AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 30, 2001
FILE NO. 001-16445
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM 10/A
GENERAL FORM FOR
REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
NEW ROCKWELL COLLINS, INC.
(TO BE RENAMED ROCKWELL COLLINS, INC.)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 52-2314475
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
400 COLLINS ROAD NE
CEDAR RAPIDS, IOWA 52498
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (319) 295-1000
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON
TO BE SO REGISTERED WHICH EACH CLASS IS TO BE REGISTERED
------------------- ------------------------------------
COMMON STOCK, PAR VALUE $.01 PER SHARE NEW YORK STOCK EXCHANGE
PREFERRED SHARE PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
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SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
NEW ROCKWELL COLLINS, INC.
PART I
INFORMATION INCLUDED IN INFORMATION STATEMENT
AND INCORPORATED IN FORM 10/A BY REFERENCE
CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT
AND ITEMS OF FORM 10/A
ITEM
NO. CAPTION LOCATION IN INFORMATION STATEMENT
---- ------- ---------------------------------
1. Business..................... "Summary"; "Risk Factors"; "The Rockwell Collins
Business"; "Management's Discussion and Analysis of
Financial Condition and Results of Operations"; "The
Distribution -- Introduction"; and "The
Distribution -- Background and Reasons for the
Distribution".
2. Financial Information........ "Summary"; "Historical Selected Financial Data";
"Unaudited Pro Forma Condensed Financial Information";
"Management's Discussion and Analysis of Financial
Condition and Results of Operations"; "The Distribution";
and "Financial Statements and Schedule".
3. Properties................... "The Rockwell Collins Business -- Properties".
4. Security Ownership of Certain
Beneficial Owners and
Management................... "The Distribution -- Trading Market" and "Management --
Ownership of Our Common Stock".
5. Directors and Executive
Officers..................... "Arrangements Between Rockwell and Our Company";
"Management"; and "Liability and Indemnification of
Directors and Officers".
6. Executive Compensation....... "Arrangements Between Rockwell and Our Company" and
"Management".
7. Certain Relationships and
Related Transactions......... "Summary" and "Arrangements Between Rockwell and Our
Company".
8. Legal Proceedings............ "The Rockwell Collins Business -- Legal Proceedings".
9. Market Price of and Dividends
on the Registrant's Common
Equity and Related Shareowner
Matters...................... "Summary"; "Risk Factors"; "The
Distribution -- Introduction"; and "The
Distribution -- Trading Market".
10. Recent Sales of Unregistered
Securities................... Not Applicable.
11. Description of Registrant's
Securities to be
Registered................... "The Distribution -- Trading Market" and "Description of
Capital Stock".
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ITEM
NO. CAPTION LOCATION IN INFORMATION STATEMENT
---- ------- ---------------------------------
12. Indemnification of Directors
and Officers................. "Liability and Indemnification of Directors and
Officers".
13. Financial Statements and
Supplementary Data........... "Summary"; "Historical Selected Financial Data";
"Unaudited Pro Forma Condensed Financial Information";
"Management's Discussion and Analysis of Financial
Condition and Results of Operations"; and "Financial
Statements and Schedule".
14. Changes in and Disagreements
with Accountants on
Accounting and Financial
Disclosure................... Not Applicable.
15. Financial Statements and
Exhibits..................... "Financial Statements and Schedule".
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[ROCKWELL LOGO]
June , 2001
Dear Shareowner:
On December 8, 2000, we announced that the Board of Directors of Rockwell International Corporation had approved in principle the distribution to our shareowners of all the outstanding shares of New Rockwell Collins, Inc., a wholly-owned subsidiary of Rockwell to be renamed Rockwell Collins, Inc. After the distribution, Rockwell Collins will be a separately traded public company owning and operating Rockwell's Avionics and Communications business. The distribution, which is expected to occur on June 29, 2001, will be at the rate of one share of Rockwell Collins common stock for each share of Rockwell common stock held as of the close of business on June 15, 2001. The enclosed Information Statement explains the distribution in detail and provides important financial and other information about Rockwell Collins. A shareowner vote is not required, and, accordingly, your proxy is not being sought. Holders of Rockwell common stock are not required to pay for the shares of Rockwell Collins common stock to be received by them or to take any other action to participate in the distribution.
During the past five years, Rockwell has undergone a strategic transformation, beginning with the sale of our Aerospace & Defense businesses to The Boeing Company in 1996, followed by the spin-offs of Meritor Automotive, Inc. (now ArvinMeritor, Inc.) in 1997 and Conexant Systems, Inc. in 1998. We believe that, as independent companies, both Rockwell Collins and our Automation business will be better able to focus on enhancing their strategic positions, serving their customers and creating value for shareowners. By taking this step, we also expect to achieve more appropriate valuations for each business and give our current shareowners -- as well as prospective ones -- the ability to invest in either or both of these great companies.
Rockwell Collins is a business with a rich heritage of excellence in the design, development and manufacture of avionics and communications equipment. With fiscal 2001 revenues expected to approximate $2.9 billion and its outstanding employees, facilities and resources, we are confident about the future of Rockwell Collins as an independent public company.
Revenues of our continuing Automation business are expected to approximate $4.5 billion in fiscal 2001. Operating margins and cash flow are among the best in the industry, as this business continues to be a global leader in industrial automation solutions. Although sales growth has been slow in recent years due to a marked reduction in capital spending in the manufacturing economy, we go forward with world-class customers, a large installed base, industry-leading brands and strong profitability. In addition, through several growth initiatives in which we have invested considerably, we are well positioned to take advantage of the next phase of capital investment as global manufacturing companies position themselves to operate in the dynamic world of e-business.
Following the distribution, we will operate our Automation business under the name Rockwell Automation, and we will recommend to our shareowners at our 2002 annual meeting an amendment to our certificate of incorporation to change our name to Rockwell Automation, Inc.
The actions we are taking underscore our focus on developing and positioning each business, Rockwell Collins and Rockwell Automation, to deliver value to our shareowners. We are confident that these actions will be successful.
Sincerely,
/s/ Don Davis DON H. DAVIS, JR. Chairman and Chief Executive Officer |
[ROCKWELL COLLINS LOGO]
June , 2001
Dear Future Shareowner:
The enclosed Information Statement includes detailed information about Rockwell Collins, Inc., in which you will soon become a shareowner. As you know, the Board of Directors of Rockwell International Corporation has approved in principle the distribution of all the outstanding shares of common stock of Rockwell Collins to Rockwell's shareowners. After consummation of the distribution, Rockwell Collins will be an independent public company and will own and operate the Avionics and Communications business now owned and operated by Rockwell.
We would like to take this opportunity to welcome you as a shareowner and introduce you to our company. With fiscal 2001 sales expected to approximate $2.9 billion, Rockwell Collins is a world leader in providing aviation electronics and airborne and mobile communications products and systems for commercial and military applications. We have a global presence, with operations in 27 countries, and serve our worldwide customer base through our Commercial Systems and Government Systems businesses.
Our Commercial Systems business supplies flight deck electronic products and systems, including communications, navigation, display and automatic flight control systems, as well as in-flight entertainment and information management systems, to commercial aircraft manufacturers and airlines throughout the world. Our Government Systems business supplies defense electronics products and systems, including communications, navigation and integrated systems, for airborne, ground and shipboard applications to the U.S. Department of Defense, foreign militaries and manufacturers of military aircraft and helicopters. In addition, both our Commercial Systems and Government Systems businesses provide a wide array of services and support to our customers through our network of over 60 service locations worldwide.
We are very excited about our prospects as an independent public company. Since our beginnings in the early 1930's as the Collins Radio Company, we have maintained a strong commitment to excellence in aviation electronics and communications. We believe our company possesses a strong and highly-motivated leadership team, outstanding employees, impressive design and manufacturing capabilities, a well-deserved reputation for outstanding quality and customer service and a solid track record of financial performance. Over the last four years, we have achieved a compound annual sales growth rate of approximately 14%, with operating margins of approximately 16% in fiscal 2000. Operating as an independent company, Rockwell Collins will be well positioned to serve our customers, capitalize on exciting growth opportunities, generate value for shareowners and provide new incentives for our employees. We look forward to your participation in our future.
Sincerely,
/s/ Clayton Jones CLAYTON M. JONES President and Chief Executive Officer |
SUBJECT TO COMPLETION, DATED MAY 30, 2001 -- FOR INFORMATION ONLY
INFORMATION STATEMENT
NEW ROCKWELL COLLINS, INC.
(PAR VALUE $.01 PER SHARE)
This information statement is being furnished to shareowners of Rockwell International Corporation in connection with the distribution by Rockwell to its shareowners of all of the outstanding shares of common stock of New Rockwell Collins, Inc., a wholly-owned subsidiary of Rockwell to be renamed Rockwell Collins, Inc. Following the distribution, Rockwell Collins will own and operate Rockwell's Avionics and Communications business.
The distribution is expected to be made as of the close of business on June 29, 2001 to holders of record of Rockwell common stock as of the close of business on June 15, 2001, which will be the record date. Each such holder will receive one share of our common stock for each share of Rockwell common stock held on the record date.
No shareowner approval of the distribution is required or sought. We are
not asking you for a proxy and you are requested not to send us a proxy.
ROCKWELL SHAREOWNERS WILL NOT BE REQUIRED TO PAY FOR THE SHARES OF OUR COMMON
STOCK TO BE RECEIVED BY THEM IN THE DISTRIBUTION, OR TO SURRENDER OR EXCHANGE
SHARES OF ROCKWELL COMMON STOCK IN ORDER TO RECEIVE OUR COMMON STOCK, OR TO TAKE
ANY OTHER ACTION IN CONNECTION WITH THE DISTRIBUTION. Each share of our common
stock distributed will be accompanied by one preferred share purchase right.
There is no current trading market for our common stock, although a
"when-issued" trading market is expected to develop prior to the distribution
date. Our common stock has been approved for listing, subject to official notice
of issuance, on the New York Stock Exchange under the trading symbol "COL".
IN REVIEWING THIS INFORMATION STATEMENT, YOU SHOULD CAREFULLY CONSIDER THE
MATTERS DESCRIBED UNDER THE CAPTION "RISK FACTORS" BEGINNING ON PAGE 8.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS INFORMATION STATEMENT IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS INFORMATION STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES.
The date of this information statement is June , 2001.
TABLE OF CONTENTS
Summary..................................................... 2 Risk Factors................................................ 8 The Rockwell Collins Business............................... 13 Credit Facility And Commercial Paper Program................ 25 Historical Selected Financial Data.......................... 26 Unaudited Pro Forma Condensed Financial Information......... 27 Management's Discussion And Analysis Of Financial Condition And Results Of Operations................................. 29 The Distribution............................................ 36 Arrangements Between Rockwell And Our Company............... 40 Management.................................................. 48 Description Of Capital Stock................................ 64 Liability And Indemnification Of Directors And Officers..... 69 Where You Can Find More Information......................... 70 Index To Financial Statements And Schedule.................. F-1 |
SUMMARY
The following is a summary of some of the information contained in this information statement. In addition to this summary, we urge you to read the entire information statement carefully, especially the risks of investing in our common stock discussed under "Risk Factors", and our financial statements.
Please note that in this information statement the term "Rockwell" refers to Rockwell International Corporation, the parent company effecting the distribution. Please also note that in this information statement the terms "Rockwell Collins", "we", "our" and "us" refer to New Rockwell Collins, Inc. (which will be renamed Rockwell Collins, Inc.), the company whose shares are being distributed in the distribution. After the distribution, Rockwell will continue to own and operate its Automation business and Rockwell Collins will own and operate the Avionics and Communications business previously owned and operated by Rockwell.
We describe in this information statement the Avionics and Communications business of Rockwell as if it was our business for all historical periods described. Following the distribution, we will be an independent public company, and Rockwell will have no continuing stock ownership in us. Accordingly, our historical financial results as part of Rockwell contained herein may not reflect our financial results in the future as an independent company or what our financial results would have been had we been a stand-alone company during the periods presented.
Distributing Company.......... Rockwell International Corporation, a Delaware corporation.
Our Company................... New Rockwell Collins, Inc., a Delaware
corporation incorporated in March 2001 and to
be renamed Rockwell Collins, Inc., is currently
a wholly-owned subsidiary of Rockwell. Prior to
the distribution, Rockwell will transfer to us
the assets and liabilities of the Avionics and
Communications business, including the stock of
certain subsidiaries, and certain other assets
and liabilities which will be allocated to us
under the distribution agreement to be entered
into among Rockwell, the Rockwell Science
Center and us. Our principal corporate offices
are located at 400 Collins Road NE, Cedar
Rapids, Iowa 52498, and our telephone number is
(319) 295-1000.
The Rockwell Collins
Business...................... We are a world leader in providing aviation
electronics and airborne and mobile
communications products and systems for
commercial and military applications. We have a
global presence, with operations in 27
countries, and serve our worldwide customer
base through our Commercial Systems and
Government Systems businesses. Our Commercial
Systems business supplies flight deck
electronic products and systems, including
communications, navigation, display and
automatic flight control systems, as well as
in-flight entertainment and information
management systems, to commercial aircraft
manufacturers and airlines throughout the
world. Our Government Systems business supplies
defense electronics products and systems,
including communications, navigation and
integrated systems, for airborne, ground and
shipboard applications to the U.S. Department
of Defense, foreign militaries and
manufacturers of military aircraft and
helicopters. In addition, both our Commercial
Systems and Government Systems businesses
provide a wide array of services and support to
our customers through our network of over 60
service locations worldwide.
Shares to be Distributed...... Approximately 182.9 million shares of our
common stock, together with the associated
preferred share purchase rights, based on the
number of shares of Rockwell common stock
outstanding as of April 30, 2001. The shares of
our common stock to be distributed
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will constitute all the outstanding shares of our common stock immediately after the distribution.
Distribution Ratio............ Each holder of Rockwell common stock will
receive a dividend of one share of our common
stock, and the associated preferred share
purchase right, for each share of Rockwell
common stock held on the record date. Rockwell
shareowners holding fractional shares through
the Mellon Investor Services Investor Program
will receive an equal number of fractional
shares in the distribution.
Record Date................... The record date is the close of business on
June 15, 2001.
Distribution Date............. The distribution is expected to occur at the
close of business on June 29, 2001. On or about
the distribution date, the distribution agent
will begin mailing account statements
reflecting ownership of shares of our common
stock to Rockwell shareowners as of the close
of business on the record date.
Direct (Book-Entry)
Registration; Share
Certificates.................. Our shareowners initially will have their
ownership of our common stock registered only
in book-entry form. Book-entry registration
refers to a method of recording stock ownership
in our records in which no share certificates
are issued. Following the distribution date,
any shareowner whose ownership of our common
stock is registered in book-entry form may
obtain at any time without charge a certificate
to represent the number of whole shares owned
by contacting our transfer agent.
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Distribution Agent, Transfer
Agent and Registrar for the
Shares........................ Mellon Investor Services LLC will serve as the
distribution agent for the distribution. Mellon
will also serve as transfer agent and registrar
for our common stock. Mellon's address is P.O.
Box 3310, South Hackensack, New Jersey 07606,
and its telephone number for questions about
the distribution is (800) 204-7800.
Trading Market................ A "when-issued" trading market for our common
stock is expected to develop prior to the
distribution date. "When-issued" trading refers
to a transaction made conditionally because the
security has been authorized but not yet
issued. On the first New York Stock Exchange
trading day after the distribution date,
"when-issued" trading in respect of our common
stock will end and "regular way" trading will
begin.
Federal Income Tax
Consequences.................. The distribution is conditioned on the receipt
by Rockwell of a tax ruling from the Internal
Revenue Service to the effect that the
distribution will qualify as a tax-free
reorganization within the meaning of Section
368(a)(1)(D) of the Internal Revenue Code of
1986, as amended.
Conditions to the
Distribution.................. The distribution is subject to the satisfaction
or waiver of certain conditions set forth in
the distribution agreement to be entered into
among Rockwell, the Rockwell Science Center and
us, including receipt of a tax ruling from the
Internal Revenue Service. Although the
conditions to the distribution set forth in the
distribution agreement may be waived by
Rockwell's board of
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directors in its sole discretion, Rockwell does not presently intend to waive the condition of receipt of the tax ruling. Regardless of whether the conditions are satisfied, the distribution agreement may be terminated and the distribution abandoned by Rockwell's board of directors, in its sole discretion, without the approval of Rockwell shareowners, at any time prior to the distribution.
Reasons for the
Distribution.................. The distribution will separate our Avionics and
Communications business from Rockwell's
remaining Automation business, each with
distinct financial, investment and operating
characteristics. Rockwell's board of directors
believes that the distribution will accomplish
a number of important business objectives and,
by enabling Rockwell and us to develop our
respective businesses separately, should better
position the two companies to produce greater
total shareowner value over the long term.
These important business objectives include
greater strategic focus, focused incentives and
greater accountability for employees, and
appropriate market recognition of performance.
Rockwell Name................. Following the distribution, Rockwell will
continue to own the Rockwell name and will
recommend to its shareowners at its 2002 annual
meeting an amendment to its certificate of
incorporation to change its name to Rockwell
Automation, Inc. We will continue to be known
as Rockwell Collins, Inc. and Rockwell will
grant us the exclusive right to use the
Rockwell Collins name other than in connection
with automation products.
Arrangements Between Rockwell
and Our Company............... Prior to the distribution, we, Rockwell and the
Rockwell Science Center will enter into a
distribution agreement and several ancillary
agreements for the purpose of accomplishing the
separation of our business from Rockwell and
the distribution of our common stock to
Rockwell's shareowners. These agreements also
will govern our relationship with Rockwell and
the Rockwell Science Center subsequent to the
distribution and provide for the allocation of
employee benefit, tax and other liabilities and
obligations. Please see "Arrangements Between
Rockwell and Our Company" for a more detailed
description of these agreements.
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Pre-Distribution Payment to
Rockwell...................... Prior to the distribution, we will pay $400
million in cash to Rockwell. We will fund this
pre-distribution payment to Rockwell through
borrowings under a credit facility, issuances
of commercial paper under a commercial paper
program or a combination thereof. Rockwell will
use the proceeds of the pre-distribution
payment to repay outstanding indebtedness. The
effect of this payment will be to adjust the
post-distribution capital structure of Rockwell
and us by decreasing Rockwell's consolidated
debt and increasing our consolidated debt. The
amount of the pre-distribution payment to
Rockwell was determined with the intention of
establishing a strong capital structure for
both Rockwell and us.
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Trading in Rockwell Common
Stock Prior to the
Distribution.................. It is expected that the New York Stock Exchange
will determine that Rockwell common stock
traded on or after June 13, 2001, the second
trading day prior to the record date, may be
traded either "ex-distribution -- when-issued"
or "regular way" (with due bills
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attached). Rockwell common stock traded "ex-distribution -- when-issued" will entitle the buyer to receive only the underlying shares of Rockwell common stock and will entitle a seller who is the holder of record of those shares on the record date to receive shares of our common stock in the distribution. Rockwell common stock traded "regular way" (with due bills attached) will entitle the buyer to receive and require the seller to deliver the shares of our common stock to be issued in the distribution as well as the underlying shares of Rockwell common stock. Beginning on the first New York Stock Exchange trading day after the distribution date, it is expected that trading of Rockwell common stock "ex- distribution -- when-issued" or "regular way" (with due bills attached) will cease and Rockwell common stock will trade "regular way" only, entitling the buyer to receive only Rockwell common stock.
Post-Distribution Dividend
Policy........................ We anticipate that following the distribution,
we initially will pay quarterly cash dividends
which, on an annual basis, will equal $.36 per
share and Rockwell initially will pay quarterly
cash dividends which, on an annual basis, will
equal $.66 per share. We therefore anticipate
that the aggregate cash dividends payable by
Rockwell and us after the distribution, taken
together, in respect of (1) shares of Rockwell
common stock held on the distribution date and
(2) shares of our common stock received in the
distribution will initially equal the annual
rate of the cash dividend currently paid on
Rockwell common stock of $1.02 per share.
However, no formal action has been taken with
respect to these dividends and the declaration
and payment of dividends by us and Rockwell
will be at the sole discretion of our
respective boards of directors.
Risk Factors.................. Shareowners should carefully consider the
matters discussed under the section entitled
"Risk Factors" in this information statement.
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SUMMARY FINANCIAL DATA
The following summary financial data have been derived from our financial statements. The data should be read in conjunction with our financial statements and notes thereto included elsewhere in this information statement. The statement of operations data for the years ended September 30, 1998, 1999 and 2000 and the statement of assets and liabilities data as of September 30, 1999 and 2000 have been derived from our audited financial statements. The statement of operations data for the years ended September 30, 1996 and 1997 and the statement of assets and liabilities data as of September 30, 1996, 1997 and 1998 have been derived from our unaudited financial information. The statement of operations data for the six months ended March 31, 2000 and 2001 and the statement of assets and liabilities data as of March 31, 2000 and 2001 have been derived from our unaudited financial statements, which, in the opinion of management, include all adjustments necessary for a fair presentation of results of operations for such periods and assets and liabilities as of such dates. Operating results for the six months ended March 31, 2001 are not necessarily indicative of the results that may be expected for the year ending September 30, 2001.
SIX MONTHS
ENDED
FISCAL YEAR ENDED SEPTEMBER 30, MARCH 31,
-------------------------------------------------- -----------------
1996(1) 1997 1998(2) 1999(3) 2000(4) 2000 2001(4)
------- ------ ------- ------- ------- ------ -------
(IN MILLIONS)
STATEMENT OF OPERATIONS DATA:
Sales................................ $1,498 $1,701 $2,026 $2,438 $2,510 $1,181 $1,277
Cost of sales........................ 1,162 1,255 1,603 1,782 1,845 865 944
Selling, general and
administrative..................... 226 237 256 278 274 131 157
Purchased research and
development(5)..................... -- -- 103 -- -- -- --
Income before income taxes and
accounting change.................. 138 220 73 437 399 187 181
Net income(6)........................ 92 144 32 291 269 126 119
STATEMENT OF ASSETS AND LIABILITIES
DATA (AT END OF PERIOD):
Working capital(7)................... $ 213 $ 286 $ 334 $ 451 $ 565 $ 575 $ 758
Property............................. 218 229 322 365 417 361 476
Intangible assets.................... 53 57 119 126 148 119 441
Total assets......................... 1,206 1,412 1,841 2,033 2,100 2,012 2,628
Rockwell's invested equity........... 182 322 503 695 908 811 1,386
OTHER DATA:
Capital expenditures................. $ 60 $ 72 $ 143 $ 127 $ 98 $ 37 $ 50
Depreciation and amortization........ 52 58 66 86 99 45 68
EBIT(8).............................. 138 220 73 437 399 187 181
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(2) Includes (a) $65 million ($43 million after tax) of realignment charges and
(b) $53 million ($33 million after tax) of charges for estimated losses on
two government contracts.
(3) Includes a $32 million ($20 million after tax) gain on the sale of a business.
(4) Commencing in the third quarter of 2000, we incurred costs that our management anticipated would be recovered under an in-flight network system contract. As a result of information which became available in March 2001, our management concluded that the contract award was no longer probable and, accordingly, these costs have been presented in the financial statements as an expense in the periods incurred. These costs were $16 million ($11 million after tax) for the year ended September 30, 2000 and $8 million ($5 million after tax) for the six months ended March 31, 2001.
(5) Purchased research and development of $103 million ($65 million after tax) relates to the acquisition of the in-flight entertainment business of Hughes-Avicom International, Inc. in December 1997.
(6) Effective October 1, 1997, we changed our method of accounting for certain inventoriable general and administrative costs related to government contracts. The cumulative effect of this change in accounting principle was a $17 million reduction of net income.
(7) Working capital consists of all current assets and liabilities, including cash and short-term debt.
(8) EBIT represents income before interest, income taxes and accounting change. We had no interest expense for the periods presented.
PRO FORMA CAPITALIZATION
The following sets forth our unaudited pro forma cash, short-term debt and capitalization as of March 31, 2001 giving effect to the distribution and the borrowings necessary to make the pre-distribution payment to Rockwell in the amount of $400 million. This information should be read in conjunction with our pro forma financial information and our financial statements and notes thereto appearing elsewhere in this information statement. The pro forma information may not reflect our cash, short-term debt and capitalization in the future or as it would have been had we been a stand-alone company on March 31, 2001. Assumptions regarding the number of shares of our common stock may not reflect the actual number outstanding on the distribution date.
PRO FORMA CAPITALIZATION TABLE
AS OF MARCH 31, 2001
ROCKWELL ROCKWELL
COLLINS PRO FORMA COLLINS
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(IN MILLIONS)
Cash....................................................... $ 20 $ -- $ 20
====== ======= ======
Short-term debt............................................ $ -- $ 400(1) $ 400
====== ======= ======
Shareowners' equity:
Rockwell's net investment................................ $1,416 $(1,416)(2) $ --
Common stock............................................. -- 2(2) 2
Additional paid-in capital............................... -- 1,414(2) 1,014
(400)(1)
Retained earnings........................................ -- -- --
Accumulated other comprehensive loss..................... (30) -- (30)
------ ------- ------
Total shareowners' equity................................ 1,386 (400) 986
------ ------- ------
Total capitalization............................. $1,386 $ (400) $ 986
====== ======= ======
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(2) To reflect the distribution as the elimination of Rockwell's net investment and the issuance of an estimated 183 million shares of our common stock, par value $.01 per share. This is based on the number of shares of Rockwell common stock outstanding on March 31, 2001 and the distribution ratio of one share of our common stock for each share of Rockwell common stock outstanding.
RISK FACTORS
You should carefully consider and evaluate all of the information set forth in this information statement, including the risk factors listed below.
RISKS RELATED TO OUR BUSINESS
WE MAY NOT BE ABLE TO CONTINUE TO COMPETE EFFECTIVELY IN OUR HIGHLY COMPETITIVE MARKETS.
The aerospace industry in which we operate is highly competitive. We compete worldwide with a number of United States and international companies that are both larger and smaller than us in terms of resources and market share, and some of which are our customers. Some of our competitors have more extensive or more specialized engineering, manufacturing and marketing capabilities than we do in some areas. As a result, these competitors may be able to adapt more quickly to new or emerging technologies and changes in customer requirements or may be able to devote greater resources to the development, promotion and sale of their products than we can. Furthermore, some of our competitors who have greater financial resources than we do may be better able to provide financing to their customers in connection with sales of their products.
THE SIGNIFICANT CONSOLIDATION OCCURRING IN THE INDUSTRIES IN WHICH WE OPERATE COULD NEGATIVELY IMPACT OUR MARKET SHARE AND RESULTS OF OPERATIONS.
The aerospace industry in which we operate has been experiencing significant consolidation among suppliers, including us and our competitors, and the customers we serve. Commercial airlines have increasingly been merging and creating global alliances to achieve greater scale and enhance their geographic reach. Aircraft manufacturers continue to make acquisitions to expand their product portfolios to better compete in the global marketplace. In addition, aviation electronics and communications suppliers have been consolidating and forming alliances to broaden their product and integrated system offerings and achieve critical mass. This supplier consolidation is in part attributable to aircraft manufacturers and airlines more frequently awarding long-term sole source or preferred supplier contracts to the most capable suppliers, thus reducing the total number of suppliers from whom components and systems are purchased. Recent examples of aerospace supplier consolidations include the merger of Honeywell, Inc. and AlliedSignal, Inc., followed shortly thereafter by the announced merger of General Electric Company with the new Honeywell. Other large competitors that have recently been created include Raytheon Company, BAE Systems, plc, Thales S.A. (the parent company of Sextant Avionique, S.A.) and Lockheed Martin Corporation. Our competitive position may be disadvantaged because larger competitors may be able to offer a broader product line to our customers. There can be no assurance that our market share and results of operations will not be adversely impacted as a result of consolidation by our competitors or customers.
DOWNTURNS IN THE CYCLICAL AEROSPACE INDUSTRY MAY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.
The aviation electronics and communications markets in which we sell our products are, to varying degrees, cyclical and have experienced periodic downturns. For example, markets for our commercial aviation electronic products have experienced downturns during periods of slowdowns in the commercial airline industry and during periods of weak conditions in the economy generally, as demand for new aircraft typically declines during these periods. Although we believe that aftermarket demand for many of our products and our Government Systems business may reduce our exposure to these business downturns, we have experienced these conditions in our business in the past and may experience downturns in the future.
WE DEPEND TO A SIGNIFICANT DEGREE ON U.S. GOVERNMENT CONTRACTS, WHICH ARE SUBJECT TO UNIQUE RISKS.
In fiscal 2000, 27% of our sales were derived from United States government contracts. In addition to normal business risks, companies engaged in supplying military equipment to the United States government are subject to unique risks which are largely beyond our control. These risks include:
- dependence on Congressional appropriations and administrative allotment of funds;
- the ability of the U.S. government to terminate, without prior notice, partially completed government programs that were previously authorized;
- changes in governmental procurement legislation and regulations and other policies which may reflect military and political developments;
- significant changes in contract scheduling;
- intense competition for available United States government business necessitating increases in time and investment for design and development;
- difficulty of forecasting costs and schedules when bidding on developmental and highly sophisticated technical work;
- changes over the life of United States government contracts, particularly development contracts, which generally result in adjustments of contract prices; and
- claims based on United States government work, which may result in fines, the cancellation or suspension of payments or suspension or debarment proceedings affecting potential further business with the United States government.
OUR LARGEST CUSTOMERS HAVE SUBSTANTIAL BARGAINING POWER, WHICH COULD ADVERSELY AFFECT OUR BUSINESS.
Our largest customers have substantial bargaining power, including with respect to price and other commercial terms. Although we believe that we generally enjoy good relations with our customers, loss of all or a substantial portion of our sales to any of our large volume customers for any reason, including the loss of contracts, reduced or delayed customer requirements or strikes or other work stoppages affecting production by these customers, could have a material adverse effect on our business, financial condition and results of operations. During fiscal 2000, various branches of the United States government accounted for 27% of our total sales and The Boeing Company accounted for 9% of our total sales.
IMPEDIMENTS TO THE TRANSITION TO FREE FLIGHT TECHNOLOGIES, INCLUDING THE FAILURE OF GOVERNMENT AVIATION AGENCIES TO PROVIDE THE NECESSARY INFRASTRUCTURE TO ENABLE THIS TRANSITION, MAY IMPACT FUTURE SALES.
The aerospace industry is experiencing a global transition from traditional communications, navigation, surveillance and air traffic control systems to "free flight" air traffic management systems utilizing satellite-based technologies that will allow pilots to fly at desired paths and speeds selected in real time, while still complying with instrument flight regulations. This transition to free flight technologies will require the use of digital communications systems, global positioning system navigation, satellite surveillance techniques and ground surveillance systems. Free flight technologies are expected to result in more direct and efficient flight routes, fewer flight delays and reduced airport congestion.
The FAA and similar aviation authorities throughout the world are developing national and international standards and the necessary infrastructure, including ground surveillance systems, for free flight technologies. As a result, free flight technologies and the demand for products using these technologies is expected to develop incrementally and on varying timetables across geographic regions throughout the world. We and other suppliers are actively involved in establishing new regulatory standards and are working closely with regulatory agencies and industry forums around the world to ensure that our free flight architectures and products will be compliant.
Although we believe that we are well positioned to participate in this market evolution, our ability to capitalize on the transition to free flight technologies is subject to various risks, including:
- delays in the development of the necessary satellite and ground infrastructure by U.S. and foreign governments;
- delays in adopting national and international regulatory standards;
- failure of our product development investments in communications, navigation and surveillance products that enable free flight to coincide with market evolution to, and demand for, these products; and
- the ability and desire of customers to invest in products enabling free flight.
OUR MANUFACTURING OPERATIONS IN CALIFORNIA MAY BE ADVERSELY AFFECTED BY POWER OUTAGES AND WILL BE ADVERSELY AFFECTED BY INCREASED ELECTRIC POWER COSTS IN THAT STATE.
We have manufacturing operations in California, which may experience electric power outages due to the difficulties being encountered by the electric utility industry in that state. If our California operations were to shut down due to lack of electric power for extended periods, they might be unable to meet customers' delivery schedules, thereby adversely affecting our revenue. In addition, our California operations may experience increased operating expenses due to inefficiencies resulting from irregular interruptions in electric power supply. These operations also will incur increased electric power costs in the future. We are unable to predict how long the difficulties faced by the electric utility industry in California will continue, or how such difficulties will be resolved. To the extent they do continue and our operations experience power outages and/or increases in their cost of electric power, our business could be adversely affected.
WE DO NOT HAVE A RECENT OPERATING HISTORY AS AN INDEPENDENT COMPANY.
We do not have a recent operating history as an independent company. The historical financial information we have included in this information statement has been derived from Rockwell's consolidated financial statements and does not reflect what our financial position, results of operations and cash flows would have been had we been a separate, stand-alone entity during the periods presented. Rockwell did not account for us, and we were not operated, as a single stand-alone entity for the periods presented. In addition, the historical information is not necessarily indicative of what our results of operations, financial position and cash flows will be in the future. For example, following our separation from Rockwell, changes will occur in our cost structure, funding and operations, including changes in our tax structure, increased costs associated with reduced economies of scale and increased costs associated with becoming a public, stand-alone company. While we have been profitable as part of Rockwell, we cannot assure you that as a stand-alone company our profits will continue at a similar level.
In addition, we have historically relied on Rockwell for various financial, legal, administrative and other corporate services to support our operations. After the distribution, Rockwell will continue to supply us certain of these services on a short-term transitional basis. However, we will be required to establish the necessary infrastructure and systems to supply these services on an ongoing basis. We may not be able to replace these services provided by Rockwell in a timely manner or on terms and conditions, including cost, as favorable as those we receive from Rockwell.
Furthermore, following the distribution we will maintain our own banking relationships and sources of long-term funding. We have entered into a credit facility and expect to establish a commercial paper program, one or both of which we will use to fund a pre-distribution payment to Rockwell of $400 million and for our working capital and other general corporate purposes following the distribution. Although we believe that cash flows from operations and available borrowings under our credit facility and commercial paper program will be sufficient to satisfy our future working capital, research and development, capital expenditure and other financing requirements, there can be no assurance that this will be the case.
OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE PROJECTIONS AND BUSINESS TRENDS INCLUDED IN THIS INFORMATION STATEMENT.
In addition to the historical information included herein, this information statement contains statements, including certain projections and business trends, that are forward-looking statements. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including those discussed in this information statement, as well as other risks and uncertainties, including but not limited to those detailed
from time to time in our Securities and Exchange Commission filings. Please see "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Cautionary Statement".
RISKS RELATED TO OUR SEPARATION FROM ROCKWELL,
THE SECURITIES MARKETS AND OWNERSHIP OF OUR COMMON STOCK
SUBSTANTIAL SALES OF OUR COMMON STOCK MAY OCCUR AFTER THE DISTRIBUTION, WHICH COULD CAUSE OUR STOCK PRICE TO DECLINE.
There is no current trading market for our common stock, and while a "when-issued" trading market is expected to develop prior to the distribution, there can be no assurance as to the prices at which trading in our common stock will occur after the distribution. At least until our common stock is fully distributed and an orderly market develops, and even thereafter, the market price of our common stock may fluctuate significantly.
Substantially all of the shares of our common stock distributed in the distribution will be eligible for immediate resale in the public market. In spin-off transactions similar to the distribution, it is not unusual for a significant redistribution of shares to occur during the first few weeks or even months following completion of the spin-off. We are unable to predict whether substantial amounts of our common stock will be sold in the open market following the distribution or what effect these sales may have on the market price of our common stock. A portion of Rockwell's common stock is held by index funds tied to the Standard & Poor's 500 index. If our stock is not included in this index at the time of Rockwell's distribution of our common stock, these index funds will be required to sell our stock. Any sales of substantial amounts of our common stock in the public market, or the perception that any redistribution has not been completed, could materially adversely affect the market price of our common stock.
PROVISIONS IN OUR ORGANIZATIONAL DOCUMENTS AND RIGHTS PLAN AND DELAWARE LAW WILL MAKE IT MORE DIFFICULT FOR SOMEONE TO ACQUIRE CONTROL OF US.
Our restated certificate of incorporation, our amended by-laws, our rights plan and the Delaware General Corporation Law contain several provisions that would make more difficult an acquisition of control of our company in a transaction not approved by our board of directors, including transactions in which shareowners might otherwise receive a premium for their shares over then current prices, and that may limit the ability of shareowners to approve transactions that they may deem to be in their best interests. Our restated certificate of incorporation and amended by-laws include provisions such as:
- the division of our board of directors into three classes to be elected on a staggered basis, one class each year;
- a provision authorizing our board of directors to issue shares of our preferred stock in one or more series without further authorization of our shareowners;
- a prohibition on shareowner action by written consent;
- a requirement that shareowners provide advance notice of any shareowner nomination of directors or any proposal of new business to be considered at any meeting of shareowners;
- a requirement that a supermajority vote be obtained to remove a director for cause or to amend or repeal specified provisions of our restated certificate of incorporation or our amended by-laws;
- elimination of the right of shareowners to call a special meeting of shareowners; and
- a fair price provision, as described under "Description of Capital Stock -- Our Restated Certificate of Incorporation and Amended By-Laws".
Our rights agreement gives our shareowners rights that would substantially increase the cost of acquiring us in a transaction not approved by our board of directors.
In addition, Section 203 of the Delaware General Corporation Law generally provides that a corporation shall not engage in any business combination with any interested shareowner during the three-year period following the time that the shareowner becomes an interested shareowner, unless a majority of the directors then in office approves either the business combination or the transaction that results in the shareowner becoming an interested shareowner or specified shareowner approval requirements are met.
WE MAY BE RESPONSIBLE FOR FEDERAL INCOME TAX LIABILITIES THAT RELATE TO THE DISTRIBUTION.
The distribution is conditioned upon the receipt by Rockwell of a tax ruling from the Internal Revenue Service, or the IRS, to the effect that the distribution will qualify as a tax-free reorganization for U.S. federal income tax purposes. Please see "The Distribution -- Certain Federal Income Tax Consequences of the Distribution". While such a tax ruling generally is binding on the IRS, the continuing validity of any such ruling is subject to certain factual representations and assumptions. We are not aware of any facts or circumstances that would cause these representations and assumptions to be untrue.
The tax allocation agreement to be entered into between us and Rockwell provides that we will be responsible for any taxes imposed on Rockwell, us or Rockwell shareowners as a result of either:
- the failure of the distribution to qualify as a tax-free reorganization for U.S. federal income tax purposes, or
- the subsequent disqualification of the distribution as a tax-free transaction to Rockwell for U.S. federal income tax purposes,
if the failure or disqualification is attributable to specific post-distribution actions by or in respect of us, our subsidiaries or our shareowners. For example, even if the distribution otherwise qualifies as a tax-free reorganization for U.S. federal income tax purposes, it may be disqualified as tax-free to Rockwell if 50% or more of our stock is acquired as part of a plan or series of related transactions that include the distribution. For this purpose, any acquisitions of our stock within two years before or after the distribution are presumed to be part of such a plan, although Rockwell or we may be able to rebut that presumption. Under proposed IRS regulations, if specified conditions are satisfied, an acquisition occurring more than six months after the distribution will not be considered as part of a plan which includes the distribution provided that there was no agreement, understanding, arrangement or substantial negotiations concerning the acquisition before a date that is six months after the distribution. There is no assurance that the proposed regulations will become effective. The process for determining whether a change of ownership has occurred under the tax rules is complex and uncertain. If we do not carefully monitor our compliance with these rules we might inadvertently cause or permit a change of ownership to occur, triggering our obligation to indemnify Rockwell pursuant to the tax allocation agreement. In addition, our obligation to indemnify Rockwell in the event that a change of ownership causes the distribution not to be tax-free could discourage or prevent a third party from making a proposal to acquire our company.
If we were required to pay any of the taxes described above, the payment would be substantial and would have a material adverse effect on our business, financial condition and results of operation.
THE ROCKWELL COLLINS BUSINESS
Rockwell Collins is a world leader in providing aviation electronics and airborne and mobile communications products and systems for commercial and military applications. We have a global presence, with operations in 27 countries, and serve our worldwide customer base through our Commercial Systems and Government Systems businesses. Our Commercial Systems business supplies flight deck electronic products and systems, including communications, navigation, display and automatic flight control systems, as well as in-flight entertainment and information management systems, to manufacturers of commercial air transport, business and regional aircraft and commercial airlines throughout the world. Our Government Systems business supplies defense electronics products and systems, including communications, navigation and integrated systems, for airborne, ground and shipboard applications to the U.S. Department of Defense, foreign militaries and manufacturers of military aircraft and helicopters. In addition, both our Commercial Systems and Government Systems businesses provide a wide array of services and support to our customers through our network of over 60 service locations worldwide.
In 1996, we consolidated our Commercial Systems and Government Systems businesses under a single management team and implemented strategies to sustain profitable growth. At that time, we also implemented a shared services model which consolidated common functions such as manufacturing, procurement, information technology, finance, human resources and certain engineering functions. From 1996 through fiscal 2000, we achieved a compound annual sales growth rate of approximately 14%, with operating margins of approximately 16% in fiscal 2000. With fiscal 2000 sales of $2.5 billion, we are a major global supplier to the aerospace industry with approximately 17,500 employees, approximately 4,200 of whom are engineers. Sales outside the United States, which include export sales and sales by our non-U.S. subsidiaries, accounted for approximately 40% of total sales in fiscal 2000.
Our sales by product category for the three fiscal years ended September 30, 2000 and the six months ended March 31, 2000 and 2001 were as follows (in millions):
FISCAL YEAR SIX MONTHS
ENDED SEPTEMBER 30, ENDED MARCH 31,
-------------------------- ----------------
1998 1999 2000 2000 2001
------ ------ ------ ------ ------
Commercial Avionics Products.......... $1,095 $1,213 $1,231 $ 580 $ 618
In-Flight Entertainment Products...... 118 333 355 164 178
Defense Electronics Products.......... 813 892 924 437 481
------ ------ ------ ------ ------
Total....................... $2,026 $2,438 $2,510 $1,181 $1,277
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The following charts depict our sales by product category and geographic region for the fiscal year ended September 30, 2000:
2000 SALES BY PRODUCT CATEGORY 2000 SALES BY GEOGRAPHIC REGION [2000 SALES BY PRODUCT CATEGORY PIE CHART] [2000 SALES BY GEOGRAPHIC REGION PIE CHART] |
[United States (60%);
[Commercial Avionics (49%); Europe (22%); Asia-Pacific (9%);
Defense Electronics (37%); Canada (6%); Africa/Middle East (2%);
In-Flight Entertainment (14%)] Latin America (1%)]
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PRODUCT CATEGORIES
We design, develop, manufacture, market, distribute, sell, service and support a broad range of aviation electronics and airborne and mobile communications products and systems for commercial and military applications. While products, systems and services in our Commercial Systems business are primarily focused on aviation applications, our Government Systems business also offers products and systems for ground and shipboard applications. Through our network of over 60 service locations worldwide, both our Commercial Systems and Government Systems businesses also provide a wide range of services and support to our customers, including equipment repair and overhaul, service parts, field service engineering, training services, technical information services and aftermarket used equipment sales.
COMMERCIAL AVIONICS PRODUCTS
We are one of the world's leading suppliers of avionics equipment to manufacturers of commercial air transport, business and regional aircraft and commercial airlines throughout the world. This equipment includes:
- communications products and systems, such as data links, High Frequency and Very High Frequency communications systems and satellite communications systems;
- navigation products and systems, including a broad range of navigation sensors and flight management systems;
- surveillance products and systems, such as weather radar, traffic collision avoidance systems and Mode S transponders, which aid pilots in awareness of airborne obstacles and resolve flight path conflicts;
- flight deck products and systems, which include a broad offering of multi-function liquid crystal display units;
- automatic flight control systems, which perform manual and automatic pilot and landing functions;
- integrated avionics systems, such as our Pro Line 21 system, which integrate communications and navigation sensors, displays and flight control systems; and
- integrated information systems, such as our I(2)S system, which is focused on providing information management solutions that help improve flight operations, maintenance and cabin services.
IN-FLIGHT ENTERTAINMENT PRODUCTS
We are a leading provider of in-flight entertainment and cabin management products and systems and have a full line of audio and video entertainment solutions for standard and widebody aircraft. In addition to offering audio, video and display products, we provide integrated in-flight entertainment systems, including our Total Entertainment System, to provide airline passengers with a variety of entertainment options while in flight. In-flight entertainment products and systems are marketed worldwide to commercial air transport manufacturers and commercial airlines.
DEFENSE ELECTRONICS PRODUCTS
We provide defense electronics equipment to all branches of the U.S. Department of Defense (Air Force, Army, Navy and Marines), the U.S. Coast Guard, Ministries of Defense throughout the world and manufacturers of military aircraft and helicopters. Our defense electronics equipment, which is supplied by our Government Systems business, includes:
- communications products and systems designed to help our customers transfer information across the communications spectrum, ranging from Low and Very Low Frequency to High, Very High and Ultra High Frequency to satellite communications;
- military data link products and systems;
- navigation products and systems, including radio navigation systems, global positioning systems, handheld navigation systems and multi-mode receivers; and
- integrated systems for the flight deck, such as our Flight2 system, an avionics architecture that integrates flight operations with navigation and guidance functions and that can include flight controls and displays, information/data processing and communications, navigation and/or safety and surveillance systems.
We have incumbent positions on multiple military transport and fighter planes and helicopters. These platforms include:
FIGHTER (PLANES) TRANSPORT (PLANES) FIGHTER (HELICOPTERS) TRANSPORT (HELICOPTERS)
-------------------- -------------------- ---------------------- -----------------------
Boeing B-52 Boeing C-17 Bell 406/OH-58D Agusta A109
Boeing F-15 Eagle LM C-130 Hercules Bell AH-1 Cobra Bell UH-1/212/412
Boeing F/A-18 Hornet Lockheed C-5 Galaxy Boeing AH-64 Apache Huey
Boeing AV-8B Boeing 707/E-3 Boeing/Sikorsky RAH-66 Boeing CH-47 Chinook
Joint Strike Fighter Sentry Comanche Eurocopter AS 332
Lockheed F-117 Night Boeing E-6 TACAMO II Super Puma
Hawk Lockheed Martin P-3 Kaman SH-2 Seasprite
Lockheed F-22 Raptor Northrop Grumman E-2 Sikorsky S-76
Lockheed F-16 Falcon Northrop Grumman E-8 Sikorsky S-92
Northrop Grumman B-2 JSTARS Sikorsky S-70
Boeing B-1 Lancer Boeing C/KC-135 Sikorsky UH-60 Black
Saab Gripen Hawk
Bell/Boeing V-22
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INDUSTRY TRENDS
The aerospace industry is experiencing several significant trends that present opportunities and challenges to industry suppliers. These trends, which influence our business strategies, include:
- consolidation of aerospace suppliers and the customers we serve;
- increased customer demand for integrated system solutions;
- evolving buying practices of customers; and
- emerging technologies for air traffic management.
The aerospace industry in which we operate has been experiencing significant consolidation among suppliers, including us and our competitors, and the customers we serve. Commercial airlines have increasingly been merging and creating global alliances to achieve greater scale and enhance their geographic reach. Aircraft manufacturers continue to make acquisitions to expand their product portfolios to better compete in the global marketplace. In addition, aviation electronics and communications suppliers have been consolidating and forming alliances to broaden their product and integrated system offerings and achieve critical mass. This supplier consolidation is in part attributable to aircraft manufacturers and airlines more frequently awarding long-term sole source or preferred supplier contracts to the most capable suppliers, thus reducing the total number of suppliers from whom components and systems are purchased. Recent examples of aerospace supplier consolidations include the merger of Honeywell, Inc. and AlliedSignal, Inc., followed shortly thereafter by the announced merger of General Electric Company with the new Honeywell. Other large competitors that have recently been created include Raytheon Company, BAE Systems, plc, Thales S.A. (the parent company of Sextant Avionique, S.A.) and Lockheed Martin Corporation.
Historically, aircraft manufacturers have performed the integration role in manufacturing airplanes, installing multiple products and ensuring their compatibility. However, as technology has advanced and manufacturers have been refocusing on their core strengths, manufacturers are more frequently requiring suppliers to take a "systems" approach to aviation electronics and communications designs. Customers
increasingly no longer desire stand-alone products, but instead are seeking systems that integrate a broad range of functions, including communications, navigation, flight management and display systems in the flight deck, and audio, video, e-mail and Internet services in the cabin. As a result, suppliers are taking on the added roles of developing flexible systems architectures and performing systems integration, in addition to designing new product technologies that are compatible with these new architectures.
Economics are transforming the aerospace industry, causing the buying practices of customers to continue to evolve. With increasing global competitive pressures to improve quality and reduce costs, customers are more frequently outsourcing products and services that they have historically provided through internal capabilities. In addition, customers are increasingly reducing the number of suppliers they buy from and demanding "single-stop-shopping" for products, systems, services and support. Similarly, the U.S. Department of Defense, a major customer of our Government Systems business, has undergone significant procurement reform over the last five years, seeking to adopt more commercial buying practices. These changes in the buying behavior of aerospace customers provide new opportunities to suppliers who are positioned with the product portfolios and wide range of service offerings to meet their customers' requirements.
The aerospace industry is experiencing a global transition from traditional communications, navigation, surveillance and air traffic control systems to "free flight" air traffic management systems utilizing satellite-based technologies that will allow pilots to fly at desired paths and speeds selected in real time, while still complying with instrument flight regulations. This transition to free flight technologies will require the use of digital communications systems, global positioning system navigation, satellite surveillance techniques and ground surveillance systems. Free flight technologies are expected to result in more direct and efficient flight routes, fewer flight delays and reduced airport congestion. We estimate that the market for free flight avionics equipment will approximate $20 billion over the next 15 to 20 years.
The FAA and similar aviation authorities throughout the world are developing national and international standards and the necessary infrastructure, including ground surveillance systems, for free flight technologies. As a result, free flight technologies and the demand for products using these technologies is expected to develop incrementally and on varying timetables across geographic regions throughout the world. We and other suppliers are actively involved in establishing new regulatory standards and are working closely with regulatory agencies and industry forums around the world to ensure that our free flight architectures and products will be compliant.
BUSINESS STRATEGIES
We have developed many leading market positions as we have grown into a supplier of a broad range of aviation electronics and communications products and systems. We seek to enhance our leadership positions and capitalize on our existing customer, product and technology strengths, as well as the industry trends described above, to provide consistent and profitable growth by employing the business strategies described below.
OPTIMIZE OUR HERITAGE BUSINESSES
One of our key strategies is to focus continually on growing our heritage businesses of supplying communications, navigation, display and automatic flight control products and systems for flight deck and other applications. We seek to achieve this growth by leveraging our broad portfolio of aviation electronics and communications products and one of the largest installed bases of customers in the industry.
A recent example of growth in our heritage businesses has been the expansion of our product offerings in display technology. We have a long history of designing, developing and manufacturing flight deck displays, initially utilizing cathode ray tube technology and, more recently, liquid crystal display technology. In an effort to increase our market presence in flight deck displays, in March 1999 we acquired the remaining 50% interest in Flight Dynamics, Inc. that we did not already own. Flight Dynamics, a market leader in head-up guidance systems for aircraft, had been operated as a joint venture of Rockwell Collins and Kaiser Aerospace and Electronics Corporation. In December 2000, we acquired Kaiser Aerospace and Electronics Corporation to
enhance our capability to offer customers complete display solutions for high performance military aircraft. This acquisition also will enable us to migrate our expanded military display technologies to the commercial sector.
In anticipation of increasing customer demand for integrated systems solutions, we began in 1994 developing a next generation integrated avionics architecture in a further effort to grow our heritage businesses. This architecture has been implemented into many of our current products and, when completed, will bring together in one system all the product elements of the flight deck, including flight management systems, communications and navigation controls, flight controls, surveillance systems controls and display units. This integrated system will be marketed to address all of our served commercial and government avionics markets. This system's flexible, integrated architecture, radio and navigation products and intuitive human-machine interfaces are expected to make it one of the most advanced flight deck solutions in the industry.
FOCUS ON EXPANSION AND NEW GROWTH OPPORTUNITIES BEYOND OUR HERITAGE BUSINESSES
Another of our key strategies is to seek expansion and new growth opportunities beyond our heritage businesses. In recent years, we have implemented this strategy by focusing on our eFlight(TM) initiative, free flight technologies and service and support.
eFlight(TM). A significant growth strategy for Rockwell Collins is our eFlight(TM) initiative, which we developed as we continued to look beyond our heritage businesses at avenues for growth and to expand our aviation electronics and communications content on all platforms. Our eFlight(TM) initiative is comprised of in-flight entertainment systems and integrated information systems.
The first element of our eFlight(TM) strategy, in-flight entertainment systems, began with our acquisition of Hughes-Avicom, Inc. in 1997. This acquisition gave us a leadership position in supplying in-flight entertainment equipment to larger, wide-body aircraft and brought together our capabilities in providing innovative and reliable products and our worldwide support system with the experience of Hughes-Avicom in in-flight entertainment systems. In order to provide airline customers with a single vendor solution for their in-flight entertainment needs, in July 2000 we acquired Sony Trans Com, a leading supplier of in-flight entertainment systems on standard or narrow-body aircraft.
The second element of our eFlight(TM) initiative is I(2)S, our recently launched integrated information system, which capitalizes on our strengths in flight deck and passenger communications systems. I(2)S is one of the first integrated communications systems enabling timely transfer of information between an airplane's flight deck and cabin and the ground infrastructure. I(2)S is designed to improve flight operations, aircraft maintenance and cabin services and facilitates access to the Internet, e-mail and live TV.
Free Flight. We continue to take a leadership position in the emerging era of free flight technologies, the global transition from traditional communications, navigation and surveillance systems to satellite-based technologies. With one of the broadest product and technology portfolios in the industry, we believe we are well positioned to deliver all the communications, navigation and surveillance products that enable free flight. We are also taking a leadership role in industry forums which will define this market going forward.
Service and Support. Another of our avenues for expansion is in the area of service and support. As discussed above, economics are transforming the industry and aviation electronics and communications customers are looking for suppliers to provide "single-stop-shopping" for products, systems, service and support. Over the last few years, we have developed a broad range of new, value-added service options to offer our customers. These include:
- providing web-based purchasing for service parts, technical publications and training;
- expanding rental and exchange pools for spare parts; and
- making spare units available at airports for prompt replacement of equipment needing repair.
We have also augmented our service and support offerings through acquisitions. In 1997 we acquired Melbourne Avionics Workshop, a service operation in Australia, to complement and expand upon the existing capabilities of our Australian service facility. In 1999 we acquired Intertrade, Ltd. to provide our customers with an outlet to purchase, lease, exchange or sell their used aircraft equipment. In addition, we have expanded our service solutions and service network by establishing strategic alliances with a number of leading aircraft component suppliers. We believe that our growing service and support business, together with our Government Systems business, reduces our exposure to the cyclicality of the commercial aviation electronics and communications markets which we serve.
STRIVE FOR OPERATIONAL EXCELLENCE THROUGH LEAN ELECTRONICS(SM) INITIATIVE
Established in 1998, our Lean Electronics(SM) initiative is designed to make us more agile, more efficient and more responsive to our customers' needs. Lean Electronics(SM) actions are focused on reducing product costs and improving product quality, while also lowering required asset levels, and reducing product development and response times. We believe that through actions already taken and continuous core process improvements, we will be better positioned to be competitive and meet our long-term business goals. A key element of our Lean Electronics(SM) initiative is our recent investment in an enterprise resource planning system. To date, expenditures for this enterprise resource planning system, which has been deployed in approximately 80% of our current businesses, have approximated $150 million. We anticipate full deployment of our enterprise resource planning system by the end of 2002. This system is expected to support nearly all of our internal operational and infrastructure processes, other than engineering design, and will consolidate multiple material requirements planning, order management and financial systems into one integrated company-wide system. We believe the enterprise resource planning system will result in significant cost reductions from, among other things, reduced staffing requirements, the elimination of mainframe computer usage and improved inventory and supply chain management.
CUSTOMERS; SALES AND MARKETING
We serve a broad range of customers worldwide, including commercial air transport, business and regional aircraft manufacturers, military aircraft and helicopter manufacturers, airlines, the U.S. Department of Defense, other governmental agencies and foreign militaries. We market our products, systems and services directly to our Commercial Systems and Government Systems customers through an internal marketing and sales force. In addition, we utilize a worldwide dealer network to distribute our products.
Our ten largest customers accounted for 58% of total fiscal 2000 sales. In fiscal 2000, various branches of the U.S. Government accounted for 27% of our total sales and The Boeing Company accounted for 9% of our total sales.
COMPETITION
We operate in a highly competitive environment. Principal competitive factors include total cost of ownership, product and system performance, quality, service, design and engineering capabilities, new product innovation and timely delivery.
In our Commercial Systems business, our principal competitors for avionics systems are Honeywell International, Inc. and Sextant Avionique, S.A. (a business unit of Thales S.A., formerly Thomson-CSF). In October 2000, Honeywell International, Inc. announced that it had agreed to be acquired by General Electric Company. In-flight entertainment systems competitors include Matsushita Electronic Industrial Co., Ltd. and Sextant Avionique, S.A. In addition, our Commercial Systems business competes with other aviation electronics and communications suppliers and dealers, aircraft manufacturers and airlines for service and support business.
Our Government Systems business competes against a variety of companies, including Raytheon Company, Harris Corporation, BAE Systems, plc and Thales S.A., for communications and navigation equipment sales; and Honeywell International, Inc., Smiths Group plc and Thales S.A., in the area of
integrated systems. Our principal competitors in the sale of services and support to our Government Systems customers are the U.S. Government and other government contractors.
The recent trend toward industry consolidation has had a major impact on the competitive environment in which we operate. Over the past several years, our competitors have undertaken a number of mergers, alliances and realignments that have contributed to a very dynamic competitive landscape. During this same time frame, we have completed six acquisitions and entered into numerous strategic alliances to improve our competitive position.
RAW MATERIALS AND SUPPLIES
We believe we have adequate sources for the supply of raw materials and components for our manufacturing needs with suppliers located around the world. Electronic components and other raw materials used in the manufacture of our products are generally available from several suppliers. However, some of our suppliers currently allocate various commodities among their customers in response to supply shortages. For example, the increased demand for certain materials in the telecommunications industry has created shortages of electronic components, including tantalum and ceramic capacitors and flash memory. We continue to work with our supply base for these and other components to ensure an adequate source of supply, including through strategic alliances, dual sourcing, identification of substitute or alternate parts that meet performance requirements and last-time and life-time buys. Although historically we have not experienced any significant difficulties in obtaining an adequate supply of raw materials and components necessary for our manufacturing operations, the loss of a significant supplier or the inability of a supplier to meet performance and quality specifications or delivery schedules could have a material adverse effect on our business, financial condition and results of operations.
BACKLOG
The following table summarizes our backlog (in millions):
SEPTEMBER 30,
---------------- MARCH 31,
1999 2000 2001
------ ------ ---------
Commercial Systems...................................... $ 835 $ 878 $ 882
Government Systems:
Funded Orders......................................... 1,047 902 1,111
Unfunded Orders....................................... 78 120 125
------ ------ -------
Total Backlog................................. $1,960 $1,900 $ 2,118
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Our backlog represents the aggregate of the sales price of orders received from customers, but not recognized as revenue, and excludes unexercised options. Although we believe that the orders included in backlog are firm, some orders may be canceled by the customer without penalty, and we may elect to permit cancellation of orders without penalty where our management believes that it is in our best interest to do so.
JOINT VENTURES
As the aviation electronics and communications industry has been experiencing significant trends of consolidation of suppliers and has become more globalized, joint ventures and other cooperative arrangements have become an important element of our business strategies. We currently have interests in three joint ventures with operations in the United States. Our joint ventures include our 50%-owned joint venture with BAE Systems, plc (formerly Marconi Electronic Systems) for joint pursuit of the worldwide military datalink market. In addition, Kaiser Aerospace and Electronics Corporation, our wholly-owned subsidiary, has a 50%-owned joint venture with Elbit Systems, Ltd. (formerly EFW, Inc.) for joint pursuit of helmet mounted cueing systems for the worldwide military fixed wing marketplace. In accordance with generally accepted accounting principles, these joint ventures are accounted for under the equity method.
ACQUISITIONS AND DISPOSITIONS
We continually consider various strategic and business opportunities, including strategic acquisitions and alliances, licenses and marketing arrangements, and review the prospects of our existing businesses to determine whether any of them should be modified, sold or otherwise discontinued.
Since fiscal 1998, we have completed six cash acquisitions to augment our internal growth plans. These acquisitions, which have been targeted in the general areas of in-flight entertainment systems, flight deck displays technology and service and support, include:
- in-flight entertainment systems: the December 1997 acquisition of Hughes-Avicom International, Inc. and the July 2000 acquisition of Sony Trans Com;
- displays technology: the March 1999 acquisition of the remaining 50% interest in Flight Dynamics that we did not already own and the December 2000 acquisition of Kaiser Aerospace and Electronics Corporation; and
- service and support: the November 1997 acquisition of Melbourne Avionics Workshop and the August 1999 acquisition of Intertrade Ltd.
In October 1998 we completed the disposition of our railroad electronics business in order to better align the strategic fit and contribution of our businesses. Please see Note 3, Acquisitions of Businesses in the Notes to Financial Statements.
RESEARCH AND DEVELOPMENT
We have significant research, development, engineering and product design capabilities. At March 31, 2001, we employed approximately 4,200 engineers.
We spent $265 million, $232 million and $202 million in fiscal 2000, 1999 and 1998, respectively, on research and development. In addition, customer-sponsored research and development was $203 million, $188 million and $182 million in fiscal 2000, 1999 and 1998, respectively.
ROCKWELL SCIENCE CENTER
Following the distribution, we and Rockwell each will own a 50% equity interest in the Rockwell Science Center, which is engaged in advanced research and development of technologies in electronics, imaging and optics, material and computational sciences and information technology. Following the distribution, we and Rockwell may seek new equity investors in the Rockwell Science Center with complementary financial and technological resources. The Rockwell Science Center will provide research and development services to us, as well as to The Boeing Company, Conexant Systems, Inc., Rockwell and the U.S. Government. Rockwell will grant the Rockwell Science Center the exclusive right to use the Rockwell name in conjunction with the Rockwell Science Center and Rockwell Scientific Company names. This exclusive right would terminate in certain events, including the aggregate ownership interest of us and Rockwell in the Rockwell Science Center falling below 50%, as described in the distribution agreement to be entered into among Rockwell, us and the Rockwell Science Center.
INTELLECTUAL PROPERTY
Following the distribution, we will own over 600 United States and foreign patents and numerous pending patent applications, including those patents and patent applications purchased in our recent acquisitions of Sony Trans Com and Kaiser Aerospace and Electronics Corporation. We also license certain patents relating to our manufacturing and other activities. While in the aggregate we consider our patents and licenses important to the operation of our business, we do not consider them of such importance that the loss or termination of any one of them would materially affect us.
Following the distribution, Rockwell will continue to own the Rockwell name and will recommend to its shareowners at its 2002 annual meeting an amendment to its certificate of incorporation to change its name to Rockwell Automation, Inc. We will continue to be known as Rockwell Collins, Inc. and Rockwell will grant us
the exclusive right to continue to use the Rockwell Collins name other than in connection with automation products. This exclusive right would terminate following certain change of control events applicable to us as described in the distribution agreement to be entered into among Rockwell, us and the Rockwell Science Center.
We rely primarily on patent, copyright, trademark and trade secret laws, as well as other industrial property right statutes worldwide, to protect our proprietary technologies and processes. We also rely on nondisclosure and confidentiality agreements and other methods to protect our proprietary technologies and processes. In addition, we are sometimes asked to incorporate the intellectual property of our customers into specific products for such customers and we have obligations with respect to the use and disclosure of their intellectual property. We cannot assure you that:
- the steps we take to prevent misappropriation or infringement of our intellectual property or the intellectual property of our customers will be successful;
- any of our existing or future patents will not be challenged, invalidated or circumvented; or
- any of the protective measures described above will provide meaningful protection.
We are not a party to any material litigation involving infringement of intellectual property rights of third parties. However, from time to time we have received claims of infringement of intellectual property rights of others and we may continue to receive such claims in the future. We cannot assure you that actions alleging infringement by us of third-party intellectual property rights will not materially and adversely affect our business, financial condition and results of operations. If claims or actions are asserted or commenced against us, in certain situations we may seek to obtain licenses under a third party's intellectual property rights to avert or resolve a controversy. There can be no assurance that under such circumstances a license would be available on commercially reasonable terms, if at all.
EMPLOYEES
As of March 31, 2001, we had approximately 17,500 full-time employees. Approximately 2,700 of our employees in the United States are covered by collective bargaining agreements.
A collective bargaining agreement with the International Association of Theatrical and Stage Employees covering approximately 350 IFE employees located throughout the United States expires on December 31, 2001. Negotiations with this union will commence during the last calendar quarter of 2001.
In July 1998, following a 16-day strike by members of the International Brotherhood of Electrical Workers Local 1634, we entered into a collective bargaining agreement with that union covering approximately 600 of our production and maintenance employees at our Coralville, Iowa facility. This agreement will expire in May 2003. No other significant work stoppages have occurred in the past five years with our union workforce.
CYCLICALITY
The avionics and communications markets in which we sell our products are, to varying degrees, cyclical and have experienced periodic downturns. For example, markets for our commercial aviation electronic products have experienced downturns during periods of slowdowns in the commercial airline industry and during periods of weak conditions in the economy generally, as demand for new aircraft generally declines during these periods.
PROPERTIES
As of March 31, 2001, we operated fourteen manufacturing facilities throughout the United States and one manufacturing facility each in Mexico, France, the United Kingdom and Australia. We also have 75 engineering facilities, sales offices, warehouses, and service locations. These facilities have aggregate floor space of approximately 5.5 million square feet, substantially all of which is in use. Of this floor space, approximately 63% is owned and approximately 37% is leased. There are no major encumbrances on any of
our plants or equipment, other than financing arrangements which in the aggregate are not material. In the opinion of management, our properties have been well maintained, are in sound operating condition and contain all equipment and facilities necessary to operate at present levels. A summary of floor space of these facilities at March 31, 2001 is as follows:
OWNED LEASED
LOCATION FACILITIES FACILITIES TOTAL
-------- ---------- ---------- -----
(IN THOUSANDS OF SQUARE FEET)
United States............................................ 3,392 1,620 5,012
Canada and Mexico........................................ -- 112 112
Europe................................................... 90 205 295
Asia-Pacific............................................. -- 53 53
South America............................................ -- 6 6
Australia................................................ -- 25 25
----- ----- -----
Total.......................................... 3,482 2,021 5,503
===== ===== =====
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OWNED LEASED
TYPE OF FACILITY FACILITIES FACILITIES TOTAL
---------------- ---------- ---------- -----
(IN THOUSANDS OF SQUARE FEET)
Manufacturing............................................ 1,284 550 1,834
Sales, Engineering, Service and General Office Space..... 2,198 1,471 3,669
----- ----- -----
Total.......................................... 3,482 2,021 5,503
===== ===== =====
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Our major facilities are located in Cedar Rapids, Iowa (830,000 square feet), Richardson, Texas (280,000 square feet), Melbourne, Florida (270,000 square feet), Coralville, Iowa (180,000 square feet), Irvine, California (390,000 square feet), Pomona, California (249,000 square feet), San Jose, California (200,000 square feet), Charlotte, North Carolina (77,000 square feet), Portland, Oregon (76,000 square feet) and Mexicali, Mexico (110,000 square feet). Our facilities are generally shared by our Commercial Systems and Government Systems businesses.
Certain of our facilities, including those located in California and Mexicali, Mexico, are located near major earthquake fault lines. We maintain only minimal earthquake insurance with respect to these facilities.
REGULATORY MATTERS
The continued sale, installation and operation of our products in commercial aviation applications is subject to continued compliance with applicable regulatory requirements and future changes to those requirements. In the U.S., our commercial aviation products are required to comply with Federal Aviation Administration (FAA) regulations governing production and quality systems, airworthiness and installation approvals, repair procedures and continuing operational safety. Some of our products, such as radio frequency transmitters and receivers, must also comply with Federal Communications Commission regulations governing authorization and operational approval of telecommunications equipment.
Internationally, similar requirements exist for airworthiness, installation and operational approvals. These requirements are administered by the national aviation authorities of each country and, in the case of Europe, coordinated by the European Joint Aviation Authorities. Many countries also impose specific telecommunications equipment requirements, administered through their national aviation authorities or telecommunications authority. In Europe, approval to import products also requires compliance with European Commission directives, such as those associated with electrical safety, electro-magnetic compatibility and the use of metric units of measurement.
Products already in service may also become subject to mandatory changes for continued regulatory compliance as a result of any identified safety issue, which can arise from an aircraft accident, incident or service difficulty report.
ENVIRONMENTAL MATTERS
Federal, state and local requirements relating to the discharge of substances into the environment, the disposal of hazardous wastes, and other activities affecting the environment have had and will continue to have an impact on our manufacturing operations. Thus far, compliance with environmental requirements and resolution of environmental claims have been accomplished without material effect on our liquidity and capital resources, competitive position or financial condition.
We believe that our expenditures for environmental capital investment and remediation necessary to comply with present regulations governing environmental protection and other expenditures for the resolution of environmental claims will not have a material adverse effect on our business or financial condition. Management cannot assess the possible effect of compliance with future requirements.
LEGAL PROCEEDINGS
On January 15, 1997, a civil action was filed against us in the United States District Court for the District of Arizona in Tucson, Universal Avionics Systems Corp. v. Rockwell International Corp. and Rockwell Collins, Inc., No. CV 97-28 TUC ACM, in which Universal, a manufacturer and marketer of aviation electronics, including Flight Management Systems (FMS), asserted four claims against us arising out of our participation in the FMS business: (1) attempted monopolization under Section 2 of the Sherman Act; (2) anticompetitive conduct (exclusive dealing and tying) under Section 1 of the Sherman Act; (3) tortious interference with business relationships and prospective economic business advantage under the common law of Arizona; and (4) unfair competition under the common law of Arizona. Universal seeks damages of approximately $35 million before trebling for the alleged antitrust violations; actual damages of an unspecified amount for the alleged common law violations; punitive damages; attorneys' fees and injunctive relief. We and Rockwell have asserted counterclaims against Universal for defamation and unfair competition. We have denied and are vigorously defending against Universal's allegations. Discovery is essentially complete and in January 2000 we filed motions for summary judgment as to all of Universal's claims. The court has yet to render a decision on any of the pending motions for summary judgment and no trial date has been set.
On April 3, 2000, a civil action was filed against us in the Court of Common Pleas of Pennsylvania for Allegheny County, Westinghouse Air Brake Technologies Corp. v. Rockwell Collins, Inc. No. GD 00-5766, asserting various claims arising out of the plaintiff's purchase of our former Railroad Electronics Business pursuant to a Sale Agreement dated October 5, 1998. Specifically, the plaintiff alleges that it is entitled under provisions of the Sale Agreement to a post-closing adjustment of approximately $7 million in the purchase price, and that it is entitled to unspecified damages for alleged misrepresentations, breaches of warranty, mistake of fact, and failure by us to turn over certain assets and to provide certain post-closing support. On December 13, 2000, the trial court ordered that the claim for a post-closing adjustment in the purchase price be submitted to mandatory arbitration pursuant to provisions of the Sale Agreement, but declined to stay court proceedings on the other issues during pendency of the arbitration proceeding. The parties are in the early stages of discovery and in the process of initiating arbitration of the post-closing purchase price adjustment claim.
On December 14, 1995, a civil action was filed in the United States District Court for the Western District of Texas, El Paso Division, United States, ex. rel Staines v. Rockwell International Corp., No. LP 95 CA 514, under the qui tam provisions of the False Claims Act seeking unspecified damages for alleged violations of the Act on two contracts with agencies of the U.S. Government under which an electronics fabricating plant in El Paso now owned by The Boeing Company performed work on subcontract for Boeing, and one contract where the plant performed work on subcontract for our Dallas, Texas facility. Specifically with respect to the work performed at the El Paso plant for us, the plaintiff alleges that certain components were improperly tested and that certain components removed from circuit boards for testing were thereafter reinstalled when they should not have been. The Boeing Company has agreed to defend and indemnify us and Rockwell for claims relating to work performed on Boeing contracts, and for any wrongdoing that may have occurred at the El Paso plant relating to work performed there for us, but not for wrongdoing, if any, that may have occurred at or under the direction of our Dallas facility. In October 1998 the United States declined to
intervene in the action on its own behalf and the plaintiff has since proceeded to prosecute the action himself with private counsel. Rockwell and Boeing have denied wrongdoing and are vigorously defending the action. Discovery is not yet complete. On May 11, 1999 Boeing and Rockwell filed a motion to dismiss the case on the pleadings, which motion is still pending. On January 13, 2000, the case was placed in administrative closure by the court pending a decision in the Fifth Circuit Court of Appeals on the constitutionality of the False Claims Act.
On January 15, 1999, a civil action was filed against us and Hughes Electronics Manufacturing Service Company in the Superior Court of the State of California for Orange County, SOS Wireless Communications, Inc. v. Rockwell Collins, Inc., and Hughes Electronics Manufacturing Service Company, No. 804428, in which the plaintiff alleges defendants breached a contract to build a special purpose cellular telephone for the plaintiff and made various misrepresentations with respect thereto. The plaintiff seeks damages of approximately $29 million for breach of contract, negligent misrepresentation and intentional misrepresentation. We denied the allegation, filed a counterclaim against the plaintiff for approximately $1.1 million based on unpaid invoices for product delivered, and have vigorously defended the action. On August 9, 1999, the parties stipulated that the matter should be submitted to binding arbitration pursuant to the terms of a contractual arbitration clause, and the civil action was dismissed without prejudice. On August 25, 2000, the arbitrator entered an order granting judgment in favor of us and against the plaintiff in the amount of approximately $1.1 million on our counterclaim. Arbitration proceedings on the plaintiff's claims commenced on January 8, 2001 and are proceeding.
Various other lawsuits, claims and proceedings have been or may be instituted or asserted against Rockwell or us or our subsidiaries relating to the conduct of our business, including those pertaining to product liability, intellectual property, environmental, contract, safety and health, and employment matters.
Although the outcome of litigation cannot be predicted with certainty and some lawsuits, claims or proceedings may be disposed of unfavorably to us, based on our evaluation of matters which are pending or asserted, our management believes the disposition of such matters will not have a material adverse effect on our business or financial condition.
Pursuant to the terms of the distribution agreement to be entered into among Rockwell, the Rockwell Science Center and us, if the distribution occurs we will assume responsibility for all litigation, including environmental proceedings, against Rockwell or its subsidiaries in respect of our business.
CREDIT FACILITY AND COMMERCIAL PAPER PROGRAM
We have entered into a $500 million 364-day unsecured revolving credit facility and a $500 million five-year unsecured revolving credit facility with a group of banks. We also anticipate entering into a commercial paper program that will be supported by the credit facilities. We will fund the pre-distribution payment to Rockwell and obtain funds for working capital and other general corporate purposes through borrowings under the credit facilities, the issuance of commercial paper or a combination thereof.
The credit facilities contain, among other things, conditions precedent, covenants, representations and warranties and events of default customary for facilities of this type. Such covenants include certain restrictions on incurrence of secured indebtedness, consolidations and mergers, sales of assets and sale and lease-back transactions. The credit facilities also include a maximum leverage ratio based on consolidated debt to total capitalization. Complete copies of the forms of the credit agreements have been filed as exhibits to the registration statement of which this information statement is a part.
Under our commercial paper program we may from time to time sell up to $1 billion face amount of our unsecured short-term promissory notes in the commercial paper market in transactions not constituting a public offering pursuant to the exemption provided by Section 4(2) of the Securities Act of 1933, as amended. The commercial paper notes may bear interest or may be sold at a discount and will have a maturity not more than 364 days from the time of issuance.
HISTORICAL SELECTED FINANCIAL DATA
The following selected financial data have been derived from our financial statements. The data should be read in conjunction with our financial statements and notes thereto included elsewhere in this information statement. The statement of operations data for the years ended September 30, 1998, 1999 and 2000 and the statement of assets and liabilities data as of September 30, 1999 and 2000 have been derived from our audited financial statements. The statement of operations data for the years ended September 30, 1996 and 1997 and the statement of assets and liabilities data as of September 30, 1996, 1997 and 1998 have been derived from our unaudited financial information. The statement of operations data for the six months ended March 31, 2000 and 2001 and the statement of assets and liabilities data as of March 31, 2000 and 2001 have been derived from our unaudited financial statements, which, in the opinion of management, include all adjustments necessary for a fair presentation of results of operations for such periods and assets and liabilities as of such dates. Operating results for the six months ended March 31, 2001 are not necessarily indicative of the results that may be expected for the year ending September 30, 2001.
SIX MONTHS
ENDED
FISCAL YEAR ENDED SEPTEMBER 30, MARCH 31,
---------------------------------------------------- ----------------
1996(1) 1997 1998(2) 1999(3) 2000(4) 2000 2001(4)
------- ------ ------------- ------- ------- ------ -------
(IN MILLIONS)
STATEMENT OF OPERATIONS DATA:
Sales.......................................... $1,498 $1,701 $2,026 $2,438 $2,510 $1,181 $1,277
Cost of sales.................................. 1,162 1,255 1,603 1,782 1,845 865 944
Selling, general and administrative............ 226 237 256 278 274 131 157
Purchased research and development(5).......... -- -- 103 -- -- -- --
Income before income taxes and accounting
change....................................... 138 220 73 437 399 187 181
Net income(6).................................. 92 144 32 291 269 126 119
STATEMENT OF ASSETS AND LIABILITIES DATA (AT
END OF PERIOD):
Working capital(7)............................. $ 213 $ 286 $ 334 $ 451 $ 565 $ 575 $ 758
Property....................................... 218 229 322 365 417 361 476
Intangible assets.............................. 53 57 119 126 148 119 441
Total assets................................... 1,206 1,412 1,841 2,033 2,100 2,012 2,628
Rockwell's invested equity..................... 182 322 503 695 908 811 1,386
OTHER DATA:
Capital expenditures........................... $ 60 $ 72 $ 143 $ 127 $ 98 $ 37 $ 50
Depreciation and amortization.................. 52 58 66 86 99 45 68
EBIT(8)........................................ 138 220 73 437 399 187 181
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(2) Includes (a) $65 million ($43 million after tax) of realignment charges and
(b) $53 million ($33 million after tax) of charges for estimated losses on
two government contracts.
(3) Includes a $32 million ($20 million after tax) gain on the sale of a business.
(4) Commencing in the third quarter of 2000, we incurred costs that our management anticipated would be recovered under an in-flight network system contract. As a result of information which became available in March 2001, our management concluded that the contract award was no longer probable and, accordingly, these costs have been presented in the financial statements as an expense in the periods incurred. These costs were $16 million ($11 million after tax) for the year ended September 30, 2000 and $8 million ($5 million after tax) for the six months ended March 31, 2001.
(5) Purchased research and development of $103 million ($65 million after tax) relates to the acquisition of the in-flight entertainment business of Hughes-Avicom International, Inc. in December 1997.
(6) Effective October 1, 1997, we changed our method of accounting for certain inventoriable general and administrative costs related to government contracts. The cumulative effect of this change in accounting principle was a $17 million reduction of net income.
(7) Working capital consists of all current assets and liabilities, including cash and short-term debt.
(8) EBIT represents income before interest, income taxes and accounting change. We had no interest expense for the periods presented.
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
UNAUDITED PRO FORMA CONDENSED STATEMENT OF ASSETS AND LIABILITIES
Our unaudited pro forma condensed statement of assets and liabilities has been derived from our historical statement of assets and liabilities and has been prepared as if the distribution occurred on March 31, 2001.
Our unaudited pro forma condensed statement of assets and liabilities should be read in conjunction with our historical financial statements and the notes thereto for the three years ended September 30, 2000 and for the six months ended March 31, 2001 included elsewhere herein. Our unaudited pro forma condensed statement of assets and liabilities is not necessarily indicative of our financial position had the distribution occurred on March 31, 2001.
MARCH 31, 2001
------------------------------------------------------
ROCKWELL COLLINS PRO FORMA ROCKWELL COLLINS
HISTORICAL ADJUSTMENTS(1) PRO FORMA
---------------- -------------- ----------------
(IN MILLIONS)
ASSETS
Cash........................................... $ 20 $ -- $ 20
Receivables.................................... 516 -- 516
Inventories.................................... 813 -- 813
Deferred taxes and other current assets........ 182 -- 182
------ ------- ------
Total current assets................. 1,531 -- 1,531
Property....................................... 476 -- 476
Intangible assets.............................. 441 -- 441
Other assets................................... 180 -- 180
------ ------- ------
Total assets......................... $2,628 $ -- $2,628
====== ======= ======
LIABILITIES AND SHAREOWNERS' EQUITY
Short-term debt................................ $ -- $ 400(2) $ 400
Accounts payable............................... 207 -- 207
Other current liabilities...................... 566 -- 566
------ ------- ------
Total current liabilities............ 773 400 1,173
------ ------- ------
Other liabilities.............................. 469 -- 469
Shareowners' equity:
Rockwell's net investment...................... 1,416 (1,416)(3) --
Common stock................................... -- 2(3) 2
Additional paid-in capital..................... -- 1,414(3) 1,014
(400)(2)
Retained earnings.............................. -- -- --
Accumulated other comprehensive loss........... (30) -- (30)
------ ------- ------
Total shareowners' equity............ 1,386 (400) 986
------ ------- ------
Total liabilities and shareowners'
equity............................. $2,628 $ -- $2,628
====== ======= ======
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(2) Borrowings to finance the pre-distribution payment to be made by us to Rockwell.
(3) To reflect the distribution as the elimination of Rockwell's net investment and the issuance of an estimated 183 million shares of our common stock, par value $.01 per share. This is based on the number of shares of Rockwell common stock outstanding on March 31, 2001 and the distribution ratio of one share of our common stock for each share of Rockwell common stock outstanding.
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
Our unaudited pro forma condensed statement of operations has been derived from our historical statements of operations and has been prepared as if the distribution occurred on October 1, 1999.
Our unaudited pro forma condensed statement of operations should be read in conjunction with our historical financial statements and notes thereto for the three years in the period ended September 30, 2000 and for the six-month period ended March 31, 2001 included elsewhere herein. Our unaudited pro forma condensed statement of operations is not necessarily indicative of our financial results had the distribution occurred on October 1, 1999.
FISCAL YEAR ENDED SEPTEMBER 30, 2000 SIX MONTHS ENDED MARCH 31, 2001
------------------------------------ ------------------------------------
ROCKWELL ROCKWELL ROCKWELL ROCKWELL
COLLINS PRO FORMA COLLINS COLLINS PRO FORMA COLLINS
HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- --------- ---------- ----------- ---------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Sales................................ $2,510 $ -- $2,510 $1,277 $ -- $1,277
Costs and Expenses:
Cost of sales........................ 1,845 -- 1,845 944 -- 944
Selling, general and
administrative..................... 274 (2)(1) 272 157 (3)(1) 154
Interest expense..................... -- 27(2) 27 -- 13(2) 13
Losses (earnings) from equity
affiliates......................... 3 -- 3 (2) -- (2)
Other income......................... (11) -- (11) (3) -- (3)
------ ---- ------ ------ ---- ------
Total costs and expenses............. 2,111 25 2,136 1,096 10 1,106
------ ---- ------ ------ ---- ------
Income before income taxes........... 399 (25) 374 181 (10) 171
Income tax provision................. 130 (9)(3) 121 62 (3)(3) 59
------ ---- ------ ------ ---- ------
Net income........................... $ 269 $(16) $ 253 $ 119 $ (7) $ 112
====== ==== ====== ====== ==== ======
Earnings per share(4):
Basic.............................. $ 1.35 $ 0.62
====== ======
Diluted............................ $ 1.33 $ 0.61
====== ======
Average outstanding shares(4):
Basic.............................. 187.8 182.4
====== ======
Diluted............................ 189.9 185.0
====== ======
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(1) Costs related to employee benefit obligations, including pension and other retirement benefits, related to active and former Rockwell employees who were not associated with our Avionics and Communications business. Lower pro forma expense is attributable to pension plan assets in excess of obligations related to these active and former Rockwell employees. These pension plan assets and obligations will be assumed by us as part of the distribution. Please see Note 13, Retirement Benefits in the Notes to Financial Statements.
(2) Interest expense at 6.8% for the year ended September 30, 2000 and 6.4% for the six months ended March 31, 2001 related to the borrowings to finance the pre-distribution payment to be made by us to Rockwell. The interest rate represents our estimated cost of borrowing for the periods presented.
(3) Income tax effect of adjustments (1) and (2).
(4) Earnings per share and average shares outstanding are based on our expected post-distribution capital structure. These amounts are based on average outstanding shares of Rockwell common stock and the distribution ratio of one share of our common stock for each share of Rockwell common stock outstanding.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Rockwell Collins is a world leader in providing aviation electronics and airborne and mobile communications products and systems for commercial and military applications. Our Commercial Systems business supplies flight deck electronic products and systems, including communications, navigation, display and automatic flight control systems, as well as in-flight entertainment and information management systems, to commercial aircraft manufacturers and airlines throughout the world. Our Government Systems business supplies defense electronics products and systems, including communications, navigation and integrated systems, for airborne, ground and shipboard applications to the U.S. Department of Defense, foreign militaries and manufacturers of military aircraft and helicopters. We also provide a wide array of services and support to our customers through our network of over 60 service locations worldwide.
During the past few years, our Commercial Systems business has operated in an environment of steady increases in commercial aviation passenger and cargo traffic. As depicted in the following table, commercial air transport and business and regional aircraft delivery rates worldwide have grown significantly since 1997 to meet increased air traffic demand.
NEW AIRCRAFT DELIVERIES
--------------------------------------------
1997 1998 1999 2000 2001
---- ---- ---- ----- -----------
(ESTIMATED)
Air Transport Aircraft.............................. 579 812 937 814 925
Business & Regional Aircraft........................ 780 808 976 1,152 1,328
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Our Commercial Systems business has benefited from the increased number of new aircraft deliveries since 1997, and from strong demand for retrofit and upgrade programs driven in large part by equipment changes to support noise reduction, emissions control and government mandated safety programs. Demand for our in-flight entertainment products has also increased as airlines strive to accommodate passenger demand for entertainment, e-mail connectivity, video on demand and live TV while in flight.
Although overall U.S. government defense and procurement spending has been relatively flat over the past few years, the defense electronics markets we address have shown modest growth. During the past few years, our Government Systems business has benefited from upgrade and modification programs for aging military aircraft fleets, such as the U.S. Air Force C/KC-135 tanker aircraft programs. Our Government Systems business has also benefited from increased order activity in areas such as military data links and next-generation global positioning system programs.
RESULTS OF OPERATIONS
FISCAL YEARS ENDED SEPTEMBER 30, 2000, 1999 AND 1998
Our sales increased $72 million, or 3%, to $2,510 million in 2000 compared to sales of $2,438 million in 1999. This increase reflects continued favorable conditions in our served commercial markets, the acquisition of the Sony Trans Com in-flight entertainment business in the fourth quarter of 2000 and modest growth in the defense electronics markets we address despite overall flat defense spending.
We generate revenues from the sale of end products, including spare parts, as well as from the sale of services. In 2000, our sales of services grew at a faster rate than sales of our end products resulting primarily from our continued focus on providing an expanded range of services and support, as well as strong conditions in the aftermarket resulting from increasing worldwide airline passenger traffic and government mandated retrofit programs. Sales of services increased 17% in 2000 to $239 million compared to $205 million in 1999.
Our international sales, which include U.S. export sales, grew 19% to $1,015 million in 2000 compared to $852 million in 1999. This sales growth resulted primarily from demand for in-flight entertainment equipment in Asia, strong sales volume to a Canadian manufacturer of business and regional jets and higher service and
support revenues worldwide. New market positions with foreign airlines as well as government mandated retrofits also contributed to international sales growth during this period.
Selling, general and administrative costs were $274 million, or 10.9% of sales, in 2000, compared to $278 million, or 11.4%, of sales in 1999. This decrease reflects the continued benefits from our Lean Electronics(SM) initiative, including implementation of our enterprise resource planning system, and from our company-wide shared services model.
Other income includes royalty income, gains and losses on the sale of property and businesses, as well as other miscellaneous income and expenses. Other income in 2000 was $11 million compared to $48 million in 1999. Other income in 1999 included a $32 million gain on the sale of our railroad electronics business.
Net income in 2000 was $269 million compared to $291 million in 1999. Net income in 1999 included a $32 million gain ($20 million after tax) on the sale of the railroad electronics business as well as higher earnings from equity affiliates resulting from our investment in the Rockwell Science Center.
Sales of $2,438 million in 1999 increased $412 million, or 20%, compared to sales of $2,026 million in 1998. In 1999, Commercial Systems sales increased 27% primarily due to increased demand for in-flight entertainment products, higher aircraft production rates and strong retrofit activity, while Government Systems sales grew 10% primarily resulting from certain retrofit programs.
In 1999, our sales of services grew at a faster rate than sales of our end products, resulting primarily from our focus on providing an expanded range of services and support, as well as strong conditions in the aftermarket resulting from increasing worldwide airline passenger traffic and government mandated retrofit programs. Sales of services increased 23% in 1999 to $205 million compared to $166 million in 1998.
International sales in 1999 of $852 million were 24% higher than the $689 million of international sales in 1998. International sales growth in 1999 resulted primarily from new market positions with European aircraft manufacturers, primarily Airbus Industrie. New market positions with foreign airlines as well as government mandated retrofits also contributed to international sales growth during this period.
Selling, general and administrative costs were $278 million, or 11.4% of sales, in 1999 compared to $239 million, or 11.8% of sales, in 1998, excluding $17 million of realignment charges in 1998. Reductions in selling, general and administrative costs as a percentage of sales resulted from our Lean Electronics(SM) initiative and from the benefits of our company-wide shared services model. Workforce reductions resulting from our 1998 realignment actions reduced selling, general and administrative costs by approximately $3 million in 1999.
Other income in 1999 was $48 million compared to $8 million in 1998. Other income in 1999 included a $32 million gain on the sale of our railroad electronics business.
Net income in 1999 was $291 million compared to net income of $32 million in 1998. Net income in 1999 included a $32 million gain ($20 million after tax) on the sale of the railroad electronics business, while net income in 1998 included $65 million ($43 million after tax) of realignment charges, $103 million ($65 million after tax) of purchased research and development charges associated with the acquisition of Hughes-Avicom's in-flight entertainment business, $53 million ($33 million after tax) of charges for estimated losses on two government contracts and a $27 million ($17 million after tax) charge resulting from a change in the method of accounting for certain inventoriable general and administrative costs related to government contracts. Excluding these items, net income was $271 million in 1999 compared to $190 million in 1998. The increase resulted primarily from incremental profitability on higher sales volumes, higher earnings from equity affiliates resulting from our investment in the Rockwell Science Center and the absence of approximately $8 million of after-tax losses attributable to non-strategic businesses that were exited in connection with our realignment actions taken in 1998.
We have two operating segments. The following table presents segment sales and operating earnings information (in millions):
SIX MONTHS
FISCAL YEAR ENDED ENDED
SEPTEMBER 30, MARCH 31,
------------------------------ ----------------
1998(1)(2) 1999 2000 2000 2001
---------- ------ ------ ------ ------
SALES:
Commercial Systems........................ $1,213 $1,546 $1,586 $ 744 $ 796
Government Systems........................ 813 892 924 437 481
------ ------ ------ ------ ------
Total............................. $2,026 $2,438 $2,510 $1,181 $1,277
====== ====== ====== ====== ======
SEGMENT OPERATING EARNINGS:
Commercial Systems........................ $ 147 $ 285 $ 296 $ 146 $ 136
Government Systems........................ 54 139 144 61 79
------ ------ ------ ------ ------
Total............................. 201 424 440 207 215
Goodwill and purchase accounting items...... (110) (10) (15) (6) (21)
Gain on disposition of a business........... -- 32 -- -- --
Earnings (losses) from equity affiliates.... 1 11 (3) (3) 2
General corporate-net....................... (19) (20) (23) (11) (15)
------ ------ ------ ------ ------
Income before income taxes and accounting
change.................................... 73 437 399 187 181
Income tax provision........................ (24) (146) (130) (61) (62)
Cumulative effect of accounting change...... (17) -- -- -- --
------ ------ ------ ------ ------
Net income.................................. $ 32 $ 291 $ 269 $ 126 $ 119
====== ====== ====== ====== ======
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(2) Segment operating earnings for Government Systems in 1998 include $53 million of charges for estimated losses on two government contracts.
Segment operating earnings, an internal performance measure, exclude income taxes, unallocated general corporate expenses, gains and losses from the disposition of businesses, earnings and losses from equity affiliates, and incremental acquisition-related expenses resulting from purchase accounting adjustments, such as goodwill and other intangible asset amortization, depreciation, inventory and purchased research and development charges. Our definition of segment operating earnings may be different from definitions used by other companies.
In 2000, Commercial Systems sales increased $40 million to $1,586 million from $1,546 million in 1999. This increase was driven primarily by newly captured market positions in the business and regional jet market, higher service and support revenues and the acquisition of the Sony Trans Com in-flight entertainment business in the fourth quarter of 2000, which more than offset the results of expected lower production of large commercial aircraft. Commercial Systems segment operating earnings in 2000 were $296 million, an increase of $11 million over 1999 segment operating earnings of $285 million. Commercial Systems segment operating earnings as a percentage of sales increased to 18.7% in 2000 compared to 18.4% in 1999, reflecting lower customer incentives, partially offset by costs incurred in connection with our I(2)S initiative.
In 2000, Government Systems sales increased $32 million, or 4%, to $924 million, while segment operating earnings increased 4% to $144 million from $139 million in 1999. The increase in sales was primarily related to two flight deck retrofit programs for the C/KC-135 tanker aircraft as well as increased volume from
the Sikorsky S-70 helicopter and ARC-210 Radio programs. Government Systems segment operating earnings as a percentage of sales was 15.6% in both 2000 and 1999.
In 1999, Commercial Systems sales increased 27% to $1,546 million compared to sales of $1,213 million in 1998, primarily due to higher production rates for new aircraft across all market segments, higher air transport aircraft retrofit activity, growth in service and support revenue, and increased customer demand for in-flight entertainment systems. Commercial Systems segment operating earnings increased $83 million to $285 million in 1999 compared to 1998 segment operating earnings of $202 million, before $55 million of realignment charges in 1998 resulting from the exit of non-strategic businesses and other cost reduction initiatives. Commercial Systems segment operating earnings as a percentage of sales was 18.4% in 1999 compared to 16.7% in 1998, before the realignment charges. This increase was driven by incremental profitability on higher sales volumes and approximately $15 million of cost savings resulting from the realignment actions taken in 1998.
In 1999, Government Systems sales increased 10% to $892 million compared to 1998 sales of $813 million, primarily resulting from higher volumes on the C/KC-135 tanker aircraft retrofit program and the ARC 210/220 Radio programs. Government Systems segment operating earnings increased $22 million to $139 million in 1999 compared to $117 million for 1998, excluding $53 million in contract charges in 1998 for estimated losses on two contracts and $10 million in realignment charges. Government Systems segment operating earnings as a percentage of sales in 1999 increased to 15.6% compared to 14.4% in 1998, before the contract-related and realignment charges, driven by efficiencies achieved from the realignment actions taken in 1998.
Included in goodwill and purchase accounting items in 1998 is a charge for purchased research and development of $103 million ($65 million after tax) related to our acquisition of Hughes-Avicom. The charge related principally to the Total Entertainment System, an audio/video on demand system for in-flight entertainment that was in process at the acquisition date. The system was completed and placed in service in early fiscal 2000, approximately one year later than originally estimated. The delay resulted in higher than anticipated product development costs. Our management believes that this delay will not materially affect our results of operations or financial position because this system has functionality comparable to the most advanced products currently available in the in-flight entertainment market.
At the acquisition date, Hughes-Avicom was also developing a product utilizing direct broadcast satellite technology to deliver live television to aircraft. This effort represented less than 20% of the total charge for purchased research and development. This development effort was discontinued in fiscal 2000 when our management concluded that alternative technologies under development would better meet the changing demands of the in-flight entertainment marketplace.
SIX MONTHS ENDED MARCH 31, 2000 AND 2001
Sales increased $96 million, or 8%, to $1,277 million for the first six months of 2001 compared to the first six months of 2000. The recent acquisitions of Kaiser Aerospace and Electronics and Sony Trans Com contributed $142 million of sales during the first six months of 2001. Excluding acquisitions, sales in the first six months of 2001 decreased $46 million, with increased sales of commercial avionics products offset by lower sales of wide-body in-flight entertainment products and reduced Government Systems sales. Net income for the first six months of 2001 decreased to $119 million from $126 million in the first six months of 2000 due to higher intangible amortization resulting from recent acquisitions, partially offset by higher earnings from equity affiliates.
Commercial Systems sales increased $52 million, or 7%, to $796 million for the first six months of 2001 compared to the same period in 2000. The Sony Trans Com acquisition, completed in July 2000, contributed $64 million of sales during the first six months of 2001. Excluding acquisitions, sales for the first six months of 2001 were $12 million lower than the same period in 2000. Sales of commercial avionics products increased 7% during this period resulting from continued demand in the air transport and business and regional markets, but the increase was more than offset by lower sales of wide-body in-flight entertainment products, which are expected to increase in the second half of 2001. Segment operating earnings for Commercial Systems in the
first six months of 2001 of $136 million were down $10 million from the comparable period a year ago due primarily to lower sales of wide-body in-flight entertainment products and increased product development spending. Commercial Systems segment operating earnings as a percentage of sales were 17.1% for the first six months of 2001 compared to 19.6% for the first six months of 2000.
Government Systems sales increased $44 million, or 10%, to $481 million in the first six months of 2001 over the comparable period in 2000. The Kaiser Aerospace and Electronics acquisition, completed in December 2000, added $78 million in sales during the first six months of 2001. Excluding acquisitions, sales for the first six months of 2001 decreased $34 million compared to the same period in 2000, primarily as a result of reduced volume on the C/KC-135 Pacer Crag retrofit program and timing of deliveries on certain communication programs, which are expected to increase in the second half of 2001. Segment operating earnings for Government Systems increased $18 million to $79 million compared to the same period in 2000 primarily as a result of the Kaiser Aerospace and Electronics acquisition and a favorable resolution of a government contract dispute. Government Systems segment operating earnings as a percentage of sales were 16.4% for the first six months of 2001 compared to 14.0% for the first six months of 2000.
INCOME TAXES
Our effective income tax rates were determined on a stand-alone basis and were 32.5% in 2000, 33.5% in 1999 and 32.8% in 1998. The effective tax rates are lower than the U.S. statutory rate of 35% due primarily to our utilization of certain tax benefits related to export sales. We expect an effective income tax rate of approximately 34% through fiscal 2002, reflecting nondeductible goodwill amortization resulting from recent acquisitions.
OUTLOOK
Our management has established long-term financial goals that consist of average annual sales growth of 10%, operating margins of 15% to 17%, average annual earnings per share growth of 13% to 15% and return on invested capital of 25%. Our average annual sales growth goal assumes increased revenues from both our heritage businesses and our identified growth opportunities, including in-flight entertainment systems, integrated information systems and free flight products and systems, and expansion of our service and support offerings. In addition, we have assumed that acquisitions will contribute modestly to our sales growth over the next several years. Our average annual earnings per share growth goal assumes the realization of our average annual sales growth goal and continued operating margin improvements from our Lean Electronics(SM) initiative. We have recently established these goals on the basis of our operating as an independent public company after the distribution and with the recognition that the commercial aviation markets we address are, to varying degrees, cyclical and have experienced periodic downturns. Accordingly, we will measure our performance against these goals over a multi-year period.
Our management expects fiscal 2001 sales to approximate $2.9 billion, consisting of sales of approximately $1.8 billion from our Commercial Systems business and $1.1 billion from our Government Systems business. Our management also expects pro forma net income for fiscal 2001 to be in the range of $ million to $ million and pro forma earnings per share for fiscal 2001 to be in the range of $ to $ . In calculating our projected pro forma net income and pro forma earnings per share, we have included all pro forma adjustments applied to our historical financial information referenced in "Unaudited Pro Forma Condensed Financial Information -- Unaudited Pro Forma Condensed Statement of Operations" above, including adjustments to interest expense and retirement benefit expense. As we believe that the costs allocated to us for certain management services provided by Rockwell, including corporate oversight, financial, legal, tax, corporate communications and human resources, approximate those which we would have incurred operating on a stand alone basis, no pro forma adjustment for these costs has been made in calculating pro forma net income or earnings per share.
FINANCIAL CONDITION
Cash provided by operations was $281 million in 2000, $203 million in 1999 and $146 million in 1998. Over the past three years, cash provided by operations has improved as a result of increased focus on inventory and accounts receivable management, which offset working capital increases related to sales growth. During this period, cash provided by operations, together with investments from Rockwell, have enabled us to fund capital expenditures, including our enterprise resource planning system, and to make strategic acquisitions. As the investment in our enterprise resource planning system nears completion and we continue to recognize benefits from our Lean Electronics(SM) initiative, we expect our operating cash flow performance to continue to improve.
During the first six months of 2001, cash used by operations was $19 million, compared to cash provided by operations of $47 million in the first six months of 2000. Lower cash provided by operations during the first six months of 2001 primarily relates to higher levels of inventories in anticipation of increased sales expected in the second half of fiscal 2001 and timing of progress payments from customers. Cash provided by operations is generally lower in the first half of each fiscal year due principally to the timing of certain U.S. government payments to us and certain employee incentive compensation payments.
Capital expenditures were $50 million during the first six months of 2001, $98 million in 2000, $127 million in 1999, and $143 million in 1998. Capital expenditures during this period included an investment of approximately $110 million in our enterprise resource planning system. We expect capital expenditures for the full year of 2001 to approximate $115 million. During 1999, we received $87 million from the sale of our railroad electronics business and other property.
Cash investments in strategic acquisitions and joint ventures since 1998 approximated $630 million. We extended our capabilities in the area of displays technology with the acquisition of Kaiser Aerospace and Electronics during the first quarter of 2001 and the acquisition of the remaining 50% interest in Flight Dynamics that we did not already own during 1999. We entered into the growing market for in-flight entertainment systems with the acquisition of Hughes-Avicom in 1998, and we expanded our in-flight entertainment product offerings with the acquisition of Sony Trans Com during 2000. We also invested in our In-Flight Network LLC joint venture with News Corporation during 2000. In April 2001, we announced that we will cease further investment in this joint venture. We continuously evaluate acquisition opportunities and expect to continue to acquire businesses and capabilities as an integral component of our overall growth strategy. Subsequent to the distribution, our ability to finance significant acquisitions will depend in large part on our ability to access debt and equity markets on a cost effective basis. Although our access to these capital markets is unproven, we believe we are well positioned to access these markets due to our strong balance sheet and expected improved cash flow from operations.
We currently expect to make a tax-deductible cash contribution of approximately $100 million to $120 million to our pension plan in order to satisfy certain U.S. government cost accounting standards rules. The cash contribution is expected to be made no later than January 31, 2002.
We have entered into an unsecured revolving credit facility with a group of banks and expect to establish a commercial paper program in order to fund a pre-distribution payment to Rockwell of $400 million and to provide for future working capital needs and other general corporate purposes. We believe that cash flow from operations will be sufficient to fund future capital expenditures and shareowner dividends that are initially expected to be $.36 per share annually.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For our fiscal year ended September 30, 2000, approximately 40% of our total sales consisted of sales outside of the United States, with less than 10% of total sales denominated in currencies other than the United States dollar. In addition, from time to time we execute intercompany loans with our foreign subsidiaries that are denominated in foreign currencies.
We are exposed to foreign currency risks that arise from normal business operations. These risks include the translation of local currency balances of our foreign subsidiaries, intercompany loans with foreign
subsidiaries and transactions denominated in foreign currencies. Our objective is to minimize our exposure to these risks through a combination of normal operating activities (by requiring, where possible, export sales denominated in United States dollars) and utilizing foreign currency forward exchange contracts. These contracts are executed with creditworthy banks and are denominated in currencies of major industrial countries. It is our policy not to enter into derivative financial instruments for speculative purposes. We do not hedge our exposure to the translation of reported results of our foreign subsidiaries from local currency to United States dollars. A 10% adverse change in the underlying foreign currency exchange rates would not be significant to our financial condition or results of operations.
At September 30, 2000 and 1999, we had outstanding foreign currency forward exchange contracts with notional amounts of $140 million and $119 million, respectively, primarily consisting of contracts to exchange the euro and pound sterling. Notional amounts are stated in the U.S. dollar equivalents at spot exchange rates at the respective dates. The use of these contracts allows us to manage transactional exposure to exchange rate fluctuations as the gains or losses incurred on the foreign currency forward exchange contracts will offset, in whole or in part, losses or gains on the underlying foreign currency exposure. A hypothetical 10% adverse change in underlying foreign currency exchange rates associated with these contracts would not be material to our financial condition or results of operations.
CAUTIONARY STATEMENT
This information statement contains statements, including certain projections and business trends, accompanied by such phrases as "believes", "estimates", "expects", "could", "likely", "anticipates", "will", "intends", and other similar expressions, that are forward-looking statements. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to economic and political changes in international markets where we compete, such as currency exchange rates, inflation rates, recession, foreign ownership restrictions and other external factors over which we have no control; domestic and foreign government spending, budgetary and trade policies; demand for and market acceptance of new and existing products; competitive product and pricing pressures; and the uncertainties of litigation, as well as other risks and uncertainties, including but not limited to those set forth under "Risk Factors" and elsewhere in this information statement, as well as those detailed from time to time in our Securities and Exchange Commission filings. These forward-looking statements are made only as of the date hereof.
THE DISTRIBUTION
INTRODUCTION
On December 8, 2000, the board of directors of Rockwell approved in principle the distribution of all of the outstanding shares of our common stock to the holders of Rockwell common stock. The distribution, which is expected to occur at the close of business on June 29, 2001, will result in the separation of Rockwell into two companies by means of a tax-free spin-off of our company. The distribution is subject to the satisfaction or waiver of certain conditions set forth in the distribution agreement to be entered into among Rockwell, the Rockwell Science Center and us. At the time of the distribution, we will own substantially all of the assets, liabilities (including liabilities relating to former operations) and operations which prior to the distribution date comprise Rockwell's Avionics and Communications business. Please see "The Rockwell Collins Business".
Shareowners of Rockwell with inquiries relating to the distribution should
contact Mellon Investor Services LLC, the distribution agent, telephone number
(800) 204-7800 or Rockwell, Shareowner Services, telephone number (414)
212-5300. After the distribution, our shareowners with inquiries relating to the
distribution or their investment in us should contact us at 400 Collins Road NE,
Cedar Rapids, Iowa 52498, telephone number (319) 295-4045 or Mellon Investor
Services LLC, our transfer agent, at P.O. Box 3310, South Hackensack, New Jersey
07606, telephone number (888) 253-4522.
BACKGROUND AND REASONS FOR THE DISTRIBUTION
Rockwell's board of directors believes that the distribution will accomplish a number of important business objectives and, by enabling Rockwell and us to develop our respective businesses separately, should better position the two companies to produce greater total shareowner value over the long term. These important business objectives include:
Greater Strategic Focus. The distribution will separate our Avionics and Communications business from Rockwell's remaining Automation business, each with distinct financial, investment and operating characteristics, so that each can adopt strategies and pursue objectives appropriate to its specific business. The distribution will permit the management of each company to prioritize the allocation of its respective management and financial resources for achievement of its own corporate objectives. In particular, Rockwell believes that the distribution will permit each business to maximize its strengths and provide greater flexibility to pursue business opportunities, including acquisitions, joint ventures and other business alliances and combinations.
Focused Incentives and Greater Accountability for Employees. The distribution is expected to allow each of us and Rockwell to attract, motivate and retain key personnel by enabling us and Rockwell to provide more effective incentive compensation programs that are based on the performance of the respective business in which these individuals are employed without being influenced by the results of the business in which they have no involvement.
Appropriate Market Recognition of Performance. The distribution also will enable shareowners and potential investors to evaluate better the financial performance of each business and its strategies, enhancing the likelihood that each will achieve appropriate market recognition for its own performance.
MANNER OF EFFECTING THE DISTRIBUTION
The distribution is expected to be made on June 29, 2001, the distribution date, to shareowners of record of Rockwell common stock as of the close of business on June 15, 2001, which will be the record date. On the distribution date, Rockwell will deliver all of the outstanding shares of our common stock to the distribution agent for allocation to the holders of record of Rockwell common stock as of the close of business on the record date. In the distribution, each Rockwell shareowner will receive one share of our common stock and an associated preferred share purchase right for each share of Rockwell common stock held as of the close of business on the record date. Please see "Description of Capital Stock -- Rights Plan". Based on the number of shares of Rockwell common stock outstanding as of April 30, 2001, approximately 182.9 million shares of our common stock will be distributed in the distribution.
Our shareowners will have their ownership of our common stock registered only in book-entry form. Book-entry registration refers to a method of recording stock ownership in our records in which no share certificates are issued. On the distribution date, each owner of Rockwell common stock as of the close of business on the record date will be credited through book-entry in our records with the number of shares of our common stock distributed to the shareowner. Beginning on or about the distribution date, the distribution agent will begin mailing account statements to these Rockwell shareowners indicating the number of shares of our common stock that each such shareowner owns. Following the distribution date, any shareowner whose ownership of our common stock is registered in book-entry form may obtain at any time without charge, physical certificates to represent the number of whole shares owned by such shareowner by contacting our transfer agent. All shares of our common stock distributed in the distribution will be fully paid and nonassessable and holders thereof will not be entitled to preemptive rights. Please see "Description of Capital Stock -- Common Stock".
Participants in the Rockwell Investor Services Program will be credited with the number of shares (including fractional shares) of our common stock distributed in the distribution in respect of the Rockwell common stock held in their accounts. Shares of our common stock credited as a result of the distribution to participants in the Rockwell Investor Services Program in respect of the Rockwell common stock held by these participants in their accounts will be aggregated with shares of our common stock distributed in the distribution in respect of Rockwell common stock held outside these accounts (except shares held in any Rockwell savings plan) and will be credited to such shareowner through book-entry in our records.
Participants in any Rockwell savings plan will have their Rockwell common stock accounts credited with the number of shares (including fractional shares) of our common stock distributed in the distribution in respect of the Rockwell common stock held in their Rockwell savings plan accounts. Individual Rockwell savings plan participants, rather than the applicable Rockwell savings plans, will have authority to determine if and when shares of our common stock held in their Rockwell savings plan accounts will be sold, subject to the terms of the applicable savings plan. Please see "Arrangements Between Rockwell and Our Company -- Employee Matters Agreement".
ROCKWELL SHAREOWNERS WILL NOT BE REQUIRED TO PAY FOR SHARES OF OUR COMMON STOCK RECEIVED IN THE DISTRIBUTION, OR TO SURRENDER OR EXCHANGE SHARES OF ROCKWELL COMMON STOCK OR TAKE ANY OTHER ACTION IN ORDER TO RECEIVE OUR COMMON STOCK.
The distribution will not affect the number of outstanding shares of Rockwell common stock or the rights attendant thereto. Certificates representing outstanding shares of Rockwell common stock will also continue to represent the related preferred share purchase rights.
TRADING MARKET
There is no current trading market for our common stock. It is anticipated that trading will commence on a "when-issued" basis prior to the distribution. "When-issued" trading refers to a transaction made conditionally because the security has been authorized but not yet issued. On the first trading day following the distribution date, "when-issued" trading in our common stock will end and "regular way" trading will begin. "Regular way" trading refers to trading after a security has been issued and typically involves a transaction that settles on the third full business day following the date of a transaction.
We cannot assure you as to the price at which our common stock will trade before, on or after the distribution date. In addition, the combined trading prices of our common stock and Rockwell common stock held by shareowners after the distribution may be less than, equal to or greater than the trading price of Rockwell common stock prior to the distribution. Please see "Risk Factors -- Risks Related to Our Separation from Rockwell, the Securities Markets and Ownership of Our Common Stock -- Our securities have no prior market, and our stock price may fluctuate significantly following the distribution."
Our common stock has been approved for listing, subject to official notice of issuance, on the New York Stock Exchange under the trading symbol "COL". We initially will have approximately 48,000 shareowners of record, based on the number of record holders of Rockwell common stock as of April 30, 2001. For certain information regarding options to purchase our common stock that will be or may become outstanding after the distribution, please see "Arrangements Between Rockwell and Our Company -- Employee Matters Agree-
ment", "Management -- Historical Compensation of Executive Officers" and "-- Benefit Plans Following the Distribution".
Shares of our common stock distributed to Rockwell shareowners in the distribution will be freely transferable, except for shares received by persons who may be deemed to be "affiliates" of us under the Securities Act of 1933, as amended. Persons who may be deemed our affiliates after the distribution generally include individuals or entities that control, are controlled by, or are under common control with us. This may include our officers and directors, as well as our significant shareowners, if any. Persons who are our affiliates will be permitted to sell their shares of our common stock only pursuant to an effective registration statement under the Securities Act or an exemption from the registration requirements of the Securities Act, such as the exemption afforded by Rule 144 under the Securities Act.
DIVIDEND POLICY
It is anticipated that following the distribution, we initially will pay quarterly cash dividends which, on an annual basis, will equal $.36 per share and Rockwell initially will pay quarterly cash dividends which, on an annual basis, will equal $.66 per share. It is therefore anticipated that the aggregate cash dividends payable by Rockwell and us after the distribution, taken together, in respect of (1) shares of Rockwell common stock held on the distribution date and (2) shares of our common stock received in the distribution will initially equal the annual rate of the cash dividend currently paid on Rockwell common stock of $1.02 per share. However, no formal action with respect to any such dividends has been taken and the declaration and payment of dividends by us and Rockwell will be at the sole discretion of our respective boards of directors.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION
The distribution is conditioned upon the receipt by Rockwell of a tax
ruling from the Internal Revenue Service, or the IRS, to the effect that the
distribution will qualify as a tax-free reorganization within the meaning of
Section 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended, or the
Code. The ruling has been requested from the IRS but has not been received as of
the date hereof. So long as the distribution qualifies as such a tax-free
reorganization and is not disqualified as a tax-free reorganization to Rockwell
under Section 355(e) of the Code because of a post-distribution acquisition of
Rockwell or us by a third party as described below, the material U.S. federal
income tax consequences of the distribution will be as follows:
- Rockwell will not recognize any taxable gain or loss upon the distribution;
- no taxable gain or loss will be recognized by, or be includible in the income of, a shareowner of Rockwell common stock solely as the result of the receipt of our common stock in the distribution;
- the tax basis of the Rockwell common stock and our common stock in the hands of Rockwell's shareowners immediately after the distribution will be the same as the tax basis of the Rockwell common stock immediately before the distribution, allocated between the common stock of Rockwell and us in proportion to their relative fair market values on the distribution date; and
- the holding period of our common stock received by Rockwell shareowners will include the holding period of their Rockwell common stock, provided that the Rockwell common stock is held as a capital asset on the date of the distribution.
While the ruling relating to the qualification of the distribution as a tax-free transaction generally would be binding on the IRS, the continuing validity of the ruling is subject to factual representations and assumptions. Rockwell and we are not aware of any facts or circumstances that would cause these representations and assumptions to be untrue.
If the distribution were not to qualify as a tax-free transaction, Rockwell would recognize taxable gain equal to the excess of the fair market value of our common stock distributed to Rockwell shareowners over Rockwell's tax basis in our common stock. In addition, each shareowner who receives our common stock in the distribution would generally be treated as receiving a taxable distribution in an amount equal to the fair market value of our common stock received.
