the provisions of
Section 5.2(a), in the event a Tax Audit Proceeding shall determine
(by settlement or otherwise), or the parties otherwise determine
pursuant to Section 4.5, that all or a portion of the Tax deductions
in respect of Compensation Payments paid to Company Employees and
Former Employees was not available to the Company Group, Newco shall
pay to the Company the amount of the resulting Tax Deficiency (such
Tax Refund not to include, or be tax-effected for, any Tax Refund of
the Company's allocable share of Allowable Taxes) within 10 days after
the Company Group has notified the Newco Group that such Tax
Deficiency has been Actually Realized. In the event a Tax Audit
Proceeding shall determine (by settlement or otherwise), or the
parties otherwise determine pursuant to Section 4.5, that all or a
portion of the Tax deductions in respect of Compensation Payments paid
to Other Individuals should have been claimed by the Company Group,
the Company shall claim such Tax deductions (by an amended Tax Return
or otherwise) and shall pay to Newco the amount of any Tax Refund
(such Tax Refund not to include, or be tax-effected for, any Tax
Refund of the Company's allocable share of Allowable Taxes) arising in
respect of such deductions, in each case within 10 days after such Tax
Refund is Actually Realized by the Company Group (including at the
time estimated Tax payments are due). In the event that any Tax Audit
Proceeding shall determine (by settlement or otherwise) that the
Company Group realized taxable income directly or indirectly as a
result of the payment of any Compensation Payments (determined in a
manner analogous to the determination of an Income Tax Detriment),
Newco shall pay to the Company the amount of any resulting Tax
Deficiency (such Tax Refund not to include, or be tax-effected for,
any Tax Refund of the Company's allocable share of Allowable Taxes)
within 10 days after the Company Group has notified the Newco Group
that such Tax Deficiency has been Actually Realized.
5.3. Percentage Completion Contracts.
(a) Adjustment to Contract Profitability. Newco and the
Company shall each bear one-half of any interest cost due to, and be
entitled to receive one-half of any interest refunded by, the IRS in
respect of Tax Indemnification Periods resulting from adjustments
required subsequent to the Distribution Date with respect to long-
term contracts held by the Company pursuant to the look-back method of
Treasury Regulation Section 1.460-6 or any comparable provision of
State, local or foreign Tax law.
<PAGE>
The Company shall pay to Newco its share of any such refunded interest
within 10 days after such refund is Actually Realized by the Company,
and Newco shall pay to the Company its share of any such interest due
within 10 days after the Company Group has notified the Newco Group
that such interest cost has been Actually Realized by the Company
Group.
5.4. Gunship Claims.
(a) Gunship Claims Income Tax Paid. Newco hereby represents
that prior to the date hereof the Company has reflected in taxable
income on its U.S. Federal Income Tax Returns $181 million of income
relating to the Gunship Claims.
(b) Tax Item Timing Adjustments. If the Newco Group so
requests, the Company Group shall consent to Newco pursuing a claim
for a Tax Refund, at Newco's sole expense, in respect of Federal
Income Taxes paid by the Company prior to the date hereof with respect
to income relating to the Gunship Claims. Any such refund claim shall
be governed by Section 3.2. Notwithstanding any other provision in
this Agreement, Newco shall pay to the Company the amount of any
increase in Taxes for the Post-Tax Indemnification Period attributable
to the receipt of any resulting Tax Refund within 10 days after the
Company Group has notified the Newco Group that such increase has been
Actually Realized.
5.5. Environmental Coverage Claims and Health Care Claims.
(a) Tax Return Reporting. Newco and the Company shall each
report its proportionate share of Tax Items attributable to the
Environmental Coverage Claims and Health Care Claims, based on the
allocation of the proceeds of the Environmental Coverage Claims and
Health Care Claims (in the case of income Items), and the manner in
which costs are shared (in the case of deduction Items), pursuant to
Sections 3.2 and 3.8, respectively, of the Post-Closing Covenants
Agreement.
(b) Tax Audit Adjustments. (i) In the event a Tax Audit
Proceeding shall determine (by settlement or otherwise), or the
parties otherwise determine pursuant to Section 4.5, that the Company
Group should have reported Tax Items in respect of the Environmental
Coverage Claims or the Health Care Claims that were reported by the
Newco Group
<PAGE>
pursuant to Section 5.5(a), Newco shall pay to the Company the amount
of any resulting Tax Deficiency (and shall have the right to receive
or retain any resulting Tax Refund) within ten days after the Company
has notified Newco that it has Actually Realized such Tax Deficiency
or after the Company Group has Actually Realized such Tax Refund, as
the case may be.
(ii) In the event a Tax Audit Proceeding shall determine (by
settlement or otherwise), or the parties otherwise determine pursuant
to Section 4.5, that the Newco Group should have reported Tax Items in
respect of the Environmental Coverage Claims or the Health Care Claims
that were reported by the Company Group pursuant to Section 5.5(a),
the Company shall pay to the Newco Group the amount of any resulting
Tax Deficiency (and shall have the right to receive or retain any
resulting Tax Refund) within ten days after Newco has notified the
Company that it has Actually Realized such Tax Deficiency or after the
Newco Group has Actually Realized such Tax Refund, as the case may be.
(c) For purposes of determining when a party has Actually
Realized a Tax Deficiency under Section 5.5(b), in the event and to
the extent Taxes payable by that the Company or Newco, as the case may
be, are not increased as a result of including Tax Items in the nature
of income attributable to the Environmental Coverage Claims or the
Health Care Claims because such Tax Items are offset by losses,
credits or other Tax Items of such party, such party shall be deemed
to have paid Taxes with respect to such offset Tax Items at the
highest applicable marginal rates.
5.6. B-1B Contracts.
(a) Tax Return Reporting. The Company Group shall report on
its Post-Tax Indemnification Period Income Tax Returns all Tax Items
arising in respect of the B-1B Contracts that are not reflected on the
Company's Income Tax Returns for any Tax Indemnification Period, shall
pay all Taxes with respect to such Tax Items and shall be entitled to
all Tax Refunds attributable to such Tax Items.
5.7. Research and Experimentation Credit. The Company Group
hereby consents to Newco pursuing its claim for Tax Refund in respect
of Tax Returns filed for the Tax Indemnification Period relating to
the research and experimentation tax credit.
<PAGE>
5.8. Foreign Subsidiaries.
(a) Distribution of Australian Subsidiary. Prior to the
Distribution, Rockwell Australia Limited ("Rockwell Australia") will
be distributed to the Company in a transaction intended to qualify as
a transaction pursuant to Section 355 of the Code. In the event that
such transaction does not so qualify and the Company Group sells or
otherwise disposes of the stock of Rockwell Australia, the Company
shall pay to Newco, within 10 days after such Tax Refund is Actually
Realized by the Company, the amount of any Company Group Tax Refund
arising because such transaction failed to so qualify.
(b) Foreign Tax Credits, Subpart F Income and PFIC Income.
In the event that, during the period beginning on the Distribution
Date and ending on September 30, 1997, the Company Group engages in
any transaction outside of the ordinary course of business and such
transaction (i) affects the foreign tax credit computation with
respect to any amount taken into income by the Company Group with
respect to Rockwell Australia and its subsidiaries for the Tax
Indemnification Period, (ii) increases the amount includible in the
Company Group's income pursuant to Section 951 et seq of the Code that
is attributable to the Company's ownership interest in Rockwell
Australia and its subsidiaries for the Tax Indemnification Period or
(iii) increases the Company Group's Tax pursuant to Section 1291 et
seq of the Code that is attributable to the Company's ownership
interest in Rockwell Australia and its subsidiaries for the Tax
Indemnification Period, the Company shall pay to Newco any resulting
additional net Tax cost to the Newco Group for the Tax Indemnification
Period within ten days after notification by Newco that the Company
Group has Actually Realized such net Tax cost.
(c) In connection with the transactions contemplated under
the Business Acquisition Agreement, the Company Group will cooperate
with Newco, provide such information as Newco reasonably requests and
take all actions as reasonably requested by Newco to minimize the
Taxes payable by the Company Group or the Newco Group attributable to
any action taken in connection with such transactions including, but
not limited to, consenting to the filing by Newco for rollover relief.
5.9. Consent Solicitation; Repayment of Short-Term Debt.
<PAGE>
(a) Any net Income Tax cost attributable to cancellation of
indebtedness income ("CODI"), or net Income Tax benefit attributable
to bond retirement premium ("BRP") (determined in each case in a
manner analogous to the determination of an Income Tax Detriment and
Income Tax Benefit, respectively), recognized by the Company Group as
a result of the transactions described in Sections 3.1 and 5.18 of the
Merger Agreement and/or a tender offer by Acquiror for the outstanding
notes of the Company (collectively, the "Debt Refinancing") shall be
for the account of Acquiror.
(b) The Company Group shall report any CODI or BRP resulting
from the Debt Refinancing as occurring in a Post-Tax Indemnification
Period in accordance with Treasury Regulation Section
1.1502-76(b)(ii)(B), unless the relevant Taxing Authority will not
accept a Tax Return on such basis.