Even if the distribution otherwise qualifies as a tax-free reorganization within the meaning of Section 368(a)(1)(D) of the Code, it may be disqualified as tax-free to Rockwell under Section 355(e) of the
Code if 50% or more of the stock of Rockwell or us is acquired as part of a plan or series of related transactions that include the distribution. For this purpose, any acquisitions of our stock or Rockwell's stock within two years before or after the distribution are presumed to be part of such a plan, although Rockwell or we may be able to rebut that presumption. Under proposed IRS regulations if specified conditions are satisfied, an acquisition occurring more than six months after the distribution will not be considered as part of a plan which includes the distribution provided that there was no agreement, understanding, arrangement or substantial negotiations concerning the acquisition before a date that is six months after the distribution. There is no assurance that the proposed regulations will become effective. The process for determining whether a change of ownership has occurred under the tax rules is complex and uncertain. If such an acquisition of our stock or Rockwell's stock triggers the application of Section 355(e), Rockwell would recognize taxable gain as described above but the distribution would generally be tax-free to each Rockwell shareowner. Under the tax allocation agreement to be entered into between Rockwell and us, we would be required to indemnify Rockwell against that taxable gain if it were triggered by an acquisition of our stock.
Although pursuant to the terms of the distribution agreement the conditions to the distribution set forth therein may be waived by Rockwell's board of directors in its sole discretion, Rockwell does not presently intend to waive the condition of receipt of the tax ruling.
Promptly following the distribution, information with respect to the allocation of tax basis between Rockwell common stock and our common stock will be made available to the holders of Rockwell common stock.
THE FOREGOING IS ONLY A SUMMARY OF THE MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION UNDER CURRENT LAW AND IS INTENDED FOR GENERAL INFORMATION ONLY. EACH ROCKWELL SHAREOWNER SHOULD CONSULT HIS OR HER TAX ADVISOR AS TO THE PARTICULAR CONSEQUENCES OF THE DISTRIBUTION TO SUCH SHAREOWNER, INCLUDING THE APPLICATION OF STATE, LOCAL AND FOREIGN TAX LAWS, AND AS TO POSSIBLE CHANGES IN TAX LAW THAT MAY AFFECT THE TAX CONSEQUENCES DESCRIBED ABOVE.
The tax allocation agreement to be entered into between us and Rockwell provides that neither we nor Rockwell are to take any action inconsistent with, or fail to take any action required by, the request for the tax ruling or the tax ruling unless required to do so by law or the other party has given its prior written consent or, in certain circumstances, a supplemental tax ruling permitting such action is obtained. Please see "Arrangements Between Rockwell and Our Company -- Tax Allocation Agreement".
CONDITIONS; TERMINATION
The distribution is subject to the satisfaction or waiver of certain conditions as set forth in the distribution agreement to be entered into among Rockwell, the Rockwell Science Center and us. Regardless of whether the conditions are satisfied, Rockwell's board of directors, in its sole discretion, without approval of Rockwell's shareowners, may terminate the distribution agreement and abandon the distribution at any time prior to the effective time of the distribution. Please see "Arrangements Between Rockwell and Our Company -- Distribution Agreement".
REASONS FOR FURNISHING THIS INFORMATION STATEMENT
This information statement is being furnished solely to provide information to shareowners of Rockwell who will receive shares of our common stock in the distribution. It is not, and is not to be construed as, an inducement or encouragement to buy or sell any of our securities. The information contained in this information statement is believed by us to be accurate as of the date set forth on its cover. Changes may occur after that date, and we will not update the information except in the normal course of our respective public disclosure obligations and practices.
ARRANGEMENTS BETWEEN ROCKWELL AND OUR COMPANY
Prior to the distribution, we and Rockwell will enter into various agreements for the purpose of accomplishing the separation of our business from Rockwell and the distribution of our common stock to Rockwell's shareowners. These agreements, which will also govern our relationship with Rockwell subsequent to the distribution, include the following:
- a distribution agreement;
- an employee matters agreement;
- a tax allocation agreement;
- a continuing services agreement; and
- a transition agreement.
Prior to the distribution, we and Rockwell will also enter into service agreements with the Rockwell Science Center and intellectual property agency licensing agreements with a subsidiary of the Rockwell Science Center.
The agreements relating to our separation from Rockwell were made in the context of a parent-subsidiary relationship. The terms of these agreements may be more or less favorable than those we could have negotiated with unaffiliated third parties. The following summarizes the material terms of these agreements. However, you should read the complete agreements which have been filed as exhibits to the registration statement of which this information statement is a part.
DISTRIBUTION AGREEMENT
The distribution agreement to be entered into among Rockwell, the Rockwell Science Center and us provides for, among other things, the principal corporate transactions required to effect the separation of our business from Rockwell and the distribution, and certain other agreements governing the relationship among Rockwell, us and the Rockwell Science Center with respect to or in consequence of the separation and the distribution.
The Separation. The distribution agreement provides for the transfer from Rockwell to us of assets used primarily in or related primarily to our Avionics and Communications business and certain other assets which are not related to our Avionics and Communications business or Rockwell's Automation business. The distribution agreement also provides generally for the assumption by us of liabilities of Rockwell related to our Avionics and Communications business and certain other liabilities which are not related to our Avionics and Communications business or Rockwell's Automation business. The distribution agreement generally provides that Rockwell will cause bank accounts of our company and our subsidiaries to be funded in an aggregate amount equal to $20 million at the time of the distribution. The distribution agreement also generally provides for the elimination of intercompany indebtedness between us and Rockwell in existence at the time of the distribution.
Rockwell Science Center. Following the distribution, we and Rockwell each will own a 50% equity interest in the Rockwell Science Center. Rockwell will grant the Rockwell Science Center the exclusive right to use the Rockwell name in conjunction with the Rockwell Science Center and Rockwell Scientific Company names. This exclusive right would terminate in certain events, including the aggregate ownership interest of us and Rockwell in the Rockwell Science Center falling below 50% as described in the distribution agreement. The distribution agreement generally provides that Rockwell will cause bank accounts of Rockwell Science Center and its subsidiaries to be funded in an aggregate amount equal to $2 million at the time of the distribution.
The Distribution. The distribution agreement provides that the distribution will not be made until all of the following conditions are satisfied or waived by the Rockwell board in its sole discretion:
- the IRS must issue a favorable private letter ruling confirming that the distribution will qualify as a tax-free distribution for U.S. federal income tax purposes;
- Rockwell's board of directors must give final approval of the distribution;
- all material consents required to effect the distribution must be received;
- all required government approvals must be in effect;
- shares of our common stock to be distributed in the distribution must be listed on the New York Stock Exchange; and
- there must be no legal restraint preventing the distribution and no litigation seeking to restrain or challenge the distribution.
Even if all the conditions have been satisfied, the distribution may be abandoned by Rockwell's board of directors, in its sole discretion, without the approval of Rockwell shareowners, at any time prior to the distribution.
Intellectual Property Matters. The distribution agreement generally provides for the transfer from Rockwell to us of intellectual property, subject to existing licenses, used primarily in or related primarily to our business. The distribution agreement also includes covenants not to sue by each of us and Rockwell in favor of the other relating to certain of our and Rockwell's intellectual property used by the other in the operation of its business.
Rockwell Name. Following the distribution, Rockwell will continue to own the Rockwell name and will recommend to its shareowners at its 2002 annual meeting an amendment to its certificate of incorporation to change its name to Rockwell Automation, Inc. We will continue to be known as Rockwell Collins, Inc. and Rockwell will grant us the exclusive right to use the Rockwell Collins name and trademark other than in connection with automation products. This exclusive right would terminate following certain change of control events applicable to us as described in the distribution agreement. We will be able to use the Rockwell name and trademark only in conjunction with the Rockwell Collins name and trademark.
Liabilities. In addition, under the distribution agreement, we will generally assume all liabilities, including those relating to environmental and intellectual property matters, to the extent they relate to current and former operations of our Avionics and Communications business. We also will assume responsibility for all current and future litigation, including environmental and intellectual property proceedings, against Rockwell or its subsidiaries to the extent relating to our business. Please see "The Rockwell Collins Business -- Legal Proceedings". We also will assume certain other liabilities which are not related to our Avionics and Communications business or Rockwell's Automation business, including liabilities related to certain corporate functions (such as payroll and employee benefits administration), the assets of which will be transferred to us, and liabilities allocated to us under the employee matters agreement to be entered into between us and Rockwell.
Indemnification. Under the terms of the distribution agreement, we generally will be obligated to indemnify and defend Rockwell and its affiliates and representatives for all damages, liabilities or actions arising out of or in connection with:
- our Avionics and Communications business, including with respect to former operations;
- the liabilities assumed by us as part of the separation;
- the breach by us of the distribution agreement or any ancillary agreement; and
- any material untrue statements or omissions in this information statement and the registration statement of which it is a part, except to the extent based upon or arising from information provided by Rockwell expressly for use in certain sections therein.
Rockwell generally will be obligated to indemnify and defend us and our affiliates and representatives for all damages, liabilities or actions arising out of or in connection with:
- Rockwell's Automation business, including with respect to former operations;
- liabilities allocated to Rockwell as part of the separation;
- the breach by Rockwell of the distribution agreement or any ancillary agreement; and
- any material untrue statements or omissions in certain sections of this information statement and the registration statement of which it is a part to the extent based upon or arising from information provided by Rockwell expressly for use therein.
Expenses. The distribution agreement provides generally that Rockwell will pay all costs and expenses incurred prior to the distribution in connection with the distribution, the preparation, execution and delivery of the distribution agreement, the employee matters agreement, the tax allocation agreement, the transition agreement and related agreements and the consummation of the distribution, other than specified costs and expenses which will be paid or reimbursed by us, including:
- the costs and expenses of our credit facility and commercial paper program; and
- other costs and expenses to the extent relating to operations of our business subsequent to the distribution.
Except as otherwise expressly provided, all costs and expenses incurred following the distribution in connection with the implementation thereof will be charged to and paid by the party for whose benefit the expenses are incurred, with any expenses which cannot be allocated on such basis to be split equally between us and Rockwell.
EMPLOYEE MATTERS AGREEMENT
The employee matters agreement allocates assets, liabilities and responsibilities relating to our and Rockwell's active and former employees and their participation in our respective stock and other benefit plans.
The employee matters agreement generally requires us to establish and maintain until at least January 2003 benefit plans on terms and conditions substantially comparable in the aggregate to those contained in Rockwell benefit plans prior to the separation. Each of our benefit plans will provide that all service, compensation and other benefit determinations that, as of the separation, were recognized under the corresponding Rockwell benefit plan will be taken into account under our benefit plan.
Qualified Pension Plan. The employee matters agreement provides that we will assume the existing Rockwell pension plan, which we call the assumed Rockwell pension plan. Rockwell will establish one or more new pension plans which will generally cover eligible participants who, immediately after the distribution, are (i) active employees of Rockwell's Automation business (including its Electronic Commerce business), other than those who are former Rockwell corporate employees who have not accepted permanent employment with Rockwell's Automation business immediately after the distribution, or (ii) former employees of Rockwell's Automation business (including its Electronic Commerce business). In connection with the distribution, we will transfer the accrued benefit liabilities for these eligible participants and a proportionate share of the assets attributable to those liabilities from the assumed Rockwell pension plan to Rockwell's new pension plans. In connection with the distribution, we will also transfer the accrued benefit liabilities for eligible participants who, immediately after the distribution, are active or former employees of the Rockwell Science Center and a proportionate share of the assets attributable to those liabilities from the assumed Rockwell pension plan to new pension plans that will be established by the Rockwell Science Center. We will generally assume accrued benefit liabilities under the assumed Rockwell pension plan for all other eligible participants, including eligible participants who, immediately after the distribution, are (i) active or former employees of our Avionics and Communications business, (ii) active or former employees of any divested Rockwell business or (iii) former Rockwell corporate employees (other than those who have accepted permanent employment with Rockwell's Automation business immediately after the distribution).
The amount of pension plan assets to be transferred from the assumed Rockwell pension plan to the Rockwell Automation pension plan and the Rockwell Science Center pension plan will be determined in accordance with Section 4044 of the Employee Retirement Income Security Act of 1974, Section 414(l) of the Internal Revenue Code, guidelines published by the Pension Benefit Guaranty Corporation and U.S. Government Cost Accounting Standards which are applicable to U.S. Government contractors. Although the final determination of pension plan assets to be transferred to each plan will be based on the fair market value of pension plan assets on the distribution date, we currently expect to make a tax-deductible cash contribution of $100 million to $120 million to the assumed Rockwell pension plan in order to satisfy certain
U.S. government cost accounting standards rules. The cash contribution is expected to be made no later than January 31, 2002.
Non-Qualified Supplemental Pension Plans. Pursuant to the employee matters agreement, we will assume sponsorship of the Rockwell non-qualified supplemental pension plan, which we call the assumed Rockwell non-qualified pension plan. Prior to the distribution, Rockwell will establish a separate non-qualified pension plan, the Rockwell Automation non-qualified pension plan, which will generally assume liability for benefits payable under the assumed Rockwell non-qualified pension plan to eligible participants who, immediately after the distribution, are (i) active employees of Rockwell's Automation business (including its Electronic Commerce business), other than those who are former Rockwell corporate employees who have not accepted permanent employment with Rockwell's Automation business immediately after the distribution, or (ii) former employees of Rockwell's Automation business (including its Electronic Commerce business). Prior to the distribution, Rockwell will establish, and the Rockwell Science Center will assume, a separate non-qualified supplemental pension plan, the Rockwell Science Center non-qualified pension plan, which will generally assume all liabilities under the assumed Rockwell non-qualified pension plan for benefits payable to eligible participants who, immediately after the distribution, are active or former employees of the Rockwell Science Center. Following the distribution, we and the assumed Rockwell non-qualified pension plan will generally retain all liabilities under the assumed Rockwell non-qualified pension plan for benefits payable to all other eligible participants, including eligible participants who, immediately after the distribution, are (i) active or former employees of our Avionics and Communications business, (ii) active or former employees of any divested Rockwell business or (iii) former Rockwell corporate employees (other than those who have accepted permanent employment with Rockwell's Automation business immediately after the distribution).
Qualified Savings Plans. Pursuant to the employee matters agreement, following the distribution, Rockwell will retain sponsorship of the Rockwell savings plans and the trusts related thereto. Rockwell will cause each employee who will be employed by us or one of our subsidiaries or the Rockwell Science Center on the distribution date to have a fully nonforfeitable right to such employee's account balances, if any, under the Rockwell savings plans. The account balances of each such employee will be maintained under the Rockwell savings plans. However, such employees will not be entitled to make additional contributions under the Rockwell savings plans and matching contributions will no longer be made by either Rockwell or us on behalf of such employees. We will establish new savings plans for our active employees. Our new savings plans will allow our active employees to transfer their account balances from the Rockwell savings plans to our new savings plans. The Rockwell Science Center will also establish a new savings plan for its active employees. The Rockwell Science Center savings plan will allow active employees of the Rockwell Science Center to transfer their account balances from the Rockwell savings plans to the Rockwell Science Center savings plan.
Based upon the Rockwell savings plans' ownership of Rockwell common stock on April 30, 2001, the Rockwell savings plans are expected to hold approximately 25,543,000 shares of our common stock or approximately 14% of our common stock outstanding immediately following the distribution. The Rockwell savings plans will provide participants in such plans a high degree of flexibility with respect to continued investment in our common stock in their Rockwell savings plan accounts, so that individual participants, rather than the Rockwell savings plans, will have authority to determine if and when shares of our common stock held in participant accounts will be sold and reinvested in accordance with the provisions of the Rockwell savings plans. Participants in the Rockwell savings plans will be entitled to elect at any time to have all or a portion of the shares of our common stock in their accounts under the Rockwell savings plans sold, with the net proceeds reinvested as provided for in the Rockwell savings plans. Under the Rockwell savings plans, dispositions of our common stock will be made only at the direction and on behalf of individual participants.
Non-Qualified Supplemental Savings Plan. Pursuant to the employee matters agreement, we will assume sponsorship of the Rockwell non-qualified supplemental savings plan, which we call the assumed Rockwell non-qualified savings plan. Prior to the distribution, Rockwell will establish a separate non-qualified supplemental savings plan, the Rockwell Automation non-qualified savings plan, which will generally assume liability for benefits payable under the assumed Rockwell non-qualified savings plan to eligible participants who, immediately after the distribution, are (i) active employees of Rockwell's Automation business
(including its Electronic Commerce business), other than those who are former Rockwell corporate employees who have not accepted permanent employment with Rockwell's Automation business immediately after the distribution, or (ii) former employees of Rockwell's Automation business (including its Electronic Commerce business). Prior to the distribution, Rockwell will establish, and Rockwell Science Center will assume, a separate non-qualified supplemental savings plan, the Rockwell Science Center non-qualified savings plan, which will generally assume all liabilities under the assumed Rockwell non-qualified savings plan for benefits payable to eligible participants who, immediately after the distribution, are active or former employees of the Rockwell Science Center. Following the distribution, we and the assumed Rockwell non-qualified savings plan will generally retain all liabilities under the assumed Rockwell non-qualified savings plan for benefits payable to all other eligible participants, including eligible participants who, immediately after the distribution, are (i) active or former employees of our Avionics and Communications business, (ii) active or former employees of any divested Rockwell business or (iii) former Rockwell corporate employees (other than those who have accepted permanent employment with Rockwell's Automation business immediately after the distribution).
Non-Qualified Deferred Compensation Plan. Pursuant to the employee matters agreement, we will assume sponsorship of the Rockwell non-qualified deferred compensation plan, which we call the assumed Rockwell non-qualified deferred compensation plan. Prior to the distribution, Rockwell will establish a separate non-qualified deferred compensation plan, the Rockwell Automation non-qualified deferred compensation plan, which will generally assume liability for benefits payable under the assumed Rockwell non-qualified deferred compensation plan to eligible participants who, immediately after the distribution, are (i) active employees of Rockwell's Automation business (including its Electronic Commerce business), other than those who are former Rockwell corporate employees who have not accepted permanent employment with Rockwell's Automation business immediately after the distribution, or (ii) former employees of Rockwell's Automation business (including its Electronic Commerce business). Prior to the distribution, Rockwell will establish, and Rockwell Science Center will assume, a separate non-qualified deferred compensation plan, the Rockwell Science Center non-qualified deferred compensation plan, which will generally assume all liabilities under the assumed Rockwell non-qualified deferred compensation plan for benefits payable to eligible participants who, immediately after the distribution, are active or former employees of the Rockwell Science Center. Following the distribution, we and the assumed Rockwell non-qualified deferred compensation plan will generally retain all liabilities under the assumed Rockwell non-qualified deferred compensation plan for benefits payable to all other eligible participants, including eligible participants who, immediately after the distribution, are (i) active or former employees of our Avionics and Communications business, (ii) active or former employees of any divested Rockwell business or (iii) former Rockwell corporate employees (other than those who have accepted permanent employment with Rockwell's Automation business immediately after the distribution).
Establishment and Funding of Master Rabbi Trusts. Prior to the distribution, Rockwell will establish three master rabbi trusts. One of the master rabbi trusts will relate to the assumed Rockwell non-qualified pension plan, the assumed Rockwell non-qualified savings plan and the assumed Rockwell non-qualified deferred compensation plan, and we will assume that master rabbi trust (and the assets thereof) as of the time of the distribution. Another of the master rabbi trusts will relate to the Rockwell Automation non-qualified pension plan, the Rockwell Automation non-qualified savings plan and the Rockwell Automation non-qualified deferred compensation plan, and Rockwell will retain that master rabbi trust (and the assets thereof) following the distribution. The third master rabbi trust will relate to the Rockwell Science Center non-qualified pension plan, the Rockwell Science Center non-qualified savings plan and the Rockwell Science Center non-qualified deferred compensation plan, and the Rockwell Science Center will assume that master rabbi trust (and the assets thereof) as of the time of distribution. Prior to the distribution, Rockwell will fund the three master rabbi trusts in cash amounts which are expected to approximate $150 million in the aggregate (for all three master rabbi trusts) and which are intended to approximate the accrued liabilities as of the time of the distribution of the non-qualified plans related to such master rabbi trusts (assuming, in the case of non-qualified pension liabilities, a discount rate of 7.5%).
Post-Retirement Health and Life Insurance. Rockwell will generally retain all obligations to provide post-retirement health and life insurance benefits to eligible participants who, immediately after the
distribution, are (i) active employees of Rockwell's Automation business (including its Electronic Commerce business), other than those who are former Rockwell corporate employees who have not accepted permanent employment with Rockwell's Automation Business immediately after the distribution, or (ii) former employees of Rockwell's Automation business (including its Electronic Commerce business). The Rockwell Science Center will assume all obligations to provide post-retirement health and life insurance benefits to eligible participants who, immediately after the distribution, are active or former employees of the Rockwell Science Center. We will generally assume all obligations to provide post-retirement health and life insurance benefits to all other eligible participants, including eligible participants who, immediately after the distribution, are (i) active or former employees of our Avionics and Communications business, (ii) active or former employees of any divested Rockwell business or (iii) former Rockwell corporate employees (other than those who have accepted permanent employment with Rockwell's Automation business immediately after the distribution).
Stock Options. The employee matters agreement provides for adjustment of outstanding options to purchase Rockwell common stock (Rockwell options) granted under the Rockwell 2000 Long-Term Incentives Plan, the Rockwell 1995 Long-Term Incentives Plan, the Rockwell 1988 Long-Term Incentives Plan and the Rockwell Directors Stock Plan.
Rockwell options outstanding at the time of the distribution which are held by persons who are active employees of our Avionics and Communications business immediately after the distribution (other than former Rockwell corporate employees who become employees of our Avionics and Communications business in connection with the distribution) generally will be replaced with options to purchase shares of our common stock (Rockwell Collins options). The number of shares these Rockwell Collins options cover and their exercise price per share will be determined using a formula designed to cause (1) the economic value of such Rockwell Collins options (i.e., the difference between the fair market value of the shares of our common stock subject to such options and the aggregate per share exercise price thereof) immediately after the distribution to be the same as the economic value immediately prior to the distribution of the Rockwell options being replaced, and (2) the ratio of the exercise price to the fair market value of the underlying stock to remain the same immediately before and immediately after the distribution.
Rockwell options outstanding at the time of the distribution which are held by persons who are active employees of Rockwell's Automation business (including its Electronic Commerce business) immediately after the distribution (other than former Rockwell corporate employees who become employees of Rockwell's Automation business in connection with the distribution) generally will remain Rockwell options, but the number of shares they cover and the exercise price per share will be adjusted using a formula designed to cause (1) the economic value of such Rockwell options (i.e., the difference between the fair market value of the shares of Rockwell common stock subject to such options and the aggregate per share exercise price thereof) to remain the same immediately before and immediately after the distribution, after giving effect to any change in the market value of Rockwell common stock resulting from the distribution, and (2) the ratio of the exercise price to the fair market value of the underlying Rockwell common stock to remain the same immediately before and immediately after the distribution.
All other Rockwell options outstanding at the time of the distribution (including options which are held by persons who, immediately after the distribution, are (i) active Rockwell Science Center employees or active employees of any divested Rockwell business, (ii) former Rockwell corporate employees (including those who become employees of our Avionics and Communications business or Rockwell's Automation business in connection with the distribution), (iii) former employees of any business of Rockwell, including former employees of our Avionics and Communications business, Rockwell's Automation business, the Rockwell Science Center or any divested Rockwell business or (iv) active or former outside directors of Rockwell) generally will be adjusted so that following the distribution, each option holder will hold Rockwell options and Rockwell Collins options. The number of shares subject to, and the exercise prices of, such options will be adjusted to take into account the distribution using a formula designed to cause (1) the aggregate economic value (i.e., the difference between the aggregate fair market value of the shares subject to such options and the aggregate per share exercise prices thereof) of the resulting Rockwell and Rockwell Collins options immediately after the distribution to be equal to the aggregate economic value of the Rockwell options
immediately prior to the distribution, and (2) for each resulting option, the ratio of the exercise price to the fair market value of the underlying stock to remain the same immediately before and immediately after the distribution.
TAX ALLOCATION AGREEMENT
Through the distribution date, the results of the operations of our business have been and will be included in Rockwell's consolidated United States federal income tax returns. As part of the distribution, we and Rockwell will enter into a tax allocation agreement which provides, among other things, for the allocation between us and Rockwell of federal, state, local and foreign tax liabilities relating to our business.
The tax allocation agreement also allocates the liability for any taxes that may arise in connection with separating our business from Rockwell. The tax allocation agreement provides, in general, that Rockwell will be responsible for any such taxes. However, we will be responsible for any taxes imposed on us, Rockwell or Rockwell shareowners as a result of either:
- the failure of the distribution to qualify as a tax-free reorganization for U.S. federal income tax purposes or
- the subsequent disqualification of the distribution as a tax-free transaction to Rockwell for U.S. federal income tax purposes,
if the failure or disqualification is attributable to specific post-distribution actions by or in respect of us, our subsidiaries or our shareowners. Even if the distribution otherwise qualifies as a tax-free reorganization for U.S. federal income tax purposes, it may be disqualified as tax-free to Rockwell if 50% or more of our stock is acquired as part of a plan or series of related transactions that include the distribution. For this purpose, any acquisitions of our stock within two years before or after the distribution are presumed to be part of such a plan, although Rockwell or we may be able to rebut that presumption. Under proposed IRS regulations, if specified conditions are satisfied, an acquisition occurring more than six months after the distribution will not be considered as part of a plan which includes the distribution provided that there was no agreement, understanding, arrangement or substantial negotiations concerning the acquisition before a date that is six months after the distribution. There is no assurance that the proposed regulations will become effective. The process for determining whether a change of ownership has occurred under the tax rules is complex and uncertain. If we do not carefully monitor our compliance with these rules we might inadvertently cause or permit a change of ownership to occur, triggering our obligation to indemnify Rockwell under the tax allocation agreement. In addition, our obligation to indemnify Rockwell in the event that a change of ownership causes the distribution not to be tax-free could discourage or prevent a third party from making a proposal to acquire our company.
In addition, we and Rockwell have agreed not to take any action inconsistent with the representations made to the IRS in connection with the request for the tax ruling regarding the tax-free nature of the distribution, except as required by law, unless the other party has given its prior written consent or, in certain circumstances, a supplemental ruling permitting such action is obtained. We and Rockwell will indemnify each other with respect to any tax liability resulting from our respective failures to comply with such representations. If we are required to pay any of the taxes described in the two preceding paragraphs, the payment would have a material adverse effect on our financial position, results of operations and cash flow.
Though valid as between the parties thereto, the tax allocation agreement is not binding on the IRS and does not affect the liability of us, Rockwell and our respective subsidiaries to the IRS for all federal taxes of the consolidated group relating to periods through the date of distribution.
CONTINUING SERVICES AGREEMENTS
Under the continuing services agreement to be entered into between us and Rockwell, we will provide Rockwell with payroll and employee benefits administration services for an initial term of three and one-half years after the distribution.
Under a separate continuing services agreement to be entered into between us and the Rockwell Science Center, we will provide the Rockwell Science Center similar payroll and employee benefits administration services for an initial term of three and one-half years after the distribution.
ROCKWELL SCIENCE CENTER AGREEMENTS
Under the service agreement to be entered into between us and the Rockwell Science Center, the Rockwell Science Center will provide certain research and development services to us for an initial term expiring on September 30, 2004. The Rockwell Science Center and Rockwell will enter into a similar service agreement pursuant to which the Rockwell Science Center will provide certain research and development services to Rockwell for an initial term expiring on September 30, 2004.
Under the agency licensing agreement to be entered into between us and a subsidiary of the Rockwell Science Center, that subsidiary will act as our exclusive agent for the licensing of certain of our intellectual property to third parties in fields other than our business for an initial term expiring on September 30, 2002. Rockwell will also enter into a similar agency licensing agreement with a subsidiary of the Rockwell Science Center pursuant to which that subsidiary will act as Rockwell's exclusive agent for the licensing of certain of Rockwell's intellectual property to third parties in fields other than Rockwell's business for an initial term expiring on September 30, 2002.
TRANSITION AGREEMENT
Under the transition agreement to be entered into among Rockwell, the Rockwell Science Center and us, Rockwell and the Rockwell Science Center will provide us certain transitional services which prior to the distribution have been provided to us by Rockwell or the Rockwell Science Center, including:
- facilities services for shared facilities owned or leased by Rockwell or the Rockwell Science Center;
- computer services;
- general consulting services; and
- other administrative and technical services.
Under the transition agreement we and the Rockwell Science Center will provide Rockwell certain transitional services, including:
- facilities services for shared facilities owned or leased by us or the Rockwell Science Center;
- general consulting services; and
- other administrative and technical services.
Under the transition agreement we and Rockwell will provide the Rockwell Science Center certain transitional services, including:
- general consulting services; and
- other administrative and technical services.
MANAGEMENT
DIRECTORS
Immediately after the distribution, our board of directors is expected to consist of the individuals named below. Our restated certificate of incorporation provides that the board of directors will be divided into three classes. The term of office of directors assigned to Class I will expire at the annual meeting of shareowners in 2002 and at each third succeeding annual meeting after that. The term of office of directors assigned to Class II will expire at the annual meeting of shareowners in 2003 and at each third succeeding annual meeting after that. The term of office of directors assigned to Class III will expire at the annual meeting of shareowners in 2004 and at each third succeeding annual meeting after that. We expect to hold our first annual meeting of shareowners in February 2002. Unless otherwise indicated, (i) the business address for each person listed below is New Rockwell Collins, Inc., 400 Collins Road NE, Cedar Rapids, Iowa 52498 and (ii) each individual listed below is a citizen of the United States.
CLASS I DIRECTORS
Joseph F. Toot, Jr. -- Mr. Toot, age 65, is retired President and Chief Executive Officer of The Timken Company (tapered roller bearings and specialty steel). He has been a director of Rockwell since 1977. Mr. Toot joined The Timken Company in 1962 and served in various senior executive positions until his election as Executive Vice President in 1973, President in 1979 and Chief Executive Officer in 1992. He retired as President and Chief Executive Officer in December 1997 and then served as Chairman of the Executive Committee -- Board of Directors from July 1998 until April 2000. Mr. Toot has served as a director of Timken since 1968. He is a member of the Supervisory Board of PSA Peugeot Citroen. Mr. Toot has also served as a director, officer, trustee or member of various community, charitable and philanthropic organizations.
CLASS II DIRECTORS
Clayton M. Jones -- Mr. Jones, age 52, is expected to be our President and Chief Executive Officer. He has served as Senior Vice President of Rockwell (electronic controls and communications) and President of Rockwell Collins, Inc. since January 1999. He served as Executive Vice President of Rockwell Collins from November 1996 to January 1999; and Vice President and General Manager of Rockwell's Collins Air Transport Division prior thereto. Mr. Jones, a former Air Force fighter pilot, received his M.B.A. in finance from George Washington University and his B.S. in political science from the University of Tennessee. Mr. Jones also serves as a director or member of a number of professional and civic organizations.
Anthony J. Carbone -- Mr. Carbone, age 60, is currently Vice Chairman of the board of directors and a Senior Consultant of The Dow Chemical Company (chemical, plastic and agricultural products). He served as Executive Vice President of Dow from November 1996 to November 2000; and Group Vice President -- Global Plastics, Hydrocarbons and Energy of Dow from 1995 to 1996. Mr. Carbone has served as a director of Dow since 1995. He is a member of the American Chemical Society and former board member and Chairman of the American Plastics Council and the Society of Plastics Industries. Mr. Carbone has also served on the Advisory Council of the Heritage Foundation.
CLASS III DIRECTORS
Donald R. Beall -- Mr. Beall, age 62, is expected to be the non-executive Chairman of our board of directors. Mr. Beall is retired Chairman of the Board and Chief Executive Officer of Rockwell and was a director of Rockwell from February 1978 to February 2001. He served as Chairman of the Board of Rockwell from February 1988 to February 1998 and Chief Executive Officer of Rockwell from February 1988 to September 1997. Mr. Beall is a director of Conexant Systems, Inc. and The Procter & Gamble Company. He is a trustee of California Institute of Technology, a member of the Foundation Board of Trustees at the University of California -- Irvine and an Overseer of the Hoover Institution. He is also a member of The Business Council and numerous professional, civic and entrepreneurial organizations.
Richard J. Ferris -- Mr. Ferris, age 64, served as Co-Chairman of Doubletree Corporation (hotel services) and Co-Chairman of Doubletree Partners from 1993 to 1997. Mr. Ferris is the former Chairman, President and Chief Executive Officer of UAL Corporation (travel related services), a position he held from April 1976 to June 1987. He was a private investor for more than five years following his resignation from UAL. Mr. Ferris is on the board of directors of BP Amoco p.l.c. and The Proctor & Gamble Company, and he is also Chairman, Policy Board of PGA Tour Inc.
COMMITTEES OF THE BOARD OF DIRECTORS
The standing committees of our board of directors will include an Audit Committee, a Compensation and Management Development Committee (Compensation Committee), and a Board Composition Committee, each of which will be comprised of non-employee directors. The functions of each of these three committees are described below.
The Audit Committee will, among other things, assist our board of directors in overseeing:
- the integrity of our financial statements;
- our compliance with legal and regulatory requirements; and
- the independence and performance of our internal and external auditors.
The principal functions of the Compensation Committee will be to:
- evaluate the performance of our senior executives and plans for management succession and development;
- consider the design and competitiveness of our compensation plans;
- review and approve senior executive compensation; and
- administer our incentive, deferred compensation, stock option and long-term incentives plans pursuant to the terms of the respective plans.
The members of the Compensation Committee will be ineligible to participate in any of the plans or programs which are administered by the Committee except our Directors Stock Plan.
The principal functions of the Board Composition Committee will be to:
- consider and recommend to the board of directors qualified candidates for election as our directors;
- prepare and submit periodically to the board of directors for adoption the Committee's selection criteria for director nominees; and
- assess annually the performance of the board of directors as a whole and of the individual directors and report thereon to the board of directors.
COMPENSATION OF DIRECTORS
The non-executive Chairman of our board of directors will receive compensation of $250,000 per year. In addition, he will receive a special one-time grant of an option to purchase 150,000 shares of our common stock effective concurrently with the first grant of options under our 2001 Long-Term Incentives Plan.
Following the distribution, our other non-employee directors will receive a retainer at the rate of $50,000 per year for service on our board of directors. Under the Directors Stock Plan, one-half of the retainer will be paid as restricted shares of our common stock valued at the closing price of our common stock on the New York Stock Exchange Composite Transactions reporting system on the date the initial installment of the cash portion of the annual retainer payment would be made. Under the Directors Stock Plan, each non-employee director (other than the non-executive Chairman of our board of directors) will be entitled to elect each year to defer all or any part of the cash portion of his or her retainer or fees by electing to receive additional restricted shares of our common stock valued at the closing price of our common stock on the New York
Stock Exchange Composite Transactions reporting system on the date the cash portion of the retainer payment or fees would otherwise be paid.
Under the Directors Stock Plan, each non-employee director (other than the non-executive Chairman of our board of directors) will be granted an option to purchase 10,000 shares of our common stock effective upon election as a director or, for the initial non-employee directors, effective concurrently with the first grant of options under our 2001 Long-Term Incentives Plan. In addition, each non-employee director (other than the non-executive Chairman of our board of directors) will be granted an option to purchase 5,000 shares of our common stock immediately after each annual meeting of our shareowners, provided that at the time of the grant the director has served on our board of directors for at least one year. Please see "-- Benefit Plans Following the Distribution -- Directors Stock Plan".
EXECUTIVE OFFICERS
Set forth below are the names, ages, positions and backgrounds of those individuals who are expected to serve as our executive officers immediately following the distribution. Those individuals named below who are currently officers or employees of Rockwell will resign from all their positions with Rockwell prior to the distribution. Executive officers will be elected to serve until they resign or are removed, or are otherwise disqualified to serve, or until their successors are elected and qualified.
CLAYTON M. JONES, age 52, is expected to be our President and Chief Executive Officer. Please see "-- Directors" for biographical information about Mr. Jones.
PATRICK E. ALLEN, age 36, is expected to be our Vice President Finance and Treasury. He has served as Vice President and Treasurer of Rockwell since June 2000. He served as Vice President, Financial Planning and Analysis of Rockwell from June 1999 to May 2000; Assistant Controller of Rockwell from August 1997 to May 1999; Director, External Financial Reports of Rockwell from October 1996 to July 1997; and Manager, External Financial Reports of Rockwell from December 1994 to September 1996. Mr. Allen received his B.S. in finance from The Pennsylvania State University.
ROBERT M. CHIUSANO, age 50, is expected to be our Executive Vice President and Chief Operating Officer, Government Systems. He has served as Vice President and General Manager, Government Systems of Rockwell Collins since November 1996. He served as Vice President, Program Management of Rockwell's Collins Avionics and Communications Division from October 1993 to October 1996. Mr. Chiusano received his B.S. in industrial engineering from the State University of New York and his M.B.A. from the University of Iowa.
LAWRENCE A. ERICKSON, age 52, is expected to be our Senior Vice President and Chief Financial Officer. He has served as Vice President and Controller, Finance and Strategic Development of Rockwell Collins since October 1999. He served as Vice President and Controller of Rockwell Collins from November 1996 to September 1999; and Vice President and Controller, Finance of Rockwell Collins Commercial Avionics from November 1994 to October 1996. Mr. Erickson received his B.S. in accounting from Mount Mercy College.
JEROME J. GASPAR, age 56, is expected to be our Senior Vice President, Engineering and Technology. He has served as Vice President, Engineering and Technology of Rockwell Collins since January 2000. He served as Vice President, Displays Center of Excellence from August 1997 to December 1999; and Vice President, Programs of Rockwell Collins Commercial Avionics from July 1989 to July 1997. Mr. Gaspar received his B.S. in electrical engineering from South Dakota State University and his M.B.A. in marketing from the University of Iowa.
NEAL J. KEATING, age 45, is expected to be our Executive Vice President and Chief Operating Officer, Commercial Systems. He has served as Vice President and General Manager, Passenger Systems of Rockwell Collins since June 1999. He served as Vice President and General Manager of Rockwell Collins Air Transport Systems from March 1997 to May 1999; and Vice President and General Manager, Operator Interface Business of Rockwell Automation from January 1996 to February 1997. Mr. Keating received his B.A. in electrical engineering from the University of Illinois-Urbana and his M.B.A. from the University of Chicago.
HERMAN M. REININGA, age 59, is expected to be our Senior Vice President, Operations. He has served as Vice President, Operations of Rockwell Collins since November 1996. He served as Vice President, Operations of Rockwell's Collins Avionics and Communications Division from November 1991 to October 1996. Mr. Reininga received his B.S. in industrial engineering from Iowa State University and an M.S. in industrial engineering from the University of Iowa.
WILLIAM J. RICHTER, age 55, is expected to be our Senior Vice President, Human Resources. He has served as Vice President, Human Resources of Rockwell Collins since March 1995. He served as Vice President, Human Resources of Rockwell's Collins Avionics and Communications Division from April 1994 to February 1995. Mr. Richter received his B.S. in marketing from Southern Illinois University.
ALFRED J. SPIGARELLI, age 61, is expected to be our Vice President, Benefits and Administrative Services. He has served as Vice President, Benefits and Administrative Services of Rockwell since July 1999. He served as Vice President, Compensation and Benefits of Rockwell from February 1997 to July 1999; and Director, Benefits Administration of Rockwell from February 1992 to June 1997. Mr. Spigarelli received his B.A. in marketing and finance from Michigan State University and his M.B.A. in business management from Michigan State University.
DEREK R. WIMMER, age 54, is expected to be our Vice President and General Auditor. He has served as Controller of Rockwell Collins Air Transport Systems since November 2000. He served as Senior Director, Commercial and Business Compliance of Rockwell Collins from October 1998 to November 2000; Vice President, International Planning and Development of Rockwell from November 1997 to September 1998; and Director, International Planning and Development of Rockwell from March 1996 to October 1997. He received his B.A. in accounting and marketing from the University of Witwatersrand.
HISTORICAL COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning the annual and long-term compensation for services rendered in all capacities to Rockwell and its subsidiaries for the fiscal years noted of the individual who will serve as our chief executive officer and the other four most highly compensated individuals who will serve as our executive officers, referred to collectively as the named executive officers, in each case, based on their employment by Rockwell or an affiliate of Rockwell at September 30, 2000. The compensation described in this table was paid by Rockwell or an affiliate of Rockwell. The services rendered to Rockwell were, in some cases, in capacities not equivalent to those to be provided to us and this table does not reflect the compensation to be paid to executive officers in the future.
SUMMARY COMPENSATION TABLE(1)
LONG-TERM ALL OTHER
ANNUAL COMPENSATION COMPENSATION COMPENSATION(3)
---------------------------------- ------------------------ ---------------
AWARDS PAYOUTS
----------- ----------
STOCK LONG-TERM
NAME AND OTHER ANNUAL OPTIONS INCENTIVE
PRINCIPAL POSITION(2) YEAR SALARY BONUS(4) COMPENSATION (SHARES)(5) PAYOUTS(6)
--------------------- ---- -------- -------- ------------ ----------- ----------
Clayton M. Jones.............. 2000 $350,000 $300,000 $ 32,450 90,000 $ 559,924 $ 2,693
President and Chief 1999 292,500 375,000 43,324 72,083 1,202,787 55,089
Executive Officer
Robert M. Chiusano............ 2000 220,000 110,000 18,877 22,500 677,654 9,659
Executive Vice President and
Chief Operating Officer,
Government Systems
Lawrence A. Erickson.......... 2000 202,000 92,700 22,485 18,000 176,001 11,365
Senior Vice President and
Chief Financial Officer
Neal J. Keating............... 2000 225,000 110,000 119,356(7) 22,500 677,654 10,497
Executive Vice President and
Chief Operating Officer,
Commercial Systems
Herman M. Reininga............ 2000 216,083 98,000 16,988 18,000 214,962 10,363
Senior Vice President,
Operations
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(2) The positions reflected in the table are the positions to be held by the named executive officers with us at the time of the distribution and were not the positions held by the named executive officers with Rockwell during the period or periods covered by the table.
(3) Amounts contributed or accrued for the named executive officers under the Rockwell savings plan and the related supplemental savings plan and the Rockwell deferred compensation plan.
(4) Amounts awarded, even if deferred, under the Rockwell Annual Incentive Compensation Plan for Senior Executive Officers for Mr. Jones and under the Rockwell Incentive Compensation Plan for Messrs. Chiusano, Erickson, Keating and Reininga.
(5) References to "stock options" relate to awards of options under the Rockwell 1995 Long-Term Incentives Plan.
(6) Cash and market value of Rockwell common stock issued in respect of performance units granted under business unit long-term incentive plans for the three-year performance periods ended September 30, 2000 and 1999 for Mr. Jones and September 30, 2000 for Messrs. Chiusano, Erickson, Keating and Reininga.
(7) Includes amounts paid in connection with the temporary relocation of Mr. Keating to Pomona, California, consisting of $96,451 in respect of mortgage, maintenance and security expenses for his Iowa home and taxes incurred on these payments. These amounts were paid in addition to amounts payable under Rockwell's relocation policy applicable to all salaried employees.
Effective July 1, 2001 the annual salaries of Messrs. Jones, Chiusano, Erickson, Keating and Reininga are expected to be $550,000, $275,000, $250,000, $275,000 and $235,000, respectively. It is anticipated that options for shares of our common stock will be granted to our employees, including the named executive officers, in the last fiscal quarter of 2001.
Prior to the distribution, we expect to enter into change of control employment agreements with each of the named executive officers and with certain other executives. Each employment agreement becomes effective upon a "change of control" of us. Each employment agreement provides for the continuing employment of the executive after the change of control on terms and conditions no less favorable than those
in effect before the change of control. If the executive's employment is terminated by us without "cause" or if the executive terminates his or her own employment for "good reason", the executive is entitled to severance benefits equal to a multiple of his or her annual compensation, including bonus, and continuation of other benefits for a number of years equal to the multiple. The multiple is 3 for each of the named executive officers and 3 or 2 for the other executives. The executives are entitled to an additional payment, if necessary, to make them whole as a result of any excise tax imposed by the Internal Revenue Code on these change of control payments, unless the safe harbor below which the excise tax is imposed is not exceeded by more than 10%, in which event the payments will be reduced to avoid the excise tax.
OPTION GRANTS
The following table shows all options to purchase Rockwell common stock granted to the named executive officers during fiscal 2000, which are reflected in the Summary Compensation Table above.
GRANT DATE
INDIVIDUAL GRANTS VALUE
--------------------------------------------------------------- -------------
PERCENTAGE
OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING ROCKWELL EXERCISE OR GRANT DATE
OPTIONS EMPLOYEES IN BASE PRICE PRESENT
NAME GRANTED (SHARES) FISCAL 2000 (PER SHARE) EXPIRATION DATE VALUE(1)
---- ---------------- ------------ ----------- --------------- -------------
Clayton M. Jones............. 60,000(2) 1.74% $52.50 10/4/2009 $1,183,200
30,000(3) 0.87% 52.50 10/4/2009 591,600
Robert M. Chiusano........... 15,000(2) 0.35% 52.50 10/4/2009 295,800
7,500(3) 0.18% 52.50 10/4/2009 147,900
Lawrence A. Erickson......... 12,000(2) 0.35% 52.50 10/4/2009 236,640
6,000(3) 0.18% 52.50 10/4/2009 118,320
Neal J. Keating.............. 15,000(2) 0.35% 52.50 10/4/2009 295,800
7,500(3) 0.18% 52.50 10/4/2009 147,900
Herman J. Reininga........... 12,000(2) 0.35% 52.50 10/4/2009 236,640
6,000(3) 0.18% 52.50 10/4/2009 118,320
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(2) Granted on October 4, 1999 and exercisable in three substantially equal annual installments beginning October 4, 2000.
(3) Granted on October 4, 1999 and exercisable when the closing market price reaches at least 150% of the grant date closing market price on 20 consecutive trading days, or, if earlier, on October 4, 2006.
On October 2, 2000, options to purchase an aggregate of 120,000, 25,500, 22,500, 25,500 and 22,500 shares of Rockwell common stock were granted under the Rockwell 2000 Long-Term Incentives Plan to Messrs. Jones, Chiusano, Erickson, Keating and Reininga, respectively.
As set forth in the employee matters agreement, Rockwell options outstanding at the time of distribution which are held by persons who are active employees of our Avionics and Communications business immediately prior to the distribution will be replaced with options to purchase shares of our common stock with the number of shares covered thereby and the exercise price per share to be determined pursuant to a formula designed to provide equivalent value to each option holder after giving effect to the distribution. Please see "Arrangements Between Rockwell and Our Company -- Employee Matters Agreement".
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table shows (i) aggregated exercises by the named executive officers during fiscal 2000 of options to purchase Rockwell common stock granted under the Rockwell option plans and (ii) unexercised options to purchase Rockwell common stock granted to the named executive officers in fiscal 2000 and prior years under the Rockwell option plans and held by them at September 30, 2000.
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS
SHARES SEPTEMBER 30, 2000 AT SEPTEMBER 30, 2000(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
Clayton M. Jones............. 3,644 $106,302 72,969 122,036 $376,815 $96,089
Robert M. Chiusano........... -- -- 6,517 34,514 18,014 36,035
Lawrence A. Erickson......... -- -- 4,005 26,008 12,013 24,019
Neal J. Keating.............. -- -- 23,204 41,181 96,353 36,035
Herman M. Reininga........... -- -- 10,523 26,008 30,030 24,019
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RETIREMENT BENEFITS
All of the named executive officers participate in a defined benefit pension plan which qualifies under Section 401(a) of the Internal Revenue Code and which we will assume prior to the time of distribution. Please see "Arrangements Between Rockwell and Our Company -- Employee Matters Agreement".
The following table shows the estimated aggregate annual retirement benefits payable on a straight life annuity basis to participating employees in the earnings and years of service classifications indicated, under the retirement plans of us and Rockwell which cover most of our officers and other salaried employees on a noncontributory basis. Such benefits reflect a reduction to recognize in part the cost of Social Security benefits related to service for us and Rockwell. The plans also provide for the payment of benefits to an employee's surviving spouse or other beneficiary.
ESTIMATED ANNUAL RETIREMENT BENEFITS FOR
YEARS OF CREDITED SERVICE
AVERAGE ----------------------------------------------------------------------------
ANNUAL 35 OR MORE
EARNINGS 5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS YEARS
-------- -------- -------- -------- -------- -------- -------- ----------
$ 250,000....................... $ 32,525 $ 65,078 $ 97,603 $103,414 $109,225 $115,036 $120,848
500,000...................... 65,850 131,735 197,603 209,664 221,725 233,786 245,848
750,000...................... 99,175 198,428 297,603 315,914 334,225 352,536 370,848
1,000,000...................... 132,500 265,103 397,603 422,164 446,725 471,286 495,848
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Covered compensation includes salary and annual bonus. The calculation of retirement benefits under the plans generally is based upon average earnings for the highest five years of the ten years preceding retirement.
The credited years of service of Messrs. Jones, Chiusano, Erickson, Keating and Reininga are 21, 23, 26, 23 and 36 years, respectively.
Sections 401(a)(17) and 415 of the Internal Revenue Code limit the annual benefits which may be paid from a tax-qualified retirement plan. As permitted by the Employee Retirement Income Security Act of 1974, Rockwell has established supplemental pension plans which authorize the payment of any benefits calculated under provisions of the applicable retirement plan which may be above the limits under these sections. Pursuant to the employee matters agreement, we will assume all of Rockwell's liabilities with respect to Rockwell Collins participants under such supplemental pension plans of Rockwell.
BENEFIT PLANS FOLLOWING THE DISTRIBUTION
The following are descriptions of certain benefit plans that are expected to provide benefits to our employees and directors after the distribution.
2001 LONG-TERM INCENTIVES PLAN
Our 2001 Long-Term Incentives Plan, or the "2001 LTIP", has been adopted by our board of directors and approved by Rockwell as our sole shareowner. The 2001 LTIP will also be submitted to our shareowners for approval at our 2002 annual meeting. The 2001 LTIP permits grants to be made from time to time as nonqualified stock options, incentive stock options, stock appreciation rights, or SARs, restricted stock, performance units and stock purchase awards.
Administration. The 2001 LTIP will be administered by the Compensation
Committee, consisting of two or more members of our board of directors who are
not eligible to participate in the 2001 LTIP. In order to meet the requirements
of Section 162(m) of the Internal Revenue Code and the rules under Section 16 of
the Securities Exchange Act, all grants under the 2001 LTIP will be made by
those members of the Compensation Committee who are both "outside directors" as
defined for purposes of Section 162(m) of the Internal Revenue Code and
regulations thereunder and "nonemployee directors" as defined for purposes of
Section 16 of the Securities Exchange Act.
Participation. The persons to whom grants are made under the 2001 LTIP will be selected from time to time by the Compensation Committee in its sole discretion from among our employees and those of our subsidiaries. The 2001 LTIP defines employees broadly to include our "leased employees" and consultants and those of our subsidiaries. Although the 2001 LTIP would permit the Compensation Committee to grant awards to consultants and "leased employees", it does not presently intend to do so. The 2001 LTIP also excludes non-employee members of our board of directors (other than the non-executive Chairman of our board of directors) from the definition of employees. In selecting participants and determining the type and amount of their grants, the Compensation Committee may consider recommendations of our chief executive officer and will take into account such factors as the participant's level of responsibility, performance, performance potential, level and type of compensation and potential value of grants under the 2001 LTIP.
Shares Subject to 2001 LTIP. The 2001 LTIP authorizes the issuance or delivery of an aggregate of up to 14 million shares of our common stock, provided that no more than 12 million shares will be available for awards other than stock options or stock appreciation rights. Shares of our common stock subject to the unexercised, undistributed or unearned portion of any terminated or forfeited grant under the 2001 LTIP will be available for further awards.
Stock Options, Stock Appreciation Rights and Restricted Stock. The 2001 LTIP authorizes grants of stock options, which may be either incentive stock options eligible for special tax treatment or nonqualified stock options, stock appreciation rights, and restricted stock.
Under the provisions of the 2001 LTIP authorizing the grant of stock options:
- the option price may not be less than the fair market value of the shares of our common stock at the date of grant;
- the aggregate fair market value, determined as of the date the option is granted, of the shares of our common stock for which any employee may be granted incentive stock options which are exercisable for the first time in any calendar year may not exceed the maximum permitted under the Internal Revenue Code (presently $100,000);
- stock options may not be exercised after ten years from the date of grant; and
- at the time of exercise of a stock option the option price must be paid in full in cash or, at the discretion of the Compensation Committee, in shares of our common stock or in a combination of cash and shares of our common stock.
The 2001 LTIP permits the Compensation Committee to prescribe in the award agreement for each grant any other terms and conditions of that grant, including but not limited to exercisability upon termination of a participant's employment.
The 2001 LTIP permits the grant of SARs covering up to an aggregate of 100,000 shares of our common stock, which may be tandem SARs, which are SARs related to a stock option, or freestanding SARs, which are SARs separate and apart from the grant of an option. Tandem SARs permit an optionee, upon exercise of such rights, and surrender of the related option to the extent of an equivalent number of shares of our common stock, to receive a payment equal to the excess of the fair market value (on the date of exercise) of the portion of the option so surrendered over the option price of such shares. Freestanding SARs entitle the grantee, upon exercise of such rights, to receive a payment equal to the excess of the fair market value (on the date of exercise) of all or part of a designated number of shares over the fair market value of such shares on the date such rights were granted. Such payment may be made in shares (valued on the basis of the fair market value of the shares on the date of exercise of the SARs), or in cash or partly in cash and partly in shares, as the Compensation Committee may determine.
Under the 2001 LTIP, the Compensation Committee may grant up to an aggregate of 1,000,000 shares of our common stock subject to restrictions on transfer and such other restrictions on incidents of ownership as the Compensation Committee may determine, referred to as "restricted stock". During the restricted period, shares of restricted stock have all the attributes of outstanding shares of our common stock, except that the Compensation Committee may provide at the time of the grant that any dividends or other distributions paid on such restricted stock while subject to such restrictions will be accumulated or reinvested in our common stock and held subject to the same restrictions as the restricted stock and such other terms and conditions as the Compensation Committee may determine.
Performance Units. The 2001 LTIP authorizes the Compensation Committee to grant performance units, the amount of which is based on the achievement of one or more specific goals with respect to Rockwell Collins, a business unit or the participant over a specified period of time of at least one fiscal year. Earned payouts of performance units, which may not exceed $5 million for any one participant with respect to any one performance period, will be paid in cash unless the Compensation Committee decides that payment should be in shares of our common stock or a combination of shares of our common stock and cash.
Stock Purchase Awards. The Compensation Committee may grant stock purchase awards entitling a participant to purchase, with a loan from us, a specified number of shares of our common stock at their fair market value on the date of purchase. Stock purchase awards may be granted under the 2001 LTIP with respect to up to an aggregate of 5,000,000 shares of our common stock. Loans made to participants with respect to stock purchase awards will be evidenced by interest-bearing promissory notes, secured by a pledge of the shares purchased and with recourse to the participant. The Compensation Committee may forgive all or part of any stock purchase award loan on such terms as it determines, including but not limited to achievement of one or more specified goals with respect to performance of Rockwell Collins, a business unit or the participant over a specified period of time.
Performance Compensation Awards. Under the 2001 LTIP, the Compensation Committee generally may designate any award (other than a grant of stock options or stock appreciation rights, which are in any event deemed to be performance-based) at the time of its grant as a performance compensation award to qualify payment of the award under Section 162(m) of the Internal Revenue Code. If the Compensation Committee does so, it must establish a performance period, performance measure, performance goals and performance formula for the award within 90 days after the beginning of the performance period. The Compensation Committee may not adjust the performance measure, performance goals or performance period unless after any such adjustment the award would continue to qualify as performance-based compensation under Section 162(m).
Awards Agreements. All grants made under the 2001 LTIP will be evidenced by an agreement between us and the 2001 LTIP participant setting forth the terms and conditions applicable to the grants, as determined by the Compensation Committee consistent with the terms of the 2001 LTIP. Each award agreement will set forth the terms and conditions applicable to awards, including but not limited to provisions
for the time at which the award becomes exercisable or otherwise vests; the treatment of the award in the event of the termination of a participant's status as an employee; and any special provisions applicable in the event of an occurrence of a change in control, as determined by the Compensation Committee consistent with the provisions of the 2001 LTIP.
Under the 2001 LTIP, stock options, restricted stock and other awards generally may not be granted after June 29, 2011.
Tax Matters. The following is a brief summary of the material federal income tax consequences of benefits under the 2001 LTIP under present law and regulations:
(a) Incentive Stock Options. The grant of an incentive stock option will not result in any immediate tax consequences to us or the optionee. An optionee will not realize taxable income, and we will not be entitled to any deduction, upon the timely exercise of an incentive stock option, but the excess of the fair market value of the shares of our common stock acquired over the option exercise price will be includable in the optionee's "alternative minimum taxable income" for purposes of the alternative minimum tax. If the optionee does not dispose of the shares of our common stock acquired within one year after their receipt, and within two years after the option was granted, gain or loss realized on the subsequent disposition of the shares of our common stock will be treated as long-term capital gain or loss. Capital losses of individuals are deductible only against capital gains and a limited amount of ordinary income. In the event of an earlier disposition, the optionee will realize ordinary income in an amount equal to the lesser of (i) the excess of the fair market value of the shares of our common stock on the date of exercise over the option exercise price or (ii) if the disposition is a taxable sale or exchange, the amount of any gain realized. Upon such a disqualifying disposition, we will be entitled to a deduction in the same amount and at the same time as the optionee realizes such ordinary income.
(b) Nonqualified Stock Options. The grant of a nonqualified stock option will not result in any immediate tax consequences to us or the optionee. Upon the exercise of a nonqualified stock option, the optionee will realize ordinary income, and we will be entitled to a deduction, equal to the excess of the fair market value of the shares of our common stock acquired at the time of exercise over the option exercise price.
(c) Stock Appreciation Rights. Upon the exercise of either a tandem SAR or a freestanding SAR, any cash received and the fair market value on the exercise date of any shares of our common stock received will constitute ordinary income to the grantee. We will be entitled to a deduction in the same amount and at the same time.
(d) Restricted Stock. An employee normally will not realize taxable income in connection with an award of restricted stock, and we will not be entitled to a deduction, until the termination of the restrictions. Upon termination of the restrictions, the employee will realize ordinary income in an amount equal to the fair market value of the shares of our common stock at that time, plus the amount of the dividends and interest thereon to which the employee then becomes entitled. However, an employee may elect to realize taxable ordinary income in the year the restricted stock is awarded in an amount equal to its fair market value at that time, determined without regard to the restrictions. We will be entitled to a deduction in the same amount and at the same time as the employee realizes income. If the employee is then a covered employee under Section 162(m) of the Internal Revenue Code, any portion of the income realized in respect of restricted stock which, together with other non-performance based compensation, exceeds $1 million will not be deductible by us under the limitations of Section 162(m) of the Internal Revenue Code.
(e) Performance Units. Any cash and the fair market value of any
shares of our common stock received in connection with the grant of a
performance unit under the 2001 LTIP will constitute ordinary income to the
employee in the year in which paid, and we will be entitled to a deduction
in the same amount. If the employee is then a covered employee under
Section 162(m) of the Internal Revenue Code, any portion of the payout of
performance units which, together with other non-performance based
compensation, exceeds $1 million will not be deductible by us under the
limitations of Section 162(m) of the Internal Revenue Code.
(f) Stock Purchase Awards. The grant of a stock purchase award and the acquisition of shares of our common stock pursuant to such an award will not result in any immediate tax consequences to an employee or to us. Upon the sale of the shares of our common stock acquired pursuant to the stock purchase award, an employee will realize capital gain or loss equal to the difference between the amount received on the sale and the purchase price of the shares. Interest payable by an employee pursuant to a stock purchase award will be deductible by the employee to the extent permitted by law and we will accrue ordinary income equal to the amount of interest payable.
(g) Payouts of Performance Compensation Awards. The designation of an award of restricted stock or the grant of a performance unit or stock purchase award as a performance compensation award will not change the tax treatment described above to an employee who receives such an award or grant. Such a designation will, however, enable such award or grant to qualify as performance-based compensation not subject to the $1 million limitation on deductible compensation under Section 162(m) of the Internal Revenue Code.
Change of Control. The 2001 LTIP permits the agreements governing any awards under the 2001 LTIP to include a change of control contingency in order to maintain the rights of 2001 LTIP participants in the event of a change of control of us. The Compensation Committee is expected to include such contingencies in most awards with the effect that in the event of a change of control of us:
- all outstanding stock options and stock appreciation rights will become fully exercisable whether or not otherwise then exercisable;
- the restrictions on all shares of our common stock granted as restricted stock will lapse; and
- all payouts of performance units will be deemed to be fully earned based on assumed completion of all performance periods and attainment of all performance goals for the performance units.
A change of control is deemed to occur under the same circumstances as provided in Article III, Section 13(I) of our amended by-laws. This section of our amended by-laws defines change of control to mean, generally:
- the acquisition by any individual, entity or group of beneficial ownership of 20% or more of either the then outstanding shares of our common stock or the combined voting power of our then outstanding voting securities entitled to vote generally in the election of directors; or
- a change in the composition of a majority of our board of directors which is not supported by our current board of directors;
- a major corporate transaction, such as a reorganization, merger or consolidation or sale or other disposition of all or substantially all of our assets, which results in a change in the majority of our board of directors or of more than 50% of our shareowners; or
- approval by our shareowners of the complete liquidation or dissolution of our company.
Amendment, Suspension or Termination of 2001 LTIP. In the event any change in or affecting our shares of common stock occurs, our board of directors may make appropriate amendments to or adjustments in the 2001 LTIP or grants made thereunder, including changes in the number of shares of our common stock which may be issued or transferred under the 2001 LTIP. Our board of directors may at any time amend, suspend or terminate the 2001 LTIP or grants made thereunder. It may not, however, except in making amendments and adjustments in the event of changes in or affecting shares of our common stock, (i) without the consent of the person affected, impair the rights of the holder of any award other than as provided for or contemplated in the award agreement or (ii) without the approval of shareowners, make any change in the 2001 LTIP that would require shareowner approval under any tax, or regulatory requirement applicable to the 2001 LTIP. Under present tax and regulatory requirements, shareowner approval would be required, among other things, to change the class of persons eligible to receive incentive stock options under the 2001 LTIP or to increase the number of shares of our common stock that may be issued or transferred under the 2001 LTIP. In no event may the board of directors of the Compensation Committee reprice underwater stock options
(those whose option exercise price is greater than the fair market value of the shares covered by the options) by reducing the option exercise price, canceling the options and granting replacement options or otherwise.
2001 STOCK OPTION PLAN
Our 2001 Stock Option Plan, or the "2001 Plan", has been adopted by our board of directors and approved by Rockwell as our sole shareowner. The 2001 Plan covers nonqualified stock options and incentive stock options to purchase shares of our common stock resulting from the adjustments to certain Rockwell options outstanding at the time of the distribution. Please see "Arrangements Between Rockwell and Our Company -- Employee Matters Agreement".
Administration. The Compensation Committee will administer the 2001 Plan. In addition, our board of directors has authority to perform all functions of the Compensation Committee under the 2001 Plan.
Participation. The persons to whom grants are made under the 2001 Plan are holders of Rockwell options outstanding at the time of the distribution who receive Rockwell Collins options as a result of adjustments to the Rockwell options pursuant to the terms of the employee matters agreement.
Shares Subject to 2001 Plan. The 2001 Plan authorizes the issuance of the aggregate number of shares of our common stock necessary to provide for the exercise of all Rockwell Collins options outstanding on the date of the distribution as a result of adjustments to outstanding Rockwell options pursuant to the terms of the employee matters agreement, as may be adjusted under the 2001 Plan. The number of shares of our common stock that will be subject to such options will depend on the ratio between the respective market value of our common stock and Rockwell common stock at the time of the distribution. Please see "Arrangements Between Rockwell and Our Company -- Employee Matters Agreement".
Stock Options. The 2001 Plan authorizes the issuance to 2001 Plan participants of Rockwell Collins options, which may be either incentive stock options eligible for special tax treatment or nonqualified stock options. Under the provisions of the 2001 Plan authorizing the issuance of stock options, the exercise price and the number of shares of our common stock issuable upon exercise of such options will be determined pursuant to the adjustments to Rockwell options set forth under "Arrangements Between Rockwell and Our Company -- Employee Matters Agreement". Each stock option will otherwise have substantially the same terms and conditions as the corresponding Rockwell option which was adjusted, except that references to Rockwell will be changed to refer to us. The 2001 Plan also contains specific provisions applicable only to certain options which correspond to the terms of the relevant Rockwell plan under which the corresponding Rockwell options were originally granted. Incentive stock options held by 2001 Plan participants who are not active employees of our Avionics and Communications business after the distribution will automatically convert to non-qualified stock options 90 days following the distribution.
No stock options may be granted under the 2001 Plan after the distribution date.
Tax Matters. The material federal income tax consequences of receipt of incentive stock options and non-qualified stock options under the 2001 Plan under present law and regulations are as described for incentive stock options and non-qualified stock options under the 2001 LTIP. Please see "-- 2001 Long-Term Incentives Plan -- Tax Matters".
Change of Control. In order to maintain the rights of 2001 Plan participants in the event of a change of control of us, the 2001 Plan provides that upon the occurrence of such change, all stock options then outstanding shall become fully exercisable whether or not otherwise then exercisable. A change of control is deemed to occur under the same circumstances as provided in Article III, Section 13(I) of our amended by-laws. Please see "-- 2001 Long-Term Incentives Plan -- Change of Control".
Amendment, Suspension or Termination of 2001 Plan. The Compensation Committee may at any time amend, suspend or terminate the 2001 Plan or Rockwell Collins options subject to the 2001 Plan. In the event any change in shares of our common stock occurs, our board of directors may make appropriate amendments to or adjustments in the 2001 Plan or Rockwell Collins options subject to the 2001 Plan, including changes in the number of shares of our common stock which may be issued under the 2001 Plan and the number of
shares of our common stock and exercise price per share of our common stock subject to Rockwell Collins options. Except for amendments and adjustments in the event of changes in shares of our common stock, our board of directors and the Compensation Committee may not, however, without the consent of the person affected, cancel or reduce an outstanding Rockwell Collins option other than as provided for or contemplated in the option agreement, increase the number of shares of our common stock that may be issued under the 2001 Plan or reduce the option exercise price of any Rockwell Collins option.
DIRECTORS STOCK PLAN
Our Directors Stock Plan has been adopted by our board of directors and approved by Rockwell as our sole shareowner. The Directors Stock Plan will also be submitted to our shareowners for approval at our 2002 annual meeting. An aggregate of 325,000 shares of our common stock may be issued under the Directors Stock Plan, subject to appropriate adjustment in the event of any change in or affecting shares of our common stock, including but not limited to stock dividends, stock splits and recapitalizations.
Participation. Participation in the Directors Stock Plan will be limited to directors who are not employees of us or any of our subsidiaries (other than the non-executive Chairman of our board of directors).
Stock Options. Under the Directors Stock Plan, each non-employee director (other than the non-executive Chairman of our board of directors) will be granted an option to purchase 10,000 shares of our common stock effective upon election as a director or, for the initial non-employee directors, effective concurrently with the first grant of options under our 2001 Long-Term Incentives Plan. In addition, each non-employee director (other than the non-executive Chairman of our board of directors) will be granted an option to purchase 5,000 shares of our common stock immediately after each annual meeting of our shareowners, provided that at the time of the grant the director has served on our board of directors for at least one year. Our board of directors may also at any time grant non-employee directors (other than the non-executive Chairman of our board of directors) such additional options under the Directors Stock Plan as it may determine in its sole discretion. The purchase price of the shares subject to each option granted under the Directors Stock Plan will be 100% of the fair market value of our common stock on the date such option is granted. Upon exercise of an option, the option price must be paid in full in cash, shares of our common stock valued at their fair market value on the date of exercise, or a combination of both.
Options granted under the Directors Stock Plan may not be exercised prior to one year nor after ten years from the date of grant and become exercisable in three approximately equal installments on the first, second and third anniversaries of the date of grant. If an optionee who holds an outstanding stock option dies, the Directors Stock Plan permits the exercise of such option within three years of the date of death, or until the expiration date specified in the option, if earlier, even if it were not exercisable at such date. If an optionee who holds an outstanding stock option retires from our board of directors after reaching age 70 or having served at least five years as a director, all options then held will be exercisable even if they were not exercisable at such retirement date, provided that such options expire at the earlier of five years from the date of retirement or the expiration date specified in the options. If an optionee ceases to be a director by reason of disability or resignation from our board of directors for reasons of the antitrust laws, compliance with our conflict of interest policies or other circumstances that the Compensation Committee may determine as serving our best interests, all options then held by such optionee may be exercised from and after such termination date for a period of one year or until the expiration date specified in the option, if earlier, even if they were not exercisable at such termination date, unless the Compensation Committee determines otherwise. If an optionee ceases to be a director while holding unexercised options for any other reason, such options will then be cancelled.
Restricted Shares. Under the Directors Stock Plan, directors (other than the non-executive Chairman of our board of directors) will receive 50% of their annual retainer for board service in the form of restricted shares of our common stock and may elect to receive all or any portion of the cash component of their annual retainer for board service in the form of restricted shares of our common stock. Our board of directors may also at any time grant non-employee directors (other than the non-executive Chairman of our board of directors) such additional restricted shares under the Directors Stock Plan as it may determine in its sole discretion. Restricted shares will be held by us until ten days after the recipient retires from our board of
directors after reaching age 70 and having served at least three years as a director or ceases to be a director by reason of the antitrust laws, compliance with our conflict of interest policies, death, disability or other circumstances our board of directors determines not to be adverse to the best interests of us. Restricted shares will have all the attributes of outstanding shares, including the right to vote and to receive dividends thereon.
Administration and Amendment. The Compensation Committee will administer the Directors Stock Plan. Our board of directors may amend the Directors Stock Plan in any respect, provided that no amendment may be made without shareowner approval that would materially increase the maximum number of shares of our common stock available for delivery under the Directors Stock Plan (other than adjustments to reflect changes in or affecting shares of our common stock).
Our board of directors also has authority to terminate the Directors Stock Plan at any time.
Change of Control. In order to maintain the rights of participants in the Directors Stock Plan in the event of a change of control of us, the Directors Stock Plan provides that upon the occurrence of such a change, all outstanding stock options shall become fully exercisable whether or not then exercisable and the restrictions on all restricted shares shall lapse. Please see "-- 2001 Long-Term Incentives Plan -- Change of Control".
Tax Matters. The material federal income tax consequences of the issuance or transfer of restricted shares awarded in lieu of cash retainers are that the value thereof is not taxable to the recipient, and we will not be entitled to its deduction, until the restriction lapses (at the value of the shares on the date the restriction lapses).
The material federal income tax consequences of the grant of options under the Directors Stock Plan are that upon the exercise of an option, the optionee realizes ordinary income, and we are entitled to a deduction, equal to the excess of the fair market value of the shares acquired at the time of exercise over the option exercise price.
ANNUAL INCENTIVE COMPENSATION PLAN FOR SENIOR EXECUTIVE OFFICERS
Our Annual Incentive Compensation Plan for Senior Executive Officers, or Senior Executive ICP, has been adopted by our board of directors and approved by Rockwell as our sole shareowner. The Senior Executive ICP will also be submitted to our shareowners for approval at our 2002 annual meeting.
The purpose of the Senior Executive ICP is to preserve for us the current
federal income tax deductibility of annual base salary and incentive
compensation earned by the five officers of our company whose compensation might
not be deductible as a result of certain provisions of the Internal Revenue
Code. Section 162(m) of the Internal Revenue Code provides that a publicly owned
corporation may not deduct compensation in excess of $1 million per year paid to
a corporation's chief executive officer and its four other most highly paid
executive officers subject to certain exceptions. One exception is for
performance based compensation paid pursuant to a shareowner-approved plan that
satisfies certain conditions of Section
162(m), such as the Senior Executive ICP.
Eligibility. Our Chief Executive Officer and four other executive officers designated each year by the Compensation Committee will be eligible to participate in the Senior Executive ICP.
Determination of Awards. Awards under the Senior Executive ICP will be allocated each year out of a "covered employees performance fund", which shall be equal to 1.5% of our net income before income taxes for that year, but which may be adjusted by the Compensation Committee to omit the effects of extraordinary items, gains or losses on the disposal of business segments, unusual or infrequently occurring events and transactions and cumulative effects of changes in accounting principles. Subject to the Compensation Committee's right to reduce any participant's allocation award as described below, the amount set aside under the Senior Executive ICP will be allocated to each participant as follows: 35% of the fund to the Chief Executive Officer, 20% of the fund to the Chief Operating Officer and 15% of the fund to each of the other three participants, provided that if there is more than one Chief Operating Officer, the amounts allocable to each of the other participants (other than the Chief Executive Officer) will be reduced ratably. Awards
allocated to a participant will be paid to the participant in cash in a lump sum or in installments as determined by the Compensation Committee.
The Compensation Committee may reduce, but not increase, a participant's award under the Senior Executive ICP based on such factors as the Compensation Committee may deem relevant.
Administration. The Compensation Committee will administer the Senior Executive ICP and will have the power to interpret the plan. The amount of the "covered employees performance fund" in any year will be determined by our independent certified public accountants.
Amendment and Termination. The Compensation Committee may discontinue or terminate the Senior Executive ICP in whole or in part at any time and may amend the Senior Executive ICP in any respect at any time, subject to certain restrictions.
EMPLOYEE STOCK PURCHASE PLAN
Prior to the distribution, we expect to adopt (and expect that Rockwell will approve as our sole shareowner) an employee stock purchase plan to be qualified under Section 423 of the Internal Revenue Code for anticipated implementation during fiscal 2002. Participation in the stock purchase plan is expected to be available to all full-time and certain part-time employees of our company (including represented hourly employees) in the United States and all salaried employees at our company's international locations (to the extent permitted by local law). It is anticipated that participants may elect to have up to 15% of their base salaries (to a maximum of $25,000 per individual) withheld for semiannual purchases of our common stock at a price equal to 85% of the lesser of the fair market value thereof at the beginning or end of each six month period. It is anticipated that an aggregate of 9 million shares of our common stock will initially be authorized for issuance pursuant to the stock purchase plan.
OWNERSHIP OF OUR COMMON STOCK
The following table sets forth the number of shares of our common stock expected to be beneficially owned following the distribution, directly or indirectly, by each director, each named executive officer and such persons and other executive officers, as a group, based upon the beneficial ownership of such persons of Rockwell common stock reported to Rockwell as of April 30, 2001, including shares as to which a right to acquire ownership exists (for example, through the exercise of stock options, conversions of securities or through various trust arrangements) within the meaning of Rule 13d-3(d)(1) under the Exchange Act.
COMMON STOCK
-------------------------
PERCENT OF
NAME SHARES(1) CLASS(2)
---- --------- ----------
Clayton M. Jones............................................ 124,883(3,4) --
Donald R. Beall............................................. 1,263,253(3,4,5) --
Anthony J. Carbone.......................................... -- --
Richard J. Ferris........................................... -- --
Joseph F. Toot, Jr. ........................................ 23,831(4,6) --
Robert M. Chiusano.......................................... 21,909(3,4) --
Lawrence A. Erickson........................................ 21,974(3,4,7) --
Neal J. Keating............................................. 42,665(3,4) --
Herman M. Reininga.......................................... 28,019(3,4) --
All of the above and other executive officers as a group (14
persons).................................................. 1,673,875 .9%
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(1)Each person has sole voting and investment power with respect to the shares listed unless otherwise indicated.
(2)The shares owned by each person, and by the group, and the shares included in the number of shares outstanding have been adjusted, and the percentage of shares owned (where such percentage exceeds
1%) has been computed, in accordance with Rule 13d-3(d)(1) under the Securities Exchange Act of 1934, as amended.
(3) Includes shares expected to be beneficially owned in respect of shares of Rockwell common stock held under the Rockwell savings plan as of April 30, 2001. Does not include 1,887, 527, 132, 415, 223 and 3,383 share equivalents for Messrs. Jones, Chiusano, Erickson, Keating, Reininga and the group, respectively, expected to be beneficially owned in respect to share equivalents held under the Rockwell supplemental savings plan as of April 30, 2001.
(4) Includes shares in respect of shares of Rockwell common stock which may be acquired upon the exercise of outstanding stock options within 60 days as follows: 105,343, 1,080,568, 9,213, 17,524, 12,009, 35,722, 18,527 and 1,388,977 for Messrs. Jones, Beall, Toot, Chiusano, Erickson, Keating, Reininga and the group, respectively. Does not include 288,209 shares in respect of shares of Rockwell common stock which may be acquired on exercise of outstanding options granted to Mr. Beall, that have been assigned to or for the benefit of family members and are not attributable to him pursuant to Rule 13d-3(d)(1) under the Securities Exchange Act. For Messrs. Jones, Beall, Toot, Chiusano, Erickson, Keating, Reininga and the group, the number of shares of our common stock is assumed to be the same as the number of shares of Rockwell common stock that may be acquired upon exercise of such outstanding stock options; the actual number of shares of our common stock that will be subject to such options will depend on the ratio between the respective market values of our common stock and Rockwell common stock at the time of the distribution.
(5) Includes shares, as to which beneficial ownership is disclaimed, as follows:
20,154 shares expected to be held for the benefit of family members and
10,000 shares expected to be owned by The Beall Foundation, of which Mr.
Beall is President and a Director.
(6) Includes 3,418 shares granted as restricted stock under the Rockwell Directors Stock Plan or otherwise as compensation for services as a director for Mr. Toot.
(7) Includes 6,183 shares expected to be beneficially owned in respect of shares of Rockwell common stock held by Mr. Erickson's spouse under a retirement plan.
With the exception of Wells Fargo Bank, N.A., as trustee under the Rockwell International Corporation Savings Plan, which held approximately 14% (of which approximately 5.9% was for active Rockwell employees and the remainder for former Rockwell employees) of the outstanding shares of Rockwell common stock as of April 30, 2001, there are no persons known to us who are expected to be "beneficial owners" (as that term is defined in the rules of the SEC) of more than 5% of any class of our voting securities outstanding as of the distribution date.
DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock includes a summary of provisions of our restated certificate of incorporation and our amended by-laws. This description is subject to the detailed provisions of, and is qualified by reference to, our restated certificate of incorporation and our amended by-laws, copies of which will be filed as exhibits to the registration statement of which this information statement is a part.
Immediately prior to the distribution, we will be authorized to issue (1) 1,000,000,000 shares of common stock, par value $.01 per share, and (2) 25,000,000 shares of preferred stock, without par value, of which our board of directors will designate 2,500,000 shares as Series A Junior Participating Preferred Stock for issuance in connection with the exercise of our preferred share purchase rights. For a more detailed discussion of our preferred share purchase rights and how they relate to our common stock, please see "-- Rights Plan". The authorized shares of our common stock and preferred stock will be available for issuance without further action by our shareowners, unless such action is required by applicable law or the rules of any stock exchange or automated quotation system on which our securities may be listed or traded. If the approval of our shareowners is not so required, our board of directors may determine not to seek shareowner approval.
Certain of the provisions described under this section entitled "Description of Capital Stock" could have the effect of discouraging transactions that might lead to a change of control of us. Our restated certificate of incorporation and amended by-laws:
- establish a classified board of directors, whereby our directors are elected for staggered terms in office so that only one-third of our directors stand for election in any one year;
- require shareowners to provide advance notice of any shareowner nominations of directors or any proposal of new business to be considered at any meeting of shareowners;
- require a supermajority vote to remove a director or to amend or repeal certain provisions of our restated certificate of incorporation or our amended by-laws; and
- preclude shareowners from calling a special meeting of shareowners.
COMMON STOCK
Our restated certificate of incorporation permits us to issue up to 1,000,000,000 shares of our common stock.
Dividends. Holders of our common stock will be entitled to such dividends as may be declared by our board of directors out of any of our funds legally available therefor. Dividends may not be paid on common stock unless all accrued dividends on preferred stock, if any, have been paid or set aside.
Voting. Each holder of our common stock will be entitled to one vote for each share of our common stock outstanding in the holder's name. No holder of common stock will be entitled to cumulate votes in voting for directors.
Liquidation. In the event of our liquidation, dissolution or winding up, the holders of our common stock will be entitled to share pro rata in the assets remaining after payment to creditors and after payment of the liquidation preference plus any unpaid dividends to holders of any outstanding preferred stock.
Other Rights. Our restated certificate of incorporation provides that, unless otherwise determined by our board of directors, no holder of shares of our common stock will have any right to purchase or subscribe for any stock of any class which we may issue or sell.
Mellon Investor Services LLC is the transfer agent and registrar for our common stock.
PREFERRED STOCK
Our restated certificate of incorporation permits us to issue up to 25,000,000 shares of our preferred stock in one or more series and with rights and preferences that may be fixed or designated by our board of directors without any further action by our shareowners. Our board of directors will designate 2,500,000 shares of our
preferred stock as Series A Junior Participating Preferred Stock for issuance in connection with the exercise of our preferred share purchase rights. The powers, preferences, rights and qualifications, limitations and restrictions of the preferred stock of any other series will be fixed by the certificate of designation relating to such series, which will specify the terms of the preferred stock, including:
- the terms on which dividends, if any, will be paid;
- the terms on which the shares may be redeemed, if at all;
- the terms of any retirement or sinking fund for the purchase or redemption of the shares of the series;
- the liquidation preference, if any;
- the terms and conditions, if any, on which the shares of the series shall be convertible into, or exchangeable for, shares of any other class or classes of capital stock;
- the restrictions on the issuance of shares of the same series or any other class or series; and
- the voting rights, if any, of the shares of the series.
Although our board of directors has no intention at the present time of doing so, it could issue a series of preferred stock that could, depending on the terms of such series, impede the completion of a merger, tender offer or other takeover attempt.
For a description of the Series A Junior Participating Preferred Stock, please see "-- Rights Plan".
OUR RESTATED CERTIFICATE OF INCORPORATION AND AMENDED BY-LAWS
Our restated certificate of incorporation and amended by-laws contain various provisions intended to promote the stability of our shareowner base and render unsolicited or hostile attempts to acquire control of us more difficult.
Classified Board of Directors. Our restated certificate of incorporation provides that the number of directors is fixed by our board of directors. Other than directors elected by the holders of any series of preferred stock or any other series or class of stock except common stock, our directors are divided into three classes. Each class consists as nearly as possible of an equal number of directors. Currently, the terms of office of the three classes of directors expire, respectively, at our annual meetings in 2002, 2003 and 2004. The term of the successors of each class of directors expires three years from the year of election. Directors elected by shareowners at an annual meeting of shareowners will be elected by a plurality of all votes cast.
Fair Price Provision. Our restated certificate of incorporation contains a fair price provision pursuant to which a business combination, as defined in our restated certificate of incorporation, between us or one of our subsidiaries and an interested shareowner, as defined in our restated certificate of incorporation, requires approval by the affirmative vote of the holders of not less than 80% of the voting power of all of our outstanding capital stock entitled to vote generally in the election of directors, voting together as a single class, unless the business combination is approved by at least two-thirds of the continuing directors, as defined in our restated certificate of incorporation, or certain fair price criteria and procedural requirements specified in the fair price provision are met. If either the requisite approval of our board of directors or the fair price criteria and procedural requirements were met, the business combination would be subject to the voting requirements otherwise applicable under the Delaware General Corporation Law, which for most types of business combinations currently would be the affirmative vote of the holders of a majority of all of our outstanding shares of stock entitled to vote thereon. Any amendment or repeal of the fair price provision, or the adoption of provisions inconsistent therewith, must be approved by the affirmative vote of the holders of not less than 80% of the voting power of all of our outstanding capital stock entitled to vote generally in the election of directors, voting together as a single class, unless such amendment, repeal or adoption were approved by at least two-thirds of the continuing directors, in which case the provisions of the Delaware General Corporation Law would require the affirmative vote of the holders of a majority of the outstanding shares of our capital stock entitled to vote thereon.
Special Meetings; Written Consent. Our restated certificate of incorporation and amended by-laws provide that a special meeting of shareowners may be called only by a resolution adopted by a majority of the entire board of directors. Shareowners are not permitted to call, or to require that the board of directors call, a special meeting of shareowners. Moreover, the business permitted to be conducted at any special meeting of shareowners is limited to the business brought before the meeting pursuant to the notice of the meeting given by us. In addition, our restated certificate of incorporation provides that any action taken by our shareowners must be effected at an annual or special meeting of shareowners and may not be taken by written consent instead of a meeting. Our amended by-laws establish an advance notice procedure for shareowners to nominate candidates for election as directors or to bring other business before meetings of our shareowners.
Our restated certificate of incorporation provides that the affirmative vote of at least 80% of the voting power of all of our outstanding capital stock entitled to vote generally in the election of directors, voting together as a single class, would be required to amend or repeal the provisions of our restated certificate of incorporation with respect to:
- the election of directors;
- the right to call a special shareowners meeting;
- the right to act by written consent;
- amending our restated certificate of incorporation or amended by-laws; or
- the right to adopt any provision inconsistent with the preceding provisions.
In addition, our restated certificate of incorporation provides that our board of directors may make, alter, amend and repeal our amended by-laws and that the amendment or repeal by shareowners of any of our amended by-laws would require the affirmative vote of at least 80% of the voting power described above, voting together as a single class.
RIGHTS PLAN
Each outstanding share of our common stock evidences one preferred share purchase right. Each preferred share purchase right entitles the registered holder to purchase from us one one-hundredth of a share of Series A Junior Participating Preferred Stock, at $125, subject to adjustment. The description and terms of the preferred share purchase rights are set forth in our rights agreement. The preferred share purchase rights are intended to have anti-takeover effects. If the preferred share purchase rights become exercisable, the rights will cause substantial dilution to a person or group that attempts to acquire or merge with us in most cases. Accordingly, the existence of the preferred share purchase rights may deter a potential acquiror from making a takeover proposal or tender offer. The preferred share purchase rights should not interfere with any merger or other business combination approved by our board of directors since we may redeem the preferred share purchase rights as described below and since a transaction approved by our board of directors would not cause the preferred share purchase rights to become exercisable.
Until the earlier to occur of (1) 10 days following a public announcement that a person or group of affiliated or associated persons has acquired beneficial ownership of 15% or more of our outstanding capital stock, or an acquiring person, or (2) 10 business days, or such later date as may be determined by our board of directors prior to such time as any person or group becomes an acquiring person, following the commencement of, or announcement of an intention to make, a tender offer or exchange offer the consummation of which would result in the beneficial ownership by a person or group of 15% or more of our outstanding capital stock, the earlier of such dates being called the rights distribution date, preferred share purchase rights will be attached to common stock and will be owned by the registered owners of common stock.
The rights agreement provides that, until the preferred share purchase rights are no longer attached to the common stock, or until the earlier redemption or expiration of the preferred share purchase rights:
- the preferred share purchase rights will be transferred with and only with common stock;
- certificates representing common stock and statements in respect of shares of common stock registered in book-entry or uncertificated form will contain a notation incorporating by reference the terms of the preferred share purchase rights; and
- the transfer of any shares of common stock will also constitute the transfer of the associated preferred share purchase rights.
As soon as practicable following the date the preferred share purchase rights are no longer attached to the common stock, separate certificates evidencing preferred share purchase rights will be mailed to holders of record of common stock as of the close of business on the date the preferred share purchase rights are no longer attached to the common stock and the separate certificates alone will evidence preferred share purchase rights.
In addition, the rights agreement provides that in connection with the issuance or sale of our common stock following the date the rights separate from the common stock and prior to the earlier of (1) the date the preferred share purchase rights are redeemed and (2) the date the preferred share purchase rights expire, (a) we will, with respect to common stock issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement in existence prior to the date the rights separate from the common stock, or upon the exercise, conversion or exchange of securities, notes or debentures under the terms thereof issued by us and in existence prior to the date the rights separate from the common stock, and (b) we may, in any other case, if deemed necessary or appropriate by the board of directors, issue certificates representing the appropriate number of preferred share purchase rights in connection with such issuance or sale. We will not be obligated to issue any of these certificates if, and to the extent that, we are advised by counsel that the issuance of those certificates would create a significant risk of material adverse tax consequences to us or the person to whom such certificate would be issued or would create a significant risk that the stock options or employee plans or arrangements would fail to qualify for otherwise available special tax treatment. In addition, no certificate will be issued if, and to the extent that, appropriate adjustments otherwise have been made instead of the issuance thereof.
Preferred share purchase rights will not be exercisable until the rights distribution date. Preferred share purchase rights will expire on June 30, 2011, unless this expiration date is extended or unless preferred share purchase rights are earlier redeemed by us, in each case, as described below.
The purchase price payable, and the number of shares of Series A Junior Participating Preferred Stock or other securities or property issuable, upon exercise of the preferred share purchase rights will be subject to adjustment from time to time to prevent dilution upon the occurrence of the following events:
- in the event of a stock dividend on, or a subdivision, combination or reclassification of, Series A Junior Participating Preferred Stock;
- upon the grant to holders of shares of Series A Junior Participating Preferred Stock of rights or warrants to subscribe for or purchase shares of Series A Junior Participating Preferred Stock at a price, or securities convertible into shares of Series A Junior Participating Preferred Stock with a conversion price, less than the then current market price of the shares of Series A Junior Participating Preferred Stock; or
- upon the distribution to holders of shares of Series A Junior Participating Preferred Stock of evidences of indebtedness or assets, excluding regular periodic cash dividends or dividends payable in shares of Series A Junior Participating Preferred Stock, or of subscription rights or warrants, other than those referred to above.
The number of outstanding preferred share purchase rights and the number of one one-hundredth of a share of Series A Junior Participating Preferred Stock issuable upon exercise of each preferred share purchase
right will also be subject to adjustment in the event of a stock split of common stock or a stock dividend on common stock payable in common stock or subdivisions, consolidations or combinations of common stock occurring, in any such case, prior to the date the preferred share purchase rights are no longer attached to the common stock.
We cannot redeem shares of Series A Junior Participating Preferred Stock purchasable upon exercise of preferred share purchase rights. Each share of Series A Junior Participating Preferred Stock will be entitled to a minimum preferential quarterly dividend payment of $1 per share but will be entitled to an aggregate dividend of 100 times the dividend declared per share of common stock whenever such dividend is declared. In the event of liquidation, the holders of Series A Junior Participating Preferred Stock will be entitled to a minimum preferential liquidation payment of $100 per share but will be entitled to an aggregate payment of 100 times the payment made per share of common stock. Each share of Series A Junior Participating Preferred Stock will have 100 votes, voting together with common stock. In the event of any merger, consolidation or other transaction in which shares of common stock are exchanged, each share of Series A Junior Participating Preferred Stock will be entitled to receive 100 times the amount received per share of common stock. These rights will be protected by customary antidilution provisions.
Because of the nature of the Series A Junior Participating Preferred Stock's dividend, liquidation and voting rights, the value of each one one-hundredth interest in a share of Series A Junior Participating Preferred Stock purchasable upon exercise of each preferred share purchase right should approximate the value of one share of common stock.
In the event that, at any time after any person or group of affiliated or associated persons becomes an acquiring person, we are acquired in a merger or other business combination transaction or 50% or more of our consolidated assets or earning power is sold, proper provision will be made so that each holder of a preferred share purchase right will thereafter have the right to receive, upon the exercise thereof at the then current exercise price of a preferred share purchase right, that number of shares of common stock of the acquiring company which at the time of such transaction will have a market value of two times the exercise price of a preferred share purchase right. In the event that any person becomes an acquiring person, proper provision shall be made so that each holder of a preferred share purchase right, other than preferred share purchase rights beneficially owned by the acquiring person, which will thereafter be void, will thereafter have the right to receive upon exercise, instead of shares of Series A Junior Participating Preferred Stock, that number of shares of common stock having a market value of two times the exercise price of a preferred share purchase right.
At any time after any person or group of affiliated or associated persons becomes an acquiring person, and prior to the acquisition by such person or group of 50% or more of our outstanding capital stock, our board of directors may exchange preferred share purchase rights, other than preferred share purchase rights owned by such person or group, which will have become void after such person became an acquiring person, for common stock at an exchange ratio of one share of common stock per preferred share purchase right, subject to adjustment.
Generally, no adjustment in the purchase price will be required until cumulative adjustments require an adjustment of at least 1%. No fractional shares of Series A Junior Participating Preferred Stock will be issued, other than fractions which are integral multiples of one one-hundredth of a share of Series A Junior Participating Preferred Stock, which may, at our election, be evidenced by depository receipts. Instead, an adjustment in cash will be made based on the market price of Series A Junior Participating Preferred Stock on the last trading day prior to the date of exercise.
At any time prior to any person or group of affiliated or associated persons becoming an acquiring person, our board of directors may redeem preferred share purchase rights in whole, but not in part, at a price of $.01 per preferred share purchase right, subject to adjustment. The redemption of preferred share purchase rights may be made effective at such time, on such basis and with such conditions as our board of directors may determine, in its sole discretion. Immediately upon any redemption of preferred share purchase rights, the right to exercise preferred share purchase rights will terminate and the only right of the holders of preferred share purchase rights will be to receive the redemption price.
The terms of preferred share purchase rights may be amended by our board of directors without the consent of the holders of preferred share purchase rights, including an amendment to decrease the threshold at which a person becomes an acquiring person from 15% to not less than 10%, except that from and after such time as any person becomes an acquiring person no such amendment may adversely affect the interests of the holders of preferred share purchase rights.
Until a preferred share purchase right is exercised, the holder thereof, as such, will have no rights as a shareowner of our company, including, without limitation, the right to vote or to receive dividends.
The foregoing summary of the material terms of preferred share purchase rights is qualified by reference to the rights agreement, a copy of which will be filed as an exhibit to the registration statement of which this information statement is a part.
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware General Corporation Law permits Delaware corporations to eliminate or limit the monetary liability of directors for breach of their fiduciary duty of care, subject to limitations. Our restated certificate of incorporation provides that our directors are not liable to us or our shareowners for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to us or our shareowners, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for willful or negligent violation of the laws governing the payment of dividends or the purchase or redemption of stock, or (iv) for any transaction from which a director derived an improper personal benefit.
The Delaware General Corporation Law provides for indemnification of directors, officers, employees and agents subject to limitations. Our amended by-laws and the appendix thereto provide for the indemnification of our directors, officers, employees and agents to the extent permitted by Delaware law. It is expected that our directors and officers will be insured against certain liabilities for actions taken in such capacities, including liabilities under the Securities Act of 1933, as amended.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission, Washington, D.C. 20549, a registration statement on Form 10 under the Securities Exchange Act with respect to the shares of our common stock and associated preferred share purchase rights being issued in the distribution. This information statement does not contain all of the information set forth in the registration statement and the exhibits and schedules to the registration statement. Some items are omitted in accordance with the rules and regulations of the SEC. For further information about us and our common stock, reference is made to the registration statement and the exhibits and any schedules to the registration statement. Statements contained in this information statement as to the contents of any contract or other document referred to are not necessarily complete and in each instance, if the contract or document is filed as an exhibit, reference is made to the copy of the contract or other documents filed as an exhibit to the registration statement, each statement being qualified in all respects by such reference. A copy of the registration statement, including the exhibits and schedules to the registration statement, may be read and copied at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site at http://www.sec.gov, from which interested persons can electronically access the registration statement, including the exhibits and any schedules to the registration statement.
After the distribution, we will be subject to the full informational requirements of the Exchange Act. We will fulfill our obligations with respect to those requirements by filing periodic reports and other information with the SEC. We intend to furnish our shareowners with annual reports containing consolidated financial statements certified by an independent public accounting firm. We also maintain an Internet site at http://www.rockwellcollins.com. Our Internet site and the information contained therein or connected thereto are not intended to be incorporated into this information statement or the registration statement of which it forms a part.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
PAGE
----
ROCKWELL COLLINS
Independent Auditors' Report................................ F-2
Statement of Assets and Liabilities as of September 30, 1999
and 2000 and March 31, 2001 (unaudited)................... F-3
Statement of Operations for the years ended September 30,
1998, 1999 and 2000 and the six months ended March 31,
2000 and 2001 (unaudited)................................. F-4
Statement of Cash Flows for the years ended September 30,
1998, 1999 and 2000 and the six months ended March 31,
2000 and 2001 (unaudited)................................. F-5
Statement of Changes in Rockwell's Invested Equity and
Comprehensive Income for the years ended September 30,
1998, 1999 and 2000 and the six months ended March 31,
2000 and 2001 (unaudited)................................. F-6
Notes to Financial Statements............................... F-7
Schedule II -- Valuation and Qualifying Accounts............ F-26
NEW ROCKWELL COLLINS, INC.
Independent Auditors' Report................................ F-27
Balance Sheet as of April 10, 2001 and Note to Balance
Sheet..................................................... F-28
|
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareowners of Rockwell International Corporation:
We have audited the accompanying statement of assets and liabilities of Rockwell Collins, consisting of the avionics and communications business and certain other assets and liabilities of Rockwell International Corporation (Rockwell), as of September 30, 2000 and 1999, as described in Note 1 to the financial statements. We have also audited the related statements of operations, cash flows, and changes in Rockwell's invested equity and comprehensive income of Rockwell Collins for each of the three years in the period ended September 30, 2000. Our audits also included the financial statement schedule listed in the Index to Rockwell Collins Financial Statements and Schedule at page F-1. These financial statements and financial statement schedule are the responsibility of Rockwell's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
The accompanying financial statements were prepared to present the assets and liabilities and related results of operations and cash flows of Rockwell Collins, as described in Note 1 to the financial statements, and may not necessarily be indicative of the conditions that would have existed or the results of operations and cash flows if Rockwell Collins had been operated as a stand-alone company during the periods presented.
In our opinion, the financial statements referred to above present fairly, in all material respects, the assets and liabilities of Rockwell Collins as of September 30, 2000 and 1999 and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2000, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
As discussed in Note 2 to the financial statements, in 1998 Rockwell Collins changed its method of accounting for certain inventoriable general and administrative costs related to government contracts.
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
May 30, 2001
ROCKWELL COLLINS
STATEMENT OF ASSETS AND LIABILITIES
(IN MILLIONS)
SEPTEMBER 30,
---------------- MARCH 31,
1999 2000 2001
------ ------ ------------
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash........................................................ $ 20 $ 20 $ 20
Receivables................................................. 513 495 516
Inventories................................................. 621 656 813
Current deferred income taxes............................... 153 133 148
Other current assets........................................ 25 23 34
------ ------ ------
Total current assets.............................. 1,332 1,327 1,531
PROPERTY.................................................... 365 417 476
INTANGIBLE ASSETS........................................... 126 148 441
OTHER ASSETS................................................ 210 208 180
------ ------ ------
TOTAL ASSETS...................................... 2,033 2,100 2,628
------ ------ ------
LIABILITIES
CURRENT LIABILITIES
Accounts payable............................................ 256 220 207
Compensation and benefits................................... 188 163 145
Product warranty costs...................................... 114 120 131
Other current liabilities................................... 323 259 290
------ ------ ------
Total current liabilities......................... 881 762 773
RETIREMENT BENEFITS......................................... 430 404 430
OTHER LIABILITIES........................................... 27 26 39
------ ------ ------
TOTAL LIABILITIES................................. 1,338 1,192 1,242
------ ------ ------
ROCKWELL'S INVESTED EQUITY........................ $ 695 $ 908 $1,386
====== ====== ======
|
See notes to financial statements.
ROCKWELL COLLINS
STATEMENT OF OPERATIONS
(IN MILLIONS)
SIX MONTHS
ENDED
YEAR ENDED SEPTEMBER 30, MARCH 31,
------------------------ ---------------
1998 1999 2000 2000 2001
------ ------ ------ ------ ------
(UNAUDITED)
SALES................................................. $2,026 $2,438 $2,510 $1,181 $1,277
COSTS AND EXPENSES:
Cost of sales (Note 15)............................... 1,603 1,782 1,845 865 944
Selling, general and administrative (Note 15)......... 256 278 274 131 157
Purchased research and development (Note 3)........... 103 -- -- -- --
(Earnings) losses from equity affiliates.............. (1) (11) 3 3 (2)
Other income.......................................... (8) (48) (11) (5) (3)
------ ------ ------ ------ ------
Total costs and expenses.............................. 1,953 2,001 2,111 994 1,096
------ ------ ------ ------ ------
INCOME BEFORE INCOME TAXES AND ACCOUNTING CHANGE...... 73 437 399 187 181
Income tax provision.................................. 24 146 130 61 62
------ ------ ------ ------ ------
INCOME BEFORE ACCOUNTING CHANGE....................... 49 291 269 126 119
Cumulative effect of accounting change................ (17) -- -- -- --
------ ------ ------ ------ ------
NET INCOME............................................ $ 32 $ 291 $ 269 $ 126 $ 119
====== ====== ====== ====== ======
|
See notes to financial statements.
ROCKWELL COLLINS
STATEMENT OF CASH FLOWS
(IN MILLIONS)
SIX MONTHS
ENDED
YEAR ENDED SEPTEMBER 30, MARCH 31,
-------------------------- -------------
1998 1999 2000 2000 2001
------ ------ ------ ---- -----
(UNAUDITED)
OPERATING ACTIVITIES
Income before accounting change................... $ 49 $ 291 $ 269 $126 $ 119
Adjustments to arrive at cash provided by (used
for)
operating activities:
Depreciation.................................... 58 74 83 38 48
Amortization of intangible assets............... 8 12 16 7 20
Gain on disposition of a business (Note 16)..... -- (32) -- -- --
Purchased research and development (Note 3)..... 103 -- -- -- --
Changes in assets and liabilities, excluding
effects of acquisitions, divestitures, and
foreign currency adjustments:
Receivables.................................. (118) (80) 34 36 10
Inventories.................................. (122) (44) 17 (29) (99)
Accounts payable............................. 90 6 (42) (79) (27)
Compensation and benefits.................... 64 17 (26) (33) (32)
Other assets and liabilities................. 14 (41) (70) (19) (58)
----- ----- ----- ---- -----
CASH PROVIDED BY (USED FOR) OPERATING
ACTIVITIES................................. 146 203 281 47 (19)
----- ----- ----- ---- -----
INVESTING ACTIVITIES
Property additions................................ (143) (127) (98) (37) (50)
Acquisitions of businesses, net of cash
acquired........................................ (158) (56) (123) (6) (292)
Proceeds from the dispositions of property and a
business........................................ -- 87 -- -- --
----- ----- ----- ---- -----
CASH USED FOR INVESTING ACTIVITIES........... (301) (96) (221) (43) (342)
----- ----- ----- ---- -----
FINANCING ACTIVITIES
Increase (decrease) in short-term borrowings...... 1 (14) -- -- --
Net transfers from (to) Rockwell.................. 155 (94) (52) (6) 360
----- ----- ----- ---- -----
CASH PROVIDED BY (USED FOR) FINANCING
ACTIVITIES................................. 156 (108) (52) (6) 360
----- ----- ----- ---- -----
Effect of exchange rate changes on cash........... (1) 1 (8) 2 1
----- ----- ----- ---- -----
INCREASE IN CASH.................................. -- -- -- -- --
CASH AT BEGINNING OF PERIOD....................... 20 20 20 20 20
----- ----- ----- ---- -----
CASH AT END OF PERIOD............................. $ 20 $ 20 $ 20 $ 20 $ 20
===== ===== ===== ==== =====
|
See notes to financial statements.
ROCKWELL COLLINS
STATEMENT OF CHANGES IN ROCKWELL'S INVESTED EQUITY
AND COMPREHENSIVE INCOME
(IN MILLIONS)
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, MARCH 31,
------------------------ ----------------
1998 1999 2000 2000 2001
----- ------ ----- ----- -------
(UNAUDITED)
ROCKWELL'S NET INVESTMENT
Beginning balance.................................. $336 $ 523 $720 $720 $ 937
Net income......................................... 32 291 269 126 119
Net transfers from (to) Rockwell................... 155 (94) (52) (6) 360
---- ----- ---- ---- ------
Ending balance..................................... 523 720 937 840 1,416
---- ----- ---- ---- ------
ACCUMULATED OTHER COMPREHENSIVE LOSS
Beginning balance.................................. (14) (20) (25) (25) (29)
Currency translation (loss) gain................... (1) (2) (8) (4) (1)
Pension adjustments................................ (5) (3) 4 -- --
---- ----- ---- ---- ------
Ending balance..................................... (20) (25) (29) (29) (30)
---- ----- ---- ---- ------
TOTAL ROCKWELL'S INVESTED EQUITY................... $503 $ 695 $908 $811 $1,386
==== ===== ==== ==== ======
COMPREHENSIVE INCOME
Net income......................................... $ 32 $ 291 $269 $126 $ 119
Other comprehensive (loss) income.................. (6) (5) (4) (4) (1)
---- ----- ---- ---- ------
Comprehensive income............................... $ 26 $ 286 $265 $122 $ 118
==== ===== ==== ==== ======
|
See notes to financial statements.
ROCKWELL COLLINS
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
On December 8, 2000, the Board of Directors of Rockwell International Corporation (Rockwell) approved in principle the spin-off of Rockwell's avionics and communications business (Avionics and Communications) by means of a distribution (the Distribution) of all of the outstanding shares of common stock of New Rockwell Collins, Inc., a wholly-owned subsidiary of Rockwell, which, in connection with the Distribution, will own Avionics and Communications and certain other assets and liabilities of Rockwell (Avionics and Communications and such other assets and liabilities are referred to collectively as Rockwell Collins or the Company). The shares of New Rockwell Collins, Inc. will be distributed on a pro rata basis to the shareowners of Rockwell in a tax-free distribution, with each Rockwell shareowner receiving one share of New Rockwell Collins, Inc. common stock (including an associated preferred share purchase right) for each share of Rockwell common stock owned on the record date for the Distribution. At the time of the Distribution, New Rockwell Collins, Inc. will become a separately traded, publicly held company. The Distribution is subject to satisfaction of several conditions, including receipt of a ruling by the Internal Revenue Service that the transaction qualifies as a tax-free distribution and final approval of Rockwell's Board of Directors. The Distribution is expected to be completed on June 29, 2001.
In connection with the Distribution, Rockwell will transfer substantially all assets and liabilities associated with Avionics and Communications to New Rockwell Collins, Inc. In addition, Rockwell will transfer other assets and liabilities to New Rockwell Collins, Inc., including certain assets and liabilities of Rockwell-sponsored employee benefit plans and a 50 percent ownership interest in the Rockwell Science Center. In connection with the Distribution, Rockwell Collins will retain cash balances of $20 million. In connection with the Distribution, New Rockwell Collins, Inc. expects to pay a dividend of $400 million to Rockwell, which will be funded using a credit facility to be entered into prior to the Distribution.
In addition to the assets and liabilities associated with Avionics and Communications, the Statement of Assets and Liabilities includes other assets and liabilities, as provided for in the form of distribution agreement filed on May 30, 2001 as an exhibit to the Company's Registration Statement on Form 10 (Distribution Agreement) and related ancillary agreements, not previously associated with Avionics and Communications that will be transferred to New Rockwell Collins, Inc. in connection with the Distribution. The Statement of Operations includes the results of operations of Avionics and Communications along with the Company's share of the earnings and losses of the Rockwell Science Center for all periods presented. These financial statements may not necessarily be indicative of the conditions that would have existed or the results of operations and cash flows if Rockwell Collins had been operated as a stand-alone company during the periods presented. The assets and liabilities to be included in New Rockwell Collins, Inc. when it is distributed are subject to final determination, which will be set forth in a definitive distribution agreement to be entered into among Rockwell, New Rockwell Collins, Inc. and the Rockwell Science Center prior to the Distribution.
Rockwell provides services to Avionics and Communications, including payroll and employee benefits administration, data processing and telecommunications services, procurement, and advanced research and development. Rockwell also administers programs in which Avionics and Communications' domestic operations participate, including medical and insurance programs. Costs for these services and programs are billed to Avionics and Communications based on actual usage and are included in the Statement of Operations. These costs totaled $6 million, $7 million and $11 million in 1998, 1999, and 2000, respectively, and $5 million for each of the six-month periods ended March 31, 2000 and 2001. Management believes that the methods of determining these costs are reasonable and that the costs billed approximate those that would have been incurred on a stand-alone basis. Advanced research and development services provided to the Company by Rockwell are provided through the Rockwell Science Center. The Rockwell Science Center will continue to provide advanced research and development services to Rockwell Collins after the Distribution, the cost of which is expected to approximate the amounts included in the Statement of Operations for the periods presented.
ROCKWELL COLLINS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Rockwell also provides management services to Avionics and Communications, including corporate oversight, financial, legal, tax, corporate communications, and human resources. The costs of providing these services have been allocated based on sales in proportion to total Rockwell sales and are included in Selling, General and Administrative expenses in the Statement of Operations. These costs totaled $26 million, $25 million, and $25 million in 1998, 1999, and 2000, respectively, and $12 million and $14 million for the six months ended March 31, 2000 and 2001, respectively. Management believes that the method of allocating these costs is reasonable and the amounts approximate the costs that would have been incurred on a stand-alone basis.
Avionics and Communications' domestic and certain international operations participate in Rockwell's centralized cash management systems. Accordingly, the financial statements exclude debt and interest income and expense for countries participating in the centralized cash management systems. Accounts Payable includes $30 million, $17 million and $23 million related to checks drawn on domestic centralized disbursement and payroll accounts which remained outstanding at September 30, 1999 and 2000 and March 31, 2001, respectively.
Management believes the interim financial statements contain all adjustments, consisting solely of adjustments of a normal recurring nature, necessary to present fairly the assets and liabilities, results of operations and cash flows for the periods presented. At the end of each interim reporting period, management makes an estimate of the effective income tax rate expected to be applicable for the full fiscal year. The rate so determined is used in providing for income taxes on a year-to-date basis. All amounts in the financial statements as of or for the six months ended March 31, 2000 and 2001 are unaudited.
All significant transactions among the Company's locations have been eliminated. Intercompany accounts receivable and payable between Rockwell Collins and Rockwell or its subsidiaries as of the date of the Distribution will generally be canceled or otherwise eliminated and, accordingly, have been reflected in Rockwell's Invested Equity on the Statement of Assets and Liabilities.
2. SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The financial statements have been prepared in accordance with generally accepted accounting principles which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and revenues and expenses during the periods reported. Actual results could differ from those estimates. Estimates are used in accounting for, among other items, long-term contracts, allowances for doubtful accounts, inventory obsolescence, product warranty costs, customer incentives, employee benefits, reserves, purchased research and development and contingencies. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the Statement of Operations in the period that they are determined to be necessary.
Revenue Recognition
Product and service sales are recognized when all of the following criteria are met: an agreement of sale exists, product delivery and acceptance has occurred or services have been rendered, pricing is fixed or determinable, and collection is reasonably assured. Sales under all cost-type and certain fixed-price-type contracts requiring performance over several periods are accounted for under the percentage-of-completion method of accounting, using the cost-to-cost or units-of-delivery methods. Anticipated losses on contracts are recognized in full in the period that the losses become probable and estimable. Anticipated losses related to contract options are recognized in full when it is considered probable that such options will be exercised.
ROCKWELL COLLINS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Customer Incentives
Avionics and Communications provides sales incentives to certain commercial customers. These incentives are recognized as a reduction of the sales price for customer account credits or a charge to cost of sales for products or services to be provided.
Cash
Cash includes time deposits and certificates of deposit with original maturities of three months or less.
Inventories
Inventories are stated at the lower of cost or market using standard costs which approximate the first-in, first out method, less related progress payments received. Market is determined on the basis of estimated realizable values. Inventoried costs include direct costs of manufacturing, engineering and tooling, and allocable overhead costs.
Property
Property is stated at acquisition cost. Depreciation of property is provided generally using accelerated and straight-line methods over the following estimated useful lives: buildings and improvements, fifteen to forty years; machinery and equipment, eight years; and information systems software and hardware, three to ten years. Significant renewals and betterments are capitalized and replaced units are written off. Maintenance and repairs, as well as renewals of minor amounts, are charged to expense.
Purchased Intangibles
Goodwill and other intangible assets generally result from business acquisitions. All of Avionics and Communications' business acquisitions have been accounted for under the purchase method by assigning the purchase price to tangible and intangible assets and liabilities, including research and development projects which have not yet reached technological feasibility and have no alternative future use (purchased research and development). Assets acquired and liabilities assumed are recorded at their fair values; the appraised value of purchased research and development is immediately charged to expense, and the excess of the purchase price over the amounts assigned is recorded as goodwill.
Intangible assets including goodwill, trademarks, patents, product technology and other intangible assets are amortized on a straight-line basis over their estimated useful lives, generally ranging from two to twenty-five years.
Impairment of Long-Lived Assets
Long-lived assets, including goodwill, are reviewed for impairment when events or circumstances indicate that the carrying amount of a long-lived asset may not be recoverable, and for all assets to be disposed of. Long-lived assets held for use are reviewed for impairment by comparing the carrying amount of an asset to its fair value calculated using undiscounted future cash flows expected to be generated by the asset over its remaining useful life. If an asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. Management determines fair value using discounted future cash flow analysis or other accepted valuation techniques.
ROCKWELL COLLINS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Investments
Investments in affiliates which the Company does not control, including the Rockwell Science Center, are accounted for using the equity method of accounting. Accordingly, the Company includes its proportional share of the respective affiliates' earnings or losses in the Statement of Operations.
Research and Development
Research and development expenditures under company-initiated programs are expensed as incurred. Customer-funded research and development expenditures are accounted for as contract costs.
Stock-Based Compensation
Rockwell accounts for stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. As stock options are granted at prices equal to or greater than the fair market value of Rockwell's common stock on the grant dates, no compensation expense is recognized in connection with stock options granted to employees.
Derivative Financial Instruments
Rockwell Collins uses derivative financial instruments in the form of foreign currency forward exchange contracts to manage foreign currency risks. Foreign currency forward exchange contracts are used to hedge changes in fair value of certain assets and liabilities resulting from intercompany loans and transactions with third parties denominated in foreign currencies. The Company's accounting method for derivative financial instruments is based upon the designation of such instruments as hedges under generally accepted accounting principles. The Company has not designated any foreign currency forward exchange contracts as hedges for accounting purposes and, accordingly, the instruments have been adjusted to fair value through earnings in the current period Cost of Sales. It is the policy of Rockwell to execute such instruments with creditworthy banks and not to enter into derivative financial instruments for speculative purposes. All foreign currency forward exchange contracts are denominated in currencies of major industrial countries. Effective July 1, 2000, Rockwell accounts for derivative financial instruments in accordance with Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133).
Foreign Currency Translation
Assets and liabilities of subsidiaries operating outside of the United States with a functional currency other than the U.S. dollar are translated into U.S. dollars using exchange rates at the end of the respective period. Sales, costs and expenses are translated at average exchange rates effective during the respective period. Foreign currency translation gains and losses are included as a component of Accumulated Other Comprehensive Loss. Currency transaction gains and losses are included in the results of operations in the period incurred.
New Accounting Standards
Effective July 1, 2000, Rockwell adopted SFAS 133 which requires all derivatives to be recorded on the balance sheet at fair value regardless of the purpose or intent for holding them. Derivatives that are not hedges are adjusted to fair value through earnings. For derivatives that are hedges, depending on the nature of the hedge, changes in fair value are either offset by changes in the fair value of the hedged assets, liabilities or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value is immediately recognized in earnings. The effect of adopting SFAS 133 was not material to the Company's financial position or results of operations or Rockwell's Invested Equity.
ROCKWELL COLLINS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In October 2000, Rockwell adopted Securities and Exchange Commission Staff Accounting Bulletin 101, Revenue Recognition in Financial Statements (SAB 101). The effect of adoption of SAB 101 was not material to the Company's financial position or results of operations or Rockwell's Invested Equity.