ARTICLE VI
TAX INDEMNIFICATION; TAX CONTESTS
6.1. Indemnification.
(a) Newco Indemnification. Except as otherwise provided in
Article V or Section 6.1(b), Newco and the Newco Group shall be liable
for and shall indemnify, defend and hold harmless the members of the
Company Group and Acquiror and each of their respective affiliates and
Representatives from and against (A) all Taxes of the Company Group
and the Newco Group for Pre-Merger Taxable Periods other than the
Company Group's allocable share of Allowable Taxes for such Pre-Merger
Taxable Periods, (B) all Taxes of the Company Group and the Newco
Group for the portion of any Straddle Period ending on the
Distribution Date other than the Company Group's allocable share of
Allowable Taxes for such portion of any such Straddle Period, (C) all
Taxes of the Newco Group for the portion of any Straddle Period
beginning on the day after the Distribution Date (calculated by
treating the day after the Distribution Date as the first day of a
taxable period), (D) all Taxes of the Newco Group for Post-Merger
Taxable Periods, (E) all liability (as a result of Treasury Regulation
Section 1.1502-6(a) or otherwise) for Income Taxes of any person
(other than a member of the Company Group or the Newco Group) which is
or has ever been affiliated with any member of the Company Group or
the Newco Group or with which any member of the
<PAGE>
Company Group or the Newco Group joins or has ever joined (or is or
has ever been required to join) in filing any consolidated, combined
or unitary Tax Return for any Pre-Merger Taxable Period or Straddle
Period, (F) the amount of any California Tax Deficiency resulting from
the receipt by the Company Group of any Tax Refund attributable to any
California Tax Credits, and the amount of any other net Tax cost
attributable to the California Tax Credits or any refund thereof, (G)
all Taxes for which Newco is liable pursuant to Article V or Section
6.5, (H) any Transfer Taxes imposed in connection with or as a result
of the Contribution and/or the Distribution, and one-half of any
Transfer Taxes imposed in connection with or as a result of the
Merger, (I) 50% of any Income Taxes payable by the Company Group in
any Post-Tax Indemnification Period with respect to any long-term
contract accounted for Federal income Tax purposes pursuant to the
"completed contract method" and/or the "percentage completion method"
of accounting to the extent attributable to Contract Profitability
with respect to such contract as of the Distribution Date, but only to
the extent such Contract Profitability exceeds $22 million in the
aggregate, (J) all Taxes for any taxable period (whether beginning
before, on or after the Distribution Date) that would not have been
payable but for the breach by any member of the Newco Group of any
representation, warranty or obligation under this Agreement, (K) all
Taxes for any taxable period (whether beginning before, on or after
the Distribution Date) that would not have been payable but for the
inaccuracy of the representations and warranties contained in clauses
(ix) or (xii) of Section 4.1(l) or clause (xi) of Section 4.1(m) of
the Merger Agreement or the breach of the covenant contained in
Section 5.1(n) of the Merger Agreement, (L) all liability for Taxes
resulting from the Contribution, Distribution and/or Merger (including
the transactions described in the last sentence of each of Sections
2.1(a), 2.1(b), 2.2(a) and 2.2(b) of the Distribution Agreement), (but
not including any Taxes attributable to collateral consequences of
such transactions, such as a reassessment of Company property for
property Tax purposes resulting from the change in control incident to
the Merger), (M) all Taxes that would not have been imposed but for
any reduction in the Tax attributes (including without limitation, Tax
loss carryovers and Tax basis in stock) of any member of the Company
Group that occurs as a result of the transactions (other than the
transfer of the stock of Rockwell Australia to the Company referred to
in Section 5.8(a)) contemplated under the Business Acquisition
Agreement (the "Rockwell Australia
<PAGE>
Reorganization") (such additional Taxes to be computed taking into
account any Tax benefit resulting from the Rockwell Australia
Reorganization actually realized by any member of the Company Group at
or before the time such additional Taxes are imposed, provided,
however, that if any Tax benefit resulting from the Rockwell Australia
Reorganization is actually realized by any member of the Company Group
after the time such Taxes are imposed, the Company Group shall
reimburse Newco for the amount of any such reduction in Taxes as a
result therefrom, but not in excess of the amount previously paid by
the Newco Group pursuant to this Section 6.1(a)(M)), (N) all liability
for Taxes incurred by any member of the Company Group that would not
have been imposed except as a result of any action taken pursuant to
Section 5.8(c), and (O) all liability for any reasonable legal,
accounting, appraisal, consulting or similar fees and expenses
relating to the foregoing. Notwithstanding the foregoing, Newco shall
not indemnify, defend or hold harmless any member of the Company Group
from any liability for Taxes, other than Taxes resulting from the
failure of the Contribution or Distribution to qualify as transactions
described in Sections 351 or 355 of the Code and/or as a
"reorganization" under Section 368(a)(1)(D) of the Code and the Merger
as a "reorganization" pursuant to Section 368(a)(1)(B) of the Code,
resulting from any action taken by any member of the Company Group on
the Distribution Date after the Effective Time (other than actions
relating to the Debt Refinancing or in the ordinary course of
business) (a "Buyer Tax Act").
For purposes of clause (I) of the second preceding sentence,
Newco's indemnity obligation shall arise only at such time as the
Company Group Actually Realizes a Tax cost with respect to Contract
Profitability in excess of $22,000,000, which shall be deemed to occur
only after the Company Group has Actually Realized income items
attributable to Contract Profitability with respect to long-term
contracts in existence on the Distribution Date in an aggregate amount
of $22,000,000.
(b) Company and Acquiror Indemnification. (i) Company
Indemnification. Except as otherwise provided in Article V or Section
6.1(a), the Company shall be liable for and shall indemnify, defend
and hold harmless the Newco Group from and against (A) all Taxes of
the Company Group for Post-Merger Taxable Periods, (B) the Company
Group's allocable share of Allowable Taxes for Pre-Merger Taxable
Periods and the portion of any Straddle Period ending on the
<PAGE>
Distribution Date, (C) all Taxes of the Company Group for the portion
of any Straddle Period beginning on the day after the Distribution
Date (calculated by treating the day after the Distribution Date as
the first day of a taxable period), (D) all Taxes resulting from a
Buyer Tax Act, (E) all Taxes for which the Company is liable pursuant
to Article V or Section 6.5, (F) all Taxes for any taxable period
(whether beginning before, on or after the Distribution Date) that
would not have been paid but for the breach by any member of the
Company Group of any representation, warranty or obligation under this
Agreement and (G) all liability for any reasonable legal, accounting,
appraisal, consulting or similar fees and expenses relating to the
foregoing.
(ii) Acquiror Indemnification. Acquiror shall indemnify
defend and hold harmless Newco for one-half of any Transfer Taxes
imposed in connection with or as a result of the Merger.
(c) Payments. Subject to Section 6.6(b), any indemnity
payment required to be made pursuant to this Section 6.1 shall be paid
within thirty days after the indemnified party makes written demand
upon the indemnifying party, but in no case earlier than five business
days prior to the date on which the relevant Taxes are required to be
paid (or would be required to be paid if no such Taxes are due) to the
relevant Taxing Authority (including estimated Tax payments).
6.2. Notice of Indemnity. Whenever a party hereto
(hereinafter an "Indemnitee") becomes aware of the existence of an
issue raised by any Taxing Authority which could reasonably be
expected to result in a determination that would increase the
liability for any Tax of the other party hereto or any member of its
Group for any Post-Tax Indemnification Period (in the case of the
Company Group) or for any Tax Indemnification Period (in the case of
the Newco Group) or require a payment hereunder to the other party
(hereinafter an "Indemnity Issue"), the Indemnitee shall in good faith
promptly give notice to such other party (hereinafter the
"Indemnitor") of such Indemnity Issue. The failure of any Indemnitee
to give such notice shall not relieve any Indemnitor of its
obligations under this Agreement except to the extent such Indemnitor
or its affiliate is actually materially prejudiced by such failure to
give notice.
<PAGE>
6.3. Tax Contests. The Indemnitor and its representatives,
at the Indemnitor's expense, shall be entitled to participate (A) in
all conferences, meetings or proceedings with any Taxing Authority,
the subject matter of which is or includes an Indemnity Issue and (B)
in all appearances before any court, the subject matter of which is or
includes an Indemnity Issue. The party who has responsibility for
filing the Tax Return under this Agreement (the "Responsible Party")
with respect to which there could be an increase in liability for any
Tax or with respect to which a payment could be required hereunder
shall have the right to decide as between the parties hereto how such
matter is to be dealt with and finally resolved with the appropriate
Taxing Authority and shall control all audits and similar proceedings.
If no Tax Return is or was required to be filed in respect of an
Indemnity Issue, the Indemnitor shall be treated as the Responsible
Party with respect thereto. The Responsible Party agrees to cooperate
in the settlement of any Indemnity Issue with the other party and to
take such other party's interests into account. If the Indemnitor is
not the Responsible Party, such cooperation may include permitting the
Indemnitor, at the Indemnitor's sole expense, to litigate or otherwise
resolve any Indemnity Issue. If Newco is the Responsible Party and if
either (x) the Taxes at issue in the aggregate may equal or exceed
$50,000 (computed taking into account reasonably anticipated future
year Tax costs on a present value basis) or (y) the Indemnity Issue
relates to the qualification of the Contribution or the Distribution
as transactions described in Sections 351 and 355 of the Code and/or a
"reorganization" within the meaning of Section 368(a)(1)(D) of the
Code or the Merger as a "reorganization" within the meaning of Section
368(a)(1)(B) of the Code, (i) Newco shall not settle any such
Indemnity Issue without the prior written consent of the Acquiror,
which consent shall not be unreasonably withheld, (ii) the Acquiror,
and counsel of its own choosing, shall have the right to participate
fully, at its own expense, in all aspects of the defense of such
Indemnity Issue, (iii) Newco shall inform the Acquiror, reasonably
promptly in advance, of the date, time and place of all administrative
and judicial meetings, conferences, hearings and other proceedings
relating to such Indemnity Issue, (iv) the Acquiror shall, at its own
expense, be entitled to have its representatives (including counsel,
accountants and consultants) attend and participate in any such
administrative and judicial meetings, conferences, hearings and other
proceedings relating to such Indemnity Issue, (v) Newco shall provide
to the Acquiror all
<PAGE>
information, document requests and responses, proposed notices of
deficiency, notices of deficiency, revenue agent's reports, protests,
petitions and any other documents relating to such Indemnity Issue
promptly upon receipt from, or in advance of submission to (as the
case may be), the relevant Taxing Authority or courts and (vi) Newco
shall not file or submit any protests, briefs, responses, petitions or
other documents relating to such Indemnity Issue with such relevant
Taxing Authority or courts without the prior written consent of the
Acquiror, which consent shall not be unreasonably withheld.
Notwithstanding any other provision of this Agreement, if Newco has
materially satisfied its obligations under this Agreement and if the
Company fails to permit Newco to control any Indemnity Issue relating
to the qualification of the Contribution and Distribution as
transactions described in Sections 351 and 355 of the Code and/or a
"reorganization" within the meaning of Section 368(a)(1)(D) of the
Code or the qualification of the Merger as a "reorganization" within
the meaning of Section 368(a)(1)(B) of the Code, then Newco shall not
be liable for and shall not indemnify the Company Group for any Tax
Deficiency resulting from an adverse determination of such Indemnity
Issue.