Accounting Change
Effective October 1, 1997, Avionics and Communications changed its method of accounting for certain general and administrative costs related to government contracts to expense these costs as incurred. Under the previous accounting method, these costs were included in inventory. As a result of the evolution of government procurement practices from cost-based pricing systems to market-based pricing systems and to consistently apply accounting methods across the Company's Commercial Systems and Government Systems businesses, management determined that it was preferable to expense general and administrative costs as incurred. The amount of general and administrative costs included in inventory as of October 1, 1997 was $27 million ($17 million after-tax) and is presented as the cumulative effect of an accounting change in the Statement of Operations for the year ended September 30, 1998.
3. ACQUISITIONS OF BUSINESSES
In December 2000, Avionics and Communications acquired Kaiser Aerospace and Electronics Corporation (KAEC). KAEC is a leading supplier of flight deck display solutions for tactical aircraft, optical technologies for instrumentation and communication, and specialized aircraft products for the defense and aerospace industry. The purchase price, net of cash acquired, was approximately $300 million, of which $170 million was allocated to goodwill and $84 million was allocated to other intangible assets, including developed technology, trademarks and assembled workforce. Goodwill is being amortized on a straight-line basis over twenty-five years and the other intangible assets are being amortized on a straight-line basis over periods ranging from eight to fifteen years. Through March 31, 2001, cash payments totaled approximately $292 million. Assets acquired and liabilities assumed have been recorded at estimated fair values, on a preliminary basis, based on information currently available.
In July 2000, Avionics and Communications acquired substantially all of the assets and assumed substantially all of the liabilities of Sony Trans Com Inc., a producer of in-flight entertainment systems for commercial aircraft. The purchase price was approximately $117 million, of which $60 million was allocated to goodwill and $27 million was allocated to other intangible assets, primarily developed technology and assembled workforce. Goodwill is being amortized on a straight-line basis over ten years and the other intangible assets are being amortized on a straight-line basis over periods ranging from two to nine years. Assets acquired and liabilities assumed have been recorded at estimated fair values, on a preliminary basis, based on information currently available.
In August 1999, Avionics and Communications acquired Intertrade Limited, an avionics parts supplier. In March 1999, Commercial Systems acquired the remaining 50 percent interest that it did not already own in Flight Dynamics, a market leader in Head-Up Guidance Systems for aircraft operations. The aggregate purchase price for these acquisitions was approximately $56 million of which $18 million was allocated to goodwill and $18 million was allocated to other intangible assets, primarily developed technology and assembled workforce. Goodwill is being amortized on a straight-line basis over periods of ten and fifteen years, respectively, and the other intangible assets are being amortized on a straight-line basis over periods ranging from five to seventeen years.
In December 1997, Avionics and Communications acquired the in-flight entertainment business of Hughes-Avicom International, Inc. for approximately $157 million. In connection with the acquisition, Avionics and Communications recorded a charge of $103 million ($65 million after tax) for purchased research and development and recorded $37 million for goodwill and $33 million for other intangible assets, primarily developed technology, patents and assembled workforce. Goodwill is being amortized on a straight-
ROCKWELL COLLINS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
line basis over ten years and the other intangible assets are being amortized on a straight-line basis over periods ranging from eight to eleven years.
Amounts recorded for liabilities assumed in connection with these acquisitions were $50 million, $11 million and $25 million for the years ended September 30, 1998, 1999 and 2000, respectively.
These acquisitions were accounted for as purchases and, accordingly, the results of operations of these businesses have been included in the Statement of Operations since their respective dates of acquisition. Pro forma financial information is not presented as the combined effect of these acquisitions was not material to Rockwell Collins' results of operations or financial position.
4. RECEIVABLES
Receivables are summarized as follows (in millions):
SEPTEMBER 30,
-------------- MARCH 31,
1999 2000 2001
----- ----- -----------
(UNAUDITED)
Billed................................................... $448 $445 $438
Unbilled................................................. 98 102 132
Less progress payments................................... (25) (43) (42)
---- ---- ----
Total.......................................... 521 504 528
Less allowance for doubtful accounts..................... (8) (9) (12)
---- ---- ----
Receivables.............................................. $513 $495 $516
==== ==== ====
|
Unbilled receivables principally represent sales recorded under the percentage-of-completion method of accounting and are billed to customers in accordance with applicable contract terms.
5. INVENTORIES
Inventories are summarized as follows (in millions):
SEPTEMBER 30,
-------------- MARCH 31,
1999 2000 2001
----- ----- -----------
(UNAUDITED)
Finished goods............................................. $149 $159 $181
Work in process............................................ 245 218 299
Raw materials, parts, and supplies......................... 274 334 372
---- ---- ----
Total............................................ 668 711 852
Less progress payments..................................... (47) (55) (39)
---- ---- ----
Inventories................................................ $621 $656 $813
==== ==== ====
|
ROCKWELL COLLINS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. PROPERTY
Property is summarized as follows (in millions):
SEPTEMBER 30,
--------------- MARCH 31,
1999 2000 2001
----- ------ -----------
(UNAUDITED)
Land.................................................... $ 3 $ 3 $ 27
Buildings and improvements.............................. 177 183 217
Machinery and equipment................................. 455 555 569
Information systems software and hardware............... 181 255 260
Construction in progress................................ 115 49 44
----- ------ ------
Total......................................... 931 1,045 1,117
Less accumulated depreciation........................... (566) (628) (641)
----- ------ ------
Property................................................ $ 365 $ 417 $ 476
===== ====== ======
|
7. INTANGIBLE ASSETS
Intangible assets are summarized as follows (in millions):
SEPTEMBER 30,
-------------- MARCH 31,
1999 2000 2001
----- ----- -----------
(UNAUDITED)
Goodwill................................................... $ 69 $ 77 $292
Other intangible assets.................................... 94 121 219
---- ---- ----
Total............................................ 163 198 511
Less accumulated amortization.............................. (37) (50) (70)
---- ---- ----
Intangible assets.......................................... $126 $148 $441
==== ==== ====
|
The increase in goodwill and other intangible assets in the six months of 2001 is the result of the acquisition of KAEC in December 2000 and adjustments to the Sony Trans Com Inc. purchase price allocation.
8. OTHER ASSETS
Other assets are summarized as follows (in millions):
SEPTEMBER 30,
-------------- MARCH 31,
1999 2000 2001
----- ----- -----------
(UNAUDITED)
Long-term deferred income taxes (Note 17)................ $ 63 $ 59 $ 5
Investments in affiliates................................ 35 38 46
Prepaid pension cost (Note 13)........................... 99 99 122
Other.................................................... 13 12 7
---- ---- ----
Other assets............................................. $210 $208 $180
==== ==== ====
|
ROCKWELL COLLINS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
9. OTHER CURRENT LIABILITIES
Other current liabilities are summarized as follows (in millions):
SEPTEMBER 30,
-------------- MARCH 31,
1999 2000 2001
----- ----- -----------
(UNAUDITED)
Customer incentives...................................... $140 $106 $ 93
Contract reserves........................................ 79 64 90
Advance payments from customers.......................... 38 33 52
Other.................................................... 66 56 55
---- ---- ----
Other current liabilities................................ $323 $259 $290
==== ==== ====
|
10. FINANCIAL INSTRUMENTS
The Company's financial instruments include cash and foreign currency forward exchange contracts. Foreign currency forward exchange contracts provide for the purchase or sale of foreign currencies at specified future dates at specified exchange rates. At September 30, 1999 and 2000, Rockwell Collins had outstanding foreign currency forward exchange contracts with notional amounts of $119 million and $140 million, respectively, primarily consisting of contracts for the euro and pound sterling. Notional amounts are stated in the U.S. dollar equivalents at spot exchange rates at the respective dates.
At September 30, 2000, the net carrying value of foreign currency forward exchange contracts of $1 million was equal to their fair value based upon quoted market prices for contracts with similar maturities. As of September 30, 2000, the foreign currency forward exchange contracts are recorded in Other Current Assets and Other Current Liabilities in the amounts of $4 million and $5 million, respectively. At September 30, 1999, the net carrying value of foreign currency forward exchange contracts approximated their fair value. Management does not anticipate any material adverse effect on its results of operations or financial position relating to these foreign currency forward exchange contracts.
11. STOCK OPTIONS
Certain employees of the Company have been granted options to purchase Rockwell common stock under Rockwell's stock-based compensation plans. These options were granted at prices equal to or greater than the fair market value of Rockwell's common stock on the dates the options were granted. Stock options granted under Rockwell's stock-based compensation plans generally expire ten years from the date they are granted and vest over three years (time vesting options) with the exception of price-vesting options. Price-vesting options vest at the earlier of (a) the date the market price of Rockwell's common stock reaches a specified level for a pre-determined period of time or (b) depending on the grant, a period of seven or nine years from the date they are granted. Notwithstanding the foregoing, the earliest date at which an option is exercisable is one year from the grant date.
At the time of the Distribution, Rockwell stock options held by active employees of the Company, as well as certain other current and former employees of Rockwell, will be converted either entirely or in part to options to acquire common stock of New Rockwell Collins, Inc. The converted stock options will have the same vesting provisions, option periods, and other terms and conditions as the Rockwell options they will replace, except that the exercise price and/or the number of shares covered by the New Rockwell Collins, Inc. stock option will be adjusted in order to preserve the intrinsic value and the ratio of the exercise price to the fair market value of the Rockwell options being replaced. As a result, there will be no accounting consequence from the conversion of these options.
ROCKWELL COLLINS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
12. ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated other comprehensive loss consisted of the following (in millions):
SEPTEMBER 30,
-------------- MARCH 31,
1999 2000 2001
----- ----- -----------
(UNAUDITED)
Foreign currency translation adjustments................... $(12) $(20) $(21)
Pension adjustments........................................ (13) (9) (9)
---- ---- ----
Accumulated other comprehensive loss....................... $(25) $(29) $(30)
==== ==== ====
|
The income tax benefit (expense) related to pension adjustments was $3 million, $2 million and $(2) million for the years ended September 30, 1998, 1999 and 2000, respectively.
13. RETIREMENT BENEFITS
Most of Avionics and Communications' employees participate in Rockwell-sponsored pension plans and Rockwell-sponsored retiree medical and insurance plans (Other Retirement Benefits) which provide for monthly pension and other benefits to eligible employees upon retirement. Pension benefits for salaried employees generally are based on years of credited service and average earnings. Pension benefits for hourly employees generally are based on specified benefit amounts and years of service. Pension obligations are funded in conformity with the funding requirements of applicable laws and governmental regulations.
The components of net periodic benefit cost are as follows (in millions):
PENSION BENEFITS OTHER RETIREMENT BENEFITS
---------------------- --------------------------
1998 1999 2000 1998 1999 2000
---- ----- ----- ------ ------ ------
Service cost................................. $ 23 $ 29 $ 29 $ 4 $ 4 $ 4
Interest cost................................ 73 85 96 19 14 14
Expected return on plan assets............... (87) (105) (121) (1) (1) (1)
Amortization
Prior service cost......................... 4 4 4 (4) (11) (9)
Net transition asset....................... (4) (4) (3) -- -- --
Net actuarial loss......................... -- 2 -- 1 -- 1
---- ----- ----- --- ---- ---
Net periodic benefit cost.................... $ 9 $ 11 $ 5 $19 $ 6 $ 9
==== ===== ===== === ==== ===
|
In connection with the Distribution, Rockwell Collins will assume Rockwell's domestic qualified pension plan (Rockwell Retirement Plan) which will consist of pension plan obligations and a proportionate share of pension plan assets attributable to all domestic active and former eligible employees of Avionics and Communications and certain active and former eligible employees of Rockwell (Non-Collins Participants) as of the distribution date. Pension plan obligations attributable to remaining Rockwell and Rockwell Science Center domestic active and former employees and a proportionate share of pension plan assets will be transferred from the Rockwell Retirement Plan to two new pension plans to be established by Rockwell and the Rockwell Science Center. The Company also will assume the obligation for all Other Retirement Benefits for active and former eligible employees of Avionics and Communications and Non-Collins Participants. The accumulated benefit obligation associated with Non-Collins Participants approximates $579 million for pension benefits and $85 million for Other Retirement Benefits at September 30, 2000. The following table reconciles the benefit obligations, plan assets, funded status, and net liability information of the Rockwell
ROCKWELL COLLINS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
pension plans and the Other Retirement Benefits after giving effect to the transactions that will occur in connection with the Distribution (in millions):
OTHER RETIREMENT
PENSION BENEFITS BENEFITS
---------------- ----------------
1999 2000 1999 2000
------ ------ ------ ------
Benefit obligation at beginning of year.................. $1,491 $1,490 $ 291 $ 273
Service cost............................................. 29 29 4 4
Interest cost............................................ 85 96 14 14
Discount rate change..................................... (155) (100) (24) (14)
Actuarial losses......................................... 71 33 4 43
Plan amendments.......................................... -- -- 14 (26)
Benefits paid............................................ (51) (62) (35) (30)
Other (including currency translation)................... 20 13 5 8
------ ------ ----- -----
Benefit obligation at end of year........................ 1,490 1,499 273 272
------ ------ ----- -----
Plan assets at beginning of year......................... 1,602 1,695 14 16
Actual return on plan assets............................. 135 182 2 2
Company contributions.................................... 7 6 35 30
Benefits paid............................................ (51) (62) (36) (31)
Other (including currency translation)................... 2 (2) 1 1
------ ------ ----- -----
Plan assets at end of year............................... 1,695 1,819 16 18
------ ------ ----- -----
Funded status of plans................................... 205 320 (257) (254)
Unamortized amounts:
Prior service cost..................................... 15 10 (149) (158)
Net transition asset................................... (4) (1) -- --
Net actuarial (gain) loss.............................. (165) (282) 62 90
------ ------ ----- -----
Net asset (liability) on balance sheet................... $ 51 $ 47 $(344) $(322)
====== ====== ===== =====
Net asset (liability) on balance sheet consists of:
Prepaid benefit cost..................................... $ 99 $ 99 $ -- $ --
Accrued benefit liability................................ (75) (71) (344) (322)
Deferred tax asset....................................... 7 5 -- --
Intangible asset......................................... 7 5 -- --
Accumulated other comprehensive loss..................... 13 9 -- --
------ ------ ----- -----
Net asset (liability) on balance sheet................... $ 51 $ 47 $(344) $(322)
====== ====== ===== =====
|
ROCKWELL COLLINS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Assets and liabilities are measured using a measurement date of June 30. Significant assumptions used in determining these benefit obligations are summarized as follows (in weighted averages):
OTHER
PENSION RETIREMENT
BENEFITS BENEFITS
------------ ------------
1999 2000 1999 2000
---- ---- ---- ----
Discount rate............................................... 7.5% 8.0% 7.5% 8.0%
Compensation increase rate.................................. 4.5% 4.5% -- --
Expected return on plan assets.............................. 9.5% 9.5% 9.5% 9.5%
Health care cost trend rate*................................ -- -- 7.0% 7.0%
|
Pension Benefits
The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for nonqualified and certain international pension plans with accumulated benefit obligations in excess of the fair value of plan assets (underfunded plans) were $85 million, $75 million and $0, respectively, as of September 30, 1999 and $83 million, $71 million and $0, respectively, as of September 30, 2000.
Other Postretirement Benefits
Assumed health care cost trend rates have a significant effect on amounts reported for the other postretirement benefit plans. A one-percentage point change in assumed health care cost trend rates would have the following effect (in millions):
ONE-PERCENTAGE ONE-PERCENTAGE
POINT INCREASE POINT DECREASE
--------------- --------------
1999 2000 1999 2000
----- ----- ----- -----
Increase (decrease) to total of service and interest cost
components................................................ $ 2 $ 2 $ (2) $ (2)
Increase (decrease) to postretirement benefit obligation.... 14 12 (12) (11)
|
Defined Contribution Savings Plans
The majority of Avionics and Communications' employees are eligible to participate in defined contribution savings plans sponsored by Rockwell. The plans allow employees to contribute a portion of their compensation on a pre-tax and/or after-tax basis in accordance with specified guidelines. Rockwell matches a percentage of employee contributions up to certain limits. Avionics and Communications' expense related to Rockwell savings plans was $18 million, $20 million and $23 million for 1998, 1999 and 2000, respectively.
14. RESEARCH AND DEVELOPMENT
Avionics and Communications performs research and development under company-initiated programs for its commercial products. Avionics and Communications also performs research and development under contracts with customers. Research and development under contracts with customers is generally performed by the Government Systems business. Total company-initiated research and development expenditures in 1998, 1999, and 2000 were $202 million, $232 million, and $265 million, respectively, and are recorded in Cost of Sales. Company-initiated expenditures include advanced research and development performed by the Rockwell Science Center on behalf of the Company in the amount of $7 million in 1998 and $9 million in each of 1999 and 2000. Total customer-funded research and development expenditures were $182 million, $188 million, and $203 million, in 1998, 1999, and 2000, respectively.
ROCKWELL COLLINS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
15. REALIGNMENT COSTS
Avionics and Communications recorded charges of $65 million in 1998 ($43 million after tax) in connection with the exiting of non-strategic businesses and other cost reduction initiatives to improve operational focus and efficiencies. These charges included $16 million for severance and other employee separation costs associated with a workforce reduction of approximately 130 employees, $29 million for asset impairments, and $20 million related to other costs associated with exiting non-strategic businesses. These actions were complete at December 31, 1999. The non-strategic businesses sold in connection with these realignment actions were the Integrated Local Transit Systems business that provided command and control systems for vehicle based public transit systems and the Agriculture business that provided global positioning systems to the agriculture market. Revenues and results of operations from these businesses were not material.
Cash expenditures for employee severance and other costs in connection with these actions approximated $26 million. During 2000, Avionics and Communications recorded a net adjustment of $5 million as a reduction of Cost of Sales primarily as a result of lower than expected employee separation costs and higher than anticipated costs associated with the exit of a product line. These charges are included in Cost of Sales and Selling, General and Administrative expenses in the amounts of $48 million and $17 million, respectively, for the year ended September 30, 1998.
16. OTHER INCOME
Other Income for the years ended September 30, 1998, 1999, and 2000 consisted principally of interest income, royalty income, and in 1999, a gain of $32 million on the sale of Avionics and Communications' railroad electronics business.
17. INCOME TAXES
Substantially all of Avionics and Communications' operations are included in the consolidated or combined income tax returns of Rockwell. Rockwell intends to indemnify Rockwell Collins for all income tax liabilities and retain rights to all tax refunds relating to operations included in consolidated or combined tax returns for periods through the date of the Distribution. Accordingly, the Statement of Assets and Liabilities does not include current or prior period income tax receivables or payables related to wholly-owned subsidiaries which file on a consolidated or combined basis with Rockwell. The income tax provisions have been determined as if Rockwell Collins were a separate taxpayer.
The components of the income tax provision are as follows (in millions):
1998 1999 2000
---- ---- ----
Current:
United States............................................. $27 $113 $ 94
Non-United States......................................... 3 7 4
State and local........................................... 4 10 8
--- ---- ----
Total current............................................... 34 130 106
--- ---- ----
Deferred:
United States............................................. (8) 15 22
Non-United States......................................... -- -- --
State and local........................................... (2) 1 2
--- ---- ----
Total deferred.............................................. (10) 16 24
--- ---- ----
Income tax provision........................................ $24 $146 $130
=== ==== ====
|
ROCKWELL COLLINS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Net current deferred income tax benefits at September 30, 1999 and 2000 consist of the tax effects of temporary differences related to the following (in millions):
1999 2000
---- ----
Compensation and benefits................................... $ 37 $ 35
Product warranty costs...................................... 33 28
Inventory................................................... 36 34
Contract loss reserves...................................... 23 20
Other -- net................................................ 24 16
---- ----
Current deferred income taxes............................... $153 $133
==== ====
|
Net long-term deferred income tax benefits included in Other Assets in the Statement of Assets and Liabilities at September 30, 1999 and 2000 consist of the tax effects of temporary differences related to the following (in millions)
1999 2000
---- ----
Retirement benefits......................................... $121 $113
Property.................................................... (22) (16)
Other -- net................................................ (36) (38)
---- ----
Long-term deferred income taxes............................. $ 63 $ 59
==== ====
|
Management believes it is more likely than not that current and long-term deferred tax assets will be realized through the reduction of future taxable income. Significant factors considered by management in its determination of the probability of the realization of the deferred tax assets include: (a) the historical operating results of Avionics and Communications ($782 million of United States taxable income over the past three years), (b) expectations of future earnings, and (c) the extended period of time over which the retirement medical liability will be paid.
The effective income tax rate differed from the United States statutory tax rate for the reasons set forth below:
1998 1999 2000
---- ---- ----
Statutory tax rate.......................................... 35.0% 35.0% 35.0%
State and local income taxes................................ 1.3 1.6 1.6
Foreign sales corporation benefit........................... (7.3) (3.1) (3.9)
Non-deductible goodwill write-off........................... 2.2 -- --
Other....................................................... 1.6 -- (0.2)
---- ---- ----
Effective income tax rate................................... 32.8% 33.5% 32.5%
==== ==== ====
|
The income tax provisions were calculated based upon the following components of income before income taxes and accounting change (in millions):
1998 1999 2000
---- ---- ----
United States income........................................ $64 $418 $388
Non-United States income.................................... 9 19 11
--- ---- ----
Total....................................................... $73 $437 $399
=== ==== ====
|
No provision has been made for United States, state, or additional foreign income taxes related to approximately $35 million of undistributed earnings of foreign subsidiaries which have been or are intended to
ROCKWELL COLLINS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
'be permanently reinvested. It is not practicable to determine the United States federal income tax liability, if any, which would be payable if such earnings were not permanently reinvested.
Income taxes paid in 1998, 1999 and 2000 were not significant.
18. LEASE COMMITMENTS
Minimum future rental commitments under operating leases having noncancelable lease terms in excess of one year aggregated $46 million at September 30, 2000 and are payable as follows (in millions): 2001, $11; 2002, $9; 2003, $7; 2004, $7; 2005, $4; and after 2005, $8.
Rent expense for 1998, 1999, and 2000 was $15 million, $17 million, and $18 million, respectively.
19. CONTINGENT LIABILITIES
Pursuant to the terms of the Distribution Agreement, New Rockwell Collins, Inc. will assume responsibility for all litigation, including environmental proceedings, against Rockwell or its subsidiaries with respect to Avionics and Communications.
Litigation
On January 15, 1997, a civil action was filed against the Company in the United States District Court for the District of Arizona in Tucson, Universal Avionics Systems Corp. v. Rockwell International Corp. and Rockwell Collins, Inc., in which Universal, a manufacturer and marketer of aviation electronics, including Flight Management Systems (FMS), asserted four claims against the Company arising out of its participation in the FMS business: (1) attempted monopolization under Section 2 of the Sherman Act; (2) anticompetitive conduct (exclusive dealing and tying) under Section 1 of the Sherman Act; (3) tortious interference with business relationships and prospective economic business advantage under the common law of Arizona; and (4) unfair competition under the common law of Arizona. Universal seeks damages of approximately $35 million before trebling for the alleged antitrust violations; actual damages of an unspecified amount for the alleged common law violations; punitive damages; attorneys' fees and injunctive relief. The Company and Rockwell have asserted counterclaims against Universal for defamation and unfair competition. The Company has denied and is vigorously defending against Universal's allegations. Discovery is essentially complete and in January 2000 the Company filed motions for summary judgment as to all of Universal's claims. The court has yet to render a decision on any of the pending motions for summary judgment and no trial date has been set.
On April 3, 2000, a civil action was filed against the Company in the Court of Common Pleas of Pennsylvania for Allegheny County, Westinghouse Air Brake Technologies Corp. v. Rockwell Collins, Inc., asserting various claims arising out of the plaintiff's purchase of the Company's former railroad electronics business pursuant to a Sale Agreement dated October 5, 1998. Specifically, the plaintiff alleges that it is entitled under provisions of the Sale Agreement to a post-closing adjustment of approximately $7 million in the purchase price, and that it is entitled to unspecified damages for alleged misrepresentations, breaches of warranty, mistake of fact, and failure by the Company to turn over certain assets and to provide certain post-closing support. On December 13, 2000, the trial court ordered that the claim for a post-closing adjustment in the purchase price be submitted to mandatory arbitration pursuant to provisions of the Sale Agreement, but declined to stay court proceedings on the other issues during pendency of the arbitration proceeding. The parties are in the early stages of discovery and in the process of initiating arbitration of the post-closing purchase price adjustment claim.
On December 14, 1995, a civil action was filed in the United States District Court for the Western District of Texas, El Paso Division, United States, ex. rel Staines v. Rockwell International Corp., under the qui tam provisions of the False Claims Act seeking unspecified damages for alleged violations of the Act on
ROCKWELL COLLINS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
two contracts with agencies of the U.S. Government under which an electronics fabricating plant in El Paso now owned by The Boeing Company (Boeing) performed work on subcontract for Boeing, and one contract where the plant performed work on subcontract for the Company's Dallas, Texas facility. Specifically with respect to the work performed at the El Paso plant for the Company, the plaintiff alleges that certain components were improperly tested and that certain components removed from circuit boards for testing were thereafter reinstalled when they should not have been. Boeing has agreed to defend and indemnify Rockwell and the Company for claims relating to work performed on Boeing contracts, and for any wrongdoing that may have occurred at the El Paso plant relating to work performed there for the Company, but not for wrongdoing, if any, that may have occurred at or under the direction of the Company's Dallas facility. In October 1998 the United States declined to intervene in the action on its own behalf and the plaintiff has since proceeded to prosecute the action himself with private counsel. Rockwell and Boeing have denied wrongdoing and are vigorously defending the action. Discovery is not yet complete. On May 11, 1999 Rockwell and Boeing filed a motion to dismiss the case on the pleadings, which motion is still pending. On January 13, 2000, the case was placed in administrative closure by the court pending a decision in the Fifth Circuit Court of Appeals on the constitutionality of the False Claims Act.
On January 15, 1999, a civil action was filed against the Company and Hughes Electronics Manufacturing Service Company in the Superior Court of the State of California for Orange County, SOS Wireless Communications, Inc. v. Rockwell Collins, Inc., and Hughes Electronics Manufacturing Service Company, in which the plaintiff alleges defendants breached a contract to build a special purpose cellular telephone for the plaintiff and made various misrepresentations with respect thereto. The plaintiff seeks damages of approximately $29 million for breach of contract, negligent misrepresentation and intentional misrepresentation. The Company denied the allegation, filed a counterclaim against the plaintiff for approximately $1.1 million based on unpaid invoices for product delivered, and has vigorously defended the action. On August 9, 1999, the parties stipulated that the matter should be submitted to binding arbitration pursuant to the terms of a contractual arbitration clause, and the civil action was dismissed without prejudice. On August 25, 2000, the arbitrator entered an order granting judgment in favor of the Company and against the plaintiff in the amount of $1.1 million on its counterclaim. Arbitration proceedings on the plaintiff's claims commenced on January 8, 2001 and are proceeding.
Various other lawsuits, claims and proceedings have been or may be instituted or asserted against Rockwell or the Company relating to the conduct of the Company's business, including those pertaining to product liability, intellectual property, environmental, safety and health, and employment matters.
Although the outcome of litigation cannot be predicted with certainty and some lawsuits, claims or proceedings may be disposed of unfavorably to the Company, based on its evaluation of matters which are pending or asserted, management believes the disposition of such matters will not have a material adverse effect on the Company's business or financial condition.
Environmental
Federal, state and local requirements relating to the discharge of substances into the environment, the disposal of hazardous wastes, and other activities affecting the environment have had and will continue to have an impact on the Company's manufacturing operations. Thus far, compliance with environmental requirements and resolution of environmental claims have been accomplished without material effect on the Company's liquidity and capital resources, competitive position or financial condition.
Based on its assessment, management believes that the Company's expenditures for environmental capital investment and remediation necessary to comply with present regulations governing environmental protection and other expenditures for the resolution of environmental claims will not have a material adverse effect on the Company's business or financial condition. Management cannot assess the possible effect of compliance with future requirements.
ROCKWELL COLLINS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Other Matters
Various claims (whether based upon United States government or Company audits and investigations or otherwise) have been or may be instituted or asserted against the Company related to its United States government contract work, including claims based on business practices and cost classifications. Although such claims are usually resolved by detailed fact-finding and negotiation, on those occasions when they are not resolved, civil or criminal legal or administrative proceedings may ensue. Depending on the circumstances and the outcome, such proceedings could result in fines, the cancellation of or suspension of payments under one or more United States government contracts, suspension or debarment proceedings affecting the Company's potential further business with the United States government, or alteration of the Company's procedures relating to the performance or obtaining of United States government contracts. Management of the Company believes there are no claims, audits or investigations currently pending which will have a material adverse effect on the Company's business or financial condition.
20. BUSINESS SEGMENT INFORMATION
Rockwell Collins is a supplier of aviation electronics and airborne and mobile communication systems, service and support solutions for commercial and military applications. The Company has two operating segments consisting of the Commercial Systems and Government Systems businesses.
Products sold by the Commercial Systems business include flight deck systems, consisting of liquid crystal multi-function displays, communications systems, such as data links and satellite communications, navigation systems, such as flight management systems and global positioning systems (GPS), surveillance systems such as weather radar and Traffic Collision Avoidance Systems (TCAS), automatic flight control systems, as well as in-flight entertainment and information management systems. Customers include aircraft manufacturers and airlines throughout the world.
The Government Systems business supplies defense electronics products and systems including advanced communication and navigation solutions for air, ground and sea, narrow and wide-band communications systems for interoperability and situational awareness, flight management systems, data link terminals and military GPS-based navigation. Major customers are the United States Department of Defense and foreign militaries around the world.
Sales made to the United States Government by all segments (primarily the Government Systems segment) were 28 percent of sales in 1998 and 1999 and 27 percent of sales in 2000. Sales made to Boeing by all segments (primarily the Commercial Systems segment) were 13 percent of sales in 1998, 11 percent of sales in 1999, and 9 percent of sales in 2000.
ROCKWELL COLLINS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the sales and operating results for each reportable segment (in millions):
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, MARCH 31,
-------------------------- ----------------
1998 1999 2000 2000 2001
------ ------ ------ ------ ------
(UNAUDITED)
Sales:
Commercial Systems.......................... $1,213 $1,546 $1,586 $ 744 $ 796
Government Systems.......................... 813 892 924 437 481
------ ------ ------ ------ ------
Total............................... $2,026 $2,438 $2,510 $1,181 $1,277
====== ====== ====== ====== ======
Segment operating earnings:
Commercial Systems.......................... $ 147 $ 285 $ 296 $ 146 $ 136
Government Systems.......................... 54 139 144 61 79
------ ------ ------ ------ ------
Total............................... 201 424 440 207 215
Goodwill and purchase accounting items........ (110) (10) (15) (6) (21)
Gain on disposition of a business............. -- 32 -- -- --
Earnings (losses) from equity affiliates...... 1 11 (3) (3) 2
General corporate-net......................... (19) (20) (23) (11) (15)
------ ------ ------ ------ ------
Income before income taxes and accounting
change...................................... $ 73 $ 437 $ 399 $ 187 $ 181
====== ====== ====== ====== ======
|
Goodwill and purchase accounting items for the year ended September 30, 1998 includes a charge of $103 million for purchased research and development (see Note 3).
Intersegment sales are not material and have been eliminated. Among other considerations, Rockwell Collins evaluates performance and allocates resources based upon segment operating earnings before income taxes, unallocated general corporate expenses, gains and losses from the disposition of businesses, earnings and losses from equity affiliates, and incremental acquisition-related expenses resulting from purchase accounting adjustments such as goodwill and other intangible asset amortization, depreciation, inventory and purchased research and development charges. The accounting policies used in preparing the segment information are consistent with those described in Note 2.
ROCKWELL COLLINS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following tables summarize the identifiable assets at September 30, the provision for depreciation and amortization and the amount of capital expenditures for property for the years ended September 30 for each of the reportable segments and Corporate (in millions):
1998 1999 2000
------ ------ ------
Identifiable assets:
Commercial Systems..................................... $1,016 $1,084 $1,271
Government Systems..................................... 438 547 447
Corporate.............................................. 387 402 382
------ ------ ------
Total.......................................... $1,841 $2,033 $2,100
====== ====== ======
Depreciation and amortization:
Commercial Systems..................................... $ 39 $ 53 $ 64
Government Systems..................................... 20 24 22
------ ------ ------
Total.......................................... 59 77 86
Purchase accounting depreciation and amortization...... 7 9 13
------ ------ ------
Total.......................................... $ 66 $ 86 $ 99
====== ====== ======
Capital expenditures for property:
Commercial Systems..................................... $ 94 $ 86 $ 72
Government Systems..................................... 49 41 26
------ ------ ------
Total.......................................... $ 143 $ 127 $ 98
====== ====== ======
|
The majority of the Company's businesses are centrally located and share many common resources, infrastructures and assets in the normal course of business. Certain assets, principally property, plant and equipment, have been allocated between the reportable segments primarily based upon occupancy or usage. Identifiable assets at Corporate consist principally of cash, net deferred income tax assets, prepaid pension cost and investments in equity affiliates.
The following table summarizes sales by product category for the years ended September 30 (in millions):
1998 1999 2000
------ ------ ------
Commercial avionics products............................. $1,095 $1,213 $1,231
In-flight entertainment products......................... 118 333 355
Defense electronics products............................. 813 892 924
------ ------ ------
Total.......................................... $2,026 $2,438 $2,510
====== ====== ======
|
ROCKWELL COLLINS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following table reflects sales for the years ended September 30 and property by geographic region at September 30 (in millions):
SALES PROPERTY
-------------------------- --------------------
1998 1999 2000 1998 1999 2000
------ ------ ------ ---- ---- ----
United States............................ $1,337 $1,586 $1,495 $296 $346 $379
Europe................................... 350 503 552 13 4 23
Asia-Pacific............................. 141 168 234 10 11 11
Canada................................... 120 117 156 -- -- --
Africa/Middle East....................... 43 42 47 -- -- --
Latin America............................ 35 22 26 3 4 4
------ ------ ------ ---- ---- ----
Total.......................... $2,026 $2,438 $2,510 $322 $365 $417
====== ====== ====== ==== ==== ====
|
Sales are attributed to the geographic regions based on the country of destination.
21. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
2000 QUARTERS
--------------------------------------------
FIRST SECOND THIRD FOURTH 2000
----- ------ ----- ------ ------
(IN MILLIONS)
Sales.............................................. $563 $618 $627 $702 $2,510
Cost of sales...................................... 409 458 448 530 1,845
Net income......................................... 67 59 69 74 269
|
1999 QUARTERS
--------------------------------------------
FIRST SECOND THIRD FOURTH 1999
----- ------ ----- ------ ------
(IN MILLIONS)
Sales.............................................. $528 $573 $628 $709 $2,438
Cost of sales...................................... 388 406 463 525 1,782
Net income......................................... 77 69 69 76 291
|
The sale of the railroad electronics business occurred in the first quarter of 1999 (see Note 16).
22. OTHER MATTERS
Commencing in the third quarter of 2000, Avionics and Communications incurred costs that management anticipated would be recovered under an in-flight network system contract. As a result of information which became available in March 2001, management concluded that the contract award was no longer probable and, accordingly, these costs have been presented in the financial statements as an expense in the periods incurred. These costs were $16 million for the year ended September 30, 2000 and $8 million for the six months ended March 31, 2001.
SCHEDULE II
ROCKWELL COLLINS
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED SEPTEMBER 30, 2000, 1999 AND 1998
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF YEAR(A) EXPENSES OTHER(B) DEDUCTIONS(C) YEAR(A)
----------- ---------- ---------- -------- ------------- ----------
Year ended September 30, 2000:
Allowance for doubtful accounts......... $ 8 $-- $2 $ -- $ 10
Allowance for excess and obsolete
inventories.......................... 89 10 13 (17) 95
Year ended September 30, 1999:
Allowance for doubtful accounts......... 9 1 -- (2) 8
Allowance for excess and obsolete
inventories.......................... 103 3 (8) (9) 89
Year ended September 30, 1998:
Allowance for doubtful accounts......... 16 5 1 (4) 9
(9)(d)
Allowance for excess and obsolete
inventories.......................... 50 27 35 (9) 103
|
(b) Consists principally of amounts relating to businesses acquired and businesses disposed of.
(c) Amounts written off.
(d) Recovery of amounts previously written off.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of New Rockwell Collins, Inc.:
We have audited the accompanying balance sheet of New Rockwell Collins, Inc. (a wholly-owned subsidiary of Rockwell International Corporation) as of April 10, 2001. This balance sheet is the responsibility of the Company's management. Our responsibility is to express an opinion on this balance sheet based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the balance sheet. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall balance sheet presentation. We believe that our audit of the balance sheet provides a reasonable basis for our opinion.
In our opinion, such balance sheet presents fairly, in all material respects, the financial position of New Rockwell Collins, Inc. (a wholly-owned subsidiary of Rockwell International Corporation) as of April 10, 2001 in conformity with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
April 12, 2001
NEW ROCKWELL COLLINS, INC.
BALANCE SHEET
APRIL 10, 2001
ASSETS
Cash........................................................ $1,000
------
Total Assets................................................ $1,000
======
SHAREOWNER'S EQUITY
Common stock, $.01 par value; 1,000 shares authorized,
issued and outstanding.................................... $ 10
Additional paid-in capital.................................. 990
------
Shareowner's Equity......................................... $1,000
======
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NOTE TO BALANCE SHEET
BASIS OF PRESENTATION
The balance sheet of New Rockwell Collins, Inc. (New Rockwell Collins) consists of the accounts of an inactive wholly-owned subsidiary of Rockwell International Corporation (Rockwell). New Rockwell Collins was incorporated in Delaware on March 1, 2001 in anticipation of a proposed distribution of Rockwell's avionics and communications business (Avionics and Communications) and certain other assets and liabilities of Rockwell. The distribution, which is expected to be completed in June 2001, will result in the transfer to New Rockwell Collins of the assets and liabilities of Avionics and Communications and certain other assets and liabilities of Rockwell. The shares of New Rockwell Collins common stock (including the associated preferred share purchase rights) will be distributed in a tax-free spin-off, with each Rockwell shareowner receiving one share of New Rockwell Collins common stock (including the associated preferred share purchase right) for every share of Rockwell common stock owned.
PART II
INFORMATION NOT INCLUDED IN INFORMATION STATEMENT
EXHIBIT
NO. DESCRIPTION
------- -----------
2 Form of Distribution Agreement among Rockwell, Rockwell
Collins and the Rockwell Science Center
*3.1 Certificate of Incorporation of Rockwell Collins
*3.2 By-Laws of Rockwell Collins
3.3 Form of Restated Certificate of Incorporation of Rockwell
Collins
3.4 Form of Amended By-Laws of Rockwell Collins
4.1 Specimen certificate for Rockwell Collins Common Stock, par
value $.01 per share
4.2 Form of Rights Agreement by and between Rockwell Collins and
the rights agent named therein
10.1 Form of Rockwell Collins 2001 Long-Term Incentives Plan
10.2 Form of Rockwell Collins Directors Stock Plan
10.3 Form of Rockwell Collins 2001 Stock Option Plan
10.4 Form of Rockwell Collins Annual Incentive Compensation Plan
for Senior Executive Officers
10.5 Form of Employee Matters Agreement among Rockwell, Rockwell
Collins and the Rockwell Science Center
10.6 Form of Tax Allocation Agreement between Rockwell and
Rockwell Collins
10.7.1 Form of Change of Control Agreement between Rockwell Collins
and certain executives of
Rockwell Collins
10.7.2 Schedule identifying executives of Rockwell Collins who will
be party to a Change of Control Agreement in the form set
forth as Exhibit 10.7.1 to this Registration Statement
10.8.1 Form of Change of Control Agreement between Rockwell Collins
and certain executives of Rockwell Collins
10.8.2 Schedule identifying executives of Rockwell Collins who will
be party to a Change of Control Agreement in the form set
forth as Exhibit 10.8.1 to this Registration Statement
10.9.1 Form of 364-Day Credit Agreement
10.9.2 Form of Five-Year Credit Agreement
|
II-1
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Amendment No. 1 to the registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.
NEW ROCKWELL COLLINS, INC.
By: /s/ WILLIAM J. CALISE, JR.
------------------------------------
Name: William J. Calise, Jr.
Title: Vice President
Date: May 30, 2001
|
II-2
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
------- -----------
2 Form of Distribution Agreement among Rockwell, Rockwell
Collins and the Rockwell Science Center
*3.1 Certificate of Incorporation of Rockwell Collins
*3.2 By-Laws of Rockwell Collins
3.3 Form of Restated Certificate of Incorporation of Rockwell
Collins
3.4 Form of Amended By-Laws of Rockwell Collins
4.1 Specimen certificate for Rockwell Collins Common Stock, par
value $.01 per share
4.2 Form of Rights Agreement by and between Rockwell Collins and
the rights agent named therein
10.1 Form of Rockwell Collins 2001 Long-Term Incentives Plan
10.2 Form of Rockwell Collins Directors Stock Plan
10.3 Form of Rockwell Collins 2001 Stock Option Plan
10.4 Form of Rockwell Collins Annual Incentive Compensation Plan
for Senior Executive Officers
10.5 Form of Employee Matters Agreement among Rockwell, Rockwell
Collins and the Rockwell Science Center
10.6 Form of Tax Allocation Agreement between Rockwell and
Rockwell Collins
10.7.1 Form of Change of Control Agreement between Rockwell Collins
and certain executives of
Rockwell Collins
10.7.2 Schedule identifying executives of Rockwell Collins who will
be party to a Change of Control Agreement in the form set
forth as Exhibit 10.7.1 to this Registration Statement
10.8.1 Form of Change of Control Agreement between Rockwell Collins
and certain executives of Rockwell Collins
10.8.2 Schedule identifying executives of Rockwell Collins who will
be party to a Change of Control Agreement in the form set
forth as Exhibit 10.8.1 to this Registration Statement
10.9.1 Form of 364-Day Credit Agreement
10.9.2 Form of Five-Year Credit Agreement
|
*Previously filed
Exhibit 2
FORM OF
DISTRIBUTION AGREEMENT
by and among
ROCKWELL INTERNATIONAL CORPORATION,
NEW ROCKWELL COLLINS, INC.
and
ROCKWELL SCIENTIFIC COMPANY LLC
June 29, 2001
Page
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I DEFINITIONS..............................................................................1
SECTION 1.01 General..................................................................................1
ARTICLE II THE DISTRIBUTION........................................................................33
SECTION 2.01 The Distribution........................................................................33
SECTION 2.02 Cooperation Prior to the Distribution...................................................33
SECTION 2.03 Rockwell Board Action; Conditions to the Distribution...................................34
SECTION 2.04 Waiver of Conditions....................................................................35
SECTION 2.05 Disclosure..............................................................................35
ARTICLE III TRANSACTIONS RELATING TO THE DISTRIBUTION...............................................35
SECTION 3.01 Intercorporate Reorganization...........................................................35
SECTION 3.02 Financial Instruments...................................................................38
SECTION 3.03 Shared Agreements.......................................................................39
SECTION 3.04 Intercompany Accounts and Arrangements..................................................40
SECTION 3.05 Cash Management.........................................................................41
SECTION 3.06 The Rockwell Collins Board and the Rockwell Science Center Board........................44
SECTION 3.07 Resignations; Transfer of Stock Held as Nominee.........................................44
SECTION 3.08 Rockwell Collins Certificate of Incorporation and By-Laws; Rights
Plan....................................................................................46
SECTION 3.09 Insurance...............................................................................46
SECTION 3.10 Use of Names, Trademarks, etc...........................................................51
SECTION 3.11 Consents................................................................................57
SECTION 3.12 Intellectual Property...................................................................58
SECTION 3.13 Software and Other License Agreements...................................................63
SECTION 3.14 Charitable Entities.....................................................................64
ARTICLE IV MUTUAL RELEASE; INDEMNIFICATION.........................................................64
SECTION 4.01 Mutual Release..........................................................................64
SECTION 4.02 Indemnification by Rockwell.............................................................65
SECTION 4.03 Indemnification by Rockwell Collins.....................................................65
SECTION 4.04 Indemnification by Rockwell Science Center..............................................66
SECTION 4.05 Limitations on Indemnification Obligations..............................................67
SECTION 4.06 Procedures Relating to Indemnification..................................................68
SECTION 4.07 Remedies Cumulative.....................................................................69
SECTION 4.08 Survival of Indemnities.................................................................69
SECTION 4.09 Exclusivity of Tax Allocation Agreement.................................................69
ARTICLE V ACCESS TO INFORMATION...................................................................70
SECTION 5.01 Access to Information...................................................................70
|
Page
----
SECTION 5.02 Production of Witnesses.................................................................72
SECTION 5.03 Retention of Records....................................................................72
SECTION 5.04 Confidentiality.........................................................................73
ARTICLE VI MISCELLANEOUS...........................................................................73
SECTION 6.01 Entire Agreement; Construction..........................................................73
SECTION 6.02 Survival of Agreements..................................................................74
SECTION 6.03 Expenses................................................................................74
SECTION 6.04 Governing Law...........................................................................75
SECTION 6.05 Notices.................................................................................75
SECTION 6.06 Dispute Resolution......................................................................77
SECTION 6.07 Consent to Jurisdiction.................................................................77
SECTION 6.08 Amendments..............................................................................78
SECTION 6.09 Assignment..............................................................................78
SECTION 6.10 Captions; Currency......................................................................78
SECTION 6.11 Severability............................................................................78
SECTION 6.12 Parties in Interest.....................................................................79
SECTION 6.13 Schedules...............................................................................79
SECTION 6.14 Termination.............................................................................79
SECTION 6.15 Waivers; Remedies.......................................................................79
SECTION 6.16 Further Assurances......................................................................79
SECTION 6.17 Counterparts............................................................................79
SECTION 6.18 Performance.............................................................................79
SECTION 6.19 Currency Calculations...................................................................80
SECTION 6.20 Interpretation..........................................................................80
|
ANNEXES
Annex A - Employee Matters Agreement
Annex B - Tax Allocation Agreement
SCHEDULES
Schedule 1.01(a) - Rockwell Collins Amended By-Laws Schedule 1.01(b) - Rockwell Collins Restated Certificate of Incorporation Schedule 1.01(c) - Cypress Computer Servers Schedule 1.01(d) - Rockwell Automation Patents and Trademarks Schedule 1.01(e) - Rockwell Automation Shared Facilities Schedule 1.01(f) - Rockwell Automation Aircraft Schedule 1.01(g) - Former Businesses of Rockwell Automation Schedule 1.01(h) - Unrelated Former Businesses Schedule 1.01(i) - Rockwell Collins Aircraft Schedule 1.01(j) - Rockwell Collins Patents and Trademarks Schedule 1.01(k) - Rockwell Collins Shared Facilities Schedule 1.01(l) - Former Businesses of Rockwell Collins Schedule 1.01(m) - Rockwell Collins Financial Instruments Schedule 1.01(n) - Rockwell Collins Litigation Schedule 1.01(o) - Rockwell Collins Non-U.S. Bank Accounts Schedule 1.01(p) - Rockwell Collins Subsidiaries Schedule 1.01(q) - Rockwell Collins U.S. Bank Accounts Schedule 1.01(r) - Rockwell Science Center Patents and Trademarks Schedule 1.01(s) - Rockwell Science Center Financial Instruments Schedule 1.01(t) - Rockwell Science Center Litigation Schedule 1.01(u) - Rockwell Science Center Non-U.S. Bank Accounts Schedule 1.01(v) - Rockwell Science Center Subsidiaries Schedule 1.01(w) - Rockwell Science Center U.S. Bank Accounts Schedule 1.01(x) - Rockwell Collins Securities Schedule 1.01(y) - Rockwell Science Center Securities Schedule 3.01(c) - Reorganization Transactions Schedule 3.04(a) - Continuing Intercompany Accounts Schedule 3.04(b)(ii) - Continuing Intercompany Agreements Schedule 3.06(b) - Rockwell Science Center Board Schedule 3.07 - Continuing Directors and Officers Schedule 3.14 - Rockwell Collins Charitable Corporation Commitments Schedule 4.02(b) - Certain Form 10 Sections |
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT (this "Agreement"), dated as of June 29, 2001, by and among (i) ROCKWELL INTERNATIONAL CORPORATION, a Delaware corporation ("Rockwell"), (ii) NEW ROCKWELL COLLINS, INC., a Delaware corporation and, as of the date hereof, a wholly-owned subsidiary of Rockwell ("Rockwell Collins"), and (iii) ROCKWELL SCIENTIFIC COMPANY LLC, a Delaware limited liability company and, as of the date hereof, a wholly-owned subsidiary of Rockwell ("Rockwell Science Center").
WHEREAS, the Rockwell Board (as defined herein) has determined that it is appropriate and desirable to distribute all outstanding shares of Rockwell Collins Common Stock (as defined herein) on a pro rata basis to the holders of Rockwell Common Stock (as defined herein); and
WHEREAS, Rockwell, Rockwell Collins and Rockwell Science Center have determined that it is appropriate and desirable to set forth the principal corporate transactions required to effect such distribution and certain other agreements that will govern certain matters relating to such distribution;
NOW, THEREFORE, in consideration of the premises and of the respective agreements and covenants contained in this Agreement, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 General. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):
"ACTION" means, with respect to any Person, any actual or threatened or future action, suit, arbitration, inquiry, proceeding or investigation by or before any Governmental Entity or any claims or other legal matters that have been or may be asserted by or against, or otherwise affect, such Person.
"ADMINISTRATIVE SERVICES" shall have the meaning ascribed thereto in Section 3.12(g)(i)(A).
"ADMINISTRATIVE SERVICES SOFTWARE" shall have the meaning ascribed thereto in Section 3.12(g)(i)(B).
"AFFILIATE" means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person; provided, however, that for purposes of this Agreement, following the Time of Distribution no member of any Group shall be deemed to be an Affiliate of any member of any other Group. For purposes of the immediately preceding sentence, the term "control" (including, with correlative meanings, the terms "controlled by" and "under common control with"), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract or otherwise.
"AGENCY LICENSING AGREEMENTS" means (a) the agency licensing agreement among Rockwell, Rockwell Science Center and ITL pursuant to which, among other things, ITL will act as exclusive agent for Rockwell and its Subsidiaries in connection with the licensing of certain intellectual property to third parties in fields other than the Rockwell Automation Group's businesses and (b) the agency licensing agreement by and among Rockwell Collins, Rockwell Science Center and ITL pursuant to which, among other things, ITL will act as exclusive agent for Rockwell Collins and its Subsidiaries in connection with the licensing of certain intellectual property to third parties in fields other than the Rockwell Collins Group's businesses.
"AGREEMENT" shall have the meaning ascribed thereto in the preamble.
"AMENDED AND RESTATED ROCKWELL SCIENCE CENTER LLC AGREEMENT" means
the Amended and Restated Limited Liability Company Agreement of Rockwell Science
Center dated as of the date hereof by and between Rockwell Automation
Technologies, Inc., a Delaware corporation and a Rockwell Subsidiary, and
Rockwell Collins Technologies, LLC, a Delaware limited liability company and a
Rockwell Collins Subsidiary.
"ANCILLARY AGREEMENTS" means, collectively, the Employee Matters Agreement, the Tax Allocation Agreement, the Continuing Services Agreements, the Rockwell Science Center Services Agreements, the Agency Licensing Agreements, the Amended and Restated Rockwell Science Center LLC Agreement, the Product Manufacturing Agreement, the Transition Agreement and the Conveyance and Assumption Instruments.
"ASSETS" means any and all assets, properties and rights, whether tangible or intangible, real, personal or mixed, fixed, contingent or otherwise, and wherever located (other than ownership interests in Subsidiaries), including the following:
(a) real property (including land, plants, buildings and improvements) and real property interests (including leases);
(b) machinery, equipment, tooling, vehicles, furniture and fixtures, leasehold improvements, repair parts, tools, plant, laboratory and office equipment and supplies, computer hardware and software, computer networking equipment, engineering and design equipment, test equipment and other tangible personal property, together with any
rights or claims arising out of maintenance or service contracts relating thereto or the breach of any express or implied warranty by the manufacturers or sellers of any of such assets or any component part thereof;
(c) inventories, including raw materials, work-in-process, materials, components, finished goods, parts, accessories and supplies;
(d) bank accounts;
(e) cash, cash on hand, cash equivalents, funds, certificates of deposit, similar instruments and travelers checks;
(f) accounts, loans and notes receivable (whether current or not current), performance and surety bonds and interests as beneficiary under letters of credit and other similar instruments and all proceeds thereof;
(g) Securities;
(h) swaps, collars, caps and other hedging arrangements of any kind;
(i) financial, accounting, corporate, operating, design, manufacturing, test and other data and records (in each case, in whatever form or medium, including electronic media), including books, records, notes, sales and sales promotional material and data, advertising materials, credit information, cost and pricing information, customer and supplier lists, business plans, reference catalogs, payroll and personnel records and procedures, blue-prints, research and development files, data and laboratory books, sales order files, litigation files, minute books, stock ledgers, stock transfer records and other similar data and records;
(j) Intellectual Property;
(k) Contracts;
(l) credits, prepaid expenses, deposits and retentions held by third parties;
(m) claims, causes of action, choses in action, rights under express or implied warranties, guarantees and indemnities and similar rights, rights of recovery, rights of set-off, rights of subrogation and all other rights of any kind;
(n) Licenses; and
(o) goodwill and going concern value.
"ASSIGNING PARTY" shall have the meaning ascribed thereto in
Section 3.11.
"AUTOMATION PRODUCTS" means (a) industrial automation products, systems and software, including controllers, electrical and electronic controls, I/O (input/output) systems, drives (including electronic drives for electric motors), sensors, power devices, packaged control products, operator interface devices, computer software and hardware products, gears, gear reducers, bearings, shaft supports, shaft hangers, shaft couplings, collars, clutches, sheaves, sprockets, pulleys, elevating and conveying machinery, power transmission machinery and components thereof, network monitoring products and motors and (b) training, installation, repair, maintenance, consulting, computer programming, designing, engineering, technical support and other services for use in the field of industrial automation.
"BNA" means Boeing North American, Inc., a Delaware corporation formerly named Rockwell International Corporation, and any successor thereto.
"BOEING" means The Boeing Company, a Delaware corporation.
"BOEING POST-CLOSING COVENANTS AGREEMENT" means the Post-Closing Covenants Agreement dated as of December 6, 1996 among Rockwell, Boeing, Boeing NA, Inc. and BNA, including all amendments thereto.
"BOEING TRANSITION AGREEMENT" means the Transition Agreement dated as of December 6, 1996 by and among Rockwell, Boeing and BNA, including all amendments thereto.
"BY-LAWS" means Rockwell Collins' amended by-laws substantially in the form attached hereto as Schedule 1.01(a).
"CASH" means all cash, cash on hand, cash equivalents, funds, certificates of deposit and similar instruments held by Rockwell or any of its Subsidiaries and Affiliates (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) immediately prior to the Time of Distribution (it being understood that cash equivalents do not include intercompany cash management balances which will be eliminated as of the Time of Distribution pursuant to Section 3.04(a)).
"CERTIFICATE OF INCORPORATION" means Rockwell Collins' restated certificate of incorporation substantially in the form attached hereto as Schedule 1.01(b).
"CLAIMS ADMINISTRATION" means the processing of claims made under Policies, including the reporting of claims to the insurer, management and defense of claims, and providing for appropriate releases upon settlement of claims.
"CLAIMS MADE POLICIES" shall have the meaning ascribed thereto in
Section 3.09(b)(ii).
"CODE" means the Internal Revenue Code of 1986, as amended, or any successor legislation.
"COMMISSION" means the Securities and Exchange Commission.
"CONEXANT" means Conexant Systems, Inc., a Delaware corporation, and any successor thereto.
"CONEXANT DISTRIBUTION AGREEMENT" means the Distribution Agreement dated as of December 31, 1998 by and between Rockwell and Conexant, including all amendments thereto.
"CONEXANT TRANSITION AGREEMENT" means the Transition Agreement dated as of December 31, 1998 by and between Rockwell and Conexant, including all amendments thereto.
"CONSENTS" means consents, approvals, waivers, clearances, exemptions, allowances, novations, authorizations, filings, registrations and notifications.
"CONTINUING SERVICES AGREEMENTS" means (a) the continuing services
agreement between Rockwell Collins and Rockwell entered into on or prior to the
Distribution Date pursuant to which, among other things, Rockwell Collins will
provide Rockwell with payroll and employee benefits administration services and
(b) the continuing services agreement between Rockwell Collins and Rockwell
Science Center entered into on or prior to the Distribution Date pursuant to
which, among other things, Rockwell Collins will provide Rockwell Science Center
with payroll and employee benefits administration services.
"CONTRACTS" means all agreements, real estate and other leases, contracts, memoranda of understanding, letters of intent, sales orders, purchase orders, open bids and other commitments, including in each case, all amendments, modifications and supplements thereto and waivers and consents thereunder.
"CONVEYANCE AND ASSUMPTION INSTRUMENTS" means, collectively, the various agreements, deeds, bills of sale, stock powers, certificates of title, instruments of conveyance and assignment, instruments of assumption and other instruments and documents to be entered into to effect the transfer of Assets and Subsidiaries and the assumption of Liabilities contemplated by the transactions described in Sections 3.01(b) and 3.01(c).
"COSTA MESA OFFICE LEASE" means the lease agreement dated December 20, 1996 between Rockwell and 600 Anton Boulevard Associates under which office space located at 600 Anton Boulevard, Costa Mesa, California is leased to Rockwell.
"CURRENT AVIATION PRODUCTS LIABILITY POLICY" means the aviation products liability insurance policy with [ ], as insurer, covering Rockwell and its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), the coverage under which commenced on [ ] and terminates on [ ].
"CYPRESS ASSETS" means (i) Rockwell's Corporate Shared Services Center located at 5836 Corporate Avenue, Cypress, California, the lease agreement dated July 17, 1991 between Rockwell and IRP Muller Associates related thereto and all leasehold improvements, equipment and other tangible assets (including Rockwell's global employment management systems (GEMS) software, pension recordkeeping integrated solutions management (PRISM) software
and subsystems related to such software) located thereat and (ii) the computer servers located in Milwaukee, Wisconsin set forth on Schedule 1.01(c).
"DISPUTE" shall have the meaning ascribed thereto in Section 6.06.
"DISTRIBUTION" means the distribution, on the basis provided for in Section 2.01, to holders of Rockwell Common Stock of the shares of Rockwell Collins Common Stock owned by Rockwell on the Distribution Date.
"DISTRIBUTION AGENT" means the distribution agent selected by Rockwell to distribute Rockwell Collins Common Stock in connection with the Distribution.
"DISTRIBUTION DATE" means the date determined by the Rockwell Board as the date as of which the Distribution will be effected.
"DIVESTED BUSINESS EMPLOYEE" shall have the meaning ascribed thereto in the Employee Matters Agreement.
"EMPLOYEE MATTERS AGREEMENT" means the Employee Matters Agreement by and among Rockwell, Rockwell Collins and Rockwell Science Center, substantially in the form attached hereto as Annex A.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FORM 10" means the registration statement on Form 10 filed by Rockwell Collins with the Commission to effect the registration of the Rockwell Collins Common Stock pursuant to the Exchange Act, including all amendments thereto filed by Rockwell Collins with the Commission prior to the Time of Distribution.
"FORMER BUSINESS" means any corporation, partnership, entity, division, business unit, business, assets, plants, product line, operations or contract (including any assets and liabilities comprising the same) that has been sold, conveyed, assigned, transferred or otherwise disposed of or divested (in whole or in part) by any member of the Pre-Distribution Group or the operations, activities or production of which has been discontinued, abandoned, completed or otherwise terminated (in whole or in part) by any member of the Pre-Distribution Group.
"FORMER ROCKWELL CORPORATE EMPLOYEE" shall have the meaning ascribed thereto in the Employee Matters Agreement.
"GOVERNMENTAL ENTITY" means any government or any court, arbitral tribunal, administrative agency or commission or other governmental or regulatory authority or agency, federal, state, local, domestic, foreign or international.
"GROUP" means the Rockwell Automation Group, the Rockwell Collins Group or the Rockwell Science Center Group, as applicable.
"INDEMNIFIABLE LOSSES" means, subject to Article IV, any and all losses, Liabilities, claims, damages, deficiencies, obligations, fines, payments, Taxes, Liens, costs and expenses, matured or unmatured, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, known or unknown, whenever arising and whether or not resulting from Third Party Claims (including the costs and expenses of any and all Actions; all amounts paid in connection with any demands, assessments, judgments, settlements and compromises relating thereto; interest and penalties with respect thereto; out-of-pocket expenses and reasonable attorneys', accountants' and other experts' fees and expenses reasonably incurred in investigating, preparing for or defending against any such Actions or in asserting, preserving or enforcing an Indemnitee's rights hereunder; and any losses that may result from the granting of injunctive relief as a result of any such Actions).
"INDEMNIFYING PARTY" shall have the meaning ascribed thereto in
Section 4.05(a).
"INDEMNITEE" means any of the Rockwell Automation Indemnitees, the Rockwell Collins Indemnitees or the Rockwell Science Center Indemnitees who or which is entitled to seek indemnification under this Agreement.
"INDEMNITY REDUCTION AMOUNTS" shall have the meaning ascribed thereto in Section 4.05(a).
"INFORMATION" means all records, books, contracts, instruments, computer data and other data and information (in each case, in whatever form or medium, including electronic media).
"INFORMATION STATEMENT" means the information statement with respect to Rockwell Collins sent to the holders of Rockwell Common Stock in connection with the Distribution.
"INSURANCE PROCEEDS" means monies (a) received by an insured from an insurer, (b) paid by an insurer on behalf of an insured or (c) received from any third party in the nature of insurance, contribution or indemnification in respect of any Liability.
"INTELLECTUAL PROPERTY" means (a) inventions (whether patentable
or unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents (including utility and design patents, industrial
designs and utility models), patent applications, patent and invention
disclosures and all other rights of inventorship, worldwide, together with all
reissuances, continuations, continuations-in-part, divisions, revisions,
supplementary protection certificates, extensions and re-examinations thereof;
(b) trademarks, service marks, trade names, trade dress, logos, domain names,
business and product names and slogans and any and every other form of trade
identity and all registrations and applications for registration thereof,
worldwide; (c) copyrights in copyrightable works and all other rights of
authorship, worldwide, and all applications (including the right to file
applications), registrations and renewals in connection therewith; (d) mask
works and semiconductor chip rights, worldwide, and all applications (including
the right to file applications), registrations and renewals in connection
therewith; (e) trade secrets and confidential business and technical information
(including ideas,
research and development, know-how, formulas, technology, compositions,
manufacturing and production processes and techniques, technical data,
engineering, production and other designs, drawings, engineering notebooks,
industrial models, software and specifications and any other information meeting
the definition of a trade secret under the Uniform Trade Secrets Act); (f)
computer and electronic data processing programs and software, both source code
and object code (including data and related documentation, flow charts,
diagrams, descriptive texts and programs, computer print-outs, underlying tapes,
computer databases and similar items), computer applications and operating
programs; (g) rights to sue for and remedies against past, present and future
infringements of any or all of the foregoing and rights of priority and
protection of interests therein under the laws of any jurisdiction worldwide;
(h) all copies and tangible embodiments of any or all of the foregoing (in
whatever form or medium, including electronic media); (i) all other proprietary
and intellectual property rights and interests; and (j) all other rights
relating to any or all of the foregoing.
"IRS" means the Internal Revenue Service.
"ITL" means Innovative Technology Licensing Corporation, a
[Delaware] corporation and a wholly owned subsidiary of Rockwell Science Center.
"LIABILITIES" means any and all claims, debts, liabilities, commitments and obligations of whatever nature, whether fixed, contingent or absolute, matured or unmatured, liquidated or unliquidated, accrued or not accrued, known or unknown, due or to become due, whenever or however arising and whether or not the same would be required by generally accepted accounting principles to be reflected as a liability in financial statements or disclosed in the notes thereto, including all costs and expenses relating thereto and those claims, debts, liabilities, commitments and obligations:
(a) based upon, arising out of or relating to any law, rule, regulation, order or consent decree of any Governmental Entity or any noncompliance therewith or breach or violation of any thereof;
(b) in respect of accounts payable;
(c) in respect of outstanding checks;
(d) based upon, arising out of or relating to workers' compensation, automobile liability, general liability, product liability, intellectual property liability and other claims and matters (whether direct or for indemnification of any Person or otherwise, and whether insured or uninsured);
(e) based upon, arising out of or relating to Actions or any award of any arbitrator of any kind;
(f) in respect of salary, bonuses, incentive payments, severance payments and other compensation payments and all Taxes and withholdings related thereto;
(g) in respect of employee welfare and fringe benefits;
(h) based upon, arising out of or relating to environmental matters (including all removal, remediation and cleanup costs, investigatory costs, governmental response
costs, natural resources damages, property damages, personal injury damages and all other costs and damages);
(i) based upon, arising out of or relating to Contracts;
(j) based upon, arising out of or relating to any tort (whether based on negligence, strict liability or otherwise) or infringement; and
(k) in respect of products and services, including warranty liabilities, deferred revenues, product liability claims and liabilities in respect of the return, repair or replacement of products.
"LICENSES" means licenses, permits, authorizations, consents, certificates, registrations, variances, franchises and other approvals from any Governmental Entity, including those relating to environmental matters.
"LIEN" means any lien, security interest, pledge, mortgage, charge, restriction, claim, retention of title agreement or other encumbrance of whatever nature.
"LOS ANGELES OFFICE LEASE" means the lease agreement dated April 15, 1994 between Rockwell and Center West under which office space located at 10877 Wilshire Boulevard, Los Angeles, California is leased for the benefit of Robert Anderson.
"MERITOR" means ArvinMeritor, Inc., an Indiana corporation, successor by merger to Meritor Automotive, Inc., a Delaware corporation, and any successor thereto.
"MERITOR DISTRIBUTION AGREEMENT" means the Distribution Agreement dated as of September 30, 1997 by and between Rockwell and Meritor, including all amendments thereto.
"MERITOR TRANSITION AGREEMENT" means the Transition Agreement dated as of September 30, 1997 by and between Rockwell and Meritor, including all amendments thereto.
"METLIFE TRUST" means (a) the MetLife Demutualization Grantor Trust established by Rockwell in 2000 in connection with the demutualization of the Metropolitan Life Insurance Company and (b) all funds contained therein and rights related thereto.
"MILWAUKEE OFFICE LEASE" means the lease agreement dated March 5, 1999 between Rockwell and Firstar Bank N.A. under which office space located at 777 E. Wisconsin Avenue, Milwaukee, Wisconsin is leased to Rockwell.
"NYSE" means the New York Stock Exchange, Inc.
"OCCURRENCE BASIS POLICIES" shall have the meaning ascribed thereto in Section 3.09(b)(i).
"ORDINARY COURSE INTERCOMPANY ARRANGEMENTS" shall have the meaning ascribed thereto in Section 3.04(b)(ii).
"PERSON" means any individual, partnership, joint venture, corporation, limited liability entity, trust, unincorporated organization or other entity (including a Governmental Entity).
"PITTSBURGH OFFICE LEASE" means the lease agreement dated December 28, 1989 between Rockwell and Lincoln Liberty Avenue, Ltd. under which office space located at 625 Liberty Avenue, Pittsburgh, Pennsylvania is leased to Rockwell.
"POLICIES" means all insurance policies, insurance contracts and claim administration contracts relating to self insured claims of any kind of the Pre-Distribution Group which were or are in effect at any time at or prior to the Time of Distribution (other than insurance policies, insurance contracts and claim administration contracts established in contemplation of the Distribution to cover only members of the Rockwell Collins Group or members of the Rockwell Science Center Group from and after the Time of Distribution), including primary, excess and umbrella, commercial general liability, fiduciary liability, product liability, automobile, aircraft, property and casualty, business interruption, directors and officers liability, employment practices liability, workers' compensation, crime, errors and omissions, special accident, cargo and employee dishonesty insurance policies, bonds and captive insurance company arrangements, together with all rights, benefits and privileges thereunder.
"PRE-DISTRIBUTION GROUP" means (a) each of Rockwell, the Subsidiaries of Rockwell existing immediately prior to the Time of Distribution (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) and the former Subsidiaries of Rockwell, (b) each of the predecessors of each of the foregoing (including BNA) and (c) each of the present and former Subsidiaries and other Affiliates of each of the foregoing, and their predecessors. Notwithstanding the foregoing, BNA and Persons who are Affiliates of BNA after December 6, 1996 will not constitute members of the Pre-Distribution Group after December 6, 1996.
"PRESCRIPTION CENTER ASSETS" means Rockwell's prescription center located at 298 Blairs Ferry Road, N.E., Cedar Rapids, Iowa, the lease agreement dated April 1997 between Rockwell Collins and Lawrence R. Kelly and Dorothy A. Kelly related thereto and all leasehold improvements, equipment and other tangible assets located thereat.
"PRIVILEGED INFORMATION" means, with respect to any 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 any other Group may come into possession of or obtain access to pursuant to this Agreement or otherwise.
"PRODUCT MANUFACTURING AGREEMENT" means the agreement between Rockwell and Rockwell Collins entered into on or prior to the Distribution Date pursuant to which, among other things, Rockwell Collins will provide the Electronic Commerce business of Rockwell with product manufacturing services.
"RECIPIENT PARTY" shall have the meaning ascribed thereto in
Section 3.11.
"RECORD DATE" means the close of business on the date determined by the Rockwell Board as the record date for the Distribution.
"RECORDED AMOUNT" means, with respect to cash in U.S. and non-U.S. bank accounts, the amount on deposit in such bank accounts, as reflected on bank account statements in respect of such bank accounts, as of the Time of Distribution. The parties acknowledge that the Recorded Amount with respect to any bank account will not have deducted therefrom the amount of outstanding checks issued on such account.
"REPRESENTATIVE" means, with respect to any Person, any of such Person's directors, officers, employees, agents, consultants, advisors, accountants, attorneys and representatives.
"RIGHTS" means the Rights to be issued pursuant to the Rights Plan.
"RIGHTS PLAN" means the rights agreement entered into on or prior to the Distribution Date between Rockwell Collins and Mellon Investor Services LLC, as rights agent, substantially in the form filed as an exhibit to the Form 10.
"ROCKWELL" shall have the meaning ascribed thereto in the preamble.
"ROCKWELL AUTOMATION ASSETS" means the following:
(a) all rights of any member of the Rockwell Automation Group under any Transaction Agreement to which it is or becomes a party;
(b) all Assets which are expressly allocated to any member of the Rockwell Automation Group pursuant to any Transaction Agreement;
(c) all Assets (other than those described in paragraphs (b) and (d) of the definition of "Rockwell Collins Assets" and paragraphs (b) and (d) of the definition of "Rockwell Science Center Assets") which immediately prior to the Time of Distribution are owned by Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) and which are used primarily in or relate primarily to the Rockwell Automation Business, as the same shall exist as of such time;
(d) the following specifically enumerated Assets which immediately prior to the Time of Distribution are owned by Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), in each case whether or not such Assets are used primarily in or relate primarily to the Rockwell Automation Business, the Rockwell Collins Business or the Rockwell Science Center Business:
(i) all (A) Rockwell Automation Retained Accounts, and (B) Cash, including all cash contained in the Rockwell Automation Retained Accounts, the Rockwell Collins U.S. Bank Accounts, the Rockwell Collins Non-U.S. Bank Accounts, the Rockwell Science Center U.S. Bank Accounts and the Rockwell Science Center Non-U.S. Bank Accounts, but not including cash described in paragraph (d)(viii) of the definition of "Rockwell Collins Assets" and paragraph (d)(ii) of the definition of "Rockwell Science Center Assets";
(ii) all Securities, other than Rockwell Collins Securities and Rockwell Science Center Securities;
(iii) all Policies (including Shared Policies, but excluding the Current Aviation Products Liability Policy) and all rights, benefits and privileges thereunder and related thereto (including the right to receive any and all return premiums with respect thereto), other than the right to assert claims under Shared Policies to the extent described in Section 3.09(b);
(iv) other than as provided for in Section 3.10, all rights in, and to the use of, the names, trademarks, trade names, domain names and service marks "Rockwell", "Rockwell International", "Rockwell Automation", "Rockwell Collins", "Rockwell Science Center" and "Rockwell Scientific Company" and all corporate symbols and logos related thereto and all names, trademarks, trade names, domain names and service marks which include the words "Rockwell" or "Rockwell International";
(v) the Rockwell VEBA;
(vi) the Rockwell Good Government Committee;
(vii) the patents, patent applications, invention disclosures and registered trademarks set forth on Schedule 1.01(d);
(viii) 50% of Rockwell's ownership interest in Rockwell Science Center;
(ix) all interests in charitable trusts (including the Rockwell Charitable Trust and the Rockwell Canadian Charitable Trust) and assets thereof, subject to the provisions of Section 3.14;
(x) 32% of all assets of the MetLife Trust;
(xi) the Rockwell Property Trust;
(xii) the Rockwell Insurance Escrow Account;
(xiii) the shared facilities set forth on Schedule 1.01(e);
(xiv) the aircraft set forth on Schedule 1.01(f);
(xv) the Milwaukee Office Lease and all leasehold improvements, equipment and other assets located at or related to the office facility leased thereunder;
(xvi) the Costa Mesa Office Lease and all leasehold improvements, equipment and other assets located at or related to the office facility leased thereunder;
(xvii) the Pittsburgh Office Lease and all leasehold improvements, equipment and other assets located at or related to the office facility leased thereunder;
(xviii) all Assets based upon, arising out of or relating to the RAN Contract;
(xix) all Assets based upon, arising out of or relating to the operations of (i) the Rocky Flats plant, Golden, Colorado and (ii) the Hanford Nuclear Reservation, Hanford, Washington;
(xx) all rights to receive payments for services rendered prior to the Time of Distribution under the Boeing Transition Agreement (other than pursuant to Section 2 of the Boeing Transition Agreement), the Meritor Transition Agreement and the Conexant Transition Agreement (other than pursuant to Section 2 or 9 of the Conexant Transition Agreement);
(xxi) all rights in U.S. Patent #4,368,098 entitled "Epitaxial Composite and Method of Making", all license agreements and royalties with respect to the licensing thereof and all rights to sue and recover for and remedies against past, present and future infringements thereof (including all rights in respect of the Action Rockwell International Corporation v. United States and SDL, Inc., Civ. No. 93-542 C, U.S. Court of Federal Claims);
(xxii) all Rockwell Science Center Shared Agreements that relate to the Rockwell Automation Business and rights, benefits and privileges thereunder and all Rockwell Collins Shared Agreements and rights, benefits and privileges thereunder, except that, with respect to Shared Agreements relating to Unrelated Former Businesses, Rockwell Collins will have the rights described in paragraph (c)(i) of the definition of "Rockwell Collins Assets" and Rockwell Science Center will have the rights described in paragraph (c)(i) of the definition of "Rockwell Science Center Assets"; and
(xxiii) all rights in respect of Unrelated Former Businesses, other than (A) rights expressly allocated to Rockwell Collins pursuant to the Transaction Agreements in respect of Unrelated Former Businesses and current and former employees thereof, which shall constitute Rockwell Collins Assets, (B) rights described in paragraphs (c)(i) and (d) of the definition of "Rockwell Collins
Assets", which shall constitute Rockwell Collins Assets and (C) rights described in paragraphs (c)(i) and (d) of the definition of "Rockwell Science Center Assets", which shall constitute Rockwell Science Center Assets;
(e) all other Assets which immediately prior to the Time of Distribution are owned by Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) that are not Rockwell Collins Assets or Rockwell Science Center Assets; and
(f) all rights, choses in action, causes of action and claims of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) to the extent relating to any asset described in clauses (a) through (e) above.
Anything contained herein to the contrary notwithstanding, assets described in paragraphs (b) and (d) of the definition of "Rockwell Collins Assets" and paragraphs (b) and (d) of the definition of "Rockwell Science Center Assets" will not be included in Rockwell Automation Assets.
"ROCKWELL AUTOMATION BUSINESS" means:
(a) the Automation business engaged in prior to the Time of Distribution by the Pre-Distribution Group of researching, developing, designing, engineering, manufacturing, building, selling, distributing, installing, modifying, repairing, servicing and supporting Automation Products (marketed under such names as Rockwell Automation, Allen-Bradley, Rockwell Software, Dodge, and Reliance Electric);
(b) the Electronic Commerce business engaged in at all times prior to the Time of Distribution by the Pre-Distribution Group of researching, developing, designing, engineering, manufacturing, building, selling, distributing, installing, modifying, repairing, servicing and supporting electronic commerce products for call center systems and personalized electronic commerce applications, including automatic call distributors, computer telephony integration software, information collection, reporting, queuing and management systems, and call center systems and consulting services;
(c) Former Businesses related primarily to any of the foregoing, including Former Businesses listed on Schedule 1.01(g); and
(d) activities of the Pre-Distribution Group related to the foregoing; provided, however, that, notwithstanding anything contained herein to the contrary, the Rockwell Automation Business shall not include (i) the Rockwell Science Center Business or (ii) the Unrelated Former Businesses set forth on Schedule 1.01(h).
"ROCKWELL AUTOMATION EXPENSES" means:
(a) the following out-of-pocket costs and expenses of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), whether incurred and/or paid before, at or after the Time of Distribution:
(i) all investment banking, legal and auditing fees and
expenses incurred in connection with effecting the Distribution
(other than (A) any such fees and expenses described in paragraphs
(a), (b) and (c) of the definition of "Rockwell Collins Expenses"
or paragraph (a) of the definition of "Rockwell Science Center
Expenses" and (B) any such fees and expenses incurred in
connection with any dispute or modification after the Distribution
Date with respect to the Transaction Agreements or the
transactions contemplated thereby or any claim under Article IV);
(ii) all fees and expenses of the Distribution Agent incurred in connection with effecting the Distribution;
(iii) the initial listing fee payable to the NYSE for the initial listing of the Rockwell Collins Common Stock on the NYSE; and
(iv) all out-of-pocket costs and expenses relating to the Distribution to the extent the same relate to operations of the Rockwell Automation Business after the Time Distribution; and
(b) all other out-of-pocket costs and expenses of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) incurred through the Time of Distribution in connection with effecting the Distribution, the preparation, execution and delivery of the Transaction Agreements and the consummation of the Distribution which are not Rockwell Collins Expenses or Rockwell Science Center Expenses.
"ROCKWELL AUTOMATION GROUP" means Rockwell and the Rockwell Subsidiaries.
"ROCKWELL AUTOMATION INDEMNITEES" means each member of the Rockwell Automation Group, each of their respective Representatives and each of the heirs, executors, successors and permitted assigns of any of the foregoing.
"ROCKWELL AUTOMATION LIABILITIES" means the following:
(a) all Liabilities of any member of the Rockwell Automation Group under any Transaction Agreement to which it is or becomes a party;
(b) all Liabilities for which any member of the Rockwell Automation Group is expressly made responsible pursuant to any Transaction Agreement;
(c) all Liabilities (other than those described in paragraphs
(b) and (d) of the definition of "Rockwell Collins Liabilities" and
paragraphs (b) and (d) of the definition of "Rockwell Science Center
Liabilities") of Rockwell or any of its Subsidiaries (including members
of the Rockwell Collins Group and members of the Rockwell Science Center
Group) to the extent based upon, arising out of or relating to the
Rockwell Automation Assets or the Rockwell Automation Business,
including:
(i) all Liabilities to the extent relating to the Rockwell Automation Business based upon, arising out of or relating to Contracts (whether or not such Contracts constitute Rockwell Automation Assets) (including any primary, secondary, contingent or other obligations, such as under guaranties or indemnities, in respect of such Contracts), including Liabilities arising out of any breaches or violations and Liabilities to make payments or otherwise in connection with the termination thereof as a result of the transactions contemplated hereby or otherwise and including liabilities in respect of Shared Agreements;
provided, however, that Rockwell Automation Liabilities shall not include
(i) Rockwell Collins Liabilities described in paragraph (c)(i) of the
definition of "Rockwell Collins Liabilities" in respect of Contracts that
constitute Rockwell Automation Assets or (ii) Rockwell Science Center
Liabilities described in paragraph (c)(i) of the definition of "Rockwell
Science Center Liabilities" in respect of Contracts that constitute
Rockwell Automation Assets;
(d) the following specifically enumerated Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), in each case whether or not such Liabilities relate to the Rockwell Automation Business, the Rockwell Automation Assets, the Rockwell Collins Business, the Rockwell Collins Assets, the Rockwell Science Center Business or the Rockwell Science Center Assets:
(i) all Liabilities in respect of the RAN Contract;
(ii) all Liabilities in respect of asbestos-related claims of Former Rockwell Corporate Employees and Divested Business Employees in connection with their employment by any member of the Pre-Distribution Group;
(iii) all Liabilities in respect of the operations
of (A) the Rocky Flats plant, Golden, Colorado (including
in respect of the pending Action brought against Rockwell
by James Stone relating to alleged violations of the False
Claims Act), (B) the Hanford Nuclear Reservation, Hanford,
Washington and (C) the Santa Susana Field Laboratory
operated by Rockwell's former Rocketdyne Division (other
than, in each case, Liabilities described in paragraph
(d)(ii) of the definition of "Rockwell Collins Liabilities"
and Liabilities allocated to Rockwell Collins under the
Employee Matters Agreement, which shall constitute Rockwell
Collins Liabilities);
(iv) all Liabilities in respect of the Milwaukee
Office Lease (other than Liabilities in respect of Former
Rockwell Corporate Employees as described in paragraph
(d)(ii) of the definition of "Rockwell Collins Liabilities"
and Liabilities
allocated to Rockwell Collins under the Employee Matters Agreement, which shall constitute Rockwell Collins Liabilities);
(v) all Liabilities in respect of the Costa Mesa
Office Lease (other than Liabilities in respect of Former
Rockwell Corporate Employees as described in paragraph
(d)(ii) of the definition of "Rockwell Collins Liabilities"
and Liabilities allocated to Rockwell Collins under the
Employee Matters Agreement, which shall constitute Rockwell
Collins Liabilities);
(vi) all Liabilities in respect of the Pittsburgh
Office Lease (other than Liabilities in respect of Former
Rockwell Corporate Employees as described in paragraph
(d)(ii) of the definition of "Rockwell Collins Liabilities"
and Liabilities allocated to Rockwell Collins under the
Employee Matters Agreement, which shall constitute Rockwell
Collins Liabilities);
(vii) all Liabilities based upon, arising out of or relating to the wind tunnel donated by Rockwell to the University of California, Los Angeles, in 1998;
(viii) all Liabilities based upon, arising out of or relating to the Rockwell Debt, including all indebtedness outstanding thereunder and interest and fees payable with respect thereto; and
(ix) all Liabilities based upon, arising out of or
relating to Unrelated Former Businesses, other than (A)
Liabilities expressly allocated to Rockwell Collins
pursuant to the Transaction Agreements in respect of
Unrelated Former Businesses and current and former
employees thereof, which shall constitute Rockwell Collins
Liabilities, (B) Liabilities described in paragraphs
(c)(ii) and (d) of the definition of "Rockwell Collins
Liabilities", which shall constitute Rockwell Collins
Liabilities, and (C) Liabilities described in paragraphs
(c)(ii) and (d) of the definition of "Rockwell Science
Center Liabilities", which shall constitute Rockwell
Science Center Liabilities; and
(e) all other Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) in respect of operations engaged in prior to the Time of Distribution that are not Rockwell Collins Liabilities or Rockwell Science Center Liabilities.
Anything contained herein to the contrary notwithstanding, Liabilities described in paragraphs (b) and (d) of the definition of "Rockwell Collins Liabilities" and paragraphs (b) and (d) of the definition of "Rockwell Science Center Liabilities" will not be included in Rockwell Automation Liabilities.
"ROCKWELL AUTOMATION LICENSE AGREEMENT" shall have the
meaning ascribed thereto in Section 3.13.
"ROCKWELL AUTOMATION RETAINED ACCOUNTS" means all bank accounts of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and
members of the Rockwell Science Center Group) immediately prior to the Time of Distribution, other than Rockwell Collins U.S. Bank Accounts, Rockwell Collins Non-U.S. Bank Accounts, Rockwell Science Center U.S. Bank Accounts and Rockwell Science Center Non-U.S. Bank Accounts.
"ROCKWELL BOARD" means the Board of Directors of Rockwell or a duly authorized committee thereof.
"ROCKWELL CANADIAN CHARITABLE TRUST" means the Rockwell International Canadian Trust.
"ROCKWELL CHARITABLE TRUST" means the Rockwell International Corporation Trust.
"ROCKWELL CLIR FUND" means (a) the Rockwell Continued Life Insurance Reserve Fund and (b) all funds contained therein and rights related thereto.
"ROCKWELL COLLINS" shall have the meaning ascribed thereto in the preamble.
"ROCKWELL COLLINS ASSETS" means the following:
(a) all rights of any member of the Rockwell Collins Group under any Transaction Agreement to which it is or becomes a party;
(b) all Assets which are expressly allocated to any member of the Rockwell Collins Group pursuant to any Transaction Agreement;
(c) all Assets (other than those described in paragraphs
(b) and (d) of the definition of "Rockwell Automation Assets" and
paragraphs (b) and (d) of the definition of "Rockwell Science Center
Assets") which immediately prior to the Time of Distribution are owned by
Rockwell or any of its Subsidiaries (including members of the Rockwell
Collins Group and members of the Rockwell Science Center Group) and which
are used primarily in or relate primarily to the Rockwell Collins
Business, as the same shall exist as of such time, including:
(i) all rights in respect of Unrelated Former Businesses relating primarily to the operations of the Rockwell Collins Business which do not constitute a Rockwell Automation Asset (or a right related thereto) described in any of paragraphs (b) or (d)(i) - (xxi) of the definition of "Rockwell Automation Assets" or a Rockwell Science Center Asset (or a right related thereto) described in paragraphs (b) or (d) of the definition of "Rockwell Science Center Assets", including:
(A) rights to receive payments for services provided under Section 9 of the Conexant Transition Agreement;
(B) all rights to the extent relating primarily to the operations of the Rockwell Collins Business to receive indemnification from (x) BNA pursuant to the Boeing Post-Closing Covenants Agreement, (y) Meritor pursuant to the Meritor Distribution Agreement or (z) Conexant pursuant to the Conexant Distribution Agreement; and
(C) all rights to the extent relating primarily to the operations of the Rockwell Collins Business under Section 20 of the Boeing Transition Agreement;
(d) the following specifically enumerated Assets which immediately prior to the Time of Distribution are owned by Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), in each case whether or not such Assets are used primarily in or relate primarily to the Rockwell Automation Business, the Rockwell Collins Business or the Rockwell Science Center Business:
(i) 50% of Rockwell's ownership interest in Rockwell Science Center;
(ii) the Cypress Assets;
(iii) the Prescription Center Assets;
(iv) the Los Angeles Office Lease and all leasehold improvements, equipment and other tangible assets located at the office facility leased thereunder;
(v) the Washington Office Assets;
(vi) the Rockwell CLIR Fund;
(vii) the Rockwell Collins U.S. Bank Accounts and the Rockwell Collins Non-U.S. Bank Accounts;
(viii) (x) cash contained in Rockwell Collins U.S. Bank Accounts and Rockwell Collins Non-U.S. Bank Accounts of up to an aggregate Recorded Amount of $20 million; (y) all balances contained in petty cash accounts at non-U.S. locations of the Rockwell Collins Business; and (z) the dollar value of travelers checks at non-U.S. locations of the Rockwell Collins Business;
(ix) 65% of all assets of the MetLife Trust;
(x) the aircraft set forth on Schedule 1.01(i);
(xi) the Rockwell Collins VEBA;
(xii) the Rockwell Collins Good Government Committee;
(xiii) the patents, patent applications, invention disclosures and registered trademarks set forth on Schedule 1.01(j);
(xiv) the Rockwell Collins Securities;
(xv) the shared facilities set forth on Schedule 1.01(k); and
(xvi) the Current Aviation Products Liability Policy and all rights, benefits and privileges thereunder and related thereto, other than the right to assert claims thereunder to the extent described in Section 3.09(d);
(e) all rights, choses in action, causes of action and claims of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) to the extent relating to any asset described in clauses (a) through (d) above.
Anything contained herein to the contrary notwithstanding, assets described in paragraphs (b) and (d) of the definition of "Rockwell Automation Assets" and paragraphs (b) and (d) of the definition of "Rockwell Science Center Assets" will not be included in Rockwell Collins Assets.
"ROCKWELL COLLINS BOARD" means the Board of Directors of Rockwell Collins.
"ROCKWELL COLLINS BUSINESS" means:
(a) the Rockwell Collins business engaged in prior to the Time of Distribution by the Pre-Distribution Group of researching, developing, designing, engineering, manufacturing, building, selling, distributing, installing, modifying, repairing, servicing and supporting aviation electronics and airborne and mobile communications products and systems for commercial and military applications (marketed primarily under the name Rockwell Collins), including (i) flight deck electronic products and systems, including communications, navigation, display and automatic flight control systems, as well as in-flight entertainment and information management systems, and (ii) defense electronics products and systems, including communications, navigation and integrated systems, for airborne, ground and shipboard applications;
(b) Former Businesses related primarily to any of the foregoing, including the Former Businesses listed on Schedule 1.01(l); and
(c) activities of the Pre-Distribution Group related to the foregoing; provided, however, that, notwithstanding anything contained herein to the contrary, the Rockwell Collins Business shall not include (i) the Rockwell Science Center Business or (ii) the Unrelated Former Businesses set forth on Schedule 1.01(h).
"ROCKWELL COLLINS CHANGE IN CONTROL" means any of the following events or circumstances: (a) any person (as that term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the beneficial owner (as that term is used in Section 13(d) of the Exchange
Act, and the rules and regulations promulgated thereunder) of shares of Rockwell Collins entitled to cast more than 50% of the votes at the time entitled to be cast generally for the election of directors of Rockwell Collins; (b) more than 50% of the members of the Rockwell Collins Board shall not be Rockwell Collins Continuing Directors; or (c) Rockwell Collins shall be merged or consolidated with, or, in any transaction or series of transactions, substantially all of the business or assets of Rockwell Collins shall be sold to or otherwise acquired by, another corporation or entity and, as a result thereof, the shareowners of Rockwell Collins immediately prior thereto shall not have at least 50% or more of the combined voting power of the surviving, resulting or transferee corporation or entity immediately thereafter.
"ROCKWELL COLLINS CHARITABLE CORPORATION" means the not- for-profit charitable corporation to be established by Rockwell Collins prior to the Time of Distribution.
"ROCKWELL COLLINS COMMON STOCK" means, collectively, the Common Stock, par value $.01 per share, of Rockwell Collins and the related Rights.
"ROCKWELL COLLINS CONTINUING DIRECTOR" means any member of the Rockwell Collins Board who either (i) is a member of the Rockwell Collins Board as of the Time of Distribution or (ii) is thereafter elected to the Rockwell Collins Board, or nominated for election by shareowners, by a vote of at least a majority of the directors who are Rockwell Collins Continuing Directors at the time of such vote; provided, that an individual who is so elected or nominated in connection with a merger, consolidation, acquisition or similar transaction (but excluding the Distribution) shall not be a Rockwell Collins Continuing Director unless such individual was a Rockwell Collins Continuing Director prior thereto.
"ROCKWELL COLLINS CREDIT FACILITIES" means [list of
Rockwell Collins credit facilities to be provided].
"ROCKWELL COLLINS EXPENSES" means the following out-of-pocket costs and expenses of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), in each case, whether incurred and/or paid before, at or after the Time of Distribution:
(a) all out-of-pocket costs and expenses (including legal fees and expenses) of and related to the credit facilities established prior to the Time of Distribution for the benefit of Rockwell Collins and other members of the Rockwell Collins Group with The Chase Manhattan Bank, as agent;
(b) all out-of-pocket costs and expenses (including legal fees and expenses) of and related to the commercial paper program established prior to the Time of Distribution for the benefit of Rockwell Collins and other members of the Rockwell Collins Group;
(c) all legal fees and expenses of Buchanan Ingersoll, P.C. incurred in connection with the Distribution or matters relating thereto from and after May 1, 2001;
(d) all out-of-pocket costs and expenses of the transfer agent and registrar for the Rockwell Collins Common Stock;
(e) all out-of-pocket costs and expenses of executive search firms in connection with recruiting officers and directors of the Rockwell Collins Group to be in place at or after the Time of Distribution;
(f) all out-of-pocket costs and expenses of consultants in connection with establishing executive compensation plans for Rockwell Collins;
(g) all expenses required to be paid by Rockwell Collins pursuant to Section 3.01(c)(ix) of the Employee Matters Agreements; and
(h) all other out-of-pocket costs and expenses relating to the Distribution to the extent the same relate to operations of the Rockwell Collins Business after the Time of Distribution.
"ROCKWELL COLLINS FINANCIAL INSTRUMENTS" means all credit facilities, guaranties, foreign currency forward exchange contracts, comfort letters, letters of credit and similar instruments related solely to the Rockwell Collins Business under which any member of the Rockwell Automation Group has any primary, secondary, contingent, joint, several or other Liability, including those set forth on Schedule 1.01(m).
"ROCKWELL COLLINS GOOD GOVERNMENT COMMITTEE" means [ ], a political action committee established for Rockwell Collins in contemplation of the Distribution.
"ROCKWELL COLLINS GROUP" means Rockwell Collins and the Rockwell Collins Subsidiaries.
"ROCKWELL COLLINS INDEMNITEES" means each member of the Rockwell Collins Group, each of their respective Representatives and each of the heirs, executors, successors and permitted assigns of any of the foregoing.
"ROCKWELL COLLINS LIABILITIES" means the following:
(a) all Liabilities of any member of the Rockwell Collins Group under any Transaction Agreement to which it is or becomes a party;
(b) all Liabilities for which any member of the Rockwell Collins Group is expressly made responsible pursuant to any Transaction Agreement;
(c) all Liabilities (other than those described in paragraphs (b) and (d) of the definition of "Rockwell Automation Liabilities" and paragraphs (b) and (d) of the definition of "Rockwell Science Center Liabilities") of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) to the extent based upon, arising out of or relating to the Rockwell Collins Assets or the Rockwell Collins Business, including:
(i) all Liabilities to the extent relating to the Rockwell Collins Business based upon, arising out of or relating to Contracts (whether or not such Contracts constitute Rockwell Collins Assets) (including any primary, secondary, contingent or other obligations, such as under guaranties or indemnities, in respect of such Contracts), including Liabilities arising out of any breaches or violations and Liabilities to make payments or otherwise in connection with the termination thereof as a result of the transactions contemplated hereby or otherwise and including Liabilities in respect of Shared Agreements; and
(ii) all Liabilities based upon, arising out of or
relating to Unrelated Former Businesses to the extent
relating to the operations of the Rockwell Collins Business
which do not constitute a Rockwell Automation Liability
described in any of paragraphs (b) or (d)(i) - (viii) of
the definition of "Rockwell Automation Liabilities",
including (A) all performance and other Liabilities
relating to the services required to be provided under
Section 9 of the Conexant Transition Agreement; and (B) all
Liabilities to the extent relating to the operations of the
Rockwell Collins Business to indemnify (x) BNA and certain
other Persons pursuant to the Boeing Post-Closing Covenants
Agreement, (y) Meritor and certain other Persons pursuant
to the Meritor Distribution Agreement or (z) Conexant and
certain other Persons pursuant to the Conexant Distribution
Agreement;
provided, however, that Rockwell Collins Liabilities shall not
include (i) Rockwell Automation Liabilities described in paragraph
(c)(i) of the definition of "Rockwell Automation Liabilities" in
respect of Contracts that constitute Rockwell Collins Assets or
(ii) Rockwell Science Center Liabilities described in paragraph
(c)(i) of the definition of "Rockwell Science Center Liabilities"
in respect of Contracts that constitute Rockwell Collins Assets;
and
(d) the following specifically enumerated Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), in each case whether or not such Liabilities relate to the Rockwell Automation Business, the Rockwell Automation Assets, the Rockwell Collins Business, the Rockwell Collins Assets, the Rockwell Science Center Business or the Rockwell Science Center Assets:
(i) all Liabilities based upon, arising out of or relating to the Actions set forth on Schedule 1.01(n);
(ii) except as provided in paragraph
(d)(ii) of the definition of "Rockwell Automation
Liabilities", all Liabilities based upon, arising out of or
relating to the employment of Former Rockwell Corporate
Employees and Divested Business Employees by any member of
the Pre-Distribution Group, including all Liabilities based
upon, arising out of or relating to (A) claims of Former
Rockwell Corporate Employees and Divested Business
Employees in respect of their employment (or termination of
employment) with any member of the Pre-Distribution Group;
(B) relocation, severance and other amounts payable to
Former Rockwell Corporate Employees and Divested Business
Employees after the Time of Distribution; (C) providing
office, secretarial, telecommunications and other support
services to Donald R. Beall from and after the Time of
Distribution, including any monthly stipend paid to Mr.
Beall for the payment of such services; and (D) providing
office, secretarial, telecommunications and other support
services to Robert Anderson from and after the Time of
Distribution, including all Liabilities in respect of the
Los Angeles Office Lease (and any replacement thereof);
(iii) all Liabilities based upon, arising out of or relating to workers' compensation claims of Rockwell Collins Participants (as defined in the Employee Matters Agreement);
(iv) all Liabilities based upon, arising out of or relating to the Rockwell CLIR Fund;
(v) all Liabilities based upon, arising out of or relating to the Cypress Assets or the operations thereof (it being understood that Liabilities in respect of employees of the Rockwell Automation Business engaged in payroll and benefits consolidation activities shall constitute Rockwell Automation Liabilities);
(vi) all Liabilities based upon, arising out of or relating to the Prescription Center Assets or the operations thereof;
(vii) all Liabilities based upon, arising out of or relating to the Washington Office Assets or the operations thereof;
(viii) all Liabilities based upon, arising out of or relating to claims in respect of the demutualization of the Metropolitan Life Insurance Company;
(ix) all Liabilities based upon, arising out of or relating to the Rockwell Collins VEBA;
(x) all Liabilities based upon, arising out of or relating to the Rockwell Collins Good Government Committee;
(xi) all Liabilities based upon, arising out of or relating to the Rockwell Collins Credit Facilities, including all indebtedness outstanding thereunder and interest and fees payable with respect thereto;
(xii) all Liabilities in respect of commitments of the Rockwell Collins Charitable Corporation to be assumed pursuant to Section 3.14; and
(xiii) all Liabilities based upon, arising out of or relating to corporate office overhead claims filed by Rockwell with the U.S. Department of Defense prior to the Time of Distribution, including all Liabilities in respect of any adjustments thereto (other than any such Liabilities that would have been allocated to Rockwell Science Center in accordance with government contract cost allocation practices of Rockwell in effect immediately prior to the Time of Distribution, which shall constitute Rockwell Science Center Liabilities).
Anything contained herein to the contrary notwithstanding, Liabilities described in paragraphs (b) and (d) of the definition of "Rockwell Automation Liabilities" and paragraphs (b) and (d) of the definition of "Rockwell Science Center Liabilities" will not be included in Rockwell Collins Liabilities.
"ROCKWELL COLLINS MARKS" shall have the meaning ascribed thereto in Section 3.10(b)(i).
"ROCKWELL COLLINS NON-U.S. BANK ACCOUNTS" means all bank
accounts set forth on Schedule 1.01(o).
"ROCKWELL COLLINS SECURITIES" means the Securities set forth on Schedule 1.01(x).
"ROCKWELL COLLINS SHARED AGREEMENTS" means all Contracts under which Rockwell or any Rockwell Subsidiary has any rights or primary, secondary, contingent, joint, several or other Liability arising out of or relating to both (i) the Rockwell Collins Business and (ii) one or more other businesses of Rockwell or any Rockwell Subsidiary (other than the Rockwell Science Center Business), which by their terms will be outstanding or in effect as of or at any time following the Time of Distribution; provided, however, that Rockwell Collins Shared Agreements shall not include any Contract assigned by any member of the Rockwell Automation Group to any member of the Rockwell Collins Group prior to the Time of Distribution and under which no member of the Rockwell Automation Group will make purchases after the Time of Distribution (it being understood that any such Contracts will constitute Rockwell Collins Assets).
"ROCKWELL COLLINS SUBSIDIARY" means each Person listed on Schedule 1.01(p).
"ROCKWELL COLLINS U.S. BANK ACCOUNTS" means all bank
accounts set forth on Schedule 1.01(q).
"ROCKWELL COLLINS VEBA" means (a) [name of trust] and (b) all funds contained therein and rights related thereto.
"ROCKWELL COMMON STOCK" means the Common Stock, par value $1.00 per share, of Rockwell.
"ROCKWELL DEBT" means all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) based upon, arising out of or relating to:
(a) the 6.8% Notes of Reliance Electric Company due April 15, 2003;
(b) the 6.15% Notes of Rockwell due January 15, 2008;
(c) the 6.70% Debentures of Rockwell due January 15, 2028;
(d) the 5.20% Debentures of Rockwell due January 15, 2098;
(e) the Reliance Electric Company Athens-Clarke County Industrial Development Authority Revenue Bonds Series 1977;
(f) the commercial paper borrowings of Rockwell;
(g) the Amended and Restated Credit Agreement dated December 3, 1997 among Rockwell, the banks parties thereto and Morgan Guaranty Trust Company of New York, as agent, and any borrowings thereunder; and
(h) [add Rockwell Automation overseas credit facilities.]
"ROCKWELL GOOD GOVERNMENT COMMITTEE" means the Rockwell International Corporation Good Government Committee, a political action committee (Federal Elections Commission I.D. No. C00324996), and all funds held thereby.
"ROCKWELL INSURANCE ESCROW ACCOUNT" means (a) the escrow account established by Rockwell prior to the Time of Distribution with Travelers Insurance Company relating to the processing of the deductible portion of certain workers' compensation and automobile liability losses and the self-insured retention portion of certain commercial general liability losses and (b) all funds contained therein and rights related thereto.
"ROCKWELL PROPERTY TRUST" means (a) the Master Rockwell Property Exchange Trust established by Rockwell prior to the Time of Distribution to receive proceeds from the sale of certain real property and to disburse trust assets for the purpose of acquiring certain real property and (b) all funds contained therein and rights related thereto.
"ROCKWELL SCIENCE CENTER" shall have the meaning ascribed thereto in the preamble.
"ROCKWELL SCIENCE CENTER AGENCY LICENSING AGREEMENTS" means
(a) the Agency Licensing Agreement between Advanced Technologies Licensing
Corporation, a Rockwell Science Center Subsidiary, and Rockwell entered into on
or prior to the date hereof and (b) the Agency Licensing Agreement between
Advanced Technologies Corporation, a Rockwell Science Center Subsidiary, and
Rockwell Collins entered into on or prior to the date hereof.
"ROCKWELL SCIENCE CENTER ASSETS" means the following:
(a) all rights of any member of the Rockwell Science Center Group under any Transaction Agreement to which it is or becomes a party;
(b) all Assets which are expressly allocated to any member of the Rockwell Science Center Group pursuant to any Transaction Agreement;
(c) all Assets (other than those described in paragraphs
(b) and (d) of the definition of "Rockwell Automation Assets" and
paragraphs (b) and (d) of the definition of "Rockwell Collins Assets")
which immediately prior to the Time of Distribution are owned by Rockwell
or any of its Subsidiaries (including members of the Rockwell Collins
Group and members of the Rockwell Science Center Group) and which are
used
primarily in or relate primarily to the Rockwell Science Center Business, as the same shall exist as of such time, including:
(i) all rights in respect of Unrelated Former Businesses relating primarily to the operations of the Rockwell Science Center Business and which do not constitute a Rockwell Automation Asset described in any of paragraphs (b) or (d)(i) - (xxi) of the definition of "Rockwell Automation Assets" or a Rockwell Collins Asset described in any of paragraphs (b) or (d) of the definition of "Rockwell Collins Assets", including:
(A) rights to receive payments for services provided under Section 2 of the Boeing Transition Agreement and under Section 2 of the Conexant Transition Agreement;
(B) all rights to the extent relating primarily to the operations of the Rockwell Science Center Business to receive indemnification from (x) BNA pursuant to the Boeing Post-Closing Covenants Agreement, (y) Meritor pursuant to the Meritor Distribution Agreement or (z) Conexant pursuant to the Conexant Distribution Agreement; and
(C) all rights to the extent relating primarily to the operations of the Rockwell Science Center Business under Section 20 of the Boeing Transition Agreement;
(d) the following specifically enumerated Assets which immediately prior to the Time of Distribution are owned by Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), in each case whether or not such Assets are used primarily in or relate primarily to the Rockwell Automation Business, the Rockwell Collins Business or the Rockwell Science Center Business:
(i) the Rockwell Science Center U.S. Bank Accounts and the Rockwell Science Center Non-U.S. Bank Accounts;
(ii) (A) cash contained in Rockwell Science Center U.S. Bank Accounts and Rockwell Science Center Non-U.S. Bank Accounts of up to an aggregate Recorded Amount of $2 million; (B) all balances contained in petty cash accounts at non-U.S. locations of the Rockwell Science Center Business; and (C) the dollar value of travelers checks at non-U.S. locations of the Rockwell Science Center Business;
(iii) the Rockwell Science Center Securities;
(iv) the patents, patent applications, invention disclosures and registered trademarks set forth on Schedule 1.01(r); and
(v) 3% of all assets of the MetLife Trust; and
(e) all rights, choses in action, causes of action and claims of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) to the extent relating to any asset described in clauses (a) through (d) above.
Anything contained herein to the contrary notwithstanding, assets described in paragraphs (b) and (d) of the definition of "Rockwell Automation Assets" and paragraphs (b) and (d) of the definition of "Rockwell Collins Assets" will not be included in Rockwell Science Center Assets.
"ROCKWELL SCIENCE CENTER BOARD" means the Board of Directors of Rockwell Science Center.
"ROCKWELL SCIENCE CENTER BUSINESS" means:
(a) the business engaged in prior to the Time of Distribution by the Rockwell Science Center Group of researching, developing, designing, engineering, manufacturing, selling, licensing, servicing and supporting technologies in electronics, imaging and optics, material and computational sciences and information technologies;
(b) Former Businesses related primarily to any of the foregoing; and
(c) activities of the Rockwell Science Center Group related to the foregoing; provided, however, that, notwithstanding anything contained herein to the contrary, the Rockwell Science Center Business shall not include (i) the Rockwell Automation Business, (ii) the Rockwell Collins Business or (iii) the Unrelated Former Businesses set forth on Schedule 1.01(h).
"ROCKWELL SCIENCE CENTER CREDIT FACILITIES" means [list of
Rockwell Science Center Credit Facilities, if any, to be provided].
"ROCKWELL SCIENCE CENTER EXPENSES" means the following out-of-pocket costs and expenses of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) (in each case, whether incurred and/or paid before, at or after the Time of Distribution):
(a) all out-of-pocket costs and expenses (including legal fees and expenses) of and related to the credit facilities established prior to the Time of Distribution for the benefit of Rockwell Science Center and other members of the Rockwell Science Center Group with [ ], as agent; and
(b) all other out-of-pocket costs and expenses related to the Distribution to the extent the same relate to operations of the Rockwell Science Center Business after the Time of Distribution.
"ROCKWELL SCIENCE CENTER FINANCIAL INSTRUMENTS" means all credit facilities, guaranties, foreign currency forward exchange contracts, comfort letters, letters of credit and similar instruments related solely to the Rockwell Science Center Business under which any member of the Rockwell Automation Group or the Rockwell Collins Group has any primary, secondary, contingent, joint, several or other Liability, including those set forth on Schedule 1.01(s).
"ROCKWELL SCIENCE CENTER GROUP" means Rockwell Science Center and the Rockwell Science Center Subsidiaries.
"ROCKWELL SCIENCE CENTER INDEMNITEES" means each member of the Rockwell Science Center Group, each of their respective Representatives and each of the heirs, executors, successors and permitted assigns of any of the foregoing.
"ROCKWELL SCIENCE CENTER LIABILITIES" means the following:
(a) all Liabilities of any member of the Rockwell Science Center Group under any Transaction Agreement to which it is or becomes a party;
(b) all Liabilities for which any member of the Rockwell Science Center Group is expressly made responsible pursuant to any Transaction Agreement;
(c) all Liabilities (other than those described in paragraphs
(b) and (d) of the definition of "Rockwell Automation Liabilities" and
paragraphs (b) and (d) of the definition of "Rockwell Collins
Liabilities") of Rockwell or any of its Subsidiaries (including members
of the Rockwell Collins Group and members of the Rockwell Science Center
Group) to the extent based upon, arising out of or relating to the
Rockwell Science Center Assets or the Rockwell Science Center Business,
including:
(i) all Liabilities to the extent relating to the Rockwell Science Center Business based upon, arising out of or relating to Contracts (whether or not such Contracts constitute Rockwell Science Center Assets) (including any primary, secondary, contingent or other obligations, such as under guaranties or indemnities, in respect of such Contracts), including Liabilities arising out of any breaches or violations and Liabilities to make payments or otherwise in connection with the termination thereof as a result of the transactions contemplated hereby or otherwise and including Liabilities in respect of Shared Agreements; and
(ii) all Liabilities based upon, arising out of or relating to Unrelated Former Businesses to the extent relating to the operations of the Rockwell Science Center Business which do not constitute a Rockwell Automation Liability described in any of paragraphs (b) or (d)(i) - (viii) of the definition of "Rockwell Automation Liabilities" or a Rockwell Collins Liability described in any of paragraphs (b) or (d) of the definition of "Rockwell Collins Liabilities", including (A) all performance and other Liabilities relating to the services required to be
provided under Section 2 of the Boeing Transition Agreement and
Section 2 of the Conexant Transition Agreement; and (B) all
Liabilities to the extent relating to the operations of the
Rockwell Science Center Business to indemnify (x) BNA and certain
other Persons pursuant to the Boeing Post-Closing Covenants
Agreement, (y) Meritor and certain other Persons pursuant to the
Meritor Distribution Agreement or (z) Conexant and certain other
Persons pursuant to the Conexant Distribution Agreement;
provided, however, that Rockwell Science Center Liabilities shall not include (i) Rockwell Automation Liabilities described in paragraph (c)(i) of the definition of "Rockwell Automation Liabilities" in respect of Contracts that constitute Rockwell Science Center Assets or (ii) Rockwell Collins Liabilities described in paragraph (c)(i) of the definition of "Rockwell Collins Liabilities" in respect of Contracts that constitute Rockwell Science Center Assets; and
(d) (i) all Liabilities based upon, arising out of or relating to the Actions set forth on Schedule 1.01(t);
(ii) all Liabilities based upon, arising out of or relating to the Rockwell Science Center Credit Facilities, including all indebtedness outstanding thereunder and interest and fees payable with respect thereto; and
(iii) all Liabilities based upon, arising out of or relating to corporate office overhead claims filed by Rockwell with the U.S. Department of Defense prior to the Time of Distribution, including all Liabilities in respect of any adjustments thereto, which would have been allocated to Rockwell Science Center in accordance with government contract cost allocation practices of Rockwell in effect immediately prior to the Time of Distribution.
Anything contained herein to the contrary notwithstanding, Liabilities described in paragraphs (b) and (d) of the definition of "Rockwell Automation Liabilities" and paragraphs (b) and (d) of the definition of "Rockwell Collins Liabilities" will not be included in Rockwell Science Center Liabilities.
"ROCKWELL SCIENCE CENTER MARKS" shall have the meaning ascribed thereto in Section 3.10(c)(i).
"ROCKWELL SCIENCE CENTER NON-U.S. BANK ACCOUNTS" means the bank
accounts set forth on Schedule 1.01(u).
"ROCKWELL SCIENCE CENTER SECURITIES" means the Securities set forth on Schedule 1.01(y).
"ROCKWELL SCIENCE CENTER SERVICES AGREEMENTS" means (a) the agreement between Rockwell Science Center and Rockwell entered into on or prior to the Distribution Date pursuant to which, among other things, Rockwell Science Center will provide Rockwell with research and development services and (b) the agreement between Rockwell Science Center and
Rockwell Collins entered into on or prior to the Distribution Date pursuant to which, among other things, Rockwell Science Center will provide Rockwell Collins with research and development services.
"ROCKWELL SCIENCE CENTER SHARED AGREEMENTS" means all Contracts under which Rockwell or any Rockwell Subsidiary and/or Rockwell Collins or any Rockwell Collins Subsidiary has any rights or primary, secondary, contingent, joint, several or other Liability arising out of or relating to both (i) the Rockwell Science Center Business and (ii) one or more other businesses of Rockwell or any Rockwell Subsidiary and/or one or more other businesses of Rockwell Collins or any Rockwell Collins Subsidiary, which by their terms will be outstanding or in effect as of or at any time following the Time of Distribution.
"ROCKWELL SCIENCE CENTER SUBSIDIARY" means each Person listed on Schedule 1.01(v).
"ROCKWELL SCIENCE CENTER U.S. BANK ACCOUNTS" means all bank
accounts set forth on Schedule 1.01(w).
"ROCKWELL SUBSIDIARY" means each Subsidiary of Rockwell other than Rockwell Collins, the Rockwell Collins Subsidiaries, Rockwell Science Center and the Rockwell Science Center Subsidiaries.
"ROCKWELL VEBA" means (a) the Trust for Employee Welfare Benefit Programs of Rockwell International Corporation and (b) all funds contained therein and rights related thereto.
"SECURITIES" means all short-term and long-term investments, banker's acceptances, shares of stock, notes, bonds, debentures, evidences of indebtedness, certificates of interest or participation in profit-sharing agreements, collateral-trust certificates, preorganization certificates or subscriptions, transferable shares, puts, calls, straddles, options, investment contracts, voting-trusts and certificates and other securities of any kind (other than ownership interests in Subsidiaries, Rockwell Science Center and joint ventures).
"SHARED AGREEMENTS" means Rockwell Collins Shared Agreements and Rockwell Science Center Shared Agreements.
"SHARED POLICIES" means (a) in the case of Rockwell Collins, all Policies (other than the Current Aviation Products Liability Policy) which include Rockwell Collins, any of the Rockwell Collins Subsidiaries and/or the Rockwell Collins Business within the definition of the named insured and (b) in the case of Rockwell Science Center, all Policies (other than the Current Aviation Products Liability Policy) which include Rockwell Science Center, any of the Rockwell Science Center Subsidiaries and/or the Rockwell Science Center Business within the definition of the named insured.
"STRATEGIC SOURCING AGREEMENTS" means Shared Agreements (other than those which do not relate to the Rockwell Automation Business) that are strategic sourcing or similar agreements under which members of two or more Groups purchased or had rights to purchase
any products or services prior to the Time of Distribution, as such Shared Agreements exist as of the Time of Distribution.
"SUBSIDIARY" means, with respect to any Person, any corporation or other organization, whether incorporated or unincorporated, of which such Person or any Subsidiaries of such Person controls or owns, directly or indirectly, more than 50% of the stock or other equity interest, or more than 50% of the voting power entitled to vote on the election of members to the board of directors or similar governing body; provided, however, that for purposes of this Agreement none of Rockwell Collins, the Rockwell Collins Subsidiaries, Rockwell Science Center or the Rockwell Science Center Subsidiaries shall be deemed to be a Rockwell Subsidiary.
"TAX" shall have the meaning ascribed thereto in the Tax Allocation Agreement.
"TAX ALLOCATION AGREEMENT" means the Tax Allocation Agreement by and among Rockwell, Rockwell Collins and Rockwell Science Center, substantially in the form attached hereto as Annex B.
"TAX RULING" means a private letter ruling issued by the IRS in form and substance satisfactory to Rockwell (in its sole discretion) indicating that the Distribution will qualify as a tax-free spin-off to the shareowners of Rockwell for federal income tax purposes under Section 368(a)(1)(D) of the Code.