6.4. Timing Adjustments.
(a) Timing Differences. If a Tax Audit Proceeding or an
amendment of a Tax Return results in a Timing Difference, and such
Timing Difference results in a decrease in an indemnity obligation
Newco has or would otherwise have under Section 6.1 and/or an increase
in the amount of a Tax Refund to which Newco is entitled to under
Section 3.2, then in each Post-Tax Indemnification Period in which the
Company Group Actually Realizes an Income Tax Detriment, Newco shall
pay to the Company an amount equal to such Income Tax Detriment;
provided, however, that the aggregate payments which Newco shall be
required to make under this Section 6.4(a) with respect to any Timing
Difference shall not exceed the aggregate amount of the Income Tax
Benefits realized by the Newco Group for all taxable periods and the
Company Group for all Tax Indemnification Periods as a result of such
Timing Difference. Newco shall make all such payments within ten days
after the Company notifies Newco that the relevant Income Tax
Detriment has been Actually Realized.
(b) Reverse Timing Differences. If a Tax Audit proceeding or
an amendment of a Tax Return results in a
<PAGE>
Reverse Timing Difference, and such Reverse Timing Difference results
in an increase in an indemnity obligation of Newco under Section 6.1
and/or a decrease in the amount of a Tax Refund to which Newco is or
would otherwise be entitled to under Section 3.2, then in each
Post-Tax Indemnification Period in which the Company Group Actually
Realizes an Income Tax Benefit, the Company shall pay to Newco within
ten days after the Company has Actually Realized such Income Tax
Benefit an amount equal to such Income Tax Benefit; provided, however,
that the aggregate payments which the Company shall be required to
make under this Section 6.4(b) which respect to any Reverse Timing
Difference shall not exceed the aggregate amount of the Income Tax
Detriments realized by the Company Group and the Newco Group for all
Tax Indemnification Periods as a result of such Reverse Timing
Difference.
6.5. Certain Post-Distribution Transactions.
(a) Consistent with Agreements. Newco shall, and shall cause
each Newco Group member to, comply with and take no action
inconsistent with Newco's Tax Representation Letter. Acquiror shall,
and shall cause each member of the Company Group to, comply with and
take no action inconsistent with Acquiror's Tax Representation Letter.
The Newco Group, Acquiror and the Company Group shall use their
respective best efforts to have the Contribution and the Distribution
qualify as transactions described in Sections 351 and 355 of the Code
and/or a "reorganization" within the meaning of Section 368(a)(1)(D)
of the Code and to have the Merger qualify as a "reorganization"
within the meaning of Section 368(a)(1)(B) of the Code. The parties
hereto intend that the sole remedy for breach of the covenants
contained in this Section 6.5(a) shall be as set forth in Section
6.5(b) hereof.
(b) Tax-Free Reorganization Treatment. Acquiror and the
Company agree to indemnify and hold the Newco Group harmless from and
against any Taxes resulting from any Action (as hereinafter defined)
which causes either the Contribution and the Distribution to fail to
qualify as transactions described in Sections 351 and 355 of the Code
and/or a "reorganization" within the meaning of Section 368(a)(1)(D)
of the Code or the Merger to qualify as a "reorganization" within the
meaning of Section 368(a)(1)(B) of the Code. An "Action" shall mean
any of the actions set forth on Schedule 6.5 hereof, taken by Acquiror
or the Company or any of their respective affiliates (other than
<PAGE>
the members of the Newco Group) within the two-year period following
the Distribution Date. Notwithstanding the foregoing, an Action shall
not include any transaction or action disclosed or described in
Newco's Tax Representation Letter or the Acquiror's Tax Representation
Letter, or required or otherwise contemplated by any Reorganization
Agreement (or any agreement or document included as an exhibit
thereto), or of which the Company or Newco has actual knowledge as of
the Distribution Date. An Action shall not include any action on the
part of any member of the Newco Group, or any of their respective
shareholders, officers, directors or agents. Newco agrees to indemnify
and hold the Acquiror and the Company Group harmless from and against
any Tax liability resulting from or otherwise attributable to the
Contribution and Distribution failing to qualify under Sections 351
and 355 of the Code and/or a "reorganization" under Section
368(a)(1)(D) of the Code or the Merger failing to qualify as a
"reorganization" under Section 368(a)(1)(B) of the Code, except to the
extent such Tax liability results from an Action. For purposes of this
Section 6.5(b), the amount of any Taxes resulting from an Action shall
equal the difference between (i) the Taxes actually paid with respect
to the Contribution, Distribution and the Merger and (ii) the greater
of (x) the amount of Taxes that would have been payable with respect
to the Contribution and Distribution if such transactions had
qualified under Sections 351 and 355 of the Code and/or a
"reorganization" under Section 368(a)(1)(D) of the Code and the
Merger if such transaction had qualified as a "reorganization" under
Section 368(a)(1)(B) and (y) the amount of Taxes that would have been
payable with respect to the Contribution, Distribution and the Merger
in the absence of such Action.