"THIRD PARTY CLAIM" shall have the meaning ascribed thereto in
Section 4.06(a).
"TIME OF DISTRIBUTION" means the close of business on the Distribution Date.
"TRANSACTION AGREEMENTS" means, collectively, this Agreement and each Ancillary Agreement.
"TRANSITION AGREEMENT" means the transition services agreement by and among Rockwell, Rockwell Collins and Rockwell Science Center entered into on or prior to the Distribution Date and providing for various service and other relationships among Rockwell, Rockwell Collins and Rockwell Science Center following the Distribution Date.
"TRANSITION PERIOD" shall have the meaning ascribed thereto in
Section 3.12(g)(i)(C).
"UNRELATED FORMER BUSINESSES" means all Former Businesses not included in the Rockwell Automation Business, the Rockwell Collins Business or the Rockwell Science Center Business. Notwithstanding anything to the contrary contained herein, Unrelated Former Businesses shall include the Former Businesses set forth on Schedule 1.01(h).
"WASHINGTON OFFICE ASSETS" means Rockwell's office facility located at 1300 Wilson Boulevard, Arlington, Virginia, the lease agreement dated December 31, 1997 between Rockwell and US Property Fund GmbH & Co. related thereto and all leasehold improvements, equipment and other tangible assets located thereat.
ARTICLE II
THE DISTRIBUTION
SECTION 2.01 The Distribution.
(a) Subject to Section 2.03, on or prior to the Distribution Date, Rockwell will deliver to the Distribution Agent, for the benefit of holders of record of Rockwell Common Stock as of the Record Date, a certificate or certificates, endorsed by Rockwell in blank, representing, in the aggregate, a number of shares of Rockwell Collins Common Stock equal to the number of shares of Rockwell Common Stock issued and outstanding as of the Record Date (excluding treasury shares held by Rockwell), and Rockwell will instruct the Distribution Agent to make book-entry credits on the Distribution Date or as soon thereafter as practicable for each holder of record of Rockwell Common Stock as of the Record Date, or the designated transferee or transferees of such holder, for a number of shares of Rockwell Collins Common Stock equal to the number of shares of Rockwell Common Stock so held by such holder of record as of the Record Date (excluding treasury shares held by Rockwell). The Distribution will be effective as of the Time of Distribution.
(b) Rockwell and Rockwell Collins will each provide to the Distribution Agent all information (including information necessary to make appropriate book-entry credits) and share certificates, in each case, as may be required in order to complete the Distribution on the basis of one share of Rockwell Collins Common Stock for each share of Rockwell Common Stock issued and outstanding as of the Record Date (excluding treasury shares held by Rockwell).
SECTION 2.02 Cooperation Prior to the Distribution. Prior to the Distribution:
(a) Rockwell and Rockwell Collins will prepare the Information Statement, which will set forth appropriate disclosure concerning Rockwell Collins, the Distribution and such other matters as Rockwell and Rockwell Collins may determine. Rockwell and Rockwell Collins will prepare, and Rockwell Collins will file with the Commission, the Form 10, which will include or incorporate by reference the Information Statement. Rockwell Collins will use its reasonable best efforts to cause the Form 10 to become effective under the Exchange Act as soon as practicable following the filing thereof. Promptly after effectiveness of the Form 10 and completion of the Information Statement included therein, Rockwell will mail to the holders of Rockwell Common Stock the Information Statement.
(b) Rockwell and Rockwell Collins will cooperate in preparing, filing with the Commission and causing to become effective any registration statements or amendments thereof which are required to reflect the establishment of, or amendments to, any employee benefit and other plans contemplated by the Employee Matters Agreement.
(c) Rockwell and Rockwell Collins will take all such action as may be necessary or appropriate under the securities or "blue sky" laws of the states or other political subdivisions of the United States and the securities laws of any applicable foreign countries or
other political subdivisions thereof in connection with the transactions contemplated by this Agreement.
(d) Rockwell and Rockwell Collins will cause to be prepared, and Rockwell Collins will file and use its reasonable best efforts to have approved, an application for the listing on the NYSE of the Rockwell Collins Common Stock to be distributed in the Distribution.
SECTION 2.03 Rockwell Board Action; Conditions to the Distribution. The Rockwell Board will in its discretion establish the Record Date and the Distribution Date and all appropriate procedures in connection with the Distribution, but in no event will the Distribution occur prior to such time as each of the following conditions shall have been satisfied or shall have been waived by the Rockwell Board in accordance with Section 2.04:
(a) Rockwell shall have received the Tax Ruling and the Tax Ruling shall be in full force and effect and shall not have been modified or amended in any respect adversely affecting the tax consequences set forth therein;
(b) the Rockwell Board shall have given final approval of the Distribution;
(c) all material Consents which are required to effect the Distribution shall have been obtained and shall be in full force and effect;
(d) the Form 10 shall have become effective under the Exchange Act;
(e) the Certificate of Incorporation, the By-Laws and the Rights Plan each shall have been adopted and be in effect;
(f) the Rockwell Collins Common Stock shall have been approved for listing upon notice of issuance on the NYSE;
(g) the transactions contemplated by Section 3.01 and
Section 3.02 shall have been consummated in all material respects;
(h) Rockwell, Rockwell Collins and Rockwell Science Center shall have entered into each of the Ancillary Agreements to which they are parties and each such agreement shall be in full force and effect;
(i) no order, injunction or decree issued by any court of competent jurisdiction or other legal restraint or prohibition preventing consummation of the Distribution shall be in effect; and
(j) no suit, action or proceeding by or before any court of competent jurisdiction or other Governmental Entity shall have been commenced and be pending to restrain or challenge the Distribution, and no inquiry shall have been received that in the reasonable judgment of the Rockwell Board may lead to such a suit, action or proceeding;
provided that the satisfaction of such conditions will not create any obligation
on the part of Rockwell to effect or seek to effect the Distribution or in any
way limit Rockwell's right to terminate this Agreement set forth in Section 6.14
or alter the consequences of any such termination from those specified in
Section 6.14.
SECTION 2.04 Waiver of Conditions. Any or all of the conditions set forth in Section 2.03 may be waived, in whole or in part, in the sole discretion of the Rockwell Board.
SECTION 2.05 Disclosure. If at any time after the date hereof any of the parties shall become aware of any circumstances that will or could reasonably be expected to prevent any or all of the conditions contained in Section 2.03 from being satisfied, it will promptly give to the other parties written notice of those circumstances.
ARTICLE III
TRANSACTIONS RELATING TO THE DISTRIBUTION
SECTION 3.01 Intercorporate Reorganization.
(a) Prior to the Distribution Date, Rockwell and Rockwell Collins will take all actions necessary to increase the outstanding shares of Rockwell Collins Common Stock so that, immediately prior to the Distribution, Rockwell will hold a number of shares of Rockwell Collins Common Stock equal to the number of shares of Rockwell Common Stock issued and outstanding as of the Record Date (excluding treasury shares held by Rockwell).
(b) Subject to Section 3.11, prior to the Time of
Distribution, Rockwell, Rockwell Collins and Rockwell Science Center will take,
or cause to be taken, all actions necessary, including the actions specified in
Section 3.01(c), to have:
(i) Rockwell, each Rockwell Subsidiary, Rockwell Science Center and each Rockwell Science Center Subsidiary assign and transfer, or cause to be assigned and transferred, to Rockwell Collins or a Rockwell Collins Subsidiary, as appropriate, any and all right, title and interest of Rockwell, each of the Rockwell Subsidiaries, Rockwell Science Center and each of the Rockwell Science Center Subsidiaries in the Rockwell Collins Subsidiaries;
(ii) Rockwell, each Rockwell Subsidiary, Rockwell Collins and each Rockwell Collins Subsidiary assign and transfer, or cause to be assigned and transferred, to Rockwell Science Center or a Rockwell Science Center Subsidiary, as appropriate, any and all right, title and interest of Rockwell, each of the Rockwell Subsidiaries, Rockwell Collins and each of the Rockwell Collins Subsidiaries in the Rockwell Science Center Subsidiaries;
(iii) Rockwell Collins, each Rockwell Collins Subsidiary, Rockwell Science Center and each Rockwell Science Center Subsidiary assign and transfer, or cause to be assigned and transferred, to Rockwell or a Rockwell Subsidiary, as appropriate, any and
all right, title and interest of Rockwell Collins, each of the Rockwell Collins Subsidiaries, Rockwell Science Center and each of the Rockwell Science Center Subsidiaries in the Rockwell Subsidiaries;
(iv) Rockwell, each Rockwell Subsidiary, Rockwell Science Center and each Rockwell Science Center Subsidiary assign and transfer, or cause to be assigned and transferred, to Rockwell Collins or a Rockwell Collins Subsidiary, as appropriate, any and all right, title and interest of Rockwell, each of the Rockwell Subsidiaries, Rockwell Science Center and each of the Rockwell Science Center Subsidiaries in Rockwell Collins Assets;
(v) Rockwell, each Rockwell Subsidiary, Rockwell Collins and each Rockwell Collins Subsidiary assign and transfer, or cause to be assigned and transferred, to Rockwell Science Center or a Rockwell Science Center Subsidiary, as appropriate, any and all right, title and interest of Rockwell, each of the Rockwell Subsidiaries, Rockwell Collins and each of the Rockwell Collins Subsidiaries in Rockwell Science Center Assets;
(vi) Rockwell Collins, each Rockwell Collins Subsidiary, Rockwell Science Center and each Rockwell Science Center Subsidiary assign and transfer, or cause to be assigned and transferred, to Rockwell or a Rockwell Subsidiary, as appropriate, any and all right, title and interest of Rockwell Collins, each of the Rockwell Collins Subsidiaries, Rockwell Science Center and each of the Rockwell Science Center Subsidiaries in Rockwell Automation Assets;
(vii) Rockwell, each Rockwell Subsidiary, Rockwell Science Center and each Rockwell Science Center Subsidiary assign and transfer, or cause to be assigned and transferred, to Rockwell Collins or a Rockwell Collins Subsidiary, as appropriate, and have Rockwell Collins or a Rockwell Collins Subsidiary, as appropriate, unconditionally assume and undertake to pay, perform and discharge, in a timely manner and in accordance with the terms thereof, all Liabilities of Rockwell, the Rockwell Subsidiaries, Rockwell Science Center and the Rockwell Science Center Subsidiaries that are Rockwell Collins Liabilities;
(viii) Rockwell, each Rockwell Subsidiary, Rockwell Collins and each Rockwell Collins Subsidiary assign and transfer, or cause to be assigned and transferred, to Rockwell Science Center or a Rockwell Science Center Subsidiary, as appropriate, and have Rockwell Science Center or a Rockwell Science Center Subsidiary, as appropriate, unconditionally assume and undertake to pay, perform and discharge, in a timely manner and in accordance with the terms thereof, all Liabilities of Rockwell, the Rockwell Subsidiaries, Rockwell Collins and the Rockwell Collins Subsidiaries that are Rockwell Science Center Liabilities; and
(ix) Rockwell Collins, each Rockwell Collins Subsidiary, Rockwell Science Center and each Rockwell Science Center Subsidiary assign and transfer, or cause to be assigned and transferred, to Rockwell or a Rockwell Subsidiary, as appropriate, and have
Rockwell or a Rockwell Subsidiary, as appropriate, unconditionally assume and undertake to pay, perform and discharge, in a timely manner and in accordance with the terms thereof, all Liabilities of Rockwell Collins, the Rockwell Collins Subsidiaries, Rockwell Science Center and the Rockwell Science Center Subsidiaries that are Rockwell Automation Liabilities.
In the event that at any time or from time to time (whether prior to, at or after the Time of Distribution) any party (or any member of such party's respective Group) shall receive or otherwise possess any Asset that is allocated to any other Person pursuant to this Agreement or any Ancillary Agreement, such party will promptly transfer, or cause to be transferred, such Asset to the Person so entitled thereto. Prior to any such transfer, the Person receiving or possessing such Asset will hold such Asset in trust for the benefit of the Person entitled thereto (at the expense of the Person entitled thereto).
In the event that at any time or from time to time (whether prior to, at or after the Time of Distribution) any party determines that any other party (or any member of such other party's respective Group) shall not have unconditionally assumed any Liabilities that are allocated to such other party (or a member of such other party's respective Group) pursuant to this Agreement or any Ancillary Agreement, such other party will promptly execute and deliver, or cause to be executed and delivered, all such documents and instruments and will take, or cause to be taken, all such actions as the requesting party may reasonably request to unconditionally assume, or cause to be unconditionally assumed, such Liabilities.
(c) Subject to Section 3.11, Rockwell, Rockwell Collins and Rockwell Science Center will take, or cause to be taken, the actions described on Schedule 3.01(c) in connection with United States and international operations of the Rockwell Collins Business, the Rockwell Automation Business and the Rockwell Science Center Business.
(d) In connection with the transfers of Subsidiaries and
Assets and the assumptions of Liabilities contemplated by subsections (b) and
(c) of this Section 3.01, Rockwell, Rockwell Collins and Rockwell Science Center
will execute or cause to be executed by the appropriate entities the Conveyance
and Assumption Instruments. The transfer of capital stock contemplated by such
subsections will be effected by means of delivery of stock certificates duly
endorsed or accompanied by duly executed stock powers and notation on the stock
record books of the corporation or other legal entities involved and, to the
extent required by applicable law, by notation on appropriate registries.
(e) Each of Rockwell (on behalf of itself and each other
member of the Rockwell Automation Group), Rockwell Collins (on behalf of itself
and each other member of the Rockwell Collins Group) and Rockwell Science Center
(on behalf of itself and each other member of the Rockwell Science Center Group)
understands and agrees that, except as expressly set forth in any Transaction
Agreement, no party to any Transaction Agreement or any other agreement or
document contemplated by any Transaction Agreement either has or is, in such
agreement or otherwise, representing or warranting in any way as to the Assets,
Subsidiaries, businesses or Liabilities retained, transferred or assumed as
contemplated hereby or thereby, as to any consents or approvals required in
connection with the transactions contemplated by the
Transaction Agreements, as to the value or freedom from any Lien of, or any other matter concerning, any Assets, Liabilities or Subsidiaries of such party, or as to the absence of any defenses or rights of setoff or freedom from counterclaim with respect to any claim or other Assets or Subsidiaries of any party, or as to the legal sufficiency of any assignment, document or instrument delivered hereunder or thereunder to convey title to any Asset or Subsidiary or thing of value upon the execution, delivery or filing hereof or thereof. Except as may expressly be set forth in any Transaction Agreement, all Assets and Subsidiaries being transferred or retained as contemplated by any Transaction Agreement or any other agreement or document contemplated by any Transaction Agreement are being transferred, or are being retained, on an "as is", "where is" basis (and, in the case of the transfer of any real property, by means of a quitclaim or similar form deed or conveyance) and the respective transferees shall bear the economic and legal risks that any conveyance shall prove to be insufficient or that the title to any Asset or Subsidiary shall be other than good and marketable and free and clear of any Lien.
(f) It is the intention of the parties that payments made by the parties to each other after the Time of Distribution pursuant to this Agreement, the Employee Matters Agreement and the Tax Allocation Agreement are to be treated as relating back to the transactions occurring prior to the Time of Distribution pursuant to this Section 3.01 as an adjustment to the transfers of Assets, Subsidiaries and Liabilities contemplated by this Section 3.01, and Rockwell, Rockwell Collins and Rockwell Science Center will, and will cause their Subsidiaries to, take positions consistent with such intention with any Tax authority, unless with respect to any payment any party receives an opinion of counsel reasonably acceptable to Rockwell and Rockwell Collins to the effect that there is no substantial authority for such a position.
SECTION 3.02 Financial Instruments.
(a) Rockwell Collins will, at its expense, take or cause to be taken all actions and enter into (or cause the Rockwell Collins Subsidiaries to enter into) such agreements and arrangements as shall be necessary to effect the release of and substitution for each member of the Rockwell Automation Group, as of the Time of Distribution, from all primary, secondary, contingent, joint, several and other Liabilities in respect of Rockwell Collins Financial Instruments (it being understood that all Liabilities in respect of Rockwell Collins Financial Instruments are Rockwell Collins Liabilities).
(b) Rockwell Collins' obligations under this Section 3.02 will continue to be applicable to all Rockwell Collins Financial Instruments identified at any time by Rockwell, whether before, at or after the Time of Distribution.
(c) Rockwell Science Center will, at its expense, take or cause to be taken all actions and enter into (or cause the Rockwell Science Center Subsidiaries to enter into) such agreements and arrangements as shall be necessary to effect the release of and substitution for each member of the Rockwell Automation Group and each member of the Rockwell Collins Group, effective as of the Time of Distribution, from all primary, secondary, contingent, joint, several and other Liabilities in respect of Rockwell Science Center Financial Instruments (it
being understood that all Liabilities in respect of Rockwell Science Center Financial Instruments are Rockwell Science Center Liabilities).
(d) Rockwell Science Center's obligations under this
Section 3.02 will continue to be applicable to all Rockwell Science Center
Financial Instruments identified at any time by Rockwell or Rockwell Collins, as
the case may be, whether before, at or after the Time of Distribution.
SECTION 3.03 Shared Agreements.
(a) The parties acknowledge and understand that (i) all Rockwell Science Center Shared Agreements that relate to the Rockwell Automation Business and (ii) all Rockwell Collins Shared Agreements shall constitute Rockwell Automation Assets, except that, with respect to Shared Agreements relating to Unrelated Former Businesses, Rockwell Collins will have the rights described in paragraph (c)(i) of the definition of "Rockwell Collins Assets" and Rockwell Science Center will have the rights described in paragraph (c)(i) of the definition of "Rockwell Science Center Assets". All Rockwell Science Center Shared Agreements that do not relate to the Rockwell Automation Business will constitute (i) Rockwell Collins Assets if they relate primarily to the Rockwell Collins Business and (ii) Rockwell Science Center Assets if they relate primarily to the Rockwell Science Center Business. No member of any Group will extend or amend any Shared Agreement after the Time of Distribution unless it is the owner of the Shared Agreement.
(b) The parties agree as follows with respect to Strategic Sourcing Agreements:
(i) For so long as any member of the Rockwell Automation Group derives any benefit under any Strategic Sourcing Agreement following the Time of Distribution (including the ability to continue to make purchases on the terms set forth in the Strategic Sourcing Agreement) as a result of purchases by members of the Rockwell Collins Group or the Rockwell Science Center Group, as the case may be, then Rockwell Collins or Rockwell Science Center, as the case may be, will use reasonable best efforts to, and will cause the other members of the Rockwell Collins Group or the Rockwell Science Center Group, as the case may be, to use reasonable best efforts to, continue to make purchases under such Strategic Sourcing Agreement in accordance with the terms thereof.
(ii) Each party will use its reasonable best efforts to obtain, or cause to be obtained, any required consents of third parties to Strategic Sourcing Agreements to allow members of any Group to make purchases under Strategic Sourcing Agreements on the terms and conditions of such Strategic Sourcing Agreements existing as of the Time of Distribution.
(iii) If Rockwell receives any rebate from a third party to a Strategic Sourcing Agreement after the Time of Distribution, Rockwell will promptly pay to each of Rockwell Collins and Rockwell Science Center its proportionate share of such rebate, if any, as reasonably determined by Rockwell (after deducting Rockwell's out-of-pocket
costs and expenses incurred in connection with obtaining such rebate), based on the amount of purchases made by each Group under such Strategic Sourcing Agreement that the rebate relates to.
(iv) If Rockwell is required for any reason to return after the Time of Distribution all or any portion of a rebate received from a third party to a Strategic Sourcing Agreement, then each of Rockwell Collins and Rockwell Science Center will promptly upon request of Rockwell pay to Rockwell its proportionate share of such rebate, as reasonably determined by Rockwell.
SECTION 3.04 Intercompany Accounts and Arrangements.
(a) Elimination of Intercompany Accounts.
(i) Except as set forth in Section 3.04(a)(ii) or on Schedule 3.04(a), Rockwell Collins, on behalf of itself and each other member of the Rockwell Collins Group, Rockwell, on behalf of itself and each other member of the Rockwell Automation Group, and Rockwell Science Center, on behalf of itself and each other member of the Rockwell Science Center Group, hereby settle and eliminate, by cancellation or transfer to a member of the other Group (whether to cancel or transfer and the manner thereof will be determined by Rockwell), effective as of the Time of Distribution, all intercompany receivables, payables and other balances (including intercompany cash management balances) existing immediately prior to the Time of Distribution (a) between Rockwell Collins and/or any Rockwell Collins Subsidiary, on the one hand, and Rockwell and/or any Rockwell Subsidiary, on the other hand, (b) between Rockwell Science Center and/or any Rockwell Science Center Subsidiary, on the one hand, and Rockwell and/or any Rockwell Subsidiary, on the other hand, and (c) between Rockwell Science Center and/or any Rockwell Science Center Subsidiary, on the one hand, and Rockwell Collins and/or any Rockwell Collins Subsidiary, on the other hand.
(ii) The provisions of Section 3.04(a)(i) will not apply to any intercompany receivables, payables and other balances arising under any Transaction Agreement, including those arising under Section 3.05 and those incurred in connection with the payment by any party of any expenses which are required to be paid or reimbursed by the other party pursuant to Section 6.03.
(b) Intercompany Agreements.
(i) Except as set forth in Section 3.04(b)(ii), in furtherance of the releases and other provisions of Section 4.01, Rockwell Collins, on behalf of itself and each other member of the Rockwell Collins Group, Rockwell, on behalf of itself and each other member of the Rockwell Automation Group, and Rockwell Science Center, on behalf of itself and each other member of the Rockwell Science Center Group, hereby terminate any and all agreements, arrangements, commitments or understandings in existence as of the Time of Distribution, whether or not in writing (A) between or among Rockwell Collins and/or any Rockwell Collins Subsidiary, on the one hand, and Rockwell and/or
any Rockwell Subsidiary, on the other hand, (B) between or among Rockwell
Science Center and/or any Rockwell Science Center Subsidiary, on the one
hand, and Rockwell and/or any Rockwell Subsidiary, on the other hand, and
(C) between or among Rockwell Science Center and/or any Rockwell Science
Center Subsidiary, on the one hand, and Rockwell Collins and/or any
Rockwell Collins Subsidiary, on the other hand. No such terminated
agreement, arrangement, commitment or understanding (including any
provision thereof which purports to survive termination) shall be of any
further force or effect after the Time of Distribution.
(ii) The provisions of Section 3.04(b)(i) will not apply to any of the following agreements, arrangements, commitments or understandings (or to any of the provisions thereof): (A) the Transaction Agreements (and each other agreement, instrument or document expressly contemplated by any Transaction Agreement to be entered into by any party hereto or any of the members of their respective Groups; (B) any agreements, arrangements, commitments or understandings listed or described on Schedule 3.04(b)(ii); (C) any agreements, arrangements, commitments or understandings to which any Person other than the parties hereto and their respective Affiliates is a party; (D) any other agreements, arrangements, commitments or understandings that any of the Transaction Agreements expressly contemplates will survive the Time of Distribution; and (E) any agreements, arrangements, commitments or understandings (x) between Rockwell Collins and/or any Rockwell Collins Subsidiary, on the one hand, and Rockwell and/or any Rockwell Subsidiary, on the other hand, (y) between Rockwell Science Center and/or any Rockwell Science Center Subsidiary, on the one hand, and Rockwell and/or any Rockwell Subsidiary, on the other hand, or (z) between Rockwell Science Center and/or any Rockwell Science Center Subsidiary, on the one hand, and Rockwell Collins and/or any Rockwell Collins Subsidiary, on the other hand, in any such case for the purchase or sale of goods or services of a type which the provider thereof provides to unaffiliated third parties in the ordinary course of its business ("Ordinary Course Intercompany Arrangements"); provided, however, that in the event any such Ordinary Course Intercompany Arrangements (other than any Ancillary Agreements) do not, as of the Time of Distribution, contain commercially reasonable arm's-length terms of a type to which unaffiliated parties would reasonably agree or do not include terms which would normally appear in such arrangements between unaffiliated parties, Rockwell, Rockwell Collins and Rockwell Science Center, as the case may be, will cause such Ordinary Course Intercompany Arrangements to be amended so that they will contain terms which are, as of the Time of Distribution, commercially reasonable arm's-length terms of a type to which unaffiliated parties would reasonably agree.
SECTION 3.05 Cash Management.
(a) Bank Accounts. Subject to Section 3.05(b), (i) all Rockwell Collins U.S. Bank Accounts and Rockwell Collins Non-U.S. Bank Accounts will constitute Rockwell Collins Assets, (ii) all Rockwell Science Center U.S. Bank Accounts and Rockwell Science Center Non-U.S. Bank Accounts will constitute Rockwell Science Center Assets, and (iii) all Rockwell Automation Retained Accounts will constitute Rockwell Automation Assets.
(b) Cash Balances.
(i) (A) In the event the aggregate Recorded Amount of cash in the Rockwell Collins U.S. Bank Accounts and the Rockwell Collins Non-U.S. Bank Accounts (x) exceeds $20 million, Rockwell Collins will pay to Rockwell (by wire transfer to Rockwell's bank account at Mellon Bank, N.A., Pittsburgh, Pennsylvania, Account No. 102-3474), within three business days after the Distribution Date, an amount equal to such excess or (y) is less than $20 million, Rockwell will pay to Rockwell Collins, within three business days after the Distribution Date, an amount equal to such deficit.
(B) Rockwell Collins will pay to Rockwell (by wire transfer to Rockwell's bank account at Mellon Bank, N.A., Pittsburgh, Pennsylvania, Account No. 102-3474), within three business days after the Distribution Date, (x) all balances contained immediately prior to the Time of Distribution in petty cash accounts at U.S. locations of the Rockwell Collins Business, and (y) the dollar value of travelers checks immediately prior to the Time of Distribution at U.S. locations of the Rockwell Collins Business.
(ii) (A) In the event the aggregate Recorded Amount of cash in the Rockwell Science Center U.S. Bank Accounts and the Rockwell Science Center Non-U.S. Bank Accounts (x) exceeds $2 million, Rockwell Science Center will pay to Rockwell (by wire transfer to Rockwell's bank account at Mellon Bank, N.A., Pittsburgh, Pennsylvania, Account No. 102-3474), within three business days after the Distribution Date, an amount equal to such excess or (y) is less than $2 million, Rockwell will pay to Rockwell Science Center, within three business days after the Distribution Date, an amount equal to such deficit.
(B) Rockwell Science Center will pay to Rockwell (by wire transfer to Rockwell's bank account at Mellon Bank, N.A., Pittsburgh, Pennsylvania, Account No. 102-3474), within three business days after the Distribution Date, (x) all balances contained immediately prior to the Time of Distribution in petty cash accounts at U.S. locations of the Rockwell Science Center Business, and (y) the dollar value of travelers checks immediately prior to the Time of Distribution at U.S. locations of the Rockwell Science Center Business.
(c) Rockwell Customer Payments. Each of Rockwell Collins and Rockwell Science Center will, and will cause their respective Subsidiaries and Affiliates to, forward promptly to Rockwell (for the account of Rockwell or the applicable Rockwell Subsidiary) any customer payments in respect of accounts receivable constituting Rockwell Automation Assets received by Rockwell Collins, Rockwell Science Center or any of their respective Subsidiaries or Affiliates after the Time of Distribution, whether received in lock boxes, via wire transfer or otherwise. Such amounts will be forwarded by wire transfer (to Rockwell's bank account at Mellon Bank, N.A., Pittsburgh, Pennsylvania, Account No. 102-3474) in the case of customer payments received within thirty days after the Distribution Date and by check in the case of customer payments received thereafter.
(d) Rockwell Collins Customer Payments. Each of Rockwell and Rockwell Science Center will, and will cause their respective Subsidiaries and Affiliates to, forward promptly to Rockwell Collins (for the account of Rockwell Collins or the applicable Rockwell Collins Subsidiary) any customer payments in respect of accounts receivable constituting Rockwell Collins Assets received by Rockwell, Rockwell Science Center or any of their respective Subsidiaries or Affiliates after the Time of Distribution, whether received in lock boxes, via wire transfer or otherwise. Such amounts will be forwarded by wire transfer in the case of customer payments received within thirty days after the Distribution Date and by check in the case of customer payments received thereafter.
(e) Rockwell Science Center Customer Payments. Each of Rockwell and Rockwell Collins will, and will cause their respective Subsidiaries and Affiliates to, forward promptly to Rockwell Science Center (for the account of Rockwell Science Center or the applicable Rockwell Science Center Subsidiary) any customer payments in respect of accounts receivable constituting Rockwell Science Center Assets received by Rockwell, Rockwell Collins or any of their respective Subsidiaries or Affiliates after the Time of Distribution, whether received in lock boxes, via wire transfer or otherwise. Such amounts will be forwarded by wire transfer in the case of customer payments received within thirty days after the Distribution Date and by check in the case of customer payments received thereafter.
(f) Funding of Outstanding Checks.
(i) The following subsections of this Section 3.05(f) are intended to implement the parties' agreement that (A) Rockwell Collins or a Rockwell Collins Subsidiary will be liable for payment of checks relating to the Rockwell Collins Business or the Rockwell Collins Liabilities that are outstanding immediately prior to the Time of Distribution and (B) Rockwell Science Center or a Rockwell Science Center Subsidiary will be liable for payment of checks relating to the Rockwell Science Center Business or the Rockwell Science Center Liabilities that are outstanding immediately prior to the Time of Distribution.
(ii) Rockwell Collins or a Rockwell Collins Subsidiary will fund all amounts in respect of checks that are outstanding immediately prior to the Time of Distribution and presented for payment at or after the Time of Distribution in Rockwell Collins U.S. Bank Accounts or Rockwell Collins Non-U.S. Bank Accounts. Rockwell Science Center or a Rockwell Science Center Subsidiary will fund all amounts in respect of checks that are outstanding immediately prior to the Time of Distribution and presented for payment at or after the Time of Distribution in Rockwell Science Center U.S. Bank Accounts or Rockwell Science Center Non-U.S. Bank Accounts.
(iii) Rockwell or a Rockwell Subsidiary will fund all amounts in respect of checks that are outstanding immediately prior to the Time of Distribution and presented for payment at or after the Time of Distribution in Rockwell Automation Retained Accounts. Within three business days after Rockwell's request:
(A) Rockwell Collins will reimburse Rockwell (by wire transfer to Rockwell's bank account at Mellon Bank, N.A., Pittsburgh, Pennsylvania, account number 102-3474), for the account of Rockwell or the applicable Rockwell Subsidiary, for all such amounts funded by Rockwell or a Rockwell Subsidiary in respect of checks relating to the Rockwell Collins Business or the Rockwell Collins Liabilities that are outstanding immediately prior to the Time of Distribution and presented for payment at or after the Time of Distribution in Rockwell Automation Retained Accounts;
(B) Rockwell Science Center will reimburse Rockwell (by wire transfer to Rockwell's bank account at Mellon Bank, N.A., Pittsburgh, Pennsylvania, account number 102-3474), for the account of Rockwell or the applicable Rockwell Subsidiary, for all such amounts funded by Rockwell or a Rockwell Subsidiary in respect of checks relating to the Rockwell Science Center Business or the Rockwell Science Center Liabilities that are outstanding immediately prior to the Time of Distribution and presented for payment at or after the Time of Distribution in Rockwell Automation Retained Accounts.
(iv) No checks relating to the Rockwell Collins Business or the Rockwell Science Center Business will be issued on any Rockwell Automation Retained Accounts at or after the Time of Distribution.
SECTION 3.06 The Rockwell Collins Board and the Rockwell Science Center Board.
(a) Prior to the Time of Distribution, Rockwell and Rockwell Collins will take all actions which may be required to elect or otherwise appoint the persons named in the Form 10 to constitute the board of directors of Rockwell Collins at the Time of Distribution.
(b) Prior to the Time of Distribution, Rockwell and Rockwell Collins will take all actions which may be required to elect or otherwise appoint the persons set forth on Schedule 3.06(b) to constitute the board of directors of Rockwell Science Center at the Time of Distribution.
SECTION 3.07 Resignations; Transfer of Stock Held as Nominee.
(a) Rockwell will cause all of its employees and directors and all of the employees and directors of each other member of the Rockwell Automation Group to resign, not later than the Time of Distribution, from all boards of directors or similar governing bodies of Rockwell Collins or any other member of the Rockwell Collins Group [and of Rockwell Science Center or any other member of the Rockwell Science Center Group] on which they serve, and from all positions as officers of Rockwell Collins or any other member of the Rockwell Collins Group [and of Rockwell Science Center or any other member of the Rockwell Science Center Group] in which they serve, except as otherwise specified on Schedule 3.07. Rockwell Collins will cause all of its employees and directors and all of the employees and directors of each other member of the Rockwell Collins Group to resign, not later than the Time of Distribution, from
all boards of directors or similar governing bodies of Rockwell or any other member of the Rockwell Automation Group [and of Rockwell Science Center or any other member of the Rockwell Science Center Group] on which they serve, and from all positions as officers of Rockwell or any other member of the Rockwell Automation Group [and of Rockwell Science Center or any other member of the Rockwell Science Center Group] in which they serve, except as otherwise specified on Schedule 3.07. [Rockwell Science Center will cause all of its employees and directors and all of the employees and directors of each other member of the Rockwell Science Center Group to resign, not later than the Time of Distribution, from all boards of directors or similar governing bodies of Rockwell or any other member of the Rockwell Automation Group and of Rockwell Collins or any other member of the Rockwell Collins Group on which they serve, and from all positions as officers of Rockwell or any other member of the Rockwell Automation Group and of Rockwell Collins or any other member of the Rockwell Collins Group in which they serve, except as otherwise specified on Schedule 3.07.]
(b) Rockwell will cause each of its employees, and each of the employees of the other members of the Rockwell Automation Group, who holds stock or similar evidence of ownership of any Rockwell Collins Group entity or Rockwell Science Center Group entity as nominee for such entity pursuant to the laws of the country in which such entity is located to transfer such stock or similar evidence of ownership to the Person so designated by Rockwell Collins or Rockwell Science Center, as the case may be, to be such nominee as of and after the Time of Distribution. Rockwell Collins will cause each of its employees, and each of the employees of the other members of the Rockwell Collins Group, who holds stock or similar evidence of ownership of any Rockwell Automation Group entity or Rockwell Science Center Group entity as nominee for such entity pursuant to the laws of the country in which such entity is located to transfer such stock or similar evidence of ownership to the Person so designated by Rockwell or Rockwell Science Center, as the case may be, to be such nominee as of and after the Time of Distribution. Rockwell Science Center will cause each of its employees, and each of the employees of the other members of the Rockwell Science Center Group, who holds stock or similar evidence of ownership of any Rockwell Automation Group entity or Rockwell Collins Group entity as nominee for such entity pursuant to the laws of the country in which such entity is located to transfer such stock or similar evidence of ownership to the Person so designated by Rockwell or Rockwell Collins, as the case may be, to be such nominee as of and after the Time of Distribution.
(c) Rockwell will cause each of its employees and each of the employees of the other members of the Rockwell Automation Group to revoke or withdraw their express written authority, if any, to act on behalf of any Rockwell Collins Group entity or Rockwell Science Center Group entity as an agent or representative thereof after the Time of Distribution. Rockwell Collins will cause each of its employees and each of the employees of the other members of the Rockwell Collins Group to revoke or withdraw their express written authority, if any, to act on behalf of any Rockwell Automation Group entity or Rockwell Science Center Group entity as an agent or representative thereof after the Time of Distribution. Rockwell Science Center will cause each of its employees and each of the employees of the other members of the Rockwell Science Center Group to revoke or withdraw their express written authority, if any, to act on behalf of any Rockwell Automation Group entity or Rockwell Collins Group entity as an agent or representative thereof after the Time of Distribution.
SECTION 3.08 Rockwell Collins Certificate of Incorporation
and By-Laws; Rights Plan. Prior to the Time of Distribution, (a) the Rockwell
Collins Board will (i) approve the Certificate of Incorporation and will cause
the same to be filed with the Secretary of State of the State of Delaware and
(ii) adopt the By-Laws, and (b) Rockwell, as sole shareowner of Rockwell
Collins, will approve the Certificate of Incorporation. Prior to the Time of
Distribution, the Rockwell Collins Board will adopt the Rights Plan and declare
a dividend of the Rights so that each share of Rockwell Collins Common Stock
issued and outstanding as of the Time of Distribution will initially have one
Right attached thereto.
SECTION 3.09 Insurance.
(a) Coverage. Subject to the provisions of this Section 3.09, coverage of Rockwell Collins, the Rockwell Collins Subsidiaries, Rockwell Science Center and the Rockwell Science Center Subsidiaries under all Policies (other than the Current Aviation Products Liability Policy) shall cease as of the Time of Distribution. From and after the Time of Distribution, Rockwell Collins, the Rockwell Collins Subsidiaries, Rockwell Science Center and the Rockwell Science Center Subsidiaries will be responsible for obtaining and maintaining all insurance coverages in their own right. All Policies (other than the Current Aviation Products Liability Policy) will constitute Rockwell Automation Assets and will be retained by Rockwell and the Rockwell Subsidiaries, together with all rights, benefits and privileges thereunder (including the right to receive any and all return premiums with respect thereto). The Current Aviation Products Liability Policy will constitute a Rockwell Collins Asset and will be transferred by Rockwell to Rockwell Collins, together with all rights, benefits and privileges thereunder (including the right to receive any and all return premiums with respect thereto).
(b) Rights Under Shared Policies. From and after the Time of Distribution, Rockwell Collins, the Rockwell Collins Subsidiaries, Rockwell Science Center and the Rockwell Science Center Subsidiaries will have no rights with respect to any Policies (other than the Current Aviation Products Liability Policy), except that:
(i) Rockwell Collins will have the right to assert claims (and Rockwell will use reasonable best efforts to assist Rockwell Collins in asserting claims) for any loss, liability or damage with respect to Rockwell Collins Assets or Rockwell Collins Liabilities under Shared Policies with third-party insurers which are "occurrence basis" Policies ("Occurrence Basis Policies") arising out of insured incidents occurring from the date coverage thereunder first commenced until the Time of Distribution to the extent that the terms and conditions of any such Occurrence Basis Policies and agreements relating thereto so allow;
(ii) Rockwell Collins will have the right to continue to prosecute claims with respect to Rockwell Collins Assets or Rockwell Collins Liabilities properly asserted with the insurer prior to the Time of Distribution (and Rockwell will use reasonable best efforts to assist Rockwell Collins in connection therewith) under Shared Policies with third-party insurers which are Policies written on a "claims made" basis ("Claims Made Policies") arising out of insured incidents occurring from the date coverage thereunder
first commenced until the Time of Distribution to the extent that the terms and conditions of any such Claims Made Policies and agreements relating thereto so allow;
(iii) Rockwell Science Center will have the right to assert claims (and Rockwell will use reasonable best efforts to assist Rockwell Science Center in asserting claims) for any loss, liability or damage with respect to Rockwell Science Center Assets or Rockwell Science Center Liabilities under Occurrence Basis Policies arising out of insured incidents occurring from the date coverage thereunder first commenced until the Time of Distribution to the extent that the terms and conditions of any such Occurrence Basis Policies and agreements relating thereto so allow; and
(iv) Rockwell Science Center will have the right to continue to prosecute claims with respect to Rockwell Science Center Assets or Rockwell Science Center Liabilities properly asserted with the insurer prior to the Time of Distribution (and Rockwell will use reasonable best efforts to assist Rockwell Science Center in connection therewith) under Claims Made Policies arising out of insured incidents occurring from the date coverage thereunder first commenced until the Time of Distribution to the extent that the terms and conditions of any such Claims Made Policies and agreements relating thereto so allow;
provided, that in the case of each of clauses (i), (ii), (iii) and (iv) above, (A) all of Rockwell's and each Rockwell Subsidiary's reasonable costs and expenses incurred in connection with the foregoing are promptly paid by Rockwell Collins or Rockwell Science Center, as the case may be, (B) Rockwell and the Rockwell Subsidiaries may, at any time, without liability or obligation to Rockwell Collins, any Rockwell Collins Subsidiary, Rockwell Science Center or any Rockwell Science Center Subsidiary (other than as set forth in Section 3.09(c)), amend, commute, terminate, buy-out, extinguish liability under or otherwise modify any Occurrence Basis Policies or Claims Made Policies (and such claims shall be subject to any such amendments, commutations, terminations, buy-outs, extinguishments and modifications), (C) such claims will be subject to (and recovery thereon will be reduced by the amount of) any applicable deductibles, retentions, self-insurance provisions or any payment or reimbursement obligations of Rockwell, any Rockwell Subsidiary or any Affiliate of Rockwell or any Rockwell Subsidiary in respect thereof, and (D) such claims will be subject to exhaustion of existing aggregate limits. Rockwell's obligation to use reasonable best efforts to assist Rockwell Collins and Rockwell Science Center in asserting claims under Occurrence Basis Policies will include using reasonable best efforts in assisting Rockwell Collins and Rockwell Science Center to establish its right to coverage under Occurrence Basis Policies (so long as all of Rockwell's costs and expenses in connection therewith are promptly paid by Rockwell Collins or Rockwell Science Center, as the case may be). None of Rockwell or the Rockwell Subsidiaries will bear any Liability for the failure of an insurer to pay any claim under any Occurrence Basis Policy or Claims Made Policy.
(c) Rockwell Actions. In the event that after the Time of Distribution Rockwell or any Rockwell Subsidiary proposes to amend, commute, terminate, buy-out, extinguish liability under or otherwise modify any Occurrence Basis Policies or Claims Made Policies under which Rockwell Collins or Rockwell Science Center has rights to assert claims
pursuant to Section 3.09(b) in a manner that would adversely affect any such
rights of Rockwell Collins or Rockwell Science Center, (i) Rockwell will give
Rockwell Collins and/or Rockwell Science Center, as the case may be, prior
notice thereof and consult with Rockwell Collins and/or Rockwell Science Center,
as the case may be, with respect to such action (it being understood that the
decision to take any such action will be in the sole discretion of Rockwell) and
(ii) Rockwell will pay to Rockwell Collins and/or Rockwell Science Center, as
the case may be, its equitable share (which shall be determined by Rockwell
based on the amount of premiums paid by or allocated to the Rockwell Collins
Business or the Rockwell Science Center Business, as the case may be, in respect
of the applicable Shared Policy) of any net proceeds actually received by
Rockwell from the insurer of the applicable Shared Policy as a result of such
action by Rockwell (after deducting Rockwell's reasonable costs and expenses
incurred in connection with such action).
(d) Rights Under the Current Aviation Products Liability Policy. From and after the Time of Distribution, Rockwell, the Rockwell Subsidiaries, Rockwell Science Center and the Rockwell Science Center Subsidiaries will have no rights with respect to the Current Aviation Products Liability Policy, except that:
(i) Rockwell will have the right to assert claims (and Rockwell Collins will use reasonable best efforts to assist Rockwell in asserting claims) for any loss, liability or damage with respect to Rockwell Automation Assets or Rockwell Automation Liabilities under the Current Aviation Products Liability Policy arising out of insured incidents occurring from the date coverage thereunder first commenced until the Time of Distribution to the extent that the terms and conditions of the Current Aviation Products Liability Policy and agreements relating thereto so allow;
(ii) Rockwell will have the right to continue to prosecute claims with respect to Rockwell Automation Assets or Rockwell Automation Liabilities properly asserted with the insurer prior to the Time of Distribution (and Rockwell Collins will use reasonable best efforts to assist Rockwell in connection therewith) under the Current Aviation Products Liability Policy arising out of insured incidents occurring from the date coverage thereunder first commenced until the Time of Distribution to the extent that the terms and conditions of the Current Aviation Products Liability Policy and agreements relating thereto so allow;
(iii) Rockwell Science Center will have the right to assert claims (and Rockwell Collins will use reasonable best efforts to assist Rockwell Science Center in asserting claims) for any loss, liability or damage with respect to Rockwell Science Center Assets or Rockwell Science Center Liabilities under the Current Aviation Products Liability Policy arising out of insured incidents occurring from the date coverage thereunder first commenced until the Time of Distribution to the extent that the terms and conditions of the Current Aviation Products Liability Policy and agreements relating thereto so allow; and
(iv) Rockwell Science Center will have the right to continue to prosecute claims with respect to Rockwell Science Center Assets or Rockwell Science Center
Liabilities properly asserted with the insurer prior to the Time of Distribution (and Rockwell Collins will use reasonable best efforts to assist Rockwell Science Center in connection therewith) under the Current Aviation Products Liability Policy arising out of insured incidents occurring from the date coverage thereunder first commenced until the Time of Distribution to the extent that the terms and conditions of the Current Aviation Products Liability Policy and agreements relating thereto so allow;
provided, that in the case of each of clauses (i), (ii), (iii) and (iv) above, (A) all of Rockwell Collins' and each Rockwell Collins Subsidiary's reasonable costs and expenses incurred in connection with the foregoing are promptly paid by Rockwell or Rockwell Science Center, as the case may be, (B) Rockwell Collins and the Rockwell Collins Subsidiaries may, at any time, without liability or obligation to Rockwell, any Rockwell Subsidiary, Rockwell Science Center or any Rockwell Science Center Subsidiary (other than as set forth in Section 3.09(e)), amend, commute, terminate, buy-out, extinguish liability under or otherwise modify the Current Aviation Products Liability Policy (and such claims shall be subject to any such amendments, commutations, terminations, buy-outs, extinguishments and modifications), (C) such claims will be subject to (and recovery thereon will be reduced by the amount of) any applicable deductibles, retentions, self-insurance provisions or any payment or reimbursement obligations of Rockwell Collins, any Rockwell Collins Subsidiary or any Affiliate of Rockwell Collins or any Rockwell Collins Subsidiary in respect thereof, and (D) such claims will be subject to exhaustion of existing aggregate limits. Rockwell Collins' obligation to use reasonable best efforts to assist Rockwell and Rockwell Science Center in asserting claims under the Current Aviation Products Liability Policy will include using reasonable best efforts in assisting Rockwell and Rockwell Science Center to establish its right to coverage under the Current Aviation Products Liability Policy (so long as all of Rockwell Collins' costs and expenses in connection therewith are promptly paid by Rockwell or Rockwell Science Center, as the case may be). None of Rockwell Collins or the Rockwell Collins Subsidiaries will bear any Liability for the failure of the insurer to pay any claim under the Current Aviation Products Liability Policy.
(e) Rockwell Collins Actions. In the event that after the Time of Distribution Rockwell Collins or any Rockwell Collins Subsidiary proposes to amend, commute, terminate, buy-out, extinguish liability under or otherwise modify the Current Aviation Products Liability Policy in a manner that would adversely affect any rights of Rockwell or Rockwell Science Center in respect thereof, (i) Rockwell Collins will give Rockwell and/or Rockwell Science Center , as the case may be, prior notice thereof and consult with Rockwell and/or Rockwell Science Center, as the case may be, with respect to such action (it being understood that the decision to take any such action will be in the sole discretion of Rockwell Collins) and (ii) Rockwell Collins will pay to Rockwell and/or Rockwell Science Center, as the case may be, its equitable share (which shall be determined by Rockwell Collins based on the amount of premiums paid by or allocated to the Rockwell Automation Business or the Rockwell Science Center Business, as the case may be, in respect of the Current Aviation Products Liability Policy) of any net proceeds actually received by Rockwell Collins from the insurer of the Current Aviation Products Liability Policy as a result of such action by Rockwell Collins (after deducting Rockwell Collins' reasonable costs and expenses incurred in connection with such action).
(f) Administration. From and after the Time of Distribution:
(i) Rockwell or a Rockwell Subsidiary, as appropriate, will be responsible for the Claims Administration with respect to claims of Rockwell and the Rockwell Subsidiaries under Occurrence Basis Policies, Claims Made Policies and, to the extent claims are permitted under Section 3.09(d), the Current Aviation Products Liability Policy;
(ii) Rockwell Collins or a Rockwell Collins Subsidiary, as appropriate, will be responsible for the Claims Administration with respect to the claims of Rockwell Collins and the Rockwell Collins Subsidiaries under Occurrence Basis Policies and Claims Made Policies that are permitted under Section 3.09(b) and claims of Rockwell Collins and the Rockwell Collins Subsidiaries under the Current Aviation Products Liability Policy; and
(iii) Rockwell Science Center or a Rockwell Science Center Subsidiary, as appropriate, will be responsible for the Claims Administration with respect to the claims of Rockwell Science Center and the Rockwell Science Center Subsidiaries under Occurrence Basis Policies, Claims Made Policies and the Current Aviation Products Liability Policy that are permitted under Section 3.09(b) or 3.09(d).
(g) Insurance Premiums.
(i) Rockwell will pay all premiums (retrospectively-rated or otherwise) as required under the terms and conditions of the respective Shared Policies in respect of periods prior to the Time of Distribution, whereupon (A) Rockwell Collins will, upon request of Rockwell, forthwith reimburse Rockwell for that portion of such premiums paid by Rockwell as are reasonably determined by Rockwell to be attributable to the Rockwell Collins Business and (B) Rockwell Science Center will, upon request of Rockwell, forthwith reimburse Rockwell for that portion of such premiums paid by Rockwell as are reasonably determined by Rockwell to be attributable to the Rockwell Science Center Business.
(ii) Rockwell Collins will pay all premiums (retrospectively-rated or otherwise) as required under the terms and conditions of the Current Aviation Products Liability Policy in respect of periods prior to the Time of Distribution, whereupon (A) Rockwell will, upon request of Rockwell Collins, forthwith reimburse Rockwell Collins for that portion of such premiums paid by Rockwell Collins as are reasonably determined by Rockwell Collins to be attributable to the Rockwell Automation Business and (B) Rockwell Science Center will, upon request of Rockwell, forthwith reimburse Rockwell Collins for that portion of such premiums paid by Rockwell Collins as are reasonably determined by Rockwell Collins to be attributable to the Rockwell Science Center Business.
(h) Agreement for Waiver of Conflict and Shared Defense.
In the event that an Occurrence Basis Policy, a Claims Made Policy or the
Current Aviation Products Liability Policy provides coverage for two or more of
(i) Rockwell and/or a Rockwell Subsidiary,
(ii) Rockwell Collins and/or a Rockwell Collins Subsidiary and (iii) Rockwell Science Center and/or a Rockwell Science Center Subsidiary relating to the same occurrence, Rockwell, Rockwell Collins and Rockwell Science Center, as applicable, agree to defend jointly and to waive any conflict of interest necessary to the conduct of that joint defense. Nothing in this Section 3.09(f) will be construed to limit or otherwise alter in any way the indemnity obligations of the parties to this Agreement, including those created by this Agreement, by operation of law or otherwise.
(i) Directors' and Officers' Insurance. Rockwell will use its reasonable best efforts to cause the persons currently serving as directors and/or officers of Rockwell or any Subsidiary of Rockwell who will be, effective as of the Time of Distribution, directors and/or officers of Rockwell Collins, any Rockwell Collins Subsidiary, Rockwell Science Center or any Rockwell Science Center Subsidiary to be covered for a period of six years from the Time of Distribution with respect to claims arising from facts or events which occurred prior to the Time of Distribution by the directors' and officers' liability insurance policies maintained by Rockwell during such six-year period following the Time of Distribution for all persons who served as directors and/or officers of Rockwell or any Rockwell Subsidiary prior to the Time of Distribution with respect to claims arising from facts or events which occurred prior to the Time of Distribution.
SECTION 3.10 Use of Names, Trademarks, etc.
(a) From and after the Time of Distribution, subject to Sections 3.10(b), 3.10(c) and 3.10(d), Rockwell will own all rights of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) in, and to the use of, the names "Rockwell", "Rockwell International", "Rockwell Collins", "Rockwell Science Center" and "Rockwell Scientific Company" and all corporate symbols and logos related thereto and any name or mark which includes the words "Rockwell" or "Rockwell International" and all derivatives thereof and any other name, mark or symbol connoting "Rockwell" or which constitutes a formative thereof. From and after the Time of Distribution, except as permitted in Sections 3.10(b), 3.10(c) and 3.10(d), the Rockwell Collins Group and the Rockwell Science Center Group will not use or have any rights to the names, trademarks, trade names, domain names and service marks "Rockwell", "Rockwell International", "Rockwell Collins", "Rockwell Science Center" or "Rockwell Scientific Company" or any corporate symbol or logo related thereto or any name or mark which includes the words "Rockwell" or "Rockwell International" or any derivative thereof or any name or mark confusingly similar thereto, or any special script, type font, form, style, logo, design, device, trade dress or symbol which contains, represents or evokes the trademark, trade name or service mark "Rockwell" or "Rockwell International" or any derivative thereof or any name or mark confusingly similar thereto. From and after the Time of Distribution the Rockwell Collins Group will not hold itself out as having any affiliation with the Rockwell Automation Group. Prior to or as soon as practicable following the Time of Distribution (but in no event later than one year after the Distribution Date) (i) Rockwell Collins will change the name of any Rockwell Collins Subsidiary to eliminate therefrom the name "Rockwell" other than in the combined format "Rockwell Collins" and (ii) Rockwell Science Center will change the name of any Rockwell Science Center Subsidiary to eliminate therefrom the name "Rockwell" other than in the
combined format "Rockwell Science Center", "Rockwell Scientific" or "Rockwell Scientific Company".
(b) (i) Rockwell hereby grants to Rockwell Collins an
exclusive, perpetual, non-transferable (other than by way of sublicenses
to members of the Rockwell Collins Group) license to utilize without
obligation to pay royalties to Rockwell the names, trademarks, trade
names, domain names and service marks (A) "Rockwell", but only in the
combined format "Rockwell Collins", and (B) "Rockwell Collins"
(collectively, the "Rockwell Collins Marks") in connection with
businesses of the Rockwell Collins Group, other than researching,
developing, designing, engineering, manufacturing, building, selling,
distributing, installing, modifying, repairing, servicing or supporting
Automation Products. Unless and until the license granted under this
Section 3.10(b) is terminated, Rockwell will not use, nor grant a license
to any third party to use, the name, trademark, trade name, domain name
or service mark "Rockwell Collins".
(ii) As a condition to the license granted by this
Section 3.10(b), Rockwell Collins will use the Rockwell Collins Marks (A)
in connection with goods and services having a level of quality at least
as high as that established by the Rockwell Collins Business for similar
goods or services made, sold or offered for sale prior to the
Distribution Date and (B) in compliance with all applicable laws and
regulations.
(iii) Rockwell will have the right to exercise quality control over Rockwell Collins' and any permitted sublicensee's presentation or use of the Rockwell Collins Marks to that degree reasonably necessary, in the opinion of Rockwell, to maintain the validity and enforceability of the Rockwell Collins Marks and the name, trademark, trade name or service mark "Rockwell" and to protect the goodwill associated with any of the foregoing. Rockwell Collins will, upon request by Rockwell, submit to Rockwell materials of the Rockwell Collins Group bearing the Rockwell Collins Marks as Rockwell may reasonably require to ensure Rockwell Collins' and any permitted sublicensee's compliance with the obligations set forth in this Section 3.10(b).
(iv) (A) Rockwell may terminate the license granted under this Section 3.10(b) in the event of a material breach of this Section 3.10(b) by any member of the Rockwell Collins Group that has not been cured within sixty days (or ninety days, if substantial progress is being made at the end of such sixty day period) of written notice by Rockwell to Rockwell Collins.
(B) The license granted under this Section 3.10(b)
will terminate automatically on the 180th day after a Rockwell
Collins Change in Control.
(v) From and after the Time of Distribution, subject to Section 3.10(f), Rockwell Collins will have all rights of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) in, and to the use of, the name "Collins" (other than in the combined format
"Rockwell Collins") and all corporate symbols and logos related thereto and all derivatives thereof.
(c) (i) Rockwell hereby grants to Rockwell Science Center an exclusive, perpetual, non-transferable (other than by way of sublicenses to members of the Rockwell Science Center Group) license to utilize without obligation to pay royalties to Rockwell the names, trademarks, trade names, domain names and service marks (A) "Rockwell", but only in the combined format "Rockwell Science Center", "Rockwell Scientific" or "Rockwell Scientific Company" and (B) "Rockwell Science Center", "Rockwell Scientific" and "Rockwell Scientific Company" (collectively, the "Rockwell Science Center Marks") in connection with the Rockwell Science Center Business as it exists on the Distribution Date. Unless and until the license granted under this Section 3.10(c) is terminated, Rockwell will not use, nor grant a license to any third party to use, the Rockwell Science Center Marks.
(ii) As a condition to the license granted by this Section 3.10(c), Rockwell Science Center will use the Rockwell Science Center Marks (A) in connection with goods and services having a level of quality at least as high as that established by the Rockwell Science Center Business for similar goods or services made, sold or offered for sale prior to the Distribution Date and (B) in compliance with all applicable laws and regulations.
(iii) Rockwell will have the right to exercise quality control over Rockwell Science Center's and any permitted sublicensee's presentation or use of the Rockwell Science Center Marks to that degree reasonably necessary, in the opinion of Rockwell, to maintain the validity and enforceability of the Rockwell Science Center Marks and the name, trademark, trade name or service mark "Rockwell" and to protect the goodwill associated with any of the foregoing. Rockwell Science Center will, upon request by Rockwell, submit to Rockwell materials of the Rockwell Science Center Group bearing the Rockwell Science Center Marks as Rockwell may reasonably require to ensure Rockwell Science Center's and any permitted sublicensee's compliance with the obligations set forth in this Section 3.10(c).
(iv) (A) Rockwell may terminate the license granted under this
Section 3.10(c) in the event of a material breach of this Section 3.10(c)
by any member of the Rockwell Science Center Group that has not been
cured within sixty days (or ninety days, if substantial progress is being
made at the end of such sixty day period) of written notice by Rockwell
to Rockwell Science Center.
(B) The license granted under this Section 3.10(c)
will terminate automatically on the earlier of (x) the 180th day after
the aggregate equity ownership interest of Rockwell and Rockwell Collins
in Rockwell Science Center falls below 50% or (y) the 180th day after a
Rockwell Collins Change in Control or (z) the date that Rockwell and
Rockwell Collins, when acting in concert, lack the ability to control
management of Rockwell Science Center.
(d) In addition to, and without limiting the licenses
granted in Section 3.10(b) and Section 3.10(c), Rockwell hereby grants to
each of Rockwell Collins and Rockwell Science Center a non-exclusive,
non-transferable (other than by way of sublicenses to members of the
Rockwell Collins Group or the Rockwell Science Center Group, as the case
may be) license to utilize without obligation to pay royalties to
Rockwell the names, trademarks or trade names "Rockwell" and "Rockwell
International" and any corporate symbol or logo related thereto in
connection with stationery, supplies, labels, catalogs, vehicles, signs
and products of the Rockwell Collins Business or the Rockwell Science
Center Business, as the case may be, described in paragraphs (i) through
(vi) of this Section 3.10(d), subject to the terms and conditions of this
Section 3.10(d) and Section 3.10(e), in each case in the same manner and
to the same extent as such names, trademarks, trade names, corporate
symbols or logos were used by the Rockwell Collins Business or the
Rockwell Science Center Business, as the case may be, at any time within
the five year period preceding the Distribution:
(i) All stationery, invoices, purchase orders and other similar documents of a transactional nature, business cards, outside forms such as packing lists, labels, and cartons, forms for internal use only and product literature constituting Rockwell Collins Assets or Rockwell Science Center Assets, as the case may be, as of the Time of Distribution may be used for a period of one year following the Distribution Date or until the supply is exhausted, whichever is the first to occur.
(ii) All vehicles constituting Rockwell Collins Assets or Rockwell Science Center Assets, as the case may be, as of the Time of Distribution may continue to be used without re-marking (except as to legally required permit numbers, license numbers, etc.) for a period not to exceed (A) twelve months following the Distribution Date or (B) the date of disposition of the vehicle, whichever is the first to occur.
(iii) Within six months following the Distribution Date, Rockwell Collins and Rockwell Science Center, as the case may be, will cause to be removed from display at all owned and leased facilities constituting Rockwell Collins Assets or Rockwell Science Center Assets, respectively, all demountable displays which contain the names, trademarks or trade names "Rockwell" or "Rockwell International" (other than, (x) in the case of Rockwell Collins, in the combined format "Rockwell Collins" and (y) in the case of Rockwell Science Center, in the combined format "Rockwell Science Center" or "Rockwell Scientific Company") or any corporate symbol related thereto and Rockwell Collins and Rockwell Science Center each will remove, or will cause the removal of, all signs displaying any such name, trademark, trade name or corporate symbol at all such facilities (A) located in the United States, no later than six months following the Distribution Date and (B) located outside the United States, no later than twelve months following the Distribution Date.
(iv) Products of the Rockwell Collins Business and the Rockwell Science Center Business may have applied thereto the names, trademarks or trade names "Rockwell" or "Rockwell International" or any Rockwell corporate symbol or logo related thereto for a period of six months after the Distribution.
(v) Products of the Rockwell Collins Business and the Rockwell Science Center Business in finished goods inventory and work in process (to the extent the same bear the names, trademarks or trade names "Rockwell" or "Rockwell International" at the Time of Distribution or have any such trademark or trade name applied to them in accordance with paragraph (v) above) may be disposed of without re-marking.
(e) (i) Apart from the rights granted under Section 3.10(b), Section 3.10(c) and Section 3.10(d), no member of the Rockwell Collins Group or the Rockwell Science Center Group shall have any right, title or interest in, or to the use of, the Rockwell Collins Marks, the Rockwell Science Center Marks or the names, trademarks or trade names "Rockwell" or "Rockwell International" or any corporate symbol or logo related thereto, either alone or in combination with any other word, name, symbol, device, trademarks, or any combination thereof. Anything contained herein to the contrary notwithstanding, except as expressly permitted by Section 3.10(b), Section 3.10(c) and Section 3.10(d), in no event will any member of the Rockwell Collins Group or any member of the Rockwell Science Center Group utilize the Rockwell Collins Marks, the Rockwell Science Center Marks, as the case may be, or the names, trademarks, trade names or domain names "Rockwell" or "Rockwell International" or any corporate symbol or logo related thereto as a component of a company or trade name. Rockwell Collins and Rockwell Science Center each will not, and will cause each other member of the Rockwell Collins Group and the Rockwell Science Center Group, as the case may be, not to, challenge or contest the validity of such names, trademarks, trade names, domain names, corporate symbols or logos, the registration thereof or the ownership thereof by the Rockwell Automation Group. Rockwell Collins and Rockwell Science Center each will not, and will cause each other member of the Rockwell Collins Group and the Rockwell Science Center Group, as the case may be, not to, apply anywhere at any time for any registration as owner or exclusive licensee of such names, trademarks, trade names, domain names, corporate symbols or logos. If, notwithstanding the foregoing, any member of the Rockwell Collins Group or the Rockwell Science Center Group develops, adopts or acquires, directly or indirectly, any right, title or interest in, or to the use of, any such names, trademarks, trade names, domain names, corporate symbols or logos in any jurisdiction, or any goodwill incident thereto, Rockwell Collins or Rockwell Science Center, as the case may be, will, upon the request of Rockwell, and for a nominal consideration of one dollar, assign or cause to be assigned to Rockwell or any designee of Rockwell, all right, title and interest in, and to the use of, such names, trademarks, trade names, domain names, corporate symbols or logos in any and all jurisdictions, together with any goodwill incident thereto.
(ii) If the laws of any country require that any mark
subject to Section 3.10(b), Section 3.10(c) or Section 3.10(d) or
the right of any member of the Rockwell Collins Group or the
Rockwell Science Center Group to use any mark as permitted by
Section 3.10(b), Section 3.10(c) or Section 3.10(d) be registered
in order to fully protect the Rockwell Automation Group, then
Rockwell Collins or Rockwell Science Center, as the case may be,
and Rockwell will cooperate in constituting such member of the
Rockwell Collins Group or the Rockwell Science Center Group, as
the case may be, as a registered user (or its equivalent) in each
of the countries in which such registration is
necessary. Any expenses for registering such mark or constituting such member
of the Rockwell Collins Group or the Rockwell Science Center Group, as the
case may be, as a registered user in any country shall be borne by Rockwell
Collins or Rockwell Science Center, as the case may be. Any registration of
such member of the Rockwell Collins Group or the Rockwell Science Center
Group, as the case may be, as a registered user of any mark hereunder shall be
expunged on termination of the period of permitted use under this Agreement or
upon a breach or threatened breach by any member of the Rockwell Collins Group
or the Rockwell Science Center Group, as the case may be, of the terms of this
Section 3.10 and Rockwell Collins or Rockwell Science Center, as the case may
be, will, upon request of Rockwell, take all necessary steps to cause such
registration to be so expunged upon such termination or breach or threatened
breach. In addition, (A) Rockwell Collins hereby constitutes and appoints
Rockwell the true and lawful attorney of Rockwell Collins with full power of
substitution, in the name and on behalf of Rockwell Collins (and at the cost
of Rockwell Collins), to take all necessary steps to cause such registration
to be so expunged upon such termination or breach or threatened breach by a
member of the Rockwell Collins Group and (B) Rockwell Science Center hereby
constitutes and appoints Rockwell the true and lawful attorney of Rockwell
Science Center with full power of substitution in the name and on behalf of
Rockwell Science Center (and at the cost of Rockwell Science Center), to take
all necessary steps to cause such registration to be so expunged upon such
termination or breach or threatened breach by a member of the Rockwell Science
Center Group.
(iii) Rockwell will have the right to terminate the license granted in
Section 3.10(b) and/or Section 3.10(d) (with respect to Rockwell Collins) in
the event of a material breach of this Section 3.10(e) by any member of the
Rockwell Collins Group that has not been cured within sixty days (or ninety
days, if substantial progress is being made at the end of such sixty day
period) after written notice by Rockwell to Rockwell Collins. Rockwell will
have the right to terminate the license granted in Section 3.10(c) and/or
Section 3.10(d) (with respect to Rockwell Science Center) in the event of a
material breach of this Section 3.10(e) by any member of the Rockwell Science
Center Group that has not been cured within sixty days (or ninety days, if
substantial progress is being made at the end of such sixty day period) after
written notice by Rockwell to Rockwell Science Center.
(iv) Rockwell Collins hereby constitutes and appoints Rockwell the true and lawful attorney of Rockwell Collins and its Subsidiaries to act as their attorney-in-fact to execute any documents and to take all necessary steps to cause Rockwell Collins and its Subsidiaries to perform any of their obligations set forth in this Section 3.10(e), provided however, that Rockwell will provide Rockwell Collins sixty days written notice prior to executing such documents or commencing such steps. Rockwell Science Center hereby constitutes and appoints Rockwell the true and lawful attorney of Rockwell Science Center and its Subsidiaries to act as their attorney-in-fact to execute any documents and to take all necessary steps to cause Rockwell Science Center and its Subsidiaries to perform any of their obligations set forth in this Section 3.10(e), provided however, that Rockwell will provide Rockwell Science Center sixty days written notice prior to executing such documents or commencing such steps.
(f) From and after the Distribution Date, the Rockwell Automation Group will not hold itself out as having an affiliation with the Rockwell Collins Group.
SECTION 3.11 Consents. Prior to and after the Distribution Date, Rockwell, Rockwell Collins and Rockwell Science Center will, and will cause their respective Subsidiaries to, use their reasonable best efforts (as requested by any other party) to obtain, or to cause to be obtained, all Consents and to resolve all impracticalities of assignments or transfers necessary for the transfer of all Assets, Subsidiaries and Liabilities contemplated to be transferred pursuant to this Article III; provided, however, that none of Rockwell, Rockwell Collins or Rockwell Science Center or their respective Subsidiaries shall be obligated to pay any consideration or offer or grant any financial accommodation in connection therewith. Anything contained herein to the contrary notwithstanding, this Agreement shall not constitute an agreement to assign any Contract, License or Asset if an assignment or attempted assignment of the same without the Consent of any other party or parties thereto or other required Consent would constitute a breach thereof or of any applicable law or in any way impair the rights of any member of the Rockwell Automation Group, the Rockwell Collins Group or the Rockwell Science Center Group, as the case may be, thereunder. If any such Consent is not obtained or if an attempted assignment would be ineffective or would impair any member of a Group's rights under any such Contract, License or Asset so that the contemplated assignee hereunder (the "Recipient Party") would not receive all such rights, then (x) the party contemplated hereunder to assign such Contract, License or Asset (the "Assigning Party") will use reasonable best efforts (it being understood that such efforts shall not include any requirement of the Assigning Party to pay any consideration or offer or grant any financial accommodation) to provide or cause to be provided to the Recipient Party, to the extent permitted by law, the benefits of any such Contract, License or Asset and the Assigning Party will promptly pay or cause to be paid to the Recipient Party when received all moneys and properties received by the Assigning Party with respect to any such Contract, License or Asset and (y) the Recipient Party will pay, perform and discharge on behalf of the Assigning Party all of the Assigning Party's Liabilities thereunder in a timely manner and in accordance with the terms thereof. In addition, the Assigning Party will take such other actions (at the Recipient Party's expense) as may reasonably be requested by the Recipient Party in order to place the Recipient Party, insofar as reasonably possible, in the same position as if such Contract, License or Asset had been transferred as contemplated hereby and so all the benefits and burdens relating thereto, including possession, use, risk of loss, potential for gain and dominion, control and command, shall inure to the Recipient Party. If and when such Consents are obtained, the transfer of the applicable Contract, License or Asset shall be effected as promptly following the Time of Distribution as shall be practicable in accordance with the terms of this Agreement. To the extent that any transfers and assumptions contemplated by this Article III shall not have been consummated on or prior to the Time of Distribution, the parties shall cooperate to effect such transfers as promptly following the Time of Distribution as shall be practicable, it nonetheless being agreed and understood by the parties that no party shall be liable in any manner to any other party for any failure of any of the transfers contemplated by this Article III to be consummated prior to the Time of Distribution.
SECTION 3.12 Intellectual Property.
(a) Effective immediately after the Time of Distribution, Rockwell, on behalf of itself and the Rockwell Subsidiaries, hereby grants to Rockwell Science Center a royalty-free, world-wide, irrevocable, non-exclusive license under all Intellectual Property (excluding trademarks, trade names, domain names, service marks, trade dress or any other form of trade identity) which constitutes Rockwell Automation Assets and which immediately after the Time of Distribution is either owned by the Rockwell Automation Group or under which the Rockwell Automation Group has a right to license without the payment of royalties to a third party to make, have made, use, import, sell or otherwise dispose of products, or to practice any process in connection therewith, in the conduct of the Rockwell Science Center Business (as such business is being conducted at the Time of Distribution); said non-exclusive license being transferable only by sublicenses (to the extent permitted in the case of any restricted grant to Rockwell or a Rockwell Subsidiary, as a licensee) to members of the Rockwell Science Center Group and in connection with the sale or other disposition of all or any part of the Rockwell Science Center Business to which such Intellectual Property relates. To the extent that the Rockwell Science Center Group does not have copies of any information or materials relating to Intellectual Property licensed under this Section 3.12(a) that are essential to exercising such rights, Rockwell will, upon reasonable request, supply to the Rockwell Science Center Group copies of any such information or materials relating to such Intellectual Property. In no event shall Rockwell Science Center utilize the subject matter of any Intellectual Property licensed under this Section 3.12(a) in a manner that is competitive with the Rockwell Automation Business as such business is being conducted at the Time of Distribution, or any related extensions or expansions thereof, except that Rockwell Science Center shall be able to continue to utilize the subject matter of such Intellectual Property in a manner that is competitive with the Rockwell Automation Business in any related extensions or expansions of the Rockwell Automation Business to the extent (but only to the extent) such Intellectual Property was utilized by Rockwell Science Center prior to such extensions or expansions of the Rockwell Automation Business.
(b) Effective immediately after the Time of Distribution, Rockwell Science Center, on behalf of itself and the Rockwell Science Center Subsidiaries, hereby grants to Rockwell a royalty-free, world-wide, irrevocable, non-exclusive license under all Intellectual Property (excluding trademarks, trade names, domain names, service marks, trade dress or any other form of trade identity) which constitutes Rockwell Science Center Assets and which immediately after the Time of Distribution is either owned by the Rockwell Science Center Group or under which the Rockwell Science Center Group has a right to license without the payment of royalties to a third party to make, have made, use, import, sell or otherwise dispose of products, or to practice any process in connection therewith, in the conduct of the Rockwell Automation Business (as such business is being conducted at the Time of Distribution, or any related extensions or expansions thereof); said non-exclusive license being transferable only by sublicenses (to the extent permitted in the case of any restricted grant to Rockwell Science Center or a Rockwell Science Center Subsidiary, as a licensee) to members of the Rockwell Automation Group and in connection with the sale or other disposition of all or any part of the Rockwell Automation Business to which such Intellectual Property relates. To the extent that the Rockwell Automation Group does not have copies of any information or materials relating to
Intellectual Property licensed under this Section 3.12(b) that are essential to exercising such rights, Rockwell Science Center will, upon reasonable request, supply to the Rockwell Automation Group copies of any such information or materials relating to such Intellectual Property.
(c) Effective immediately after the Time of Distribution, Rockwell Collins, on behalf of itself and the Rockwell Collins Subsidiaries, hereby grants to Rockwell Science Center a royalty-free, world-wide, irrevocable, non-exclusive license under all Intellectual Property (excluding trademarks, trade names, domain names, service marks, trade dress or any other form of trade identity) which constitutes Rockwell Collins Assets and which immediately after the Time of Distribution is either owned by the Rockwell Collins Group or under which the Rockwell Collins Group has a right to license without the payment of royalties to a third party to make, have made, use, import, sell or otherwise dispose of products, or to practice any process in connection therewith, in the conduct of the Rockwell Science Center Business (as such business is being conducted at the Time of Distribution); said non-exclusive license being transferable only by sublicenses (to the extent permitted in the case of any restricted grant to Rockwell Collins or a Rockwell Collins Subsidiary, as a licensee) to members of the Rockwell Science Center Group and in connection with the sale or other disposition of all or any part of the Rockwell Science Center Business to which such Intellectual Property relates. To the extent that the Rockwell Science Center Group does not have copies of any information or materials relating to Intellectual Property licensed under this Section 3.12(c) that are essential to exercising such rights, Rockwell Collins will, upon reasonable request, supply to the Rockwell Science Center Group copies of any such information or materials relating to such Intellectual Property. In no event shall Rockwell Science Center utilize any subject matter of the Intellectual Property licensed under this Section 3.12(c) in a manner that is competitive with the Rockwell Collins Business as such business is being conducted at the Time of Distribution, or any related extensions or expansions thereof, except that Rockwell Science Center shall be able to continue to utilize the subject matter of such Intellectual Property in a manner that is competitive with the Rockwell Collins Business in any related extensions or expansions of the Rockwell Collins Business to the extent (but only to the extent) such Intellectual Property was utilized by Rockwell Science Center prior to such extensions or expansions of the Rockwell Collins Businesses.
(d) Effective immediately after the Time of Distribution, Rockwell Science Center, on behalf of itself and the Rockwell Science Center Subsidiaries, hereby grants to Rockwell Collins a royalty-free, world-wide, irrevocable, non-exclusive license under all Intellectual Property (excluding trademarks, trade names, domain names, service marks, trade dress or any other form of trade identity) which constitutes Rockwell Science Center Assets and which immediately after the Time of Distribution is either owned by the Rockwell Science Center Group or under which the Rockwell Science Center Group has a right to license without the payment of royalties to a third party to make, have made, use, import, sell or otherwise dispose of products, or to practice any process in connection therewith, in the conduct of the Rockwell Collins Business (as such business is being conducted at the Time of Distribution, or any related extensions or expansions thereof); said non-exclusive license being transferable only by sublicenses (to the extent permitted in the case of any restricted grant to Rockwell Science Center or a Rockwell Science Center Subsidiary, as a licensee) to members of the Rockwell
Collins Group and in connection with the sale or other disposition of all or any part of the Rockwell Collins Business to which such Intellectual Property relates. To the extent that the Rockwell Collins Group does not have copies of any information or materials relating to Intellectual Property licensed under this Section 3.12(d) that are essential to exercising such rights, Rockwell Science Center will, upon reasonable request, supply to the Rockwell Collins Group copies of any such information or materials relating to such Intellectual Property.
(e) Rockwell hereby covenants not to (and to cause the Rockwell Subsidiaries not to) assert any claims or rights, bring any suit, or institute any other action against the Rockwell Collins Group or any Person in the chain of title of products and services of the Rockwell Collins Group, based upon any infringement of any Intellectual Property (excluding trademarks, trade names, domain names, service marks, trade dress or any other form of trade identity) which constitutes Rockwell Automation Assets and which immediately after the Time of Distribution is either owned by the Rockwell Automation Group or under which the Rockwell Automation Group has a right to license or grant immunity from suit without payment of royalties to a third party which might occur as a result of any manufacture, use, import, sale or other disposition by the Rockwell Collins Group of products or services after the Time of Distribution in the conduct of the Rockwell Collins Business (as such business is being conducted at the Time of Distribution, or any related extensions or expansions thereof). This covenant not to sue shall extend in perpetuity to (i) the Rockwell Collins Group and (ii) assignees of the Rockwell Collins Group, but only in connection with the sale or other disposition of all or any part of the Rockwell Collins Business to which such Intellectual Property relates. All Intellectual Property covered by the covenant in this Section 3.12(e) shall be transferred, whether by assignment, license or otherwise, subject to this covenant and all transferees of such Intellectual Property shall take such assignment, license or other transfer subject to this covenant.
(f) Rockwell Collins hereby covenants not to (and to cause the Rockwell Collins Subsidiaries not to) assert any claims or rights, bring any suit, or institute any other action against the Rockwell Automation Group or any Person in the chain of title of products and services of the Rockwell Automation Group, based upon any infringement of any Intellectual Property (excluding trademarks, trade names, domain names, service marks, trade dress or any other form of trade identity) which constitutes Rockwell Collins Assets and which immediately after the Time of Distribution is either owned by the Rockwell Collins Group or under which the Rockwell Collins Group has a right to license or grant immunity from suit without payment of royalties to a third party which might occur as a result of any manufacture, use, import, sale or other disposition by the Rockwell Automation Group of products or services after the Time of Distribution in the conduct of the Rockwell Automation Business (as such business is being conducted at the Time of Distribution, or any related extensions or expansions thereof). This covenant not to sue shall extend in perpetuity to (i) the Rockwell Automation Group and (ii) assignees of the Rockwell Automation Group, but only in connection with the sale or other disposition of all or any part of the Rockwell Automation Business to which such Intellectual Property relates. All Intellectual Property covered by the covenant in this Section 3.12(f) shall be transferred, whether by assignment, license or otherwise, subject to this covenant and all transferees of such Intellectual Property shall take such assignment, license or other transfer subject to this covenant.
(g) (i) For purposes of this Section 3.12(g), the following terms will have the following definitions:
(A) "Administrative Services" means services pertaining to personnel, payroll, property management, benefits, human resource management, financial planning, case docketing and management, contract and subcontract management, facilities management, proposal activities and other similar services.
(B) "Administrative Services Software" means software
originated internally and owned by Rockwell or any of its Subsidiaries
(including members of the Rockwell Collins Group and members of the
Rockwell Science Center Group) prior to the Time of Distribution and
relating to the provision of Administrative Services to business units
of Rockwell or any of its Subsidiaries (including members of the
Rockwell Collins Group and members of the Rockwell Science Center
Group) immediately prior to the Time of Distribution, regardless of
where ownership of such software vests after the Time of Distribution.
Administrative Services Software also shall include materials and
documentation supplied by one party to the other pursuant to clause
(iv) of this Section 3.12(g).
(C) "Transition Period" means the period from the Time of Distribution until the termination or expiration of the provision of services pursuant to each of the Transition Agreement and the Continuing Services Agreements.
(ii) Anything contained herein to the contrary notwithstanding, the following licenses shall govern Administrative Services Software:
(A) Effective as of the Time of Distribution, Rockwell, on
behalf of itself and the Rockwell Subsidiaries, hereby grants to the
Rockwell Collins Group and the Rockwell Science Center Group a
royalty-free, world-wide, irrevocable non-exclusive license to use
Administrative Services Software which constitutes Rockwell Automation
Assets and which immediately after the Time of Distribution is either
owned by the Rockwell Automation Group or under which the Rockwell
Automation Group has a right to license without the payment of
royalties to a third party, but only for the internal business
purposes of the Rockwell Collins Group or the Rockwell Science Center
Group, as the case may be, including the right to sublicense only to
(x) members of the Rockwell Collins Group or the Rockwell Science
Center Group, as the case may be, and (y) service providers to use the
Administrative Services Software for or on behalf of the Rockwell
Collins Group or the Rockwell Science Center Group, as the case may
be.
(B) Effective as of the Time of Distribution, Rockwell Collins, on behalf of itself and the Rockwell Collins Subsidiaries, hereby grants to the Rockwell Automation Group and the Rockwell Science Center Group a royalty-free, world-wide, irrevocable non-exclusive license to use Administrative Services Software which constitutes Rockwell Collins Assets and which immediately after the Time of Distribution is either owned by the Rockwell Collins Group or under which the Rockwell Collins Group has a right to license without the payment of royalties to a third party, but only for the internal
business purposes of the Rockwell Automation Group or the Rockwell Science Center Group, as the case may be, including the right to sublicense only to (x) members of the Rockwell Automation Group or the Rockwell Science Center Group, as the case may be, and (y) service providers to use the Administrative Services Software for or on behalf of the Rockwell Automation Group or the Rockwell Science Center Group, as the case may be.
(C) Effective as of the Time of Distribution, Rockwell Science Center, on behalf of itself and the Rockwell Science Center Subsidiaries, hereby grants to the Rockwell Automation Group and the Rockwell Collins Group a royalty-free, world-wide, irrevocable non-exclusive license to use Administrative Services Software which constitutes Rockwell Science Center Assets and which immediately after the Time of Distribution is either owned by the Rockwell Science Center Group or under which the Rockwell Science Center Group has a right to license without the payment of royalties to a third party, but only for the internal business purposes of the Rockwell Automation Group or the Rockwell Collins Group, as the case may be, including the right to sublicense only to (x) members of the Rockwell Automation Group or the Rockwell Collins Group, as the case may be, and (y) service providers to use the Administrative Services Software for or on behalf of the Rockwell Automation Group or the Rockwell Collins Group, as the case may be.
(D) Except as set forth in this paragraph (ii), the licenses granted pursuant to this Section 3.12(g) do not include the right to sublicense. Software originated or maintained during the Transition Period by a party and relating to the provision of Administrative Services to any other party pursuant to the Transition Agreement or the Continuing Services Agreements shall be considered Administrative Services Software subject to the above licenses, provided, that the party to be licensed has paid a mutually agreeable share of the origination and/or maintenance costs for such software and requests during the Transition Period that such software be subject to such licenses.
(iii) Each party shall have the right to use, disclose, perform, display, copy, distribute and make derivatives of Administrative Services Software within the scope of the licenses granted herein. Title to Administrative Services Software and all rights therein, including all rights in patents, copyrights and trade secrets and any other intellectual property rights applicable thereto, shall remain vested in the party to which ownership is allocated pursuant to this Agreement. Notwithstanding anything to the contrary contained herein, each licensed party agrees that it will not use, copy, disclose, sell, assign or sublicense, or otherwise transfer Administrative Services Software licensed to it under this Section 3.12(g) or any derivatives thereof, except as expressly provided in this Section 3.12(g).
(iv) To the extent that a licensed party does not have copies of any Administrative Services Software or materials and documentation (such as source code listings, flow charts, user guides and programmer's guides) relating to the operation and maintenance of such Administrative Services Software to which another applicable party has ownership, such owning party shall, as soon as practicable after request of the licensed party, supply to the
licensed party copies of such Administrative Services Software and any related operating and maintenance materials or documentation existing as of the Time of Distribution.
(v) In the event that Administrative Services Software is used by the owner in the ordinary course of its business either associated or bundled with software owned or controlled by a third party (e.g., as a suite of software), without which the Administrative Services Software would be wholly or partly inoperable or otherwise unfit for its intended purposes, the grant of the licenses under the provisions of this Section 3.12(g) shall not be construed as an implied license to use the software of such a third party or as an undertaking on the part of the owner of the Administrative Services Software to obtain a license to permit the use of such third party software.
(h) (i) Rockwell makes no representations or warranties
of any kind with respect to the validity, scope or enforceability of any
Intellectual Property of Rockwell or the Rockwell Subsidiaries subject to this
Section 3.12 and none of Rockwell or the Rockwell Subsidiaries has any
obligation to file or prosecute any patent applications or maintain any
patents in force in connection therewith. Notwithstanding anything contained
herein to the contrary, this Section 3.12 will not be applicable to any rights
in, and to the use of, the names, trademarks, trade names and service marks
"Rockwell" and "Rockwell International" and all corporate symbols and logos
related thereto and all names, trademarks, trade names and service marks which
include the words "Rockwell" or "Rockwell International" or any derivative
thereof.
(ii) Rockwell Collins makes no representations or warranties of any kind with respect to the validity, scope or enforceability of any Intellectual Property of Rockwell Collins or the Rockwell Collins Subsidiaries subject to this Section 3.12 and none of Rockwell Collins or the Rockwell Collins Subsidiaries has any obligation to file or prosecute any patent applications or maintain any patents in force in connection therewith.
(iii) Rockwell Science Center makes no representations or warranties of any kind with respect to the validity, scope or enforceability of any Intellectual Property of Rockwell Science Center or the Rockwell Science Center Subsidiaries subject to this Section 3.12 and none of Rockwell Science Center or the Rockwell Science Center Subsidiaries has any obligation to file or prosecute any patent applications or maintain any patents in force in connection therewith.
SECTION 3.13 Software and Other License Agreements. If after
the Time of Distribution, Rockwell Collins (or any member of the Rockwell
Collins Group) or Rockwell Science Center (or any member of the Rockwell
Science Center Group), as the case may be, no longer has licensee rights under
any software or other license agreement of Rockwell (or any member of the
Rockwell Automation Group) (a "Rockwell Automation License Agreement") that,
prior to the Time of Distribution, was used in the conduct of the Rockwell
Collins Business or the Rockwell Science Center Business, as the case may be,
(i) because such license agreement does not constitute a Rockwell Collins
Asset or a Rockwell Science Center Asset, as the case may be, (ii) because the
transfer of, or sublicense under such Rockwell Automation License Agreement
required the consent of a third party and such consent was not obtained or
(iii) for
any other reason, then Rockwell Collins or Rockwell Science Center, as the case may be, shall be responsible for all costs and expenses incurred in connection with the procurement of new license agreements to replace any such Rockwell Automation License Agreements.
SECTION 3.14 Charitable Entities. Prior to the Time of Distribution, Rockwell Collins shall have established the Rockwell Collins Charitable Corporation. Prior to the Time of Distribution, Rockwell shall cause $[ ] to be transferred from the Rockwell Charitable Trust to the Rockwell Collins Charitable Corporation. Prior to the Time of Distribution, Rockwell shall cause to be transferred to the Rockwell Collins Charitable Corporation, and Rockwell and Rockwell Collins shall cause the Rockwell Collins Charitable Corporation to assume, the commitments of the Rockwell Charitable Trust set forth on Schedule 3.14.
ARTICLE IV
MUTUAL RELEASE; INDEMNIFICATION
SECTION 4.01 Mutual Release. Effective as of the Time of Distribution and except as otherwise specifically set forth in the Transaction Agreements, each of Rockwell, on behalf of itself and the Rockwell Subsidiaries, Rockwell Collins, on behalf of itself and the Rockwell Collins Subsidiaries, and Rockwell Science Center, on behalf of itself and the Rockwell Science Center Subsidiaries, hereby releases and forever discharges each other party and its Subsidiaries, and its and their respective officers, directors, agents, record and beneficial security holders (including trustees and beneficiaries of trusts holding such securities), advisors and Representatives (in each case, 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 or ever will have, which arise out of or relate to events, circumstances or actions taken by such other party occurring or failing to occur or any conditions existing at or prior to the Time of Distribution; provided, however, that the foregoing general release shall not apply to (i) any Liabilities or other obligations (including Liabilities with respect to payment, reimbursement, indemnification or contribution) under the Transaction Agreements or assumed, transferred, assigned, allocated or arising under any of the Transaction Agreements (including any Liability that the parties may have with respect to payment, performance, reimbursement, indemnification or contribution pursuant to any Transaction Agreement for claims brought against the parties by third Persons) and the foregoing release will not affect any party's right to enforce the Transaction Agreements in accordance with their terms, (ii) any Liability arising from or relating to any agreement, arrangement, commitment or undertaking described in Section 3.04(b)(ii) (including Ordinary Course Intercompany Arrangements), or (iii) any Liability the release of which would result in the release of any Person other than a Person released pursuant to this Section 4.01 (provided, that the parties agree not to bring suit or permit any of their Subsidiaries to bring suit against any member of any other Group with respect to any Liability to the extent such member of the other Group would be released with respect to such Liability by this Section 4.01 but for this clause (iii)).
SECTION 4.02 Indemnification by Rockwell. Subject to the provisions of this Article IV, Rockwell shall indemnify, defend and hold harmless the Rockwell Collins Indemnitees and the Rockwell Science Center Indemnitees from and against, and pay or reimburse, as the case may be, the Rockwell Collins Indemnitees and the Rockwell Science Center Indemnitees for, all Indemnifiable Losses, as incurred, suffered by any Rockwell Collins Indemnitee or Rockwell Science Center Indemnitee, as the case may be, based upon, arising out of or relating to the following (except that paragraph (b) below shall not apply to Rockwell Science Center Indemnitees):
(a) the Rockwell Automation Liabilities (including the failure by Rockwell or any other member of the Rockwell Automation Group to pay, perform or otherwise discharge such Liabilities in accordance with their terms), whether such Indemnifiable Losses are based upon, arise out of or relate to events, occurrences, actions, omissions, facts, circumstances or conditions occurring, existing or asserted before, at or after the Time of Distribution;
(b) any untrue statement or alleged untrue statement of a material fact contained in the sections of the Form 10 listed on Schedule 4.02(b), or any omission or alleged omission to state in such sections a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; but only in each case with respect to information relating to the Rockwell Automation Group provided by Rockwell expressly for use in the sections of the Form 10 listed on Schedule 4.02(b);
(c) the breach by any member of the Rockwell Automation Group of any agreement or covenant contained in a Transaction Agreement which does not by its express terms expire at the Time of Distribution; or
(d) the enforcement by the Rockwell Collins Indemnitees or the Rockwell Science Center Indemnitees, as the case may be, of their rights to be indemnified, defended and held harmless under this Agreement.
SECTION 4.03 Indemnification by Rockwell Collins. Subject to the provisions of this Article IV, Rockwell Collins shall indemnify, defend and hold harmless the Rockwell Automation Indemnitees and the Rockwell Science Center Indemnitees from and against, and pay or reimburse, as the case may be, the Rockwell Automation Indemnitees and the Rockwell Science Center Indemnitees for, all Indemnifiable Losses, as incurred, suffered by any Rockwell Automation Indemnitee or Rockwell Science Center Indemnitee, as the case may be, based upon, arising out of or relating to the following (except that paragraphs (b) and (d) below will not apply to Rockwell Science Center Indemnitees):
(a) the Rockwell Collins Liabilities (including the failure by Rockwell Collins or any other member of the Rockwell Collins Group to pay, perform or otherwise discharge Rockwell Collins Liabilities in accordance with their terms), whether such Indemnifiable Losses are based upon, arise out of or relate to events, occurrences,
actions, omissions, facts, circumstances or conditions occurring, existing or asserted before, at or after the Time of Distribution;
(b) any untrue statement or alleged untrue statement of a material fact contained in the Form 10, or any omission or alleged omission to state in the Form 10 a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except in each case with respect to information relating to the Rockwell Automation Group provided by Rockwell expressly for use in the sections of the Form 10 listed on Schedule 4.02(b);
(c) the breach by any member of the Rockwell Collins Group of any agreement or covenant contained in a Transaction Agreement which does not by its express terms expire at the Time of Distribution;
(d) the use by members of the Rockwell Collins Group of any names, trademarks, trade names, domain names or corporate symbols or logos pursuant to Section 3.10(b) or Section 3.10(d); or
(e) the enforcement by the Rockwell Automation Indemnitees or the Rockwell Science Center Indemnitees, as the case may be, of their rights to be indemnified, defended and held harmless under this Agreement.
SECTION 4.04 Indemnification by Rockwell Science Center. Subject to the provisions of this Article IV, Rockwell Science Center shall indemnify, defend and hold harmless the Rockwell Automation Indemnitees and the Rockwell Collins Indemnitees from and against, and pay or reimburse, as the case may be, the Rockwell Automation Indemnitees and the Rockwell Collins Indemnitees for, all Indemnifiable Losses, as incurred, suffered by any Rockwell Automation Indemnitee or Rockwell Collins Indemnitee, as the case may be, based upon, arising out of or relating to the following (except that paragraph (c) below will not apply to Rockwell Collins Indemnitees):
(a) the Rockwell Science Center Liabilities (including the failure by Rockwell Science Center or any other member of the Rockwell Science Center Group to pay, perform or otherwise discharge Rockwell Science Center Liabilities in accordance with their terms), whether such Indemnifiable Losses are based upon, arise out of or relate to or are otherwise in connection with events, occurrences, actions, omissions, facts, circumstances or conditions occurring, existing or asserted before, at or after the Time of Distribution;
(b) the breach by any member of the Rockwell Science Center Group of any agreement or covenant contained in a Transaction Agreement which does not by its express terms expire at the Time of Distribution;
(c) the use by members of the Rockwell Science Center Group of any names, trademarks, trade names, domain names or corporate symbols or logos pursuant to Section 3.10(c) or Section 3.10(d); or
(d) the enforcement by the Rockwell Automation Indemnitees or the Rockwell Collins Indemnitees, as the case may be, of their rights to be indemnified, defended and held harmless under this Agreement.
SECTION 4.05 Limitations on Indemnification Obligations.
(a) The amount which any party (an "Indemnifying Party") is or may be required to pay to an Indemnitee in respect of Indemnifiable Losses or other Liability for which indemnification is provided under this Agreement shall be reduced by any amounts actually received (including Insurance Proceeds actually received) by or on behalf of such Indemnitee (net of increased insurance premiums and charges related directly and solely to the related Indemnifiable Losses and costs and expenses (including reasonable legal fees and expenses) incurred by such Indemnitee in connection with seeking to collect and collecting such amounts) in respect of such Indemnifiable Losses or other Liability (such net amounts are referred to herein as "Indemnity Reduction Amounts"). If any Indemnitee receives any Indemnity Reduction Amounts in respect of an Indemnifiable Loss for which indemnification is provided under this Agreement after the full amount of such Indemnifiable Loss has been paid by an Indemnifying Party or after an Indemnifying Party has made a partial payment of such Indemnifiable Loss and such Indemnity Reduction Amounts exceeds the remaining unpaid balance of such Indemnifiable Loss, then the Indemnitee shall promptly remit to the Indemnifying Party an amount equal to the excess (if any) of (A) the amount theretofore paid by the Indemnifying Party in respect of such Indemnifiable Loss, less (B) the amount of the indemnity payment that would have been due if such Indemnity Reduction Amounts in respect thereof had been received before the indemnity payment was made. An insurer or other third party who would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto or, solely by virtue of the indemnification provisions hereof, have any subrogation rights with respect thereto, it being expressly understood and agreed that no insurer or any other third party shall be entitled to any benefit they would not be entitled to receive in the absence of the indemnification provisions by virtue of the indemnification provisions hereof.
(b) In determining the amount of any Indemnifiable Losses, such amount shall be (i) reduced to take into account any net Tax benefit realized by the Indemnitee arising from the incurrence or payment by the Indemnitee of such Indemnifiable Losses and (ii) increased to take into account any net Tax cost incurred by the Indemnitee as a result of the receipt or accrual of payments hereunder (grossed-up for such increase), in each case determined by treating the Indemnitee as recognizing all other items of income, gain, loss, deduction or credit before recognizing any item arising from such Indemnifiable Losses. It is the intention of the parties to this Agreement that indemnity payments made pursuant to this Agreement are to be treated as relating back to the Distribution as an adjustment to capital (i.e., capital contribution or distribution), and the parties shall not take any position inconsistent with such intention before any Tax Authority (as defined in the Tax Allocation Agreement), except to the extent that a final determination (as defined in Section 1313 of the Code) with respect to the recipient party causes any such payment not to be so treated.
SECTION 4.06 Procedures Relating to Indemnification.
(a) If a claim or demand is made against an Indemnitee, or an Indemnitee shall otherwise learn of an assertion, by any Person who is not a party to this Agreement (or an Affiliate thereof) as to which an Indemnifying Party may be obligated to provide indemnification pursuant to this Agreement (a "Third Party Claim"), such Indemnitee will notify the Indemnifying Party in writing, and in reasonable detail, of the Third Party Claim reasonably promptly after becoming aware of such Third Party Claim; provided, however, that failure to give such notification will not affect the indemnification provided hereunder except to the extent the Indemnifying Party shall have been actually prejudiced as a result of such failure. Thereafter, the Indemnitee will deliver to the Indemnifying Party, promptly after the Indemnitee's receipt thereof, copies of all material notices and documents (including court papers) received or transmitted by the Indemnitee relating to the Third Party Claim.
(b) If a Third Party Claim is made against an Indemnitee, the Indemnifying Party will be entitled to participate in or to assume the defense thereof (in either case, at the expense of the Indemnifying Party) with counsel selected by the Indemnifying Party and reasonably satisfactory to the Indemnitee. Should the Indemnifying Party so elect to assume the defense of a Third Party Claim, the Indemnifying Party will not be liable to the Indemnitee for any legal or other expenses subsequently incurred by the Indemnitee in connection with the defense thereof; provided, that if in the Indemnitee's reasonable judgment a conflict of interest exists in respect of such claim or if the Indemnifying Party shall have assumed responsibility for such claim with any reservations or exceptions, such Indemnitee will have the right to employ separate counsel reasonably satisfactory to the Indemnifying Party to represent such Indemnitee and in that event the reasonable fees and expenses of such separate counsel (but not more than one separate counsel for all Indemnitees similarly situated) shall be paid by such Indemnifying Party. If the Indemnifying Party assumes the defense of any Third Party Claim, the Indemnitee will have the right to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the Indemnifying Party, it being understood that the Indemnifying Party will control such defense. The Indemnifying Party will be liable for the fees and expenses of counsel employed by the Indemnitee for any period during which the Indemnifying Party has failed to assume the defense thereof. If the Indemnifying Party assumes the defense of any Third Party Claim, the Indemnifying Party will promptly supply to the Indemnitee copies of all material correspondence and documents relating to or in connection with such Third Party Claim and keep the Indemnitee fully informed of all material developments relating to or in connection with such Third Party Claim (including providing to the Indemnitee on request updates and summaries as to the status thereof). If the Indemnifying Party chooses to defend a Third Party Claim, the parties hereto will cooperate in the defense thereof (such cooperation to be at the expense, including reasonable legal fees and expenses, of the Indemnifying Party), which cooperation shall include the retention in accordance with this Agreement and (upon the Indemnifying Party's request) the provision to the Indemnifying Party of records and information which are reasonably relevant to such Third Party Claim, and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder.
(c) No Indemnifying Party will consent to any settlement, compromise or discharge (including the consent to entry of any judgment) of any Third Party Claim without the Indemnitee's prior written consent (which consent will not be unreasonably withheld); provided, that if the Indemnifying Party assumes the defense of any Third Party Claim, the Indemnitee will agree to any settlement, compromise or discharge of such Third Party Claim which the Indemnifying Party may recommend and which by its terms obligates the Indemnifying Party to pay the full amount of Indemnifiable Losses in connection with such Third Party Claim and unconditionally and irrevocably releases the Indemnitee and its Affiliates completely from all Liability in connection with such Third Party Claim; provided, however, that the Indemnitee may refuse to agree to any such settlement, compromise or discharge (x) that provides for injunctive or other nonmonetary relief affecting the Indemnitee or any of its Affiliates or (y) that, in the reasonable opinion of the Indemnitee, would otherwise materially adversely affect the Indemnitee or any of its Affiliates. Whether or not the Indemnifying Party shall have assumed the defense of a Third Party Claim, the Indemnitee will not (unless required by law) admit any liability with respect to, or settle, compromise or discharge, such Third Party Claim without the Indemnifying Party's prior written consent (which consent will not be unreasonably withheld).
(d) Any claim on account of Indemnifiable Losses which does not involve a Third Party Claim will be asserted by reasonably prompt written notice given by the Indemnitee to the Indemnifying Party from whom such indemnification is sought. The failure by any Indemnitee so to notify the Indemnifying Party will not relieve the Indemnifying Party from any liability which it may have to such Indemnitee under this Agreement, except to the extent that the Indemnifying Party shall have been actually prejudiced by such failure.
(e) In the event of payment in full by an Indemnifying Party to any Indemnitee in connection with any Third Party Claim, such Indemnifying Party will be subrogated to and shall stand in the place of such Indemnitee as to any events or circumstances in respect of which such Indemnitee may have any right or claim relating to such Third Party Claim against any claimant or plaintiff asserting such Third Party Claim or against any other Person. Such Indemnitee will cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any subrogated right or claim.
SECTION 4.07 Remedies Cumulative. Subject to the provisions of Section 6.06, the remedies provided in this Article IV shall be cumulative and shall not preclude assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against any Indemnifying Party.
SECTION 4.08 Survival of Indemnities. The obligations of each of Rockwell, Rockwell Collins and Rockwell Science Center under this Article IV will not terminate at any time and will survive the sale or other transfer by any party of any assets or businesses or the assignment by any party of any Liabilities with respect to any Indemnifiable Losses of the other related to such assets, businesses or Liabilities.
SECTION 4.09 Exclusivity of Tax Allocation Agreement. Notwithstanding anything in this Agreement to the contrary, the Tax Allocation Agreement will be the exclusive
agreement among the parties with respect to all Tax matters, including indemnification in respect of Tax matters.
ARTICLE V
ACCESS TO INFORMATION
SECTION 5.01 Access to Information.
(a) From and after the Time of Distribution, Rockwell will, and will cause each Rockwell Subsidiary to, afford to Rockwell Collins and its Representatives (at Rockwell Collins' expense) reasonable access and duplicating rights during normal business hours and upon reasonable advance notice to all Information within Rockwell's possession or control or in the possession or control of a Rockwell Subsidiary relating to Rockwell Collins, any Rockwell Collins Subsidiary or the Rockwell Collins Business insofar as such access is reasonably required by Rockwell Collins or any Rockwell Collins Subsidiary, subject to the provisions below regarding Privileged Information.
(b) From and after the Time of Distribution, Rockwell will, and will cause each Rockwell Subsidiary to, afford to Rockwell Science Center and its Representatives (at Rockwell Science Center's expense) reasonable access and duplicating rights during normal business hours and upon reasonable advance notice to all Information within Rockwell's possession or control or in the possession or control of a Rockwell Subsidiary relating to Rockwell Science Center, any Rockwell Science Center Subsidiary or the Rockwell Science Center Business insofar as such access is reasonably required by Rockwell Science Center or any Rockwell Science Center Subsidiary, subject to the provisions below regarding Privileged Information.
(c) From and after the Time of Distribution, Rockwell Collins will, and will cause each Rockwell Collins Subsidiary to, afford to Rockwell and its Representatives (at Rockwell's expense) reasonable access and duplicating rights during normal business hours and upon reasonable advance notice to all Information within Rockwell Collins' possession or control or in the possession or control of a Rockwell Collins Subsidiary relating to Rockwell, any Rockwell Subsidiary or the Rockwell Automation Business insofar as such access is reasonably required by Rockwell or any Rockwell Subsidiary, subject to the provisions below regarding Privileged Information.
(d) From and after the Time of Distribution, Rockwell Collins will, and will cause each Rockwell Collins Subsidiary to, afford to Rockwell Science Center and its Representatives (at Rockwell Science Center's expense) reasonable access and duplicating rights during normal business hours and upon reasonable advance notice to all Information within Rockwell Collins' possession or control or in the possession or control of a Rockwell Collins Subsidiary relating to Rockwell Science Center, any Rockwell Science Center Subsidiary or the Rockwell Science Center Business insofar as such access is reasonably required by Rockwell
Science Center or any Rockwell Science Center Subsidiary, subject to the provisions below regarding Privileged Information.
(e) From and after the Time of Distribution, Rockwell Science Center will, and will cause each Rockwell Science Center Subsidiary to, afford to Rockwell and its Representatives (at Rockwell's expense) reasonable access and duplicating rights during normal business hours and upon reasonable advance notice to all Information within Rockwell Science Center's possession or control or in the possession or control of a Rockwell Science Center Subsidiary relating to Rockwell, any Rockwell Subsidiary or the Rockwell Automation Business insofar as such access is reasonably required by Rockwell or any Rockwell Subsidiary, subject to the provisions below regarding Privileged Information.
(f) From and after the Time of Distribution, Rockwell Science Center will, and will cause each Rockwell Science Center Subsidiary to, afford to Rockwell Collins and its Representatives (at Rockwell Collins' expense) reasonable access and duplicating rights during normal business hours and upon reasonable advance notice to all Information within Rockwell Science Center's possession or control or in the possession or control of a Rockwell Science Center Subsidiary relating to Rockwell Collins, any Rockwell Collins Subsidiary or the Rockwell Collins Business insofar as such access is reasonably required by Rockwell Collins or any Rockwell Collins Subsidiary, subject to the provisions below regarding Privileged Information.
(g) Without limiting the foregoing, Information may be requested under this Article V for audit, accounting, claims, litigation, insurance, environmental and safety and tax purposes, as well as for purposes of fulfilling disclosure and reporting obligations and for performing this Agreement and the transactions contemplated hereby.
In furtherance of the foregoing:
(i) Each party acknowledges that (A) each of Rockwell, Rockwell Collins and the Rockwell Science Center (and the members of the Rockwell Automation Group, the Rockwell Collins Group and the Rockwell Science Center Group, respectively) has or may obtain Privileged Information; (B) there are a number of Actions affecting one or more of the members of the Rockwell Automation Group, the Rockwell Collins Group and the Rockwell Science Center Group; (C) the parties may have a common legal interest in Actions, in the Privileged Information, and in the preservation of the confidential status of the Privileged Information; and (D) each of Rockwell, Rockwell Collins and Rockwell Science Center intends that the transactions contemplated by the Transaction Agreements and any transfer of Privileged Information in connection therewith shall not operate as a waiver of any potentially applicable privilege.
(ii) Each of Rockwell, Rockwell Collins and Rockwell Science Center 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 another Group without providing prompt written notice to and obtaining the prior written consent of the applicable other party, which consent will not be
unreasonably withheld. In the event of a disagreement between any member of the Rockwell Automation Group, any member of the Rockwell Collins Group and/or any member of the Rockwell Science Center Group concerning the reasonableness of withholding such consent, no disclosure will be made prior to a final, nonappealable resolution of such disagreement.
(iii) Upon any member of the Rockwell Automation Group, any member of the Rockwell Collins Group or any member of the Rockwell Science Center Group receiving any subpoena or other compulsory disclosure notice from a court, other Governmental Entity or otherwise which requests disclosure of Privileged Information, in each case relating to the business of another Group, the recipient of the notice will promptly provide to the applicable other party (following the notice provisions set forth herein) a copy of such notice, the intended response, and all materials or information relating to the other Group that might be disclosed. In the event of a disagreement as to the intended response or disclosure, unless and until the disagreement is resolved as provided in Section 5.01(g)(ii), the parties will cooperate to assert all defenses to disclosure claimed by any Group, at the cost and expense of the Group claiming such defense to disclosure, and shall not disclose any disputed documents or information until all legal defenses and claims of privilege have been finally determined.
SECTION 5.02 Production of Witnesses. Subject to Section 5.01, after the Time of Distribution, each of Rockwell, Rockwell Collins and Rockwell Science Center will, and will cause each member of the Rockwell Automation Group, the Rockwell Collins Group and the Rockwell Science Center Group, respectively, to, make available to each other party and members of such other party's Group, upon written request and at the cost and expense of the party so requesting, its directors, officers, employees and agents as witnesses to the extent that any such Person may reasonably be required (giving consideration to business demands of such directors, officers, employees and agents) in connection with any Actions or other proceedings in which the requesting party may from time to time be involved, provided that the same shall not unreasonably interfere with the conduct of business by the Group of which the request is made.
SECTION 5.03 Retention of Records. Except as otherwise required by law or agreed to by the parties in writing, if any Information relating to the business, assets or Liabilities of a member of a Group is retained by a member of any other Group, each of Rockwell, Rockwell Collins and Rockwell Science Center will, and will cause the members of the Group of which it is a member to, retain for the period required by the applicable Rockwell records retention policy in effect immediately prior to the Time of Distribution all such Information in such Group's possession or under its control. In addition, after the expiration of such required retention period, if any member of a Group wishes to destroy or dispose of any such Information, prior to destroying or disposing of any of such Information, (1) Rockwell, Rockwell Collins or Rockwell Science Center, on behalf of the member of its Group that is proposing to dispose of or destroy any such Information, will provide no less than 30 days' prior written notice to the applicable other party, specifying in reasonable detail the Information proposed to be destroyed or disposed of, and (2) if, prior to the scheduled date for such destruction or disposal, the recipient of such notice requests in writing that any of the Information proposed to be destroyed or disposed of be delivered to such requesting party, the party whose Group is proposing to
dispose of or destroy such Information promptly will arrange for the delivery of the requested Information to a location specified by, and at the expense of, the requesting party.
SECTION 5.04 Confidentiality. Subject to Section 5.01, which
shall govern Privileged Information, from and after the Time of Distribution,
each of Rockwell, Rockwell Collins and Rockwell Science Center shall hold, and
shall use reasonable efforts to cause members of its Group and its and their
Representatives to hold, in strict confidence all Information concerning each
other party's Group in its possession or control or furnished to it by such
other party's Group pursuant to the Transaction Agreements or the transactions
contemplated thereby and will not release or disclose such Information to any
other Person, except members of its Group and its and their Representatives,
who will be bound by the provisions of this Section 5.04; provided, however,
that any member of the Rockwell Automation Group, the Rockwell Collins Group
or the Rockwell Science Center Group may disclose such Information to the
extent that (a) disclosure is compelled by judicial or administrative process
or, in the opinion of such Person's counsel, by other requirements of law (in
which case the party required to make such disclosure will notify the other
party as soon as practicable of such obligation or requirement and cooperate
with the other party to limit the Information required to be disclosed and to
obtain a protective order or other appropriate remedy with respect to the
Information ultimately disclosed) or (b) such Person can show that such
Information was (i) available to such Person on a nonconfidential basis (other
than from a member of another 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 another party's Group, and not acquired from
such source subject to any confidentiality obligation on the part of such
source known to the acquiror, or on the part of the acquiror. Each party
acknowledges that it will be liable for any breach of this Section 5.04 by its
Representatives to whom such Information is disclosed by such party.
Notwithstanding the foregoing, each of Rockwell, Rockwell Collins and Rockwell
Science Center will be deemed to have satisfied its obligations under this
Section 5.04 with respect to any Information (other than Privileged
Information) if it exercises the same care with regard to such Information as
it takes to preserve confidentiality for its own similar Information.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01 Entire Agreement; Construction. This Agreement and the Ancillary Agreements, including any annexes, schedules and exhibits hereto or thereto, and other agreements and documents referred to herein and therein, will together constitute the entire agreement between the parties with respect to the subject matter hereof and thereof and will supersede all prior negotiations, agreements and understandings of the parties of any nature, whether oral or written, with respect to such subject matter. Notwithstanding any other provisions in the Transaction Agreements to the contrary, (i) in the event and to the extent that there is a conflict between the provisions of this Agreement and the provisions of the Employee Matters Agreement or the Tax Allocation Agreement, the provisions of the Employee Matters Agreement or the Tax Allocation Agreement, as appropriate, will control and (ii) in the event
and to the extent that there is a conflict between the provisions of this Agreement and the provisions of any Conveyance and Assumption Instruments, the provisions of this Agreement will control.
SECTION 6.02 Survival of Agreements. Except as otherwise contemplated by the Transaction Agreements, all covenants and agreements of the parties contained in the Transaction Agreements will remain in full force and effect and survive the Time of Distribution.
SECTION 6.03 Expenses.
(a) Except as otherwise set forth in any Transaction Agreement, (i) all Rockwell Automation Expenses will be charged to and paid by Rockwell, (ii) all Rockwell Collins Expenses will be charged to and paid by Rockwell Collins and (iii) all Rockwell Science Center Expenses will be charged to and paid by Rockwell Science Center.
(b) Within ten days after the Distribution Date, Rockwell
Collins will reimburse Rockwell (by wire transfer to Rockwell's bank account
at Mellon Bank, N.A., Pittsburgh, Pennsylvania, account number 102-3474) for
all amounts in respect of Rockwell Collins Expenses paid by Rockwell or any of
its Subsidiaries (including members of the Rockwell Collins Group and members
of the Rockwell Science Center Group) before or at the Time of Distribution
and notified in writing by Rockwell to Rockwell Collins within five days after
the Distribution Date. Promptly after Rockwell's request therefor, Rockwell
Collins will reimburse Rockwell (by wire transfer to the same bank account
referred to in the preceding sentence) for all Rockwell Collins Expenses paid
by Rockwell or any of its Subsidiaries before, at or after the Time of
Distribution (other than as previously reimbursed by Rockwell Collins pursuant
to the preceding sentence). Rockwell will, at the request of Rockwell Collins,
provide Rockwell Collins with appropriate documentation to support Rockwell
Collins Expenses required to be reimbursed to Rockwell pursuant to this
Section 6.03(b).
(c) Within ten days after the Distribution Date, Rockwell
Science Center will reimburse Rockwell (by wire transfer to Rockwell's bank
account at Mellon Bank, N.A., Pittsburgh, Pennsylvania, Account No. 102-3474)
for all amounts in respect of Rockwell Science Center Expenses paid by
Rockwell or any of its Subsidiaries (including members of the Rockwell Collins
Group and members of the Rockwell Science Center Group) before or at the Time
of Distribution and notified in writing by Rockwell to Rockwell Science Center
within five days after the Distribution Date. Promptly after Rockwell's
request therefor, Rockwell Science Center will reimburse Rockwell (by wire
transfer to the same bank account referred to in the preceding sentence) for
all Rockwell Science Center Expenses paid by Rockwell or any of its
Subsidiaries before, at or after the Time of Distribution (other than as
previously reimbursed by Rockwell Science Center pursuant to the preceding
sentence). Rockwell will, at the request of Rockwell Science Center, provide
Rockwell Science Center with appropriate documentation to support Rockwell
Science Center Expenses required to be reimbursed to Rockwell pursuant to this
Section 6.03(c).
(d) Except as otherwise set forth in any Transaction Agreement, all out-of-pocket costs and expenses incurred following the Time of Distribution in connection with
implementation of the transactions contemplated by the Transaction Agreements will be charged to and paid by the party for whose benefit the expenses are incurred, with any out-of-pocket expenses which cannot be allocated on such basis to be split equally between Rockwell and Rockwell Collins.
SECTION 6.04 Governing Law. This Agreement will be governed by and construed in accordance with the internal laws of the State of New York applicable to contracts made and to be performed entirely within such State, without regard to the conflicts of law principles of such State.
SECTION 6.05 Notices. All notices, requests, claims, demands and other communications required or permitted to be given hereunder will be in writing and will be delivered by hand or telecopied, e-mailed or sent, postage prepaid, by registered, certified or express mail or reputable overnight courier service and will be deemed given when so delivered by hand or telecopied, when e-mail confirmation is received if delivered by e-mail, or three business days after being so mailed (one business day in the case of express mail or overnight courier service). All such notices, requests, claims, demands and other communications will be addressed as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:
(a) If to Rockwell:
Rockwell International Corporation
Firstar Center
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Mr. Michael A. Bless
Senior Vice President,
Finance and Planning and
Chief Financial Officer
Telecopy: (414) 212-5552
E-mail: mabless@corp.rockwell.com
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with a copy to:
Rockwell International Corporation
Firstar Center
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: William J. Calise, Jr., Esq.
Senior Vice President,
General Counsel and
Secretary
Telecopy: (414) 212-5357
E-mail: wjcalise@corp.rockwell.com
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(b) If to Rockwell Collins:
New Rockwell Collins, Inc. 400 Rockwell Collins Road NE Cedar Rapids, Iowa 52498
Attention: Lawrence A. Erickson
Senior Vice President and
Chief Financial Officer
Telecopy: (319) 295-3400
E-mail: laerickson@rockwellcollins.com
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with a copy to:
New Rockwell Collins, Inc. 400 Rockwell Collins Road NE Cedar Rapids, Iowa 52498
Attention: [ ]
Senior Vice President,
General Counsel and
Secretary
Telecopy: (319) [ ]
E-mail: [ ]@rockwellcollins.com
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(c) If to Rockwell Science Center:
Rockwell Scientific Company LLC 1049 Camino Dos Rios Thousand Oaks, California 91360
Attention: Derek Cheung
Vice President and Center Director
Telecopy: (805) 373-4775
E-Mail: dtcheung@rsc.rockwell.com
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with a copy to:
Rockwell Scientific Company LLC 1049 Camino Dos Rios Thousand Oaks, California 91360
Attention: Wayne A. Davey
Controller and Director Business Operations
Telecopy: (805) 373-4775
E-Mail: wadavey@rsc.rockwell.com
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and with a copy to Rockwell and Rockwell Collins.
SECTION 6.06 Dispute Resolution. In the event that any dispute, claim or controversy (collectively, a "dispute") arises out of or relates to this Agreement, the Employee Matters Agreement or the Tax Allocation Agreement, any provision of this Agreement, the Employee Matters Agreement or the Tax Allocation Agreement or the breach, performance, enforcement or validity or invalidity of any thereof, the Chief Financial Officers of the parties to the dispute will attempt a good faith resolution of such dispute within thirty days after receipt by the parties of written notice from any party of such dispute. Should they be unable to resolve such dispute within thirty days of receipt of such written notification, or within such other time as they may agree, such dispute will be referred for resolution to the Chief Executive Officers of the parties to the dispute. Should they be unable to resolve such dispute within thirty days following such referral to them, or within such other time as they may agree, the parties to the dispute will then attempt in good faith to resolve such dispute by mediation in accordance with the then-existing CPR Model Procedure for Mediation of Business Disputes, promulgated by the CPR Institute for Dispute Resolution, New York City. If such mediation is unsuccessful within sixty days after commencement thereof, any party to the dispute may pursue any other remedies available to it.
SECTION 6.07 Consent to Jurisdiction. Each of Rockwell, Rockwell Collins and Rockwell Science Center irrevocably submits to the exclusive jurisdiction of (i) the Court of Chancery in and for the State of Delaware and the Superior Court in and for the State of Delaware and (ii) the United States District Court for the District of Delaware, for the purposes of any suit, action or other proceeding arising out of this Agreement, the Employee Matters
Agreement or the Tax Allocation Agreement or any transaction contemplated thereby (and agrees not to commence any action, suit or proceeding relating thereto except in such courts). Each of Rockwell, Rockwell Collins and Rockwell Science Center further agrees that service of any process, summons, notice or document hand delivered or sent by U.S. registered mail to such party's respective address set forth in Section 6.05 will be effective service of process for any action, suit or proceeding in Delaware with respect to any matters to which it has submitted to jurisdiction as set forth in the immediately preceding sentence. Each of Rockwell, Rockwell Collins and Rockwell Science Center irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement, the Employee Matters Agreement or the Tax Allocation Agreement or the transactions contemplated thereby in (i) the Court of Chancery in and for the State of Delaware and the Superior Court in and for the State of Delaware or (ii) the United States District Court for the District of Delaware, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. Notwithstanding the foregoing, each party agrees that a final judgment in any action, suit or proceeding so brought shall be conclusive and may be enforced by suit on the judgment in any jurisdiction or in any other manner provided in law or in equity.
SECTION 6.08 Amendments. This Agreement cannot be amended, modified or supplemented except by a written agreement executed by each party affected thereby.
SECTION 6.09 Assignment. No party to this Agreement will convey, assign or otherwise transfer any of its rights or obligations under this Agreement without the prior written consent of the other parties in their sole and absolute discretion, except that, other than as expressly provided herein, any party may (without obtaining any consent) assign any of its rights hereunder to a successor to all or any part of its business. Any such conveyance, assignment or transfer requiring the prior written consent of the other parties which is made without such consent will be void ab initio. No assignment of this Agreement will relieve the assigning party of its obligations hereunder.
SECTION 6.10 Captions; Currency. The article, section and paragraph captions herein and the table of contents hereto are for convenience of reference only, do not constitute part of this Agreement and will not be deemed to limit or otherwise affect any of the provisions hereof. Unless otherwise specified, all references herein to numbered articles or sections are to articles and sections of this Agreement and all references herein to annexes or schedules are to annexes and schedules to this Agreement. Unless otherwise specified, all references contained in this Agreement, in any annex or schedule referred to herein or in any instrument or document delivered pursuant hereto to dollars or "$" shall mean United States Dollars.
SECTION 6.11 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, will remain in full force and effect and will in no way be affected, impaired or invalidated thereby. If the economic or legal substance of the transactions contemplated hereby is affected in any manner adverse to any party as a result thereof, the
parties will negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the parties.
SECTION 6.12 Parties in Interest. This Agreement is binding upon and is for the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement is not made for the benefit of any Person not a party hereto, and no Person other than the parties hereto or their respective successors and permitted assigns will acquire or have any benefit, right, remedy or claim under or by reason of this Agreement, except that the provisions of Sections 4.02, 4.03 and 4.04 hereof shall inure to the benefit of the Persons referred to therein.
SECTION 6.13 Schedules. All annexes and schedules attached hereto are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Capitalized terms used in the schedules hereto but not otherwise defined therein will have the respective meanings assigned to such terms in this Agreement.
SECTION 6.14 Termination. This Agreement may be terminated and the Distribution abandoned at any time prior to the Time of Distribution by and in the sole discretion of the Rockwell Board without the approval of Rockwell Collins, Rockwell Science Center, or Rockwell's shareowners. In the event of such termination, no party will have any liability of any kind to any other party on account of such termination.
SECTION 6.15 Waivers; Remedies. The conditions to Rockwell's obligation to consummate the Distribution are for the sole benefit of Rockwell and may be waived in writing by Rockwell in whole or in part in Rockwell's sole discretion. No failure or delay on the part of Rockwell, Rockwell Collins or Rockwell Science Center in exercising any right, power or privilege hereunder will operate as a waiver thereof, nor will any waiver on the part of Rockwell, Rockwell Collins or Rockwell Science Center 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. Subject to the provisions of Section 6.06, the rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies which the parties may otherwise have at law or in equity.
SECTION 6.16 Further Assurances. From time to time after the Distribution, as and when requested by any party hereto, each other party shall execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken, all such actions as the requesting party may reasonably request to consummate the transactions contemplated by the Transaction Agreements.
SECTION 6.17 Counterparts. This Agreement may be executed in separate counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts will together constitute the same agreement.
SECTION 6.18 Performance. Each party will cause to be performed and hereby guarantees the performance of all actions, agreements and obligations set forth herein to be performed by any Subsidiary or Affiliate of such party.
SECTION 6.19 Currency Calculations. Following the Distribution Date, for purposes of calculating the United States Dollar equivalent of any amount payable under any Transaction Agreement which is denominated in a currency other than United States Dollars, the New York foreign exchange selling rate applicable to such currency will be used, as published in the Wall Street Journal, New York Edition, for the second business day preceding the earlier of the date such payment is due or the date such payment is made (it being understood that this Section 6.19 shall not apply to the conversion of foreign currency balances made as of the Distribution Date in accordance with standard Rockwell accounting practices and procedures).
SECTION 6.20 Interpretation. Any reference to any federal, state, local, or foreign law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. For the purposes of this Agreement, (i) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires, (ii) the terms "hereof", "herein", and "herewith" and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement and (iii) the word "including" and words of similar import when used in this Agreement shall mean "including, without limitation".
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officers of the parties as of the date first hereinabove written.
ROCKWELL INTERNATIONAL CORPORATION
Title:
NEW ROCKWELL COLLINS, INC.
Title:
ROCKWELL SCIENTIFIC COMPANY LLC
Title:
Exhibit 3.3
[5/30/01]
FORM OF
RESTATED
CERTIFICATE OF INCORPORATION
OF
NEW ROCKWELL COLLINS, INC.
Pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware
New Rockwell Collins, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), does hereby certify as follows:
FIRST: The name of the Corporation is New Rockwell Collins, Inc.
SECOND: The original Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on March 1, 2001.
THIRD: The Certificate of Incorporation of the Corporation is hereby amended in its entirety and restated and integrated into a single instrument to read in full as set forth in the Restated Certificate of Incorporation of the Corporation attached hereto as Exhibit A and made a part hereof.
FOURTH: The Restated Certificate of Incorporation of the Corporation shall become effective at 8:30 a.m., Eastern Time, on June 13, 2001.
FIFTH: The Restated Certificate of Incorporation of the Corporation was proposed by the Board of Directors of the Corporation and was duly adopted in accordance with Section 228 of the General Corporation Law of the State of Delaware by the sole shareholder of the Corporation in the manner prescribed by Section 242 of the General Corporation Law of the State of Delaware.
SIXTH: The Restated Certificate of Incorporation of the Corporation was duly adopted in accordance with the provisions of Section 245 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed by its officer thereunto duly authorized this [ ] day of June, 2001.
NEW ROCKWELL COLLINS, INC.
Title: Vice President
RESTATED CERTIFICATE OF
INCORPORATION
OF
NEW ROCKWELL COLLINS, INC.
FIRST: The name of the Corporation is New Rockwell Collins, Inc.
SECOND: The Corporation's registered office in the State of Delaware is located at 1209 Orange Street, in the City of Wilmington, County of New Castle. The name and address of its registered agent is The Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801.
THIRD: The nature of the business, or objects or purposes to be transacted, promoted or carried on, are: To engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.
FOURTH: The total number of shares of all classes of stock which the Corporation shall have the authority to issue is 1,025,000,000, of which (i) 1,000,000,000 shares of the par value of $.01 each are to be of a class designated Common Stock (the "Common Stock") and (ii) 25,000,000 shares without par value are to be of a class designated Preferred Stock (the "Preferred Stock").
In this Article Fourth, any reference to a section or paragraph, without further attribution, within a provision relating to a particular class of stock is intended to refer solely to the specified section or paragraph of the other provisions relating to the same class of stock.
COMMON STOCK
The Common Stock shall have the following voting powers, designations, preferences and relative, participating, optional and other special rights, and qualifications, limitations or restrictions thereof:
1. Dividends. Whenever the full dividends upon any outstanding Preferred Stock for all past dividend periods shall have been paid and the full dividends thereon for the then current respective dividend periods shall have been paid, or declared and a sum sufficient for the respective payments thereof set apart, the holders of shares of the Common Stock shall be entitled to receive such dividends and distributions in equal amounts per share, payable in cash or otherwise, as may be declared thereon by the Board of Directors from time to time out of assets or funds of the Corporation legally available therefor.
2. Rights on Liquidation. In the event of any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, after the payment or setting apart for payment to the holders of any outstanding Preferred Stock of the full preferential amounts to which such holders are entitled as herein provided or referred to, all of the remaining assets of the Corporation shall belong to and be distributable in equal amounts per share to the holders of the Common Stock. For purposes of this paragraph 2, a consolidation or merger of the Corporation with any other corporation, or the sale, transfer or lease of all or substantially all its assets shall not constitute or be deemed a liquidation, dissolution or winding-up of the Corporation.
3. Voting. Except as otherwise provided by the laws of the State of Delaware or by this Article Fourth, each share of Common Stock shall entitle the holder thereof to one vote.
PREFERRED STOCK
The Preferred Stock may be issued from time to time in one or more series. The Board of Directors is hereby authorized to provide for the issuance of shares of Preferred Stock in series and, by filing a certificate pursuant to the applicable law of the State of Delaware (hereinafter referred to as a "Preferred Stock Designation"), to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations and restrictions thereof. The authority of the Board of Directors with respect to each series shall include, but not be limited to, determination of the following:
(a) the designation of the series, which may be by distinguishing number, letter or title;
(b) the number of shares of the series, which number the Board of Directors may thereafter (except where otherwise provided in the Preferred Stock Designation) increase or decrease (but not below the number of shares thereof then outstanding);
(c) whether dividends, if any, shall be cumulative or noncumulative and the dividend rate of the series;
(d) the dates at which dividends, if any, shall be payable;
(e) the redemption rights and price or prices, if any, for shares of the series;
(f) the terms and amount of any sinking fund provided for the purchase or redemption of shares of the series;
(g) the amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation;
(h) whether the shares of the series shall be convertible into shares of any other class or series, or any other security, of the Corporation or any other corporation, and, if so, the specification of such other class or series or such other security, the conversion price or prices or rate or rates, any adjustments thereof, the date or dates as of which such shares shall be convertible and all other terms and conditions upon which such conversion may be made;
(i) restrictions on the issuance of shares of the same series or of any other class or series; and
(j) the voting rights, if any, of the holders of shares of the series.
Except as may be provided in this Certificate of Incorporation or in a Preferred Stock Designation, the Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes, and holders of Preferred Stock shall not be entitled to receive notice of any meeting of shareowners at which they are not entitled to vote. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the outstanding Common Stock, without a vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required pursuant to any Preferred Stock Designation.
The Corporation shall be entitled to treat the person in whose name any share of its stock is registered as the owner thereof for all purposes and shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other person, whether or not the Corporation shall have notice thereof, except as expressly provided by applicable law.
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
1. Designation and Amount. A series of Preferred Stock, without par value, is hereby created and shall be designated as "Series A Junior Participating Preferred Stock" (the "Series A Preferred Stock") and the number of shares constituting the Series A Preferred Stock shall be 2,500,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease
shall reduce the number of shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series A Preferred Stock.
2. Dividends and Distributions.
2.1. Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar stock) ranking prior and superior to the Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock, in preference to the holders of Common Stock and of any other junior stock of the Corporation, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the second Monday of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
2.2. The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in paragraph 2.1 immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend
Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.
2.3. Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof.
3. Voting Rights. The holders of shares of Series A Preferred Stock shall have the following voting rights:
3.1. Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the shareowners of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
3.2. Except as otherwise provided herein, in any other Preferred Stock Designation creating a series of Preferred Stock or any similar stock, or by law,
the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of shareowners of the Corporation.
3.3. Except as set forth herein, or as otherwise provided by law, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.
4. Certain Restrictions.
4.1. Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in paragraph 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not:
(a) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock;
(b) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;
(c) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock; or
(d) redeem or purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of
the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.
4.2. The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under subparagraph (c) of paragraph 4.1, purchase or otherwise acquire such shares at such time and in such manner.
5. Reacquired Shares. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein or in any other Preferred Stock Designation creating a series of Preferred Stock or any similar stock or as otherwise required by law.
6. Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (i) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series A Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (ii) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the proviso in clause (i) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
8. No Redemption. The shares of Series A Preferred Stock shall not be redeemable.
9. Rank. The Series A Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, junior to all series of any other class of the Corporation's Preferred Stock.
10. Amendment. The Certificate of Incorporation of the Corporation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Preferred Stock, voting together as a single class.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: The private property of the shareowners of the Corporation shall not be subject to the payment of corporate debts to any extent whatever.
SEVENTH: Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the number of directors of the Corporation shall be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the whole Board. A director
need not be a shareowner. The election of directors of the Corporation need not be by ballot unless the By-Laws so require.
The directors, other than those who may be elected by the holders of any series of Preferred Stock or any other series or class of stock, as provided herein or in any Preferred Stock Designation, shall be divided into three classes, as nearly equal in number as possible. One class of directors shall be initially elected for a term expiring at the annual meeting of shareowners to be held in 2002, another class shall be initially elected for a term expiring at the annual meeting of shareowners to be held in 2003, and another class shall be initially elected for a term expiring at the annual meeting of shareowners to be held in 2004. Members of each class shall hold office until their successors are duly elected and qualified. At each annual meeting of the shareowners of the Corporation, commencing with the 2002 annual meeting, the successors of the class of directors whose term expires at that meeting shall be elected by a plurality vote of all votes cast for the election of directors at such meeting to hold office for a term expiring at the annual meeting of shareowners held in the third year following the year of their election.
Subject to the rights of the holders of any series of Preferred Stock, and unless the Board of Directors otherwise determines, newly created directorships resulting from any increase in the authorized number of directors or any vacancies on the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause may be filled only by a majority vote of the directors then in office, though less than a quorum, and directors so chosen shall hold office for a term expiring at the annual meeting of shareowners at which the term of office of the class to which they have been elected expires and until such director's successor shall have been duly elected and qualified. No decrease in the number of authorized directors constituting the whole Board of Directors shall shorten the term of any incumbent director.
Subject to the rights of the holders of any series of Preferred Stock or any other series or class of stock, as provided herein or in any Preferred Stock Designation, to elect additional directors under specific circumstances, any director may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least 80 percent of the voting power of the then outstanding capital stock of the Corporation (the "Capital Stock") entitled to vote generally in the election of directors (the "Voting Stock"), voting together as a single class.
No director of the Corporation shall be liable to the Corporation or its shareowners for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its shareowners, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware
General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. No repeal or modification of this paragraph, directly or by adoption of an inconsistent provision of this Certificate of Incorporation, by the shareowners of the Corporation shall be effective with respect to any cause of action, suit, claim or other matter that, but for this paragraph, would accrue or arise prior to such repeal or modification.
EIGHTH: Unless otherwise determined by the Board of Directors, no holder of stock of the Corporation shall, as such holder, have any right to purchase or subscribe for any stock of any class which the Corporation may issue or sell, whether or not exchangeable for any stock of the Corporation of any class or classes and whether out of unissued shares authorized by the Certificate of Incorporation of the Corporation as originally filed or by any amendment thereof or out of shares of stock of the Corporation acquired by it after the issue thereof.
NINTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its shareowners or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or shareowner thereof, or on the application of any receiver or receivers appointed for this Corporation under the provisions of section 291 of the General Corporation Law of the State of Delaware (the "GCL") or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of section 279 of the GCL order a meeting of the creditors or class of creditors, and/or of the shareowners or class of shareowners of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the shareowners or class of shareowners of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the shareowners or class of shareowners, of this Corporation, as the case may be, and also on this Corporation.
TENTH:
1. Amendment of Certificate of Incorporation. From time to time any of the provisions of the Certificate of Incorporation may be amended, altered or repealed, and other provisions authorized by the statutes of the State of Delaware at the time in force may be added or inserted in the manner at the time prescribed by said statutes, and all rights at any time conferred upon the shareowners of the Corporation by its Certificate
of Incorporation are granted subject to the provisions of this Article Tenth. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least 80% of the voting power of the then outstanding Voting Stock, voting together as a single class, shall be required to amend or repeal Article Seventh, this Article Tenth or Article Twelfth or adopt any provision inconsistent with any of the foregoing articles.
2. By-Laws. The Board of Directors is expressly authorized to make, alter, amend and repeal the By-Laws of this Corporation, in any manner not inconsistent with the laws of the State of Delaware or of the Certificate of Incorporation of the Corporation, subject to the power of the holders of the Capital Stock to alter or repeal the By-Laws made by the Board of Directors; provided, that any such amendment or repeal by shareowners shall require the affirmative vote of the holders of at least 80% of the voting power of the then outstanding Voting Stock, voting together as a single class.
ELEVENTH: The shareowner vote required to approve Business Combinations (as hereinafter defined) shall be as set forth in this Article Eleventh.
1. Higher Vote for Business Combinations. In addition to any
affirmative vote required by law, this Certificate of Incorporation or the
By-Laws of the Corporation, and except as otherwise expressly provided in
Section 2 of this Article Eleventh, a Business Combination shall not be
consummated without the affirmative vote of the holders of at least 80% of the
voting power of the then outstanding Voting Stock, voting together as a single
class. Such affirmative vote shall be required notwithstanding the fact that no
vote may be required, or that a lesser percentage or separate class vote may be
specified, by law or in any agreement with any national securities exchange or
otherwise.
2. When Higher Vote Is Not Required. The provisions of Section 1 of this Article Eleventh shall not be applicable to a Business Combination if the conditions specified in either of the following paragraphs A or B are met.
A. Approval by Continuing Directors. The Business Combination shall have been approved by at least two-thirds of the Continuing Directors (as hereinafter defined), whether such approval is made prior to or subsequent to the date on which the Interested Shareowner (as hereinafter defined) became an Interested Shareowner (the "Determination Date").
B. Price and Procedure Requirements. Each of the seven conditions specified in the following subparagraphs (i) through (vii) shall have been met:
(i) The aggregate amount of the cash and the Fair Market
Value (as hereinafter defined) as of the date of the consummation
of the Business Combination (the "Consummation Date") of any
consideration other than cash to be received per share by holders
of Common Stock in such Business Combination shall be an amount at
least equal to the higher amount determined under clauses (a) and
(b) below (the requirements of this paragraph B(i) shall be
applicable with respect to all shares of Common Stock outstanding,
whether or not the Interested Shareowner has previously acquired
any shares of the Common Stock): (a) the highest per share price
(including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by or on behalf of the Interested
Shareowner for any shares of Common Stock acquired beneficially by
it (1) within the two-year period immediately prior to the first
public announcement of the proposal of the Business Combination
(the "Announcement Date") or (2) in the transaction in which it
became an Interested Shareowner, whichever is higher, plus
interest compounded annually from the Determination Date through
the Consummation Date at the prime rate of interest of Morgan
Guaranty Trust Company of New York (or of such other major bank
headquartered in New York City selected by at least two-thirds of
the Continuing Directors) from time to time in effect in New York
City, less the aggregate amount of any cash dividends paid, and
the Fair Market Value of any dividends paid in other than cash,
per share of Common Stock from the Determination Date through the
Consummation Date in an amount up to but not exceeding the amount
of such interest payable per share of Common Stock; and (b) the
Fair Market Value per share of Common Stock on the Announcement
Date or on the Determination Date, whichever is higher.
(ii) The aggregate amount of the cash and the Fair Market Value as of the Consummation Date of any consideration other than cash to be received per share by holders of shares of any class or series of outstanding Capital Stock, other than the Common Stock, in such Business Combination shall be an amount at least equal to the highest amount determined under clauses (a), (b) and (c) below (the requirements of this paragraph B(ii) shall be applicable with respect to all shares of every class or series of outstanding Capital Stock, other than the Common Stock, whether or not the Interested Shareowner has previously acquired any shares of a particular class or series of Capital Stock):
(a) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by or on behalf of the Interested Shareowner for any shares of such class
or series of Capital Stock acquired beneficially by it (1) within the two-year period immediately prior to the Announcement Date or (2) in the transaction in which it became an Interested Shareowner, whichever is higher, plus interest compounded annually from the Determination Date through the Consummation Date at the prime rate of interest of Morgan Guaranty Trust Company of New York (or of such other major bank headquartered in New York City selected by at least two-thirds of the Continuing Directors) from time to time in effect in New York City, less the aggregate amount of any cash dividends paid, and the Fair Market Value of any dividends paid in other than cash, per share of such class or series of Capital Stock from the Determination Date through the Consummation Date in an amount up to but not exceeding the amount of such interest payable per share of such class or series of Capital Stock; and
(b) the Fair Market Value per share of such class or series of Capital Stock on the Announcement Date or on the Determination Date, whichever is higher; and
(c) the highest preferential amount per share to which the holders of shares of such class or series of Capital Stock would be entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, regardless of whether the Business Combination to be consummated constitutes such an event.
(iii) The consideration to be received by holders of a particular class or series of outstanding Capital Stock (including Common Stock) shall be in cash or in the same form as previously has been paid by or on behalf of the Interested Shareowner in its direct or indirect acquisition of beneficial ownership of shares of such class or series of Capital Stock. If the consideration so paid for shares of any class or series of Capital Stock varied as to form, the form of consideration for such class or series of Capital Stock shall be either cash or the form used to acquire beneficial ownership of the largest number of shares of such class or series of Capital Stock previously acquired by the Interested Shareowner.
(iv) After such Interested Shareowner has become an Interested Shareowner and prior to the consummation of such Business Combination, such Interested Shareowner shall not have become the beneficial owner of any additional shares of Capital Stock except as part of the transaction that
results in such Interested Shareowner becoming an Interested Shareowner and except in a transaction that, after giving effect thereto, would not result in any increase in the Interested Shareowner's percentage beneficial ownership of any class or series of Capital Stock; and, except as approved by at least two-thirds of the Continuing Directors: (a) there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) payable in accordance with the terms of any outstanding Capital Stock; (b) there shall have been no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any stock split, stock dividend or subdivision of the Common Stock); and (c) there shall have been an increase in the annual rate of dividends paid on the Common Stock as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of Common Stock.
(v) After such Interested Shareowner has become an Interested Shareowner, such Interested Shareowner shall not have received the benefit, directly or indirectly (except proportionately as a shareowner of the Corporation), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise.
(vi) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to all shareowners of the Corporation at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). The proxy or information statement shall contain on the first page thereof, in a prominent place, any statement as to the advisability of the Business Combination that the Continuing Directors, or any of them, may choose to make and, if deemed advisable by at least two-thirds of the Continuing Directors, the opinion of an investment banking firm selected for and on behalf of the Corporation by at least two-thirds of the Continuing Directors as to the fairness of the terms of the Business Combination from a financial point of view to the holders of the outstanding shares of Capital Stock other than the Interested Shareowner and its Affiliates or Associates (as hereinafter defined).
(vii) Such Interested Shareowner shall not have made any material change in the Corporation's business or equity capital structure without the approval of at least two-thirds of the Continuing Directors.
Any Business Combination to which Section 1 of this Article Eleventh shall not apply by reason of this Section 2 shall require only such affirmative vote as is required by law, any other provision of this Certificate of Incorporation, the By-Laws of the Corporation or any agreement with any national securities exchange.
3. Certain Definitions. For the purposes of this Article Eleventh:
A. A "Business Combination" shall mean:
(i) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with (i) any Interested Shareowner or
(ii) any other corporation (whether or not itself an Interested
Shareowner) which is, or after such merger or consolidation would be, an
Affiliate or Associate of an Interested Shareowner; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Shareowner or any Affiliate or Associate of any Interested Shareowner involving any assets or securities of the Corporation, any Subsidiary or any Interested Shareowner or any Affiliate or Associate of any Interested Shareowner having an aggregate Fair Market Value of $25,000,000 or more; or
(iii) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of any Interested Shareowner or any Affiliate or Associate of any Interested Shareowner; or
(iv) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Shareowner) that has the effect, directly or indirectly, of increasing the proportionate share of any class or series of Capital Stock, or any securities convertible into Capital Stock or into equity securities of any Subsidiary, that is beneficially owned by any Interested Shareowner or any Affiliate or Associate of any Interested Shareowner; or
(v) any agreement, contract, arrangement or other understanding providing for any one or more of the actions specified in clauses (i) through (iv) above.
B. A "person" shall mean any individual, firm, corporation or other entity and shall include any group composed of any person and any other person with whom such person or any Affiliate or Associate of such person has any agreement, arrangement or understanding, directly or indirectly, for the purpose of acquiring, holding, voting or disposing of Capital Stock.
C. "Interested Shareowner" shall mean any person (other than the Corporation or any Subsidiary and other than any profit-sharing, employee stock ownership or other employee benefit plan of the Corporation, any Subsidiary or Rockwell International Corporation or any trustee of or fiduciary with respect to any such plan when acting in such capacity) who or which:
(i) is the beneficial owner of Voting Stock having 10% or more of the votes entitled to be cast by the holders of all then outstanding shares of Voting Stock; or
(ii) is an Affiliate or Associate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner of Voting Stock having 10% or more of the votes entitled to be cast by the holders of all then outstanding shares of Voting Stock; or
(iii) is an assignee of or has otherwise succeeded to any shares of Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by any Interested Shareowner, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933;
provided, however, that Rockwell International Corporation shall not be an Interested Shareowner as a result of its ownership of Capital Stock of the Corporation prior to the distribution of the shares of Capital Stock of the Corporation to the holders of capital stock of Rockwell International Corporation (the "Distribution").
D. A person shall be a "beneficial owner" of any Capital Stock:
(i) which such person or any Affiliate or Associate of such person beneficially owns, directly or indirectly; or
(ii) which such person or any Affiliate or Associate of such person has, directly or indirectly, (a) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise, or (b) the right to vote pursuant to any agreement, arrangement or understanding; or
(iii) which are beneficially owned, directly or indirectly, by any other person with which such person or any Affiliate or Associate of such person has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Capital Stock.
E. For the purposes of determining whether a person is an
Interested Shareowner pursuant to paragraph C of this Section 3, the number of
shares of Capital Stock deemed to be outstanding shall include shares deemed
owned by the Interested Shareowner through application of paragraph D of this
Section 3 but shall not include any other shares of Capital Stock that may be
issuable pursuant to any agreement, arrangement or understanding, or upon
exercise of conversion rights, warrants or options, or otherwise.
F. "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on June [ ], 2001 (the term "registrant" in such Rule 12b-2 meaning in this case the Corporation).
G. "Subsidiary" means any corporation of which a majority of any class of equity security is beneficially owned by the Corporation; provided, however, that for the purposes of the definition of Interested Shareowner set forth in paragraph C of this Section 3, the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is beneficially owned by the Corporation.
H. "Continuing Director" means any member of the Board of Directors of the Corporation (the "Board") who is not an Affiliate or Associate or representative of the Interested Shareowner and was a member of the Board prior to the time that the Interested Shareowner became an Interested Shareowner, and any successor of a Continuing Director who is not an Affiliate or Associate or representative of the Interested Shareowner and is recommended or elected to succeed a Continuing Director by at least two-thirds of the Continuing Directors then members of the Board.
I. "Fair Market Value" means: (i) in the case of cash, the amount of such cash; (ii) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the New York Stock Exchange Composite Transactions reporting system, or, if such stock is not quoted on such system, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not
listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period immediately preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined in good faith by at least two-thirds of the Continuing Directors; and (iii) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined in good faith by at least two-thirds of the Continuing Directors.
J. In the event of any Business Combination in which the Corporation survives, the phrase "consideration other than cash to be received" as used in paragraphs B(i) and (ii) of Section 2 of this Article Eleventh shall include the shares of Common Stock and/or the shares of any other class or series of Capital Stock retained by the holders of such shares.
4. Powers of Continuing Directors. Any determination as to compliance with this Article Eleventh, including without limitation (A) whether a person is an Interested Shareowner, (B) the number of shares of Capital Stock or other securities beneficially owned by any person, (C) whether a person is an Affiliate or Associate of another, (D) whether the requirements of paragraph B of Section 2 have been met with respect to any Business Combination, and (E) whether the assets that are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Business Combination has, an aggregate Fair Market Value of $25,000,000 or more shall be made only upon action by not less than two-thirds of the Continuing Directors of the Corporation; and the good faith determination of at least two-thirds of the Continuing Directors on such matters shall be conclusive and binding for all the purposes of this Article Eleventh.
5. No Effect on Fiduciary Obligations. Nothing contained in this Article Eleventh shall be construed to relieve the Board of Directors or any Interested Shareowner from any fiduciary obligation imposed by law.
6. Amendment, Repeal, etc. Notwithstanding any other provisions of this Certificate of Incorporation or the By-Laws of the Corporation (and notwithstanding the fact that a lesser percentage or separate class vote may be specified by law, this Certificate of Incorporation or the By-Laws of the Corporation), the affirmative vote of the holders of at least 80% of the voting power of the then outstanding Voting Stock, voting together as a single class, shall be required to amend or repeal, or adopt any provisions inconsistent with, this Article Eleventh; provided, however, that the preceding provisions of this Section 6 shall not apply to any amendment to this Article Eleventh, and such amendment shall require only such affirmative vote as is required by law and any other provisions of this Certificate of Incorporation or the By-Laws of the
Corporation, if such amendment shall have been approved by at least two-thirds of the members of the Board who are persons who would be eligible to serve as Continuing Directors.
TWELFTH: From and after the time of the Distribution, any action required or permitted to be taken by the shareowners shall be taken only at an annual or special meeting of such shareowners and not by consent in writing. Special meetings of the shareowners for any purpose or purposes shall be called only by the Board of Directors pursuant to a resolution adopted by a majority of the whole Board.
Exhibit 3.4
[5/30/01]
FORM OF
BY-LAWS OF
NEW ROCKWELL COLLINS, INC.
ARTICLE I.
OFFICES
SECTION 1. REGISTERED OFFICE IN DELAWARE; RESIDENT AGENT. The address of the Corporation's registered office in the State of Delaware and the name and address of its resident agent in charge thereof are as filed with the Secretary of State of the State of Delaware.
SECTION 2. OTHER OFFICES. The Corporation may also have an office or offices at such other place or places either within or without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation requires.
ARTICLE II.
MEETINGS OF SHAREOWNERS
SECTION 1. PLACE OF MEETINGS. All meetings of the shareowners of the Corporation shall be held at such place, within or without the State of Delaware, as may from time to time be designated by resolution passed by the Board of Directors. The Board of Directors may, in its sole discretion, determine that the meetings shall not be held at any place, but may instead be held solely by means of remote communication.
SECTION 2. ANNUAL MEETING. An annual meeting of the shareowners for the election of directors and for the transaction of such other proper business, notice of which was given in the notice of meeting, shall be held on a date and at a time as may from time to time be designated by resolution passed by the Board of Directors.
SECTION 3. SPECIAL MEETINGS. A special meeting of the shareowners for any purpose or purposes shall be called only by the Board of Directors pursuant to a resolution adopted by a majority of the whole Board.
SECTION 4. NOTICE OF MEETINGS. Except as otherwise provided by law, written notice of each meeting of the shareowners, whether annual or special, shall be mailed, postage prepaid, or sent by electronic transmission not less than ten nor more than sixty days before the date of the meeting, to each shareowner entitled to vote at such meeting, at the shareowner's address as it appears on the records of the
Corporation. Every such notice shall state the place, date and hour of the meeting the means of remote communications, if any, by which shareowners and proxy holders may be deemed to be present in person or by proxy and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Notice of any adjourned meeting of the shareowners shall not be required to be given, except when expressly required by law.
SECTION 5. LIST OF SHAREOWNERS. The Secretary shall, from information obtained from the transfer agent, prepare and make, at least ten days before every meeting of shareowners, a complete list of the shareowners entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each shareowner and the number of shares registered in the name of each shareowner. Such list shall be open to the examination of any shareowner, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting: (a) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (b) during ordinary business hours, at the principal place of business of the Corporation. In the event that the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to shareowners of the Corporation. If the meeting is to be held at a specified place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any shareowner who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any shareowner during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access the list shall be provided with the notice of the meeting. The stock ledger shall be the only evidence as to who are the shareowners entitled to examine the stock ledger, the list referred to in this section or the books of the Corporation, or to vote in person or by proxy at any meeting of shareowners.
SECTION 6. QUORUM. At each meeting of the shareowners, the holders of a majority of the issued and outstanding stock of the Corporation present either in person or by proxy shall constitute a quorum for the transaction of business except where otherwise provided by law or by the Certificate of Incorporation or by these By-Laws for a specified action. Except as otherwise provided by law, in the absence of a quorum, a majority in interest of the shareowners of the Corporation present in person or by proxy and entitled to vote shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until shareowners holding the requisite amount of stock shall be present or represented. At any such adjourned meeting at which a quorum may be present, any business may be transacted which might have been transacted at a meeting as
originally called, and only those shareowners entitled to vote at the meeting as originally called shall be entitled to vote at any adjournment or adjournments thereof. The absence from any meeting of the number of shareowners required by law or by the Certificate of Incorporation or by these By-Laws for action upon any given matter shall not prevent action at such meeting upon any other matter or matters which may properly come before the meeting, if the number of shareowners required in respect of such other matter or matters shall be present.
SECTION 7. ORGANIZATION. At every meeting of the shareowners the President and Chief Executive Officer, or in the absence of the President and Chief Executive Officer, a director or an officer of the Corporation designated by the Board, shall act as Chairman of the meeting. The Secretary, or, in the Secretary's absence, an Assistant Secretary, shall act as Secretary at all meetings of the shareowners. In the absence from any such meeting of the Secretary and the Assistant Secretaries, the Chairman may appoint any person to act as Secretary of the meeting.
SECTION 8. NOTICE OF SHAREOWNER BUSINESS AND NOMINATIONS.
(A) Annual Meetings of Shareowners. (1) Nominations of persons for election to the Board of Directors of the Corporation and the proposal of business to be considered by the shareowners may be made at an annual meeting of shareowners (a) pursuant to the Corporation's notice of meeting, (b) by or at the direction of the Board of Directors or (c) by any shareowner of the Corporation who was a shareowner of record at the time of giving of notice provided for in this by-law, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this by-law.
(2) For nominations or other business to be properly brought before an annual meeting by a shareowner pursuant to clause (c) of paragraph (A)(1) of this by-law, the shareowner must have given timely notice thereof in writing to the Secretary of the Corporation and such other business must otherwise be a proper matter for shareowner action. To be timely, a shareowner's notice shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 90th day nor earlier than the close of business on the 120th day prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the case of the annual meeting to be held in 2002 or in the event that the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the shareowner to be timely must be so delivered not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day on which public announcement of the date
of such meeting is first made by the Corporation. In no event shall the public
announcement of an adjournment of an annual meeting commence a new time period
for the giving of a shareowner's notice as described above. Such shareowner's
notice shall set forth (a) as to each person whom the shareowner proposes to
nominate for election or reelection as a director all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors in an election contest, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and Rule 14a-11 thereunder (including
such person's written consent to being named in the proxy statement as a
nominee and to serving as a director if elected); (b) as to any other business
that the shareowner proposes to bring before the meeting, a brief description
of the business desired to be brought before the meeting, the reasons for
conducting such business at the meeting and any material interest in such
business of such shareowner and the beneficial owner, if any, on whose behalf
the proposal is made; and (c) as to the shareowner giving the notice and the
beneficial owner, if any, on whose behalf the nomination or proposal is made
(i) the name and address of such shareowner, as they appear on the
Corporation's books, and of such beneficial owner and (ii) the class and
number of shares of the Corporation which are owned beneficially and of record
by such shareowner and such beneficial owner.
Notwithstanding anything in the second sentence of paragraph (A)(2) of this by-law to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board of Directors at least 100 days prior to the first anniversary of the preceding year's annual meeting, a shareowner's notice required by this by-law shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation.
(B) Special Meetings of Shareowners. Only such business shall be conducted at a special meeting of shareowners as shall have been brought before the meeting pursuant to the Corporation's notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of shareowners at which directors are to be elected pursuant to the Corporation's notice of meeting (a) by or at the direction of the Board of Directors or (b) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any shareowner of the Corporation who is a shareowner of record at the time of giving of notice provided for in this by-law, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this by-law. In the event the
Corporation calls a special meeting of shareowners for the purpose of electing one or more directors to the Board of Directors, any shareowner who shall be entitled to vote at the meeting may nominate a person or persons (as the case may be), for election to such position(s) as specified in the Corporation's notice of meeting, if the shareowner's notice required by paragraph (A)(2) of this by-law shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the 120th day prior to such special meeting and not later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment of a special meeting commence a new time period for the giving of a shareowner's notice as described above.
(C) General.
(1) Only such persons who are nominated in accordance with the procedures set forth in this by-law shall be eligible to serve as directors and only such business shall be conducted at a meeting of shareowners as shall have been brought before the meeting in accordance with the procedures set forth in this by-law. Except as otherwise provided by law, the Certificate of Incorporation or these By-Laws, the Chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this by-law and, if any proposed nomination or business is not in compliance with this by-law, to declare that such defective proposal or nomination shall be disregarded.
(2) For purposes of this by-law, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this by-law, a
shareowner shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this by-law. Nothing in this by-law shall be deemed to affect any
rights (i) of shareowners to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or
(ii) of the holders of any series of Preferred Stock to elect directors under
specified circumstances.
SECTION 9. BUSINESS AND ORDER OF BUSINESS. At each meeting of the shareowners such business may be transacted as may properly be brought before such meeting, except as otherwise provided by law or in these By-Laws. The order of business at all meetings of the shareowners shall be as determined by the Chairman of the meeting, unless otherwise determined by a majority in interest of the shareowners present in person or by proxy at such meeting and entitled to vote thereat.
SECTION 10. VOTING. Except as otherwise provided by law, the Certificate of Incorporation or these By-Laws, each shareowner shall at every meeting of the shareowners be entitled to one vote for each share of stock held by such shareowner. Any vote on stock may be given by the shareowner entitled thereto in person or by proxy appointed by an instrument in writing, subscribed (or transmitted by electronic means and authenticated as provided by law) by such shareowner or by the shareowner's attorney thereunto authorized, and delivered to the Secretary; provided, however, that no proxy shall be voted after three years from its date unless the proxy provides for a longer period. Except as otherwise provided by law, the Certificate of Incorporation or these By-Laws, at all meetings of the shareowners, all matters shall be decided by the vote (which need not be by ballot) of a majority in interest of the shareowners present in person or by proxy and entitled to vote thereat, a quorum being present.
SECTION 11. PARTICIPATION AT MEETINGS HELD BY REMOTE COMMUNICATION. If authorized by the Board of Directors in its sole discretion, and subject to such guidelines and procedures as the Board of Directors may adopt, shareowners and proxy holders not physically present at a meeting of shareowners may, by means of remote communication: (A) participate in a meeting of shareowners; and (B) be deemed present in person and vote at a meeting of shareowners whether such meeting is to be held at a designated place or solely by means of remote communication.
ARTICLE III.
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The property, affairs and business of the Corporation shall be managed by or under the direction of its Board of Directors.
SECTION 2. NUMBER, QUALIFICATIONS, AND TERM OF OFFICE. Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the number of directors of the Corporation shall be fixed from time to time exclusively by the Board of Directors pursuant to a
resolution adopted by a majority of the whole Board. A director need not be a shareowner.
The directors, other than those who may be elected by the holders of any series of Preferred Stock or any other series or class of stock, as provided herein or in any Preferred Stock Designation (as defined in the Certificate of Incorporation), shall be divided into three classes, as nearly equal in number as possible. One class of directors shall be initially elected for a term expiring at the annual meeting of shareowners to be held in 2002, another class shall be initially elected for a term expiring at the annual meeting of shareowners to be held in 2003, and another class shall be initially elected for a term expiring at the annual meeting of shareowners to be held in 2004. Members of each class shall hold office until their successors are elected and shall have qualified. At each annual meeting of the shareowners of the Corporation, commencing with the 2002 annual meeting, the successors of the class of directors whose term expires at that meeting shall be elected by a plurality vote of all votes cast for the election of directors at such meeting to hold office for a term expiring at the annual meeting of shareowners held in the third year following the year of their election.
SECTION 3. ELECTION OF DIRECTORS. At each meeting of the shareowners for the election of directors, at which a quorum is present, the directors shall be elected by a plurality vote of all votes cast for the election of directors at such meeting.
SECTION 4. QUORUM AND MANNER OF ACTING. A majority of the members of the Board of Directors shall constitute a quorum for the transaction of business at any meeting, and the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors unless otherwise provided by law, the Certificate of Incorporation or these By-Laws. In the absence of a quorum, a majority of the directors present may adjourn any meeting from time to time until a quorum shall be obtained. Notice of any adjourned meeting need not be given. The directors shall act only as a board and the individual directors shall have no power as such.
SECTION 5. PLACE OF MEETINGS. The Board of Directors may hold its meetings at such place or places within or without the State of Delaware as the Board may from time to time determine or as shall be specified or fixed in the respective notices or waivers of notice thereof.
SECTION 6. FIRST MEETING. Promptly after each annual election of directors, the Board of Directors shall meet for the purpose of organization, the election of officers and the transaction of other business, at the same place as that at
which the annual meeting of shareowners was held or as otherwise determined by the Board. Notice of such meeting need not be given. Such meeting may be held at any other time or place which shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors.
SECTION 7. REGULAR MEETINGS. Regular meetings of the Board of Directors shall be held at such places and at such times as the Board shall from time to time determine. If any day fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting which would otherwise be held on that day shall be held at the same hour on the next succeeding business day not a legal holiday. Notice of regular meetings need not be given.
SECTION 8. SPECIAL MEETINGS; NOTICE. Special meetings of the Board of Directors shall be held whenever called by the Chairman of the Board or the President and Chief Executive Officer and shall be called by the Chairman of the Board, the President and Chief Executive Officer or the Secretary of the Corporation at the written request of three directors. Notice of each such meeting stating the time and place of the meeting shall be given to each director by mail, telephone, other electronic transmission or personally. If by mail, such notice shall be given not less than five days before the meeting; and if by telephone, other electronic transmission or personally, not less than two days before the meeting. A notice mailed at least two weeks before the meeting need not state the purpose thereof except as otherwise provided in these By-Laws. In all other cases the notice shall state the principal purpose or purposes of the meeting. Notice of any meeting of the Board need not be given to a director, however, if waived by the director in writing before or after such meeting or if the director shall be present at the meeting, except when the director attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.
SECTION 9. ORGANIZATION. At each meeting of the Board of Directors, the Chairman of the Board, or, in the absence of the Chairman of the Board, the President and Chief Executive Officer, or, in his or her absence, a director or an officer of the Corporation designated by the Board shall act as Chairman of the meeting. The Secretary, or, in the Secretary's absence, any person appointed by the Chairman of the meeting, shall act as Secretary of the meeting.
SECTION 10. ORDER OF BUSINESS. At all meetings of the Board of Directors, business shall be transacted in the order determined by the Board.
SECTION 11. RESIGNATIONS. Any director of the Corporation may resign at any time by giving written notice to the Chairman of the Board, the
President and Chief Executive Officer or the Secretary of the Corporation. The resignation of any director shall take effect at the time specified therein, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
SECTION 12. COMPENSATION. Each director shall be paid such compensation, if any, as shall be fixed by the Board of Directors.
SECTION 13. INDEMNIFICATION.
(A) The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation), by reason of the fact that such person is or was a director, officer, employee or agent of the Corporation or any of its majority-owned subsidiaries or is or was serving at the request of the Corporation as a director, officer, employee or agent (except in each of the foregoing situations to the extent any agreement, arrangement or understanding of agency contains provisions that supersede or abrogate indemnification under this section) of another corporation or of any partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful.
(B) The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of the Corporation or any of its majority-owned subsidiaries, or is or was serving at the request of the Corporation as a director, officer, employee or agent (except in each of the foregoing situations to the extent any agreement, arrangement or understanding of agency contains provisions that supersede or abrogate indemnification under this section) of another corporation or of any partnership, joint venture, trust, employee
benefit plan or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery of Delaware or such other court shall deem proper.
(C) To the extent that a director, officer, employee or agent of the Corporation or any of its majority-owned subsidiaries has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (A) and (B), or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by or on behalf of such person in connection therewith. If any such person is not wholly successful in any such action, suit or proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters therein, the Corporation shall indemnify such person against all expenses (including attorneys' fees) actually and reasonably incurred by or on behalf of such person in connection with each claim, issue or matter that is successfully resolved. For purposes of this subsection and without limitation, the termination of any claim, issue or matter by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.
(D) Notwithstanding any other provision of this section, to the extent any person is a witness in, but not a party to, any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director, officer, employee or agent of the Corporation or any of its majority-owned subsidiaries, or is or was serving at the request of the Corporation as a director, officer, employee or agent (except in each of the foregoing situations to the extent any agreement, arrangement or understanding of agency contains provisions that supersede or abrogate indemnification under this section) of another corporation or of any partnership, joint venture, trust, employee benefit plan or other enterprise, such person shall be indemnified against all expenses (including attorneys' fees) actually and reasonably incurred by or on behalf of such person in connection therewith.
(E) Indemnification under subsections (A) and (B) shall be made only as authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because
such person has met the applicable standard of conduct set forth in
subsections (A) and (B). Such determination shall be made (1) if a Change of
Control (as hereinafter defined) shall not have occurred, (a) with respect to
a person who is a present or former director or officer of the Corporation,
(i) by the Board of Directors by a majority vote of the Disinterested
Directors (as hereinafter defined), even though less than a quorum, or (ii) if
there are no Disinterested Directors or, even if there are Disinterested
Directors, a majority of such Disinterested Directors so directs, by (x)
Independent Counsel (as hereinafter defined) in a written opinion to the Board
of Directors, a copy of which shall be delivered to the claimant, or (y) the
shareowners of the Corporation; or (b) with respect to a person who is not a
present or former director or officer of the Corporation, by the chief
executive officer of the Corporation or by such other officer of the
Corporation as shall be designated from time to time by the Board of
Directors; or (2) if a Change of Control shall have occurred, by Independent
Counsel selected by the claimant in a written opinion to the Board of
Directors, a copy of which shall be delivered to the claimant, unless the
claimant shall request that such determination be made by or at the direction
of the Board of Directors (in the case of a claimant who is a present or
former director or officer of the Corporation) or by an officer of the
Corporation authorized to make such determination (in the case of a claimant
who is not a present or former director or officer of the Corporation), in
which case it shall be made in accordance with clause (1) of this sentence.
Any claimant shall be entitled to be indemnified against the expenses
(including attorneys' fees) actually and reasonably incurred by such claimant
in cooperating with the person or entity making the determination of
entitlement to indemnification (irrespective of the determination as to the
claimant's entitlement to indemnification) and, to the extent successful, in
connection with any litigation or arbitration with respect to such claim or
the enforcement thereof.
(F) If a Change of Control shall not have occurred, or if a Change of Control shall have occurred and a director, officer, employee or agent requests pursuant to clause (2) of the second sentence in subsection (E) that the determination as to whether the claimant is entitled to indemnification be made by or at the direction of the Board of Directors (in the case of a claimant who is a present or former director or officer of the Corporation) or by an officer of the Corporation authorized to make such determination (in the case of a claimant who is not a present or former director or officer of the Corporation), the claimant shall be conclusively presumed to have been determined pursuant to subsection (E) to be entitled to indemnification if (1) in the case of a claimant who is a present or former director or officer of the Corporation, (a)(i) within fifteen days after the next regularly scheduled meeting of the Board of Directors following receipt by the Corporation of the request therefor, the Board of Directors shall not have resolved by majority vote of the Disinterested
Directors to submit such determination to (x) Independent Counsel for its
determination or (y) the shareowners for their determination at the next
annual meeting, or any special meeting that may be held earlier, after such
receipt, and (ii) within sixty days after receipt by the Corporation of the
request therefor (or within ninety days after such receipt if the Board of
Directors in good faith determines that additional time is required by it for
the determination and, prior to expiration of such sixty-day period, notifies
the claimant thereof), the Board of Directors shall not have made the
determination by a majority vote of the Disinterested Directors, or (b) after
a resolution of the Board of Directors, timely made pursuant to clause
(a)(i)(y) above, to submit the determination to the shareowners, the
shareowners meeting at which the determination is to be made shall not have
been held on or before the date prescribed (or on or before a later date, not
to exceed sixty days beyond the original date, to which such meeting may have
been postponed or adjourned on good cause by the Board of Directors acting in
good faith), or (2) in the case of a claimant who is not a present or former
director or officer of the Corporation, within sixty days after receipt by the
Corporation of the request therefor (or within ninety days after such receipt
if an officer of the Corporation authorized to make such determination in good
faith determines that additional time is required for the determination and,
prior to expiration of such sixty-day period, notifies the claimant thereof),
an officer of the Corporation authorized to make such determination shall not
have made the determination; provided, however, that this sentence shall not
apply if the claimant has misstated or failed to state a material fact in
connection with his or her request for indemnification. Such presumed
determination that a claimant is entitled to indemnification shall be deemed
to have been made (I) at the end of the sixty-day or ninety-day period (as the
case may be) referred to in clause (1)(a)(ii) or (2) of the immediately
preceding sentence or (II) if the Board of Directors has resolved on a timely
basis to submit the determination to the shareowners, on the last date within
the period prescribed by law for holding such shareowners meeting (or a
postponement or adjournment thereof as permitted above).
(G) Expenses (including attorneys' fees) incurred in defending a civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding to a present or former director or officer of the Corporation, promptly after receipt of a request therefor stating in reasonable detail the expenses incurred, and to a person who is not a present or former director or officer of the Corporation as authorized by the chief executive officer of the Corporation or such other officer of the Corporation as shall be designated from time to time by the Board of Directors; provided that in each case the Corporation shall have received an undertaking by or on behalf of the present or former director, officer, employee or agent to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified by the Corporation as authorized in this section.
(H) The Board of Directors shall establish reasonable procedures for the submission of claims for indemnification pursuant to this section, determination of the entitlement of any person thereto and review of any such determination. Such procedures shall be set forth in an appendix to these By-Laws and shall be deemed for all purposes to be a part hereof.
(I) For purposes of this section,
(1) "Change of Control" means any of the following occurring at any time after the distribution of the shares of capital stock of the Corporation to the holders of capital stock of Rockwell International Corporation (the "Distribution"):
(a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Corporation (the "Outstanding Corporation Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors (the "Outstanding Corporation Voting Securities"); provided, however, that for purposes of this subparagraph (a), the following acquisitions shall not constitute a Change of Control: (w) any acquisition directly from the Corporation, (x) any acquisition by the Corporation, (y) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Corporation, Rockwell International Corporation or any corporation controlled by the Corporation or Rockwell International Corporation or (z) any acquisition pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Paragraph 13(I)(1); or
(b) Individuals who, as of the date of the Distribution, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director subsequent to that date whose election, or nomination for election by the Corporation's shareowners, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors; or
(c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Corporation or the acquisition of assets of another entity (a "Corporate Transaction"), in each case, unless, following such Corporate Transaction, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities immediately prior to such Corporate Transaction beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Corporation or all or substantially all of the Corporation's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities, as the case may be, (ii) no Person (excluding any employee benefit plan (or related trust) of the Corporation, of Rockwell International Corporation or of such corporation resulting from such Corporate Transaction) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Corporate Transaction and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board of Directors, providing for such Corporate Transaction; or
(d) Approval by the Corporation's shareowners of a complete liquidation or dissolution of the Corporation.
(2) "Disinterested Director" means a director of the Corporation who is not and was not a party to an action, suit or proceeding in respect of which indemnification is sought by a director, officer, employee or agent.
(3) "Independent Counsel" means a law firm, or a member of a law firm, that (i) is experienced in matters of corporation law; (ii) neither presently is, nor
in the past five years has been, retained to represent the Corporation, the director, officer, employee or agent claiming indemnification or any other party to the action, suit or proceeding giving rise to a claim for indemnification under this section, in any matter material to the Corporation, the claimant or any such other party; and (iii) would not, under applicable standards of professional conduct then prevailing, have a conflict of interest in representing either the Corporation or such director, officer, employee or agent in an action to determine the Corporation's or such person's rights under this section.
(J) The indemnification and advancement of expenses herein provided, or granted pursuant hereto, shall not be deemed exclusive of any other rights to which any of those indemnified or eligible for advancement of expenses may be entitled under any agreement, vote of shareowners or Disinterested Directors or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person. Notwithstanding any amendment, alteration or repeal of this section or any of its provisions, or of any of the procedures established by the Board of Directors pursuant to subsection (H) hereof, any person who is or was a director, officer, employee or agent of the Corporation or any of its majority-owned subsidiaries or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of any partnership, joint venture, employee benefit plan or other enterprise shall be entitled to indemnification in accordance with the provisions hereof and thereof with respect to any action taken or omitted prior to such amendment, alteration or repeal except to the extent otherwise required by law.
(K) No indemnification shall be payable pursuant to this section with respect to any action against the Corporation commenced by an officer, director, employee or agent unless the Board of Directors shall have authorized the commencement thereof or unless and to the extent that this section or the procedures established pursuant to subsection (H) shall specifically provide for indemnification of expenses relating to the enforcement of rights under this section and such procedures.
ARTICLE IV.
COMMITTEES
SECTION 1. APPOINTMENT AND POWERS. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of two or more directors of the Corporation (or
in the case of a special-purpose committee, one or more directors of the Corporation), which, to the extent provided in said resolution or in these By-Laws and not inconsistent with Section 141 of the Delaware General Corporation Law, as amended, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors.
SECTION 2. TERM OF OFFICE AND VACANCIES. Each member of a committee shall continue in office until a director to succeed him or her shall have been elected and shall have qualified, or until he or she ceases to be a director or until he or she shall have resigned or shall have been removed in the manner hereinafter provided. Any vacancy in a committee shall be filled by the vote of a majority of the whole Board of Directors at any regular or special meeting thereof.
SECTION 3. ALTERNATES. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.
SECTION 4. ORGANIZATION. Unless otherwise provided by the Board of Directors, each committee shall appoint a chairman. Each committee shall keep a record of its acts and proceedings and report the same from time to time to the Board of Directors.
SECTION 5. RESIGNATIONS. Any regular or alternate member of a committee may resign at any time by giving written notice to the Chairman of the Board, the President and Chief Executive Officer or the Secretary of the Corporation. Such resignation shall take effect at the time of the receipt of such notice or at any later time specified therein, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
SECTION 6. REMOVAL. Any regular or alternate member of a committee may be removed with or without cause at any time by resolution passed by a majority of the whole Board of Directors at any regular or special meeting.
SECTION 7. MEETINGS. Regular meetings of each committee, of which no notice shall be necessary, shall be held on such days and at such places as the chairman of the committee shall determine or as shall be fixed by a resolution passed by a majority of all the members of such committee. Special meetings of each committee will be called by the Secretary at the request of any two members of such
committee, or in such other manner as may be determined by the committee. Notice of each special meeting of a committee shall be mailed to each member thereof at least two days before the meeting or shall be given personally or by telephone or other electronic transmission at least one day before the meeting. Every such notice shall state the time and place, but need not state the purposes of the meeting. No notice of any meeting of a committee shall be required to be given to any alternate.
SECTION 8. QUORUM AND MANNER OF ACTING. Unless otherwise provided by resolution of the Board of Directors, a majority of a committee (including alternates when acting in lieu of regular members of such committee) shall constitute a quorum for the transaction of business and the act of a majority of those present at a meeting at which a quorum is present shall be the act of such committee. The members of each committee shall act only as a committee and the individual members shall have no power as such.
SECTION 9. COMPENSATION. Each regular or alternate member of a committee shall be paid such compensation, if any, as shall be fixed by the Board of Directors.
ARTICLE V.
OFFICERS
SECTION 1. OFFICERS. The officers of the Corporation shall be a President and Chief Executive Officer, one or more Vice Presidents (one or more of whom may be Executive Vice Presidents, Senior Vice Presidents or otherwise as may be designated by the Board), a Secretary and a Treasurer, all of whom shall be elected by the Board of Directors. Any two or more offices may be held by the same person. The Board of Directors may also from time to time elect such other officers as it deems necessary.
SECTION 2. TERM OF OFFICE. Each officer shall hold office until his or her successor shall have been duly elected and qualified in his or her stead, or until his or her death or until he or she shall have resigned or shall have been removed in the manner hereinafter provided.
SECTION 3. ADDITIONAL OFFICERS; AGENTS. The President and Chief Executive Officer may from time to time appoint and remove such additional officers and agents as may be deemed necessary. Such persons shall hold office for such period, have such authority, and perform such duties as provided in these By-Laws or as the President and Chief Executive Officer may from time to time prescribe. The Board of Directors or the President and Chief Executive Officer may
from time to time authorize any officer to appoint and remove agents and employees and to prescribe their powers and duties.
SECTION 4. SALARIES. Unless otherwise provided by resolution passed by a majority of the whole Board, the salaries of all officers elected by the Board of Directors shall be fixed by the Board of Directors.
SECTION 5. REMOVAL. Except where otherwise expressly provided in a contract authorized by the Board of Directors, any officer may be removed, either with or without cause, by the vote of a majority of the Board at any regular or special meeting or, except in the case of an officer elected by the Board, by any superior officer upon whom the power of removal may be conferred by the Board or by these By-Laws.
SECTION 6. RESIGNATIONS. Any officer elected by the Board of Directors may resign at any time by giving written notice to the President and Chief Executive Officer or the Secretary. Any other officer may resign at any time by giving written notice to the President and Chief Executive Officer. Any such resignation shall take effect at the date of receipt of such notice or at any later time specified therein, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
SECTION 7. VACANCIES. A vacancy in any office because of death, resignation, removal or otherwise, shall be filled for the unexpired portion of the term in the manner provided in these By-Laws for regular election or appointment to such office.
SECTION 8. PRESIDENT AND CHIEF EXECUTIVE OFFICER. The President and Chief Executive Officer shall be the chief executive officer of the Corporation and, subject to the control of the Board of Directors, shall have general and overall charge of the business and affairs of the Corporation and of its officers. The President and Chief Executive Officer shall keep the Board of Directors appropriately informed on the business and affairs of the Corporation. The President and Chief Executive Officer shall preside at all meetings of the shareowners and shall enforce the observance of the rules of order for the meetings of the shareowners and of the By-Laws of the Corporation.
SECTION 9. EXECUTIVE AND SENIOR VICE PRESIDENTS. One or more Executive or Senior Vice Presidents shall, subject to the control of the President and Chief Executive Officer, have lead accountability for components or functions of the Corporation as and to the extent designated by the President and Chief Executive Officer. Each Executive or Senior Vice President shall keep the President and Chief
Executive Officer appropriately informed on the business and affairs of the designated components or functions of the Corporation.
SECTION 10. VICE PRESIDENTS. The Vice Presidents shall perform such duties as may from time to time be assigned to them or any of them by the President and Chief Executive Officer.
SECTION 11. SECRETARY. The Secretary shall keep or cause to be kept in books provided for the purpose the minutes of the meetings of the shareowners, of the Board of Directors and of any committee constituted pursuant to Article IV of these By-Laws. The Secretary shall be custodian of the corporate seal and see that it is affixed to all documents as required and attest the same. The Secretary shall perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him or her.
SECTION 12. ASSISTANT SECRETARIES. At the request of the Secretary, or in the Secretary's absence or disability, the Assistant Secretary designated by the Secretary shall perform all the duties of the Secretary and, when so acting, shall have all the powers of, and be subject to all the restrictions upon, the Secretary. The Assistant Secretaries shall perform such other duties as from time to time may be assigned to them.
SECTION 13. TREASURER. The Treasurer shall have charge of and be responsible for the receipt, disbursement and safekeeping of all funds and securities of the Corporation. The Treasurer shall deposit all such funds in the name of the Corporation in such banks, trust companies or other depositories as shall be selected in accordance with the provisions of these By-Laws. From time to time and whenever requested to do so, the Treasurer shall render statements of the condition of the finances of the Corporation to the Board of Directors. The Treasurer shall perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him or her.
SECTION 14. ASSISTANT TREASURERS. At the request of the Treasurer, or in the Treasurer's absence or disability, the Assistant Treasurer designated by the Treasurer shall perform all the duties of the Treasurer and, when so acting, shall have all the powers of, and be subject to all the restrictions upon, the Treasurer. The Assistant Treasurers shall perform such other duties as from time to time may be assigned to them.
SECTION 15. CERTAIN AGREEMENTS. The Board of Directors shall have power to authorize or direct the proper officers of the Corporation, on behalf of the Corporation, to enter into valid and binding agreements in respect of employment,
incentive or deferred compensation, stock options, and similar or related matters, notwithstanding the fact that a person with whom the Corporation so contracts may be a member of its Board of Directors. Any such agreement may validly and lawfully bind the Corporation for a term of more than one year, in accordance with its terms, notwithstanding the fact that one of the elements of any such agreement may involve the employment by the Corporation of an officer, as such, for such term.
ARTICLE VI.
AUTHORIZATIONS
SECTION 1. CONTRACTS. The Board of Directors, except as in these By-Laws otherwise provided, may authorize any officer, employee or agent of the Corporation to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances.
SECTION 2. LOANS. No loan shall be contracted on behalf of the Corporation and no negotiable paper shall be issued in its name, unless authorized by the Board of Directors.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or officers, employee or employees, of the Corporation as shall from time to time be determined in accordance with authorization of the Board of Directors.
SECTION 4. DEPOSITS. All funds of the Corporation shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board of Directors may from time to time designate, or as may be designated by any officer or officers of the Corporation to whom such power may be delegated by the Board, and for the purpose of such deposit the officers and employees who have been authorized to do so in accordance with the determinations of the Board may endorse, assign and deliver checks, drafts, and other orders for the payment of money which are payable to the order of the Corporation.
SECTION 5. PROXIES. Except as otherwise provided in these By-Laws or in the Certificate of Incorporation, and unless otherwise provided by resolution of the Board of Directors, the President and Chief Executive Officer or any other officer may from time to time appoint an attorney or attorneys or agent or agents of the Corporation, in the name and on behalf of the Corporation, to cast the
votes which the Corporation may be entitled to cast as a shareowner or otherwise in any other corporation any of whose stock or other securities may be held by the Corporation, at meetings of the holders of the stock or other securities of such other corporations, or to consent in writing to any action by such other corporation, and may instruct the person or persons so appointed as to the manner of casting such vote or giving such consent, and may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal, or otherwise, all such written proxies or other instruments as such officer may deem necessary or proper in the premises.
ARTICLE VII.
SHARES AND THEIR TRANSFER
SECTION 1. SHARES OF STOCK. Certificates for shares of the stock of the Corporation shall be in such form as shall be approved by the Board of Directors. They shall be numbered in the order of their issue, by class and series, and shall be signed by the President and Chief Executive Officer or a Vice President, and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Corporation. If a share certificate is countersigned (1) by a transfer agent other than the Corporation or its employee, or (2) by a registrar other than the Corporation or its employee, any other signature on the certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a share certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent, or registrar at the date of issue. The Board of Directors may by resolution or resolutions provide that some or all of any or all classes or series of the shares of stock of the Corporation shall be uncertificated shares. Notwithstanding the preceding sentence, every holder of uncertificated shares, upon request, shall be entitled to receive from the Corporation a certificate representing the number of shares registered in such shareowner's name on the books of the Corporation.
SECTION 2. RECORD OWNERSHIP. A record of the name and address of each holder of the shares of the Corporation, the number of shares held by such shareowner, the number or numbers of any share certificate or certificates issued to such shareowner and the number of shares represented thereby, and the date of issuance of the shares held by such shareowner shall be made on the Corporation's books. The Corporation shall be entitled to treat the holder of record of any share of stock (including any holder registered in a book-entry or direct registration system maintained by the Corporation or a transfer agent or a registrar designated by the Board of Directors) as the holder in fact thereof and accordingly shall not be bound to
recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, except as required by law.
SECTION 3. TRANSFER OF STOCK. Shares of stock shall be transferable on the books of the Corporation by the holder of record of such stock in person or by such person's attorney or other duly constituted representative, pursuant to applicable law and such rules and regulations as the Board of Directors shall from time to time prescribe. Any shares represented by a certificate shall be transferable upon surrender of such certificate with an assignment endorsed thereon or attached thereto duly executed and with such guarantee of signature as the Corporation may reasonably require.
SECTION 4. LOST, STOLEN AND DESTROYED CERTIFICATES. The Corporation may issue a new certificate of stock or may register uncertificated shares, if then authorized by the Board of Directors, in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such person's legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate, the issuance of such new certificate or the registration of such uncertificated shares.
SECTION 5. TRANSFER AGENT AND REGISTRAR; REGULATIONS. The Corporation shall, if and whenever the Board of Directors shall so determine, maintain one or more transfer offices or agencies, each in charge of a transfer agent designated by the Board of Directors, where the shares of the stock of the Corporation shall be directly transferable, and also one or more registry offices, each in charge of a registrar designated by the Board of Directors, where such shares of stock shall be registered, and no certificate for shares of the stock of the Corporation, in respect of which a registrar and transfer agent shall have been designated, shall be valid unless countersigned by such transfer agent and registered by such registrar. The Board of Directors may also make such additional rules and regulations as it may deem expedient concerning the issue, transfer and registration of shares of stock of the Corporation and concerning the registration of pledges of uncertificated shares.
SECTION 6. FIXING RECORD DATE. For the purpose of determining the shareowners entitled to notice of or to vote at any meeting of shareowners or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be
more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed (1) the record date for determining shareowners entitled to notice of or to vote at a meeting of shareowners shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held and (2) the record date for determining shareowners for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of shareowners of record entitled to notice of or to vote at a meeting of shareowners shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
SECTION 7. EXAMINATION OF BOOKS BY SHAREOWNERS. The Board of Directors shall, subject to the laws of the State of Delaware, have power to determine from time to time, whether and to what extent and under what conditions and regulations the accounts and books of the Corporation, or any of them, shall be open to the inspection of the shareowners; and no shareowner shall have any right to inspect any book or document of the Corporation, except as conferred by the laws of the State of Delaware, unless and until authorized so to do by resolution of the Board of Directors or of the shareowners of the Corporation.
ARTICLE VIII.
NOTICE
SECTION 1. MANNER OF GIVING WRITTEN NOTICE.
(A) Any notice in writing required by law or by these By-Laws to be given to any person shall be effective if delivered personally, given by depositing the same in the post office or letter box in a postpaid envelope addressed to such person at such address as appears on the books of the Corporation or given by a form of electronic transmission consented to by such person to whom the notice is to be given. Any such consent shall be deemed revoked if (i) the Corporation is unable to deliver by electronic transmission two consecutive notices given by the Corporation in accordance with such consent and (ii) such inability becomes known to the Secretary or an Assistant Secretary of the Corporation or to the transfer agent, or other person responsible for the giving of notice; provided, however, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.
(B) Notice by mail shall be deemed to be given at the time when the same shall be mailed and notice by other means shall be deemed given when actually
delivered (and in the case of notice transmitted by a form of electronic transmission, such notice shall be deemed given (i) if by facsimile telecommunication, when directed to a number at which the shareowner has consented to receive notice; (ii) if by electronic mail, when directed to an electronic mail address at which the shareowner has consented to receive notice; (iii) if by a posting on an electronic network together with separate notice to the shareowner of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and (iv) if by any other form of electronic transmission, when directed to the shareowner).
SECTION 2. WAIVER OF NOTICE. Whenever any notice is required to be given to any person, a waiver thereof by such person in writing or transmitted by electronic means (and authenticated if and as required by law), whether before or after the time stated therein, shall be deemed equivalent thereto.
ARTICLE IX.
SEAL
The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal" and "Delaware".
ARTICLE X.
FISCAL YEAR
The fiscal year of the Corporation shall end on September 30 in each year.
APPENDIX
PROCEDURES FOR SUBMISSION AND
DETERMINATION OF CLAIMS FOR IDEMNIFICATION
PURSUANT TO ARTICLE III, SECTION 13 OF THE BY-LAWS.
SECTION 1. PURPOSE. The Procedures for Submission and Determination of Claims for Indemnification Pursuant to Article III, Section 13 of the By-Laws (the "Procedures") are to implement the provisions of Article III, Section 13 of the By-Laws of the Corporation (the "By-Laws") in compliance with the requirement of subsection (H) thereof.
SECTION 2. DEFINITIONS. For purposes of these Procedures:
(A) All terms that are defined in Article III, Section 13 of the By-Laws shall have the meanings ascribed to them therein when used in these Procedures unless otherwise defined herein.
(B) "Expenses" include all reasonable attorneys' fees, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness in, a Proceeding; and shall also include such retainers as counsel may reasonably require in advance of undertaking the representation of an Indemnitee in a Proceeding.
(C) "Indemnitee" includes any person who was or is, or is threatened to be made, a witness in or a party to any Proceeding by reason of the fact that such person is or was a director, officer, employee or agent of the Corporation or any of its majority-owned subsidiaries or is or was serving at the request of the Corporation as a director, officer, employee or agent (except in each of the foregoing situations to the extent any agreement, arrangement or understanding of agency contains provisions that supersede or abrogate indemnification under Article III, Section 13 of the By-Laws) of another corporation or of any partnership, joint venture, trust, employee benefit plan or other enterprise.
(D) "Proceeding" includes any action, suit, arbitration, alternative dispute resolution mechanism, investigation, administrative hearing or any other proceeding, whether civil, criminal, administrative or investigative, except one initiated by an Indemnitee unless the Board of Directors shall have authorized the commencement thereof.
SECTION 3. SUBMISSION AND DETERMINATION OF CLAIMS.
(A) To obtain indemnification or advancement of Expenses under Article III, Section 13 of the By-Laws, an Indemnitee shall submit to the Secretary of the Corporation a written request therefor, including therein or therewith such documentation and information as is reasonably available to the Indemnitee and is reasonably necessary to permit a determination as to whether and what extent the Indemnitee is entitled to indemnification or advancement of Expenses, as the case may be. The Secretary shall, promptly upon receipt of a request for indemnification, advise the Board of Directors (if the Indemnitee is a present or former director or officer of the Corporation) or the officer of the Corporation authorized to make the determination as to whether an Indemnitee is entitled to indemnification (if the Indemnitee is not a present or former director or officer of the Corporation) thereof in writing if a determination in accordance with Article III, Section 13(E) of the By-Laws is required.
(B) Upon written request by an Indemnitee for indemnification pursuant to Section 3(A) hereof, a determination with respect to the Indemnitee's entitlement thereto in the specific case, if required by the By-Laws, shall be made in accordance with Article III, Section 13(E) of the By-Laws, and, if it is so determined that the Indemnitee is entitled to indemnification, payment to the Indemnitee shall be made within ten days after such determination. The Indemnitee shall cooperate with the person, persons or entity making such determination, with respect to the Indemnitee's entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to the Indemnitee and reasonably necessary to such determination.
(C) If entitlement to indemnification is to be made by Independent Counsel pursuant to Article III, Section 13(E) of the By-Laws, the Independent Counsel shall be selected as provided in this Section 3(C). If a Change of Control shall not have occurred, the Independent Counsel shall be selected by the Board of Directors, and the Corporation shall give written notice to the Indemnitee advising the Indemnitee of the identity of the Independent Counsel so selected. If a Change of Control shall have occurred, the Independent Counsel shall be selected by the Indemnitee (unless the Indemnitee shall request that such selection be made by the Board of Directors, in which event the immediately preceding sentence shall apply), and the Indemnitee shall give written notice to the Corporation advising it of the identity of the Independent Counsel so selected. In either event, the Indemnitee or the Corporation, as the case may be, may, within seven days after such written notice of selection shall have been given, deliver to the Corporation or to the Indemnitee, as the
case may be, a written objection to such selection. Such objection may be
asserted only on the ground that the Independent Counsel so selected does not
meet the requirements of "Independent Counsel" as defined in Article III,
Section 13 of the By-Laws, and the objection shall set forth with
particularity the factual basis of such assertion. If such written objection
is made, the Independent Counsel so selected may not serve as Independent
Counsel unless and until a court has determined that such objection is without
merit. If, within twenty days after the next regularly scheduled Board of
Directors meeting following submission by the Indemnitee of a written request
for indemnification pursuant to Section 3(A) hereof, no Independent Counsel
shall have been selected and not objected to, either the Corporation or the
Indemnitee may petition the Court of Chancery of the State of Delaware or
other court of competent jurisdiction for resolution of any objection which
shall have been made by the Corporation or the Indemnitee to the other's
selection of Independent Counsel and/or for the appointment as Independent
Counsel of a person selected by the Court or by such other person as the Court
shall designate, and the person with respect to whom an objection is favorably
resolved or the person so appointed shall act as Independent Counsel under
Article III, Section 13(E) of the By-Laws. The Corporation shall pay any and
all reasonable fees and expenses (including without limitation any advance
retainers reasonably required by counsel) of Independent Counsel incurred by
such Independent Counsel in connection with acting pursuant to Article III,
Section 13(E) of the By-Laws, and the Corporation shall pay all reasonable
fees and expenses (including without limitation any advance retainers
reasonably required by counsel) incident to the procedures of Article III,
Section 13(E) of the By-Laws and this Section 3(C), regardless of the manner
in which Independent Counsel was selected or appointed. Upon the delivery of
its opinion pursuant to Article III, Section 13 of the By-Laws or, if earlier,
the due commencement of any judicial proceeding or arbitration pursuant to
Section 4(A)(3) of these Procedures, Independent Counsel shall be discharged
and relieved of any further responsibility in such capacity (subject to the
applicable standards of professional conduct then prevailing).
(D) If a Change of Control shall have occurred, in making a
determination with respect to entitlement to indemnification under the
By-Laws, the person, persons or entity making such determination shall presume
that an Indemnitee is entitled to indemnification under the By-Laws if the
Indemnitee has submitted a request for indemnification in accordance with
Section 3(A) hereof, and the Corporation shall have the burden of proof to
overcome that presumption in connection with the making by any person, persons
or entity of any determination contrary to that presumption.
SECTION 4. REVIEW AND ENFORCEMENT OF DETERMINATION.
(A) In the event that (1) advancement of Expenses is not timely made pursuant to Article III, Section 13(G) of the By-Laws, (2) payment of indemnification is not made pursuant to Article III, Section 13(C) or (D) of the By-Laws within ten days after receipt by the Corporation of written request therefor, (3) a determination is made pursuant to Article III, Section 13(E) of the By-Laws that an Indemnitee is not entitled to indemnification under the By-Laws, (4) the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Article III, Section 13(E) of the By-Laws and such determination shall not have been made and delivered in a written opinion within ninety days after receipt by the Corporation of the written request for indemnification, or (5) payment of indemnification is not made within ten days after a determination has been made pursuant to Article III, Section 13(E) of the By-Laws that an Indemnitee is entitled to indemnification or within ten days after such determination is deemed to have been made pursuant to Article III, Section 13(F) of the By-Laws, the Indemnitee shall be entitled to an adjudication in an appropriate court of the State of Delaware, or in any other court of competent jurisdiction, of the Indemnitee's entitlement to such indemnification or advancement of Expenses. Alternatively, the Indemnitee, at his or her option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the rules of the American Arbitration Association. The Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within one year following the date on which the Indemnitee first has the right to commence such proceeding pursuant to this Section 4(A). The Corporation shall not oppose the Indemnitee's right to seek any such adjudication or award in arbitration.
(B) In the event that a determination shall have been made pursuant to Article III, Section 13(E) of the By-Laws that an Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 4 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and the Indemnitee shall not be prejudiced by reason of that adverse determination. If a Change of Control shall have occurred, the Corporation shall have the burden of proving in any judicial proceeding or arbitration commenced pursuant to this Section 4 that the Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.
(C) If a determination shall have been made or deemed to have been made pursuant to Article III, Section 13(E) or (F) of the By-Laws that an Indemnitee is entitled to indemnification, the Corporation shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 4, absent (1) a misstatement or omission of a material fact in connection with the Indemnitee's
request for indemnification, or (2) a prohibition of such indemnification under applicable law.
(D) The Corporation shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 4 that the procedures and presumptions of these Procedures are not valid, binding and enforceable, and shall stipulate in any such judicial proceeding or arbitration that the Corporation is bound by all the provisions of these Procedures.
(E) In the event that an Indemnitee, pursuant to this Section 4, seeks to enforce the Indemnitee's rights under, or to recover damages for breach of, Article III, Section 13 of the By-Laws or these Procedures in a judicial proceeding or arbitration, the Indemnitee shall be entitled to recover from the Corporation, and shall be indemnified by the Corporation against, any and all expenses (of the types described in the definition of Expenses in Section 2 of these Procedures) actually and reasonably incurred in such judicial proceeding or arbitration, but only if the Indemnitee prevails therein. If it shall be determined in such judicial proceeding or arbitration that the Indemnitee is entitled to receive part but not all of the indemnification or advancement of Expenses sought, the expenses incurred by the Indemnitee in connection with such judicial proceeding or arbitration shall be appropriately prorated.
SECTION 5. AMENDMENTS. These Procedures may be amended at any time and from time to time in the same manner as any by-law of the Corporation in accordance with the Certificate of Incorporation; provided, however, that notwithstanding any amendment, alteration or repeal of these Procedures or any provision hereof, any Indemnitee shall be entitled to utilize these Procedures with respect to any claim for indemnification arising out of any action taken or omitted prior to such amendment, alteration or repeal except to the extent otherwise required by law.
EXHIBIT 4.1
[FACE OF CERTIFICATE OF STOCK]
Incorporated in Delaware 2001 COMMON STOCK
NUMBER SHARES
RC
TRANSFERABLE IN CUSIP 774341 10 1
NEW YORK, NY SEE REVERSE FOR CERTAIN DEFINITIONS
AND RIDGEFIELD PARK, NJ
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ROCKWELL COLLINS
ROCKWELL COLLINS, INC.
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK OF
Rockwell Collins, Inc. (hereinafter called the Corporation) transferable on the books of the Corporation by said owner in person or by duly authorized attorney upon surrender of this certificate properly endorsed. This certificate is not valid until countersigned by a Transfer Agent and registered by a Registrar.
Witness the seal of the Corporation and the signatures of its duly authorized officers.
[the words "CERTIFICATE OF STOCK" are superimposed over the foregoing text]
Dated
ASSISTANT SECRETARY PRESIDENT AND CHIEF EXECUTIVE OFFICER
[CORPORATE SEAL OF ROCKWELL COLLINS, INC. - 2001 - DELAWARE]
COUNTERSIGNED AND REGISTERED:
MELLON INVESTOR SERVICES LLC
TRANSFER AGENT AND REGISTRAR,
BY AUTHORIZED SIGNATURE
[REVERSE OF CERTIFICATE OF STOCK]
ROCKWELL COLLINS, INC.
The Corporation will furnish without charge to each shareowner who so requests, a copy of the provisions setting forth the voting powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof which the Corporation is authorized to issue, and the qualifications, limitations or restrictions of such preferences and/or rights. Any such request may be addressed to the Secretary of the Corporation or to the Transfer Agent named on the face hereof.
This certificate also evidences and entitles the holder hereof to certain Rights as set forth (and as defined) in a Rights Agreement between Rockwell Collins, Inc. and Mellon Investor Services LLC, dated as of June , 2001, as it may be amended from time to time (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of Rockwell Collins, Inc. Under certain circumstances, as set forth in the Rights Agreement, such rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. Rockwell Collins, Inc. will mail to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request therefor. Under certain circumstances, as set forth in the Rights Agreement, Rights issued to any Person (as defined in the Rights Agreement) who becomes an Acquiring Person (as defined in the Rights Agreement) may become null and void.
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right
of survivorship and not as
tenants in common
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UNF GIFT MIN ACT -- ______________ Custodian ____________________
(Cust) (Minor)
Under Uniform Gifts to Minors Act__________________________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received, ____________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
____________________________________________________________________Attorney to transfer the said stock on the books of the within named Corporation, with full power of substitution in the premises.
Dated_________________________
Signature(s) Guaranteed:
Exhibit 4.2
[5/30/01]
ROCKWELL COLLINS, INC.
and
MELLON INVESTOR SERVICES LLC, AS
RIGHTS AGENT
FORM OF
RIGHTS AGREEMENT
Dated as of June [ ], 2001
TABLE OF CONTENTS
Page
----
Section 1. Certain Definitions...........................................................................2
Section 2. Appointment of Rights Agent...................................................................8
Section 3. Issue of Right Certificates...................................................................8
Section 4. Form of Right Certificates...................................................................12
Section 5. Countersignature and Registration............................................................12
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen
Right Certificates......................................................................13
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights................................15
Section 8. Cancellation and Destruction of Right Certificates...........................................17
Section 9. Availability of Preferred Shares.............................................................17
Section 10. Preferred Shares Record Date.................................................................19
Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights...........................19
Section 12. Certificate of Adjusted Purchase Price or Number of Shares...................................32
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power.........................33
Section 14. Fractional Rights and Fractional Shares......................................................35
Section 15. Rights of Action.............................................................................37
Section 16. Agreement of Right Holders...................................................................38
Section 17. Right Holder Not Deemed a Shareowner.........................................................38
Section 18. Concerning the Rights Agent..................................................................39
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Page
----
Section 19. Merger or Consolidation or Change of Name of Rights Agent....................................40
Section 20. Duties of Rights Agent.......................................................................41
Section 21. Change of Rights Agent.......................................................................45
Section 22. Issuance of New Right Certificates...........................................................46
Section 23. Redemption ..................................................................................48
Section 24. Exchange ....................................................................................49
Section 25. Notice of Certain Events.....................................................................51
Section 26. Notices .....................................................................................53
Section 27. Supplements and Amendments...................................................................54
Section 28. Successors ..................................................................................55
Section 29. Benefits of this Agreement...................................................................55
Section 30. Severability ................................................................................56
Section 31. Governing Law ...............................................................................56
Section 32. Counterparts ................................................................................56
Section 33. Descriptive Headings.........................................................................56
Exhibit A - Form of Right Certificate
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RIGHTS AGREEMENT
Agreement, dated as of June [ ], 2001, between Rockwell Collins, Inc., a Delaware corporation (the "Company"), and Mellon Investor Services LLC, a New Jersey limited liability company, as Rights Agent (the "Rights Agent").
The Board of Directors of the Company has authorized and declared a dividend of one preferred share purchase right (a "Right") for each share of Common Stock (as hereinafter defined) to be issued in the distribution of shares of Common Stock (the "Spin-Off") by Rockwell International Corporation, a Delaware corporation ("Rockwell") to Rockwell's shareowners, each Right representing the right to purchase one one-hundredth of a Preferred Share (as hereinafter defined), upon the terms and subject to the conditions herein set forth, and has further authorized and directed the issuance of one Right with respect to each Common Share of the Company that shall become outstanding between the effective date of the Spin-Off (the "Record Date") and the earliest of the Distribution Date, the Redemption Date and the Final Expiration Date (as such terms are hereinafter defined); provided, however, that Rights may be issued with respect to shares of Common Stock that shall become outstanding after the Distribution Date and prior to the earlier of the Redemption Date and the Final Expiration Date in accordance with the provisions of Section 22 hereof.
Accordingly, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term is hereinafter defined) who or which on or after the Record Date, together with all Affiliates and Associates (as such terms are hereinafter defined) of such Person, shall be the Beneficial Owner (as such term is hereinafter defined) of 15% or more of the Common Stock then outstanding, but shall not include the Company, any Subsidiary (as such term is hereinafter defined) of the Company, any employee benefit plan of the Company, Rockwell, or any Subsidiary of the Company, or any entity holding Common Stock for or pursuant to the terms of any such plan. Notwithstanding the foregoing, no Person shall become an "Acquiring Person" as the result of an acquisition of shares of Common Stock by the Company, which, by reducing the number of shares of Common Stock outstanding, increases the proportionate number of the shares of Common Stock beneficially owned by such Person to 15% or more of the Common Stock then outstanding; provided, however, that if a Person shall become the Beneficial Owner of 15% or more of the Common Stock then outstanding by reason of share purchases by the Company and shall, after such share purchases by the Company, become the Beneficial Owner of any additional shares of Common Stock (other than an acquisition that does not directly or indirectly increase the proportionate share of the Common Stock then outstanding beneficially owned by such Person), then
such Person shall be deemed to be an "Acquiring Person". Notwithstanding
the foregoing, if the Board of Directors of the Company determines in
good faith that a Person who would otherwise be an "Acquiring Person",
as defined pursuant to the foregoing provisions of this paragraph (a),
has become such inadvertently, and such Person divests as promptly as
practicable a sufficient number of shares of Common Stock so that such
Person would no longer be an "Acquiring Person", as defined pursuant to
the foregoing provisions of this paragraph (a), then such Person shall
not be deemed to be an "Acquiring Person" for any purposes of this
Agreement. Notwithstanding the foregoing provisions of this paragraph
(a), Rockwell shall not be deemed to be an Acquiring Person as a result
of its ownership of capital stock of the Company prior to the Spin-Off.
(b) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect on the date of this Agreement.
(c) A Person shall be deemed the "Beneficial Owner" of and shall be deemed to have "Beneficial Ownership" of and to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or Associates has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities), or upon the exercise of conversion rights, exchange rights, rights (other than the Rights), warrants or options, or otherwise; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange; or (B) the right to vote pursuant to any agreement, arrangement or understanding; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security if the agreement, arrangement or understanding to vote such security (1) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations promulgated under the Exchange Act and (2) is not also then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any other Person with which such Person or any of such Person's Affiliates or Associates has any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities) for the purpose of acquiring, holding, voting (except to the extent contemplated by the proviso to Section l(c)(ii)(B)) or disposing of any securities of the Company.
Notwithstanding anything in this definition of Beneficial Ownership to the contrary, the phrase "then outstanding", when used with reference to a Person's Beneficial Ownership of securities of the Company, shall mean the number of such securities then issued and outstanding together with the number of such securities not then actually issued and outstanding which such Person would be deemed to own beneficially hereunder.
(d) "Business Day" shall mean any day other than a Saturday, a Sunday, or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.
(e) "close of business" on any given date shall mean 5:00 P.M., New York City time, on such date; provided, however, that if such date is not a Business Day it shall mean 5:00 P.M., New York City time, on the next succeeding Business Day.
(f) "current per share market price" shall have the meaning set forth in Section 11(d)(i) hereof.
(g) "Common Shares" when used with reference to any Person other than the Company shall mean the capital stock (or equity interest) with the greatest voting power of such other Person or, if such other Person is a Subsidiary of another Person, the Person or Persons which ultimately control such first-mentioned Person.
(h) "Common Stock" shall mean the Common Stock, par value $.01 per share, of the Company.
(i) "Designated Office" shall have the meaning set forth in
Section 5 hereof.
(j) "Distribution Date" shall have the meaning set forth in
Section 3(a) hereof.
(k) "equivalent preferred shares" shall have the meaning set forth in Section 11(b) hereof.
(l) "Exchange Ratio" shall have the meaning set forth in Section 24(a) hereof.
(m) "Final Expiration Date" shall have the meaning set forth in
Section 7(b) hereof.
(n) "Nasdaq" shall have the meaning set forth in Section 11(d)(i) hereof.
(o) "Person" shall mean any individual, firm, corporation or other entity, and shall include any successor (by merger or otherwise) of such entity.
(p) "Preferred Shares" shall mean shares of Series A Junior Participating Preferred Stock, without par value, of the Company having the rights and preferences set forth in the Restated Certificate of Incorporation of the Company.
(q) "Purchase Price" shall have the meaning set forth in Section 7(a) hereof.
(r) "Record Date" shall have the meaning set forth in the second paragraph of the Preamble hereof.
(s) "Redemption Date" shall have the meaning set forth in
Section 7(b) hereof.
(t) "Redemption Price" shall have the meaning set forth in
Section 23(a) hereof.
(u) "Right" shall have the meaning set forth in the second paragraph of the Preamble hereof.
(v) "Right Certificate" shall have the meaning set forth in
Section 3(a) hereof.
(w) "Security" shall have the meaning set forth in Section 11(d)(i) hereof.
(x) "Shares Acquisition Date" shall mean the first date of public announcement by the Company or an Acquiring Person that an Acquiring Person has become such.
(y) "Subsidiary" of any Person shall mean any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person.
(z) "Trading Day" shall have the meaning set forth in Section 11(d)(i) hereof.
Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such co-Rights Agents as it may deem necessary or desirable. The Rights Agent shall have no duty to supervise, and in no event shall be liable, for the acts or omission of any co-Rights Agent.
Section 3. Issue of Right Certificates. (a) Until the earlier of
(i) the tenth day after the Shares Acquisition Date or (ii) the tenth Business
Day (or such later date as may be determined by action of the Board of Directors
of the Company prior to such time as any Person becomes an Acquiring Person)
after the date of the commencement by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company or any entity holding shares of Common Stock for or
pursuant to the terms of any such plan) of, or of the first public announcement
of the intention of any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company or any entity holding Common Shares for or pursuant to the terms of any
such
plan) to commence, a tender or exchange offer the consummation of which would result in any Person becoming an Acquiring Person, the earlier of such dates being herein referred to as the "Distribution Date"), (x) the Rights will be attached to (subject to the provisions of Section 3(b) hereof) the shares of Common Stock (whether in book-entry, uncertificated or certificated form) issued and outstanding and the Rights will be owned by the registered holders of the shares of Common Stock and will not be evidenced by separate Right Certificates, and (y) any transfer of shares of Common Stock (or any interest therein, including the creation of a security interest) will also effect a transfer of the associated Rights (or the equivalent interest therein) and neither the Rights nor any interest therein may be transferred otherwise than by transfer of the associated shares of Common Stock (or the equivalent interest therein). As soon as practicable after the Distribution Date, the Company will prepare and execute, the Rights Agent will countersign, and the Company will send or cause to be sent (and the Rights Agent will, if requested and provided with a list of the relevant holders of Common Stock by the Company, send) by first-class, insured, postage-prepaid mail, to each record holder of shares of Common Stock as of the close of business on the Distribution Date, at the address of such holder shown on the records of the Company, a Right Certificate, in substantially the form of Exhibit A hereto (a "Right Certificate"), evidencing one Right for each share of Common Stock so held, subject, in the case of shares of Common Stock held in uncertificated form on the Distribution Date, to the rights provided by law to a registered pledgee whose security interest has been duly registered with the Company.
As of the Distribution Date, the Rights will be evidenced solely by such Right Certificates.
(b) Until the earliest of the Distribution Date, the Redemption Date or the Final Expiration Date, certificates for shares of Common Stock shall have impressed on, printed on, written on or otherwise affixed to them substantially the following legend:
This certificate also evidences and entitles the holder hereof to certain Rights as set forth (and as defined) in a Rights Agreement between Rockwell Collins, Inc. and Mellon Investor Services LLC, as Rights Agent, dated as of June [ ], 2001, as it may be amended from time to time (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of Rockwell Collins, Inc. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. Rockwell Collins, Inc. will mail to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request therefor. Under certain circumstances, as set forth in the Rights Agreement, Rights beneficially owned by any Person (as defined in the Rights Agreement) who becomes an Acquiring Person (as defined in the Rights Agreement) may become void.
With respect to such certificates containing the foregoing legend, until the Distribution Date, the Rights associated with the shares of Common Stock represented by such certificates shall be evidenced by such certificates alone, and the surrender for transfer of any such certificate shall also constitute the transfer of the Rights associated with the shares of Common Stock represented thereby.
(c) Until the earliest of the Distribution Date, the Redemption Date or the Final Expiration Date, confirmations and account statements sent to holders of shares of Common Stock in book-entry form and initial transaction statements relating to the
registration, pledge or release from pledge of shares of Common Stock in uncertificated form shall have impressed on, printed on, written on or otherwise affixed to them substantially the following legend:
The shares of Common Stock, par value $.01 per share, of Rockwell Collins, Inc. to which this statement relates also evidence and entitle the holder thereof to certain Rights as set forth (and as defined) in a Rights Agreement between Rockwell Collins, Inc. and Mellon Investor Services LLC, as Rights Agent, dated as of June [ ], 2001 (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of Rockwell Collins, Inc. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by the shares to which this statement relates. Rockwell Collins, Inc. will mail to the holder of the shares to which this statement relates and any registered pledgee of uncertificated shares a copy of the Rights Agreement without charge after receipt of a written request therefor. Under certain circumstances, as set forth in the Rights Agreement, Rights beneficially owned by any Person (as defined in the Rights Agreement) who becomes an Acquiring Person (as defined in the Rights Agreement) may become void.
With respect to shares of Common Stock in book-entry form for which there has been sent a confirmation or account statement and shares of Common Stock in uncertificated form for which there has been sent an initial transaction statement containing the foregoing legend, until the earliest of the Distribution Date, the Redemption Date or the Final Expiration Date, the Rights associated with such Common Shares shall be evidenced by such Common Shares alone, and the registration of transfer or pledge, or the release from pledge, of any such Common Shares shall also constitute the registration of transfer or pledge, or the release from pledge, as the case may be, of the Rights associated with such Common Shares.
(d) In the event that the Company purchases or acquires any shares of Common Stock after the Record Date but prior to the Distribution Date, any Rights associated with such Common Shares shall be deemed canceled and retired so that the Company shall not be entitled to exercise any Rights associated with the shares of Common Stock which are no longer outstanding.
Section 4. Form of Right Certificates. Subject to the provisions of Section 22 hereof, the Right Certificates (and the forms of election to purchase Preferred Shares and of assignment to be printed on the reverse thereof) shall be substantially the same as Exhibit A hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and which do not affect the rights, duties or responsibilities of the Rights Agent, and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed or the National Association of Securities Dealers, Inc., or to conform to usage.
Section 5. Countersignature and Registration. The Right Certificates shall be executed on behalf of the Company by its Chief Executive Officer, any of its Vice Presidents, or its Treasurer, either manually or by facsimile signature, shall have affixed thereto the Company's seal or a facsimile thereof, and shall be attested by the Secretary or an Assistant Secretary of the Company, either manually or by facsimile signature. The
Right Certificates shall be countersigned by the Rights Agent, either manually or by facsimile signature, and shall not be valid for any purpose unless countersigned. In case any officer of the Company who shall have signed any of the Right Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Right Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the person who signed such Right Certificates had not ceased to be such officer of the Company; and any Right Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Right Certificate, shall be a proper officer of the Company to sign such Right Certificate, although at the date of the execution of this Agreement any such person was not such an officer.
Following the Distribution Date and receipt by the Rights Agent of a list of the relevant holders of Common Stock as of the Distribution Date provided by the Company, the Rights Agent will keep or cause to be kept, at an office designated by the Rights Agent for such purpose (the "Designated Office"), books for registration and transfer of the Right Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Right Certificates, the number of Rights evidenced on its face by each of the Right Certificates and the date of each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject to the provisions of Section 14 hereof, at any time after the close of business on the Distribution
Date, and at or prior to the close of business on the earlier of the Redemption Date or the Final Expiration Date, any Right Certificate or Right Certificates (other than Right Certificates representing Rights that have become void pursuant to Section 11(a)(ii) hereof or that have been exchanged pursuant to Section 24 hereof) may be transferred, split up, combined or exchanged for another Right Certificate or Right Certificates, entitling the registered holder of the Rights evidenced thereby to purchase a like number of one one-hundredths of a Preferred Share as the Right Certificate or Right Certificates surrendered then entitled such holder to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Right Certificate or Right Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Right Certificate or Right Certificates to be transferred, split up, combined or exchanged at the Designated Office of the Rights Agent. Thereupon the Rights Agent shall countersign and deliver to the Person entitled thereto a Right Certificate or Right Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Right Certificates. The Rights Agent is not responsible or obligated to inquire as to whether the Company required that any such taxes or charges be paid or whether the payment of any such taxes or charges has been made.
Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Right Certificate, and, in case of loss, theft or destruction, of indemnity or security satisfactory to them, and, at the Company's request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights
Agent and cancellation of the Right Certificate if mutilated, the Company will make and deliver a new Right Certificate of like tenor to the Rights Agent for delivery to the registered holder in lieu of the Right Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date
of Rights. (a) Each Right (other than Rights that have become void pursuant to
Section 11(a)(ii) hereof or that have been exchanged pursuant to Section 24
hereof) shall initially entitle the registered holder thereof to purchase one
one-hundredth of a Preferred Share, subject to adjustment from time to time as
provided in Section 11 or 13 hereof. The purchase price (the "Purchase Price")
for each one one-hundredth of a Preferred Share purchasable pursuant to the
exercise of a Right shall be $125, and shall be subject to adjustment from time
to time as provided in Section 11 or 13 hereof and shall be payable in lawful
money of the United States of America in accordance with paragraph (c) below.
(b) The registered holder of any Right Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein) in whole or in part at any time after the Distribution Date upon surrender of the Right Certificate evidencing such Rights, with the form of election to purchase on the reverse side thereof duly and properly executed, to the Rights Agent at the Designated Office of the Rights Agent, together with payment of the Purchase Price for each one one-hundredth of a Preferred Share as to which the Rights are exercised, at or prior to the earliest of (i) the close of business on the tenth anniversary of the Record Date (the "Final Expiration Date"), (ii) the time at which the
Rights are redeemed as provided in Section 23 hereof (the "Redemption Date"), or
(iii) the time at which such Rights are exchanged as provided in Section 24
hereof.
(c) Upon receipt of a Right Certificate representing exercisable Rights, with the form of election to purchase duly executed and properly completed, accompanied by payment of the Purchase Price for the shares to be purchased and an amount equal to any applicable tax or charge required to be paid by the holder of the Rights evidenced by such Right Certificate in accordance with Section 9 hereof by certified check, cashier's check or money order payable to the order of the Company, the Rights Agent shall thereupon promptly (i) (A) requisition from any transfer agent of the Preferred Shares certificates for the number of Preferred Shares to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests, or (B) requisition from the depositary agent depositary receipts representing such number of one one-hundredths of a Preferred Share as are to be purchased (in which case certificates for the Preferred Shares represented by such receipts shall be deposited by the transfer agent for the Preferred Shares with the depositary agent) and the Company hereby directs the depositary agent to comply with such request, (ii) when appropriate, requisition from the Company the amount of cash to be paid in lieu of issuance of fractional shares in accordance with Section 14 hereof, (iii) after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of the Rights evidenced by such Right Certificate, registered in such name or names as may be designated by such
holder and (iv) when appropriate, after receipt, deliver such cash to or upon the order of the registered holder of the Rights evidenced by such Right Certificate.
(d) In case the registered holder of the Rights evidenced by any Right Certificate shall exercise less than all the Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent to the registered holder of such Rights or to his duly authorized assigns, subject to the provisions of Section 6 and Section 14 hereof.
Section 8. Cancellation and Destruction of Right Certificates. All Right Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in canceled form, or, if surrendered to the Rights Agent, shall be canceled by it, and no Right Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Right Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all canceled Right Certificates to the Company, or shall, at the written request of the Company, destroy such canceled Right Certificates, and in such case shall deliver a certificate of destruction thereof to the Company.
Section 9. Availability of Preferred Shares. The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and
unissued Preferred Shares or any Preferred Shares held in its treasury, the number of Preferred Shares that will be sufficient to permit the exercise in full of all outstanding Rights in accordance with Section 7 hereof. The Company covenants and agrees that it will take all such action as may be necessary to ensure that all Preferred Shares delivered upon exercise of Rights shall, at the time of delivery of the certificates for such Preferred Shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable shares.
The Company further covenants and agrees that it will pay when due and payable any and all taxes and charges which may be payable in respect of the issuance or delivery of the Rights or the Right Certificates or of any Preferred Shares upon the exercise of Rights. The Company shall not, however, be required to pay any such tax or charge which may be payable in respect of any transfer or delivery of Rights or Right Certificates to a person other than, or the issuance or delivery of certificates or depositary receipts for the Preferred Shares in a name other than that of, the registered holder of the Rights evidenced by Right Certificates surrendered for exercise or to issue or to deliver any certificates or depositary receipts for Preferred Shares upon the exercise of any Rights until any such tax and charge shall have been paid (any such tax and charge being payable by the holder of such Rights at the time of surrender of the related Right Certificates) or until it has been established to the Company's reasonable satisfaction that no such tax or charge is due.
Section 10. Preferred Shares Record Date. Each Person in whose name any Preferred Shares are issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of such Preferred Shares on, and the date of issuance of such Preferred Shares and the date of any certificate for such Preferred Shares shall be, the date upon which the Right Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any applicable taxes or charges pursuant to Section 9) was made; provided, however, that if the date of such surrender and payment is a date upon which the Preferred Shares transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares on, and the date of issuance of such Preferred Shares and the date of any such certificate shall be, the next succeeding Business Day on which the Preferred Shares transfer books of the Company are open. Prior to the exercise of any Rights, the holder thereof shall not be entitled to any rights of a holder of Preferred Shares for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights. The Purchase Price, the number of Preferred Shares covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the Record Date (A) declare a dividend on the Preferred Shares payable in Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine the outstanding Preferred Shares into a smaller number of Preferred Shares or (D) issue any shares of its capital stock in a reclassification of the Preferred Shares (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a), the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of capital stock issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive the aggregate number and kind of shares of capital stock which, if such Right had been exercised immediately prior to such date and at a time when the Preferred Shares transfer books of the Company were open, such holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right.
(ii) (A) Subject to clause (B) of this subparagraph (ii) and
Section 24 of this Agreement, in the event any Person becomes an Acquiring
Person, each registered holder of a Right shall thereafter have a right to
receive, upon exercise thereof at a price
equal to the then current Purchase Price multiplied by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable, in accordance with the terms of this Agreement and in lieu of such number of Preferred Shares for which a Right is then exercisable, such number of shares of Common Stock as shall equal the result obtained by (x) multiplying the then current Purchase Price by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable and dividing that product by (y) 50% of the then current per share market price of the shares of Common Stock (determined pursuant to Section 11(d) hereof) on the date of the occurrence of such event. In the event that any Person shall become an Acquiring Person and the Rights shall then be outstanding, the Company shall not take any action which would eliminate or diminish the benefits intended to be afforded by the Rights.
(B) From and after the occurrence of the event described in clause (A) of this subsection (ii), any Rights that are or were acquired or beneficially owned by any Acquiring Person (or any Associate or Affiliate of such Acquiring Person) shall be void and any holder of such Rights shall thereafter have no right to exercise such Rights under any provision of this Agreement. No Right Certificate shall be issued pursuant to Section 3 hereof that evidences Rights beneficially owned by an Acquiring Person (or any Associate or Affiliate of such Acquiring Person) whose Rights would be void pursuant to the preceding sentence and any Right Certificate evidencing Rights beneficially owned by any such Acquiring Person (or any Associate or Affiliate of such Acquiring Person) shall be void. No Right Certificate shall be issued at any time upon the transfer of any
Rights to an Acquiring Person (or any Associate or Affiliate of such Acquiring Person) whose Rights would be void pursuant to the second preceding sentence or to any nominee of such Acquiring Person, Associate or Affiliate; and any Right Certificate delivered to the Rights Agent for transfer to an Acquiring Person (or any Associate or Affiliate of such Acquiring Person) whose Rights would be void pursuant to the second preceding sentence shall be canceled.
(iii) In the event that there shall not be sufficient shares of
Common Stock issued but not outstanding or authorized but unissued to permit the
exercise in full of the Rights in accordance with the foregoing subparagraph
(ii), the Company shall take all such action as may be necessary to authorize
additional shares of Common Stock for issuance upon exercise of the Rights. In
the event the Company shall, after good faith effort, be unable to take all such
action as may be necessary to authorize such additional shares of Common Stock,
the Company shall substitute, for each share of Common Stock that would
otherwise be issuable upon exercise of a Right, a number of Preferred Shares or
fraction thereof such that the current per share market price of one Preferred
Share multiplied by such number or fraction is equal to the current per share
market price of one share of Common Stock as of the date of issuance of such
Preferred Shares or fraction thereof.
(b) In case the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Preferred Shares entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase Preferred
Shares (or shares having the same rights, privileges and preferences as the Preferred Shares ("equivalent preferred shares")) or securities convertible into Preferred Shares or equivalent preferred shares at a price per Preferred Share or equivalent preferred share (or having a conversion price per share, if a security convertible into Preferred Shares or equivalent preferred shares) less than the then current per share market price of the Preferred Shares on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of Preferred Shares outstanding on such record date plus the number of Preferred Shares which the aggregate offering price of the total number of Preferred Shares and/or equivalent preferred shares so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such current market price and the denominator of which shall be the number of Preferred Shares outstanding on such record date plus the number of additional Preferred Shares and/or equivalent preferred shares to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible); provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right. In case such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holders of the Rights. Preferred Shares owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such rights, options or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a distribution to all holders of the Preferred Shares (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of evidences of indebtedness or assets (other than a regular quarterly cash dividend or a dividend payable in Preferred Shares) or subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the then current per share market price of the Preferred Shares on such record date, less the fair market value (as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holders of the Rights) of the portion of the assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to one Preferred Share and the denominator of
which shall be such current per share market price of the Preferred Shares; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the "current per share market price" of any security (a "Security" for the purpose of this Section 11(d)(i)) on any date shall be deemed to be the average of the daily closing prices per share of such Security for the 30 consecutive Trading Days (as such term is hereinafter defined) immediately prior to but not including such date; provided, however, that in the event that the current per share market price of the Security is determined during a period following the announcement by the issuer of such Security of (A) a dividend or distribution on such Security payable in shares of such Security or securities convertible into such shares, or (B) any subdivision, combination or reclassification of such Security and prior to the expiration of 30 Trading Days after but not including the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the current per share market price of the Security shall be appropriately adjusted to reflect the current market price per share equivalent of such Security; and provided, further, that in the event that the current per
share market price of the shares of Common Stock is determined as of a date prior to the expiration of 30 Trading Days following the Record Date, the current per share market price of the shares of Common Stock shall be deemed to be the average of the daily closing prices per share of Common Stock for the period of Trading Days commencing with the Record Date and ending immediately prior to such date. The closing price of a Security for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Security is not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Security is listed or admitted to trading or, if the Security is not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the The Nasdaq Stock Market, Inc. National Market System ("Nasdaq") or such other system then in use, or, if on any such date the Security is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Security selected by the Board of Directors of the Company. The term "Trading Day" shall mean a day on which the principal national securities exchange on which the Security is listed or admitted to trading is open for the transaction of
business or, if the Security is not listed or admitted to trading on any national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder, the "current per share market price" of the Preferred Shares shall be determined in accordance with the method set forth in Section 11(d)(i). If the Preferred Shares are not publicly traded, the "current per share market price" of the Preferred Shares shall be conclusively deemed to be the current per share market price of the shares of Common Stock as determined pursuant to Section 11(d)(i) (appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof), multiplied by one hundred. If neither the shares of Common Stock nor the Preferred Shares are publicly held or so listed or traded, "current per share market price" shall mean the fair value per share as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holders of the Rights.
(e) No adjustment in the Purchase Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in the
Purchase Price; provided, however, that any adjustments which by reason of this
Section 11(e) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
11 shall be made to the nearest cent or to the nearest one one-millionth of a
Preferred Share or one ten-thousandth of any other share or security as the case
may be. Notwithstanding the first sentence of this Section
11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction which requires such adjustment or (ii) the date of the expiration of the right to exercise any Rights.
(f) If as a result of an adjustment made pursuant to Section 11(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock of the Company other than Preferred Shares, thereafter the number of such other shares so receivable upon exercise of any Right shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Shares contained in Section 11(a) through (c), inclusive, and the provisions of Sections 7, 9, 10 and 13 with respect to the Preferred Shares shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one one-hundredths of a Preferred Share purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price as a result of the calculations made in Sections 11(b) and (c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one one-hundredths of a Preferred Share (calculated to the
nearest one one-millionth of a Preferred Share) obtained by (i) multiplying (x) the number of one one-hundredths of a share covered by a Right immediately prior to this adjustment by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in substitution for any adjustment in the number of one one-hundredths of a Preferred Share purchasable upon the exercise of a Right. Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of one one-hundredths of a Preferred Share for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one ten-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement and prompt notice to the Rights Agent of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Right Certificates have been issued, shall be at least 10 days later than the date of the public announcement. If Right Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to registered
holders of Rights on such record date Right Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such registered holders in substitution and replacement for
the Right Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Right Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein and shall be registered in
the names of the registered holders of the Rights on the record date specified
in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the number of one one-hundredths of a Preferred Share issuable upon the exercise of the Rights, the Right Certificates theretofore and thereafter issued may continue to express the Purchase Price and the number of one one-hundredths of a Preferred Share which were expressed in the initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the Purchase Price below one one-hundredth of the then par value, if any, of the Preferred Shares issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable Preferred Shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer (and shall promptly notify the Rights Agent of any such elections) until the occurrence of such event the issuing to the registered holder of any Right exercised after such record date of the Preferred Shares and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the Preferred Shares and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that it in its sole discretion shall determine to be advisable in order that any consolidation or subdivision of the Preferred Shares, issuance wholly for cash of any Preferred Shares at less than the current market price, issuance wholly for cash of Preferred Shares or securities which by their terms are convertible into or exchangeable for Preferred Shares, dividends on Preferred Shares payable in Preferred Shares or issuance of rights, options
or warrants referred to hereinabove in Section 11(b), hereafter made by the Company to holders of its Preferred Shares shall not be taxable to such shareowners.
(n) In the event that at any time after the Record Date and
prior to the Distribution Date, the Company shall (i) declare or pay any
dividend on the Common Stock payable in shares of Common Stock or (ii) effect a
subdivision, combination or consolidation of the Common Stock (by
reclassification or otherwise than by payment of dividends in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in any
such case (A) the number of one one-hundredths of a Preferred Share purchasable
after such event upon proper exercise of each Right shall be determined by
multiplying the number of one one-hundredths of a Preferred Share so purchasable
immediately prior to such event by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately before such event and
the denominator of which is the number of shares of Common Stock outstanding
immediately after such event, and (B) each share of Common Stock outstanding
immediately after such event shall have issued with respect to it that number of
Rights which each share of Common Stock outstanding immediately prior to such
event had issued with respect to it. The adjustments provided for in this
Section 11(n) shall be made successively whenever such a dividend is declared or
paid or such a subdivision, combination or consolidation is effected.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever an adjustment is made as provided in Section 11 or 13 hereof, the Company
shall promptly (a) prepare a certificate setting forth such adjustment, and a
brief statement of the facts and computations accounting for such adjustment,
(b) file with the Rights Agent and with each transfer agent for the Common Stock
or the Preferred Shares a copy of such certificate and (c) mail a brief summary
thereof to each registered holder of a Right in accordance with Section 25
hereof. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained and shall have no duty with
respect to and shall not be deemed to have knowledge of any adjustment unless
and until it shall have received such a certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power. In the event, directly or indirectly, at any time after a Person has become an Acquiring Person, (a) the Company shall consolidate with, or merge with and into, any other Person, (b) any Person shall consolidate with the Company, or merge with and into the Company and the Company shall be the continuing or surviving corporation of such merger and, in connection with such merger, all or part of the shares of Common Stock shall be changed into or exchanged for stock or other securities of any other Person (or the Company) or cash or any other property, or (c) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one or more transactions, assets or earning power aggregating 50% or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person other than the Company or one or more of its wholly-owned Subsidiaries, then, and in each such case, proper provision shall be made so that (i) each registered holder of a Right
(except as otherwise provided herein) shall thereafter have the right to receive, upon the exercise thereof at a price equal to the then current Purchase Price multiplied by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable, in accordance with the terms of this Agreement and in lieu of Preferred Shares, such number of Common Shares of such other Person (including the Company as successor thereto or as the surviving corporation) as shall equal the result obtained by (A) multiplying the then current Purchase Price by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable and dividing that product by (B) 50% of the then current per share market price of the Common Shares of such other Person (determined pursuant to Section 11(d) hereof) on the date of consummation of such consolidation, merger, sale or transfer; (ii) the issuer of such Common Shares shall thereafter be liable for, and shall assume, by virtue of such consolidation, merger, sale or transfer, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed to refer to such issuer; and (iv) such issuer shall take such steps (including, but not limited to, the reservation of a sufficient number of its Common Shares in accordance with Section 9 hereof) in connection with such consummation as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to its Common Shares thereafter deliverable upon the exercise of the Rights. The Company shall not consummate any such consolidation, merger, sale or transfer unless prior thereto the Company and such issuer shall have executed and delivered to the Rights Agent a
supplemental agreement so providing. The Company shall not enter into any transaction of the kind referred to in this Section 13 if at the time of such transaction there are any rights, warrants, instruments or securities outstanding or any agreements or arrangements which, as a result of the consummation of such transaction, would eliminate or substantially diminish the benefits intended to be afforded by the Rights. The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers.