6.6. Payments Net of Taxes. (a) Gross-Up and
Characterization. The amount of any payment under this Agreement or
under Section 2.1(b) of the Post-Closing Covenants Agreement shall be
(i) increased to take account of any net Tax cost incurred by the
recipient thereof as a result of the receipt or accrual of payments
hereunder (grossed-up for such increase) and (ii) reduced to take
account of any net Tax benefit realized by the recipient arising from
the incurrence or payment of any such payment, other than any such net
Tax benefit that the recipient is specifically entitled to retain
pursuant to this Agreement. In computing the amount of any such Tax
cost or Tax benefit, the recipient shall be deemed to recognize all
other items of income, gain, loss, deduction or credit before
<PAGE>
recognizing any item arising from the receipt or accrual of any
payment hereunder. Except as provided in Section 6.6(b), or unless the
parties otherwise agree to an alternative method for determining the
present value of any such anticipated Tax benefit or Tax cost, any
payment hereunder shall initially be made without regard to this
Section and shall be increased or reduced to reflect any such net Tax
cost (including gross-up) or net Tax benefit only after the recipient
has Actually Realized such cost or benefit. It is the intention of the
parties that payments made pursuant to this Agreement are to be
treated as relating back to the Contribution as an adjustment to the
assets and liabilities contributed thereunder, and the parties shall
not take any position inconsistent with such intention before any
Taxing Authority, except to the extent that a final determination (as
defined in Section 1313 of the Code) with respect to the recipient
party causes any such payment not to be so treated.
(b) Time for Payment. Notwithstanding any other provision of
this Agreement, to simplify the administration of this Agreement, the
payment of any amount less than $25,000 required to be made pursuant
to this Agreement by one party hereto to another party hereto need not
be made to such other party prior to thirty days following the later
of (i) the close of the calendar quarter during which such payment
obligation arose and (ii) the day during such calendar quarter when
the aggregate amount of all such less than $25,000 payment obligations
arising during such calendar quarter exceeds $150,000. Unless
otherwise specified by the recipient for items exceeding $100,000, any
such payment may be made on a net Tax basis (i.e., reduced to take
account of any net Tax benefit to be realized by the recipient
(computed at an effective Tax rate to be agreed upon from time-to-time
by the parties)) to the extent such recipient is entitled to a
corresponding deduction.
(c) Right to Offset. Any party making a payment under this
Agreement shall have the right to reduce any such payment by any
amounts owed to it by the other party to this Agreement.
<PAGE>
ARTICLE VII
COOPERATION AND EXCHANGE OF INFORMATION
7.1. Preparation of Returns. The Company shall, and shall
cause each appropriate member of the Company Group to, prepare and
submit to Newco, at the Company's expense, (i) no later than 120 days
prior to the due date (taking into account any extensions), but in no
case earlier than 60 days after the close of the relevant taxable
period, for any Affiliated Group consolidated Federal Tax Returns or
any state, local or foreign combined or unitary corporate Joint Tax
Returns, all information that Newco shall reasonably request, in such
form as Newco shall have reasonably requested, to enable Newco to file
such Tax Returns and (ii) no later than 120 days prior to the due date
(taking into account any extensions), but in no case earlier than 60
days after the close of the relevant taxable period, for any other Tax
Return for Pre-Merger Taxable Periods and Straddle Periods which Newco
is responsible for filing, all information that Newco shall reasonably
request, in such form as Newco shall have reasonably requested, to
enable Newco to file such Tax Returns.
7.2. Cooperation and Exchange of Information. Each party
hereto, on behalf of itself and its affiliates, agrees to provide the
other party hereto with such cooperation and information as such other
party shall reasonably request in connection with the preparation or
filing of any Tax Return or claim for Tax Refund not inconsistent with
this Agreement or in conducting any audit or other proceeding in
respect to Taxes or to carry out the provisions of this Agreement. To
the extent necessary to carry out the purposes of this Agreement and
subject to the other provisions of this Agreement, such cooperation
and information shall include without limitation the non-exclusive
designation of an officer of Newco as an officer of the Company and
Acquiror and each of their affiliates for the purpose of signing Tax
Returns, cashing refund checks, pursuing refund claims, dealing with
Taxing Authorities and defending audits as well as promptly forwarding
copies of appropriate notices and forms or other communications
received from or sent to any Taxing Authority which relate to the
Company Group for the Tax Indemnification Period and providing copies
of all relevant Tax Returns for the Tax Indemnification Period,
together with accompanying schedules and related workpapers, documents
relating to rulings or other determinations by
<PAGE>
Taxing Authorities, including without limitation, foreign Taxing
Authorities, and records concerning the ownership and Tax basis of
property, which either party may possess. Subject to the rights of the
Company Group under the other provisions of this Agreement, such
officer shall have the authority to execute powers of attorney
(including Form 2848) on behalf of each member of the Company Group
with respect to Tax Returns and Taxes for the Tax Indemnification
Period. Each party to this Agreement shall make, or shall cause its
affiliates to make, their employees and facilities available on a
mutually convenient basis to provide an explanation of any documents
or information provided hereunder.