Section 14. Fractional Rights and Fractional Shares. (a) The Company shall not be required to issue fractions of Rights or to distribute Right Certificates which evidence fractional Rights. In lieu of such fractional Rights, there shall be paid to the registered holders of the Rights with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right. For the purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Rights are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading or, if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by Nasdaq or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board of Directors of the Company. If on any such date no such market maker is making a market in the Rights, the fair value of the Rights on such date as determined in good faith by the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of Preferred Shares (other than fractions which are integral multiples of one one-hundredth of a Preferred Share) upon exercise of the Rights or to distribute certificates which evidence fractional Preferred Shares (other than fractions which are integral multiples of one one-hundredth of a Preferred Share). Fractions of Preferred Shares in integral multiples of one one-hundredth of a Preferred Share may, at the election of the Company, be evidenced by depositary receipts, pursuant to an appropriate agreement between the Company and a depositary selected by it; provided, that such agreement shall provide that the holders of such depositary receipts shall have all the rights, privileges and preferences to which they are entitled as beneficial owners of the Preferred Shares represented by such depositary receipts. In lieu of fractional Preferred Shares that are not integral
multiples of one one-hundredth of a Preferred Share, the Company shall pay to the registered holders of Rights at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one Preferred Share. For the purposes of this Section 14(b), the current market value of a Preferred Share shall be the closing price of a Preferred Share (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of such exercise.
(c) The holder of a Right by the acceptance of the Right expressly waives such holder's right to receive any fractional Rights or any fractional shares upon exercise of a Right (except as provided above).
Section 15. Rights of Action. All rights of action in respect of this Agreement, excepting the rights of action expressly given to the Rights Agent under this Agreement, are vested in the respective registered holders of the Rights and any registered holder of any Right, without the consent of the Rights Agent or of the holder of any other Right, may, in such holder's own behalf and for such holder's own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, such holder's right to exercise the Rights registered in such holder's name in the manner provided in the Right Certificates and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and will be entitled to specific performance of
the obligations under, and injunctive relief against actual or threatened violations of the obligations of any Person subject to, this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by accepting the same, consents and agrees with the Company and the Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of the shares of Common Stock;
(b) after the Distribution Date, the Rights are transferable only on the registry books of the Rights Agent upon surrender of the Right Certificates evidencing such Rights at the Designated Office of the Rights Agent, duly endorsed or accompanied by a proper instrument of transfer; and
(c) the Company and the Rights Agent shall deem and treat the Person in whose name the Right is registered as the absolute owner thereof (notwithstanding any notations of ownership or writing on the Right Certificates evidencing such Rights or any certificate for the associated Common Stock made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary, except as required by law.
Section 17. Right Holder Not Deemed a Shareowner. No holder, as such, of any Right shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the Preferred Shares or any other securities of the Company which may at any
time be issuable on the exercise of such Rights, nor shall anything contained herein or in any Right Certificate be construed to confer upon the holder of any Right, as such, any of the rights of a shareowner of the Company or any right to vote for the election of directors or upon any matter submitted to shareowners at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareowners (except as provided in Section 25 hereof), or to receive dividends or subscription rights, or otherwise, until such Right or Rights shall have been exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent. The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the execution, delivery, administration and amendment of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, damage, judgment, fine, penalty, claim, demand, settlement, cost or expense, incurred without gross negligence, bad faith or willful misconduct (as each is finally determined by a court of competent jurisdiction) on the part of the Rights Agent, for any action taken, suffered or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including, without limitation, the costs and expenses of defending against any claim of liability. Anything to the contrary notwithstanding, in no event shall the Rights Agent be liable for special, indirect, consequential or incidental loss or damage of any kind whatsoever (including, without
limitation, lost profits), even if the Rights Agent has been advised of the likelihood of such loss or damage. The indemnity, exculpation and compensation provided for this Agreement shall survive the termination of this Agreement, the termination and expiration of the Rights, and the resignation or removal of the Rights Agents.
The Rights Agent shall be authorized to rely on, shall be protected and shall incur no liability for, or in respect of any action taken, suffered or omitted by it in connection with, its administration of this Agreement in reliance upon any Right Certificate or certificate for the Preferred Shares or Common Shares or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, instruction, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons, or otherwise upon the opinion of counsel as set forth in Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of Rights Agent. Any Person into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any Person resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any Person succeeding to the stock transfer or corporate trust powers of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided, that such Person would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any
of the Right Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases the Rights evidenced by such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement.
In case at any time the name of the Rights Agent shall be changed and at such time any of the Right Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or in its changed name; and in all such cases the Rights evidenced by such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes only the duties and obligations expressly imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Rights, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent, and the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking, suffering or omitting any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chief Executive Officer, any Vice President, the Treasurer or the Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization and protection to the Rights Agent, and the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted in good faith by it under the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any other Person only for its own gross negligence, bad faith or willful misconduct (as each is finally determined by a court of competent jurisdiction).
(d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Right Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not have any liability nor be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its countersignature thereof); nor shall it be responsible or liable for any breach by the Company of any covenant or condition contained in this Agreement or in any Right Certificate; nor shall it be responsible or liable for any change in the exercisability of the Rights (including the Rights becoming void pursuant to Section 11(a)(ii) hereof) or any adjustment in the terms of the Rights (including the manner, method or amount thereof) provided for in Section 3, 11, 13, 23 or 24, or the ascertaining of the existence of facts that would require any such change or adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after actual notice that such change or adjustment is required); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Preferred Shares to be issued pursuant to this Agreement or any Right Certificate or as to whether any Preferred Shares will, when issued, be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any one of the Chief Executive Officer, any Vice President, the Secretary or the Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and such advice or instructions shall be full authorization and protection to the Rights Agent and the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted by it in good faith in accordance with the advice or instructions of any such officer or for any delay in acting while waiting for those instructions.
(h) The Rights Agent and any shareowner, Affiliate, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other Person.
(i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable, accountable or liable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company or any other Person resulting from any such act, default, neglect
or misconduct, provided reasonable care was exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds in the performance of any of its duties hereunder or in the exercise of its rights if it reasonably believes in good faith the repayment of such funds as required by this Agreement is not reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, the certificate contained in the form of assignment or the form of election to purchase set forth on the reverse thereof, as the case may be, has not been completed to certify the holder is not an Acquiring Person (or an Affiliate or Associate thereof), the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon 30 days' notice in writing mailed to the Company and to each transfer agent of the shares of Common Stock or the Preferred Shares by registered or certified mail, and to the registered holders of the Rights by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon 30 days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the shares of Common Stock or the Preferred Shares by registered or certified mail, and to the registered holders of the Rights by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the registered holder of a Right (which holder shall, with such notice, submit such holder's Right Certificate, if any, or such holder's certificate, if any, for the associated shares of Common Stock for inspection by the Company), then the registered holder of any Right Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be a Person, or an Affiliate of such a Person,
organized and doing business under the laws of the United States or of the State of New York (or of any other state of the United States so long as such Person is authorized to do business as a banking institution in the State of New York), in good standing, having an office in the State of New York, which is authorized under such laws to exercise corporate trust or stock transfer powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50 million. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed. The predecessor Rights Agent shall deliver and transfer to the successor Rights Agent, or, if no successor Rights Agent is appointed within 30 days after the predecessor Rights Agent has given or received notice of resignation or removal to or from the Company, as the case may be, to the Company, any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose and thereafter the predecessor Rights Agent shall have no further duties or obligations as Rights Agent under this Agreement (it being understood that the foregoing is not intended to release the Rights Agent from any liability resulting from the Rights Agent's gross negligence, bad faith or willful misconduct (as each is finally determined by a court of competent jurisdiction) while acting as Rights Agent hereunder). Not later than the effective date of any such appointment the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the shares of Common Stock or the Preferred Shares, and mail a notice thereof in writing to the registered holders of the Rights. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any of the provisions of this Agreement or of the Right Certificates to the contrary, the Company may, at its option, issue new Right Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable upon exercise of a Right made in accordance with the provisions of this Agreement. In addition, in connection with the issuance or sale of shares of Common Stock following the Distribution Date and prior to the earlier of the Redemption Date and the Final Expiration Date, the Company (a) shall with respect to shares of Common Stock so issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement in existence prior to the Distribution Date, or upon the exercise, conversion or exchange of securities, notes or debentures (pursuant to the terms thereof) issued by the Company and in existence prior to the Distribution Date, and (b) may, in any other case, if deemed necessary or appropriate by the Board of Directors of the Company, issue Right Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) the Company shall not be obligated to issue any such Right Certificates if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the Person to whom such Right Certificate would be issued or would create a significant risk of such options or employee plans or arrangements failing to qualify for otherwise available special tax treatment, and (ii) no such Right Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof.
Section 23. Redemption. (a) The Board of Directors of the Company may, at its option, at any time prior to such time as any Person becomes an Acquiring Person, redeem all but not less than all the then outstanding Rights at a redemption price of $.01 per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the "Redemption Price"). The redemption of the Rights by the Board of Directors of the Company may be made effective at such time, on such basis and with such conditions as the Board of Directors of the Company in its sole discretion may establish.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights pursuant to paragraph (a) of this
Section 23, and without any further action and without any notice, the right to
exercise the Rights will terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price. The Company shall promptly
give public notice and notice to the Rights Agent of any such redemption;
provided, however, that the failure to give, or any defect in, any such notice
shall not affect the validity of such redemption. Within 10 days after such
action of the Board of Directors of the Company ordering the redemption of the
Rights, the Company shall mail a notice of redemption to all the registered
holders of the then outstanding Rights at their last addresses as they appear
upon the registry books of the Rights Agent or, prior to the Distribution Date,
on the registry books of the transfer agent for the shares of Common Stock. Any
notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. Neither the Company nor any of its Affiliates or Associates may redeem, acquire or purchase for value any Rights at any time in any manner other than that specifically set forth in this Section 23 or in Section 24 hereof, and other than in connection with the purchase of shares of Common Stock prior to the Distribution Date.
Section 24. Exchange. (a) The Board of Directors of the Company may, at its option, at any time after any Person becomes an Acquiring Person, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to the provisions of Section 11(a)(ii) hereof) for shares of Common Stock at an exchange ratio of one share of Common Stock per Right, appropriately adjusted pursuant to Section 11(i) to reflect any stock split, stock dividend or similar transaction occurring after the Record Date (such exchange ratio being hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board of Directors of the Company shall not be empowered to effect such exchange at any time after the Record Date if any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of Rockwell, the Company or any such Subsidiary, or any entity holding shares of Common Stock for or pursuant to the terms of any such plan), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or more of the shares of Common Stock then outstanding.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to paragraph (a) of this
Section 24 and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of shares of Common Stock equal
to the number of such Rights held by such holder multiplied by the Exchange
Ratio. The Company shall promptly give public notice and notice to the Rights
Agent of any such exchange; provided, however, that the failure to give, or any
defect in, such notice shall not affect the validity of such exchange. The
Company shall promptly mail a notice of any such exchange to all of the
registered holders of such Rights at their last addresses as they appear upon
the registry books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by which the exchange
of the shares of Common Stock for Rights will be effected and, in the event of
any partial exchange, the number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights (other than
Rights which have become void pursuant to the provisions of Section 11(a)(ii)
hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient shares of Common Stock issued but not outstanding or authorized but unissued to permit any exchange of Rights as contemplated in accordance with this Section 24, the Company shall take all such action as may be necessary to authorize additional shares of Common Stock for issuance upon
exchange of the Rights. In the event the Company shall, after good faith effort, be unable to take all such action as may be necessary to authorize such additional shares of Common Stock, the Company shall substitute, for each share of Common Stock that would otherwise be issuable upon exchange of a Right, a number of Preferred Shares or fraction thereof such that the current per share market price of one Preferred Share multiplied by such number or fraction is equal to the current per share market price of one share of Common Stock as of the date of issuance of such Preferred Shares or fraction thereof.
(d) The Company shall not be required to issue fractions of
shares of Common Stock or to distribute certificates which evidence fractional
shares of Common Stock. In lieu of such fractional shares of Common Stock, the
Company shall pay to the registered holders of the Rights with regard to which
such fractional shares of Common Stock would otherwise be issuable an amount in
cash equal to the same fraction of the current market value of a whole share of
Common Stock. For the purposes of this paragraph (d), the current market value
of a whole share of Common Stock shall be the closing price of a share of Common
Stock (as determined pursuant to the second sentence of Section 11(d)(i) hereof)
for the Trading Day immediately prior to the date of exchange pursuant to this
Section 24.
Section 25. Notice of Certain Events. (a) In case at any time after the Record Date the Company shall propose (i) to pay any dividend payable in stock of any class to the holders of its Preferred Shares or to make any other distribution to the holders
of its Preferred Shares (other than a regular quarterly cash dividend), (ii) to offer to the holders of its Preferred Shares rights or warrants to subscribe for or to purchase any additional Preferred Shares or shares of stock of any class or any other securities, rights or options, (iii) to effect any reclassification of its Preferred Shares (other than a reclassification involving only the subdivision of outstanding Preferred Shares), (iv) to effect any consolidation or merger into or with, or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one or more transactions, of 50% or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to, any other Person, (v) to effect the liquidation, dissolution or winding up of the Company, or (vi) to declare or pay any dividend on the Common Shares payable in Common Shares or to effect a subdivision, combination or consolidation of the Common Shares (by reclassification or otherwise than by payment of dividends in Common Shares), then, in each such case, the Company shall give to each registered holder of a Right and the Rights Agent, in accordance with Section 26 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, or distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of the Common Shares and/or Preferred Shares, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least 10 days prior to the record date for determining holders of the Preferred Shares for purposes of such action, and in
the case of any such other action, at least 10 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the Common Shares and/or Preferred Shares, whichever shall be the earlier.
(b) In case the event set forth in Section 11(a)(ii) hereof
shall occur, then the Company shall as soon as practicable thereafter give to
each registered holder of a Right and the Rights Agent, in accordance with
Section 26 hereof, a notice of the occurrence of such event, which notice shall
describe such event and the consequences of such event to holders of Rights
under Section 11(a)(ii) hereof.
Section 26. Notices. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Right to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows:
Rockwell Collins, Inc.
400 Collins Road NE
Cedar Rapids, Iowa 52498
Attention: Corporate Secretary
Subject to the provisions of Section 21 hereof, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Right to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows:
Mellon Investor Services LLC
150 North Wacker
Suite 2120
Chicago, IL 60606
Attention: Susan Hogan
Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Right shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company or the registry books of the holders of the Rights maintained by the Rights Agent after the Distribution Date as herein provided. Any notice or demand given prior to the Distribution Date by the Company or the Rights Agent to the holders of the Rights shall also be given to any registered pledgee of any uncertificated Common Share by first-class mail, postage prepaid, addressed to such registered pledgee at the address of such registered pledgee as shown on the registry books of the Company.
Section 27. Supplements and Amendments. The Company may from time to time supplement or amend this Agreement without the approval of any holders of Rights in order to cure any ambiguity, to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, or to make any other provisions with respect to the Rights or in regard to matters or questions arising hereunder which the Company may deem necessary or desirable, any such supplement or amendment to be evidenced by a writing signed by the Company and the Rights Agent; provided, however, that nothing herein shall obligate the Rights Agent to
execute such a supplement or amendment if such supplement or amendment changes or increases the rights, duties or obligations of the Rights Agent; and further provided that from and after such time as any Person becomes an Acquiring Person, this Agreement shall not be amended in any manner which would adversely affect the interests of the holders of Rights. Without limiting the foregoing, the Company may at any time prior to such time as any Person becomes an Acquiring Person amend this Agreement to lower the thresholds set forth in Sections 1(a) and 3(a) to not less than the greater of (i) the sum of .001% and the largest percentage of the outstanding shares of Common Stock then known by the Company to be beneficially owned by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of Rockwell, the Company or any Subsidiary of the Company, or any entity holding shares of Common Stock for or pursuant to the terms of any such plan) and (ii) 10%. Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 27, the Rights Agent shall execute such supplement or amendment.
Section 28. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Rights any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Rights.
Section 30. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated.
Section 31. Governing Law. This Agreement and each Right Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State.
Section 32. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
Section 33. Descriptive Headings. Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and attested, all as of the day and year first above written.
ROCKWELL COLLINS, INC.
MELLON INVESTOR SERVICES LLC, as Rights Agent
Exhibit A
Form of Right Certificate
Certificate No. R- _____ Rights
NOT EXERCISABLE AFTER JUNE 30, 2011 OR EARLIER IF REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
Right Certificate
ROCKWELL COLLINS, INC.
This certifies that ________________, or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement, dated as of June [ ], 2001 (the "Rights Agreement"), between Rockwell Collins, Inc., a Delaware corporation (the "Company"), and Mellon Investor Services LLC, a New Jersey limited liability company, as Rights Agent (the "Rights Agent"), to purchase from the Company at any time after the Distribution Date (as such term is defined in the Rights Agreement) and prior to 5:00 P.M., New York City time, on June 30, 2011 at the Designated Office (as such term is defined in the Rights Agreement of the Rights Agent, or at the office of its successor as Rights Agent, one one-hundredth of a fully paid non-assessable share of Series A Junior Participating Preferred Stock, without par value (the "Preferred Shares"), of the Company, at a purchase price of $125 per one one-hundredth of a Preferred Share (the "Purchase Price"), upon presentation and surrender of this Right Certificate with the Form of Election to Purchase duly executed. The number of Rights evidenced by this Right Certificate (and the number of one one-hundredths of a Preferred Share which may be purchased upon exercise thereof) set forth above, and the Purchase Price set forth above, are the number and Purchase Price as of __________, 2001, based on the Preferred Shares as constituted at such date. As provided in the Rights Agreement, the Purchase Price and the number of one one-hundredths of a Preferred Share which may be purchased upon the exercise of the Rights
evidenced by this Right Certificate are subject to modification and adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Rights. Copies of the Rights Agreement are on file at the principal executive offices of the Company and the above-mentioned offices of the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon surrender at the principal office of the Rights Agent, may be exchanged for another Right Certificate or Right Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of Preferred Shares as the Rights evidenced by the Right Certificate or Right Certificates surrendered shall have entitled such holder to purchase. If the Rights evidenced by this Right Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Right Certificate or Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by this Right Certificate (i) may be redeemed by the Company at a redemption price of $.01 per Right or (ii) may be exchanged in whole or in part for Preferred Shares or the Company's Common Stock, par value $.01 per share.
No fractional Preferred Shares will be issued upon the exercise of any Right or Rights evidenced hereby (other than fractions which are integral multiples of one one-hundredth of a Preferred Share, which may, at the election of the Company, be evidenced by depositary receipts), but in lieu thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of Rights evidenced by this Right Certificate shall be entitled to vote or receive dividends or be deemed for any purpose the holder of the Preferred Shares or of any other securities of the Company which may at any time be issuable on the exercise thereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder of any Rights evidenced hereby, as such, any of the rights of a shareowner of the Company or any right to vote for the election of directors or upon any matter submitted to shareowners at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareowners (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Right Certificate shall have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and its corporate seal.
Dated as of ____________.
ATTEST: ROCKWELL COLLINS, INC.
____________________ By:______________________
Countersigned:
MELLON INVESTOR SERVICES LLC
as Rights Agent
By:__________________________
Authorized Signature
|
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the Rights evidenced by this Right Certificate.)
FOR VALUE RECEIVED _______________________________ hereby sells, assigns and transfers unto ___________________
________________________ Rights evidenced by this Right Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint __________________ attorney, to transfer the said Rights on the books of the within-named Company, with full power of substitution.
Dated:________________
Signatures must be guaranteed by a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States, in each case, participating in a Medallion program approved by the Securities Transfer Association, Inc.
The undersigned hereby certifies that the Rights evidenced by this Right Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement).
Form of Reverse Side of Right Certificate -- continued
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights evidenced by the Right Certificate.)
To: Rockwell Collins, Inc.
The undersigned hereby irrevocably elects to exercise ___________________ Rights evidenced by this Right Certificate to purchase the Preferred Shares issuable upon the exercise of such Rights and requests that certificates for such Preferred Shares be issued in the name of:
If such number of Rights shall not be all the Rights evidenced by this Right Certificate, a new Right Certificate for the balance remaining of such Rights shall be registered in the name of and delivered to:
Dated: ____________
Signature Guaranteed:
Form of Reverse Side of Right Certificate -- continued
Signatures must be guaranteed by a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States, in each case, participating in a Medallion program approved by the Securities Transfer Association, Inc.
The undersigned hereby certifies that the Rights evidenced by this Right Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement).
NOTICE
The signature in the Form of Assignment or Form of Election to Purchase, as the case may be, must conform to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the Form of Assignment or the Form of Election to Purchase, as the case may be, is not completed, the Company and the Rights Agent will deem the beneficial owner of the Rights evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement) and such Assignment or Election to Purchase will not be honored.
EXHIBIT 10.1
[5/30/01]
FORM OF
ROCKWELL COLLINS, INC.
2001 LONG-TERM INCENTIVES PLAN
SECTION 1: PURPOSE
The purpose of the Plan is to promote the interests of the Corporation (as defined in Section 2) and its shareowners by providing incentive compensation opportunities to assist in (i) attracting, motivating and retaining Employees (as defined in Section 2) and (ii) aligning the interests of Employees participating in the Plan with the interests of the Corporation's shareowners.
SECTION 2: DEFINITIONS
As used in the Plan, the following terms shall have the respective meanings specified below.
a. "AWARD" means an award granted pursuant to Section 4.
b. "AWARD AGREEMENT" means a document described in Section 6 setting forth the terms and conditions applicable to an Award granted to a Participant.
c. "BOARD OF DIRECTORS" means the Board of Directors of the Corporation, as it may be comprised from time to time.
d. "CHANGE OF CONTROL" means any of the following:
(i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (A) the then outstanding shares of common stock of the Corporation (the "Outstanding Collins Common Stock") or (B) the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors (the "Outstanding Collins Voting Securities"); PROVIDED, HOWEVER, that for purposes of this subparagraph (i), the following acquisitions shall not constitute a Change of Control: (w) any acquisition directly from the Corporation, (x) any acquisition by the Corporation, (y) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Corporation, Rockwell International Corporation ("Rockwell") or any corporation controlled by the Corporation or Rockwell or (z) any acquisition pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (iii) of this Section 2(d); or
(ii) Individuals who, as of the date of the pro rata distribution of all the outstanding Stock by Rockwell to its shareowners (the "Collins Distribution Date"), constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors; PROVIDED, HOWEVER, that any individual becoming a director subsequent to that date whose election, or nomination for election by the Corporation's shareowners, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors; or
(iii) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Corporation or the acquisition of assets of another entity (a "Corporate Transaction"), in each case, unless, following such Corporate Transaction, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Collins Common Stock and Outstanding Collins Voting Securities immediately prior to such Corporate Transaction beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Corporation or all or substantially all of the Corporation's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Collins Common Stock and Outstanding Collins Voting Securities, as the case may be, (B) no Person (excluding any employee benefit plan (or related trust) of the Corporation, of Rockwell or of such corporation resulting from such Corporate Transaction) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Corporate Transaction and (C) at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction were members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board of Directors, providing for such Corporate Transaction; or
(iv) Approval by the Corporation's shareowners of a complete liquidation or dissolution of the Corporation.
e. "CODE" means the Internal Revenue Code of 1986, as amended from time to time.
f. "COMMITTEE" means the Compensation and Management Development Committee of the Board of Directors, as it may be comprised from time to time.
g. "CORPORATION" means Rockwell Collins, Inc. and any successor thereto.
h. "COVERED EMPLOYEE" means a covered employee within the meaning of Code
Section 162(m)(3).
i. "DIVIDEND EQUIVALENT" means an amount equal to the amount of cash dividends payable with respect to a share of Stock after the date specified in an Award Agreement with respect to an Award settled in Stock or an Award of Restricted Stock.
j. "EMPLOYEE" means an individual who is an employee or a leased employee of, or a consultant to, the Corporation or a Subsidiary, but excludes members of the Board of Directors, other than the non-executive Chairman of the Board of Directors (who shall be deemed an Employee), who are not also employees of the Corporation or a Subsidiary.
k. "EXCHANGE ACT" means the Securities Exchange Act of 1934, and any successor statute, as it may be amended from time to time.
l. "EXECUTIVE OFFICER" means an Employee who is an executive officer of the Corporation as defined in Rule 3b-7 under the Exchange Act as it may be amended from time to time.
m. "FAIR MARKET VALUE" means the closing sale price of the Stock as reported in the New York Stock Exchange -- Composite Transactions (or if the Stock is not then traded on the New York Stock Exchange, the closing sale price of the Stock on the stock exchange or over-the-counter market on which the Stock is principally trading on the relevant date) on the date of a determination (or on the next preceding day the Stock was traded if it was not traded on the date of a determination).
n. "INCENTIVE STOCK OPTION" means an Option (or an option to purchase Stock granted pursuant to any other plan of the Corporation or a Subsidiary) intended to comply with Code Section 422.
o. "NON-QUALIFIED STOCK OPTION" means an Option that is not an Incentive Stock Option.
p. "OPTION" means an option to purchase Stock granted pursuant to Section 4(a).
q. "PARTICIPANT" means any Employee who has been granted an Award.
r. "PERFORMANCE GOAL" means the level of performance, whether absolute or relative to a peer group or index, established by the Committee as the performance goal with respect to a Performance Measure. Performance Goals may vary from Performance Period to Performance Period and from Participant to Participant and may be established on a stand-alone basis, in tandem or in the alternative.
s. "PERFORMANCE FORMULA" means, for a Performance Period, one or more objective formulas or standards established by the Committee for purposes of determining whether or the extent to which an Award has been earned based on the level of performance attained with respect to one or more Performance Goals. Performance Formulas may vary from Performance Period to Performance Period and from
Participant to Participant and may be established on a stand-alone basis, in tandem or in the alternative.
t. "PERFORMANCE MEASURE" means one or more of the following selected by the Committee to measure the performance of the Corporation, a business unit (which may but need not be a Subsidiary) of the Corporation or both for a Performance Period: basic or diluted earnings per share; revenue; sales; operating income; earnings before or after interest, taxes, depreciation or amortization; return on capital; return on invested capital; return on equity; return on assets; return on net assets; cash flow; operating cash flow; free cash flow (operating cash flow plus proceeds from property dispositions less capital expenditures); working capital; stock price and total shareowner return. Each such measure, to the extent applicable, shall be determined in accordance with generally accepted accounting principles as consistently applied by the Corporation and, if so determined by the Committee at the time the Award is granted and to the extent permitted under Code Section 162(m), adjusted to omit the effects of extraordinary items, gain or loss on the disposal of a business segment, unusual or infrequently occurring events and transactions and cumulative effects of changes in accounting principles. Performance Measures may vary from Performance Period to Performance Period and from Participant to Participant and may be established on a stand-alone basis, in tandem or in the alternative.
u. "PERFORMANCE PERIOD" means one or more periods of time (of not less than one fiscal year of the Corporation), as the Committee may designate, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant's rights in respect of an Award.
v. "PLAN" means this 2001 Long-Term Incentives Plan as adopted by the Corporation and in effect from time to time.
w. "SAR" means a stock appreciation right granted pursuant to Section 4(b).
x. "STOCK" means shares of Common Stock, par value $.01 per share, of the Corporation or any security of the Corporation issued in substitution, exchange or lieu thereof.
y. "SUBSIDIARY" means (i) any corporation or other entity in which the Corporation, directly or indirectly, controls 50% or more of the total combined voting power of such corporation or other entity and (ii) any corporation or other entity in which the Corporation has a significant equity interest and which the Committee has determined to be considered a Subsidiary for purposes of the Plan.
SECTION 3: ELIGIBILITY
The Committee may grant one or more Awards to any Employee designated by it to receive an Award.
SECTION 4: AWARDS
The Committee may grant any one or more of the following types of Awards, and any such Award may be granted by itself, together with another Award that is linked and alternative to the Award with which it is granted or together with another Award that is independent of the Award with which it is granted:
a. OPTIONS. An Option is an option to purchase a specific number of shares of Stock exercisable at such time or times and subject to such terms and conditions as the Committee may determine consistent with the provisions of the Plan, including the following:
(i) The exercise price of an Option shall not be less than 100% of the Fair Market Value of the Stock on the date the Option is granted, and no Option may be exercisable more than 10 years after the date the Option is granted.
(ii) The exercise price of an Option shall be paid in cash or, at the discretion of the Committee, in Stock or in a combination of cash and Stock. Any Stock accepted in payment of the exercise price of an Option shall be valued at its Fair Market Value on the date of exercise.
(iii) No fractional shares of Stock will be issued or accepted. The Committee may impose such other conditions, restrictions and contingencies with respect to shares of Stock delivered pursuant to the exercise of an Option as it deems desirable.
(iv) Incentive Stock Options shall be subject to the following additional provisions:
A. No grant of Incentive Stock Options to any one Employee shall cover a number of shares of Stock whose aggregate Fair Market Value (determined on the date the Option is granted), together with the aggregate Fair Market Value (determined on the respective date of grant of any Incentive Stock Option) of the shares of Stock covered by any Incentive Stock Options which have been previously granted under the Plan or any other plan of the Corporation or any Subsidiary and which are exercisable for the first time during the same calendar year, exceeds $100,000 (or such other amount as may be fixed as the maximum amount permitted by Code Section 422(d)).
B. No Incentive Stock Option may be granted under the Plan after ____________, 2011.
C. No Incentive Stock Option may be granted to an Employee who on the date of grant is not an employee of the Corporation or a corporation that is a subsidiary of the Corporation within the meaning of Code Section 424(f).
b. STOCK APPRECIATION RIGHTS (SARs). A SAR is the right to receive a payment measured by the increase in the Fair Market Value of a specified number of shares of Stock from the date of grant of the SAR to the date on which the Participant exercises the SAR. SARs may be (i) freestanding SARs or (ii) tandem SARs granted in conjunction with an Option, either at the time of grant of the Option or at a later date, and exercisable at the Participant's election instead of all or any part of the related Option. The payment to which the Participant is entitled on exercise of a SAR may be in cash, in Stock valued at Fair Market Value on the date of exercise or partly in cash and partly in Stock, as the Committee may determine.
c. RESTRICTED STOCK. Restricted Stock is Stock that is issued to a Participant subject to restrictions on transfer and such other restrictions on incidents of ownership as the Committee may determine, which restrictions shall lapse at such time or times, or upon the occurrence of such event or events, including but not limited to the achievement of one or more specific goals with respect to performance of the Corporation, a business unit (which may but need not be a Subsidiary) of the Corporation or that Participant over a specified period of time as the Committee may determine. Subject to the specified restrictions, the Participant as owner of those shares of Restricted Stock shall have the rights of the holder thereof, except that the Committee may provide at the time of the Award that any dividends or other distributions paid with respect to that Stock while subject to those restrictions shall be accumulated, with or without interest, or reinvested in Stock and held subject to the same restrictions as the Restricted Stock and such other terms and conditions as the Committee shall determine. Shares of Restricted Stock shall be registered in the name of the Participant and, at the Corporation's sole discretion, shall be held in book entry form subject to the Corporation's instructions or shall be evidenced by a certificate, which shall bear an appropriate restrictive legend, shall be subject to appropriate stop-transfer orders and shall be held in
custody by the Corporation until the restrictions on those shares of Restricted Stock lapse.
d. PERFORMANCE UNITS. A Performance Unit is an Award denominated in cash, the amount of which may be based on the achievement of one or more specific goals with respect to performance of the Corporation, a business unit (which may but need not be a Subsidiary) of the Corporation or the Participant to whom the Performance Units are granted over a specified period of time. The maximum amount of compensation that may be paid to any one Participant with respect to Performance Units for any one Performance Period shall be $5 million. The payout of Performance Units may be in cash, in Stock, valued at Fair Market Value on the payout date (or at the sole discretion of the Committee, the day immediately preceding that date), or partly in cash and partly in Stock, as the Committee may determine.
e. STOCK PURCHASE AWARDS. A Stock Purchase Award is the right to purchase, with a loan from the Corporation, a specific number of shares of Stock at their Fair Market Value on the date of such purchase, subject to such terms and conditions as the Committee may determine consistent with the Plan. Each such loan shall be evidenced by the Participant's promissory note, which shall (i) be payable to the Corporation as determined by the Committee, (ii) be secured by a pledge of the Stock purchased with the loan, (iii) be recourse with respect to the Participant and (iv) bear interest at a rate, established by the Committee, not less than required to avoid the imputation of income under the Code. The Committee may forgive all or part of such loan on such terms as the Committee may determine, including but not limited to the achievement of one or more specific goals with respect to performance of the Corporation, a business unit (which may but need not be a Subsidiary) of the Corporation or the Participant over a specified period of time.
f. PERFORMANCE COMPENSATION AWARDS.
(i) The Committee may, at the time of grant of an Award (other than an Option or SAR) designate such Award as a Performance Compensation Award in order that such Award constitute qualified performance-based compensation under Code Section 162(m); PROVIDED, HOWEVER, that no Performance Compensation Award may be granted to an Employee who on the date of grant is a leased employee of, or a consultant to, the Corporation or a Subsidiary. With respect to each such Performance Compensation Award, the Committee shall (on or before the 90th day of the applicable Performance Period or such other period as may be required by Code Section 162 (m)), establish, in writing, a Performance Period, Performance Measure(s), Performance Goal(s) and Performance Formula(s). Once established for a Performance Period, such items shall not be amended or otherwise modified if and to the extent such amendment or modification would cause the compensation payable pursuant to the Award to fail to constitute qualified performance-based compensation under Code Section 162(m).
(ii) A Participant shall be eligible to receive payment in respect of a Performance Compensation Award only to the extent that the Performance Goal(s) for that Award are achieved and the Performance Formula as applied against such Performance Goal(s) determines that all or some portion of such Participant's Award has been earned for the Performance Period. As soon as practicable after the close of each Performance Period, the Committee shall review and determine whether, and to what extent, the Performance Goal(s) for the Performance Period have been achieved and, if so, determine the amount of the Performance Compensation Award earned by the Participant for such Performance Period based upon such Participant's Performance Formula. The Committee shall then determine the actual amount of the Performance Compensation Award to be
paid to the Participant and, in so doing, may in its sole discretion decrease, but not increase, the amount of the Award otherwise payable to the Participant based upon such performance. The maximum Performance Compensation Award for any one Participant for any one Performance Period shall be determined in accordance with Sections 4(d) and 5(b), as applicable.
g. DEFERRALS. The Committee may require or permit Participants to defer the issuance or vesting of shares of Stock or the settlement of Awards under such rules and procedures as it may establish under the Plan. The Committee may also provide that deferred settlements include the payment of, or crediting of interest on, the deferral amounts or the payment or crediting of Dividend Equivalents on deferred settlements in shares of Stock. Notwithstanding the foregoing, no deferral will be permitted if it will result in the Plan becoming an "employee pension benefit plan" under Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), that is not otherwise exempt under Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.
SECTION 5: STOCK AVAILABLE UNDER PLAN
a. Subject to the adjustment provisions of Section 9, the number of shares of Stock which may be delivered upon exercise of Options or upon grant or in payment of other Awards under the Plan shall not exceed 14 million, and the number of those shares which may be delivered upon grant or in payment of all Awards other than Options and SARs shall not exceed 12 million. In addition, (i) no more than 1 million shares of Stock shall be granted in the form of Restricted Stock; (ii) Stock Purchase Awards shall be granted with respect to no more than 5 million shares of Stock; and (iii) SARs shall be granted with respect to no more than 100,000 shares of Stock. For purposes of applying the limitations provided in this Section 5(a), all shares of Stock with respect to the unexercised, undistributed or unearned
portion of any terminated or forfeited Award shall be available for further Awards.
b. Subject to the adjustment provisions of Section 9, no single Participant shall receive, in any fiscal year of the Corporation, Awards in the form of (i) Options with respect to more than that number of shares of Stock determined by subtracting from 2,500,000 the number of shares of Stock with respect to which Options or options to purchase Stock under any other plan or program of the Corporation or a Subsidiary have been granted to such Participant during the immediately preceding four fiscal years of the Corporation; (ii) Restricted Stock for more than that number of shares of Stock determined by subtracting from 250,000 the number of shares of Stock granted as Restricted Stock or as restricted stock under any other plan or program of the Corporation or a Subsidiary to such Participant during the immediately preceding four fiscal years of the Corporation; and (iii) a Stock Purchase Award with respect to more than that number of shares of Stock determined by subtracting from 1,000,000 the number of shares of Stock with respect to which Stock Purchase Awards have been granted to such Participant during the immediately preceding four fiscal years of the Corporation.
c. The Stock that may be delivered on grant, exercise or settlement of an Award under the Plan may be reacquired shares held in treasury or authorized but unissued shares.
SECTION 6: AWARD AGREEMENTS
Each Award under the Plan shall be evidenced by an Award Agreement. Each Award Agreement shall set forth the terms and conditions applicable to the Award, including but not limited to provisions for (i) the time at which the Award becomes exercisable or otherwise vests; (ii) the treatment of the Award in the event of the termination of a Participant's status as an Employee; and (iii) any special provisions applicable in the event of an occurrence of a Change in Control, as determined by the Committee consistent with the provisions of the Plan.
SECTION 7: AMENDMENT AND TERMINATION
The Board of Directors may at any time amend, suspend or terminate the Plan, in
whole or in part; PROVIDED, HOWEVER, that no such action shall be effective
without the approval of the shareowners of the Corporation to the extent that
such approval is necessary to comply with any tax or regulatory requirement
applicable to the Plan; and PROVIDED, FURTHER, that subject to Section 9, no
such action shall impair the rights of any holder of an Award without the
holder's consent. The Committee may, subject to the Plan, at any time alter or
amend any or all Award Agreements to the extent permitted by applicable law;
PROVIDED, HOWEVER, that subject to Section 9, no such alteration or amendment
shall impair the rights of any holder of an Award without the holder's consent.
Notwithstanding the foregoing, neither the Board of Directors nor the Committee
shall (except pursuant to Section 9) amend the Plan or any Award Agreement to
increase the number of shares of Stock available for Awards as set forth in
Section 5 or to reprice any Option or SAR whose exercise price is above the then
Fair Market Value of the Stock subject to the Award, whether by decreasing the
exercise price, canceling the Award and granting a substitute Award, or
otherwise.
SECTION 8: ADMINISTRATION
a. The Plan and all Awards shall be administered by the Committee. The members of the Committee shall be designated by the Board of Directors from among its members who are not eligible for Awards under the Plan.
b. Any member of the Committee who, at the time of any proposed grant of one or more Awards, is not both an "outside director" as defined for purposes of Code Section 162(m) and a "Non-Employee Director" as defined in Rule 16b-3(b)(3)(i) under the Exchange Act (or any successor provision) shall abstain from and take no part in the Committee's action on the proposed grant.
c. The Committee shall have full and complete authority, in its sole and absolute discretion, (i) to exercise all of the powers granted to it under the Plan, (ii) to construe, interpret and implement the Plan and
any related document, (iii) to prescribe, amend and rescind rules relating to the Plan, (iv) to make all determinations necessary or advisable in administering the Plan, and (v) to correct any defect, supply any omission and reconcile any inconsistency in the Plan. The actions and determinations of the Committee on all matters relating to the Plan and any Awards will be final and conclusive. The Committee's determinations under the Plan need not be uniform and may be made by it selectively among Employees who receive, or who are eligible to receive, Awards under the Plan, whether or not such persons are similarly situated.
d. The Committee and others to whom the Committee has delegated such duties shall keep a record of all their proceedings and actions and shall maintain all such books of account, records and other data as shall be necessary for the proper administration of the Plan.
e. The Corporation shall pay all reasonable expenses of administering the Plan, including but not limited to the payment of professional fees.
f. It is the intent of the Corporation that the Plan and Awards hereunder
satisfy, and be interpreted in a manner that satisfy, (i) in the case
of Participants who are or may be Executive Officers, the applicable
requirements of Rule 16b-3 under the Exchange Act, so that such persons
will be entitled to the benefits of Rule 16b-3, or other exemptive
rules under Section 16 of the Exchange Act, and will not be subjected
to avoidable liability under Section 16(b) of the Exchange Act; and
(ii) in the case of Performance Compensation Awards to Covered
Employees, the applicable requirements of Code Section 162(m). If any
provision of this Plan or of any Award Agreement would otherwise
frustrate or conflict with the intent expressed in this Section 8(f),
that provision to the extent possible shall be interpreted and deemed
amended so as to avoid such conflict. To the extent of any remaining
irreconcilable conflict with
such intent, such provision shall be deemed void as to Executive Officers or Covered Employees, as applicable.
g. The Committee may appoint such accountants, counsel, and other experts as it deems necessary or desirable in connection with the administration of the Plan.
h. The Committee may delegate, and revoke the delegation of, all or any portion of its authority and powers under the Plan to the Chief Executive Officer of the Corporation, except that the Committee may not delegate any discretionary authority with respect to substantive decisions or functions regarding the Plan or Awards to the extent inconsistent with the intent expressed in Section 8(f) or to the extent prohibited by applicable law.
SECTION 9: ADJUSTMENT PROVISIONS
a. In the event of any change in or affecting the outstanding shares of Stock by reason of a stock dividend or split, merger or consolidation (whether or not the Corporation is a surviving corporation), recapitalization, reorganization, combination or exchange of shares or other similar corporate changes or an extraordinary dividend in cash, securities or other property, the Board of Directors shall make or take such amendments to the Plan and outstanding Awards and Award Agreements and such adjustments and actions thereunder as it deems appropriate, in its sole discretion, under the circumstances. Such amendments, adjustments and actions may include, but are not limited to, changes in the number of shares of Stock then remaining subject to the Plan, and the maximum number of shares that may be granted or delivered to any single Participant pursuant to the Plan, including those that are then covered by outstanding Awards, or accelerating the vesting of outstanding Awards.
b. The existence of the Plan and the Awards granted hereunder shall not affect or restrict in any way the right or power of the Board of
Directors or the shareowners of the Corporation to make or authorize any adjustment, recapitalization, reorganization or other change in the capital structure of its business, any merger or consolidation of the Corporation, any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting the Stock or the rights thereof, the dissolution or liquidation of the Corporation or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding.
SECTION 10: MISCELLANEOUS
a. NONASSIGNABILITY. Except as otherwise provided by the Committee, no Award shall be assignable or transferable except by will or by the laws of descent and distribution.
b. OTHER PAYMENTS OR AWARDS. Nothing contained in the Plan shall be deemed in any way to limit or restrict the Corporation or a Subsidiary from making any award or payment to any person under any other plan, arrangement or understanding, whether now existing or hereafter in effect.
c. PAYMENTS TO OTHER PERSONS. If payments are legally required to be made to any person other than the person to whom any amount is made available under the Plan, payments shall be made accordingly. Any such payment shall be a complete discharge of the liability hereunder.
d. UNFUNDED PLAN. The Plan shall be unfunded. No provision of the Plan or any Award Agreement shall require the Corporation or a Subsidiary, for the purpose of satisfying any obligations under the Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made or otherwise to segregate any assets, nor shall the Corporation or a Subsidiary maintain separate bank accounts, books, records or other evidence of the existence of a segregated or separately maintained or administered fund for such
purposes. Participants shall have no rights under the Plan other than as unsecured general creditors of the Corporation or a Subsidiary, except that insofar as they may have become entitled to payment of additional compensation by performance of services, they shall have the same rights as other employees under generally applicable law.
e. LIMITS OF LIABILITY. Any liability of the Corporation or a Subsidiary to any Participant with respect to an Award shall be based solely upon contractual obligations created by the Plan and the Award Agreement. Neither the Corporation or its Subsidiaries, nor any member of the Board of Directors or of the Committee, nor any other person participating in any determination of any question under the Plan, or in the interpretation, administration or application of the Plan, shall have any liability to any party for any action taken, or not taken, in good faith under the Plan.
f. RIGHTS OF EMPLOYEES. Status as an eligible Employee shall not be construed as a commitment that any Award shall be made under the Plan to such eligible Employee or to eligible Employees generally. Nothing contained in the Plan or in any Award Agreement shall confer upon any Employee or Participant any right to continue in the employ or other service of the Corporation or a Subsidiary or constitute any contract or limit in any way the right of the Corporation or a Subsidiary to change such person's compensation or other benefits or to terminate the employment or other service of such person with or without cause. A transfer of an Employee from the Corporation to a Subsidiary, or vice versa, or from one Subsidiary to another, and a leave of absence, duly authorized by the Corporation, shall not be deemed a termination of employment or other service.
g. RIGHTS AS A SHAREOWNER. A Participant shall have no rights as a shareowner with respect to any Stock covered by an Award until the date the Participant becomes the holder of record thereof. Except as provided in Section 9, no adjustment shall be made for dividends or
other rights, unless the Award Agreement specifically requires such adjustment.
h. WITHHOLDING. Applicable taxes, to the extent required by law, shall be withheld in respect of all Awards. A Participant may satisfy the withholding obligation by paying the amount of any taxes in cash or, with the approval of the Committee, shares of Stock may be delivered to the Corporation or deducted from the payment to satisfy the obligation in full or in part. The amount of the withholding and the number of shares of Stock to be paid or deducted in satisfaction of the withholding requirement shall be determined by the Committee with reference to the Fair Market Value of the Stock when the withholding is required to be made. The Corporation shall have no obligation to deliver any Stock pursuant to the grant or settlement of any Award until it has been reimbursed for all required withholding taxes.
i. SECTION HEADINGS. The section headings contained herein are for the purpose of convenience only, and in the event of any conflict, the text of the Plan, rather than the section headings, shall control.
j. CONSTRUCTION. In interpreting the Plan, the masculine gender shall include the feminine, the neuter gender shall include the masculine or feminine, and the singular shall include the plural unless the context clearly indicates otherwise. Any reference to a statutory provision or a rule under a statute shall be deemed a reference to that provision or any successor provision unless the context clearly indicates otherwise.
k. INVALIDITY. If any term or provision contained herein or in any Award Agreement shall to any extent be invalid or unenforceable, such term or provision will be reformed so that it is valid, and such invalidity or unenforceability shall not affect any other provision or part thereof.
l. APPLICABLE LAW. The Plan, the Award Agreements and all actions taken hereunder or thereunder shall be governed by, and construed
in accordance with, the laws of the State of Delaware without regard to the conflict of law principles thereof.
m. COMPLIANCE WITH LAWS. Notwithstanding anything contained herein or in any Award Agreement to the contrary, the Corporation shall not be required to sell, issue or deliver shares of Stock hereunder or thereunder if the sale, issuance or delivery thereof would constitute a violation by the Participant or the Corporation of any provisions of any law or regulation of any governmental authority or any national securities exchange; and as a condition of any sale or issuance the Corporation may require such agreements or undertakings, if any, as the Corporation may deem necessary or advisable to assure compliance with any such law or regulation.
n. SUPPLEMENTARY PLANS. The Committee may authorize Supplementary Plans
applicable to Employees subject to the tax laws of one or more
countries other than the United States and providing for the grant of
Non-Qualified Stock Options, SARs or Restricted Stock to such Employees
on terms and conditions, consistent with the Plan, determined by the
Committee which may differ from the terms and conditions of other
Awards in those forms pursuant to the Plan for the purpose of complying
with the conditions for qualification of Awards for favorable treatment
under foreign tax laws. Notwithstanding any other provision hereof,
Options granted under any Supplementary Plan shall include provisions
that conform with Sections 4(a)(i), (ii) and (iii); SARs granted under
any Supplementary Plan shall include provisions that conform with
Section 4(b); and Restricted Stock granted under any Supplementary Plan
shall include provisions that conform with Section 4(c).
o. EFFECTIVE DATE AND TERM. The Plan was adopted by the Board of Directors and shall be submitted to the sole shareowner of the Corporation, and if approved, shall be effective as of the Collins Distribution Date. The Plan also shall be submitted to the shareowners of the Corporation for approval at the first Annual
Meeting of Shareowners to be held in 2002, and no Award may be granted, no Performance Unit may be paid and no Stock Purchase Award may be made under the Plan after the date of that meeting unless such shareowner approval is obtained. If such shareowner approval is not obtained, the rights of any holder of an outstanding Award shall continue in force and effect after termination of the Plan, except as they may lapse or be terminated pursuant to the terms of the Plan or by their own terms and conditions. The Plan shall remain in effect until all Awards under the Plan have been exercised or terminated under the terms of the Plan and applicable Award Agreements; PROVIDED, HOWEVER, that Awards under the Plan may be granted only within ten (10) years from the effective date of the Plan.
EXHIBIT 10.2
[5/30/01]
FORM OF
ROCKWELL COLLINS, INC.
DIRECTORS STOCK PLAN
1. PURPOSE OF THE PLAN.
The purpose of the Directors Stock Plan (the Plan) is to link the compensation of non-employee directors of Rockwell Collins, Inc. (Collins) directly with the interests of the Collins shareowners.
2. PARTICIPANTS.
Participants in the Plan shall consist of directors, other than the non-executive Chairman of the Board, of Collins who are not employees of Collins or any of its subsidiaries (Non-Employee Directors). The term "subsidiary" as used in the Plan means a corporation more than 50% of the voting stock of which, or an unincorporated business entity more than 50% of the equity interest in which, shall at the time be owned directly or indirectly by Collins.
3. SHARES RESERVED UNDER THE PLAN.
Subject to the provisions of Section 8 of the Plan, there shall be reserved for delivery under the Plan 325,000 shares of Common Stock, par value $.01 per share, of Collins (Shares). Shares to be delivered under the Plan may be authorized and unissued Shares, Shares held in treasury or any combination thereof.
4. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Compensation and Management Development Committee (the Committee) of the Board of Directors of Collins (the Board), subject to the right of the Board, in its sole discretion, to exercise or authorize another committee or person to exercise some or all of the responsibilities, powers and authority vested in the Committee under the Plan. The Committee (or the Board or any other committee or person authorized by the Board) shall have authority to interpret the Plan and to prescribe, amend and rescind rules and regulations relating to the administration of the Plan, and all such interpretations, rules and regulations shall be conclusive and binding on all persons.
5. EFFECTIVE DATE OF THE PLAN.
The Plan has been approved by the Board and shall be submitted to the sole shareowner of Collins, and, if approved, shall become effective on the date on which Rockwell International Corporation (Rockwell) completes the
pro rata distribution of all the outstanding Shares to Rockwell's shareowners (the Distribution). The Plan shall also be submitted to the shareowners of Collins for approval at the Annual Meeting of Shareowners to be held in 2002, and, if approved by the shareowners, shall continue in full force and effect as provided herein.
6. STOCK OPTIONS.
(a) Grant of Options.
(i) Initial Grants and Grants upon Election or Appointment to the Board. Effective concurrently with the first grant of options under the Collins 2001 Long-Term Incentives Plan (the Initial Grant Date), each Non-Employee Director at such time shall be granted an option to purchase 10,000 Shares. Any individual who is elected or appointed for the first time as a Non-Employee Director of Collins after the Initial Grant Date, other than an individual who has served as the non-executive Chairman of the Board, shall be granted an option to purchase 10,000 Shares at the meeting of the Board at which, or immediately following the Annual Meeting of Shareowners at which, the Non-Employee Director is first elected a director of Collins.
(ii) Annual Grants. Immediately following the Annual Meeting of Shareowners held in the year 2003 and each Annual Meeting of Shareowners thereafter, each Non-Employee Director who has served as a director for at least one year and is
elected a director at, or who was previously elected and continues as a director after, that Annual Meeting shall be granted an option to purchase 5,000 Shares.
(iii) Discretionary Grants. At such times as the Board may determine, the Board may grant to each Non-Employee Director, or to one or more designated Non-Employee Directors, options to purchase such additional number of Shares as the Board in its sole discretion shall determine.
(b) Exercise Price.
The exercise price per share for each option granted under Section 6(a) shall be one hundred percent (100%) of the closing price per share (the Fair Market Value) of the Shares on the date of grant as reported on the New York Stock Exchange-Composite Transactions (or on the next preceding day that Shares were traded if they were not traded on the date of grant).
(c) Exercise and Termination.
The purchase price of the Shares with respect to which an option or portion thereof is exercised shall be payable in full in cash, Shares valued at their Fair Market Value on the date of exercise, or a combination thereof. Each option may be exercised in whole or in part at any time after it becomes exercisable; and each option shall become exercisable in three approximately equal installments on each of the first, second and third anniversaries of the date the
option is granted. No option shall be exercisable prior to one year nor after ten years from the date of the grant thereof; provided, however, that if the holder of an option dies, the option may be exercised from and after the date of the optionee's death for a period of three years (or until the expiration date specified in the option, if earlier) even if it was not exercisable at the date of death. Moreover, if an optionee retires after attaining age 70 or before age 70 with at least five years service as a director, all options then held by such optionee shall be exercisable even if they were not exercisable at such retirement date; provided, however, that each such option shall expire at the earlier of five years from the date of the optionee's retirement or the expiration date specified in the option. If an optionee ceases to be a director by reason of disability or resignation from the Board for reasons of the antitrust laws, compliance with Collins' conflict of interest policies or other circumstances that the Committee may determine as serving the best interests of Collins, all options then held by such optionee may be exercised from and after such termination date for a period of one year (or until the expiration date specified in the option, if earlier), even if they were not exercisable at such termination date, unless otherwise determined by the Committee. If an optionee ceases to be a director while holding unexercised options for any reason not specified above, such options are then void. If a Change of Control
as defined in Article III, Section 13(I)(1) of Collins' By-laws shall occur, then all options then outstanding pursuant to the Plan shall forthwith become fully exercisable whether or not otherwise then exercisable.
(d) Nonassignability.
Options granted under the Plan are not transferable other than (i) by will or by the laws of descent and distribution; or (ii) by gift to the grantee's spouse or natural, adopted or step-children or grandchildren (Immediate Family Members) or to a trust for the benefit of one or more of the grantee's Immediate Family Members or to a family charitable trust established by the grantee or a member of the grantee's family.
7. RESTRICTED SHARES IN LIEU OF CASH COMPENSATION.
(a) Minimum Award.
(i) In accordance with the further provisions of Sections 7(a)(ii),
(iii) and (iv), each person who is a Non-Employee Director shall
receive fifty percent (50%) of his or her annual retainer fee for
service on the Board (or the applicable pro rata portion thereof)
by delivery of a whole number of restricted Shares (Restricted
Shares) determined by dividing the portion of the retainer fee to
be paid in Restricted Shares by the closing price of the Shares
as reported on the New York Stock
Exchange-Composite Transactions on the date when payment is made (or on the next preceding day that Shares were traded if they were not traded on such date) and rounding up to the next higher whole number.
(ii) Each person who is a Non-Employee Director immediately following the Distribution shall receive the Restricted Shares to which he or she is entitled pursuant to Section 7(a)(i) on the date when payment of the initial installment of the retainer fee is made.
(iii) Each other person who is first elected or appointed as a Non-Employee Director after the Distribution but before the first day of Collins' 2002 fiscal year shall receive the Restricted Shares to which he or she is entitled pursuant to Section 7(a)(i) immediately following such election or appointment.
(iv) On and after the first day of Collins' 2002 fiscal year, each Non-Employee Director shall receive the Restricted Shares to which he or she is entitled pursuant to Section 7.1(a)(i) on the first business day of Collins' 2002 fiscal year and each subsequent fiscal year (or, if later, the first business day during that fiscal year on which such person serves as a Non-Employee Director).
(b) Elective Awards.
Each Non-Employee Director may elect each year, not later than
December 31 of the year preceding the year as to which an election is to be applicable, to receive all or any part of the cash portion of his or her retainer or other fees to be paid for board, committee or other service in the following calendar year through the issuance or transfer of Restricted Shares, valued at the closing price as reported on the New York Stock Exchange-Composite Transactions on the date when each payment of such retainer amount would otherwise be made in cash.
(c) Discretionary Grants.
At such times as the Board may determine, the Board may grant to each Non-Employee Director, or to one or more designated Non-Employee Directors, awards of such additional numbers of Restricted Shares as the Board in its sole discretion may determine.
(d) Terms of Restricted Shares.
Upon receipt of Restricted Shares, the recipient shall have the right to vote the Shares and to receive dividends thereon, and the Shares shall have all the attributes of outstanding Shares, except that the Restricted Shares shall be held in book-entry accounts subject to the direction of Collins (or if Collins elects, certificates therefor may be issued in the recipient's name but delivered to and held by Collins) until ten days after (i) the recipient retires from the Board after attaining age 70 and having served at least three years service as a director or (ii) the recipient ceases to be a director by reason of the
antitrust laws, compliance with Collins' conflict of interest policies, death, disability or other circumstances the Board determines not to be adverse to the best interests of Collins, when the restrictions on such book-entry accounts shall be released (or any certificates issued shall be delivered to the director), and such Shares shall cease to be Restricted Shares. If a Change of Control as defined in Article III, Section 13(I)(1) of Collins' By-laws shall occur, then the restrictions on all shares granted as Restricted Shares under the Plan at any time before the occurrence of a Change of Control shall forthwith lapse, those Shares shall cease to be Restricted Shares and certificates for those Shares shall be delivered as promptly as practicable to the directors in whose names they are registered.
8. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
If there shall be any change in or affecting Shares on account of any merger, consolidation, reorganization, recapitalization, reclassification, stock dividend, stock split or combination, or other distribution to holders of Shares (other than a cash dividend), there shall be made or taken such amendments to the Plan and such adjustments and actions thereunder as the Board may deem appropriate under the circumstances.
9. GOVERNMENT AND OTHER REGULATIONS.
The obligations of Collins to deliver Shares under the Plan or upon
exercise of options granted under Section 6 of the Plan shall be subject to
(i) all applicable laws, rules and regulations and such approvals by any
governmental agencies as may be required, including, without limitation,
compliance with the Securities Act of 1933, as amended, and (ii) the
condition that such Shares shall have been duly listed on the New York
Stock Exchange.
10. AMENDMENT AND TERMINATION OF THE PLAN.
The Plan may be amended by the Board in any respect, provided that, without shareowner approval, no amendment shall materially increase the maximum number of Shares available for delivery under the Plan (other than adjustments pursuant to Section 8 hereof). The Plan may also be terminated at any time by the Board. Termination of the Plan shall not affect the rights of Non-Employee Directors with respect to awards previously granted to them and all unexpired awards shall continue in force and effect after termination of the Plan except as they may lapse or be terminated by their own terms and conditions.
11. MISCELLANEOUS.
(a) Nothing contained in the Plan shall be deemed to confer upon any person any right to continue as a director of or to be associated in
any other way with Collins.
(b) To the extent that Federal laws do not otherwise control, the Plan and all determinations made and actions taken pursuant hereto shall be governed by the law of the State of Delaware.
EXHIBIT 10.3
(5/30/01)
FORM OF
ROCKWELL COLLINS, INC.
2001 STOCK OPTION PLAN
1. PURPOSE
In connection with the Collins Distribution, certain stock options granted pursuant to Rockwell's Option Plans will be adjusted so that following the Collins Distribution those options will entitle the respective grantees to purchase Collins Shares in addition to or instead of Rockwell Shares, and Collins will assume Rockwell's obligations with respect to those adjusted stock options for Collins Shares. The purpose of the 2001 Stock Option Plan is to provide a means for Collins to perform its obligations with respect to those adjusted stock options for Collins Shares and to foster creation of and enhance Collins shareowner value by linking the compensation of officers and other key employees of Collins, whose stock options granted pursuant to Rockwell's Option Plans generally will be converted into stock options for Collins Shares, to increases in the price of Collins stock, thus providing means by which persons of outstanding abilities can be motivated and retained.
2. DEFINITIONS
For the purpose of the Plan, the following terms shall have the meanings set forth below:
a. Boeing. The Boeing Company, a Delaware corporation.
b. Boeing North American. Boeing North American, Inc. (formerly Rockwell International Corporation), a Delaware corporation incorporated in 1928 that was the surviving corporation in a merger with Boeing NA, Inc., a wholly-owned subsidiary of Boeing.
c. Board of Directors. The Board of Directors of Collins.
d. Change of Control. Any of the following:
(i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a Person) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the then outstanding shares of Common Stock of Collins (the Outstanding Collins Common
Stock) or (B) the combined voting power of the then outstanding voting
securities of Collins entitled to vote generally in the election of
directors (the Outstanding Collins Voting Securities); provided, however,
that for purposes of this subparagraph (i), the following acquisitions
shall not constitute a Change of Control: (w) any acquisition directly
from Collins, (x) any acquisition by Collins, (y) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by
Collins, Rockwell or any corporation controlled by Collins or Rockwell or
(z) any acquisition pursuant to a transaction which complies with clauses
(A), (B) and (C) of subsection (iii) of this Section 2(d); or
(ii) Individuals who, as of the Collins Distribution Date, constitute the Board of Directors (the Incumbent Board) cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director subsequent to that date whose election, or nomination for election by Collins' shareowners, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors; or
(iii) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of Collins or the acquisition of assets of another entity (a Corporate Transaction), in each case, unless, following such Corporate Transaction, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Collins Common Stock and Outstanding Collins Voting Securities immediately prior to such Corporate Transaction beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Corporation or all or substantially all of the Corporation's assets either directly or
through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Collins Common Stock and Outstanding Collins Voting Securities, as the case may be, (B) no Person (excluding any employee benefit plan (or related trust) of the Corporation, of Rockwell or of such corporation resulting from such Corporate Transaction) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the then outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Corporate Transaction and (C) at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board of Directors, providing for such Corporate Transaction; or
(iv) Approval by Collins' shareowners of a complete liquidation or dissolution of Collins.
e. Committee. The Compensation and Management Development Committee designated by the Board of Directors from among its members excluding any members thereof who hold Collins Options governed by the Plan.
f. Collins. Rockwell Collins, Inc., a Delaware corporation, and any successor thereto.
g. Collins Distribution. The pro rata distribution of all outstanding Collins Shares to Rockwell's shareowners.
h. Collins Distribution Date. The date on which Rockwell completes the Collins Distribution.
i. Collins Option. An option to purchase Collins Shares derived from adjustment of a Rockwell Option in connection with the Collins Distribution.
j. Collins Shares. Shares of Common Stock, par value $.01 per share, of Collins, or any security of Collins issued in substitution or exchange therefor or in lieu thereof.
k. Corporation. Rockwell and those of its subsidiary corporations or affiliates designated by the Committee to participate in any of Rockwell's
Option Plans and after consummation of the Collins Distribution, Collins and its direct or indirect subsidiary corporations.
l. Employees. Officers and other key employees of the Corporation, but not directors who are not also employees of the Corporation.
m. Exchange Act. The Securities Exchange Act of 1934, as amended, and any successor statute.
n. Fair Market Value. The closing price of the Common Stock of Collins as reported on the New York Stock Exchange - Composite Transactions on the date of a determination (or on the next preceding day such stock was traded if it was not traded on the date of a determination).
o. Merger Closing Date. The Closing Date as defined in the Agreement and Plan of Merger dated as of July 31, 1996 among Rockwell International Corporation, a Delaware corporation incorporated in 1928, Boeing and Boeing NA, Inc.
p. Meritor. Meritor Automotive, Inc., a Delaware corporation, and, effective July 7, 2000, ArvinMeritor, Inc., an Indiana corporation.
q. Meritor Distribution Date. The Distribution Date as defined in the Distribution Agreement between Rockwell and Meritor relating, among other things, to the distribution of shares of Meritor Common Stock to Rockwell's shareowners.
r. Non-Employee Director. A present or former Non-Employee Director of Rockwell.
s. Participant. (i) Any Employee (a Continuing USA Participant) as of the close of business on May 31, 1996 who then held one or more outstanding Rockwell Options and who on or before the close of business on the Merger Closing Date became an employee of United Space Alliance, LLC (USA) immediately upon termination of employment (by retirement or otherwise) by Rockwell or a subsidiary corporation of Rockwell, but only for purposes of determining such an Employee's rights with respect to his or her outstanding Collins Options and only so long as such Employee shall remain an employee of USA and Boeing or any of its subsidiaries shall continue to own at least 50% of the total ownership interests in USA; (ii) any Employee (a Continuing Boeing Participant) as of the opening of business on the Merger Closing Date who then held one or more outstanding Rockwell Options and who as of the close of business on that date remained or became an employee of Boeing North American, Boeing or any of their respective subsidiaries, but only for purposes of
determining such an Employee's rights with respect to his or her outstanding Collins Options and only so long as such Employee shall remain an employee of Boeing or any of its subsidiaries; (iii) any Employee (a Continuing Meritor Participant) as of the opening of business on the Meritor Distribution Date who then held one or more outstanding Rockwell Options and who as of the close of business on that date remained or became an employee of Meritor or any of its subsidiaries, but only for purposes of determining such an Employee's rights with respect to his or her outstanding Collins Options and only so long as such an Employee shall remain an employee of Meritor or any of its subsidiaries; (iv) any Employee (a Continuing Collins Participant) as of the opening of business on the Collins Distribution Date who then held one or more outstanding Rockwell Options and who as of the close of business on that date remains or becomes an employee of Collins or any of its subsidiaries, but only for purposes of determining such an Employee's rights with respect to his or her outstanding Collins Options and only so long as such an Employee shall remain an employee of Collins or any of its subsidiaries; and (v) any other person (a Continuing Rockwell Participant) who on the Collins Distribution Date held one or more outstanding Rockwell Options, but only for purposes of determining the rights of such a person with respect to his or her outstanding Collins Options and only so long as such person (or his or her legatees, heirs or permitted assigns) shall remain entitled to exercise the Rockwell Options from which his or her Collins Options are derived.
t. Plan. This 2001 Stock Option Plan.
u. Rockwell. Rockwell International Corporation, a Delaware corporation, and any successor thereto.
v. Rockwell Option. An option to purchase Rockwell Shares granted pursuant to any of Rockwell's Option Plans.
w. Rockwell's Option Plans. As the context requires, any or all of Rockwell's 1988 Long-Term Incentives Plan, as amended, Rockwell's 1995 Long-Term Incentives Plan, as amended, Rockwell's 2000 Long-Term Incentives Plan, as amended, and Rockwell's Directors Stock Plan, as amended.
x. Rockwell Shares. Shares of Common Stock, par value $1 per share, of Rockwell, or any security of Rockwell issued in substitution or exchange therefor or in lieu thereof.
3. PLAN ADMINISTRATION
a. The Committee shall exercise all responsibilities, powers and authority relating to the administration of the Plan not reserved to the Board of Directors.
b. The Board of Directors reserves the right, in its sole discretion, to exercise or authorize another committee or person to exercise some or all of the responsibilities, powers and authority vested in the Committee under the Plan.
4. COLLINS OPTIONS
The outstanding Collins Options entitle the respective holders thereof to purchase such number of Collins Shares at such exercise price as shall be determined pursuant to resolutions to be adopted by Rockwell's Board of Directors before the Collins Distribution Date and otherwise have the same terms and conditions as the Rockwell Options from which they are derived; provided, however, that the purchase price of the Collins Shares with respect to which a Collins Option or portion thereof is exercised cannot be paid by delivery of Rockwell Shares but shall be payable in full in cash or in Collins Shares or in a combination of cash and Collins Shares. The value of any Collins Share delivered in payment of the purchase price shall be its Fair Market Value on the date the Collins Option is exercised.
5. EFFECT OF DEATH OR TERMINATION OF EMPLOYMENT
a. If the employment by Rockwell or any of its subsidiaries of a Continuing Rockwell Participant, the service as a director of Rockwell of any Non-Employee Director, the employment by USA of a Continuing USA Participant, the employment by Boeing North American, Boeing or any of their respective subsidiaries of a Continuing Boeing Participant, the employment by Meritor or any of its subsidiaries of a Continuing Meritor Participant, the employment by Collins or any of its subsidiaries of a Continuing Collins Participant who (or whose permitted transferee) holds any outstanding Collins Options terminates by reason of the death of the Participant, the Collins Options not theretofore exercised may be exercised from and after the date of the death of the Participant for a period of three years (or until the expiration date specified in the Rockwell Option from which the Collins Option is derived, if earlier) even if any of them was not exercisable at the date of death.
b. If a Continuing USA Participant, a Continuing Boeing Participant, a Continuing Meritor Participant or a Continuing Collins Participant who (or whose permitted transferee) holds outstanding Collins Options retires under a retirement plan of USA, Boeing North American, Boeing, Meritor, Collins or any of their respective subsidiaries, at any time after a portion of those Collins Options has become exercisable, the Collins Options not theretofore exercised may be exercised from and after the date upon which they are first exercisable under the terms thereof for a period of five years from the date of retirement (or until the expiration date specified in the Rockwell Option from which the Collins Option is derived, if earlier) even if any of them was not exercisable at the date of retirement, except that Collins Options derived from Rockwell Options granted prior to November 30, 1994 may be exercised for such period, not to exceed three years, from the date of retirement as specified in the Rockwell Option from which the Collins Option is derived (or until the expiration date specified in such Rockwell Option, if earlier) and only to the extent the grantee thereof (or a permitted transferee) was entitled to exercise the Collins Options at the time of such retirement.
c. If a Continuing Rockwell Participant who (or whose permitted transferee) holds outstanding Collins Options retires or has retired under a retirement plan of Rockwell or any of its subsidiaries at any time after a portion of those Collins Options has become exercisable, the Collins Options not theretofore exercised may be exercised from and after the date upon which they are first exercisable under the terms thereof for a period of five years from the date of retirement (or until the expiration date specified in the Rockwell Option from which the Collins Option is derived, if earlier) even if any of them was not exercisable at the date of retirement, except that Collins Options derived from Rockwell Options granted prior to November 30, 1994 may be exercised for such period, not to exceed three years, from the date of retirement as specified in the Rockwell Option from which the Collins Option is derived (or until the expiration date specified in such Rockwell Option, if earlier) and only to the extent the Continuing Rockwell Participant (or permitted transferee) was entitled to exercise the Collins Options at the time of such retirement.
d. If a Non-Employee Director who holds outstanding Collins Options retires as a director of Rockwell after attaining age 72 or completing ten years service as a director of Rockwell whether or not any portion of those Collins Options was exercisable at the date of retirement, the Collins Options not theretofore exercised may be exercised from and after the date upon which they are first exercisable under the terms thereof for a period of five years from the date of retirement (or until the expiration date specified in the Rockwell Option from which the Collins Option is derived, if earlier) even if any of them was not exercisable at the date of retirement.
e. If the employment by Rockwell or any of its subsidiaries of a Continuing Rockwell Participant who was an Employee prior to the Collins Distribution Date, the employment by USA of a Continuing USA Participant, the employment by Boeing North American, Boeing or any of their respective subsidiaries of a Continuing Boeing Participant, the employment by Meritor or its subsidiaries of a Continuing Meritor Participant or the employment by Collins or its subsidiaries of a Continuing Collins Participant who (or whose permitted transferee) holds any outstanding Collins Options is terminated or has heretofore terminated for any reason other than death or retirement under a retirement plan of Rockwell, USA, Boeing North American, Boeing, Meritor, Collins or any of their respective subsidiaries, the Collins Options not theretofore exercised may be exercised only within 90 days after the termination of such employment (or until the expiration date specified in the Rockwell Option from which the Collins Option is derived, if earlier) and only to the extent the grantee thereof (or a permitted transferee) was entitled to exercise the Options at the time of termination of such employment, unless and except to the extent the Committee may otherwise determine; provided, however, that the Committee shall not in any event permit a longer period of exercise than would have been applicable had the provisions of paragraph b. or c. above been applicable.
6. SHARES AVAILABLE
The total number of Collins Shares which may be delivered upon exercise of Collins Options shall not exceed the number (presently estimated to be 14 million) necessary to provide for exercise of all Collins Options outstanding on the Collins Distribution Date, as adjusted from time to time as herein provided. Collins Shares which may be delivered upon exercise of Collins Options may consist in whole or in part of unissued or reacquired Shares.
7. ADJUSTMENTS
If there shall be any change in or affecting Collins Shares on account of any merger, consolidation, reorganization, recapitalization, reclassification, stock dividend, stock split or combination, or other distribution to holders of Collins Shares (other than a cash dividend), there shall be made or taken such amendments to the Plan and such adjustments and actions thereunder as the Board of Directors may deem appropriate under the circumstances. Such amendments, adjustments and actions may include, without limitation, changes in the number of Collins Shares which may be issued or transferred pursuant to the Plan, the
number of Collins Shares subject to outstanding Collins Options and the related price per share. Without limiting the generality of the foregoing, (i) if any such change in or affecting Collins Shares shall result in an increase in the number of outstanding Collins Shares, the number of Collins Shares remaining subject to the Plan and the number of Collins Shares then covered by outstanding Collins Options shall be proportionately increased and the price for each Collins Share then covered by an outstanding Collins Option shall be proportionately reduced, and (ii) if any such change in or affecting Collins Shares shall result in a decrease in the number of outstanding Collins Shares, the number of Collins Shares remaining subject to the Plan and the number of Collins Shares then covered by outstanding Collins Options shall be proportionately decreased and the price for each Collins Share then covered by an outstanding Collins Option shall be proportionately increased.
8. AMENDMENT AND TERMINATION
The Committee shall have the power in its discretion to amend, suspend or terminate the Plan or Collins Options subject thereto at any time except that, subject to the provisions of Section 7, (a) without the consent of the person affected, no such action shall cancel or reduce an outstanding Collins Option other than as provided for or contemplated in the agreement evidencing the Rockwell Option from which the Collins Option is derived and (b) without the approval of the shareowners of Collins, the Committee may not (i) increase the number of Shares provided in Section 6 or (ii) reduce the exercise price of any Collins Option.
9. MISCELLANEOUS
a. No employee of Collins shall have any right as a Participant to continue in the employ of Collins for any period of time or to a continuation of any particular rate of compensation, and Collins expressly reserves the right to discharge or change the assignment of any of its employees who are Participants at any time. There is no obligation for uniformity of treatment of Participants under the Plan.
b. No Collins Option may be assigned, pledged or transferred except (i) by will or by the laws of descent and distribution; or (ii) by gift to any member of the Participant's immediate family or to a trust for the benefit of one or more members of the Participant's immediate family, if permitted in the applicable agreement governing the Rockwell Option from which that Collins Option is derived; or (iii) as otherwise determined by the Committee. Each Collins Option shall be exercisable during the lifetime of the Participant to whom the Rockwell Option from which it is derived was
granted only by such Participant unless the Collins Option has been transferred in accordance with the provisions of the applicable agreement governing the Rockwell Option from which that Collins Option is derived, to a member of the Participant's immediate family or a trust for the benefit of one or more members of the Participant's immediate family, in which case it shall be exercisable only by such transferee (or by the legal representative of the estate or by the heirs or legatees of such transferee). For purposes of this provision, a Participant's "immediate family" shall mean the Participant's spouse and natural, adopted or step-children and grandchildren.
c. No person shall have the rights or privileges of a shareowner with respect to Collins Shares subject to a Collins Option until exercise of such Collins Option.
d. No fractional Collins Shares shall be issued or transferred pursuant to the Plan. If any Collins Option shall be exercisable for a fractional Collins Share, the person entitled thereto shall be paid an amount equal to the excess of the Fair Market Value as of the date of exercise over the exercise price for any fractional Collins Share deliverable in respect of exercise of that Collins Option.
e. Notwithstanding any other provision of the Plan, if a Change of Control shall occur, then all Collins Options then outstanding pursuant to the Plan shall forthwith become fully exercisable whether or not otherwise then exercisable.
f. Collins shall have the right in connection with the delivery of any Collins Shares upon exercise of a Collins Option to require as a condition of such delivery that the recipient represent that such Collins Shares are being acquired for investment and not with a view to the distribution thereof.
g. Collins shall have the right, in connection with any exercise of a Collins Option, to deduct from any amount otherwise payable by Collins, an amount equal to any taxes required by law to be withheld with respect to exercise of that Collins Option or to require the Employee or other person effecting such exercise, as a condition of and prior to delivery of Collins Shares upon such exercise, to pay to Collins an amount sufficient to provide for any such taxes so required to be withheld.
h. Unless otherwise determined by the Committee or provided in an agreement between any Participant and his or her employer, for purposes of the Plan a Participant on authorized leave of absence will be considered as being in the employ of Rockwell, USA, Boeing North American, Boeing, Meritor, Collins or any of their respective subsidiaries, as the case may be.
i. Collins shall bear all expenses and costs in connection with the operation of the Plan, including costs related to the purchase, issue or transfer of Collins Shares, but excluding taxes imposed on any person receiving a payment or delivery of Shares under the Plan.
10. INTERPRETATIONS AND DETERMINATIONS
The Committee shall have the power from time to time to interpret the Plan, to adopt, amend and rescind rules, regulations and procedures relating to the Plan, to make, amend and rescind determinations under the Plan and to take all other actions that the Committee shall deem necessary or appropriate for the implementation and administration of the Plan. All interpretations, determinations and other actions by the Committee not revoked or modified by the Board of Directors shall be final, conclusive and binding upon all parties.
11. EFFECTIVE DATE
Upon approval by the sole shareowner of Collins, the Plan shall become effective as of the Collins Distribution Date.
EXHIBIT 10.4
[5/30/01]
FORM OF
ROCKWELL COLLINS, INC.
ANNUAL INCENTIVE COMPENSATION PLAN FOR
SENIOR EXECUTIVE OFFICERS
1. PURPOSE
The purposes of the Annual Incentive Compensation Plan for Senior Executive Officers (the Plan) are to provide a reward and an incentive to the Corporation's Senior Executive Officers who have contributed and in the future are likely to contribute to the success of the Corporation, to enhance the Corporation's ability to attract and retain outstanding persons to serve as its Senior Executive Officers and to preserve for the Corporation the benefit of federal income tax deductions with respect to annual incentive compensation paid to Senior Executive Officers.
2. DEFINITIONS.
(a) Applicable Earnings. For any fiscal year, the net income before provision for income taxes. This measure shall be determined in accordance with generally accepted accounting principles as consistently applied by the Corporation and, if so determined by the Committee and to the extent permitted under Code Section 162(m), adjusted to omit the effects of extraordinary items, gain or loss on the disposal of a business segment, unusual or infrequently occurring events and transactions and cumulative effects of changes in accounting principles. Amounts charged or credited to earnings under the ICP shall not be included in determining Applicable Earnings.
(b) Board of Directors. The Board of Directors of Rockwell Collins.
(c) Code. The Internal Revenue Code of 1986, as amended from time to time.
(d) Committee. The Compensation and Management Development Committee designated by the Board of Directors from among its members who are not eligible to receive an award under the Plan.
(e) Corporation. Rockwell Collins and its consolidated subsidiaries.
(f) Covered Employees Performance Fund. An incentive compensation fund for each fiscal year in which the Plan is applicable from which awards may be made under the Plan, which shall be equal to 1.5% of the Applicable Earnings for that fiscal year.
(g) ICP. The Corporation's annual Incentive Compensation Plan for executives other than those eligible under this plan.
(h) Rockwell. Rockwell International Corporation, a Delaware corporation.
(i) Rockwell Collins. Rockwell Collins, Inc., a Delaware corporation.
(j) Senior Executive Officers. Rockwell Collins' chief executive
officer on the last day of each fiscal year and four other executive officers
(as defined in Rule 3b-7 under the Securities Exchange Act of 1934, as amended)
which the Committee shall designate on or before the last day of that fiscal
year. No member of the Corporation's Board of Directors who is not also an
employee of the Corporation shall be eligible to participate in the Plan.
3. DETERMINATION OF APPLICABLE EARNINGS AND COVERED EMPLOYEES PERFORMANCE FUND; ALLOCATION OF POTENTIAL AWARDS.
(a) After the end of each fiscal year, the independent certified public accountants who audit the Corporation's accounts shall compute the Applicable Earnings and the amount of the Covered Employees Performance Fund for that fiscal year. Those computations shall be reported to the Board of Directors and the Committee.
(b) There shall be allocated from the Covered Employees Performance Fund for each fiscal year potential awards to each of the Senior Executive Officers equal to the following respective percentages of the Covered Employees Performance Fund for that fiscal year:
Chief Executive Officer - 35%
Each Chief Operating Officer - 20%
Each Other Senior Executive Officer - 15%
If there is more than one Chief Operating Officer, the percentages allocable to each other Senior Executive Officer, excluding the Chief Executive Officer, shall be reduced ratably so that the total amount of the Covered Employees Performance Fund allocated to all Senior Executive Officers shall equal 100%.
4. AWARDS.
(a) After the computations, reports and allocations prescribed under
Section 3(a) have been made, the Committee shall determine, in its discretion,
the amounts, if any, allocated to the Senior Executive Officers pursuant to
Section 3(b) to be awarded from the Covered Employees Performance Fund for that
fiscal year; and the form, terms and conditions of awards, including whether and
to what extent awards shall be paid in installments.
(b) Without limiting the generality of Section 4(a) the Committee may, in its sole discretion, reduce the amount of any award made to any Senior Executive Officer from the amount allocated under Section 3(b), taking into account such factors as it deems relevant, including without limitation: (i) the Applicable Earnings; (ii) other significant financial or strategic achievements during the year; (iii) its subjective assessment of each Senior Executive Officer's overall performance for the year; and (iv) information
about compensation practices at other peer group companies for the purpose of evaluating competitive compensation levels so that the Committee may determine that the amount of the annual incentive award is within the targeted competitive compensation range of the Corporation's executive compensation program. The Committee shall determine the amount of any reduction in a Senior Executive Officer's award on the basis of the foregoing and other factors it deems relevant and shall not be required to establish any allocation or weighting formula with respect to the factors it considers. In no event shall any Senior Executive Officer's award under the Plan exceed the amount of the Covered Employees Performance Fund allocated to a potential award to that Senior Executive Officer.
(c) The Committee shall have no obligation to disclose the full amount of the Covered Employees Performance Fund for any fiscal year. Amounts allocated but not actually awarded to a Senior Executive Officer may not be re-allocated to other Senior Executive Officers or utilized for awards in respect of other years.
(d) The Corporation shall promptly notify each person to whom an award has been made and pay the award in accordance with the determinations of the Committee.
(e) A cash award may be made with respect to a Senior Executive Officer who has died. Any such award shall be paid to the legal representative or representatives of the estate of such Officer.
(f) No person who is eligible for an award under the Plan for any fiscal year of the Corporation shall be eligible for an award under any other annual management incentive compensation plan of any of the Corporation's businesses for that fiscal year.
5. FINALITY OF DETERMINATIONS.
The Committee shall have the power to administer and interpret the Plan. All determinations, interpretations and actions of the Committee and all actions of the Board of Directors under or in connection with the Plan shall be final, conclusive and binding upon all concerned. Any member of the Committee who, at the time of any proposed award or at the time an award is made, is not an "outside director" as defined for purposes of Code Section 162(m) shall abstain from, and take no part in, the Committee's action on the award.
6. AMENDMENT OF THE PLAN.
The Board of Directors and the Committee shall each have the power, in its sole discretion, to amend, suspend or terminate the Plan at any time, except that:
(a) No such action shall adversely affect rights under an award already made, without the consent of the person affected; and
(b) Without approval of the shareowners of Rockwell Collins, neither the Board of Directors nor the Committee shall (1) so modify the method of determining the Covered Employees Performance Fund as to increase materially the maximum amount that may be allocated to it or (2) after the first 90 days of any fiscal year, amend the plan in a manner that would, directly or indirectly: (i) change the method of calculating the amount allocated to the Covered Employees Performance Fund for that year; (ii) increase the maximum award payable to any Senior Executive Officer for that year; or (iii) remove the amendment restriction set forth in this sentence with respect to that year.
7. MISCELLANEOUS.
(a) The Corporation shall bear all expenses and costs in connection with the operation of the Plan.
(b) The Corporation, the Board of Directors, the Committee and the officers of the Corporation shall be fully protected in relying in good faith on the computations and reports made pursuant to or in connection with the Plan by the independent certified public accountants who audit the Corporation's accounts.
8. EFFECTIVE DATE.
The Plan has been approved by the Board of Directors and shall be submitted to the sole shareowner of Rockwell Collins, and, if approved, shall become effective on the date on which Rockwell completes the pro rata distribution of all the outstanding shares of Rockwell Collins common stock to Rockwell's shareowners. The Plan shall also be submitted to the shareowners of Rockwell Collins for approval at the first annual meeting of shareowners to be held in 2002, and, (i) if approved by the shareowners shall continue in full force and effect as provided herein, or (ii) if not approved by the shareowners, no award may be paid under the Plan after the date of that meeting.
Exhibit 10.5
[5/30/01]
FORM OF
EMPLOYEE MATTERS AGREEMENT
by and among
ROCKWELL INTERNATIONAL CORPORATION,
NEW ROCKWELL COLLINS, INC.
and
ROCKWELL SCIENTIFIC COMPANY LLC
June 29, 2001
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS.....................................................1
Section 1.01 General.........................................................1
ARTICLE II EMPLOYEES.......................................................7
Section 2.01 Employees.......................................................7
Section 2.02 Employee Benefits Generally.....................................8
Section 2.03 Collective Bargaining Agreements................................9
ARTICLE III PENSION PLANS...................................................9
Section 3.01 U.S. Pension Plan...............................................9
Section 3.02 Stand-Alone Pension Plan.......................................23
Section 3.03 U.S. Non-Qualified Pension Plan................................23
Section 3.04 U.K. Pension Plan..............................................25
Section 3.05 Canadian Pension Plan..........................................25
ARTICLE IV SAVINGS PLANS..................................................25
Section 4.01 U.S. Salaried Savings Plan.....................................25
Section 4.02 U.S. Hourly Represented Savings Plan...........................26
Section 4.03 U.S. Hourly Non-Represented Savings Plan.......................27
Section 4.04 Non-Qualified Savings Plans....................................28
ARTICLE V STOCK PLANS....................................................29
Section 5.01 Stock Plans....................................................29
ARTICLE VI OTHER EMPLOYEE PLANS AND MATTERS...............................30
Section 6.01 Welfare Plans..................................................30
Section 6.02 Incentive Compensation Plans...................................34
Section 6.03 Deferred Compensation Plan.....................................35
Section 6.04 Severance Pay..................................................36
Section 6.05 Employment, Consulting and Other Employee Related Agreements...38
Section 6.06 Other Liabilities..............................................39
Section 6.07 Funding of Master Rabbi Trusts.................................39
ARTICLE VII MISCELLANEOUS..................................................40
Section 7.01 Indemnification................................................40
Section 7.02 Cooperation....................................................40
Section 7.03 Sharing of Information.........................................40
Section 7.04 Entire Agreement; Construction.................................40
|
Section 7.05 Survival of Agreements.........................................41 Section 7.06 Governing Law..................................................41 Section 7.07 Notices........................................................41 Section 7.08 Amendments.....................................................41 Section 7.09 Assignment.....................................................41 Section 7.10 Captions; Currency.............................................41 Section 7.11 Severability...................................................42 Section 7.12 Parties in Interest............................................42 Section 7.13 Schedules......................................................42 Section 7.14 Termination....................................................42 Section 7.15 Waivers; Remedies..............................................43 Section 7.16 Counterparts...................................................43 Section 7.17 Performance....................................................43 Section 7.18 Interpretation.................................................43 |
SCHEDULES Schedule 1.01 - Certain Definitions Schedule 1.02 - Certain Rockwell Automation Optionees Schedule 1.03 - Certain Rockwell Collins Optionees Schedule 2.01(a) - Certain Rockwell Automation Employees Schedule 2.01(b) - Certain Rockwell Collins Employees Schedule 2.01(c) - Certain Rockwell Science Center Employees Schedule 2.01(d) - Certain Former Rockwell Corporate Employees Schedule 2.03(a) - Rockwell Collective Bargaining Agreements Schedule 2.03(b) - Rockwell Collins Collective Bargaining Agreements Schedule 5.01(a) - Rockwell Option Adjustment - Rockwell Automation Optionees Schedule 5.01(b) - Rockwell Option Adjustment - Rockwell Collins Optionees Schedule 5.01(c)(i) - Rockwell Split Options - Rockwell Options Schedule 5.01(c)(ii) - Rockwell Split Options - Rockwell Collins Options |
EMPLOYEE MATTERS AGREEMENT
Employee Matters Agreement (this "Agreement") dated as of June 29, 2001 by and among (i) Rockwell International Corporation, a Delaware corporation ("Rockwell"), (ii) NEW ROCKWELL COLLINS, INC., a Delaware corporation and, as of the date hereof, a wholly-owned subsidiary of Rockwell ("Rockwell Collins"), and (iii) ROCKWELL SCIENTIFIC COMPANY LLC, a Delaware limited liability company and, as of the date hereof, a wholly-owned subsidiary of Rockwell ("Rockwell Science Center").
WHEREAS, the Rockwell Board has determined that it is appropriate and desirable to distribute all outstanding shares of Rockwell Collins Common Stock on a pro rata basis to the holders of Rockwell Common Stock (the "Distribution"); and
WHEREAS, Rockwell, Rockwell Collins and Rockwell Science Center are entering into a Distribution Agreement dated as of the date hereof (the "Distribution Agreement") which, among other things, sets forth the principal corporate transactions required to effect the Distribution and certain other agreements that will govern certain matters relating to the Distribution; and
WHEREAS, in connection with the Distribution, Rockwell, Rockwell Collins and Rockwell Science Center have determined that it is appropriate and desirable to provide for the allocation of certain assets and liabilities and certain other matters relating to employees, employee benefit plans and compensation arrangements;
NOW, THEREFORE, in consideration of the premises and of the respective agreements and covenants contained in this Agreement, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 General. Capitalized terms used in this Agreement but not defined herein (other than the names of employee benefit plans) will have the meanings ascribed to such terms in the Distribution Agreement. As used in this Agreement (or in any Schedule to this Agreement), the terms defined in Schedule 1.01 will have the meanings set forth in such Schedule 1.01, the terms defined in Section 3.01(e) will have the meanings set forth in such Section 3.01(e) and the following terms will have the following meanings (in each case, such meanings to be equally applicable to both the singular and plural forms of the terms defined):
"ACTIVE ROCKWELL AUTOMATION EMPLOYEE" means any individual who, immediately after the Time of Distribution, will be employed by a member of the Rockwell Automation Group pursuant to Section 2.01(a) (other than any such individual who was an employee of the Rockwell corporate office or its predecessors prior to the Distribution and who has not accepted permanent employment with a member of the Rockwell Automation Group as of the Time of Distribution).
"ACTIVE ROCKWELL COLLINS EMPLOYEE" means any individual who, immediately after the Time of Distribution, will be employed by a member of the Rockwell Collins Group pursuant to Section 2.01(b).
"ACTIVE ROCKWELL SCIENCE CENTER EMPLOYEE" means any individual who, immediately after the Time of Distribution, will be employed by a member of the Rockwell Science Center Group pursuant to Section 2.01(c).
"AGREEMENT" will have the meaning ascribed thereto in the preamble.
"DISTRIBUTION" will have the meaning ascribed thereto in the recitals.
"DISTRIBUTION AGREEMENT" will have the meaning ascribed thereto in the recitals.
"DIVESTED BUSINESS EMPLOYEE" means any Pre-Distribution Group Employee who is not, immediately after the Time of Distribution, an Active Rockwell Automation Employee, a Former Rockwell Automation Employee, an Active Rockwell Collins Employee, a Former Rockwell Collins Employee, an Active Rockwell Science Center Employee, a Former Rockwell Science Center Employee or a Former Rockwell Corporate Employee, and whose most recent active employment with Rockwell or any other member of the Pre-Distribution Group (during a time that such member of the Pre-Distribution Group was an affiliate of Rockwell or its predecessors) was with an Unrelated Former Business, whether or not such individual remains employed by such Unrelated Former Business as of the Time of Distribution.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor legislation.
"FORMER ROCKWELL AUTOMATION EMPLOYEE" means any Pre-Distribution Group Employee who is not, immediately after the Time of Distribution, an Active Rockwell Automation Employee, an Active Rockwell Collins Employee or an Active Rockwell Science Center Employee, and whose most recent active employment with Rockwell or any other member of the Pre-Distribution Group
(during a time that such member of the Pre-Distribution Group was an affiliate of Rockwell or its predecessors) was with the Rockwell Automation Business.
"FORMER ROCKWELL COLLINS EMPLOYEE" means any Pre-Distribution Group Employee who is not, immediately after the Time of Distribution, an Active Rockwell Collins Employee, an Active Rockwell Automation Employee or an Active Rockwell Science Center Employee, and whose most recent active employment with Rockwell or any other member of the Pre-Distribution Group (during a time that such member of the Pre-Distribution Group was an affiliate of Rockwell or its predecessors) was with the Rockwell Collins Business.
"FORMER ROCKWELL CORPORATE EMPLOYEE" means any Pre-Distribution Group Employee who is not, immediately after the Time of Distribution, an Active Rockwell Automation Employee, a Former Rockwell Automation Employee, an Active Rockwell Collins Employee, a Former Rockwell Collins Employee, an Active Rockwell Science Center Employee or a Former Rockwell Science Center Employee, and whose most recent active employment with Rockwell or any other member of the Pre-Distribution Group (during a time that such member of the Pre-Distribution Group was an affiliate of Rockwell or its predecessors) was with the corporate office of Rockwell or its predecessors (including Rockwell's and its predecessor's corporate offices located in Pittsburgh, Pennsylvania, El Segundo, California, Seal Beach, California, Costa Mesa, California or Milwaukee, Wisconsin), including those individuals identified on the attached Schedule 2.01(d). Any such individual employed by a member of the Rockwell Automation Group as of or immediately after the Time of Distribution will nevertheless be considered a Former Rockwell Corporate Employee if such individual has not accepted permanent employment with a member of the Rockwell Automation Group as of the Time of Distribution.
"FORMER ROCKWELL SCIENCE CENTER EMPLOYEE" means any Pre-Distribution Group Employee who is not, immediately after the Time of Distribution, an Active Rockwell Science Center Employee, an Active Rockwell Automation Employee or an Active Rockwell Collins Employee, and whose most recent active employment with Rockwell or any other member of the Pre-Distribution Group (during a time that such member of the Pre-Distribution Group was an affiliate of Rockwell or its predecessors) was with the Rockwell Science Center Business.
"INCENTIVE COMPENSATION PLAN" means the Rockwell International Corporation Incentive Compensation Plan, including all amendments thereto through the Distribution Date.
"LTIP" will have the meaning ascribed thereto in Section 6.02(a).
"PBGC" means the Pension Benefit Guaranty Corporation.
"PRE-DISTRIBUTION GROUP EMPLOYEE" means any individual who was, at any time prior to the Time of Distribution, employed by Rockwell or any other member of the Pre-Distribution Group (during a time that such member of the Pre-Distribution Group was an affiliate of Rockwell or its predecessors).
"ROCKWELL" will have the meaning ascribed thereto in the preamble.
"ROCKWELL AUTOMATION DEFERRED COMPENSATION PLAN" will have the
meaning ascribed thereto in Section 6.03(a)(i).
"ROCKWELL AUTOMATION MASTER RABBI TRUST" means the master rabbi trust related to the Rockwell Automation Deferred Compensation Plan, the Rockwell Automation Non-Qualified Pension Plan and the Rockwell Automation Non-Qualified Savings Plan.
"ROCKWELL AUTOMATION NON-QUALIFIED PENSION PLAN" will have the
meaning ascribed thereto in Section 3.03(a)(i).
"ROCKWELL AUTOMATION NON-QUALIFIED SAVINGS PLAN" will have the
meaning ascribed thereto in Section 4.04(a)(i).
"ROCKWELL AUTOMATION OPTIONEE" means any Person who (i) immediately after the Time of Distribution is an Active Rockwell Automation Employee, other than those who were employees of the Rockwell corporate office prior to the Time of Distribution and become employees of the Rockwell Automation Business (or remain employees of the Rockwell corporate office) in connection with the Distribution or (ii) is set forth in Schedule 1.02.
"ROCKWELL AUTOMATION PARTICIPANT" means any individual who, immediately after the Time of Distribution, is (a) an Active Rockwell Automation Employee, (b) a Former Rockwell Automation Employee or (c) a beneficiary of either of the foregoing.
"ROCKWELL COLLINS" will have the meaning ascribed thereto in the preamble.
"ROCKWELL COLLINS HOURLY NON-REPRESENTED SAVINGS PLAN" will have
the meaning ascribed thereto in Section 4.03(a).
"ROCKWELL COLLINS HOURLY REPRESENTED SAVINGS PLAN" will have the
meaning ascribed thereto in Section 4.02(a).
"ROCKWELL COLLINS OPTION" means an option to purchase from Rockwell Collins shares of Rockwell Collins Common Stock provided to a holder of a Rockwell Option pursuant to Section 5.01.
"ROCKWELL COLLINS OPTIONEE" means any Person who (i) immediately after the Time of Distribution is an Active Rockwell Collins Employee, other than those who were employees of the Rockwell corporate office prior to the Time of Distribution and become employees of the Rockwell Collins Business in connection with the Distribution or (ii) is set forth in Schedule 1.03.
"ROCKWELL COLLINS PARTICIPANT" means any individual who, immediately after the Time of Distribution, is (a) an Active Rockwell Collins Employee, (b) a Former Rockwell Collins Employee, (c) a Divested Business Employee, (d) a Former Rockwell Corporate Employee or (e) a beneficiary of any of the foregoing.
"ROCKWELL COLLINS SALARIED SAVINGS PLAN" will have the meaning ascribed thereto in Section 4.01(a).
"ROCKWELL COLLINS WELFARE PARTICIPANTS" means all individuals who were covered under Rockwell Welfare Plans prior to the Time of Distribution (other than Rockwell Automation Participants and Rockwell Science Center Participants), including all Rockwell Collins Participants.
"ROCKWELL COLLINS WELFARE PLANS" will have the meaning ascribed thereto in Section 6.01(a).
"ROCKWELL DEFERRED COMPENSATION PLAN" means the Rockwell International Corporation Deferred Compensation Plan, including all amendments thereto through the Distribution Date.
"ROCKWELL HOURLY NON-REPRESENTED SAVINGS PLAN" means the Rockwell
International Corporation Non-Represented Hourly Retirement Savings
Plan, including all amendments thereto through the Distribution Date.
"ROCKWELL HOURLY REPRESENTED SAVINGS PLAN" means the Rockwell International Corporation Retirement Savings Plan for Certain Employees, including all amendments thereto through the Distribution Date.
"ROCKWELL MASTER RABBI TRUST" means the master rabbi trust related to the Rockwell Deferred Compensation Plan, the Rockwell Non-Qualified Pension Plan and the Rockwell Non-Qualified Savings Plan.
"ROCKWELL NON-QUALIFIED PENSION PLAN" means the Rockwell International Corporation Non-Qualified Retirement Plan, including all amendments thereto through the Distribution Date.
"ROCKWELL NON-QUALIFIED SAVINGS PLAN" means the Rockwell International Corporation Non-Qualified Savings Plan, including all amendments through the Distribution Date.
"ROCKWELL OPTION" means an option to purchase from Rockwell shares of Rockwell Common Stock granted pursuant to one of the Rockwell Stock Plans.
"ROCKWELL SALARIED SAVINGS PLAN" means the Rockwell International Corporation Salaried Retirement Savings Plan, including all amendments thereto through the Distribution Date.
"ROCKWELL SCIENCE CENTER" will have the meaning ascribed thereto in the preamble.
"ROCKWELL SCIENCE CENTER DEFERRED COMPENSATION PLAN" will have
the meaning ascribed thereto in Section 6.03(a)(i).
"ROCKWELL SCIENCE CENTER MASTER RABBI TRUST" means the master rabbi trust related to the Rockwell Science Center Deferred Compensation Plan, the Rockwell Science Center Non-Qualified Pension Plan and the Rockwell Science Center Non-Qualified Savings Plan.
"ROCKWELL SCIENCE CENTER NON-QUALIFIED PENSION PLAN" will have
the meaning ascribed thereto in Section 3.03(a)(i).
"ROCKWELL SCIENCE CENTER NON-QUALIFIED SAVINGS PLAN" will have
the meaning ascribed thereto in Section 4.04(a)(i).
"ROCKWELL SCIENCE CENTER PARTICIPANT" means any individual who, immediately after the Time of Distribution, is (a) an Active Rockwell Science Center Employee, (b) a Former Rockwell Science Center Employee or (c) a beneficiary of either of the foregoing.
"ROCKWELL SCIENCE CENTER SALARIED SAVINGS PLAN" will have the
meaning ascribed thereto in Section 4.01(a).
"ROCKWELL SCIENCE CENTER WELFARE PLANS" will have the meaning ascribed thereto in Section 6.01(a).
"ROCKWELL SPLIT OPTION" means any Rockwell Option outstanding as of the Time of Distribution held by a Rockwell Split Optionee.
"ROCKWELL SPLIT OPTIONEE" means any individual who holds Rockwell Options at the Time of Distribution who is not a Rockwell Automation Optionee or a Rockwell Collins Optionee.
"ROCKWELL STOCK PLANS" means, collectively, the Rockwell 2000 Long-Term Incentives Plan, the Rockwell 1995 Long-Term Incentives Plan, the Rockwell 1988 Long-Term Incentives Plan and the Rockwell Directors Stock Plan, in each case, including all amendments thereto through the Distribution Date.
"ROCKWELL U.K. EXECUTIVE PLAN" means the Rockwell U.K. Executive Pension Plan.
"ROCKWELL WELFARE PLANS" means the Welfare Plans and other employee welfare benefit and fringe benefit arrangements maintained by Rockwell and its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) prior to the Time of Distribution.
"STAND-ALONE PENSION PLAN" will have the meaning ascribed thereto in Section 3.02.
"WELFARE PLAN" means any employee welfare benefit plan as defined in Section 3(1) of ERISA, including medical, vision, dental and other health plans, retiree health plans, life insurance plans, retiree life insurance plans, accidental death and dismemberment plans, long-term disability plans and severance pay plans.
ARTICLE II
EMPLOYEES
Section 2.01 Employees.
(a) Each individual employed by Rockwell or any of its
Subsidiaries (including members of the Rockwell Collins Group and members of the
Rockwell Science Center Group) immediately prior to the Distribution and (x) who
is engaged primarily in the Rockwell Automation Business or (y) who Rockwell
consents to becoming an Active Rockwell Automation Employee, it being understood
that Rockwell has granted such consent in respect of individuals identified on
the attached Schedule 2.01(a) (including, in the case of both clauses (x) and
(y), those who are
actively employed or on lay-off, leave, short-term or long-term disability or other permitted absence from employment) will be employed by a member of the Rockwell Automation Group immediately after the Time of Distribution and will be an Active Rockwell Automation Employee (other than as provided in the definition of "Active Rockwell Automation Employee").
(b) Each individual employed by Rockwell or any of its
Subsidiaries (including members of the Rockwell Collins Group and members of the
Rockwell Science Center Group) immediately prior to the Distribution and (x) who
is engaged primarily in the Rockwell Collins Business or (y) who Rockwell
consents to becoming an Active Rockwell Collins Employee, it being understood
that Rockwell has granted such consent in respect of individuals identified on
the attached Schedule 2.01(b) (including, in the case of both clauses (x) and
(y), those who are actively employed or on lay-off, leave, short-term or
long-term disability or other permitted absence from employment) will be
employed by a member of the Rockwell Collins Group immediately after the Time of
Distribution and will be an Active Rockwell Collins Employee.
(c) Each individual employed by Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) immediately prior to the Distribution and (x) who is engaged primarily in the Rockwell Science Center Business or (y) who Rockwell consents to becoming an Active Rockwell Science Center Employee, it being understood that Rockwell has granted such consent in respect of individuals identified on the attached Schedule 2.01(c) (including, in the case of both clauses (x) and (y), those who are actively employed or on lay-off, leave, short-term or long-term disability or other permitted absence from employment) will be employed by a member of the Rockwell Science Center Group immediately after the Time of Distribution and will be an Active Rockwell Science Center Employee.
(d) Nothing contained in this Section 2.01 is intended to confer upon any employee of the Rockwell Automation Group, the Rockwell Collins Group or the Rockwell Science Center Group any right to continued employment after the Distribution Date.
Section 2.02 Employee Benefits Generally. Until at least January 1, 2003, (a) the Rockwell Collins Group will provide to Rockwell Collins Participants employee benefits that are substantially comparable in the aggregate to the employee benefits provided to Rockwell Collins Participants by Rockwell and its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) immediately prior to the Time of Distribution and (b) the Rockwell Science Center will provide to Rockwell Science Center Participants employee benefits that are substantially comparable in the aggregate to the employee benefits provided to Rockwell Science Center Participants by Rockwell and its Subsidiaries
(including members of the Rockwell Science Center Group) immediately prior to the Time of Distribution.
Section 2.03 Collective Bargaining Agreements.
(a) Effective as of the Time of Distribution, Rockwell will, or will cause one or more Rockwell Subsidiaries to, unconditionally assume or retain (as applicable) all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) (including Liabilities relating to wages, hours or other terms and conditions of employment) relating to Rockwell Automation Participants under each of the collective bargaining agreements of the Pre-Distribution Group relating to the Rockwell Automation Business and collateral agreements related thereto, including those listed on Schedule 2.03(a).
(b) Effective as of the Time of Distribution, Rockwell Collins will, or will cause one or more Rockwell Collins Subsidiaries to, unconditionally assume or retain (as applicable) all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) (including Liabilities relating to wages, hours or other terms and conditions of employment) relating to Rockwell Collins Participants under each of the collective bargaining agreements of the Pre-Distribution Group relating to the Rockwell Collins Business or any Unrelated Former Business and collateral agreements related thereto, including those listed on Schedule 2.03(b).
ARTICLE III
PENSION PLANS
Section 3.01 U.S. Pension Plan.
(a) Establishment and Sponsorship of Pension Plans and Trusts.
(i) Prior to the Time of Distribution, Rockwell will have
established (A) a new defined benefit pension plan which will be qualified under
Section 401(a) of the Code (the "Rockwell Automation Pension Plan"), the purpose
of which will be to provide benefits to eligible Rockwell Automation
Participants, and a group trust related thereto which will be exempt from
taxation under Section 501(a) of the Code (the "Rockwell Automation Group
Trust") and (B) a new defined benefit pension plan which will be qualified under
Section 401(a) of the Code (the "Rockwell Science Center Pension Plan"), the
purpose of which will be to provide benefits to eligible Rockwell Science Center
Participants, and a trust related thereto which will be exempt from taxation
under Section 501(a) of the Code (the "Rockwell Science Center Trust"). The
Rockwell Automation Pension Plan and the Rockwell Science Center Pension Plan each will credit each participant thereunder for purposes of eligibility to participate, vesting, benefit accruals and all other plan purposes with all service which had been credited to such participant for such purposes under the Rockwell Retirement Plan (the "Rockwell Pension Plan") immediately prior to the Time of Distribution (excluding any such service which was not counted under the Rockwell Pension Plan by operation of its "break in service" rules).
(ii) Prior to the Time of Distribution, Rockwell Collins will have assumed sponsorship of the Rockwell Pension Plan and the group trust related thereto (the "Rockwell Group Trust"), and will have changed the name of the Rockwell Pension Plan to the Rockwell Collins Retirement Plan and will have changed the name of the Rockwell Group Trust to the Rockwell Collins Group Trust. Prior to the Time of Distribution, Rockwell will have assumed sponsorship of the Rockwell Automation Pension Plan and the Rockwell Automation Group Trust. Prior to the Time of Distribution, Rockwell Science Center will have assumed sponsorship of the Rockwell Science Center Pension Plan and the Rockwell Science Center Trust.
(b) Assumption of Pension Plan Liabilities.
(i) Effective as of the Time of Distribution, Rockwell hereby assumes, and agrees to fully perform, pay and discharge, and agrees to cause the Rockwell Automation Pension Plan and the Rockwell Automation Group Trust to assume, and to fully perform, pay and discharge, all accrued benefit and other Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), the Rockwell Pension Plan and the Rockwell Group Trust under and relating to the Rockwell Pension Plan and the Rockwell Group Trust with respect to Rockwell Automation Participants who were covered under the Rockwell Pension Plan prior to the Time of Distribution. The Liabilities assumed by Rockwell, the Rockwell Automation Pension Plan and the Rockwell Automation Group Trust pursuant to the preceding sentence will be considered to have been transferred from the Rockwell Pension Plan and the Rockwell Group Trust to the Rockwell Automation Pension Plan and the Rockwell Automation Group Trust on the Distribution Date.
(ii) Effective as of the Time of Distribution, Rockwell Science Center hereby assumes, and agrees to fully perform, pay and discharge, and agrees to cause the Rockwell Science Center Pension Plan and the Rockwell Science Center Trust to assume, and to fully perform, pay and discharge, all accrued benefit and other Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), the Rockwell Pension Plan and the Rockwell Group Trust under and relating to the Rockwell Pension Plan and the Rockwell Group Trust with respect to Rockwell Science Center Participants who were covered under the Rockwell Pension Plan prior to the Time of Distribution. The Liabilities
assumed by Rockwell Science Center, the Rockwell Science Center Pension Plan and the Rockwell Science Center Trust pursuant to the preceding sentence will be considered to have been transferred from the Rockwell Pension Plan and the Rockwell Group Trust to the Rockwell Science Center Pension Plan and the Rockwell Science Center Trust on the Distribution Date.
(iii) Effective as of the Time of Distribution, Rockwell Collins hereby assumes or retains, as applicable, and agrees to fully perform, pay and discharge, and agrees to cause the Rockwell Pension Plan and the Rockwell Group Trust to retain, and to fully perform, pay and discharge, all accrued benefit and other Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), the Rockwell Pension Plan and the Rockwell Group Trust under and relating to the Rockwell Pension Plan and the Rockwell Group Trust with respect to all participants who were covered under the Rockwell Pension Plan prior to the Time of Distribution (other than Rockwell Automation Participants and Rockwell Science Center Participants), including all Rockwell Collins Participants.
(c) Transfers of Pension Plan Assets.
(i) At least 30 days prior to the Time of Distribution, Rockwell will have filed with the IRS a proper notice on IRS Forms 5310-A regarding (A) the transfer of assets and liabilities from the Rockwell Pension Plan and the Rockwell Group Trust to the Rockwell Automation Pension Plan and the Rockwell Automation Group Trust and (B) the transfer of assets and liabilities from the Rockwell Pension Plan and the Rockwell Group Trust to the Rockwell Science Center Pension Plan and the Rockwell Science Center Trust.
(ii) Prior to the Time of Distribution, the PBGC and IRS
waiting periods applicable to the transfers of assets and liabilities from the
Rockwell Pension Plan and the Rockwell Group Trust to the Rockwell Automation
Pension Plan and the Rockwell Automation Group Trust contemplated by this
Section 3.01 will have expired or terminated. On or prior to the Distribution
Date, assets (the form of which have been agreed upon by Rockwell and Rockwell
Collins) having a value equal to the Initial Rockwell Automation Pension
Transfer Amount will have been transferred from the Rockwell Group Trust to the
Rockwell Automation Group Trust.
(iii) Prior to the Time of Distribution, the PBGC and IRS
waiting periods applicable to the transfers of assets and liabilities from the
Rockwell Pension Plan and the Rockwell Group Trust to the Rockwell Science
Center Pension Plan and the Rockwell Science Center Trust contemplated by this
Section 3.01 will have expired or terminated. On or prior to the Distribution
Date, assets (the form of which have been agreed upon by Rockwell, Rockwell
Collins and Rockwell Science Center) having a
value equal to the Initial Rockwell Science Center Pension Transfer Amount will have been transferred from the Rockwell Group Trust to the Rockwell Science Center Trust.
(iv) For purposes of determining the Allocated Rockwell Automation Pension Asset Amount and the Allocated Rockwell Science Center Pension Asset Amount the Actual Aggregate Pension Asset Amount will be allocated among (x) the Rockwell Pension Plan and the Rockwell Group Trust, (y) the Rockwell Automation Pension Plan and the Rockwell Automation Group Trust and (z) the Rockwell Science Center Pension Plan and the Rockwell Science Center Trust as follows:
(A) If the Actual Aggregate Pension Asset Amount is less than the aggregate Distribution Date ABO for all of the Pension Plans, then the Actual Aggregate Pension Asset Amount will be allocated among (x) the Rockwell Pension Plan and the Rockwell Group Trust, (y) the Rockwell Automation Pension Plan and the Rockwell Automation Group Trust and (z) the Rockwell Science Center Pension Plan and the Rockwell Science Center Trust in accordance with Section 4044 of ERISA and the regulations thereunder, using a discount rate of 7.5% and actuarial assumptions (other than such discount rate) specified in the January 2001 Pension Plan Actuarial Valuation; or
(B) If the Actual Aggregate Pension Asset Amount is equal to or greater than the aggregate Distribution Date ABO for all of the Pension Plans, then the Actual Aggregate Pension Asset Amount will be allocated among (x) the Rockwell Pension Plan and the Rockwell Group Trust, (y) the Rockwell Automation Pension Plan and the Rockwell Automation Group Trust and (z) the Rockwell Science Center Pension Plan and the Rockwell Science Center Trust, in accordance with the following priorities:
(1) First, each Pension Plan (and the related Trust) will have allocated to it that portion of the Actual Aggregate Pension Asset Amount equal to (I) in the case of the Rockwell Automation Pension Plan, the Distribution Date ABO for Rockwell Automation Participants, (II) in the case of the Rockwell Science Center Pension Plan, the Distribution Date ABO for Rockwell Science Center Participants, and (III) in the case of the Rockwell Pension Plan, the Distribution Date ABO for all participants covered under the Rockwell Pension Plan (other than Rockwell Automation Participants and Rockwell Science Center Participants), including Rockwell Collins Participants;
(2) Second, the Rockwell Science Center Pension Plan (and the Rockwell Science Center Trust) will have allocated to it that portion, if any, of any Step 2 Excess Amount that is required to be allocated to it in order to comply with Government Cost Accounting Standard (CAS) 413-50(c)(5)(ii);
(3) Third, if either of the Rockwell Pension
Plan or the Rockwell Automation Pension Plan has a Step
3 ERISA 4044 Funded Percentage of less than 100%, then
whichever of the Rockwell Pension Plan and the Rockwell
Automation Pension Plan has the lower Step 3 ERISA 4044
Funded Percentage (and the related Trust) will have
allocated to it any Step 3 Excess Amount until the ERISA
4044 Funded Percentage of such Pension Plan is equal
(after giving effect to the allocation under this
Section 3.01(c)(iv)(B)(3)) to the lesser of (I) the
ERISA 4044 Funded Percentage of whichever of the
Rockwell Pension Plan and the Rockwell Automation
Pension Plan had the higher Step 3 ERISA 4044 Funded
Percentage or (II) 100%;
(4) Fourth, if the ERISA 4044 Funded Percentage of each of the Rockwell Pension Plan and the Rockwell Automation Pension Plan (after giving effect to the allocation under Section 3.01(c)(iv)(B)(3)) is less than 100%, then the Rockwell Pension Plan and the Rockwell Automation Pension Plan each will have allocated to it, on a pro rata basis (based on the ratio of each such Pension Plan's Step 4 ERISA 4044 Shortfall Amount to the aggregate Step 4 ERISA 4044 Shortfall Amount of such two Pension Plans), any Step 4 Excess Amount until the ERISA 4044 Funded Percentage of each such Pension Plan is equal to 100% (after giving effect to the allocation under this Section 3.01(c)(iv)(B)(4));
(5) Fifth, the Rockwell Pension Plan (and the Rockwell Group Trust) will have allocated to it that portion, if any, of any Step 5 Excess Amount that is required to be allocated to it in order to comply with Government Cost Accounting Standard (CAS) 4130-50(c)(5)(ii);
(6) Sixth, the Pension Plan with the lowest
Step 6 ABO Funded Percentage (and the related Trust)
will have allocated to it any Step 6 Excess Amount until
the ABO Funded Percentage of such Pension Plan is equal
(after giving effect to the allocation under this
Section 3.01(c)(iv)(B)(6)) to the ABO Funded
Percentage of the Pension Plan with the next lowest Step 6 ABO Funded Percentage;
(7) Seventh, the two Pension Plans with the lowest Step 7 ABO Funded Percentage each will have allocated to it, on a pro rata basis (based on the ratio of each such Pension Plan's ABO Percentage to the aggregate ABO Percentage of such two Pension Plans), any Step 7 Excess Amount until the ABO Funded Percentage of each such Pension Plan is equal (after giving effect to the allocation under this Section 3.01(c)(iv)(B)(7)) to the ABO Funded Percentage of the Pension Plan with the highest Step 7 ABO Funded Percentage; and
(8) Eighth, each Pension Plan will have allocated to it such Pension Plan's pro rata share (based on such Pension Plan's ABO Percentage) of any Step 8 Excess Amount.
(v) Within 150 days following the Distribution Date, Rockwell and Rockwell Collins will cause the Actuary to prepare and deliver to Rockwell, Rockwell Collins and Rockwell Science Center an actuarial valuation (the "Post-Distribution Actuarial Valuation") which will:
(A) certify the Distribution Date ABO for Rockwell Automation Participants, the Distribution Date ABO for Rockwell Science Center Participants and the Distribution Date ABO for all other participants in the Rockwell Pension Plan, including Rockwell Collins Participants;
(B) certify the ABO Percentage for the Rockwell Automation Pension Plan, the ABO Percentage for the Rockwell Science Center Pension Plan and the ABO Percentage for the Rockwell Pension Plan;
(C) set forth the Actual Aggregate Pension Asset Amount, the Actual Rockwell Automation Pension Asset Amount and the Actual Rockwell Science Center Pension Asset Amount;
(D) certify the portion of the Actual Aggregate
Pension Asset Amount required to be allocated to the Rockwell
Pension Plan, the Allocated Rockwell Automation Pension Asset
Amount and the Allocated Rockwell Science Center Pension Asset
Amount and the calculation of each thereof in accordance with
Section 3.01(c)(iv);
(E) certify the portion of the Actual Aggregate Pension Asset Amount required to be allocated to each of the Rockwell Pension Plan, the Rockwell Automation Pension Plan and the Rockwell Science Center Pension Plan under CAS 413-50(c)(5)(ii); and
(F) certify the portion of the Actual Aggregate Pension Asset Amount required to be allocated to each of the Rockwell Pension Plan, the Rockwell Automation Pension Plan and the Rockwell Science Center Pension Plan under Section 4044 of ERISA and the regulations thereunder (using the actuarial assumptions set forth therein, including the interest rate specified by the PBGC for pension plans terminating at the Time of Distribution).
The date on which the Actuary delivers the Post-Distribution Actuarial Valuation to Rockwell, Rockwell Collins and Rockwell Science Center is referred to herein as the "Delivery Date".
(vi) Either Rockwell or Rockwell Collins may dispute any of the calculations referred to in clauses (iii)(A)-(F) above certified or set forth in the Post-Distribution Actuarial Valuation by delivering written notice thereof (a "Dispute Notice") to the Actuary and the other parties to this Agreement on or before the 30th day following the Delivery Date (the "Dispute Notice Deadline Date"). If Rockwell or Rockwell Collins delivers a Dispute Notice as provided for above, then, following delivery of a Dispute Notice, Rockwell, Rockwell Collins and the Actuary will work together in good faith and on a reasonable basis to resolve any matters specified in the Dispute Notice, and Rockwell and Rockwell Collins will use their reasonable best efforts to cause the Actuary to deliver to Rockwell, Rockwell Collins and Rockwell Science Center a restated Post-Distribution Actuarial Valuation reflecting any required adjustments agreed to by Rockwell and Rockwell Collins resulting from the resolution of such matters within 60 days following delivery of a Dispute Notice.
(vii) (A) If the Allocated Rockwell Automation Pension Asset Amount set forth in the Final Post-Distribution Actuarial Valuation is greater than the Actual Rockwell Automation Pension Asset Amount set forth in the Final Post-Distribution Actuarial Valuation, then assets having a fair market value equal to the excess thereof will be transferred from the Rockwell Pension Plan and the Rockwell Group Trust to the Rockwell Automation Pension Plan and the Rockwell Automation Group Trust on the Transfer Date. If the Actual Rockwell Automation Pension Asset Amount set forth in the Final Post-Distribution Actuarial Valuation is greater than the Allocated Rockwell Automation Pension Asset Amount set forth in the Final Post-Distribution Actuarial Valuation, then assets having a fair market value equal to the excess thereof will be transferred from the Rockwell Automation Pension Plan and the Rockwell Automation
Group Trust to the Rockwell Pension Plan and the Rockwell Group Trust on the Transfer Date.
(B) If the Allocated Rockwell Science Center Pension Asset Amount set forth in the Final Post-Distribution Actuarial Valuation is greater than the Actual Rockwell Science Center Pension Asset Amount set forth in the Final Post-Distribution Actuarial Valuation, then assets having a fair market value equal to the excess thereof will be transferred from the Rockwell Pension Plan and the Rockwell Group Trust to the Rockwell Science Center Pension Plan and the Rockwell Science Center Trust on the Transfer Date. If the Actual Rockwell Science Center Pension Asset Amount set forth in the Final Post-Distribution Actuarial Valuation is greater than the Allocated Rockwell Science Center Pension Asset Amount set forth in the Final Post-Distribution Actuarial Valuation, then assets having a fair market value equal to the excess thereof will be transferred from the Rockwell Science Center Pension Plan and the Rockwell Science Center Trust to the Rockwell Pension Plan and the Rockwell Group Trust on the Transfer Date.
(C) Any amount to be transferred pursuant to this
Section 3.01(c)(vii) will bear interest from the Time of
Distribution to the date of payment (calculated based on actual
days elapsed in a 365-day year) at a rate of 9% per annum and
assets having a fair market value equal to such interest amount
will be transferred on the Transfer Date by the applicable
Pension Plans and Trusts required to make any transfer pursuant
to this Section 3.01(c)(vii).
(D) The assets to be transferred from the Rockwell Group Trust, from the Rockwell Automation Group Trust and/or from the Rockwell Science Center Trust pursuant to this Section 3.01(c)(vii) will consist solely of cash and marketable securities.
(viii) In the event that, after the allocation and transfer of
assets among the Pension Plans (and the related Trusts) in accordance with
Section 3.01(c)(vii), any Pension Plan (and the related Trust) does not hold on
the Transfer Date an amount of assets required to be held by such Pension Plan
in order to comply with either (A) CAS 413-50(c)(5) or (B) Section 414(l) of the
Code and the regulations thereunder (using the actuarial assumptions set forth
therein, including the interest rate specified by the PBGC for pension plans
terminating at the Time of Distribution), the sponsor of such Pension Plan will
be responsible for making (and agrees to make promptly, but in no event later
than January 31, 2002) any contribution of assets required to be made to such
Pension Plan in order for such Pension Plan to so comply, and for all
Liabilities in connection therewith. Any amount required to be contributed to a
Pension Plan pursuant to this
Section 3.01(c)(viii) will bear interest from the Time of Distribution to the date of contribution (calculated based on actual days elapsed in a 365-day year) at a rate of 9% per annum.
(ix) All costs and expenses of the Actuary in connection with the matters contemplated by this Section 3.01 will be shared equally by Rockwell and Rockwell Collins.
(d) Compliance with Applicable Laws. The parties acknowledge that the transfers of assets and liabilities from the Rockwell Pension Plan and the Rockwell Group Trust to the Rockwell Automation Pension Plan and Rockwell Automation Group Trust and to the Rockwell Science Center Pension Plan and the Rockwell Science Center Trust contemplated hereby will comply with Section 414(l) of the Code and the Treasury Regulations thereunder.
(e) Definitions. For purposes of this Section 3.01, the following terms will have the respective meanings set forth below:
"ABO FUNDED PERCENTAGE" means, with respect to each Pension Plan, a fraction, (A) the numerator of which is the fair market value of the applicable assets allocated to such Pension Plan pursuant to Section 3.01(c)(iv), and (B) the denominator of which is (x) in the case of the Rockwell Automation Pension Plan, the Distribution Date ABO for Rockwell Automation Participants, (y) in the case of the Rockwell Science Center Pension Plan, the Distribution Date ABO for Rockwell Science Center Participants, and (z) in the case of the Rockwell Pension Plan, the Distribution Date ABO for all participants covered under the Rockwell Pension Plan (other than Rockwell Automation Participants and Rockwell Science Center Participants), including Rockwell Collins Participants.
"ABO PERCENTAGE" means, with respect to each Pension Plan, a fraction, (A) the numerator of which is (x) in the case of the Rockwell Automation Pension Plan, the Distribution Date ABO for Rockwell Automation Participants, (y) in the case of the Rockwell Science Center Pension Plan, the Distribution Date ABO for Rockwell Science Center Participants, and (z) in the case of the Rockwell Pension Plan, the Distribution Date ABO for all participants covered under the Rockwell Pension Plan (other than Rockwell Automation Participants and Rockwell Science Center Participants), including Rockwell Collins Participants, and (B) the denominator of which is the Distribution Date ABO for all participants covered under all the Pension Plans (including Rockwell Automation Participants, Rockwell Science Center Participants and Rockwell Collins Participants).
"ACTUAL AGGREGATE PENSION ASSET AMOUNT" means the fair market value of the aggregate assets of the Rockwell Pension Plan and the Rockwell Group Trust, the Rockwell Automation Pension Plan and the Rockwell Automation Group Trust and the Rockwell Science Center Pension Plan and the Rockwell Science Center Trust as of the Time of Distribution.
"ACTUAL ROCKWELL AUTOMATION PENSION ASSET AMOUNT" means the fair market value of the assets of the Rockwell Automation Pension Plan and the Rockwell Automation Group Trust as of the Time of Distribution.
"ACTUAL ROCKWELL SCIENCE CENTER PENSION ASSET AMOUNT" means the fair market value of the assets of the Rockwell Science Center Pension Plan and the Rockwell Science Center Trust as of the Time of Distribution.
"ACTUARY" means Watson Wyatt Worldwide.
"ALLOCATED ROCKWELL AUTOMATION PENSION ASSET AMOUNT" means the portion of the Actual Aggregate Pension Asset Amount allocated to the Rockwell Automation Pension Plan and the Rockwell Automation Group Trust under Section 3.01(c)(iv).
"ALLOCATED ROCKWELL SCIENCE CENTER PENSION ASSET AMOUNT" means the portion of the Actual Aggregate Pension Asset Amount allocated to the Rockwell Science Center Pension Plan and the Rockwell Science Center Trust under Section 3.01(c)(iv).
"DELIVERY DATE" has the meaning ascribed thereto in
Section 3.01(c)(v).
"DISPUTE NOTICE" has the meaning ascribed thereto in
Section 3.01(c)(vi).
"DISPUTE NOTICE DEADLINE DATE" has the meaning ascribed thereto in Section 3.01(c)(vi).
"DISTRIBUTION DATE ABO" means, with respect to any group of participants covered under the Rockwell Pension Plan, the Rockwell Automation Pension Plan and/or the Rockwell Science Center Pension Plan immediately prior to the Time of Distribution (including Rockwell Automation Participants, Rockwell Science Center Participants and Rockwell Collins Participants), the aggregate accumulated benefit obligation for such participants under the Rockwell Pension Plan, the Rockwell Automation Pension Plan and the Rockwell Science Center Pension Plan as of the Time of Distribution, as determined in accordance with FAS 87 utilizing a discount rate of 7.5% and actuarial
assumptions (other than such discount rate) specified in the January 2001 Pension Plan Actuarial Valuation. The determination of the Distribution Date ABO will be based on an actuarial valuation using participant data as of January 1, 2001, with the results of such valuation adjusted to the Time of Distribution using standard actuarial techniques. Other than reflecting any changes in the assignment of participants among the Pension Plans from January 1, 2001 through the Distribution Date, no changes occurring after January 1, 2001 will be taken into account in determining the Distribution Date ABO.
"ERISA 4044 FUNDED PERCENTAGE" means, with respect to each Pension Plan, a fraction, (A) the numerator of which is the fair market value of the applicable assets allocated to such Pension Plan pursuant to Section 3.01(c)(iv), and (B) the denominator of which is the portion of the Actual Aggregate Pension Asset Amount required to be allocated to such Pension Plan under Section 4044 of ERISA and the regulations thereunder (using the actuarial assumptions set forth therein, including the interest rate specified by the PBGC for pension plans terminating at the Time of Distribution).
"FAS 87" means Statement of Financial Accounting Standards No. 87.
"FINAL POST-DISTRIBUTION ACTUARIAL VALUATION" is defined
as follows:
(A) if a Dispute Notice is not delivered by Rockwell or Rockwell Collins on or prior to the Dispute Notice Deadline Date, then the Final Post-Distribution Actuarial Valuation means the Post-Distribution Actuarial Valuation delivered by the Actuary to Rockwell, Rockwell Collins and Rockwell Science Center on the Delivery Date; or
(B) if a Dispute Notice is delivered by Rockwell or Rockwell Collins on or prior to the Dispute Notice Deadline Date, then the Final Post-Distribution Actuarial Valuation means the Post-Distribution Actuarial Valuation agreed to (and restated by the Actuary, if necessary) by Rockwell and Rockwell Collins pursuant to Section 3.01(c)(vi).
"INITIAL ROCKWELL AUTOMATION PENSION TRANSFER AMOUNT"
means $ [ ].
"INITIAL ROCKWELL SCIENCE CENTER PENSION TRANSFER AMOUNT"
means $[ ].
|
"JANUARY 2001 PENSION PLAN ACTUARIAL VALUATION" means the actuarial valuation for the Rockwell Pension Plan prepared by the Actuary dated May 1, 2001.
"PENSION PLAN" means the Rockwell Pension Plan, the Rockwell Automation Pension Plan and the Rockwell Science Center Pension Plan.
"POST-DISTRIBUTION ACTUARIAL VALUATION" has the meaning
ascribed thereto in Section 3.01(c)(v).
"ROCKWELL AUTOMATION GROUP TRUST" has the meaning
ascribed thereto in Section 3.01(a)(i).
"ROCKWELL AUTOMATION PENSION PLAN" has the meaning ascribed thereto in Section 3.01(a)(i).
"ROCKWELL GROUP TRUST" has the meaning ascribed thereto in Section 3.01(a)(ii).
"ROCKWELL PENSION PLAN" has the meaning ascribed thereto in Section 3.01(a)(i).
"ROCKWELL SCIENCE CENTER PENSION PLAN" has the meaning
ascribed thereto in Section 3.01(a)(i).
"ROCKWELL SCIENCE CENTER TRUST" has the meaning ascribed
thereto in Section 3.01(a)(i).
"STEP 2 EXCESS AMOUNT" means that amount, if any, by
which the Actual Aggregate Pension Asset Amount exceeds the aggregate
portions of the Actual Aggregate Pension Asset Amount required to be
allocated to all the Pension Plans (and their related Trusts) under
Section 3.01(c)(iv)(B)(1).
"STEP 3 ERISA 4044 FUNDED PERCENTAGE" means, with respect to each Pension Plan, a fraction, (A) the numerator of which is the fair market value of the assets allocated to such Pension Plan (and the related Trust) under Sections 3.01(c)(iv)(B)(1) and (2), and (B) the denominator of which is the portion of the Actual Aggregate Pension Asset Amount required to be allocated to such Pension Plan under Section 4044 of ERISA and the regulations thereunder (using the actuarial assumptions set forth therein, including the interest rate specified by the PBGC for pension plans terminating at the Time of Distribution).
"STEP 3 EXCESS AMOUNT" means the amount, if any, by which
the Actual Aggregate Pension Asset Amount exceeds the aggregate portions
of the Actual Aggregate Pension Assets Amount required to be allocated
to all the Pension Plans (and their related Trusts) under Sections
3.01(c)(iv)(B) (1) and (2).
"STEP 4 ERISA 4044 SHORTFALL AMOUNT" means, with respect
to each Plan, the remainder of (A) the portion of the Actual Aggregate
Pension Asset Amount required to be allocated to such Pension Plan under
Section 4044 of ERISA and the regulations thereunder (using the
actuarial assumptions set forth therein, including the interest rate
specified by the PBGC for pension plans terminating at the Time of
Distribution), less (B) the fair market value of the assets allocated to
such Pension Plan (and the related Trust) under Sections
3.01(c)(iv)(B)(1), (2) and (3).
"STEP 4 EXCESS AMOUNT" means the amount, if any, by which the Actual Aggregate Pension Asset Amount exceeds the aggregate portions of the Actual Aggregate Pension Asset Amount required to be allocated to all the Pension Plans (and their related Trusts) under Sections 3.01(c)(iv)(B)(1), (2) and (3).
"STEP 5 EXCESS AMOUNT" means the amount, if any, by which the Actual Aggregate Pension Asset Amount exceeds the aggregate portions of the Actual Aggregate Pension Asset Amount required to be allocated to all the Pension Plans (and their related Trusts) under Sections 3.01(c)(iv)(B)(1), (2), (3) and (4).
"STEP 6 ABO FUNDED PERCENTAGE" means, with respect to each Pension Plan, a fraction, (A) the numerator of which is the fair market value of the assets allocated to such Pension Plan (and the related Trust) under Sections 3.01(c)(iv)(B)(1), (2), (3), (4) and (5), and (B) the denominator of which is (x) in the case of the Rockwell Automation Pension Plan, the Distribution Date ABO for Rockwell Automation Participants, (y) in the case of the Rockwell Science Center Pension Plan, the Distribution Date ABO for Rockwell Science Center Participants, and (z) in the case of the Rockwell Pension Plan, the Distribution Date ABO for all participants covered under the Rockwell Pension Plan (other than Rockwell Automation Participants and Rockwell Science Center Participants), including Rockwell Collins Participants.
"STEP 6 EXCESS AMOUNT" means the amount, if any, by which the Actual Aggregate Pension Asset Amount exceeds the aggregate portions of the Actual Aggregate Pension Asset Amount required to be allocated to all the Pension Plans (and their related Trusts) under Sections 3.01(c)(iv)(B)(1), (2), (3), (4) and (5).
"STEP 7 ABO FUNDED PERCENTAGE" means, with respect to each Pension Plan, a fraction, (A) the numerator of which is the fair market value of the assets allocated to such Pension Plan (and the related Trust) under Sections 3.01(c)(iv)(B)(1), (2), (3), (4), (5) and 6, and (B) the denominator of which is (x) in the case of the Rockwell Automation Pension Plan, the Distribution Date ABO for Rockwell Automation Participants, (y) in the case of the Rockwell Science Center Pension Plan, the Distribution Date ABO for Rockwell Science Center Participants, and (z) in the case of the Rockwell Pension Plan, the Distribution Date ABO for all participants covered under the Rockwell Pension Plan (other than Rockwell Automation Participants and Rockwell Science Center Participants), including Rockwell Collins Participants.
"STEP 7 EXCESS AMOUNT" means the amount, if any, by which the Actual Aggregate Pension Asset Amount exceeds the aggregate portions of the Actual Aggregate Pension Asset Amount required to be allocated to all the Pension Plans (and their related Trusts) under Sections 3.01(c)(iv)(B)(1), (2), (3), (4), (5) and (6).
"STEP 8 EXCESS AMOUNT" means the amount, if any, by which the Actual Aggregate Pension Asset Amount exceeds the aggregate portions of the Actual Aggregate Pension Asset amount required to be allocated to all the Pension Plans (and their related Trusts) under Sections 3.01(c)(iv)(B)(1), (2), (3), (4), (5), (6) and (7).
"TRANSFER DATE" means:
(A) if a Dispute Notice is not delivered by Rockwell or Rockwell Collins on or prior to the Dispute Notice Deadline Date, the third business day after the Dispute Notice Deadline Date; or
(B) if a Dispute Notice is delivered by Rockwell or
Rockwell Collins on or prior to the Dispute Notice Deadline Date,
the third business day following (i) the date that Rockwell and
Rockwell Collins agree in writing that the Post-Distribution
Actuarial Valuation delivered on the Delivery Date is final or
(ii) the date the Actuary delivers to Rockwell, Rockwell Collins
and Rockwell Science Center a restated Post-Distribution
Actuarial Valuation properly reflecting any required adjustments
agreed to by Rockwell and Rockwell Collins.
"TRUST" means the Rockwell Group Trust, the Rockwell Automation Group Trust or the Rockwell Science Center Trust.
Section 3.02 Stand-Alone Pension Plan. Effective as of the Time of Distribution, Rockwell Collins will or will cause one or more Rockwell Collins Subsidiaries to assume and adopt sponsorship of the Kaiser Aerospace Retirement Plan, as amended through the Time of Distribution (the "Stand-Alone Pension Plan"), the trust related thereto and all assets and Liabilities related thereto. Effective as of the Time of Distribution, Rockwell Collins hereby assumes, and agrees to fully perform, pay and discharge, and agrees to cause the Stand-Alone Pension Plan and the trust related thereto to assume, and to fully perform, pay and discharge, all accrued benefit and other Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), the Stand-Alone Pension Plan and the trust related thereto under and relating to the Stand-Alone Pension Plan and the trust related thereto with respect to all participants who were covered under the Stand-Alone Pension Plan prior to the Time of Distribution.
Section 3.03 U.S. Non-Qualified Pension Plan.
(a) Establishment and Sponsorship of Non-Qualified Pension Plans and Rabbi Trusts.
(i) Prior to the Time of Distribution, Rockwell will have established (A) a new non-qualified supplemental pension plan (the "Rockwell Automation Non-Qualified Pension Plan"), the purpose of which will be to provide benefits to Rockwell Automation Participants, and the Rockwell Automation Master Rabbi Trust and (B) a new non-qualified supplemental pension plan (the "Rockwell Science Center Non-Qualified Pension Plan"), the purpose of which will be to provide benefits to Rockwell Science Center Participants, and the Rockwell Science Center Master Rabbi Trust. The Rockwell Automation Non-Qualified Pension Plan and the Rockwell Science Center Non-Qualified Pension Plan each will be substantially similar in all material respects to the Rockwell Non-Qualified Pension Plan, and will provide a benefit formula which will be substantially similar in all material respects to the benefit formula that the Rockwell Non-Qualified Pension Plan provided immediately prior to the Time of Distribution. The Rockwell Automation Non-Qualified Pension Plan and the Rockwell Science Center Non-Qualified Pension Plan each will credit each participant thereunder for purposes of eligibility to participate, vesting, benefit accruals and all other plan purposes with all service which had been credited to such participant for such purposes under the Rockwell Non-Qualified Pension Plan immediately prior to the Time of Distribution.
(ii) Prior to the Time of Distribution, Rockwell Collins will have assumed sponsorship of the Rockwell Non-Qualified Pension Plan and the Rockwell Master Rabbi Trust and will have changed the name of the Rockwell Non-Qualified Pension Plan to the Rockwell Collins Non-Qualified Pension Plan and will have changed the name of the Rockwell Master Rabbi Trust to the Rockwell Collins Master Rabbi
Trust. Prior to the Time of Distribution, Rockwell will have assumed sponsorship of the Rockwell Automation Non-Qualified Pension Plan and the Rockwell Automation Master Rabbi Trust. Prior to the Time of Distribution, Rockwell Science Center will have assumed sponsorship of the Rockwell Science Center Non-Qualified Pension Plan and the Rockwell Science Center Master Rabbi Trust.
(b) Assumption of Non-Qualified Pension Plan Liabilities.
(i) Effective as of the Time of Distribution, Rockwell hereby assumes, and agrees to fully perform, pay and discharge, and agrees to cause the Rockwell Automation Non-Qualified Pension Plan and the Rockwell Automation Master Rabbi Trust to assume, and to fully perform, pay and discharge, all accrued benefit and other Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), the Rockwell Non-Qualified Pension Plan and the Rockwell Master Rabbi Trust under and relating to the Rockwell Non-Qualified Pension Plan and the Rockwell Master Rabbi Trust with respect to Rockwell Automation Participants who were covered under the Rockwell Non-Qualified Pension Plan prior to the Time of Distribution.
(ii) Effective as of the Time of Distribution, Rockwell Science Center hereby assumes, and agrees to fully perform, pay and discharge, and agrees to cause the Rockwell Science Center Non-Qualified Pension Plan and the Rockwell Science Center Master Rabbi Trust to assume, and to fully perform, pay and discharge, all accrued benefit and other Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), the Rockwell Non-Qualified Pension Plan and the Rockwell Master Rabbi Trust under and relating to the Rockwell Non-Qualified Pension Plan and the Rockwell Master Rabbi Trust with respect to Rockwell Science Center Participants who were covered under the Rockwell Non-Qualified Pension Plan prior to the Time of Distribution.
(iii) Effective as of the Time of Distribution, Rockwell Collins hereby assumes, and agrees to fully perform, pay and discharge, and agrees to cause the Rockwell Non-Qualified Pension Plan and the Rockwell Master Rabbi Trust to retain, and to fully perform, pay and discharge, all accrued benefit and other Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), the Rockwell Non-Qualified Pension Plan and the Rockwell Master Rabbi Trust under and relating to the Rockwell Non-Qualified Pension Plan and the Rockwell Master Rabbi Trust with respect to all participants who were covered under the Rockwell Non-Qualified Pension Plan prior to the Time of Distribution (other than Rockwell Automation Participants and Rockwell Science Center Participants), including all Rockwell Collins Participants.
Section 3.04 U.K. Pension Plan.
[PROVISIONS RE: UK AND PENSION PLAN TO BE PROVIDED]
Section 3.05 Canadian Pension Plan.
[PROVISIONS RE: CANADIAN PENSION PLAN TO BE PROVIDED]
ARTICLE IV
SAVINGS PLANS
Section 4.01 U.S. Salaried Savings Plan.
(a) As of the Time of Distribution, Rockwell Collins will have established, and will cover the Active Rockwell Collins Employees who participated in the Rockwell Salaried Savings Plan prior to the Time of Distribution under, a defined contribution plan (the "Rockwell Collins Salaried Savings Plan"), which will be qualified under Sections 401(a) and 401(k) of the Code, and will have established a related trust which will be exempt from taxation under Section 501(a) of the Code. As of the Time of Distribution, Rockwell Science Center will have established, and will cover the Active Rockwell Science Center Employees who participated in the Rockwell Salaried Savings Plan prior to the Time of Distribution under, a defined contribution plan (the "Rockwell Science Center Salaried Savings Plan"), which will be qualified under Sections 401(a) and 401(k) of the Code, and will have established a related trust which will be exempt from taxation under Section 501(a) of the Code. Each of the Rockwell Collins Salaried Savings Plan and the Rockwell Science Center Salaried Savings Plan will credit each participating Active Rockwell Collins Employee or Active Rockwell Science Center Employee, as the case may be, for purposes of vesting and eligibility with all service which had been credited to such employee for such purposes under the Rockwell Salaried Savings Plan immediately prior to the Time of Distribution (excluding any such service which was not counted under the Rockwell Salaried Savings Plan by operation of its "break in service" rules).
(b) After the Time of Distribution, each Rockwell Collins Employee will be permitted to transfer his or her account balances from the Rockwell Salaried Savings Plan to the Rockwell Collins Salaried Savings Plan in accordance with the terms of the respective plans and applicable law. After the Time of Distribution, each Rockwell Science Center Employee will be permitted to transfer his or her account balances from the Rockwell Salaried Savings Plan to the Rockwell Science Center Salaried Savings Plan in accordance with the terms of the respective plans and applicable law.
(c) Effective as of the Time of Distribution, each Active Rockwell Collins Employee and each Active Rockwell Science Center Employee who participated in the Rockwell Salaried Savings Plan immediately prior to the Time of Distribution will become fully vested in his or her account balances under the Rockwell Salaried Savings Plan. Effective as of the Time of Distribution, each Active Rockwell Collins Employee and each Active Rockwell Science Center Employee will cease to be eligible to contribute to, or receive contributions in respect of, his or her Rockwell Salaried Savings Plan accounts. None of Rockwell Collins, the Rockwell Collins Subsidiaries, Rockwell Science Center, the Rockwell Science Center Subsidiaries, Affiliates of any of the foregoing, the Rockwell Collins Salaried Savings Plan or the trust thereunder or the Rockwell Science Center Salaried Savings Plan or the trust thereunder will have or acquire any interest in or right to any of the assets of the Rockwell Salaried Savings Plan, and Rockwell will retain full power and authority with respect to the amendment and termination of the Rockwell Salaried Savings Plan and the investment and disposition of assets held in the Rockwell Salaried Savings Plan to the extent permitted by law.
Section 4.02 U.S. Hourly Represented Savings Plan.
(a) As of the Time of Distribution, Rockwell Collins will have established, and will cover the Active Rockwell Collins Employees who participated in the Rockwell Hourly Represented Savings Plan prior to the Time of Distribution under, a defined contribution plan (the "Rockwell Collins Hourly Represented Savings Plan"), which will be qualified under Sections 401(a) and 401(k) of the Code, and will have established a related trust which will be exempt from taxation under Section 501(a) of the Code. The Rockwell Collins Hourly Represented Savings Plan will credit each participating Active Rockwell Collins Employee for purpose of vesting and eligibility with all service which had been credited to such employee for such purposes under the Rockwell Hourly Represented Savings Plan immediately prior to the Time of Distribution (excluding any such service which was not counted under the Rockwell Hourly Represented Savings Plan by operation of its "break in service" rules).
(b) After the Time of Distribution, each Rockwell Collins Employee will be permitted to transfer his or her account balances from the Rockwell Hourly Represented Savings Plan to the Rockwell Collins Hourly Represented Savings Plan in accordance with the terms of the respective plans and applicable law.
(c) Effective as of the Time of Distribution, each Active Rockwell Collins Employee who participated in the Rockwell Hourly Represented Savings Plan immediately prior to the Time of Distribution will become fully vested in his or her account balances under the Rockwell Hourly Represented Savings Plan. Effective as of the Time of Distribution, each Active Rockwell Collins Employee will cease to be eligible to contribute to, or receive contributions in respect of, his or her Rockwell Hourly Represented Savings Plan accounts. None of Rockwell Collins, the Rockwell Collins
Subsidiaries, Affiliates of any of the foregoing or the Rockwell Collins Hourly Represented Savings Plan or the trust thereunder will have or acquire any interest in or right to any of the assets of the Rockwell Hourly Represented Savings Plan, and Rockwell will retain full power and authority with respect to the amendment and termination of the Rockwell Hourly Represented Savings Plan and the investment and disposition of assets held in the Rockwell Hourly Represented Savings Plan to the extent permitted by law.
Section 4.03 U.S. Hourly Non-Represented Savings Plan.
(a) As of the Time of Distribution, Rockwell Collins will have established, and will cover the Active Rockwell Collins Employees who participated in the Rockwell Hourly Non-Represented Savings Plan prior to the Time of Distribution under, a defined contribution plan (the "Rockwell Collins Hourly Non-Represented Savings Plan"), which will be qualified under Sections 401(a) and 401(k) of the Code, and will have established a related trust which will be exempt from taxation under Section 501(a) of the Code. The Rockwell Collins Hourly Non-Represented Savings Plan will credit each participating Active Rockwell Collins Employee for purpose of vesting and eligibility with all service which had been credited to such employee for such purposes under the Rockwell Hourly Non-Represented Savings Plan immediately prior to the Time of Distribution (excluding any such service which was not counted under the Rockwell Hourly Non-Represented Savings Plan by operation of its "break in service" rules).
(b) After the Time of Distribution, each Rockwell Collins Employee will be permitted to transfer his or her account balances from the Rockwell Hourly Non-Represented Savings Plan to the Rockwell Collins Hourly Non-Represented Savings Plan in accordance with the terms of the respective plans and applicable law.
(c) Effective as of the Time of Distribution, each Active Rockwell Collins Employee who participated in the Rockwell Hourly Non-Represented Savings Plan immediately prior to the Time of Distribution will become fully vested in his or her account balances under the Rockwell Hourly Non-Represented Savings Plan. Effective as of the Time of Distribution, each Active Rockwell Collins Employee will cease to be eligible to contribute to, or receive contributions in respect of, his or her Rockwell Hourly Non-Represented Savings Plan accounts. None of Rockwell Collins, the Rockwell Collins Subsidiaries, Affiliates of any of the foregoing or the Rockwell Collins Hourly Non-Represented Savings Plan or the trust thereunder will have or acquire any interest in or right to any of the assets of the Rockwell Hourly Non-Represented Savings Plan, and Rockwell will retain full power and authority with respect to the amendment and termination of the Rockwell Hourly Non-Represented Savings Plan and the investment and disposition of assets held in the Rockwell Hourly Non-Represented Savings Plan to the extent permitted by law.
Section 4.04 Non-Qualified Savings Plans.
(a) Establishment and Sponsorship of Non-Qualified Savings Plans and Rabbi Trusts.
(i) Prior to the Time of Distribution, Rockwell will have established (A) a new non-qualified supplemental savings plan (the "Rockwell Automation Non-Qualified Savings Plan"), the purpose of which will be to provide benefits to Rockwell Automation Participants and (B) a new non-qualified supplemental savings plan (the "Rockwell Science Center Non-Qualified Savings Plan"), the purpose of which will be to provide benefits to Rockwell Science Center Participants. The Rockwell Automation Non-Qualified Savings Plan and the Rockwell Science Center Non-Qualified Savings Plan each will be substantially similar in all material respects to the Rockwell Non-Qualified Savings Plan and will provide a benefit formula which will be substantially similar in all material respects to the benefit formula that the Rockwell Non-Qualified Savings Plan provided immediately prior to the Time of Distribution. The Rockwell Automation Non-Qualified Savings Plan and the Rockwell Science Center Non-Qualified Savings Plan each will credit each participant thereunder for purposes of eligibility to participate, vesting, benefit accruals and all other plan purposes with all service which had been credited to such participant for such purposes under the Rockwell Non-Qualified Savings Plan immediately prior to the Time of Distribution.
(ii) Prior to the Time of Distribution, Rockwell Collins will have assumed sponsorship of the Rockwell Non-Qualified Savings Plan, and will have changed the name of the Rockwell Non-Qualified Savings Plan to the Rockwell Collins Non-Qualified Savings Plan. Prior to the Time of Distribution, Rockwell will have assumed sponsorship of the Rockwell Automation Non-Qualified Savings Plan. Prior to the Time of Distribution, Rockwell Science Center will have assumed sponsorship of the Rockwell Science Center Non-Qualified Savings Plan.
(b) Assumption of Non-Qualified Savings Plan Liabilities.
(i) Effective as of the Time of Distribution, Rockwell hereby assumes, and agrees to fully perform, pay and discharge, and agrees to cause the Rockwell Automation Non-Qualified Pension Plan and the Rockwell Automation Master Rabbi Trust to assume, and to fully perform, pay and discharge, all accrued benefit and other Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), the Rockwell Non-Qualified Savings Plan and the Rockwell Master Rabbi Trust under and relating to the Rockwell Non-Qualified Savings Plan and the Rockwell Master Rabbi Trust with respect to Rockwell Automation Participants who were covered under the Rockwell Non-Qualified Savings Plan prior to the Time of Distribution.
(ii) Effective as of the Time of Distribution, Rockwell Science Center hereby assumes, and agrees to fully perform, pay and discharge, and agrees to cause the Rockwell Science Center Non-Qualified Savings Plan and the Rockwell Science Center Master Rabbi Trust to assume, and to fully perform, pay and discharge, all accrued benefit and other Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), the Rockwell Non-Qualified Savings Plan and the Rockwell Master Rabbi Trust under and relating to the Rockwell Non-Qualified Savings Plan and the Rockwell Master Rabbi Trust with respect to Rockwell Science Center Participants who were covered under the Rockwell Non-Qualified Savings Plan prior to the Time of Distribution.
(iii) Effective as of the Time of Distribution, Rockwell Collins hereby assumes, and agrees to fully perform, pay and discharge, and agrees to cause the Rockwell Non-Qualified Savings Plan and the Rockwell Master Rabbi Trust to retain, and to fully perform, pay and discharge, all accrued benefit and other Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), the Rockwell Non-Qualified Savings Plan and the Rockwell Master Rabbi Trust under and relating to the Rockwell Non-Qualified Savings Plan and the Rockwell Master Rabbi Trust with respect to all participants who were covered under the Rockwell Non-Qualified Savings Plan prior to the Time of Distribution (other than Rockwell Automation Participants and Rockwell Science Center Participants), including all Rockwell Collins Participants.
ARTICLE V
STOCK PLANS
Section 5.01 Stock Plans.
(a) Rockwell will take all action necessary or appropriate so that each Rockwell Option held by a Rockwell Automation Optionee that is outstanding as of the Time of Distribution is adjusted pursuant to the equitable adjustment provisions of the applicable Rockwell Stock Plan under which such Rockwell Option was granted. The number of shares of Rockwell Common Stock subject to such option and the per-share exercise price of such option will be determined as set forth on Schedule 5.01(a). Such adjusted Rockwell Option will otherwise have the same terms and conditions as those in effect prior to the adjustment.
(b) Rockwell and Rockwell Collins will take all action necessary or appropriate so that each Rockwell Option held by a Rockwell Collins Optionee that is outstanding as of the Time of Distribution will be and become a Rockwell Collins Option pursuant to the equitable adjustment provisions of the applicable Rockwell Stock Plan under which such Rockwell Option was granted. The number of shares of Rockwell
Collins Common Stock subject to the Rockwell Collins Option and the per-share exercise price of such Rockwell Collins Option will be determined as set forth on Schedule 5.01(b). Such Rockwell Collins Option will otherwise have substantially the same terms and conditions as the corresponding Rockwell Option being replaced, except that references to Rockwell will be changed to refer to Rockwell Collins and references to any of the Rockwell Stock Plans will be changed to refer to Rockwell Collins' applicable stock option plan.
(c) Rockwell and Rockwell Collins will take all action necessary or appropriate so that each Rockwell Split Option will be adjusted pursuant to the equitable adjustment and other provisions of the applicable Rockwell Stock Plan under which such Rockwell Split Option was granted. The number of shares of Rockwell Common Stock subject to such Rockwell Split Option and the per-share exercise price of such Rockwell Split Option will be determined as set forth on Schedule 5.01(c)(i). Such adjusted Rockwell Split Option will otherwise have the same terms and conditions as those in effect immediately prior to the adjustment. In addition, each Rockwell Split Optionee holding a Rockwell Split Option as of the Time of Distribution will receive a Rockwell Collins Option pursuant to the equitable adjustment and other provisions of the applicable Rockwell Stock Plan under which such Rockwell Split Option was granted. The number of shares of Rockwell Collins Common Stock subject to such Rockwell Collins Option and the per-share exercise price of such Rockwell Collins Option will be determined as set forth on Schedule 5.01(c)(ii). Such Rockwell Collins Option will otherwise have substantially the same terms and conditions as the corresponding Rockwell Split Option being adjusted, except that references to Rockwell will be changed to refer to Rockwell Collins and references to any of the Rockwell Stock Plans will be changed to refer to Rockwell Collins' applicable stock option plan.
ARTICLE VI
OTHER EMPLOYEE PLANS AND MATTERS
Section 6.01 Welfare Plans.
(a) As of the Time of Distribution, Rockwell Collins and the Rockwell Collins Subsidiaries will have established or assumed, and will cover all Rockwell Collins Welfare Participants under, Welfare Plans and other employee welfare benefit and fringe benefit arrangements (collectively, "Rockwell Collins Welfare Plans") that are comparable in the aggregate to the Rockwell Welfare Plans that covered Rockwell Collins Welfare Participants immediately prior to the Time of Distribution. As of the Time of Distribution, Rockwell Science Center and the Rockwell Science Center Subsidiaries will have established or assumed, and will cover Rockwell Science Center Participants under, Welfare Plans and other employee welfare benefit and fringe benefit
arrangements (collectively, "Rockwell Science Center Welfare Plans") that are comparable in the aggregate to the Rockwell Welfare Plans that covered Rockwell Science Center Participants immediately prior to the Time of Distribution.
(b) (i) The Rockwell Collins Welfare Plans will provide for the immediate participation of those Rockwell Collins Welfare Participants who participated in the corresponding Rockwell Welfare Plans immediately prior to the Time of Distribution. Each of the Rockwell Collins Welfare Plans will credit each Rockwell Collins Welfare Participant for all Rockwell Collins Welfare Plan purposes with all service and any other item which had been credited to or otherwise accumulated for the benefit of such participant under the corresponding Rockwell Welfare Benefit Plans immediately prior to the Time of Distribution, including service credited toward any waiting periods and amounts credited toward any medical or health insurance deductible or co-payment. Without limiting the generality of the foregoing, each Rockwell Collins Welfare Plan, to the extent applicable: (A) will recognize all amounts applied to deductibles, co-payments, out-of-pocket maximums and lifetime maximum benefits with respect to Rockwell Collins Welfare Participants under the corresponding Rockwell Welfare Plan for the plan year that includes the Time of Distribution and for prior periods (if applicable); (B) will recognize all service credited to waiting periods with respect to Rockwell Collins Welfare Participants under the corresponding Rockwell Welfare Plan; (C) will not impose any limitations on coverage of pre-existing conditions of Rockwell Collins Welfare Participants, except to the extent such limitations applied to such participants under the corresponding Rockwell Welfare Plan immediately before such Rockwell Collins Welfare Plan became effective; and (D) will not impose any other conditions (such as proof of good health, evidence of insurability or a requirement of a physical examination) upon the participation by Rockwell Collins Welfare Participants who were participating in the corresponding Rockwell Welfare Plan immediately before such Rockwell Collins Welfare Plan became effective.
(ii) The Rockwell Science Center Welfare Plans will provide for the immediate participation of those Rockwell Science Center Participants who participated in the corresponding Rockwell Welfare Plans immediately prior to the Time of Distribution. Each of the Rockwell Science Center Welfare Plans will credit each Rockwell Science Center Participant for all Rockwell Science Center Welfare Plan purposes with all service and any other item which had been credited to or otherwise accumulated for the benefit of such participant under the corresponding Rockwell Welfare Benefit Plans immediately prior to the Time of Distribution, including service credited toward any waiting periods and amounts credited toward any medical or health insurance deductible or co-payment. Without limiting the generality of the foregoing, each Rockwell Science Center Welfare Plan, to the extent applicable: (A) will recognize all amounts applied to deductibles, co-payments, out-of-pocket maximums and lifetime maximum benefits with respect to Rockwell Science Center Participants under the corresponding Rockwell Welfare Plan for the plan year that includes the Time of
Distribution and for prior periods (if applicable); (B) will recognize all service credited to waiting periods with respect to Rockwell Science Center Participants under the corresponding Rockwell Welfare Plan; (C) will not impose any limitations on coverage of pre-existing conditions of Rockwell Science Center Participants, except to the extent such limitations applied to such participants under the corresponding Rockwell Welfare Plan immediately before such Rockwell Science Center Welfare Plan became effective; and (D) will not impose any other conditions (such as proof of good health, evidence of insurability or a requirement of a physical examination) upon the participation by Rockwell Science Center Participants who were participating in the corresponding Rockwell Welfare Plan immediately before such Rockwell Science Center Welfare Plan became effective.
(c) (i) As of the Time of Distribution, Rockwell Collins and the Rockwell Collins Subsidiaries will credit each Active Rockwell Collins Employee with the unused vacation days and personal and sickness days accrued immediately prior to the Distribution in accordance with the vacation and personnel policies and labor agreements of Rockwell and its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) applicable to such employee in effect immediately prior to the Time of Distribution.
(ii) As of the Time of Distribution, Rockwell Science Center and the Rockwell Science Center Subsidiaries will credit each Active Rockwell Science Center Employee with the unused vacation days and personal and sickness days accrued immediately prior to the Distribution in accordance with the vacation and personnel policies of Rockwell and its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) applicable to such employee in effect immediately prior to the Time of Distribution.
(d) (i) From and after the Time of Distribution, except as specifically set forth in this Agreement, Rockwell Collins and the Rockwell Collins Subsidiaries will assume or retain, as the case may be, and will be solely responsible for and will fully perform, pay and discharge, all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) in respect of Rockwell Collins Welfare Participants (and claims by or relating to Rockwell Collins Welfare Participants) with respect to employee welfare and fringe benefits (including medical, dental, life, travel, accident, short- and long-term disability, hospitalization, workers' compensation and other insurance benefits), whether under the Rockwell Welfare Plans, the Rockwell Collins Welfare Plans or otherwise, whether incurred, or arising in connection with incidents occurring, before, at or after the Time of Distribution and whether any claim is made with respect thereto before, at or after the Time of Distribution. Without limiting the generality of the foregoing, from and after the Time of Distribution, Rockwell Collins and the Rockwell Collins Subsidiaries (or where appropriate, the Rockwell Collins Welfare Plans) will assume, will be solely
responsible for and will fully perform, pay and discharge all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) in respect of Rockwell Collins Welfare Participants (and claims by or relating to Rockwell Collins Welfare Participants) with respect to retiree health and welfare benefits and retiree life insurance benefits, whether under the Rockwell Welfare Plans, the Rockwell Collins Welfare Plans or otherwise, whether incurred, or arising in connection with incidents occurring, before, at or after the Time of Distribution and whether any claim is made with respect thereto before, at or after the Time of Distribution.
(ii) From and after the Time of Distribution, except as specifically set forth in this Agreement, Rockwell Science Center and the Rockwell Science Center Subsidiaries will assume or retain, as the case may be, and will be solely responsible for and will fully perform, pay and discharge, all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) in respect of Rockwell Science Center Participants (and claims by or relating to Rockwell Science Center Participants) with respect to employee welfare and fringe benefits (including medical, dental, life, travel, accident, short- and long-term disability, hospitalization, workers' compensation and other insurance benefits), whether under the Rockwell Welfare Plans, the Rockwell Science Center Welfare Plans or otherwise, whether incurred, or arising in connection with incidents occurring, before, at or after the Time of Distribution and whether any claim is made with respect thereto before, at or after the Time of Distribution. Without limiting the generality of the foregoing, from and after the Time of Distribution, Rockwell Science Center and the Rockwell Science Center Subsidiaries (or where appropriate, the Rockwell Science Center Welfare Plans) will assume, will be solely responsible for and will fully perform, pay and discharge all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) in respect of Rockwell Science Center Participants (and claims by or relating to Rockwell Science Center Participants) with respect to retiree health and welfare benefits and retiree life insurance benefits, whether under the Rockwell Welfare Plans, the Rockwell Science Center Welfare Plans or otherwise, whether incurred, or arising in connection with incidents occurring, before, at or after the Time of Distribution and whether any claim is made with respect thereto before, at or after the Time of Distribution.
(iii) From and after the Time of Distribution, except as specifically set forth in this Agreement, Rockwell and the Rockwell Subsidiaries will assume or retain, as the case may be, and will be solely responsible for and will fully perform, pay and discharge, all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) in respect of Rockwell Automation Participants (and claims by or relating to Rockwell Automation Participants) with respect to employee welfare and fringe benefits (including medical,
dental, life, travel, accident, short- and long-term disability, hospitalization, workers' compensation and other insurance benefits), whether under the Rockwell Welfare Plans or otherwise, whether incurred, or arising in connection with incidents occurring, before, at or after the Time of Distribution and whether any claim is made with respect thereto before, at or after the Time of Distribution. Without limiting the generality of the foregoing, from and after the Time of Distribution, Rockwell and the Rockwell Subsidiaries (or where appropriate, the Rockwell Welfare Plans) will assume or retain, as the case may be, will be solely responsible for and will fully perform, pay and discharge all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) in respect of Rockwell Automation Participants (and claims by or relating to Rockwell Automation Participants) with respect to retiree health and welfare benefits and retiree life insurance benefits, whether under the Rockwell Welfare Plans or otherwise, whether incurred, or arising in connection with incidents occurring, before, at or after the Time of Distribution and whether any claim is made with respect thereto before, at or after the Time of Distribution.
Section 6.02 Incentive Compensation Plans.
(a) Effective as of the Time of Distribution, Rockwell will assume or retain, as the case may be, and will be solely responsible for and will fully perform, pay and discharge, all Liabilities (including liability for earned but unpaid incentive payments) of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) for, due to and/or attributable to Rockwell Automation Participants under the Rockwell International Business Unit Long-Term Incentive Plan (the "LTIP"), the Incentive Compensation Plan and all other long-term, annual and other incentive compensation plans and arrangements of Rockwell and its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) in effect at or prior to the Time of Distribution.
(b) Effective as of the Time of Distribution, Rockwell Science Center will assume or retain, as the case may be, and will be solely responsible for and will fully perform, pay and discharge, all Liabilities (including liability for earned but unpaid incentive payments) of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) for, due to and/or attributable to Rockwell Science Center Participants under the LTIP, the Incentive Compensation Plan and all other long-term, annual and other incentive compensation plans and arrangements of Rockwell and its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) in effect at or prior to the Time of Distribution.
(c) Effective as of the Time of Distribution, Rockwell Collins will assume or retain, as the case may be, and will be solely responsible for and will fully perform, pay and discharge, all Liabilities (including liability for earned but unpaid incentive payments) of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) for, due to and/or attributable to Pre-Distribution Group Employees (other than Rockwell Automation Participants and Rockwell Science Center Participants), including all Rockwell Collins Participants, under the LTIP, the Incentive Compensation Plan and all other long-term, annual and other incentive compensation plans and arrangements of Rockwell and its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) in effect at or prior to the Time of Distribution.
Section 6.03 Deferred Compensation Plan.
(a) Establishment and Sponsorship of Deferred Compensation Plans and Rabbi Trusts.
(i) Prior to the Time of Distribution, Rockwell will have established (A) a new deferred compensation plan (the "Rockwell Automation Deferred Compensation Plan"), the purpose of which will be to provide benefits to Rockwell Automation Participants and (B) a new deferred compensation plan (the "Rockwell Science Center Deferred Compensation Plan"), the purpose of which will be to provide benefits to Rockwell Science Center Participants. The Rockwell Automation Deferred Compensation Plan and the Rockwell Science Center Deferred Compensation Plan each will be substantially similar in all material respects to the Rockwell Deferred Compensation Plan, and will provide a benefit formula which will be substantially similar in all material respects to the benefit formula that the Rockwell Deferred Compensation Plan provided immediately prior to the Time of Distribution. The Rockwell Automation Deferred Compensation Plan and the Rockwell Science Center Deferred Compensation Plan each will credit each participant thereunder for purposes of eligibility to participate, vesting, benefit accruals and all other plan purposes with all service which had been credited to such participant for such purposes under the Rockwell Deferred Compensation Plan immediately prior to the Time of Distribution.
(ii) Prior to the Time of Distribution, Rockwell Collins will have assumed sponsorship of the Rockwell Deferred Compensation Plan, and will have changed the name of the Rockwell Deferred Compensation Plan to the Rockwell Collins Deferred Compensation Plan. Prior to the Time of Distribution, Rockwell will have assumed sponsorship of the Rockwell Automation Deferred Compensation Plan. Prior to the Time of Distribution, Rockwell Science Center will have assumed sponsorship of the Rockwell Science Center Deferred Compensation Plan.
(b) Assumption of Deferred Compensation Plan Liabilities.
(i) Effective as of the Time of Distribution, Rockwell hereby assumes, and agrees to fully perform, pay and discharge, and agrees to cause the Rockwell Automation Deferred Compensation Plan and the Rockwell Automation Master Rabbi Trust to assume, and to fully perform, pay and discharge, all accrued benefit and other Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), the Rockwell Deferred Compensation Plan and the Rockwell Master Rabbi Trust under and relating to the Rockwell Deferred Compensation Plan and the Rockwell Master Rabbi Trust with respect to Rockwell Automation Participants who were covered under the Rockwell Deferred Compensation Plan prior to the Time of Distribution.
(ii) Effective as of the Time of Distribution, Rockwell Science Center hereby assumes, and agrees to fully perform, pay and discharge, and agrees to cause the Rockwell Science Center Deferred Compensation Plan and the Rockwell Science Center Master Rabbi Trust to assume, and to fully perform, pay and discharge, all accrued benefit and other Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), the Rockwell Deferred Compensation Plan and the Rockwell Master Rabbi Trust under and relating to the Rockwell Deferred Compensation Plan and the Rockwell Master Rabbi Trust with respect to Rockwell Science Center Participants who were covered under the Rockwell Deferred Compensation Plan prior to the Time of Distribution.
(iii) Effective as of the Time of Distribution, Rockwell Collins hereby assumes, and agrees to fully perform, pay and discharge, and agrees to cause the Rockwell Deferred Compensation Plan and the Rockwell Master Rabbi Trust to retain, and to fully perform, pay and discharge, all accrued benefit and other Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), the Rockwell Deferred Compensation Plan and the Rockwell Master Rabbi Trust under and relating to the Rockwell Deferred Compensation Plan and the Rockwell Master Rabbi Trust with respect to all participants who were covered under the Rockwell Deferred Compensation Plan prior to the Time of Distribution (other than Rockwell Automation Participants and Rockwell Science Center Participants), including all Rockwell Collins Participants.
Section 6.04 Severance Pay.
(a) Rockwell, Rockwell Collins and Rockwell Science Center acknowledge and agree that the transactions contemplated by the Transaction Agreements will not constitute a severance of employment of any Active Rockwell Automation Employee, Active Rockwell Collins Employee or Active Rockwell Science Center Employee prior to or as a result of the transactions contemplated thereby, and that
individuals who, in connection with the Distribution, become Active Rockwell Automation Employees, Active Rockwell Collins Employees or Active Rockwell Science Center Employees pursuant to this Agreement will not be deemed to have experienced a termination, layoff or severance of employment from Rockwell and its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), in each case for purposes of any policy, plan, program or agreement of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) that provides for the payment of severance, salary continuation or similar benefits.
(b) (i) Rockwell and the Rockwell Subsidiaries will assume or retain (as applicable) and be solely responsible for, and will fully perform, pay and discharge, all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) in connection with claims made by or on behalf of Rockwell Automation Participants in respect of severance pay, salary continuation and similar obligations relating to the termination or alleged termination (whether voluntary or involuntary) of any such person's employment, whether such termination or alleged termination occurred before, at or after the Time of Distribution and whether any claim is made with respect thereto before, at or after the Time of Distribution (whether or not such claim is based on any severance policy, agreement, arrangement or program which may exist or arise under any contract, employment agreement or collective bargaining agreement or under any Federal, state, local, provincial or foreign law).
(ii) Rockwell Science Center and the Rockwell Science Center Subsidiaries will assume or retain (as applicable) and be solely responsible for, and will fully perform, pay and discharge, all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) in connection with claims made by or on behalf of Rockwell Science Center Participants in respect of severance pay, salary continuation and similar obligations relating to the termination or alleged termination (whether voluntary or involuntary) of any such person's employment, whether such termination or alleged termination occurred before, at or after the Time of Distribution and whether any claim is made with respect thereto before, at or after the Time of Distribution (whether or not such claim is based on any severance policy, agreement, arrangement or program which may exist or arise under any contract, employment agreement or collective bargaining agreement or under any Federal, state, local, provincial or foreign law).
(iii) Rockwell Collins and the Rockwell Collins Subsidiaries will assume or retain (as applicable) and be solely responsible for, and will fully perform, pay and discharge, all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) in connection with claims made by or on behalf of all Pre-Distribution Group Employees
(other than Rockwell Automation Participants and Rockwell Science Center Participants), including all Rockwell Collins Participants, in respect of severance pay, salary continuation and similar obligations relating to the termination or alleged termination (whether voluntary or involuntary) of any such person's employment, whether such termination or alleged termination occurred before, at or after the Time of Distribution and whether any claim is made with respect thereto before, at or after the Time of Distribution (whether or not such claim is based on any severance policy, agreement, arrangement or program which may exist or arise under any contract, employment agreement or collective bargaining agreement or under any Federal, state, local, provincial or foreign law).
Section 6.05 Employment, Consulting and Other Employee Related Agreements.
(a) Effective as of the Time of Distribution, Rockwell and the Rockwell Subsidiaries will assume or retain (as applicable) and be solely responsible for, and fully perform, pay and discharge, all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) relating to Rockwell Automation Participants under their respective employment, consulting, separation, agreements to arbitrate, and other employee related agreements with any member of the Pre-Distribution Group, as the same are in effect immediately prior to the Time of Distribution.
(b) Effective as of the Time of Distribution, Rockwell Science Center and the Rockwell Science Center Subsidiaries will assume or retain (as applicable) and be solely responsible for, and fully perform, pay and discharge, all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) relating to Rockwell Science Center Participants under their respective employment, consulting, separation, agreements to arbitrate, and other employee related agreements with any member of the Pre-Distribution Group, as the same are in effect immediately prior to the Time of Distribution.
(c) Effective as of the Time of Distribution, Rockwell Collins and the Rockwell Collins Subsidiaries will assume or retain (as applicable) and be solely responsible for, and fully perform, pay and discharge, all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) relating to all Pre-Distribution Group Employees (other than Rockwell Automation Participants and Rockwell Science Center Participants), including all Rockwell Collins Participants, under their respective employment, consulting, separation, agreements to arbitrate, and other employee related agreements with any member of the Pre-Distribution Group, as the same are in effect immediately prior to the Time of Distribution.
Section 6.06 Other Liabilities.
(a) (i) From and after the Time of Distribution, except as specifically set forth in this Agreement, Rockwell and the Rockwell Subsidiaries will assume or retain, as the case may be, and be solely responsible for, and will fully perform, pay and discharge, all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) arising out of or relating to the employment of Rockwell Automation Participants by any member of the Pre-Distribution Group, whether pursuant to benefit plans or otherwise and whether such Liabilities arose before, at or after the Time of Distribution or any claim is made with respect thereto before, at or after the Time of Distribution.
(ii) From and after the Time of Distribution, except as specifically set forth in this Agreement, Rockwell Science Center and the Rockwell Science Center Subsidiaries will assume or retain, as the case may be, and be solely responsible for, and will fully perform, pay and discharge, all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) arising out of or relating to the employment of Rockwell Science Center Participants by any member of the Pre-Distribution Group, whether pursuant to benefit plans or otherwise and whether such Liabilities arose before, at or after the Time of Distribution or any claim is made with respect thereto before, at or after the Time of Distribution.
(iii) From and after the Time of Distribution, except as specifically set forth in this Agreement, Rockwell Collins and the Rockwell Collins Subsidiaries will assume or retain, as the case may be, and be solely responsible for, and will fully perform, pay and discharge, all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) arising out of or relating to the employment of Pre-Distribution Group Employees (other than Rockwell Automation Participants and Rockwell Science Participants), including all Rockwell Collins Participants, by any member of the Pre-Distribution Group, whether pursuant to benefit plans or otherwise and whether such Liabilities arose before, at or after the Time of Distribution or any claim is made with respect thereto before, at or after the Time of Distribution.
Section 6.07 Funding of Master Rabbi Trusts. Prior to the Time of Distribution, each of the Rockwell Master Rabbi Trust, the Rockwell Automation Master Rabbi Trust and the Rockwell Science Center Master Rabbi Trust will have been funded by Rockwell in an amount determined by the Rockwell Board.
ARTICLE VII
MISCELLANEOUS
Section 7.01 Indemnification. All Liabilities retained or assumed by or allocated to Rockwell Collins or any Rockwell Collins Subsidiary pursuant to this Agreement will be deemed to be Rockwell Collins Liabilities (as defined in the Distribution Agreement), all Liabilities retained or assumed by or allocated to Rockwell Science Center or any Rockwell Science Center Subsidiary pursuant to this Agreement will be deemed to be Rockwell Science Center Liabilities (as defined in the Distribution Agreement) and all Liabilities retained or assumed by or allocated to Rockwell or any Rockwell Subsidiary pursuant to this Agreement will be deemed to be Rockwell Automation Liabilities (as defined in the Distribution Agreement), and, in each case, will be subject to the indemnification provisions set forth in Article IV of the Distribution Agreement.
Section 7.02 Cooperation. Rockwell, Rockwell Collins and Rockwell Science Center will cooperate in taking all such action as may be necessary or appropriate to implement the provisions of this Agreement, including making all appropriate filings as may be required under ERISA or the Code, the regulations thereunder and any other applicable laws, exchanging and sharing all appropriate records, amending plan, trust, record keeping and other related documents and implementing all appropriate communications with participants.
Section 7.03 Sharing of Information. Each of Rockwell, Rockwell Collins and Rockwell Science Center will, and will cause each of their respective Subsidiaries to, provide to the other all such Information in its possession as the other may reasonably request to enable the requesting party to administer its employee benefit plans and programs, and to determine the scope of, and fulfill, its obligations under this Agreement. Such Information will, to the extent reasonably practicable, be provided in the format and at the times and places requested, but in no event will the party providing such Information be obligated to incur any out-of-pocket expense not reimbursed by the party making such request, nor to make such Information available outside its normal business hours and premises. Any Information shared or exchanged pursuant to this Agreement will be subject to the same confidentiality requirements set forth in the Distribution Agreement.
Section 7.04 Entire Agreement; Construction. This Agreement, the Distribution Agreement and the other Ancillary Agreements, including any annexes, schedules and exhibits hereto or thereto, and other agreements and documents referred to herein and therein, will together constitute the entire agreement between the parties with respect to the subject matter hereof and thereof and will supersede all prior negotiations, agreements and understandings of the parties of any nature, whether oral or written, with
respect to such subject matter. Notwithstanding any other provisions in this Agreement to the contrary, in the event and to the extent that there is a conflict between the provisions of this Agreement and the provisions of the Distribution Agreement, the provisions of this Agreement will control.
Section 7.05 Survival of Agreements. Except as otherwise contemplated by this Agreement, all covenants and agreements of the parties contained in this Agreement will remain in full force and effect and survive the Time of Distribution.
Section 7.06 Governing Law. This Agreement will be governed by and construed in accordance with the internal laws of the State of New York applicable to contracts made and to be performed entirely within such State, without regard to the conflicts of law principles of such State.
Section 7.07 Notices. All notices, requests, claims, demands and other communications required or permitted to be given hereunder will be in writing and will be delivered by hand or telecopied, e-mailed or sent, postage prepaid, by registered, certified or express mail or reputable overnight courier service and will be deemed given when so delivered by hand or telecopied, when e-mail confirmation is received if delivered by e-mail, or three business days after being so mailed (one business day in the case of express mail or overnight courier service). All such notices, requests, claims, demands and other communications will be addressed as set forth in Section 6.05 of the Distribution Agreement, or pursuant to such other instructions as may be designated in writing by the party to receive such notice.
Section 7.08 Amendments. This Agreement cannot be amended, modified or supplemented except by a written agreement executed by the parties affected thereby.
Section 7.09 Assignment. No party to this Agreement will convey, assign or otherwise transfer any of its rights or obligations under this Agreement without the prior written consent of the other parties in their sole and absolute discretion, except that any party may (without obtaining any consent) assign any of its rights hereunder to a successor to all or any part of its business. Any such conveyance, assignment or transfer requiring the prior written consent of the other parties which is made without such consent will be void ab initio. No assignment of this Agreement will relieve any assigning party of its obligations hereunder.
Section 7.10 Captions; Currency. The article, section and paragraph captions herein and the table of contents hereto are for convenience of reference only, do not constitute part of this Agreement and will not be deemed to limit or otherwise affect any of the provisions hereof. Unless otherwise specified, all references herein to numbered articles or sections are to articles and sections of this Agreement and all references herein to schedules are to schedules to this Agreement. Unless otherwise
specified, all references contained in this Agreement, in any schedule referred to herein or in any instrument or document delivered pursuant hereto to dollars or "$" will mean United States Dollars.
Section 7.11 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, will remain in full force and effect and will in no way be affected, impaired or invalidated thereby. If the economic or legal substance of the transactions contemplated hereby is affected in any manner adverse to any party as a result thereof, the parties will negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the parties.
Section 7.12 Parties in Interest. This Agreement is binding upon
and is for the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement is not made for the benefit of any Person not
a party hereto, and no Person other than the parties hereto or their respective
successors and permitted assigns will acquire or have any benefit, right, remedy
or claim under or by reason of this Agreement. No provision of this Agreement
will be construed (a) to limit the right of Rockwell, any Rockwell Subsidiary,
Rockwell Collins, any Rockwell Collins Subsidiary, Rockwell Science Center or
any Rockwell Science Center Subsidiary to amend or terminate any of their plans;
provided, however, that Rockwell Collins, the Rockwell Collins Subsidiaries,
Rockwell Science Center and the Rockwell Science Center Subsidiaries will be
obligated to maintain employee benefit plans and arrangements until at least
January 1, 2003 which are substantially similar in all material respects to
those which had been maintained or provided by Rockwell or any of its
Subsidiaries (including members of the Rockwell Collins Group and members of the
Rockwell Science Center Group) immediately prior to the Time of Distribution, or
(b) to create any right or entitlement whatsoever in any employee, former
employee or beneficiary including, without limitation, a right to continued
employment or to any benefit under a plan or any other benefit or compensation.
Section 7.13 Schedules. All schedules attached hereto are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Capitalized terms used in the schedules hereto but not otherwise defined therein will have the respective meanings assigned to such terms in this Agreement.
Section 7.14 Termination. This Agreement may be terminated and the Distribution abandoned at any time prior to the Time of Distribution by and in the sole discretion of the Rockwell Board without the approval of Rockwell Collins, Rockwell Science Center or Rockwell's shareowners. In the event of such termination, no party will have any liability of any kind to any other party on account of such termination.
Section 7.15 Waivers; Remedies. No failure or delay on the part of Rockwell, Rockwell Collins or Rockwell Science Center in exercising any right, power or privilege hereunder will operate as a waiver thereof, nor will any waiver on the part of Rockwell, Rockwell Collins or Rockwell Science Center of any right, power or privilege hereunder operate as a waiver of any other right, power or privilege hereunder, nor will any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. The rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies which the parties may otherwise have at law or in equity.
Section 7.16 Counterparts. This Agreement may be executed in separate counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts will together constitute the same agreement.
Section 7.17 Performance. Each party will cause to be performed and hereby guarantees the performance of all actions, agreements and obligations set forth herein to be performed by any Subsidiary or Affiliate of such party.
Section 7.18 Interpretation. Any reference to any Federal, state, local, provincial or foreign law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. For the purposes of this Agreement, (i) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires, (ii) the terms "hereof", "herein", and "herewith" and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement, (iii) the word "including" and words of similar import when used in this Agreement shall mean "including, without limitation" and (iv) all references to any plan shall be deemed to include any amendments thereto.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officers of the parties as of the date first hereinabove written.
ROCKWELL INTERNATIONAL CORPORATION
Title:
NEW ROCKWELL COLLINS, INC.
Title:
ROCKWELL SCIENTIFIC COMPANY LLC
Title:
Exhibit 10.6
[5/30/01]
FORM OF
TAX ALLOCATION AGREEMENT
by and between
ROCKWELL INTERNATIONAL CORPORATION
and
NEW ROCKWELL COLLINS, INC.
June __, 2001
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS......................................... 1
1.01 General........................................... 1
1.02 Schedules, etc.................................... 8
ARTICLE II FILING OF TAX RETURNS; PAYMENT OF TAXES; REFUNDS.... 8
2.01 Preparation of Tax Returns........................ 8
2.02 Payment of Taxes.................................. 11
2.03 Tax Refunds and Carrybacks........................ 14
2.04 Allocation of Straddle Period Taxes............... 15
2.05 Schedule of Foreign Income Tax Returns and
Payments........................................ 16
ARTICLE III TAX INDEMNIFICATION; TAX CONTESTS................... 16
3.01 Indemnification................................... 16
3.02 Rockwell Collins Tax Acts......................... 18
3.03 Notice of Indemnity............................... 19
3.04 Payments.......................................... 20
3.05 Tax Contests...................................... 22
ARTICLE IV OPTIONS; COMPENSATION PAYMENTS; INTEREST CHARGE FOR
LATE PAYMENTS; CURRENCY CALCULATIONS; EFFECTIVE
TIME OF TRANSACTIONS............................... 23
4.01 Stock Options..................................... 23
4.02 Compensation Payments............................. 25
4.03 Change in Law..................................... 26
4.04 Interest Charge for Late Payments................. 26
4.05 Currency Calculations............................. 26
4.06 Effective Time of Transactions.................... 26
ARTICLE V COOPERATION AND EXCHANGE OF INFORMATION............. 27
5.01 Inconsistent Actions.............................. 27
5.02 Ruling Request.................................... 27
5.03 Cooperation and Exchange of Information........... 27
5.04 Tax Records....................................... 28
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ARTICLE VI MISCELLANEOUS....................................... 28
6.01 Entire Agreement; Construction.................... 28
6.02 Effectiveness..................................... 29
6.03 Survival of Agreements............................ 29
6.04 Governing Law..................................... 29
6.05 Notices........................................... 29
6.06 Consent to Jurisdiction............................ 31
6.07 Amendments........................................ 31
6.08 Successors and Assigns............................ 31
6.09 Captions; Currency................................ 32
6.10 Severability...................................... 32
6.11 No Third Party Beneficiaries...................... 32
6.12 Schedules......................................... 32
6.13 Termination....................................... 33
6.14 Waivers; Remedies................................. 33
6.15 Counterparts...................................... 33
6.16 Performance....................................... 33
6.17 Interpretation.................................... 33
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SCHEDULE 2.01(c) FOREIGN INCOME TAX RETURNS TO BE FILED BY ROCKWELL
COLLINS
SCHEDULE 2.01(g) TAX RETURNS TO BE FILED BY NON-RESPONSIBLE PARTY
SCHEDULE 2.03(c) CLAIMS FOR REFUND OF TAXES
SCHEDULE 3.01(a) PRE-DISTRIBUTION TAX-FREE TRANSACTIONS
SCHEDULE 3.01(b)(v) FOREIGN TRANSACTIONS FOR WHICH ROCKWELL COLLINS IS LIABLE
SCHEDULE 3.02(a) ROCKWELL COLLINS TAX ACT
SCHEDULE 3.02(b) ROCKWELL COLLINS TAX REPRESENTATION LETTER
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TAX ALLOCATION AGREEMENT
TAX ALLOCATION AGREEMENT (this "AGREEMENT") dated as of June __, 2001, by and between ROCKWELL INTERNATIONAL CORPORATION, a Delaware corporation ("ROCKWELL"), and NEW ROCKWELL COLLINS, INC., a Delaware corporation and, as of the date hereof, a wholly-owned subsidiary of Rockwell ("ROCKWELL COLLINS").
W I T N E S S E T H :
WHEREAS, the Rockwell Board (as hereinafter defined) has determined that it is appropriate and desirable to distribute all outstanding shares of Rockwell Collins Common Stock (as hereinafter defined) on a pro rata basis to the holders of Rockwell Common Stock (as hereinafter defined);
WHEREAS, the Rockwell Board has determined that it is appropriate and desirable to effectuate the Distribution (as hereinafter defined) in a transaction that will qualify under Section 368(a)(1)(D) of the Code (as hereinafter defined) as a tax-free reorganization; and
WHEREAS, Rockwell and Rockwell Collins wish to provide for and agree upon the allocation between the Rockwell Tax Group (as hereinafter defined) and the Rockwell Collins Tax Group (as hereinafter defined) of all responsibilities, liabilities and benefits relating to or affecting Taxes (as hereinafter defined) paid or payable by either of them for all taxable periods, whether beginning before, on or after the Distribution Date (as hereinafter defined).
NOW, THEREFORE, in consideration of the premises and of the respective agreements and covenants contained in this Agreement, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.01 GENERAL. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):
"ACTUALLY REALIZED" shall mean, for purposes of determining the timing of any Taxes (or related Tax cost or benefit) relating to any payment, transaction, occurrence or event, the time at which the amount of Taxes (including estimated Taxes) payable by any person is increased above or reduced below, as the case may be, the amount of Taxes that such person would be required to pay but for the payment, transaction, occurrence or event.
"AUTOMOTIVE DISTRIBUTION" shall mean the distribution of the Meritor Automotive, Inc. common stock on a pro rata basis to holders of Rockwell Common Stock on September 30, 1997 pursuant to the Distribution Agreement by and between Rockwell and Meritor Automotive, Inc. dated September 30, 1997.
"AUTOMOTIVE RULING REQUEST" shall mean the private letter ruling request dated March 17, 1997 filed by Rockwell with the IRS (as modified or supplemented by any materials submitted to the IRS), seeking rulings that, inter alia, the Automotive Distribution qualified for U.S. federal Income Tax purposes as a tax-free reorganization under Section 368(a)(1)(D) of the Code.
"AUTOMOTIVE TRANSACTION AGREEMENTS" shall have the meaning ascribed thereto in the Distribution Agreement by and between Rockwell and Meritor Automotive, Inc. dated September 30, 1997.
"BOEING" shall mean The Boeing Company, a Delaware corporation.
"BOEING TAX GROUP" shall mean Boeing and its affiliates.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, or any successor legislation.
"COMPENSATION PAYMENTS" shall mean all non-qualified employee benefit plan and welfare benefit plan payments made by any member of the Rockwell Collins Tax Group under the Employee Matters Agreement dated as of June __, 2001 by and between Rockwell and Rockwell Collins.
"CONEXANT" shall mean Conexant Systems, Inc., a Delaware corporation.
"DISTRIBUTION" shall mean the distribution of the Rockwell Collins Common Stock on a pro rata basis to holders of Rockwell Common Stock on the Distribution Date pursuant to the Distribution Agreement.
"DISTRIBUTION AGREEMENT" shall mean the Distribution Agreement dated as of June __, 2001 by and among Rockwell, Rockwell Collins and Rockwell Scientific Company, LLC.
"DISTRIBUTION DATE" shall mean the date on which the Distribution occurs (or, if different, the date on which the Distribution is deemed to occur for U.S. federal Income Tax purposes). For purposes of this Agreement, the Distribution shall be deemed effective as of the end of the day on the Distribution Date.
"DISTRIBUTION TRANSACTION" shall mean any transaction undertaken in connection with the Distribution and described in the Ruling Request.
"FOREIGN INCOME TAX" shall mean any Income Tax other than a U.S. federal, state or local Income Tax.
"FOREIGN INCOME TAX RETURNS" shall mean any Income Tax Return which is not a U.S. federal, state or local Income Tax Return.
"INCOME TAX" shall mean (a) any Tax based upon, measured by, or calculated with respect to (i) net income or profits (including, but not limited to, any capital gains, minimum Tax and any Tax on items of Tax preference, but not including sales, use, real or personal property, gross or net receipts, transfer or similar Taxes) or (ii) multiple bases (including, but not limited to, corporate franchise, doing business or occupation Taxes) if one or more of the bases upon which such Tax may be based, measured by, or calculated with respect to, is described in clause (i) above, or (b) any U.S. state or local franchise Tax; including in the case of each of (a) and (b) any related interest and any penalties, additions to such Tax or additional amounts imposed with respect thereto by any Tax Authority.
"INCOME TAX BENEFIT" shall mean for any taxable period the excess of
(i) the hypothetical Income Tax liability of the taxpayer for the taxable period
calculated as if the Timing Difference or Reverse Timing Difference, as the case
may be, had not occurred but with all other facts unchanged, over (ii) the
actual Income Tax liability of the taxpayer for the taxable period, calculated
taking into account the Timing Difference or Reverse Timing Difference, as the
case may be (treating an Income Tax refund or credit as a negative Income Tax
liability for purposes of such calculation).
"INCOME TAX DETRIMENT" shall mean for any taxable period the excess of (i) the actual Income Tax liability of the taxpayer for the taxable period, calculated taking into account the Timing Difference or Reverse Timing Difference, as the case may be, over (ii) the hypothetical Income Tax liability of the taxpayer for the taxable
period, calculated as if the Timing Difference or Reverse Timing Difference, as the case may be, had not occurred but with all other facts unchanged (treating an Income Tax refund or credit as a negative Income Tax liability for purposes of such calculation).
"INCOME TAX RETURN" shall mean any Tax Return that relates to Income Taxes.
"INDEMNITEE" shall have the meaning set forth in Section 3.03.
"INDEMNITOR" shall have the meaning set forth in Section 3.03.
"INDEMNITY ISSUE" shall have the meaning set forth in Section 3.03.
"INTRAGROUP TRANSACTION" shall mean any transfer of intellectual property between members of the Rockwell Tax Group, members of the Rockwell Collins Tax Group or between a member of the Rockwell Tax Group and a member of the Rockwell Collins Tax Group which occurs on or before the Distribution Date.
"IRS" shall mean the Internal Revenue Service.
"KAISER TAX GROUP" shall mean for any taxable period (or portion thereof) ending on or before December 1, 2000 (i) K Systems, Inc., a California corporation, and (ii) any corporation or legal entity which K Systems, Inc. directly or indirectly owned on or before December 1, 2000.
"OLD ROCKWELL" shall mean the corporation, formerly named Rockwell International Corporation, which owned all of the Rockwell Common Stock prior to the distribution of the Rockwell Common Stock to the shareholders of such corporation on December 6, 1996.
"PRE-DISTRIBUTION TAXABLE PERIOD" shall mean a taxable period ending on or before the Distribution Date.
"POST-DISTRIBUTION TAX ACT" shall have the meaning set forth in
Section 3.01(a).
"POST-DISTRIBUTION TAXABLE PERIOD" shall mean a taxable period beginning after the Distribution Date.
"POST-TAX INDEMNIFICATION PERIOD" shall mean any Post-Distribution Taxable Period and that portion of any Straddle Period that begins on the day after the Distribution Date.
"REVERSE TIMING DIFFERENCE" shall mean an increase in income, gain or recapture, or a decrease in deduction, loss or credit, as calculated for Income Tax purposes, of the taxpayer for the Tax Indemnification Period coupled with an increase in deduction, loss or credit, or a decrease in income, gain or recapture, of the taxpayer for any Post-Tax Indemnification Period.
"RIGHTS" shall have the meaning ascribed thereto in the Distribution Agreement.
"ROCKWELL" shall have the meaning ascribed thereto in the preamble.
"ROCKWELL BOARD" shall mean the Board of Directors of Rockwell or a duly authorized committee thereof.
"ROCKWELL COLLINS" shall have the meaning ascribed thereto in the preamble.
"ROCKWELL COLLINS COMMON STOCK" shall mean, collectively, the Common Stock, par value $1 per share, of Rockwell Collins and the related Rights.
"ROCKWELL COLLINS COMMON STOCK OPTIONS" shall mean options to acquire Rockwell Collins Common Stock.
"ROCKWELL COLLINS GROUP EMPLOYEES AND FORMER EMPLOYEES" shall mean individuals (i) who are employees of any member of the Rockwell Collins Tax Group on the date of the event giving rise to a deduction in respect of any Compensation Payments made to such individuals or Stock Options held by such individuals, (ii) who were employees of any member of the Rockwell Collins Tax Group and were not thereafter employees of any member of the Rockwell Tax Group, or (iii) who were employees of Old Rockwell and its affiliates who were engaged in the Rockwell Collins business and who retired on or before December 6, 1996 and were not thereafter employees of any member of the Rockwell Tax Group.
"ROCKWELL COLLINS TAX ACT" shall have the meaning set forth in
Section 3.02(a).
"ROCKWELL COLLINS TAX GROUP" shall mean (i) Rockwell Collins and
(ii) any corporation or other legal entity which Rockwell Collins directly or
indirectly owns immediately following the Distribution other than (A) any member
of the Kaiser Tax Group or its business, assets or activities for any taxable
period (or portion thereof) ending on or before December 1, 2000 or (B) Rockwell
Scientific
Company, LLC or any corporation or other legal entity which Rockwell Scientific Company, LLC directly or indirectly owns immediately following the Distribution.
"ROCKWELL COLLINS TAX REPRESENTATION LETTER" shall mean the letter delivered by Rockwell Collins to Rockwell on the Distribution Date, substantially in the form set forth in Schedule 3.02(b) attached hereto.
"ROCKWELL COMMON STOCK" shall mean the Common Stock, par value $1.00 per share, of Rockwell.
"ROCKWELL COMMON STOCK OPTIONS" shall mean options to acquire Rockwell Common Stock.
"ROCKWELL TAX GROUP" shall mean (i) Rockwell, (ii) any corporation or other legal entity which Rockwell directly or indirectly owns immediately following the Distribution (but with respect to Rockwell Scientific Company, LLC, only for any taxable period (or portion thereof) ending on or before the Distribution Date), (iii) any other corporation or other legal entity which Rockwell or Old Rockwell directly or indirectly owned at any time prior to the Distribution (but only with respect to the period such corporation or other entity was so owned by Rockwell or Old Rockwell) other than a member of the Rockwell Collins Tax Group or the Kaiser Tax Group, and (iv) solely for purposes of this Agreement and not for purposes of any other Transaction Agreement, for any taxable period up to or including December 6, 1996, Old Rockwell and any other corporation or legal entity owned by Old Rockwell other than a member of the Rockwell Collins Tax Group.
"RULING" shall mean the private letter ruling issued by the IRS in reply to the Ruling Request including any amendment or supplement thereto.
"RULING REQUEST" shall mean the private letter ruling request dated January 12, 2001 filed by Rockwell with the IRS (as modified or supplemented by any materials submitted to the IRS), seeking rulings that, inter alia, the Distribution will qualify for U.S. federal Income Tax purposes as a tax-free reorganization under Section 368(a)(1)(D) of the Code.
"SEMICONDUCTOR DISTRIBUTION" shall mean the distribution of the Conexant common stock on a pro rata basis to holders of Rockwell Common Stock on December 31, 1998 pursuant to the Distribution Agreement by and between Rockwell and Conexant dated December 31, 1998.
"SEMICONDUCTOR RULING REQUEST" shall mean the private letter ruling request dated June 29, 1998 filed by Rockwell with the IRS (as modified or
supplemented by any materials submitted to the IRS), seeking rulings that, inter alia, the Semiconductor Distribution qualified for U.S. federal Income Tax purposes as a tax-free reorganization under Section 368(a)(1)(D) of the Code.
"SEMICONDUCTOR TRANSACTION AGREEMENTS" shall have the meaning ascribed to the phrase "Transaction Agreements" in the Distribution Agreement by and between Rockwell and Conexant dated December 31, 1998.
"STOCK OPTIONS" shall mean Rockwell Collins Common Stock Options or Rockwell Common Stock Options.
"STRADDLE PERIOD" shall mean a taxable period that includes but does not end on the Distribution Date.
"TAX" and "TAXES" shall mean all forms of taxation, whenever created or imposed, and whether of the United States or elsewhere, and whether imposed by a federal, state, municipal, governmental, territorial, local, foreign or other body, and without limiting the generality of the foregoing, shall include net income, gross income, gross receipts, sales, use, value added, ad valorem, transfer, recording, franchise, profits, license, lease, service, service use, payroll, wage, withholding, employment, unemployment insurance, workers compensation, social security, excise, severance, stamp, business license, business organization, occupation, premium, property, environmental, windfall profits, customs, duties, alternative minimum, estimated or other taxes, fees, premiums, assessments or charges of any kind whatever imposed or collected by any governmental entity or political subdivision thereof, together with any related interest and any penalties, additions to such tax or additional amounts imposed with respect thereto by any Tax Authority.
"TAX AUTHORITY" shall mean, with respect to any Tax, any governmental entity, quasi-governmental body or political subdivision thereof that imposes such Tax and the agency (if any) charged with the determination or collection of such Tax for such entity, body or subdivision.
"TAX GROUP" shall mean the Rockwell Tax Group or the Rockwell Collins Tax Group, as the case may be.
"TAX INDEMNIFICATION PERIOD" shall mean any Pre-Distribution Taxable Period and that portion of any Straddle Period that ends on the Distribution Date.
"TAX RETURN" shall mean any return, filing, questionnaire, information return, election or other document required or permitted to be filed, including requests
for extensions of time, filings made with respect to estimated tax payments, claims for refund and amended returns that may be filed, for any period with any Tax Authority (whether domestic or foreign) in connection with any Tax (whether or not a payment is required to be made with respect to such filing).
"TIMING DIFFERENCE" means an increase in income, gain or recapture, or a decrease in deduction, loss or credit, as calculated for Income Tax purposes, of the taxpayer for any Post-Tax Indemnification Period coupled with an increase in deduction, loss or credit, or a decrease in income, gain or recapture, of the taxpayer for the Tax Indemnification Period.
"TRANSACTION AGREEMENTS" shall have the meaning ascribed thereto in the Distribution Agreement.
Any capitalized term not otherwise defined in this Agreement shall have the meaning ascribed to it in the Distribution Agreement.
1.02 SCHEDULES, ETC. References to a "SCHEDULE" are, unless otherwise specified, to the Schedule attached to this Agreement; references to "SECTION" or "ARTICLE" are, unless otherwise specified, to one of the Sections or Articles of this Agreement; references to "SUB-SECTION" are, unless the context otherwise requires, references to the section in which the reference appears; and references to this Agreement include the Schedules.
ARTICLE II
FILING OF TAX RETURNS; PAYMENT OF TAXES; REFUNDS
2.01 PREPARATION OF TAX RETURNS.
(a) UNITED STATES FEDERAL INCOME TAX RETURNS. (i) Rockwell shall prepare and file or cause to be prepared and filed all U.S. federal Income Tax Returns (including amendments thereto) which include a member of the Rockwell Tax Group which are required to be filed for any Pre-Distribution Taxable Period or Straddle Period. Rockwell Collins hereby irrevocably designates, and agrees to cause each of its affiliates to so designate, Rockwell as its agent to take any and all actions necessary or incidental to the preparation and filing of such U.S. federal Income Tax Returns.
(ii) Rockwell Collins shall prepare and file or cause to be prepared and filed all U.S. federal Income Tax Returns (including amendments thereto) which
include a member of the Kaiser Tax Group but which do not include a member of the Rockwell Tax Group and which are required to be filed for any Pre-Distribution Taxable Period.
(b) UNITED STATES STATE AND LOCAL INCOME TAX RETURNS. (i) Rockwell shall prepare and file or cause to be prepared and filed all U.S. state and local Income Tax Returns (including amendments thereto) (A) which are required to be filed for any Pre-Distribution Taxable Period which include a member of the Rockwell Tax Group or a member of the Rockwell Collins Tax Group and (B) which are required to be filed for any Straddle Period which (I) relate to a member or members of the Rockwell Tax Group or their respective businesses, assets or activities, (II) relate to members of each of the Rockwell Tax Group and the Rockwell Collins Tax Group or their respective businesses, assets or activities, or (III) relate to a member of the Rockwell Collins Tax Group for a period in which such member conducts or has conducted both a Rockwell Collins business and a non-Rockwell Collins business. Rockwell Collins hereby irrevocably designates, and agrees to cause each of its affiliates to so designate, Rockwell as its agent to take any and all actions necessary or incidental to the preparation and filing of such U.S. state and local Income Tax Returns.
(ii) All U.S. state and local Income Tax Returns (including amendments thereto) which relate to a member of the Rockwell Collins Tax Group or the Kaiser Tax Group or their respective businesses, assets or activities for all Pre-Distribution Taxable Periods or Straddle Periods which are not the responsibility of the Rockwell Tax Group shall be the responsibility of the Rockwell Collins Tax Group.
(c) FOREIGN INCOME TAX RETURNS. (i) Rockwell Collins shall prepare and file or cause to be prepared and filed all Foreign Income Tax Returns which are required to be filed for any Pre-Distribution Taxable Period or any Straddle Period which relate to the entities set forth on Schedule 2.01(c) attached hereto. Rockwell hereby irrevocably designates, and agrees to cause each of its affiliates to so designate, Rockwell Collins as its agent to take any and all actions necessary or incidental to the preparation and filing of such Foreign Income Tax Returns.
(ii) Rockwell shall prepare and file or cause to be prepared and filed all Foreign Income Tax Returns (including amendments thereto) which include a member of the Rockwell Tax Group or the Rockwell Collins Tax Group which are required to be filed for any Pre-Distribution Taxable Period or any Straddle Period other than those which relate to the entities set forth on Schedule 2.01(c) attached hereto. Rockwell Collins hereby irrevocably designates, and agrees to cause each of its affiliates to so designate, Rockwell as its agent to take any and all actions
necessary or incidental to the preparation and filing of such Foreign Income Tax Returns.
(d) NON-INCOME TAX RETURNS. (i) All Tax Returns (including amendments thereto) which are not Income Tax Returns for all Pre-Distribution Taxable Periods and all Straddle Periods shall be the responsibility of the Rockwell Tax Group if such Tax Returns (A) relate to a member or members of the Rockwell Tax Group or their respective businesses, assets or activities, (B) relate to members of each of the Rockwell Tax Group and the Rockwell Collins Tax Group or their respective businesses, assets or activities, or (C) relate to a member of the Rockwell Collins Tax Group for a period in which such member conducts or has conducted both a Rockwell Collins business and a non-Rockwell Collins business. Rockwell Collins hereby irrevocably designates, and agrees to cause each of its affiliates to so designate, Rockwell as its agent to take any and all actions necessary or incidental to the preparation and filing of such Tax Returns.
(ii) All Tax Returns (including amendments thereto) which are not Income Tax Returns which relate to a member of the Rockwell Collins Tax Group or the Kaiser Tax Group or their respective businesses, assets or activities for all Pre-Distribution Taxable Periods and Straddle Periods which are not the responsibility of the Rockwell Tax Group shall be the responsibility of the Rockwell Collins Tax Group.
(e) POST-DISTRIBUTION DATE TAX RETURNS. All Tax Returns (including amendments thereto) for all Post-Distribution Taxable Periods shall be the responsibility of the Rockwell Tax Group if such Tax Returns relate to a member or members of the Rockwell Tax Group or their respective businesses, assets or activities, and shall be the responsibility of the Rockwell Collins Tax Group if such Tax Returns relate to a member or members of the Rockwell Collins Tax Group or their respective businesses, assets or activities.
(f) CONSISTENT WITH PAST PRACTICE; REVIEW BY NON-RESPONSIBLE PARTY. Unless Rockwell and Rockwell Collins otherwise agree in writing, all Tax Returns (including amendments thereto) described in this Section 2.01 filed after the date of this Agreement for Pre-Distribution Taxable Periods or Straddle Periods, in the absence of a controlling change in law or circumstances, shall be prepared on a basis consistent with the elections, accounting methods, conventions and principles of taxation used for the most recent taxable periods for which Tax Returns involving similar matters have been filed. Upon the request of the non-responsible party, the party responsible under this Section 2.01 for preparation of a particular Tax Return for Pre-Distribution Taxable Periods or Straddle Periods shall make available a draft of such Tax Return (or relevant portions thereof) for review and comment by such
non-responsible party. Subject to the provisions of this Agreement, all decisions relating to the preparation of Tax Returns shall be made in the sole discretion of the party responsible under this Agreement for such preparation.
(g) RESPONSIBILITY FOR FILING. Although, pursuant to this Agreement, Rockwell or Rockwell Collins may be responsible for filing a particular Tax Return, Rockwell and Rockwell Collins have agreed that the actual preparation and filing of certain Tax Returns will be done by the non-responsible party. Schedule 2.01(g) attached hereto sets forth a schedule specifying such Tax Returns. Rockwell and Rockwell Collins may agree from time to time to additions to or deletions from Schedule 2.01(g).
2.02 PAYMENT OF TAXES.
(a) UNITED STATES FEDERAL INCOME TAXES. Except as otherwise provided in this Agreement:
(i) Rockwell shall pay or cause to be paid, on a timely basis, all Taxes due with respect to the consolidated U.S. federal Income Tax liability (A) for all Pre-Distribution Taxable Periods of all members of the Rockwell Tax Group or the Rockwell Collins Tax Group and (B) for the Straddle Period Tax Return which includes members of the Rockwell Tax Group or the Rockwell Collins Tax Group; and
(ii) Rockwell Collins shall pay or cause to be paid, on a timely basis, all Taxes due with respect to the U.S. federal Income Tax liability of all members of the Kaiser Tax Group for all taxable periods (or portions thereof) ending on or before December 1, 2000.
(b) UNITED STATES STATE AND LOCAL INCOME TAXES. Except as otherwise provided in this Agreement:
(i) Rockwell shall pay or cause to be paid, on a timely basis, all
Taxes due with respect to the U.S. state and local Income Tax liability (A) for
all Pre-Distribution Taxable Periods of all members of the Rockwell Tax Group or
the Rockwell Collins Tax Group and (B) for all Straddle Periods which relate to
(I) a member or members of the Rockwell Tax Group or their respective
businesses, assets or activities, (II) members of each of the Rockwell Tax
Group, on the one hand, and the Rockwell Collins Tax Group, on the other, or
their respective businesses, assets or activities, or (III) a member of the
Rockwell Collins Tax Group for a period in which such member conducts or has
conducted both a Rockwell Collins business and a non-Rockwell Collins business,
provided, however, that Rockwell Collins, on behalf of
the Rockwell Collins Tax Group, hereby assumes and agrees to pay directly to or at the direction of Rockwell, at least two days prior to the date payment (including estimated payment) thereof is due, the portion of such U.S. state and local Income Taxes for that portion of any Straddle Period which begins on the day after the Distribution Date which relates to a member of the Rockwell Collins Tax Group or its business, assets or activities; and
(ii) Rockwell Collins shall pay or cause to be paid, on a timely basis, all U.S. state and local Income Taxes (A) for all Straddle Periods which relate to a member or members of the Rockwell Collins Tax Group, their businesses, assets or activities which are not the responsibility of the Rockwell Tax Group other than any U.S. state and local Income Taxes imposed in connection with the transactions contemplated by the Transaction Agreements or any other agreement entered into for the purpose of implementing the Distribution, and (B) for all taxable periods (or portions thereof) ending on or before December 1, 2000 which relate to a member or members of the Kaiser Tax Group .
(c) FOREIGN INCOME TAXES. Except as otherwise provided in this Agreement:
(i) Rockwell Collins shall pay or cause to be paid, on a timely basis, all Foreign Income Taxes due with respect to the Foreign Income Tax liability for all Pre-Distribution Taxable Periods and all Straddle Periods which relate to the entities set forth on Schedule 2.01(c) attached hereto; and
(ii) Except as provided in Section 2.02(c)(i) above, Rockwell shall pay or cause to be paid, on a timely basis, all Foreign Income Taxes due with respect to the Foreign Income Tax liability of all members of the Rockwell Collins Tax Group or Rockwell Tax Group for all Pre-Distribution Taxable Periods and Straddle Periods, provided, however, that Rockwell Collins, on behalf of the Rockwell Collins Tax Group, hereby assumes and agrees to pay directly to or at the direction of Rockwell, at least two days prior to the date payment (including estimated payment) thereof is due the portion of such Foreign Income Taxes for that portion of any Straddle Period which begins on the day after the Distribution Date which relates to a member of the Rockwell Collins Tax Group or its business, assets or activities.
(d) NON-INCOME TAXES. Except as otherwise provided in this Agreement:
(i) Rockwell shall pay or cause to be paid, on a timely basis, all Taxes due with respect to the non-Income Tax liability for all Pre-Distribution Taxable Periods and Straddle Periods which relate to (A) a member or members of the
Rockwell Tax Group or their respective businesses, assets or activities, (B) members of each of the Rockwell Tax Group, on the one hand, and the Rockwell Collins Tax Group, on the other, or their respective businesses, assets or activities, or (C) a member of the Rockwell Collins Tax Group for a period in which such member conducts or has conducted both a Rockwell Collins business and a non-Rockwell Collins business, provided, however, that Rockwell Collins, on behalf of the Rockwell Collins Tax Group, hereby assumes and agrees to pay directly to or at the direction of Rockwell, at least two days prior to the date payment (including estimated payment) thereof is due the portion of such non-Income Taxes which relates to a member of the Rockwell Collins Tax Group or the Rockwell Collins business, assets or activities for such Pre-Distribution Taxable Periods and Straddle Periods other than any such non-Income Taxes resulting from any Distribution Transaction or Intragroup Transaction; and
(ii) Rockwell Collins shall pay or cause to be paid, on a timely basis, all non-Income Taxes for all Pre-Distribution Taxable Periods and Straddle Periods which relate to the Rockwell Collins Tax Group or the Kaiser Tax Group business, assets or activities which are not the responsibility of the Rockwell Tax Group other than any non-Income Taxes imposed in connection with any Intragroup Transaction or the transactions contemplated by the Transaction Agreements or any other agreement entered into for the purpose of implementing the Distribution.
(e) POST-DISTRIBUTION DATE TAXES. Except as otherwise provided in this Agreement, all Taxes for all Post-Distribution Taxable Periods shall be paid or caused to be paid by the party responsible under this Agreement for filing the Tax Return pursuant to which such Taxes are due or, if no such Tax Returns are due, by the party liable for such Taxes.
(f) CREDIT FOR PRIOR TAX PAYMENTS. To the extent any member of a Tax Group has made a payment of Taxes (including estimated Taxes) on or before the Distribution Date, the party liable for paying such Taxes under this Agreement shall be entitled to treat the payment as having been paid or caused to have been paid by such party, and such party shall not be required to reimburse the party which actually paid such Taxes.
(g) RESPONSIBILITY FOR PAYMENT; NOTICE OF PAYMENT DUE. Although Rockwell or Rockwell Collins may be responsible for paying a particular Tax liability, Rockwell and Rockwell Collins may agree that the actual payment to a Taxing Authority of certain Tax liabilities will be made by the non-responsible party. Rockwell and Rockwell Collins may agree to prepare a schedule setting forth such Tax liabilities and may agree from time to time to additions to or deletions from such schedule. In each case where Rockwell or Rockwell Collins, as the case may be, is
required to make payment of Taxes to the other party, Rockwell or Rockwell Collins, as the case may be shall notify the other party as to the amount of Taxes due from the other party at least five days prior to the date payment (including estimated payment) is due.
2.03 TAX REFUNDS AND CARRYBACKS.
(a) RETENTION AND PAYMENT OF TAX REFUNDS. Except as otherwise provided in this Agreement, Rockwell shall be entitled to retain, and to receive within ten days after Actually Realized by the Rockwell Collins Tax Group, the portion of all refunds or credits of Taxes for which the Rockwell Tax Group is liable pursuant to Section 2.02 or Section 3.01(a) or is treated as having paid or caused to have been paid pursuant to Section 2.02(f), and Rockwell Collins shall be entitled to retain, and to receive within ten days after Actually Realized by the Rockwell Tax Group, the portion of all refunds or credits of Taxes for which the Rockwell Collins Tax Group is liable pursuant to Section 2.02 or Section 3.01(b) (including all non-Income Taxes for which Rockwell Collins would have been liable pursuant to Section 2.02(d) had such non-Income Taxes been due and not paid) or is treated as having paid or caused to have been paid pursuant to Section 2.02(f). The amount of any refund or credit of Taxes to which Rockwell or Rockwell Collins is entitled to retain or receive pursuant to the foregoing sentence shall be reduced to take account of any Taxes incurred by the Rockwell Collins Tax Group, in the case of a refund or credit to which Rockwell is entitled, or the Rockwell Tax Group, in the case of a refund or credit to which Rockwell Collins is entitled, upon the receipt of such refund or credit.
(b) CARRYBACKS. Unless the parties otherwise agree in writing, Rockwell Collins shall elect and shall cause each member of the Rockwell Collins Tax Group to elect, where permitted by law, to carry forward any net operating loss, net capital loss, charitable contribution or other item arising after the Distribution Date that could, in the absence of such election, be carried back to a Pre-Distribution Taxable Period. Except as otherwise provided in this Agreement, notwithstanding the provisions of Section 2.03(a), (i) any refund or credit of Taxes resulting from the carryback of any item of Taxes attributable to the Rockwell Collins Tax Group arising in a Post-Tax Indemnification Period to a Tax Indemnification Period shall be for the account and benefit of the Rockwell Collins Tax Group, and (ii) any refund or credit of Taxes resulting from the carryback of any item of Taxes attributable to the Rockwell Tax Group arising in a Post-Tax Indemnification Period to a Tax Indemnification Period shall be for the account and benefit of the Rockwell Tax Group.
(c) REFUND CLAIMS. Rockwell shall be permitted to file at Rockwell's sole expense, and Rockwell Collins shall reasonably cooperate with Rockwell in
connection with, any claims for refund of Taxes to which Rockwell is entitled pursuant to this Section 2.03 or any other provision of this Agreement, including those described on Schedule 2.03(c). Rockwell shall reimburse Rockwell Collins for any reasonable out-of-pocket costs and expenses incurred by any member of the Rockwell Collins Tax Group in connection with such cooperation. Rockwell Collins shall be permitted to file at Rockwell Collins's sole expense, and Rockwell shall reasonably cooperate with Rockwell Collins in connection with, any claims for refunds of Taxes to which Rockwell Collins is entitled pursuant to this Section 2.03 or any other provision of this Agreement. Rockwell Collins shall reimburse Rockwell for any reasonable out-of-pocket costs and expenses incurred by any member of the Rockwell Tax Group in connection with such cooperation.
2.04 ALLOCATION OF STRADDLE PERIOD TAXES. In the case of any
Straddle Period:
(a) Periodic Taxes. (i) The periodic Taxes of a member of the Rockwell Tax Group or the Rockwell Collins Tax Group or its business, assets or activities that are not based on income or receipts (e.g., property Taxes) for the portion of any Straddle 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; and (ii) the periodic taxes of a member of the Rockwell Tax Group or the Rockwell Collins Tax Group or its business, assets or activities that are not based on income or receipts for the portion of any Straddle Period beginning on the day after 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.
(b) Non-Periodic Taxes. (i) The Taxes of a member of the Rockwell Tax Group or the Rockwell Collins Tax Group or its business, assets or activities for that portion of any Straddle Period ending on the Distribution Date (other than Taxes described in Section 2.04(a) above), shall be computed on a "closing-of-the-books" basis as if such taxable period ended as of the close of business on the Distribution Date, and, in the case of any Taxes of a member of the Rockwell Tax Group or the Rockwell Collins Tax Group or its business, assets or activities with respect to any equity interest in any partnership or other "flowthrough" entity, as if the taxable period of such partnership or other "flowthrough" entity ended on the Distribution Date; and (ii) the Taxes of a member of the Rockwell Tax Group or the Rockwell Collins Tax Group or its business, assets or activities for that portion of any Straddle Period beginning after the Distribution Date (other than Taxes described in Section 2.04(a) above), shall be computed on a "closing-of-the-books" basis as if such taxable period began on the day after the Distribution Date, and, in the case of any Taxes of a member of the Rockwell Tax Group or the Rockwell Collins Tax Group or
its business, assets or activities with respect to any equity interest in any partnership or other "flowthrough" entity, as if the taxable period of such partnership or other "flowthrough" entity began as of the day after the Distribution Date.
(c) The Taxes of the Rockwell Tax Group and the Rockwell Collins Tax Group with respect to any Tax Return for a Straddle Period which includes a member of each of the Rockwell Tax Group and the Rockwell Collins Tax Group or their respective businesses, assets or activities shall be allocated between the Rockwell Tax Group, on the one hand, and the Rockwell Collins Tax Group, on the other hand, determined in a manner analogous to that set forth in Treasury Regulation Section 1.1552-1(a)(2).
2.05 SCHEDULE OF FOREIGN INCOME TAX RETURNS AND PAYMENTS. Following the Distribution Date, Rockwell and Rockwell Collins agree to use their best efforts to jointly prepare a schedule showing (a) each Foreign Income Tax Return required to be filed by a member of the Rockwell Tax Group and each Foreign Income Tax Return required to be filed by a member of the Rockwell Collins Tax Group for taxable periods ending after September 30, 2000 and (b) the party responsible for filing such Foreign Income Tax Returns.
ARTICLE III
TAX INDEMNIFICATION; TAX CONTESTS
3.01 INDEMNIFICATION.
(a) ROCKWELL INDEMNIFICATION. Subject to Section 3.01(b) and
Section 3.02, Rockwell shall indemnify, defend and hold harmless each member of
the Rockwell Collins Tax Group and each of their respective shareowners,
directors, officers, employees and agents and each of the heirs, executors,
successors and assigns of any of the foregoing from and against:
(i) all Taxes of the Rockwell Tax Group;
(ii) all Taxes of the Rockwell Collins Tax Group for all Pre-Distribution Taxable Periods and all Straddle Periods for which Rockwell is liable pursuant to Section 2.02;
(iii) all liability as a result of Treasury Regulation Section 1.1502-6(a) (which imposes several liability on members of an affiliated group that file a U.S. federal consolidated Income Tax return) or comparable U.S. state or local provision
for Income Taxes of any person which is or has ever been affiliated with any member of the Rockwell Tax Group or with which any member of the Rockwell Tax Group joins or has ever joined (or is or has ever been required to join) in filing any consolidated, combined or unitary Income Tax Return for any Tax period ending on or before or including the Distribution Date, but only for such period during which such person is or was affiliated with a member of the Rockwell Tax Group or with which a member of the Rockwell Tax Group joins or joined (or is or was required to join) in filing any consolidated, combined or unitary Income Tax Return;
(iv) all Taxes for any Tax period (whether beginning before, on or after the Distribution Date) that would not have been payable but for the breach by any member of the Rockwell Tax Group of any representation, warranty, covenant or obligation under this Agreement;
(v) all liability for a breach by any member of the Rockwell Tax Group of any representation, warranty, covenant or obligation under this Agreement;
(vi) all Income Taxes and non-Income Taxes imposed in connection with the transactions contemplated by the Transaction Agreements or any other agreement entered into for the purpose of implementing the Distribution other than any Foreign Income Taxes imposed in connection with the transactions specified on Schedule 3.01(b)(v);
(vii) all Taxes for which Rockwell is liable pursuant to Section 3.02; and
(viii) all liability for any reasonable legal, accounting, appraisal, consulting or similar fees and expenses relating to the foregoing.
Notwithstanding the foregoing and subject to Section 3.01(b) and Section 3.02,
Rockwell shall not indemnify, defend or hold harmless any member of the Rockwell
Collins Tax Group from any liability for Taxes (other than Taxes resulting from
(I) the failure of the Distribution to qualify as a reorganization described in
Section 368(a)(1)(D) of the Code, (II) the failure of the Distribution to
qualify as tax-free to Rockwell under Section 361(c) of the Code or (III) the
failure of any pre-Distribution transaction specified in Schedule 3.01(a) to be
non-taxable) attributable to any action (including the making of an election
under Section 338 of the Code) taken by any member of the Rockwell Collins Tax
Group after the Distribution (other than any such action expressly required or
otherwise expressly contemplated by the Transaction Agreements or any other
agreement entered into for the purpose of implementing the Distribution or taken
in the ordinary course of business) (a "POST-DISTRIBUTION TAX ACT").
(b) ROCKWELL COLLINS INDEMNIFICATION. Rockwell Collins shall be liable for, and shall indemnify, defend and hold harmless each member of the Rockwell Tax Group and each of the respective shareowners, directors, officers, employees and agents and each of the heirs, executors, successors and assigns of any of the foregoing from and against:
(i) all Taxes of any member of the Rockwell Collins Tax Group or the Kaiser Tax Group (other than Taxes for which Rockwell provides indemnification pursuant to Section 3.01(a));
(ii) all Taxes for any Tax period (whether beginning before, on or after the Distribution Date) that would not have been payable but for the breach by any member of the Rockwell Collins Tax Group of any representation, warranty, covenant or obligation under this Agreement;
(iii) all liability for a breach by any member of the Rockwell Collins Tax Group of any representation, warranty, covenant or obligation under this Agreement;
(iv) all Taxes for which Rockwell Collins is liable pursuant to
Section 3.02;
(v) all Foreign Income Taxes imposed in connection with the transactions specified on Schedule 3.01(b)(v);
(vi) all Taxes attributable to a Post-Distribution Tax Act; and
(vii) all liability for any reasonable legal, accounting, appraisal, consulting or similar fees and expenses relating to the foregoing.
3.02 ROCKWELL COLLINS TAX ACTS.
(a) Notwithstanding Section 3.01, Rockwell Collins agrees to
indemnify, defend and hold harmless each member of the Rockwell Tax Group and
each of the respective shareowners, directors, officers, employees and agents
and each of the heirs, executors, successors and assigns of any of the foregoing
from and against any Taxes resulting from any Rockwell Collins Tax Act which
causes (i) the Distribution to fail to qualify as a reorganization described in
Section 368(a)(1)(D) of the Code, (ii) the Distribution to fail to qualify as
tax-free to Rockwell under Section 361(c) of the Code, or (iii) any
pre-Distribution transaction specified in Schedule 3.01(a) undertaken in
connection with the Distribution, the Automotive Distribution
or the Semiconductor Distribution to become taxable. A Rockwell Collins Tax Act shall mean any action specified on Schedule 3.02(a) attached hereto.
(b) Rockwell Collins shall, and shall cause each member of the Rockwell Collins Tax Group to, comply with and take no action inconsistent with the Rockwell Collins Tax Representation Letter, unless, pursuant to a favorable ruling letter obtained from the IRS which is satisfactory to Rockwell or the advice of Chadbourne & Parke LLP or other nationally recognized tax counsel to Rockwell, which advice shall be satisfactory to Rockwell, such act or omission would not adversely affect the U.S. federal Income Tax consequences of the Distribution to Rockwell or the shareowners of Rockwell. Notwithstanding Sections 3.01(b)(iii), 3.01(b)(iv) and 3.01(b)(vi), the parties intend that the sole remedy for breach of the covenants contained in this Section 3.02(b) shall be as set forth in Section 3.02(a).
(c) Notwithstanding the foregoing, a Rockwell Collins Tax Act shall not include any transaction or action specifically disclosed or specifically described in any of the Transaction Agreements or, except as specifically set forth in Schedule 3.01(a) occurring on or prior to the Distribution Date, any action taken on or prior to the Distribution Date. A Rockwell Collins Tax Act shall not include any action on the part of any member of the Rockwell Tax Group. Rockwell agrees to indemnify and hold each member of the Rockwell Collins Tax Group harmless from and against any Taxes resulting from the failure of the Distribution to qualify (i) as a reorganization described in Section 368(a)(1)(D) of the Code or (ii) as tax-free to Rockwell under Section 361(c) of the Code, except where such failure is attributable to a Rockwell Collins Tax Act.
3.03 NOTICE OF INDEMNITY. Whenever a party hereto (hereinafter an "INDEMNITEE") becomes aware of the existence of an issue raised by any Tax Authority which could reasonably be expected to result in a determination that would increase the liability for any Tax of the other party hereto or any member of its Tax Group for any Tax period or require a payment hereunder by the other party (hereinafter an "INDEMNITY ISSUE"), the Indemnitee shall in good faith promptly give notice to such other party (hereinafter the "INDEMNITOR") of such Indemnity Issue. The failure of the Indemnitee to give such notice shall not relieve the Indemnitor of its obligations under this Agreement, except to the extent such Indemnitor or a member of its Tax Group is actually prejudiced by such failure to give notice.
3.04 PAYMENTS.
(a) TIMING ADJUSTMENTS. (i) Timing Differences. If a Tax audit proceeding or an amendment of a Tax Return results in a Timing Difference, and such Timing Difference results in a decrease in an indemnity obligation Rockwell has
or would otherwise have under Section 3.01(a) and/or an increase in the amount
of a Tax refund or credit to which Rockwell is entitled under Section 2.03, then
in each Post-Tax Indemnification Period in which the Rockwell Collins Tax Group
Actually Realizes an Income Tax Detriment, Rockwell shall pay to Rockwell
Collins an amount equal to such Income Tax Detriment; provided, however, that
the aggregate payments which Rockwell shall be required to make under this
Section 3.04(a)(i) with respect to any Timing Difference shall not exceed the
aggregate amount of the Income Tax Benefits realized by the Rockwell Tax Group
for all taxable periods and the Rockwell Collins Tax Group for all Tax
Indemnification Periods as a result of such Timing Difference. Rockwell shall
make all such payments within ten days after Rockwell Collins notifies Rockwell
that the relevant Income Tax Detriment has been Actually Realized.
(ii) Reverse Timing Differences. If a Tax audit proceeding or an
amendment to a Tax Return results in a Reverse Timing Difference, and such
Reverse Timing Difference results in an increase in an indemnity payment
obligation of Rockwell under Section 3.01 and/or a decrease in the amount of a
Tax refund or credit to which Rockwell is or would otherwise be entitled under
Section 2.03, then in each Post-Tax Indemnification Period in which the Rockwell
Collins Tax Group Actually Realizes an Income Tax Benefit, Rockwell Collins
shall pay to Rockwell within ten days after Rockwell Collins has Actually
Realized such Income Tax Benefit an amount equal to such Income Tax Benefit,
provided, however, that the aggregate payments which Rockwell Collins shall be
required to make under this Section 3.04(a)(ii) with respect to Reverse Timing
Differences shall not exceed the aggregate amount of the Income Tax Detriments
realized by the Rockwell Collins Tax Group and the Rockwell Tax Group for all
Tax Indemnification Periods as a result of such Reverse Timing Difference.
(b) TIME FOR PAYMENT. Except as otherwise provided in this Section 3.04(b), any indemnity payment required to be made pursuant to this Agreement shall be paid within thirty days after the indemnified party makes written demand upon the indemnifying party, provided that in no event shall such payment be required to be made earlier than five business days prior to the date on which the relevant Taxes (including estimated Taxes) are required to be paid (or would be required to be paid if no such Taxes are due) to the relevant Tax Authority. Notwithstanding any other provision in this Agreement, to simplify the administration of this Agreement, the payment of any amount less than $100,000 required to be made pursuant to this Agreement by one party hereto to another party hereto need not be made to such other party prior to thirty days following the later of (i) the close of the calendar quarter during which such payment obligation arose and (ii) the day during such calendar quarter when the aggregate amount of all such less than $100,000 payment obligations arising during such calendar quarter exceeds $500,000. Unless otherwise
specified by the recipient for items exceeding $250,000, any such payment may be
made on a net Tax basis (i.e., reduced to take account of any net Tax benefit to
be realized by the recipient (computed at the effective Tax rate set forth in
Section 3.04(c)) to the extent such recipient is entitled to a corresponding
deduction.
(c) PAYMENTS NET OF TAXES AND TAX BENEFITS. The amount of any payment under this Agreement shall be (i) reduced to take into account any net Tax benefit realized by the recipient's Tax Group arising from the incurrence or payment by such recipient's Tax Group of any amount in respect of which such payment is made and (ii) increased to take into account any net Tax cost incurred by the recipient's Tax Group as a result of the receipt or accrual of payments hereunder (grossed-up for such increase), in each case determined by treating the recipient as recognizing all other items of income, gain, loss, deduction or credit before recognizing any item arising from the receipt of accrual of any payment hereunder. In determining the amount of any such Tax benefit or Tax cost, the recipient's Tax Group shall be deemed to be subject to (A) U.S. federal Income Taxes and foreign Income Taxes at the maximum statutory rate then in effect and (B) U.S. state and local Income Taxes at an assumed rate of five percent (tax effected at such maximum statutory U.S. federal Income Tax rate). Except as otherwise provided in this Agreement or unless the parties otherwise agree to an alternative method for determining the present value of any such anticipated Tax benefit or Tax cost, any payment hereunder shall initially be made without regard to this section and shall be increased or reduced to reflect any such net Tax cost (including gross-up) or net Tax benefit only after the recipient's Tax Group has Actually Realized such Tax cost or Tax benefit.
(d) RIGHT TO OFFSET. Any party making a payment under this Agreement shall have the right to reduce any such payment by any undisputed amounts owed to it by the other party to this Agreement.
(e) CHARACTERIZATION OF PAYMENTS. It is the intention of the parties to this Agreement that payments made pursuant to this Agreement are to be treated as relating back to the Distribution as an adjustment to capital (i.e., capital contribution or distribution), and the parties shall not take any position inconsistent with such intention before any Tax Authority, except to the extent that a final determination (as defined in Section 1313 of the Code) with respect to the recipient party causes any such payment not to be so treated.