7.3. Record Retention. The Company and Newco agree to retain
all Tax Returns, related schedules and workpapers, and all material
records and other documents as required under Section 6001 of the Code
and the regulations promulgated thereunder relating thereto ("Tax
Records") existing on the date hereof or created through the
Distribution Date, for 10 years from the Distribution Date and (ii)
allow the other parties to this Agreement and their Representatives
(and Representatives of any of its affiliates), at times and dates
reasonably acceptable to the retaining party, to inspect, review and
make copies of such records, and have access to such employees, as the
Company and Newco may reasonably deem necessary or appropriate from
time to time, such activities to be conducted during normal business
hours and without disruption to either of its businesses. At the end
of the 10-year period described in clause (i), the Company or Newco,
as the case may be, shall transfer such records (or cause such records
to be transferred) to the other party (at such other party's sole
expense), unless such other party notifies the Company or Newco, as
the case may be, within 90 days prior to the expiration of the 10-year
period, that such other party does not desire to receive such Tax
Records, in which case the Company or Newco, as the case may be, may
destroy or otherwise dispose of such undesired documents.
7.4. Notification of Certain Dispositions. Acquiror shall
give Newco at least 30 days prior written notice in the event that any
time prior to October 1, 2002 Rockwell Australia disposes of all or
any portion of the ownership interest in, or all or a substantial
portion of the assets of, A.C.N. 004 471 078 Pty. Ltd. Such notice
shall describe any such disposition in sufficient detail to enable
Newco (i) to comply with the requirements of
<PAGE>
Section 367 of the Code and applicable regulations thereunder and (ii)
to enter into a revised gain recognition agreement under Section 367
of the Code and the applicable regulations if such disposition occurs
in a transaction in which no gain or loss is required to be recognized
under U.S. income tax principles or gain is recognized solely by
reason of Section 357(c) of the Code.
ARTICLE VIII
MISCELLANEOUS
8.1. Entire Agreement. This Tax Allocation Agreement
constitutes the entire agreement, and supersedes all other prior
agreements, understandings, representations and warranties, both
written and oral, among the parties, with respect to the subject
matter hereof and thereof.
8.2. Modification or Amendment. The parties hereto may
modify or amend this Agreement only by written agreement executed and
delivered by duly authorized officers of the respective parties.
Anything in this Agreement or any other Reorganization Agreement to
the contrary notwithstanding, in the event and to the extent that
there shall be a conflict between the provisions of this Agreement and
any other Reorganization Agreement, the provisions of this Agreement
shall control.
8.3. Notices. Any notice, request, instruction or other
communication to be given hereunder by any party to any other party
shall be in writing and shall be deemed to have been duly given (i) on
the date of delivery if delivered personally, or by telecopy or
telefacsimile, upon confirmation of receipt, (ii) on the first
business day following the date of dispatch if delivered by Federal
Express or other nationally reputable next-day courier service, or
(iii) on the third business day following the date of mailing if
delivered by registered or certified mail, return receipt requested,
postage prepaid. All notices hereunder shall be delivered as set forth
below, or
<PAGE>
pursuant to such other instructions as may be designated in writing by
the party to receive such notice:
(a) If to Newco:
NEW ROCKWELL INTERNATIONAL CORPORATION
2201 Seal Beach Boulevard
Seal Beach, California 90740-8250
Attention: William J. Calise, Jr., Esq.
Senior Vice President, General
Counsel and Secretary
Telecopy: (310) 797-5687
with copies to:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Peter R. Kolyer, Esq.
Telecopy: (212) 541-5369
(b) if to Acquiror or the Company:
The Boeing Company
P.O. Box 3707
M/S 13-08
Seattle, Washington 98124-2207
Attention: Theodore J. Collins
Vice President & General
Counsel
Telecopy: (206) 544-4900
with copies to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Allen Finkelson, Esq.
Telecopy: (212) 474-3700
8.4. No Third Party Beneficiaries. Except as otherwise
expressly provided herein, nothing contained in this Agreement is
intended to confer upon any person or entity other than the parties
hereto and their respective successors and permitted assigns, any
benefit, right or remedies under or by reason of this Agreement.
<PAGE>
8.5. Assignment. No party to this Agreement shall convey,
assign or otherwise transfer any of its rights or obligations under
this Agreement without the express written consent of the other
parties hereto in their sole and absolute discretion. Any such
conveyance, assignment or transfer without the express written consent
of the other parties shall be void ab initio. No assignment of this
Agreement shall relieve the assigning party of its obligations
hereunder.
8.6. Term. This Agreement shall commence on the date of
execution indicated below and shall continue in effect until otherwise
agreed to in writing by Newco and the Company, or their successors.
8.7. Captions. The Article, Section and paragraph captions
herein are for convenience of reference only, do not constitute part
of this Agreement and shall not be deemed to limit or otherwise affect
any of the provisions hereof.
8.8. Severability. If any provision of this Agreement or the
application thereof to any person or circumstance is determined by a
court of competent jurisdiction to be invalid, void or unenforceable,
the remaining provisions hereof, or the application of such provision
to persons or circumstances other than those as to which it has been
held invalid or unenforceable, shall remain in full force and effect
and shall in no way be affected, impaired or invalidated thereby, so
long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any
party. Upon any such determination, the parties shall negotiate in
good faith in an effort to agree upon a suitable and equitable
substitute provision to effect the original intent of the parties.
8.9. Specific Performance. In the event of any actual or
threatened default in, or breach of, any of the terms, conditions and
provisions of this Agreement, the party or parties who are or are to
be thereby aggrieved shall have the right of specific performance and
injunctive relief giving effect to its or their rights under this
Agreement, in addition to any and all other rights and remedies at law
or in equity, and all such rights and remedies shall be cumulative.
The parties agree that the remedies at law for any breach or
threatened breach, including monetary damages, are inadequate
compensation for
<PAGE>
any loss and that any defense in any action for specific performance
that a remedy at law would be adequate is waived.
8.10. Counterparts. For the convenience of the parties, this
Agreement may be executed in any number of separate counterparts, each
such counterpart being deemed to be an original instrument, and all
such counterparts shall together constitute the same agreement.
8.11. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New
York applicable to contracts made and to be performed entirely within
such State, without regard to the conflicts of law principles of such
State.
8.12. Agent. Any consent rights of members of the Newco
Group under this Agreement shall be exercised by Newco on behalf of
the Newco Group, and any notices given by the Company Group to Newco
shall be deemed to be given to each member of the Newco Group. Any
consent rights of the Company Group under this Agreement shall be
exercised by Acquiror on behalf of the Company Group, and any notices
given by Newco to Acquiror shall be deemed to be given to each member
of the Company Group.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed
and delivered by the duly authorized officers of the parties hereto on
the date first hereinabove written.
ROCKWELL INTERNATIONAL
CORPORATION
By:
/s/ WILLIAM J. CALISE, JR.
----------------------------------
Name: William J. Calise
Title: Senior Vice
President
NEW ROCKWELL INTERNATIONAL
CORPORATION
By:
/s/ WILLIAM J. CALISE, JR.
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Name: William J. Calise
Title: Senior Vice
President
THE BOEING COMPANY
By:
/s/ PHILIP M. CONDIT
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Name: Philip M. Condit
Title: President and Chief
Executive Officer
News Release
BOEING, ROCKWELL AEROSPACE AND DEFENSE UNITS TO MERGE
SEAL BEACH, Calif., Dec. 5, 1996--The Boeing Company will
acquire Rockwell's aerospace and defense units in a transaction valued
at approximately $3.1 billion following approval by Rockwell
shareholders yesterday. The closing of the transaction is scheduled
for tomorrow, Dec. 6, 1996, pending resolution of some remaining
issues.
The move creates one of the strongest aerospace and defense
operations in the world with more than 50,000 employees, combined 1995
revenues of $8.7 billion, and expertise in space transportation,
launch systems, rocket engines, power systems, satellites, missiles,
missile defense, helicopters, military airplanes, guidance and
navigation systems, electronics and communications systems.
It also unites two companies with a proud heritage in the
exploration of space and defense of the United States.
The Rockwell units will be renamed Boeing North American,
Inc., and will operate as a subsidiary of The Boeing Company. The
subsidiary will report to Boeing Defense & Space Group, which has
headquarters in Kent, Wash. Boeing North American will have 21,000
employees, 13,000 of them in Southern California.
"This is a major milestone for Boeing," said Jerry King,
Boeing Defense & Space Group president. "It accelerates us to
achieving our 20-year vision, which calls for Boeing to be a fully
integrated aerospace company designing, producing and supporting
commercial airplanes, defense systems, and defense and civil space
systems.
"The assets and capabilities we are acquiring are an
extremely good strategic fit with our long-term objective of creating
stockholder value. It also makes Boeing a major employer in
California.
"We anticipate that our defense and space businesses will
continue to grow," King said. "We expect the product of this merger to
be more efficient as a major contract bidder than the two parts were.
"Recent contract wins on several key programs, including the
Joint Strike Fighter, Airborne Laser and GPS
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satellites, indicate we have good reason for optimism," King
said.
"The people of Rockwell's aerospace and defense units have
been anxiously anticipating this day for the past four months," said
John McLuckey, president of the new subsidiary. "We have absolutely no
doubt that the future of our businesses will be stronger as a part of
Boeing.
"We see synergistic growth opportunities in many areas,"
McLuckey added. "To ensure that we fully address those opportunities,
we have formed eight Integrated Marketing Teams that cut across the
two businesses. In addition, we are combining our Washington D.C.
offices and field offices so that we can present a unified team to our
customers."
In addition to his role as president of Boeing North
American, McLuckey also has been named an executive vice president of
Boeing Defense & Space Group.
Boeing and Rockwell have worked side by side often over
the past 80 years. Both have built aircraft to defend the nation,
including such bombers as the B-2, B-1B, B-52, B-29, B-25 and B-17;
and fighters such as the F-22, F-100, F-86 and P-51. They also have
cooperated on major space programs such as the NASA International
Space Station, Space Shuttle and the Apollo moon landings.
With the acquisition of the Rockwell units, Boeing will have
approximately 145,000 employees involved in aerospace and defense
programs and commercial airliner design and production.
Boeing North American headquarters will be in Seal Beach,
with major operations throughout Southern California as well as
Alabama, Florida, Georgia, Iowa, Louisiana, Mississippi, Ohio,
Oklahoma, Texas and Australia.
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In addition to its Seattle-area operations, Boeing Defense &
Space Group has major operations in Alabama, California, Florida,
Kansas, Oklahoma, Pennsylvania, Tennessee and Texas.