3.05 TAX CONTESTS. The Indemnitor and its representatives, at the Indemnitor's expense, shall be entitled to participate (a) in all conferences, meetings and proceedings with any Tax Authority, the subject matter of which is or includes an Indemnity Issue and (b) in all appearances before any court, the subject matter of
which is or includes an Indemnity Issue. The party who has responsibility for filing the Tax Return under this Agreement (the "RESPONSIBLE PARTY") with respect to which there could be an increase in liability for any Tax or with respect to which a payment could be required hereunder shall have the right to decide as between the parties hereto how such matter is to be dealt with and finally resolved with the appropriate Tax Authority and shall control all audits and similar proceedings. If no Tax Return is or was required to be filed in respect of an Indemnity Issue, the Indemnitor shall be treated as the Responsible Party with respect thereto. The Responsible Party agrees to cooperate in the settlement of any Indemnity Issue with the other party and to take such other party's interests into account. Notwithstanding any other provision of this Agreement, if Rockwell has materially satisfied its obligations under this Agreement and if Rockwell Collins fails to permit Rockwell to control any audit or proceeding regarding any Indemnity Issue relating to (i) the qualification of the Distribution as a "reorganization" within the meaning of Section 368(a)(1)(D) of the Code or as tax-free to Rockwell under Section 361(c) of the Code, (ii) the qualification of any transactions undertaken pursuant to the Transaction Agreements or described in the Ruling Request as transactions described in Section 355 of the Code, "reorganizations" within the meaning of Section 368(a)(1)(D) of the Code or as otherwise tax-free transactions, (iii) the qualification of any transactions undertaken pursuant to the Automotive Transaction Agreements or described in the Automotive Ruling Request as transactions described in Section 355 of the Code, "reorganizations" within the meaning of Section 368(a)(1)(D) of the Code or as otherwise tax-free transactions, or (iv) the qualification of any transactions undertaken pursuant to the Semiconductor Transaction Agreements or described in the Semiconductor Ruling Request as transactions described in Section 355 of the Code, "reorganizations" within the meaning of Section 368(a)(1)(D) of the Code or as otherwise tax-free transactions, then Rockwell shall not be liable for and shall not indemnify the Rockwell Collins Tax Group for any Tax deficiency resulting from an adverse determination of such Indemnity Issue.
ARTICLE IV
OPTIONS; COMPENSATION PAYMENTS; INTEREST CHARGE
FOR LATE PAYMENTS; CURRENCY CALCULATIONS; EFFECTIVE TIME OF TRANSACTIONS
4.01 STOCK OPTIONS.
(a) STOCK OPTION ADJUSTMENTS. Pursuant to the terms of the Employee Matters Agreement, Rockwell Common Stock Options outstanding at the time of the Distribution will be adjusted as follows:
(i) Rockwell Common Stock Options held by employees of the Rockwell Collins Tax Group at the time of the Distribution (other than certain former Rockwell corporate employees who become employees of the Rockwell Collins Tax Group in connection with the Distribution) will be replaced with Rockwell Collins Common Stock Options;
(ii) Rockwell Common Stock Options held by active employees of the Rockwell Tax Group at the time of the Distribution (other than certain former Rockwell corporate employees who become employees of the Rockwell Tax Group in connection with the Distribution) will remain Rockwell Common Stock Options; and
(iii) Rockwell Common Stock Options held by persons who, immediately after the Distribution are (A) active employees of Rockwell Scientific Company, LLC or active employees of any divested Rockwell business, (B) former Rockwell corporate employees (including those who become employees of the Rockwell Collins Tax Group or the Rockwell Tax Group in connection with the Distribution), (C) former employees of any business of Rockwell, including former employees of the Rockwell Tax Group, the Rockwell Tax Group, Rockwell Scientific Company, LLC or any divested Rockwell business, or (D) active or former outside directors of Rockwell, will be adjusted so that following the Distribution each such holder will hold Rockwell Common Stock Options and Rockwell Collins Common Stock Options.
(b) TAX DEDUCTIONS. Notwithstanding anything to the contrary in this
Agreement, unless the IRS issues a contrary private letter ruling to Rockwell or
Rockwell Collins, or Rockwell and Rockwell Collins otherwise agree in writing,
(i) the Rockwell Tax Group (and not the Rockwell Collins Tax Group) shall claim
any Post-Distribution Date Tax deductions in respect of Rockwell Common Stock
Options exercised by current employees of any member of the Rockwell Tax Group
or former employees of any member of the Rockwell Tax Group who are not Rockwell
Collins Group Employees and Former Employees, (ii) the Rockwell Tax Group (and
not the Rockwell Collins Tax Group) shall claim any Post-Distribution Date Tax
deductions of Rockwell Collins Common Stock Options exercised by current
employees of any member of the Rockwell Tax Group or former employees of any
member of the Rockwell Tax Group who are not Rockwell Collins Group Employees
and Former Employees and Rockwell shall pay to Rockwell Collins, on or before
the due date for the U.S. federal income tax return on which such deduction is
claimed, an amount equal to the product of (x) the amount of the deduction and
(y) the maximum statutory U.S. federal income tax rate plus 5 percent (tax
effected at the maximum statutory U.S. federal income tax rate), (iii) the
Rockwell Collins Tax Group (and not the Rockwell Tax Group) shall claim any
Post-Distribution Date Tax
deductions in respect of Rockwell Common Stock Options exercised by Rockwell
Collins Group Employees and Former Employees and Rockwell Collins shall pay to
Rockwell, on or before the due date for the U.S. federal income tax return on
which such deduction is claimed, an amount equal to the product of (x) the
amount of the deduction and (y) the maximum statutory U.S. federal income tax
rate plus 5 percent (tax effected at the maximum statutory U.S. federal income
tax rate), and (iv) the Rockwell Collins Tax Group (and not the Rockwell Tax
Group) shall claim the Post-Distribution Date Tax deductions in respect of the
Rockwell Collins Common Stock Options exercised by Rockwell Collins Group
Employees and Former Employees. At the present maximum statutory U.S. federal
income tax rate of 35%, the formula described above would be as follows:
deduction x (35% + (5% x 35%)).
(c) NOTICES, WITHHOLDING, REPORTING. (i) Rockwell shall promptly notify Rockwell Collins of any post-Distribution Date event giving rise to income to any Rockwell Collins Group Employees and Former Employees in connection with the Rockwell Common Stock Options and, if required by law, Rockwell Collins shall withhold applicable Taxes and satisfy applicable Tax reporting obligations in connection therewith. Rockwell shall within ten days of demand thereof reimburse Rockwell Collins for all reasonable out-of-pocket expenses incurred in connection with the Rockwell Common Stock Options, including with respect to incremental Tax reporting obligations and any incremental employment Tax obligations; provided that Rockwell Collins shall use reasonable efforts to collect any such amounts required to be paid by Rockwell Collins Group Employees and Former Employees from such Rockwell Collins Group Employees and Former Employees.
(ii) Rockwell Collins shall promptly notify Rockwell of any post-Distribution Date event giving rise to income to any non-Rockwell Collins Group Employees and Former Employees in connection with the Rockwell Collins Common Stock Options and, if required by law, Rockwell shall withhold applicable Taxes and satisfy applicable Tax reporting obligations in connection therewith. Rockwell Collins shall within ten days of demand thereof reimburse Rockwell for all reasonable out-of-pocket expenses incurred in connection with the Rockwell Collins Common Stock Options, including with respect to incremental Tax reporting obligations and any incremental employment Tax obligations; provided that Rockwell shall use reasonable efforts to collect any such amounts required to be paid by non-Rockwell Collins Group Employees and Former Employees from such non-Rockwell Collins Group Employees and Former Employees.
(d) TAX AUDIT ADJUSTMENTS. Notwithstanding the provisions of Section 4.01(b), in the event a Tax audit proceeding shall determine (by settlement or otherwise), or the parties otherwise determine pursuant to Section 4.03, that all or a portion of the Tax deductions in respect of Rockwell Common Stock Options or
Rockwell Collins Common Stock Options should have been claimed by the Rockwell Collins Tax Group or the Rockwell Tax Group, respectively, the Rockwell Collins Tax Group or the Rockwell Tax Group, respectively, shall claim such Tax deductions (by an amended Tax Return or otherwise) and shall pay to Rockwell or Rockwell Collins, as the case may be, the amount of any Tax refund or credit arising in respect of such Tax deduction within ten days after such Tax refund or credit is Actually Realized by the Rockwell Collins Tax Group or the Rockwell Tax Group, as the case may be.
4.02 COMPENSATION PAYMENTS.
(a) TAX DEDUCTIONS. Notwithstanding anything to the contrary in this
Agreement, unless Rockwell and Rockwell Collins otherwise agree in writing, (i)
the Boeing Tax Group (and not the Rockwell Collins Tax Group or the Rockwell Tax
Group) shall claim the Post-Distribution Date Tax deductions in respect of
Compensation Payments paid to Rockwell Collins Group Employees and Former
Employees who ceased employment on or before December 6, 1996 and Rockwell shall
pay to Rockwell Collins the amount received from Boeing as a result of any Tax
benefit realized arising in respect of such Tax deductions within ten days after
such amount is received by Rockwell, (ii) the Rockwell Collins Tax Group (and
not the Rockwell Tax Group) shall claim the Post-Distribution Date Tax
deductions in respect of Compensation Payments paid by the Rockwell Collins Tax
Group to all other Rockwell Collins Group Employees and Former Employees, and
(iii) the Rockwell Tax Group (and not the Rockwell Collins Tax Group) shall
claim the Post-Distribution Date Tax deductions in respect of Compensation
Payments paid by the Rockwell Tax Group to all other Rockwell Collins Group
Employees and Former Employees.
(b) NOTICES, WITHHOLDING, REPORTING. The party responsible for making the Compensation Payments pursuant to the Employee Matters Agreement shall withhold applicable Taxes and satisfy applicable Tax reporting obligations in connection with the Compensation Payments made to all Rockwell Collins Group Employees and Former Employees.
(c) TAX AUDIT ADJUSTMENTS. Notwithstanding the provisions of Section 4.02(a), in the event a Tax audit proceeding shall determine (by settlement or otherwise), or the parties otherwise determine pursuant to Section 4.03, that all or a portion of the Tax deductions in respect of Compensation Payments paid to Rockwell Collins Group Employees or Former Employees was not available to the party claiming the Tax deduction, then the appropriate party shall claim such Tax deductions (by an amended Tax Return or otherwise) and shall pay to the party which had previously claimed such Tax deduction, within ten days after such Tax deduction
has been Actually Realized by the such appropriate party, the amount of the resulting Tax benefit to such appropriate party.
4.03 CHANGE IN LAW. Notwithstanding the agreement with respect to reporting of Tax items and the claiming of the deductions set forth in Article 4 of this Agreement, neither the Rockwell Collins Tax Group nor the Rockwell Tax Group shall have any obligation to report any such Tax items or claim such deductions as set forth in such Article in the event that either such party determines, based on an opinion of nationally recognized tax counsel, which opinion shall be satisfactory to the other party, that there is no substantial authority to support reporting such Tax items or claiming such deductions on a Tax Return filed by such party as a result of a change in or amendment to any law or regulation, or any change in the official interpretation thereof, effective or occurring after the date of this Agreement, and such Tax Group provides prompt notice to the other Tax Group of any such determination.
4.04 INTEREST CHARGE FOR LATE PAYMENTS. Any amount due and owing by one party to the other party pursuant to this Agreement that is not paid when due shall bear interest from the due date thereof until paid at a rate equal to the ____________ prime rate in effect from time to time during such period plus 1%.
4.05 CURRENCY CALCULATIONS. All currency calculations shall be made in accordance with Section 6.19 of the Distribution Agreement.
4.06 EFFECTIVE TIME OF TRANSACTION. Rockwell and Rockwell Collins agree that any transaction that, pursuant to the Distribution Agreement, is expressly effective immediately after the Time of Distribution shall be treated for federal Income Tax purposes as occurring at the beginning of the day following the Distribution Date.
ARTICLE V
COOPERATION AND EXCHANGE OF INFORMATION
5.01 INCONSISTENT ACTIONS. Each party to this Agreement agrees (i) to, and to cause each of the relevant members of its Tax Group to, report the Distribution as a transaction described in Section 368(a)(1)(D) of the Code on all Tax Returns and other filings, (ii) to use its best efforts to ensure that the Distribution receives such treatment for U.S. federal Tax purposes and (iii) that, unless it has obtained the prior written consent of the other party, it (and the members of its Tax
Group) shall not take any action inconsistent with, or fail to take any action required by, the Transaction Agreements.
5.02 RULING REQUEST. Each party hereto represents that neither it (nor any of the members of its Tax Group) will take or has any plan or intention to take any action which is inconsistent with any factual statements, representations or other similar conditions contained in the Ruling Request or in the Ruling.
5.03 COOPERATION AND EXCHANGE OF INFORMATION. Each party hereto agrees to provide, and to cause each member of its Tax Group to provide, such cooperation and information as such other party shall request, on a timely basis, in connection with the preparation or filing of any Tax Return or claim for Tax refund not inconsistent with this Agreement or in conducting any Tax audit, Tax dispute, or otherwise in respect of Taxes or to carry out the provisions of this Agreement. To the extent necessary to carry out the purposes of this Agreement and subject to the other provisions of this Agreement, such cooperation and information shall include without limitation promptly forwarding copies of appropriate notices and forms or other communications received from or sent to any Tax Authority which relate to the Rockwell Collins Tax Group for the Tax Indemnification Period and providing copies of all relevant Tax Returns for the Tax Indemnification Period, together with accompanying schedules and related workpapers, documents relating to rulings or other determinations by Tax Authorities, including without limitation, foreign Tax Authorities, and records concerning the ownership and Tax basis of property, which either party may possess. Each party to this Agreement shall make, or shall cause its affiliates to make, its employees and facilities available on a mutually convenient basis to provide an explanation of any documents or information provided hereunder.
5.04 TAX RECORDS.
(a) Rockwell and Rockwell Collins agree to (and to cause each member
of their respective Tax Group to) (i) retain all Tax Returns, related schedules
and workpapers, and all material records and other documents as required under
Section 6001 of the Code and the regulations promulgated thereunder relating
thereto existing on the date hereof or created through the Distribution Date,
for a period of at least ten years following the Distribution Date and (ii)
allow the party to this Agreement, at times and dates reasonably acceptable to
the retaining party, to inspect, review and make copies of such records, as
Rockwell and Rockwell Collins may reasonably deem necessary or appropriate from
time to time. In addition, after the expiration of such ten-year period, such
Tax Returns, related schedules and workpapers, and material records shall not be
destroyed or otherwise disposed of at any time, unless, prior to such
destruction or disposal, (A) the party proposing to destroy or otherwise dispose
of such records shall provide no less than 30 days' prior
written notice to the other party, specifying in reasonable detail the records proposed to be destroyed or disposed of and (B) if a recipient of such notice shall request in writing prior to the scheduled date for such destruction or disposal that any of the records proposed to be destroyed or disposed of be delivered to such requesting party, the party proposing the destruction or disposal shall promptly arrange for the delivery of such requested records at the expense of the party requesting such records.
(b) Notwithstanding anything in this Agreement to the contrary, if any party fails to comply with the requirements of Section 5.04(a) hereof, the party failing so to comply shall be liable for, and shall hold the other party, harmless from, any Taxes (including without limitation, penalties for failure to comply with the record retention requirements of the Code) and other costs resulting from such party's failure to comply.
ARTICLE VI
MISCELLANEOUS
6.01 ENTIRE AGREEMENT; CONSTRUCTION. This Agreement, the Distribution Agreement, all other Transaction Agreements, including, without limitation, any annexes, schedules and exhibits hereto or thereto, and other agreements and documents referred to herein and therein, will together constitute the entire agreement between the parties with respect to the subject matter hereof and thereof and will supersede all prior negotiations, agreements and understandings of the parties of any nature, whether oral or written, with respect to such subject matter. Notwithstanding any other provisions in this Agreement to the contrary, in the event and to the extent that there shall be a conflict relating to Taxes between the provisions of this Agreement and the provisions of the Distribution Agreement or any other Transaction Agreement, the provisions of this Agreement shall control.
6.02 EFFECTIVENESS. All covenants and agreements of the parties contained in this Agreement shall be subject to and conditioned upon the Distribution becoming effective.
6.03 SURVIVAL OF AGREEMENTS. Except as otherwise contemplated by this Agreement, all covenants and agreements of the parties contained in this Agreement will remain in full force and effect and will survive the Time of Distribution.
6.04 GOVERNING LAW. This Agreement will be governed by and construed in accordance with the internal laws of the State of New York applicable to
contracts made and to be performed entirely within such State, without regard to the conflicts of law principles of such State.
6.05 NOTICES. All notices, requests, claims, demands and other communications required or permitted to be given hereunder will be in writing and will be delivered by hand or telecopied, e-mailed or sent, postage prepaid, by registered, certified or express mail or reputable overnight courier service and will be deemed given when so delivered by hand or telecopied, when e-mail confirmation is received if delivered by e-mail, or three business days after being so mailed (one business day in the case of express mail or overnight courier service). All such notices, requests, claims, demands and other communications will be addressed as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:
(a) If to Rockwell:
Rockwell International Corporation
Firstar Center
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Mr. Michael A. Bless
Senior Vice President,
Finance and Planning and
Chief Financial Officer
Telecopy: (414) 212-5552
E-mail: mabless@corp.rockwell.com
|
with a copy to:
Rockwell International Corporation
Firstar Center
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: William J. Calise, Jr., Esq.
Senior Vice President,
General Counsel and
Secretary
Telecopy: (414) 212-5357
E-mail: wjcalise@corp.rockwell.com
|
(b) If to Rockwell Collins:
New Rockwell Collins, Inc. 400 Rockwell Collins Road NE Cedar Rapids, Iowa 52498
Attention: Lawrence A. Erickson
Senior Vice President and
Chief Financial Officer
Telecopy: (319) 295-3400
E-mail: laerickson@collins.rockwell.com
|
with a copy to:
New Rockwell Collins, Inc. 400 Rockwell Collins Road NE Cedar Rapids, Iowa 52498
Attention: [ ]
Senior Vice President,
General Counsel and
Secretary
Telecopy: (319) [ ]
E-mail: [ ]
|
6.06 CONSENT TO JURISDICTION. Each of the parties hereto irrevocably
submits to the exclusive jurisdiction of (a) the Court of Chancery in and for
the State of Delaware and the Superior Court in and for the State of Delaware
and (b) the U.S. District Court for the District of Delaware, for the purposes
of any suit, action or other proceeding arising out of this Agreement or any
transaction contemplated hereby (and agrees not to commence any action, suit or
proceeding relating thereto except in such courts). Each of the parties further
agrees that service of any process, summons, notice or document hand delivered
or sent by U.S. registered mail to such party's respective address set forth in
Section 6.05 will be effective service of process for any action, suit or
proceeding in Delaware with respect to any matters to which it has submitted to
jurisdiction as set forth in the immediately preceding sentence. Each of the
parties irrevocably and unconditionally waives any objection to the laying of
venue of any action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby in (i) the Court of Chancery in and for the
State of Delaware and the Superior Court in and for the State of Delaware or
(ii) the U.S. District Court for the District of Delaware, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any
such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. Notwithstanding the foregoing, each party agrees that a final judgment in any action, suit or proceeding so brought shall be conclusive and may be enforced by suit on the judgment in any jurisdiction or in any other manner provided in law or in equity.
6.07 AMENDMENTS. This Agreement may not be amended, modified or supplemented except by a written agreement executed by Rockwell and Rockwell Collins.
6.08 SUCCESSORS AND ASSIGNS. The rights and benefits under this Agreement may not be conveyed, assigned or otherwise transferred and the duties and obligations may not be delegated by any party in whole or in part without the prior written consent of the other party, which consent shall not be unreasonably withheld or delayed. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns.
6.09 CAPTIONS; CURRENCY. The article, section and paragraph captions herein and the table of contents hereto are for convenience of reference only, do not constitute part of this Agreement and will not be deemed to limit or otherwise affect any of the provisions hereof. Unless otherwise specified, all references herein to numbered articles or sections are to articles and sections of this Agreement and all references herein to schedules are to schedules to this Agreement. Unless otherwise specified, all references contained in this Agreement or in any schedule referred to herein to dollars or "$" shall mean U.S. dollars.
6.10 SEVERABILITY. If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances other than those as to which it has been held invalid or unenforceable, will remain in full force and effect and will in no way be affected, impaired or invalidated thereby. If the economic or legal substance of the transactions contemplated hereby is affected in any manner adverse to any party as a result thereof, the parties will negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the parties.
6.11 NO THIRD PARTY BENEFICIARIES. Except for the provisions of Article III relating to Tax Indemnification, this Agreement is solely for the benefit of the parties hereto and the respective members of their Tax Group and should not be deemed to confer upon third parties (including any employee of Rockwell or
Rockwell Collins or of any Rockwell or Rockwell Collins subsidiary) any remedy, claim, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement.
6.12 SCHEDULES. All schedules attached hereto are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Capitalized terms used in the schedules hereto but not otherwise defined therein will have the respective meanings assigned to such terms in this Agreement.
6.13 TERMINATION. This Agreement may be terminated and the Distribution abandoned at any time prior to the Time of Distribution by and in the sole discretion of the Rockwell Board without the approval of Rockwell Collins or of Rockwell's shareowners. In the event of such termination, no party will have any liability of any kind to any other party on account of such termination.
6.14 WAIVERS; REMEDIES. No failure or delay by any party hereto in exercising any right, power or privilege hereunder will operate as a waiver thereof, nor will any waiver on the part of any party hereto of any right, power or privilege hereunder operate as a waiver of any other right, power or privilege hereunder, nor will any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. The rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies which the parties may otherwise have at law or in equity.
6.15 COUNTERPARTS. This Agreement may be executed in separate counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts will together constitute the same agreement.
6.16 PERFORMANCE. Each party hereto will cause to be performed, and hereby guarantees the performance of all actions, agreements and obligations set forth herein to be performed by any subsidiary or any member of such party's Tax Group.
6.17 INTERPRETATION. Any reference to any federal, state, local, or foreign law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. For the purposes of this Agreement, (i) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires, (ii) the terms "hereof", "herein", and "herewith" and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement and (iii) the word "including" and
words of similar import when used in this Agreement shall mean "including, without limitation".
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officers of the parties as of the date first hereinabove written.
ROCKWELL INTERNATIONAL CORPORATION
Title:
NEW ROCKWELL COLLINS, INC.
Title:
Exhibit 10.7.1
[5/30/01]
FORM OF
CHANGE OF CONTROL AGREEMENT
AGREEMENT by and between Rockwell Collins, Inc., a Delaware corporation (the "Company") and _________ _________ (the "Executive"), dated as of the ___ day of _______, 2001.
The Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its shareowners to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Effective Date" shall mean the first
date during the Change of Control Period (as defined in Section 1(b)) on which a
Change of Control (as defined in Section 2) occurs. Anything in this Agreement
to the contrary notwithstanding, if a Change of Control occurs and if the
Executive's employment with the Company is terminated prior to the date on which
the Change of Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of Control or
(ii) otherwise arose in connection with or anticipation of a Change of Control,
then for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "Change of Control Period" shall mean the period commencing on the date hereof and ending on the fourth anniversary of the date hereof.
2. Change of Control. For the purpose of this Agreement, a "Change of Control" shall mean:
(a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of Control: (i) any
acquisition directly from the Company, (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any corporation controlled by the Company or
(iv) any acquisition by any corporation pursuant to a transaction which complies
with clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another corporation (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination, or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.
3. Protected Period. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the third anniversary of such date (the "Protected Period").
4. Terms of Employment. (a) Position and Duties. (i) During the Protected Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location less than 35 miles from such location.
(ii) During the Protected Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Protected Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Protected Period, the Executive shall receive an annual base salary ("Annual Base Salary"), which shall be paid at a monthly rate, at least equal to twelve times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Executive by the Company and its affiliated companies in respect of the twelve-month period immediately preceding the month in which the Effective Date occurs. During the Protected Period, the Annual Base Salary shall be reviewed no more than 12 months after the last salary increase awarded to the Executive prior to the Effective Date and thereafter at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term "affiliated companies" shall include any company controlled by, controlling or under common control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Protected Period, an annual bonus (the "Annual
Bonus") in cash at least equal to the Executive's highest bonus under the Company's annual incentive plans, or any comparable bonus under any predecessor or successor plan, for the last three full fiscal years prior to the Effective Date (annualized in the event that the Executive was not employed by the Company for the whole of such fiscal year) (the "Recent Annual Bonus"). Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans. During the Protected Period, the Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Effective Date or if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies.
(iv) Welfare Benefit Plans. During the Protected Period, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies.
(v) Expenses. During the Protected Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.
(vi) Fringe Benefits. During the Protected Period, the Executive shall be entitled to fringe benefits, including, without limitation, tax and financial planning services, payment of club dues, and, if applicable, use of an automobile and payment of related expenses,
in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the Protected Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its affiliated companies at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Protected Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.
5. Termination of Employment. (a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Protected Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Protected Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 12(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative.
(b) Cause. The Company may terminate the Executive's employment during the Protected Period for Cause. For purposes of this Agreement, "Cause" shall mean:
(i) the willful and continued failure of the Executive to perform substantially the Executive's duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer believes that the Executive has not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company.
For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated by the Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the provisions of
Section 4(b) of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be based at any office or location other than as provided in Section 4(a)(i)(B) hereof or the Company's requiring the Executive to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date;
(iv) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good Reason" made by the Executive shall be conclusive. Anything in this Agreement to the contrary notwithstanding, a termination by the Executive for any reason during the 30-day period immediately following the first anniversary of the Effective Date shall be deemed to be a termination for Good Reason for all purposes of this Agreement.
(d) Notice of Termination. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than thirty days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be.
6. Obligations of the Company upon Termination. (a) Good Reason; Other Than for Cause, Death or Disability. If, during the Protected Period, the Company shall terminate the Executive's employment other than for Cause or Disability or the Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts:
A. the sum of (1) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, (2) the product of (x) the higher of (I) the Recent Annual Bonus and (II) the Annual Bonus paid or payable, including any bonus or portion thereof which has been earned but deferred (and annualized for any fiscal year consisting of less than twelve full months or during which the Executive was employed for less than twelve full months), for the most recently completed fiscal year
during the Protected Period, if any (such higher amount being referred to as the "Highest Annual Bonus") and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365 and (3) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2), and (3) shall be hereinafter referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) three and
(2) the sum of (x) the Executive's Annual Base Salary and (y)
the Highest Annual Bonus; and
C. an amount equal to the excess of (a) the actuarial
equivalent of the benefit under the Company's qualified
defined benefit retirement plan (the "Retirement Plan")
(utilizing actuarial assumptions no less favorable to the
Executive than those in effect under the Company's Retirement
Plan immediately prior to the Effective Date), and any excess
or supplemental retirement plan in which the Executive
participates (together, the "SERP") which the Executive would
receive if the Executive's employment continued for three
years after the Date of Termination assuming for this purpose
that all accrued benefits are fully vested, and, assuming that
the Executive's compensation in each of the three years is
that required by Section 4(b)(i) and Section 4(b)(ii), over
(b) the actuarial equivalent of the Executive's actual benefit
(paid or payable), if any, under the Retirement Plan and the
SERP as of the Date of Termination;
(ii) for three years after the Executive's Date of Termination, or such
longer period as may be provided by the terms of the appropriate plan, program,
practice or policy, the Company shall continue benefits to the Executive and/or
the Executive's family at least equal to those which would have been provided to
them in accordance with the plans, programs, practices and policies described in
Section 4(b)(iv) of this Agreement if the Executive's employment had not been
terminated or, if more favorable to the Executive, as in effect generally at any
time thereafter with respect to other peer executives of the Company and its
affiliated companies and their families, provided, however, that if the
Executive becomes reemployed with another employer and is eligible to receive
medical or other welfare benefits under another employer provided plan, the
medical and other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of eligibility. For
purposes of determining eligibility (but not the time of commencement of
benefits) of the Executive for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive shall be considered to have
remained employed until three years after the Date of Termination and to have
retired on the last day of such period;
(iii) the Company shall, at its sole expense as incurred, provide the Executive with outplacement services the scope and provider of which shall be selected by the Executive in his sole discretion; and
(iv) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by reason of the Executive's death during the Protected Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall include, without limitation, and the Executive's estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and affiliated companies to the estates and beneficiaries of peer executives of the Company and such affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive's estate and/or the Executive's beneficiaries, as in effect on the date of the Executive's death with respect to other peer executives of the Company and its affiliated companies and their beneficiaries.
(c) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Protected Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and its affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter generally with respect to other peer executives of the Company and its affiliated companies and their families.
(d) Cause; Other than for Good Reason. If the Executive's employment shall be terminated for Cause during the Protected Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (x) his Annual Base Salary through the Date of Termination, (y) the amount of any compensation
previously deferred by the Executive, and (z) Other Benefits, in each case to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Protected Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations and the timely payment or provision of Other Benefits. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor, subject to Section
12(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
8. Full Settlement. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code").
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company or its affiliates to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 9(a), if it shall be determined that the Executive is entitled to a Gross-Up Payment, but that the Payments do not exceed 110% of the greatest amount (the "Reduced Amount") that could be paid to the Executive such that the receipt of Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to the Executive and the Payments, in the aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Deloitte & Touche LLP or such other certified public accounting firm as may be designated by the Executive (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the Company relating to such claim,
(ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 9(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the
Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement.
11. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.
12. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
If to the Company:
Rockwell Collins, Inc.
400 Collins Road, N.E.
Cedar Rapids, IA 52498
Attention: General Counsel
or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.
(d) The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, subject to Section 1(a) hereof, prior to the Effective Date, the Executive's employment may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this Agreement. From and after the Effective Date this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written.
ROCKWELL COLLINS, INC.
By______________________________
Exhibit 10.7.2
Executives of Rockwell Collins who will be party to a Change of Control Agreement
1. C.M. Jones
2. R.M. Chiusano
3. L.A. Erickson
4. J.J. Gaspar
5. N.J. Keating
6. H.M. Reininga
7. W.J. Richter
Exhibit 10.8.1
[5/30/01]
FORM OF
CHANGE OF CONTROL AGREEMENT
AGREEMENT by and between Rockwell Collins, Inc., a Delaware corporation (the "Company") and _________ _________ (the "Executive"), dated as of the ___ day of _______, 2001.
The Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its shareowners to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Effective Date" shall mean the
first date during the Change of Control Period (as defined in Section 1(b)) on
which a Change of Control (as defined in Section 2) occurs. Anything in this
Agreement to the contrary notwithstanding, if a Change of Control occurs and if
the Executive's employment with the Company is terminated prior to the date on
which the Change of Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of Control or
(ii) otherwise arose in connection with or anticipation of a Change of Control,
then for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "Change of Control Period" shall mean the period commencing on the date hereof and ending on the fourth anniversary of the date hereof.
2. Change of Control. For the purpose of this Agreement, a "Change of Control" shall mean:
(a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of Control: (i) any
acquisition directly from the Company, (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any corporation controlled by the Company or
(iv) any acquisition by any corporation pursuant to a transaction which complies
with clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another corporation (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination, or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.
3. Protected Period. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the third anniversary of such date (the "Protected Period").
4. Terms of Employment. (a) Position and Duties. (i) During the Protected Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location less than 35 miles from such location.
(ii) During the Protected Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Protected Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Protected Period, the Executive shall receive an annual base salary ("Annual Base Salary"), which shall be paid at a monthly rate, at least equal to twelve times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Executive by the Company and its affiliated companies in respect of the twelve-month period immediately preceding the month in which the Effective Date occurs. During the Protected Period, the Annual Base Salary shall be reviewed no more than 12 months after the last salary increase awarded to the Executive prior to the Effective Date and thereafter at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term "affiliated companies" shall include any company controlled by, controlling or under common control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Protected Period, an annual bonus (the "Annual
Bonus") in cash at least equal to the Executive's highest bonus under the Company's annual incentive plans, or any comparable bonus under any predecessor or successor plan, for the last three full fiscal years prior to the Effective Date (annualized in the event that the Executive was not employed by the Company for the whole of such fiscal year) (the "Recent Annual Bonus"). Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans. During the Protected Period, the Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Effective Date or if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies.
(iv) Welfare Benefit Plans. During the Protected Period, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies.
(v) Expenses. During the Protected Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.
(vi) Fringe Benefits. During the Protected Period, the Executive shall be entitled to fringe benefits, including, without limitation, tax and financial planning services, payment of club dues, and, if applicable, use of an automobile and payment of related expenses,
in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the Protected Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its affiliated companies at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Protected Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.
5. Termination of Employment. (a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Protected Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Protected Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 12(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative.
(b) Cause. The Company may terminate the Executive's employment during the Protected Period for Cause. For purposes of this Agreement, "Cause" shall mean:
(i) the willful and continued failure of the Executive to perform substantially the Executive's duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer believes that the Executive has not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company.
For purposes of this provision, no act or failure to act, on the
part of the Executive, shall be considered "willful" unless it is done, or
omitted to be done, by the Executive in bad faith or without reasonable belief
that the Executive's action or omission was in the best interests of the
Company. Any act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or upon the instructions of the Chief
Executive Officer or a senior officer of the Company or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests of the
Company. The cessation of employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with counsel, to
be heard before the Board), finding that, in the good faith opinion of the
Board, the Executive is guilty of the conduct described in subparagraph (i) or
(ii) above, and specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated by the Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be based at any office or location other than as provided in Section 4(a)(i)(B) hereof or the Company's requiring the Executive to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date;
(iv) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good Reason" made by the Executive shall be conclusive. Anything in this Agreement to the contrary notwithstanding, a termination by the Executive for any reason during the 30-day period immediately following the first anniversary of the Effective Date shall be deemed to be a termination for Good Reason for all purposes of this Agreement.
(d) Notice of Termination. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than thirty days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be.
6. Obligations of the Company upon Termination. (a) Good Reason; Other Than for Cause, Death or Disability. If, during the Protected Period, the Company shall terminate the Executive's employment other than for Cause or Disability or the Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts:
A. the sum of (1) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, (2) the product of (x) the higher of (I) the Recent Annual Bonus and (II) the Annual Bonus paid or payable, including any bonus or portion thereof which has been earned but deferred (and annualized for any fiscal year consisting of less than twelve full months or during which the Executive was employed for less than twelve full months), for the most recently completed fiscal year
during the Protected Period, if any (such higher amount being referred to as the "Highest Annual Bonus") and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365 and (3) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2), and (3) shall be hereinafter referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) two and (2) the sum of (x) the Executive's Annual Base Salary and (y) the Highest Annual Bonus; and
C. an amount equal to the excess of (a) the actuarial equivalent of the benefit under the Company's qualified defined benefit retirement plan (the "Retirement Plan") (utilizing actuarial assumptions no less favorable to the Executive than those in effect under the Company's Retirement Plan immediately prior to the Effective Date), and any excess or supplemental retirement plan in which the Executive participates (together, the "SERP") which the Executive would receive if the Executive's employment continued for two years after the Date of Termination assuming for this purpose that all accrued benefits are fully vested, and, assuming that the Executive's compensation in each of the two years is that required by Section 4(b)(i) and Section 4(b)(ii), over (b) the actuarial equivalent of the Executive's actual benefit (paid or payable), if any, under the Retirement Plan and the SERP as of the Date of Termination;
(ii) for two years after the Executive's Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(b)(iv) of this Agreement if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families, provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until two years after the Date of Termination and to have retired on the last day of such period;
(iii) the Company shall, at its sole expense as incurred, provide the Executive with outplacement services the scope and provider of which shall be selected by the Executive in his sole discretion; and
(iv) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by reason of the Executive's death during the Protected Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall include, without limitation, and the Executive's estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and affiliated companies to the estates and beneficiaries of peer executives of the Company and such affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive's estate and/or the Executive's beneficiaries, as in effect on the date of the Executive's death with respect to other peer executives of the Company and its affiliated companies and their beneficiaries.
(c) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Protected Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and its affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter generally with respect to other peer executives of the Company and its affiliated companies and their families.
(d) Cause; Other than for Good Reason. If the Executive's employment shall be terminated for Cause during the Protected Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (x) his Annual Base Salary through the Date of Termination, (y) the amount of any compensation
previously deferred by the Executive, and (z) Other Benefits, in each case to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Protected Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations and the timely payment or provision of Other Benefits. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor, subject to Section
12(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
8. Full Settlement. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code").
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company or its affiliates to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 9(a), if it shall be determined that the Executive is entitled to a Gross-Up Payment, but that the Payments do not exceed 110% of the greatest amount (the "Reduced Amount") that could be paid to the Executive such that the receipt of Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to the Executive and the Payments, in the aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Deloitte & Touche LLP or such other certified public accounting firm as may be designated by the Executive (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the Company relating to such claim,
(ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 9(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the
Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement.
11. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.
12. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
If to the Company:
Rockwell Collins, Inc.
400 Collins Road, N.E.
Cedar Rapids, IA 52498
Attention: General Counsel
or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.
(d) The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, subject to Section 1(a) hereof, prior to the Effective Date, the Executive's employment may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this Agreement. From and after the Effective Date this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written.
ROCKWELL COLLINS, INC.
By____________________________________
Exhibit 10.8.2
Executives of Rockwell Collins who will be party to a Change of Control Agreement
1. P.E. Allen
Exhibit 10.9.1
[5/30/01]
$500,000,000
FORM OF
364-DAY
CREDIT AGREEMENT
dated as of May 30, 2001
among
New Rockwell Collins, Inc.
(to be renamed Rockwell Collins, Inc.),
The Banks Listed Herein
and
The Chase Manhattan Bank,
as Agent
J.P. Morgan Securities Inc.,
Sole Lead Arranger and Bookrunner
TABLE OF CONTENTS
PAGE
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ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions................................................................................ 1
SECTION 1.02. Accounting Terms and Determinations........................................................ 11
SECTION 1.03. Types of Borrowings........................................................................ 11
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend........................................................................ 11
SECTION 2.02. Notice of Committed Borrowing.............................................................. 12
SECTION 2.03. Competitive Bid Borrowings................................................................. 12
SECTION 2.04. Notice to Banks; Funding of Loans.......................................................... 16
SECTION 2.05. Notes...................................................................................... 17
SECTION 2.06. Maturity of Loans.......................................................................... 17
SECTION 2.07. Interest Rates............................................................................. 17
SECTION 2.08. Method of Electing Interest Rates.......................................................... 19
SECTION 2.09. Facility Fee............................................................................... 21
SECTION 2.10. Optional Termination or Reduction of Commitments........................................... 21
SECTION 2.11. Scheduled Termination of Commitments....................................................... 21
SECTION 2.12. Optional Prepayments....................................................................... 21
SECTION 2.13. General Provisions as to Payments.......................................................... 22
SECTION 2.14. Funding Losses............................................................................. 22
SECTION 2.15. Computation of Interest and Fees........................................................... 23
SECTION 2.16. Regulation D Compensation.................................................................. 23
SECTION 2.17. Commitment Increase; Additional Banks...................................................... 23
ARTICLE 3
CONDITIONS
SECTION 3.01. Effectiveness.............................................................................. 24
SECTION 3.02. Borrowings................................................................................. 25
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Existence and Power.............................................................. 26
SECTION 4.02. Corporate and Governmental Authorization; No Contravention................................. 26
SECTION 4.03. Binding Effect............................................................................. 26
SECTION 4.04. Financial Information...................................................................... 26
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PAGE
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SECTION 4.05. Litigation................................................................................. 27
SECTION 4.06. Environmental Matters...................................................................... 27
ARTICLE 5
COVENANTS
SECTION 5.01. Information................................................................................ 27
SECTION 5.02. Maintenance of Existence................................................................... 28
SECTION 5.03. Compliance with Laws....................................................................... 28
SECTION 5.04. Use of Proceeds............................................................................ 28
SECTION 5.05. Debt to Capitalization..................................................................... 28
SECTION 5.06. Mergers, Consolidations and Sales of Assets................................................ 28
SECTION 5.07. Limitations on Liens....................................................................... 29
SECTION 5.08. Limitations on Sale and Lease-Back......................................................... 32
SECTION 5.09. Limitations on Change in Subsidiary Status................................................. 33
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default.......................................................................... 34
SECTION 6.02. Notice of Default.......................................................................... 35
ARTICLE 7
THE AGENT
SECTION 7.01. Appointment and Authorization.............................................................. 35
SECTION 7.02. Agent and Affiliates....................................................................... 35
SECTION 7.03. Action by Agent............................................................................ 35
SECTION 7.04. Consultation with Experts.................................................................. 35
SECTION 7.05. Liability of Agent......................................................................... 35
SECTION 7.06. Indemnification............................................................................ 36
SECTION 7.07. Credit Decision............................................................................ 36
SECTION 7.08. Successor Agent............................................................................ 36
SECTION 7.09. Agent's Fee................................................................................ 37
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair................................... 37
SECTION 8.02. Illegality................................................................................. 37
SECTION 8.03. Increased Cost and Reduced Return.......................................................... 38
SECTION 8.04. Taxes...................................................................................... 39
SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans.................................. 41
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PAGE
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ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices........................................................................................ 41
SECTION 9.02. No Waivers..................................................................................... 42
SECTION 9.03. Expenses; Indemnification...................................................................... 42
SECTION 9.04. Sharing of Set-offs............................................................................ 42
SECTION 9.05. Amendments and Waivers......................................................................... 43
SECTION 9.06. Successors and Assigns......................................................................... 43
SECTION 9.07. Designated Lenders............................................................................. 45
SECTION 9.08. Collateral..................................................................................... 46
SECTION 9.09. Governing Law; Submission to Jurisdiction...................................................... 46
SECTION 9.10. Counterparts; Integration...................................................................... 46
SECTION 9.11. Waiver of Jury Trial........................................................................... 46
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Pricing Schedule
Exhibit A - Note Exhibit B - Competitive Bid Quote Request Exhibit C - Invitation for Competitive Bid Quotes Exhibit D - Competitive Bid Quote Exhibit E - Opinion of General Counsel of the Company Exhibit F - Opinion of Special Counsel for the Agent Exhibit G - Assignment and Assumption Agreement Exhibit H - Designation Agreement |
364-DAY
CREDIT AGREEMENT
AGREEMENT dated as of May 30, 2001 among NEW ROCKWELL COLLINS,
|
INC. (to be renamed Rockwell Collins, Inc.), the BANKS listed on the signature pages hereof and THE CHASE MANHATTAN BANK, as Agent.
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have the following meanings:
"ABSOLUTE RATE AUCTION" means a solicitation of Competitive
Bid Quotes setting forth Competitive Bid Absolute Rates pursuant to
Section 2.03.
"ADDITIONAL BANK" means any financial institution that becomes a Bank for purposes hereof in connection with an increase in the aggregate amount of the Commitments pursuant to Section 2.17.
"ADMINISTRATIVE QUESTIONNAIRE" means, with respect to each Bank, an administrative questionnaire in the form prepared by the Agent and submitted to the Agent (with a copy to the Company) duly completed by such Bank.
"AGENT" means The Chase Manhattan Bank in its capacity as agent for the Banks hereunder, and its successors in such capacity.
"APPLICABLE LENDING OFFICE" means, with respect to any Bank,
(i) in the case of its Base Rate Loans, its Domestic Lending Office,
(ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending
Office and (iii) in the case of its Competitive Bid Loans, its
Competitive Bid Lending Office.
"APPROVED FUND" means any Fund that is administered or managed by (i) a Bank, (ii) an affiliate of a Bank or (iii) an entity or an affiliate of an entity that administers or manages a Bank.
"ASSIGNEE" has the meaning set forth in Section 9.06(c).
"BANK" means each bank listed on the signature pages hereof,
each Additional Bank, each Assignee which becomes a Bank pursuant to
Section 9.06(c), and their respective successors.
"BASE RATE" means, for any day, a rate per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal Funds Rate for such day.
"BASE RATE LOAN" means a Committed Loan that bears interest at the Base Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or Article 8.
"BORROWING" has the meaning set forth in Section 1.03.
"COMMISSION" means the Securities and Exchange Commission, or any successor to its duties under the Securities Exchange Act of 1934.
"COMMITMENT" means (i) with respect to each Bank, the amount
set forth opposite the name of such Bank on the signature pages hereof,
(ii) with respect to each Additional Bank which becomes a Bank pursuant
to Section 2.17, the amount of the Commitment thereby assumed by it or
(iii) with respect to any Assignee, the amount of the transferor Bank's
Commitment assigned to such Assignee pursuant to Section 9.06(c), in
each case as such amount may be reduced from time to time pursuant to
Section 2.10, increased from time to time pursuant to Section 2.17 or
changed as a result of an assignment pursuant to Section 9.06(c).
"COMMITTED LOAN" means a Revolving Credit Loan or a Term Loan; provided that, if any such loan or loans (or portions thereof) are combined or subdivided pursuant to a Notice of Interest Rate Election, the term "Committed Loan" shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be.
"COMPANY" means New Rockwell Collins, Inc. (to be renamed Rockwell Collins, Inc.), a Delaware corporation incorporated in March 2001, and its successors.
"COMPANY'S INFORMATION STATEMENT" means the Information Statement on Form 10, as filed by the Company with the SEC on April 12, 2001 in connection with the Contribution and the Distribution.
"COMPETITIVE BID ABSOLUTE RATE" has the meaning set forth in
Section 2.03(d).
"COMPETITIVE BID ABSOLUTE RATE LOAN" means a loan made or to be made by a Bank pursuant to an Absolute Rate Auction.
"COMPETITIVE BID LENDING OFFICE" means, as to each Bank, its Domestic Lending Office or such other office, branch or affiliate of such Bank as it may hereafter designate as its Competitive Bid Lending Office by notice to the Company and the Agent; provided that any Bank may from time to time by notice to the Company and the Agent designate separate Competitive Bid Lending
Offices for its Competitive Bid LIBOR Loans, on the one hand, and its Competitive Bid Absolute Rate Loans, on the other hand, in which case all references herein to the Competitive Bid Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require.
"COMPETITIVE BID LIBOR LOAN" means a loan made or to be made by a Bank pursuant to a LIBOR Auction (including such a loan bearing interest at the Base Rate pursuant to Section 8.01(a)).
"COMPETITIVE BID LOAN" means a Competitive Bid LIBOR Loan or a Competitive Bid Absolute Rate Loan.
"COMPETITIVE BID MARGIN" has the meaning set forth in Section 2.03(d).
"COMPETITIVE BID QUOTE" means an offer by a Bank to make a Competitive Bid Loan in accordance with Section 2.03.
"CONSOLIDATED DEBT" means, at any date, the Debt of the Company and its Restricted Subsidiaries, as consolidated and determined as of such date in accordance with GAAP.
"CONSOLIDATED FUNDED DEBT" means, at any date, the Funded Debt of the Company and its Restricted Subsidiaries, as consolidated and determined as of such date in accordance with GAAP.
"CONSOLIDATED SUBSIDIARY" means, as to any Person, at any date any Subsidiary or other entity the accounts of which would be consolidated with those of such Person in its consolidated financial statements if such statements were prepared as of such date.
"CONTRIBUTION" means the contribution by Rockwell International of Rockwell Collins to the Company, as more fully described in the Company's Information Statement.
"DEBT" of any Person means, at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments, (iii) all obligations of such Person to pay
the deferred purchase price of property or services, except trade
accounts payable arising in the ordinary course of business, (iv) all
obligations of such Person as lessee which are capitalized in
accordance with GAAP, (v) all non-contingent obligations of such Person
to reimburse any bank or other Person in respect of amounts paid under
a letter of credit or similar instrument, (vi) all Debt secured by a
Lien on any asset of such Person, whether or not such Debt is otherwise
an obligation of such Person, and (vii) all Guarantees by such Person
of Debt of another Person (each such Guarantee to constitute Debt in an
amount equal to the amount of such other Person's Debt Guaranteed
thereby).
"DEFAULT" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default.
"DESIGNATED LENDER" means, with respect to any Designating Lender, an Eligible Designee designated by it pursuant to Section 9.07(a) as a Designated Lender for purposes of this Agreement.
"DESIGNATING LENDER" means, with respect to each Designated
Lender, the Bank that designated such Designated Lender pursuant to
Section 9.07(a).
"DISTRIBUTION" means the pro rata distribution of all the issued and outstanding shares of common stock of the Company to the shareowners of Rockwell International, as described in the Company's Information Statement.
"DOMESTIC BUSINESS DAY" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close.
"DOMESTIC LENDING OFFICE" means, as to each Bank, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Bank may hereafter designate as its Domestic Lending Office by notice to the Company and the Agent.
"EFFECTIVE DATE" means the date this Agreement becomes effective in accordance with Section 3.01.
"ELIGIBLE DESIGNEE" means a special purpose corporation that
(i) is organized under the laws of the United States or any state
thereof, (ii) is engaged in making, purchasing or otherwise investing
in commercial loans in the ordinary course of its business and (iii)
issues (or the parent of which issues) commercial paper rated at least
A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent
thereof by Moody's.
"ENVIRONMENTAL LAWS" means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to the environment or the effect of the environment on human health or to emissions, discharges or releases of pollutants, contaminants, Hazardous Substances or wastes into the environment, including (without limitation) ambient air, surface water, ground water or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, Hazardous Substances or wastes or the clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute.
"EURO-DOLLAR BUSINESS DAY" means any Domestic Business Day on which commercial banks are open for international business (including dealings in dollar deposits) in London.
"EURO-DOLLAR LENDING OFFICE" means, as to each Bank, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Dollar Lending Office) or such other office, branch or affiliate of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Company and the Agent.
"EURO-DOLLAR LOAN" means a Committed Loan that bears interest at a Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election.
"EURO-DOLLAR MARGIN" has the meaning set forth in Section 2.07(b).
"EURO-DOLLAR RATE" means a rate of interest determined pursuant to Section 2.07(b) on the basis of the London Interbank Offered Rate.
"EURO-DOLLAR REFERENCE BANKS" means the principal London offices of The Chase Manhattan Bank, Bank of America, N.A. and Citibank, N.A., and "Euro-Dollar Reference Bank" means any of the foregoing.
"EURO-DOLLAR RESERVE PERCENTAGE" has the meaning set forth in
Section 2.16.
"EVENTS OF DEFAULT" has the meaning set forth in Section 6.01.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day, provided that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to The Chase Manhattan Bank on such day on such transactions as determined by the Agent.
"FINAL MATURITY DATE" means the first anniversary of the Termination Date or, if such day is not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day.
"FIXED RATE LOANS" means Euro-Dollar Loans or Competitive Bid Loans (excluding Competitive Bid LIBOR Loans bearing interest at the Base Rate pursuant to Section 8.01(a)) or any combination of the foregoing.
"FUND" means any Person (other than a natural Person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.
"FUNDED DEBT" of any Person means, at any date of computation, all indebtedness for borrowed money of such Person which by its terms matures more than 12 months after such date or which is extendible or renewable at the option of such Person to a time more than 12 months after such date; provided, however, that (i) Funded Debt shall include all obligations in respect of lease rentals which under GAAP appear on a balance sheet of such Person as a liability item other than a current liability, (ii) in the case of the Company, Funded Debt shall not include Subordinated Debt and (iii) outstanding preferred stock of a Restricted Subsidiary that is not owned by the Company or a Wholly-Owned Restricted Subsidiary shall be deemed to constitute a principal amount of Funded Debt equal to the par value or involuntary liquidation value, whichever amount is higher, of such preferred stock.
"GAAP" means generally accepted accounting principles as in effect from time to time, applied on a basis consistent (except for changes concurred in by the Company's independent public accountants) with the most recent audited consolidated financial statements of the Company and its Consolidated Subsidiaries delivered to the Banks.
"GROUP OF LOANS" means, at any time, a group of Loans consisting of (i) all Committed Loans which are Base Rate Loans at such time or (ii) all Euro-Dollar Loans having the same Interest Period at such time; provided that, if a Committed Loan of any particular Bank is converted to or made as a Base Rate Loan pursuant to Article 8, such Loan shall be included in the same Group or Groups of Loans from time to time as it would have been in if it had not been so converted or made.
"GUARANTEE" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt of any other Person; provided that the term "GUARANTEE" shall not include endorsements for collection or deposit in the ordinary course of business. The term "GUARANTEE" used as a verb has a corresponding meaning.
"HAZARDOUS SUBSTANCES" means any toxic, radioactive, caustic or otherwise hazardous substance, including petroleum, its derivatives and by-products and other hydrocarbons, or any substance having any constituent elements displaying any of the foregoing characteristics.
"INDEMNITEE" has the meaning set forth in Section 9.03(b).
"INTEREST PERIOD" means: (1) with respect to each Euro-Dollar Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing or on the date specified in an applicable Notice of Interest Rate Election and ending one, two, three or six months thereafter, as the Company may elect in such notice; provided that:
(a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; and
(b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Euro-Dollar Business Day of a calendar month;
(2) with respect to each Competitive Bid LIBOR Borrowing, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending such whole number of months thereafter as the Company may elect in accordance with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; and
(b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Euro-Dollar Business Day of a calendar month;
(3) with respect to each Competitive Bid Absolute Rate Borrowing, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending such number of days thereafter (but not less than 7 days) as the Company may elect in accordance with Section 2.03; provided that any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; provided further that:
(x) no Interest Period applicable to any Revolving Credit Loan or Competitive Bid Loan may end after the Termination Date; and
(y) no Interest Period applicable to any Term Loan may end after the Final Maturity Date.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as amended, or any successor statute.
"LIBOR AUCTION" means a solicitation of Competitive Bid Quotes setting forth Competitive Bid Margins based on the London Interbank Offered Rate pursuant to Section 2.03.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, or any other type of preferential arrangement that has substantially the same practical effect as a security interest, in respect of such asset. For purposes hereof, the Company or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset.
"LOAN" means a Committed Loan or a Competitive Bid Loan and "LOANS" means Committed Loans or Competitive Bid Loans or any combination of the foregoing.
"LONDON INTERBANK OFFERED RATE" has the meaning set forth in
Section 2.07(b).
"MATERIAL DEBT" means a Single Issue (other than the Notes) of the Company and/or one or more of its Subsidiaries in a principal amount exceeding $50,000,000.
"NOTES" means promissory notes of the Company, substantially in the form of Exhibit A hereto, evidencing the obligation of the Company to repay the Loans, and "NOTE" means any one of such promissory notes issued hereunder.
"NOTICE OF BORROWING" means a Notice of Committed Borrowing (as defined in Section 2.02) or a Notice of Competitive Bid Borrowing (as defined in Section 2.03(f)).
"NOTICE OF INTEREST RATE ELECTION" has the meaning specified in Section 2.09.
"PARENT" means, with respect to any Bank, any Person controlling such Bank.
"PARTICIPANT" has the meaning set forth in Section 9.06(b).
"PERSON" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.
"PRICING SCHEDULE" means the Schedule attached hereto identified as such.
"PRIME RATE" means the rate of interest publicly announced by The Chase Manhattan Bank from time to time as its Prime Rate.
"PRINCIPAL PROPERTY" means any real property (including buildings and other improvements) of the Company or any Restricted Subsidiary whether currently owned or hereafter acquired (other than any property hereafter acquired
for the control or abatement of atmospheric pollutants or contaminants or water, noise, odor or other pollution, or for purposes of developing a cogeneration facility or a small power production facility as such terms are defined in the Public Utility Regulatory Policies Act of 1978, as amended) which (i) has, at any date of determination, a book value in excess of 5% of Shareowners' Equity and (ii) in the opinion of the board of directors of the Company (or any duly authorized committee thereof) is of material importance to the total business conducted by the Company and its Restricted Subsidiaries as a whole.
"QUARTERLY PAYMENT DATES" means each March 31, June 30, September 30 and December 31.
"REGULATION T, U OR X" means Regulation T, U or X of the Board of Governors of the Federal Reserve System, as in effect from time to time.
"REQUIRED BANKS" means at any time Banks having more than 50% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, holding more than 50% of the aggregate unpaid principal amount of the Loans.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company other than an Unrestricted Subsidiary.
"REVOLVING CREDIT LOAN" means a loan made by a Bank pursuant to Section 2.01(a).
"REVOLVING CREDIT PERIOD" means the period from and including the Effective Date to but excluding the Termination Date.
"ROCKWELL COLLINS" means the avionics and communications business and certain other assets and liabilities of Rockwell International.
"ROCKWELL INTERNATIONAL" means Rockwell International Corporation, a Delaware corporation.
"SEC" means the Securities and Exchange Commission.
"SECURED DEBT" means indebtedness for borrowed money of the Company or a Restricted Subsidiary (other than indebtedness owed by a Restricted Subsidiary to the Company, by a Restricted Subsidiary to another Restricted Subsidiary or by the Company to a Restricted Subsidiary), which is secured by (a) a mortgage or other lien on any Principal Property of the Company or a Restricted Subsidiary or (b) a pledge, lien or other security interest on any shares of stock or indebtedness of a Restricted Subsidiary. The amount of Secured Debt at any time outstanding shall be the amount then owing thereon by the Company or a Restricted Subsidiary.
"SHAREOWNERS' EQUITY" means, at any date of computation, the aggregate of capital stock, capital surplus and earned surplus, after deducting the cost of
shares of capital stock of the Company held in its treasury, of the Company and its Restricted Subsidiaries, as consolidated and determined in accordance with GAAP.
"SALE AND LEASE-BACK TRANSACTION" has the meaning specified in
Section 5.08.
"SINGLE ISSUE" means indebtedness for borrowed money arising in a single transaction or a series of related transactions. Indebtedness issued in discrete offerings but governed by a single shelf indenture shall not be aggregated as a Single Issue, but indebtedness owing to multiple lenders under parallel agreements comprising a single private placement and indebtedness arising from multiple takedowns under a single or a series of related commitments from one or more lenders shall be so aggregated.
"SUBORDINATED DEBT" means any unsecured Debt of the Company
which: (1) has a final maturity subsequent to the Final Maturity Date;
(2) does not provide for mandatory payment or retirement prior to said
date, whether by means of serial maturities or sinking fund or other
analogous provisions or plan, fixed or contingent, requiring, or which
on the happening of a contingency may require, the payment or
retirement of such Debt in amounts which as of any particular time
would aggregate more than such portion of the original principal amount
thereof as is obtained by multiplying such original principal amount by
a fraction the numerator of which shall be the number of months elapsed
from the date of creation of such Debt to such time and the denominator
of which shall be the number of months from the date of creation
thereof to the final maturity thereof; and (3) is expressly made
subordinate and junior in right of payment to the Loans and such other
Debt of the Company (except other Subordinated Debt) as may be
specified in the instruments evidencing the Subordinated Debt or the
indenture or other similar instrument under which it is issued (which
indenture or other instrument shall be binding on all holders of such
Subordinated Debt).
"SUBSIDIARY" means, as to any Person, any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person; unless otherwise specified, "SUBSIDIARY" means a Subsidiary of the Company.
"TERMINATION DATE" means May 29, 2002, or, if such day is not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day.
"TERM LOAN" means a loan made by a Bank pursuant to Section 2.01(b).
"TOTAL CAPITALIZATION" means, at any date, the sum (without duplication) of (i) Consolidated Debt as of such date and (ii) all preferred stock of the Company and its Restricted Subsidiaries and the consolidated shareowners' equity of the Company and its Restricted Subsidiaries as of the date of the Company's most recent financial statements referred to in Section 4.04 or delivered pursuant to Section 5.01.
"UNITED STATES" means the United States of America, including the States and the District of Columbia, but excluding its territories and possessions.
"UNRESTRICTED SUBSIDIARY" means (a) any Subsidiary which, in accordance with the provisions of this Agreement, has been designated by the Company as an Unrestricted Subsidiary after the Effective Date, unless and until such Subsidiary shall, in accordance with the provisions of this Agreement, be designated by the Company as a Restricted Subsidiary; and (b) any corporation of which any one or more Unrestricted Subsidiaries directly or indirectly own outstanding shares of capital stock having voting power sufficient to elect, under ordinary circumstances (not dependent upon the happening of a contingency), a majority of the directors.
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" means a Restricted Subsidiary all of the outstanding capital stock of which, other than directors' qualifying shares, and all of the Funded Debt of which, shall at the time be owned by the Company or by one or more Wholly-Owned Restricted Subsidiaries, or by the Company in conjunction with one or more Wholly-Owned Restricted Subsidiaries.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with GAAP.
SECTION 1.03. Types of Borrowings. The term "BORROWING" denotes the aggregation of Loans of one or more Banks to be made to the Company pursuant to Article 2 on a single date, all of which Loans are of the same type (subject to Article 8) and, except in the case of Base Rate Loans, have the same initial Interest Period. Borrowings are classified for purposes of this Agreement either by reference to the pricing of Loans comprising such Borrowing (e.g., a "EURO-DOLLAR BORROWING" is a Borrowing comprised of Euro-Dollar Loans) or by reference to the provisions of Article 2 under which participation therein is determined (i.e., a "COMMITTED BORROWING" is a Borrowing under Section 2.01 in which all Banks participate in proportion to their Commitments, while a "COMPETITIVE BID BORROWING" is a Borrowing under Section 2.03 in which the Bank participants are determined on the basis of their bids in accordance therewith).
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend. (a) During the Revolving Credit Period each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make loans to the Company pursuant to this Section from time to
time in amounts such that the aggregate principal amount of Committed
Loans by such Bank at any one time outstanding shall not exceed the
amount of its Commitment. Within the foregoing limits, the Company may
borrow under this Section 2.01(a), repay, or to the extent permitted by
Section 2.12, prepay Loans and reborrow at any time during the
Revolving Credit Period under this Section 2.01(a).
(b) Each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make a loan to the Company on the Termination Date in an amount up to but not exceeding the amount of its Commitment. Amounts of any Loans made pursuant to this Section 2.01(b) which are prepaid pursuant to Section 2.12 shall not be reborrowed.
(c) Each Borrowing under this Section 2.01 shall be in an aggregate principal amount of $25,000,000 or any larger multiple of $1,000,000 (except that any such Borrowing may be in the aggregate amount available in accordance with Section 3.02(b)) and shall be made from the several Banks ratably in proportion to their respective Commitments.
SECTION 2.02. Notice of Committed Borrowing. The Company shall give the Agent notice (a "NOTICE OF COMMITTED BORROWING") not later than 10:30 A.M. (New York City time) on (x) the date of each Base Rate Borrowing and (y) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying:
(a) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Base Rate Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing,
(b) the aggregate amount of such Borrowing,
(c) whether the Loans comprising such Borrowing are to bear interest initially at the Base Rate or a Euro-Dollar Rate, and
(d) in the case of a Euro-Dollar Borrowing, the duration of the initial Interest Period applicable thereto, subject to the provisions of the definition of Interest Period.
SECTION 2.03. Competitive Bid Borrowings. (a) The Competitive Bid Option. In addition to Committed Borrowings pursuant to Section 2.01, the Company may, as set forth in this Section, request the Banks during the Revolving Credit Period to make offers to make Competitive Bid Loans to the Company. The Banks may, but shall have no obligation to, make such offers and the Company may, but shall have no obligation to, accept any such offers in the manner set forth in this Section.
(b) Competitive Bid Quote Request. When the Company wishes to request offers to make Competitive Bid Loans under this Section, it shall transmit to the Agent by telex or facsimile transmission a Competitive Bid Quote Request
substantially in the form of Exhibit B hereto so as to be received no later than 10:30 A.M. (New York City time) on (x) the fifth Euro-Dollar Business Day prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction or (y) the Domestic Business Day next preceding the date of Borrowing proposed therein, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Company and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Competitive Bid Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective) specifying:
(i) the proposed date of Borrowing, which shall be a Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic Business Day in the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be $25,000,000 or a larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period, and
(iv) whether the Competitive Bid Quotes requested are to set forth a Competitive Bid Margin or a Competitive Bid Absolute Rate.
The Company may request offers to make Competitive Bid Loans for more than one Interest Period in a single Competitive Bid Quote Request. No Competitive Bid Quote Request shall be given within five Euro-Dollar Business Days (or such other number of days as the Company and the Agent may agree) of any other Competitive Bid Quote Request.
(c) Invitation for Competitive Bid Quotes. Promptly upon receipt of a Competitive Bid Quote Request, the Agent shall send to the Banks by telex or facsimile transmission an Invitation for Competitive Bid Quotes substantially in the form of Exhibit C hereto, which shall constitute an invitation by the Company to each Bank to submit Competitive Bid Quotes offering to make the Competitive Bid Loans to which such Competitive Bid Quote Request relates in accordance with this Section.
(d) Submission and Contents of Competitive Bid Quotes. (i) Each Bank may submit a Competitive Bid Quote containing an offer or offers to make Competitive Bid Loans in response to any Invitation for Competitive Bid Quotes. Each Competitive Bid Quote must comply with the requirements of this subsection (d) and must be submitted to the Agent by telex or facsimile transmission at its offices specified in or pursuant to Section 9.01 not later than (x) 2:00 P.M. (New York City time) on the fourth Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) 9:30 A.M. (New York City time) on the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Company and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Competitive Bid Quote Request for the first LIBOR
Auction or Absolute Rate Auction for which such change is to be effective); provided that Competitive Bid Quotes submitted by the Agent (or any affiliate of the Agent) in the capacity of a Bank may be submitted, and may only be submitted, if the Agent or such affiliate notifies the Company of the terms of the offer or offers contained therein not later than (x) one hour prior to the deadline for the other Banks, in the case of a LIBOR Auction or (y) 15 minutes prior to the deadline for the other Banks, in the case of an Absolute Rate Auction. Subject to Articles 3 and 6, any Competitive Bid Quote so made shall be irrevocable except with the written consent of the Agent given on the instructions of the Company.
(ii) Each Competitive Bid Quote shall be in substantially the form of Exhibit D hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Competitive Bid Loan for which each such offer is being made, which principal amount (w) may be greater than or less than the Commitment of the quoting Bank, (x) must be $5,000,000 or a larger multiple of $1,000,000, (y) may not exceed the principal amount of Competitive Bid Loans for which offers were requested and (z) may be subject to an aggregate limitation as to the principal amount of Competitive Bid Loans for which offers being made by such quoting Bank may be accepted,
(C) in the case of a LIBOR Auction, the margin above or below the applicable London Interbank Offered Rate (the "COMPETITIVE BID MARGIN") offered for each such Competitive Bid Loan, expressed as a percentage (specified to the nearest 1/10,000th of 1%) to be added to or subtracted from such base rate,
(D) in the case of an Absolute Rate Auction, the rate of interest per annum (specified to the nearest 1/10,000th of 1%) (the "COMPETITIVE BID ABSOLUTE RATE") offered for each such Competitive Bid Loan, and
(E) the identity of the quoting Bank.
A Competitive Bid Quote may set forth up to five separate offers by the quoting Bank with respect to each Interest Period specified in the related Invitation for Competitive Bid Quotes.
(iii) Any Competitive Bid Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit D hereto or does not specify all of the information required by subsection (d)(ii);
(B) contains qualifying, conditional or similar language;
(C) proposes terms other than or in addition to those set forth in the applicable Invitation for Competitive Bid Quotes; or
(D) arrives after the time set forth in subsection (d)(i).
(e) Notice to Company. The Agent shall promptly notify the Company of the terms (x) of any Competitive Bid Quote submitted by a Bank that is in accordance with subsection (d) and (y) of any Competitive Bid Quote that amends, modifies or is otherwise inconsistent with a previous Competitive Bid Quote submitted by such Bank with respect to the same Competitive Bid Quote Request. Any such subsequent Competitive Bid Quote shall be disregarded by the Agent unless such subsequent Competitive Bid Quote is submitted solely to correct a manifest error in such former Competitive Bid Quote. The Agent's notice to the Company shall specify (A) the aggregate principal amount of Competitive Bid Loans for which offers have been received for each Interest Period specified in the related Competitive Bid Quote Request, (B) the respective principal amounts and Competitive Bid Margins or Competitive Bid Absolute Rates, as the case may be, so offered and (C) if applicable, limitations on the aggregate principal amount of Competitive Bid Loans for which offers in any single Competitive Bid Quote may be accepted.
(f) Acceptance and Notice by Company. Not later than 10:30
A.M. (New York City time) on (x) the third Euro-Dollar Business Day
prior to the proposed date of Borrowing, in the case of a LIBOR Auction
or (y) the proposed date of Borrowing, in the case of an Absolute Rate
Auction (or, in either case, such other time or date as the Company and
the Agent shall have mutually agreed and shall have notified to the
Banks not later than the date of the Competitive Bid Quote Request for
the first LIBOR Auction or Absolute Rate Auction for which such change
is to be effective), the Company shall notify the Agent of its
acceptance or non-acceptance of the offers so notified to it pursuant
to subsection (e). In the case of acceptance, such notice (a "NOTICE OF
COMPETITIVE BID BORROWING") shall specify the aggregate principal
amount of offers for each Interest Period that are accepted. A failure
by the Company to notify the Agent as aforesaid shall constitute
non-acceptance of the offers so notified to it. The Company may accept
any Competitive Bid Quote in whole or in part; provided that:
(i) the aggregate principal amount of each Competitive Bid Borrowing may not exceed the applicable amount set forth in the related Competitive Bid Quote Request,
(ii) the principal amount of each Competitive Bid Borrowing must be $25,000,000 or a larger multiple of $1,000,000,
(iii) acceptance of offers may only be made on the basis of ascending Competitive Bid Margins or Competitive Bid Absolute Rates, as the case may be, and
(iv) the Company may not accept any offer that is described in subsection (d)(iii) or that otherwise fails to comply with the requirements of this Agreement.
(g) Allocation by Agent. If offers are made by two or more Banks with the same Competitive Bid Margins or Competitive Bid Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Competitive Bid Loans in respect of which such offers are accepted shall be allocated by the Agent among such Banks as nearly as possible (in multiples of $1,000,000, as the Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determinations by the Agent of the amounts of Competitive Bid Loans shall be conclusive in the absence of manifest error.
SECTION 2.04. Notice to Banks; Funding of Loans. (a) Upon receipt of a Notice of Borrowing, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's share (if any) of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Company.
(b) Not later than 12:00 Noon (New York City time) on the date of each Borrowing, each Bank participating therein shall (except as provided in subsection (c) of this Section) make available its share of such Borrowing, in Federal or other funds immediately available in New York City, to the Agent at its address referred to in Section 9.01. Unless the Agent determines that any applicable condition specified in Article 3 has not been satisfied, the Agent will make the funds so received from the Banks available to the Company at the Agent's aforesaid address.
(c) If any Bank makes a Term Loan hereunder on a day on which the Company is to repay all or any part of an outstanding Revolving Credit Loan from such Bank, such Bank shall apply the proceeds of its Term Loan to make such repayment and only an amount equal to the difference (if any) between the amount being borrowed and the amount being repaid shall be made available by such Bank to the Agent as provided in subsection (b), or remitted by the Company to the Agent as provided in Section 2.12, as the case may be.
(d) Unless the Agent shall have received notice from a Bank prior to the date of any Borrowing (or, in the case of a Base Rate Borrowing, prior to 12:00 Noon (New York City time) on the date of such Borrowing) that such Bank will not make available to the Agent such Bank's share of such Borrowing, the Agent may assume that such Bank has made such share available to the Agent on the date of such Borrowing in accordance with subsections (b) and (c) of this Section 2.04 and the Agent may, in reliance upon such assumption, make available to the Company on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Agent, such Bank and the Company severally agree to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Company until the date such amount is repaid to the Agent, at (i) in the case of the Company, a rate per annum equal to the higher of the Federal Funds Rate and the interest rate applicable thereto pursuant to Section 2.07 and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Bank's Loan included in such Borrowing for purposes of this Agreement.
SECTION 2.05. Notes. (a) Each Bank may, by notice to the Company and the Agent, request that (i) its Loans be evidenced by a single Note payable to the order of such Bank for the account of its Applicable Lending Office in an amount equal to the aggregate unpaid principal amount of such Bank's Loans or (ii) its Loans of a particular type or types be evidenced by a separate Note in an amount equal to the aggregate unpaid principal amount of such Loans. Each reference in this Agreement to the "NOTE" of such Bank shall be deemed to refer to and include any or all of such Notes, as the context may require.
(b) Upon receipt of each Bank's Note pursuant to Section 3.01(b), the Agent shall forward such Note to such Bank. Each Bank shall record the date, amount, type and maturity of each Loan made by it and the date and amount of each payment of principal made by the Company with respect thereto, and may, if such Bank so elects in connection with any transfer or enforcement of its Note, endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding; provided that the failure of any Bank to make, or any error in making, any such recordation or endorsement shall not affect the obligations of the Company hereunder or under the Notes. Each Bank is hereby irrevocably authorized by the Company so to endorse its Note and to attach to and make a part of its Note a continuation of any such schedule as and when required. The Agent shall also record the date, amount, type and maturity of each Loan made by any Bank hereunder and the date and amount of each payment of principal made by the Company to the Agent with respect thereto.
SECTION 2.06. Maturity of Loans. (a) Each Revolving Credit Loan shall mature, and the principal amount thereof shall be due and payable (together with interest accrued thereon) on the Termination Date.
(b) Each Term Loan shall mature, and the principal amount thereof shall be due and payable (together with accrued interest thereon) on the Final Maturity Date.
(c) Each Competitive Bid Loan shall mature, and the principal amount thereof shall be due and payable (together with accrued interest thereon) on the last day of the Interest Period applicable thereto.
SECTION 2.07. Interest Rates. (a) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the Base Rate for such
day. Such interest shall be payable at maturity, quarterly in arrears on each Quarterly Payment Date and, with respect to the principal amount of any Base Rate Loan that is prepaid or converted to a Euro-Dollar Loan, on the date of such prepayment or conversion. Any overdue principal of or interest on any Base Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the rate otherwise applicable to Base Rate Loans for such day.
(b) Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for each day during each Interest Period applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such day plus the London Interbank Offered Rate applicable to such Interest Period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof.
"EURO-DOLLAR MARGIN" means a rate per annum determined in accordance with the Pricing Schedule.
The "LONDON INTERBANK OFFERED RATE" applicable to any Interest Period means the rate per annum appearing on the Screen at approximately 11:00 a.m. (London time) two Euro-Dollar Business Days before the first day of such Interest Period as the rate per annum for deposits in dollars with a maturity comparable to such Interest Period. If no rate appears on the Screen for the necessary period, then the "London Interbank Offered Rate" with respect to such Interest Period shall be the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which deposits in dollars are offered by each of the Euro-Dollar Reference Banks in the London interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period.
The "SCREEN" means Telerate Page 3750; provided that the Agent may nominate an alternative source of screen rates if such page is replaced by another which displays rates for inter-bank deposits offered by leading banks in London.
(c) Any overdue principal of or interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the higher of (i) the sum of 2% plus the Euro-Dollar Margin for such day plus the London Interbank Offered Rate applicable to the Interest Period for such Loan and (ii) the sum of 2% plus the Euro-Dollar Margin for such day plus the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (x) the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which one day (or, if such amount due remains unpaid more than three Euro-Dollar Business Days, then for such other period of time not longer than six months as the Agent may select) deposits in
dollars in an amount approximately equal to such overdue payment due to
each of the Euro-Dollar Reference Banks are offered by such Euro-Dollar
Reference Bank in the London interbank market for the applicable period
determined as provided above by (y) 1.00 minus the Euro-Dollar Reserve
Percentage (or, if the circumstances described in clause (a) or (b) of
Section 8.01 shall exist, at a rate per annum equal to the sum of 2%
plus the rate applicable to Base Rate Loans for such day).
(d) Subject to Section 8.01(a), each Competitive Bid LIBOR Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the London Interbank Offered Rate for such Interest Period (determined in accordance with Section 2.07(b) as if the related Competitive Bid LIBOR Borrowing were a Committed Euro-Dollar Borrowing) plus (or minus) the Competitive Bid Margin quoted by the Bank making such Loan in accordance with Section 2.03. Each Competitive Bid Absolute Rate Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the Competitive Bid Absolute Rate quoted by the Bank making such Loan in accordance with Section 2.03. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. Any overdue principal of or interest on any Competitive Bid Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the Base Rate for such day.
(e) The Agent shall determine each interest rate applicable to the Loans hereunder. The Agent shall give prompt notice to the Company and the participating Banks of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error.
(f) Each Euro-Dollar Reference Bank agrees to use its best efforts to furnish quotations to the Agent as contemplated by this Section. If any Euro-Dollar Reference Bank does not furnish a timely quotation, the Agent shall determine the relevant interest rate on the basis of the quotation or quotations furnished by the remaining Euro-Dollar Reference Bank or Banks or, if none of such quotations is available on a timely basis, the provisions of Section 8.01 shall apply.
SECTION 2.08. Method of Electing Interest Rates. (a) The Loans included in each Committed Borrowing shall bear interest initially at the type of rate specified by the Company in the applicable Notice of Committed Borrowing. Thereafter, the Company may from time to time elect to change or continue the type of interest rate borne by each Group of Loans (subject to Section 2.08(d) and the provisions of Article 8), as follows:
(i) if such Loans are Base Rate Loans, the Company may elect to convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business Day; and
(ii) if such Loans are Euro-Dollar Loans, the Company may elect to convert such Loans to Base Rate Loans or continue such Loans as Euro-Dollar Loans for an additional Interest Period, in each case as of the last day of the then current Interest Period applicable thereto.
Each such election shall be made by delivering a notice (a "NOTICE OF INTEREST RATE ELECTION") to the Agent not later than 12:00 noon (New York City time) on the third Euro-Dollar Business Day before the conversion or continuation selected in such notice is to be effective. A Notice of Interest Rate Election may, if it so specifies, apply to only a portion of the aggregate principal amount of the relevant Group of Loans; provided that (i) such portion is allocated ratably among the Loans comprising such Group and (ii) the portion to which such Notice applies, and the remaining portion to which it does not apply, are each at least $25,000,000 (unless such portion is comprised of Base Rate Loans). If no such notice is timely received before the end of an Interest Period for any Group of Euro-Dollar Loans, the Company shall be deemed to have elected that, at the end of such Interest Period, such Group of Loans be continued as Euro-Dollar Loans for an additional Interest Period of one month (subject to the provisions of the definition of Interest Period).
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such notice applies;
(ii) the date on which the conversion or continuation selected in such notice is to be effective, which shall comply with the applicable clause of Section 2.08(a);
(iii) if the Loans comprising such Group are to be converted, the new type of Loans and, if the Loans resulting from such conversion are to be Euro-Dollar Loans, the duration of the next succeeding Interest Period applicable thereto; and
(iv) if such Loans are to be continued as Euro-Dollar Loans for an additional Interest Period, the duration of such additional Interest Period.
Each Interest Period specified in a Notice of Interest Rate Election shall comply with the provisions of the definition of Interest Period.
(c) Promptly after receiving a Notice of Interest Rate Election from the Company pursuant to Section 2.08(a), the Agent shall notify each Bank of the contents thereof and such notice shall not thereafter be revocable by the Company.
(d) The Company shall not be entitled to elect to convert any Committed Loans to, or continue any Committed Loans for an additional Interest Period as, Euro-Dollar Loans if (i) the aggregate principal amount of any Group of Euro-Dollar Loans created or continued as a result of such election would be less than
$25,000,000 or (ii) a Default shall have occurred and be continuing when the Company delivers notice of such election to the Agent.
(e) If any Committed Loan is converted to a different type of Loan, the Company shall pay, on the date of such conversion, the interest accrued to such date on the principal amount being converted.
SECTION 2.09. Facility Fee. The Company shall pay to the Agent for the account of the Banks ratably a facility fee at the Facility Fee Rate (determined daily in accordance with the Pricing Schedule). Such facility fee shall accrue (i) from and including the Effective Date to but excluding the Termination Date (or earlier date of termination of the Commitments in their entirety), on the daily aggregate amount of the Commitments (whether used or unused) and (ii) from and including the Termination Date or such earlier date of termination to but excluding the date the Loans shall be repaid in their entirety, on the daily aggregate outstanding principal amount of the Loans. Accrued fees under this Section shall be payable quarterly in arrears on each Quarterly Payment Date and upon the date of termination of the Commitments in their entirety (and, if later, the date the Loans shall be repaid in their entirety).
SECTION 2.10. Optional Termination or Reduction of Commitments. During the Revolving Credit Period, the Company may, upon at least three Domestic Business Days' notice to the Agent, (i) terminate the Commitments at any time, if no Loans are outstanding at such time or (ii) ratably reduce from time to time by an aggregate amount of $25,000,000 or any larger multiple thereof, the aggregate amount of the Commitments in excess of the aggregate outstanding principal amount of the Loans.
SECTION 2.11. Scheduled Termination of Commitments. The Commitments shall terminate on the Termination Date.
SECTION 2.12. Optional Prepayments. (a) Subject in the case of any Euro-Dollar Loans to Section 2.14, the Company may (i) upon at least one Domestic Business Day's notice to the Agent, prepay any Group of Base Rate Loans (or any Competitive Bid Borrowing bearing interest at the Base Rate pursuant to Section 8.01(a)) or (ii) upon at least three Euro-Dollar Business Days' notice to the Agent, prepay any Group of Euro-Dollar Loans, in each case in whole at any time, or from time to time in part in amounts aggregating $25,000,000 or any larger multiple of $1,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. Each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in such Group (or Borrowing).
(b) Except as provided in Section 2.12(a), the Company may not prepay all or any portion of the principal amount of any Competitive Bid Loan prior to the maturity thereof.
(c) Upon receipt of a notice of prepayment pursuant to this Section, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's
ratable share (if any) of such prepayment and such notice shall not thereafter be revocable by the Company.
SECTION 2.13. General Provisions as to Payments. (a) The
Company shall make each payment of principal of, and interest on, the
Loans and of fees hereunder, not later than 12:00 Noon (New York City
time) on the date when due, in Federal or other funds immediately
available in New York City, to the Agent at its address referred to in
Section 9.01. The Agent will promptly distribute to each Bank its
ratable share of each such payment received by the Agent for the
account of the Banks. Whenever any payment of principal of, or interest
on, the Base Rate Loans or of fees shall be due on a day which is not a
Domestic Business Day, the date for payment thereof shall be extended
to the next succeeding Domestic Business Day. Whenever any payment of
principal of, or interest on, the Euro-Dollar Loans shall be due on a
day which is not a Euro-Dollar Business Day, the date for payment
thereof shall be extended to the next succeeding Euro-Dollar Business
Day unless such Euro-Dollar Business Day falls in another calendar
month, in which case the date for payment thereof shall be the next
preceding Euro-Dollar Business Day. Whenever any payment of principal
of, or interest on, the Competitive Bid Loans shall be due on a day
which is not a Euro-Dollar Business Day, the date for payment thereof
shall be extended to the next succeeding Euro-Dollar Business Day. If
the date for any payment of principal is extended by operation of law
or otherwise, interest thereon shall be payable for such extended time.
(b) Unless the Agent shall have received notice from the Company prior to the date on which any payment is due to the Banks hereunder that the Company will not make such payment in full, the Agent may assume that the Company has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent that the Company shall not have so made such payment, each Bank shall repay to the Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Agent, at the Federal Funds Rate.
SECTION 2.14. Funding Losses. If the Company makes any payment of principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is converted to a different type of Loan (whether such payment or conversion is pursuant to Article 2, 6 or 8 or otherwise) on any day other than the last day of the Interest Period applicable thereto, or the last day of an applicable period fixed pursuant to Section 2.07(c), or if the Company fails to borrow, prepay, convert or continue any Fixed Rate Loans after notice has been given to any Bank in accordance with Section 2.04(a), 2.08(c) or 2.12(c), the Company shall reimburse each Bank within 15 days after demand for any resulting loss or expense incurred by it (or by an existing or prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any
such payment or conversion or failure to borrow, prepay, convert or continue; provided that such Bank shall have delivered to the Company a certificate as to the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error.
SECTION 2.15. Computation of Interest and Fees. Interest based on the Prime Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day).
SECTION 2.16. Regulation D Compensation. Each Bank may require the Company to pay, contemporaneously with each payment of interest on the Euro-Dollar Loans, additional interest on the related Euro-Dollar Loan of such Bank at a rate per annum determined by such Bank up to but not exceeding the excess of (i) (A) the applicable London Interbank Offered Rate divided by (B) one minus the Euro-Dollar Reserve Percentage over (ii) the applicable London Interbank Offered Rate. Any Bank wishing to require payment of such additional interest (x) shall so notify the Company and the Agent, in which case such additional interest on the Euro-Dollar Loans of such Bank shall be payable to such Bank at the place indicated in such notice with respect to each Interest Period commencing at least three Euro-Dollar Business Days after the giving of such notice and (y) shall notify the Company at least five Euro-Dollar Business Days prior to each date on which interest is payable on the Euro-Dollar Loans of the amount then due it under this Section.
"EURO-DOLLAR RESERVE PERCENTAGE" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor), for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of "EUROCURRENCY LIABILITIES" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents).
SECTION 2.17. Commitment Increase; Additional Banks. (a) The Company may, upon at least 30 days' notice to the Agent (which shall promptly provide a copy of such notice to the Banks), propose to increase the aggregate amount of the Commitments to an amount not to exceed $625,000,000 (the amount of any such increase, the "COMMITMENT INCREASE"). Each Bank party to this Agreement at such time shall have the right (but no obligation), for a period of 15 days following its receipt of such notice from the Agent, to elect by notice to the Company and the Agent to increase its Commitment by a principal amount up to that amount which bears the same ratio to the Commitment Increase as its then existing Commitment bears to the aggregate Commitments then existing.
(b) If any Bank party to this Agreement shall not elect to increase its
Commitment by the full amount permitted by subsection (a) of this Section, the
Company with the consent of the Agent may designate one or more other banks or
other financial institutions (which may be, but need not be, one or more of the
existing Banks) which at the time agree in the case of any such bank that is an
existing Bank to increase its Commitment and, in the case of any other such bank
(an "ADDITIONAL BANK"), to become a party to this Agreement. The sum of the
increases in the Commitments of the existing Banks pursuant to this subsection
(b) plus the Commitments of the Additional Banks shall not in the aggregate
exceed the unsubscribed amount of the Commitment Increase.
(c) An increase in the aggregate amount of the Commitments pursuant to this Section 2.17 shall become effective upon the receipt by the Agent of an agreement in form and substance satisfactory to the Agent signed by the Company, by each Additional Bank and by each other Bank whose Commitment is to be increased, setting forth the new Commitments of such Banks and setting forth the agreement of each Additional Bank to become a party to this Agreement and to be bound by all the terms and provisions hereof, together with such evidence of appropriate corporate authorization on the part of the Company with respect to the Commitment Increase and such opinions of counsel for the Company with respect to the Commitment Increase as the Agent may reasonably request.
(d) Upon any increase in the aggregate amount of the Commitments pursuant to this Section 2.17, within five Domestic Business Days, in the case of Base Rate Loans then outstanding, and at the end of the then current Interest Period with respect thereto, in the case of Euro-Dollar Loans then outstanding, the Company shall prepay or repay such Loans in their entirety and, to the extent the Company elects to do so and subject to the conditions specified in Article 3 of this Agreement, the Company shall reborrow Committed Loans from the Banks in proportion to their respective Commitments after giving effect to such increase, until such time as all outstanding Committed Loans are held by the Banks in such proportion.
ARTICLE 3
CONDITIONS
SECTION 3.1. Effectiveness. This Agreement shall become effective on the date that each of the following conditions shall have been satisfied (or waived in accordance with Section 9.05):
(a) receipt by the Agent of counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Agent in form
satisfactory to it of telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party);
(b) receipt by the Agent of an opinion of the General Counsel of the Company, substantially in the form of Exhibit E hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request;
(c) receipt by the Agent of an opinion of Davis Polk & Wardwell, special counsel for the Agent, substantially in the form of Exhibit F hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request;
(d) receipt by the Agent of all documents the Agent may reasonably request relating to the existence of the Company, the corporate authority for and the validity of this Agreement and the Notes, and any other matters relevant hereto, all in form and substance satisfactory to the Agent; and
provided that this Agreement shall not become effective or be binding on any party hereto unless all of the foregoing conditions are satisfied not later than June 15, 2001. The Agent shall promptly notify the Company and the Banks of the Effective Date, and such notice shall be conclusive and binding on all parties hereto.
SECTION 3.02. Borrowings. The obligation of any Bank to make a Loan on the occasion of any Borrowing is subject to the satisfaction of the following conditions:
(a) receipt by the Agent of a Notice of Borrowing as required by
Section 2.02 or 2.03, as the case may be;
(b) the fact that, immediately after such Borrowing, the aggregate outstanding principal amount of the Loans will not exceed the aggregate amount of the Commitments;
(c) the fact that, immediately before and after such Borrowing, no Default shall have occurred and be continuing;
(d) the fact that the representations and warranties of the Company contained in this Agreement (other than the representations and warranties set forth in Sections 4.04, 4.05 and 4.06, which are made only as of the date hereof) shall be true on and as of the date of such Borrowing; and
(e) receipt by the Agent of evidence satisfactory to it of the consummation of the Contribution substantially as contemplated by the Company's Information Statement.
Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Company on the date of such Borrowing as to the facts specified in clause
(d) of this Section.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware, and has all corporate powers and will have on and as of the Effective Date all material governmental licenses, authorizations, consents and approvals required to carry on its business.
SECTION 4.02. Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by the Company of this Agreement and the Notes are within the Company's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official, do not contravene any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Company and do not contravene, or constitute a material default under, any debt instrument known to the Company to be binding upon it.
SECTION 4.03. Binding Effect. This Agreement constitutes a valid and binding agreement of the Company and each Note, when executed and delivered in accordance with this Agreement, will constitute a valid and binding obligation of the Company, in each case enforceable in accordance with its terms.
SECTION 4.04. Financial Information. (a) The statement of assets and liabilities of Rockwell Collins as of September 30, 2000 and the related statements of operations, cash flows and changes in Rockwell International's invested equity and comprehensive income for the fiscal year then ended, reported on by independent public accountants and set forth in the Company's Information Statement, a copy of which has been delivered to each of the Banks, fairly present, in all material respects, in conformity with GAAP, the assets and liabilities of Rockwell Collins as of such date and its results of operations, cash flows and changes in Rockwell International's invested equity and comprehensive income for such fiscal year.
(b) The unaudited statement of assets and liabilities of Rockwell Collins as of December 31, 2000 and the related unaudited consolidated statements of operations, cash flows and changes in Rockwell International's invested equity and comprehensive income for the three months then ended, set forth in the
Company's Information Statement fairly present, in all material respects, in conformity with GAAP applied on a basis consistent with the financial statements referred to in subsection (a) of this Section, the assets and liabilities of Rockwell Collins as of such date and its results of operations, cash flows and changes in Rockwell International's invested equity and comprehensive income for such three-month period (subject to normal year-end adjustments).
(c) As of the Effective Date, there will have been no material adverse change in the financial condition, business or operations of Rockwell Collins from that reflected in the Company's Information Statement.
SECTION 4.05. Litigation. Except as disclosed in the Company's Information Statement, there is no action, suit or proceeding pending against, or to the knowledge of the Company threatened against or affecting, the Company or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official, in which there is a reasonable probability of an adverse decision which could materially adversely affect the business or consolidated financial position of the Company and its Consolidated Subsidiaries, considered as a whole, or which in any manner draws into question the validity of this Agreement or the Notes.
SECTION 4.06. Environmental Matters. Expenditures by the Company and its Consolidated Subsidiaries for environmental capital investment and remediation necessary to comply with present Environmental Laws and other expenditures for the resolution of existing environmental claims known to the Company are not expected by management of the Company to have a material adverse effect on the business or financial condition of the Company and its Consolidated Subsidiaries, taken as a whole.
ARTICLE 5
COVENANTS
The Company agrees that, so long as any Bank has any Commitment hereunder or any amount payable hereunder remains unpaid:
SECTION 5.01. Information. The Company will deliver to each of the Banks:
(a) within 120 days after the end of each fiscal year of the Company, the Company's Annual Report to Shareowners and annual report on Form 10-K for such fiscal year, as filed with the Commission;
(b) within 60 days after the end of each of the first three quarters of each fiscal year of the Company, the Company's quarterly report on Form 10-Q for such fiscal quarter, as filed with the Commission;
(c) simultaneously with the delivery of each set of financial statements referred to in clause (a), a certificate of the chief financial officer, the treasurer or the controller of the Company stating whether any Default exists on the date of such financial statements;
(d) within 10 days after the chief financial officer, the treasurer or the controller of the Company obtains knowledge of any Default, if such Default is then continuing, a certificate of the chief financial officer, the treasurer or the controller of the Company setting forth the details thereof;
(e) promptly upon the filing thereof, copies of all reports on Form 8-K (or its equivalent) which the Company shall have filed with the Commission; and
(f) from time to time such additional information regarding the financial position or business of the Company and its Subsidiaries as the Agent, at the request of any Bank, may reasonably request.
SECTION 5.02. Maintenance of Existence. The Company will preserve, renew and keep in full force and effect its corporate existence and its rights, privileges and franchises necessary or desirable in the normal conduct of business; provided that nothing in this Section 5.02 shall prohibit a merger or consolidation permitted by Section 5.06.
SECTION 5.03. Compliance with Laws. The Company will comply in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, environmental laws and ERISA and the rules and regulations thereunder) except where (i) the necessity of compliance therewith is contested in good faith by appropriate proceedings or (ii) non-compliance would not, in the reasonable judgment of the Company, have a material adverse effect on the financial condition, business or operation of the Company and its Consolidated Subsidiaries, considered as a whole.
SECTION 5.04. Use of Proceeds. The proceeds of the Loans made under this Agreement will be used by the Company for its general corporate purposes, including but not limited to commercial paper backstop, acquisitions and stock repurchases. None of such proceeds will be used in violation of Regulation T, U or X of the Board of Governors of the Federal Reserve System.
SECTION 5.05. Debt to Capitalization. Consolidated Debt will at no time after the Contribution exceed 60% of Total Capitalization.
SECTION 5.06. Mergers, Consolidations and Sales of Assets. (a) The Company shall not consolidate with or merge into any other corporation or convey or transfer its properties and assets substantially as an entirety to any Person, unless
(1) the corporation formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or
transfer the properties and assets of the Company substantially as an entirety shall be a corporation organized and existing under the laws of the United States or any State or the District of Columbia, and shall expressly assume, in form satisfactory to the Agent, the due and punctual payment of the principal of (and premium, if any) and interest, if any, on all the Loans and the performance of every covenant of this Agreement on the part of the Company to be performed or observed;
(2) immediately after giving effect to such transaction, no Default shall have occurred and be continuing; and
(3) the Company shall have delivered to the Agent a certificate of a duly authorized officer of the Company and an opinion of legal counsel to the Company (which shall be reasonably acceptable to the Agent), each stating that such consolidation, merger, conveyance or transfer comply with this Section 5.06(a)and that all conditions precedent herein provided for relating to such transaction have been complied with.
(b) Upon any consolidation or merger, or any conveyance or transfer of the properties and assets of the Company substantially as an entirety in accordance with Section 5.06(a), the successor corporation formed by such consolidation or into which the Company is merged or to which such conveyance or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Agreement with the same effect as if such successor corporation had been named as the Company herein, and thereafter the predecessor corporation shall be relieved of all obligations and covenants under this Agreement and the Notes and may be liquidated and dissolved.
(c) If, upon any consolidation or merger of the Company with or into any corporation, or upon the conveyance or transfer by the Company of its properties and assets substantially as an entirety in accordance with Section 5.06(a) to any Person, any Principal Property owned by the Company or a Restricted Subsidiary immediately prior thereto would thereupon become subject to any Lien not permitted by Section 5.07, the Company will, prior to such consolidation, merger, conveyance or transfer, secure the due and punctual payment of the principal of (and premium, if any) and interest, if any, on the Loans then outstanding (equally and ratably with any other Debt of the Company then entitled to be so secured) by a direct Lien on such Principal Property, together with any other properties and assets of the Company or of any such Restricted Subsidiary, whichever shall be the owner of any such Principal Property, which would thereupon become subject to any such Lien, prior to all Liens other than any theretofore existing thereon.
SECTION 5.07. Limitations on Liens. The Company shall not at any time create, incur, assume or suffer to exist, and shall not cause, suffer or permit a Restricted Subsidiary to create, incur, assume or suffer to exist, any Secured Debt without making effective provision (and the Company covenants that in such case
it will make or cause to be made effective provision) whereby the Loans then outstanding shall be secured equally and ratably with such Secured Debt, so long as such Secured Debt shall exist; provided, however, that this Section 5.07 shall not prevent any of the following:
(a) (i) any Lien on any property hereafter acquired (including acquisition through merger or consolidation) or constructed by the Company or a Restricted Subsidiary and created contemporaneously with, or within twelve months after, such acquisition or the completion of construction to secure or provide for the payment of all or any part of the purchase price of such property or the cost of construction thereof, as the case may be; or (ii) any mortgage on property (including any unimproved portion of partially improved property) of the Company or a Restricted Subsidiary created within twelve months of completion of construction of a new plant or plants on such property to secure all or part of the cost of such construction; or (iii) the acquisition of property subject to any Lien upon such property existing at the time of acquisition thereof, whether or not assumed by the Company or such Restricted Subsidiary;
(b) Liens on capital stock hereafter acquired by the Company or any Restricted Subsidiary, provided that the aggregate cost to the Company and its Restricted Subsidiaries of all capital stock subject to such Liens does not exceed 10% of Shareowners' Equity;
(c) any Lien securing Debt of a corporation which is a successor to the Company to the extent permitted by Section 5.06; or securing Debt of a Restricted Subsidiary outstanding at the time it became a Restricted Subsidiary; or securing Debt of any Person outstanding at the time it is merged with, or all or substantially all of its properties are acquired by, the Company or any Restricted Subsidiary, provided that such Lien does not extend to any other properties of the Company or any Restricted Subsidiary; or existing on the property or on the outstanding shares or Debt of a corporation at the time it becomes a Restricted Subsidiary; or created, incurred or assumed in connection with any industrial revenue bond, pollution control bond or similar financing arrangement between the Company or any Restricted Subsidiary and any Federal, State or municipal government or other governmental body or agency;
(d) any Lien created in connection with any extension, renewal or refunding (or successive extensions, renewals or refundings), in whole or in part, of any Debt secured by a Lien permitted by the foregoing provisions of this Section 5.07 upon the same property theretofore subject thereto (plus improvements on such property), provided that the amount of such Debt outstanding at that time shall not be increased;
(e) Liens or deposits made in connection with contracts (which term includes subcontracts under such contracts) with or made at the request of the United States or any department or agency thereof, insofar as such Liens or deposits relate to property manufactured, installed or constructed by or to be supplied by, or property furnished to, the Company or a Restricted Subsidiary
pursuant to, or to enable the performance of, such contracts, or property the manufacture, installation, construction or acquisition of which is financed pursuant to, or to enable the performance of, such contracts; or deposits or Liens, made pursuant to such contracts, of or upon moneys advanced or paid pursuant to, or in accordance with the provisions of, such contracts, or of or upon any materials or supplies acquired for the purpose of the performance of such contracts; or the assignment or pledge, to the extent permitted by law, of the right, title and interest of the Company or a Restricted Subsidiary in and to any such contract, or in and to any payments due or to become due thereunder, to secure Debt incurred for funds or other property supplied, constructed or installed for or in connection with the performance by the Company or such Restricted Subsidiary of its obligations under such contracts;
(f) mechanics', materialmen's, carriers' or other like Liens, and pledges or deposits made in the ordinary course of business to obtain the release of any such Liens or the release of property in the possession of a common carrier; good faith deposits in connection with tenders, leases of real estate or bids or contracts (other than contracts involving the borrowing of money); pledges or deposits to secure public or statutory obligations; deposits to secure (or in lieu of) surety, stay, appeal or customs bonds; and deposits to secure the payment of taxes, assessments, customs duties or other similar charges;
(g) any Lien arising by reason of deposits with, or the giving of any form of security to, any governmental agency or any body created or approved by law or governmental regulation, which is required by law or governmental regulation as a condition to the transaction of any business, or the exercise of any privilege or license, or to enable the Company or a Restricted Subsidiary to maintain self- insurance or to participate in any arrangements established by law to cover any insurance risks or in connection with workmen's compensation, unemployment insurance, old age pensions, social security or similar matters;
(h) the Liens of taxes, assessments or other governmental charges or levies not at the time due, or the validity of which is being contested in good faith;
(i) judgment Liens, so long as the finality of such judgment is being contested in good faith and execution thereon is stayed;
(j) easements or similar encumbrances, the existence of which does not impair the use of the property subject thereto for the purposes for which it is held or was acquired;
(k) the landlord's interest under any lease of property;
(l) leases granted to others in the ordinary course of business;
(m) Sale and Lease-Back Transactions to the extent permitted by Section 5.08; and
(n) contracts for the manufacture, construction, installation or supply of property, products or services providing for a Lien upon advance, progress or partial payments made pursuant to such contracts and upon any material or supplies acquired, manufactured, constructed, installed or supplied in connection with the performance of such contracts to secure such advance, progress or partial payments.
Notwithstanding the foregoing provisions of this Section 5.07, the Company and any one or more Restricted Subsidiaries may create, incur, assume or suffer to exist Secured Debt which would otherwise be subject to the foregoing restrictions in an aggregate amount which, together with all other Secured Debt of the Company and its Restricted Subsidiaries which would otherwise be subject to the foregoing restrictions (not including Secured Debt permitted under clauses (a) through (o) above) and the aggregate value of the Sale and Lease-Back Transactions (as defined in Section 5.08) in existence at such time (not including Sale and Lease-Back Transactions the proceeds of which have been or will be applied in accordance with clause (b) of Section 5.08), does not at the time exceed 10% of Shareowners' Equity.
SECTION 5.08. Limitations on Sale and Lease-Back. The Company will not, and will not permit any Restricted Subsidiary to, sell or transfer (except to the Company or one or more Restricted Subsidiaries, or both) any Principal Property owned by it and which has been in full operation for more than 180 days prior to such sale or transfer with the intention (i) of taking back a lease on such property, except a lease for a temporary period (not exceeding 36 months), and (ii) that the use by the Company or such Restricted Subsidiary of such property will be discontinued on or before the expiration of the term of such lease (any such transaction being herein referred to as a "SALE AND LEASE-BACK TRANSACTION"), unless
(a) the Company or such Restricted Subsidiary would be entitled, pursuant to the provisions of Section 5.07 hereof, to incur Secured Debt equal in amount to the amount realized or to be realized upon such sale or transfer secured by a mortgage on the property to be leased without equally and ratably securing the Loans; or
(b) the Company or a Restricted Subsidiary shall, within 180 days of the effective date of any such transaction, apply an amount equal to the value of the property so leased (i) to the retirement (other than any mandatory retirement) of Consolidated Funded Debt or Debt then outstanding of the Company or any Restricted Subsidiary that was Funded Debt at the time it was created (other than Consolidated Funded Debt or such other Debt owned by the Company or any Restricted Subsidiary), or (ii) to the purchase of Principal Property having a value at least equal to the value of such property; provided, however, that the amount to be so applied pursuant to the preceding clause (i) or (ii) shall be reduced by (A) the principal amount of any Loans repaid within 180 days of the effective date of any such transaction and (B) the principal amount of Consolidated Funded Debt or Debt that was Funded Debt at the time it was created (other than Loans) retired
by the Company or a Restricted Subsidiary within 180 days of the effective date of any such transaction; or
(c) the Sale and Lease-Back Transaction involved was an industrial revenue bond, pollution control bond or similar financing arrangement between the Company or any Restricted Subsidiary and any Federal, State or municipal government or other governmental body or agency.
The term "value" shall mean, with respect to a Sale and Lease-Back Transaction, as of any particular time, the amount equal to the greater of (i) the net proceeds of the sale of the property leased pursuant to such Sale and Lease-Back Transaction or (ii) the fair value of such property at the time of entering into such Sale and Lease-Back Transaction, as determined by the board of directors of the Company (or a duly authorized committee thereof), in either case divided first by the number of full years of the term of the lease and then multiplied by the number of full years of such term remaining at the time of determination, without regard to any renewal or extension options contained in the lease.
SECTION 5.09. Limitations on Change in Subsidiary Status. The Company may designate any Subsidiary as an Unrestricted Subsidiary or as a Restricted Subsidiary, subject to the provisions set forth below:
(a) the Company will not permit any Subsidiary to be designated as an Unrestricted Subsidiary unless at the time of such designation the Subsidiary so designated does not own, directly or indirectly, any capital stock of any Restricted Subsidiary or any Funded Debt or Secured Debt of the Company or any Restricted Subsidiary;
(b) the Company will not permit any Restricted Subsidiary to be designated as, or otherwise to become, an Unrestricted Subsidiary unless immediately after such Restricted Subsidiary becomes an Unrestricted Subsidiary, no Default shall exist;
(c) the Company will not permit any Unrestricted Subsidiary to be designated as a Restricted Subsidiary unless immediately after such Unrestricted Subsidiary becomes a Restricted Subsidiary, no Default shall exist; and
(d) promptly after the designation of any Subsidiary as an Unrestricted Subsidiary or as a Restricted Subsidiary, there shall be filed with the Agent, a certificate of a duly authorized officer of the Company stating that the provisions of this Section have been complied with in connection with such designation.
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following events ("EVENTS OF DEFAULT") shall have occurred and be continuing:
(a) the Company shall fail to pay when due any principal of any Loan, or shall fail to pay within 10 days of the due date thereof any interest on any Loan, any fees or any other amount payable hereunder;
(b) the Company shall fail to observe or perform any covenant or agreement contained in Article 5 for 90 days after notice thereof has been given to the Company by the Agent at the request of any Bank;
(c) any representation or warranty made by the Company (i) in Article 4 or (ii) pursuant to Section 3.02 on the date of any Borrowing shall prove to have been incorrect in any material respect when made (or deemed made);
(d) the Company or any of its Subsidiaries shall fail to pay the principal of or interest on Material Debt when due, or within any applicable grace period, in accordance with the instrument or agreement under which the same was created;
(e) any event or condition shall occur (including failure to pay principal or interest) which results in the acceleration of the maturity of Material Debt;
(f) the entry of a decree or order for relief by a court having jurisdiction in the premises in respect of the Company in an involuntary case under the Federal bankruptcy laws, as now constituted or hereafter amended, or any other applicable Federal or State bankruptcy, insolvency or other similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 90 consecutive days; or
(g) the commencement by the Company of a voluntary case under the Federal bankruptcy laws, as now constituted or hereafter amended, or any other applicable Federal or State bankruptcy, insolvency or other similar law, or the consent by it to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action;
then, and in every such event, the Agent shall (i) if requested by Banks having more than 50% in aggregate amount of the Commitments, by notice to the Company terminate the Commitments and they shall thereupon terminate, and (ii)
if requested by Banks holding more than 50% in aggregate principal amount of the Loans, by notice to the Company declare the Loans (together with accrued interest thereon) to be, and the Loans shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company; provided that in the case of any of the Events of Default specified in clause (f) or (g) above, without any notice to the Company or any other act by the Agent or the Banks, the Commitments shall thereupon terminate and the Loans (together with accrued interest thereon) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company.
SECTION 6.02. Notice of Default. The Agent shall give notice to the Company under Section 6.01(b) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof.
ARTICLE 7
THE AGENT
SECTION 7.01. Appointment and Authorization. Each Bank irrevocably appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the Notes as are delegated to the Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto.
SECTION 7.02. Agent and Affiliates. The Chase Manhattan Bank shall have the same rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the same as though it were not the Agent, and The Chase Manhattan Bank and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Company or any Subsidiary or affiliate of the Company as if it were not the Agent hereunder.
SECTION 7.03. Action by Agent. The obligations of the Agent hereunder are only those expressly set forth herein. Without limiting the generality of the foregoing, the Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article 6.
SECTION 7.04. Consultation with Experts. The Agent may consult with legal counsel (who may be counsel for the Company), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts.
SECTION 7.05. Liability of Agent. Neither the Agent nor any of its
affiliates nor any of their respective directors, officers, agents or employees
shall be liable for any action taken or not taken by it in connection herewith
(i) with the
consent or at the request of the Required Banks or, when expressly required
hereby, all the Banks or (ii) in the absence of its own gross negligence or
willful misconduct. Neither the Agent nor any of its affiliates nor any of their
respective directors, officers, agents or employees shall be responsible for or
have any duty to ascertain, inquire into or verify (i) any statement, warranty
or representation made in connection with this Agreement or any borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements of the Company; (iii) the satisfaction of any condition specified in
Article 3, except receipt of items required to be delivered to the Agent; or
(iv) the validity, effectiveness or genuineness of this Agreement, the Notes or
any other instrument or writing furnished in connection herewith. The Agent
shall not incur any liability by acting in reliance upon any notice, consent,
certificate, statement, or other writing (which may be a bank wire, telex,
facsimile transmission or similar writing) believed by it to be genuine or to be
signed by the proper party or parties.
SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance with its Commitment, indemnify the Agent, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Company) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitee's gross negligence or willful misconduct) that such indemnitees may suffer or incur in connection with this Agreement or any action taken or omitted by such indemnitees hereunder.
SECTION 7.07. Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement.
SECTION 7.08. Successor Agent. The Agent may resign at any time by giving 30 days' notice thereof to the Banks and the Company. Upon any such resignation, the Required Banks shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Required Banks, and shall have accepted such appointment, within 30 days after the retiring Agent gives notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $50,000,000. Upon the acceptance of its appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent.
SECTION 7.09. Agent's Fee. The Company shall pay to the Agent for its own account fees in the amounts and at the times previously agreed upon between the Company and the Agent.
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period for any Fixed Rate Loans:
(a) the Agent is advised by the Euro-Dollar Reference Banks that deposits in dollars (in the applicable amounts) are not being offered to the Euro-Dollar Reference Banks in the relevant market for such Interest Period, or
(b) in the case of Euro-Dollar Loans, Banks having 50% or more of the aggregate amount of the Commitments advise the Agent that the London Interbank Offered Rate as determined by the Agent will not adequately and fairly reflect the cost to such Banks of funding their Euro-Dollar Loans for such Interest Period,
the Agent shall forthwith give notice thereof to the Company and the Banks, whereupon until the Agent notifies the Company that the circumstances giving rise to such suspension no longer exist, (i) the obligations of the Banks to make Euro-Dollar Loans, or to continue or convert outstanding Loans as or into Euro-Dollar Loans, shall be suspended and (ii) each outstanding Euro-Dollar Loan shall be converted into a Base Rate Loan on the last day of the then current Interest Period applicable thereto. Unless the Company notifies the Agent at least two Domestic Business Days before the date of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, (i) if such Fixed Rate Borrowing is a Euro-Dollar Borrowing, such Borrowing shall instead be made as a Base Rate Borrowing and (ii) if such Fixed Rate Borrowing is a Competitive Bid LIBOR Borrowing, the Competitive Bid LIBOR Loans comprising such Borrowing shall bear interest for each day from and including the first day to but excluding the last day of the Interest Period applicable thereto at the Base Rate for such day.
SECTION 8.02. Illegality. (a) If, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and such Bank
shall so notify the Agent, the Agent shall forthwith give notice thereof to the other Banks and the Company, whereupon until such Bank notifies the Company and the Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans, or to convert outstanding Loans into Euro-Dollar Loans or continue outstanding Loans as Euro-Dollar Loans, shall be suspended. Before giving any notice to the Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not, in the sole judgment of such Bank, be otherwise disadvantageous to such Bank.
(b) If such notice is given, each Euro-Dollar Loan of such Bank then outstanding shall be converted to a Base Rate Loan either (i) on the last day of the then current Interest Period applicable to such Euro-Dollar Loan if such Bank may lawfully continue to maintain and fund such Loan as a Euro-Dollar Loan to such day or (ii) immediately if such Bank shall determine that it may not lawfully continue to maintain and fund such Loan as a Euro-Dollar Loan to such day. Interest and principal on any such Base Rate Loan shall be payable on the same dates as, and on a pro rata basis with, the interest and principal payable on the related Euro-Dollar Loans of the other Banks.
SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after (x) the date hereof, in the case of any Committed Loan or any obligation to make Committed Loans or (y) the date of the related Competitive Bid Quote, in the case of any Competitive Bid Loan, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding with respect to any Euro-Dollar Loan any such requirement included in an applicable Euro-Dollar Reserve Percentage), special deposit, insurance assessment or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its Applicable Lending Office) or on the London interbank market any other condition affecting its Fixed Rate Loans, its Note or its obligation to make Fixed Rate Loans and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Agent), the Company shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction.
(b) If any Bank shall have determined that, after the date hereof, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any such law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency (including any determination by any such authority, central bank or comparable agency that, for purposes of capital adequacy requirements, the Commitments hereunder do not constitute commitments with an original maturity of one year or less, which shall be deemed a change in the interpretation and administration of such requirements) has or would have the effect of reducing the rate of return on capital of such Bank (or its Parent) as a consequence of such Bank's obligations hereunder to a level below that which such Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank (with a copy to the Agent), the Company shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its Parent) for such reduction.
(c) Each Bank will promptly notify the Company and the Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the sole judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods. Notwithstanding the foregoing subsections (a) and (b) of this Section 8.03, the Company shall only be obligated to compensate any Bank for any amount arising or accruing during (i) any time or period commencing not more than 90 days prior to the date on which such Bank notifies the Agent and the Company that it proposes to demand such compensation and identifies to the Agent and the Company the statute, regulation or other basis upon which the claimed compensation is or will be based and (ii) any time or period during which, because of the retroactive application of such statute, regulation or other such basis, such Bank did not know that such amount would arise or accrue.
SECTION 8.04. Taxes. (a) For purposes of this Section 8.04, the following terms have the following meanings:
"TAXES" means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings with respect to any payment by the Company pursuant to this Agreement or under any Note, and all liabilities with respect thereto, excluding (i) in the case of each Bank and the Agent, taxes imposed on its
income, and franchise or similar taxes imposed on it, by a jurisdiction under the laws of which such Bank or the Agent (as the case may be) is organized or in which its principal executive office is located or, in the case of each Bank, in which its Applicable Lending Office is located or by any State, possession or territory of the United States in which such Bank or the Agent (as the case may be) is doing business and (ii) in the case of each Bank, any United States withholding tax imposed on such payments but only to the extent that such Bank is subject to United States withholding tax at the time such Bank first becomes a party to this Agreement.
"OTHER TAXES" means any present or future stamp or documentary taxes and any other excise or property taxes, or similar charges or levies, which arise from any payment made pursuant to this Agreement or under any Note or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note.
(b) Any and all payments by the Company to or for the account of any
Bank or the Agent hereunder or under any Note shall be made without deduction
for any Taxes or Other Taxes; provided that, if the Company shall be required by
law to deduct any Taxes or Other Taxes from any such payments, (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 8.04) such Bank or the Agent (as the case may be) receives an
amount equal to the sum it would have received had no such deductions been made,
(ii) the Company shall make such deductions, (iii) the Company shall pay the
full amount deducted to the relevant taxation authority or other authority in
accordance with applicable law and (iv) the Company shall furnish to the Agent,
at its address referred to in Section 9.01, the original or a certified copy of
a receipt evidencing payment thereof.
(c) The Company agrees to indemnify each Bank and the Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 8.04) paid by such Bank or the Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be paid within 15 days after such Bank or the Agent (as the case may be) makes demand therefor.
(d) Each Bank organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Bank listed on the signature pages hereof and on or prior to the date on which it becomes a Bank in the case of each other Bank, and from time to time thereafter if requested in writing by the Company (but only so long as such Bank remains lawfully able to do so), shall provide the Company with Internal Revenue Service form W-8BEN or W-8ECI, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Bank is entitled to benefits under an income tax treaty to which the United States is a party which exempts the Bank from United States withholding tax or reduces
the rate of withholding tax on payments of interest for the account of such Bank or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States.
(e) For any period with respect to which a Bank has failed to provide the Company with the appropriate form pursuant to Section 8.04(d) (unless such failure is due to a change in treaty, law or regulation occurring subsequent to the date on which such form originally was required to be provided), such Bank shall not be entitled to indemnification under Section 8.04(b) or (c) with respect to Taxes imposed by the United States; provided that if a Bank, which is otherwise exempt from or subject to a reduced rate of withholding tax, becomes subject to Taxes because of its failure to deliver a form required hereunder, the Company shall take such steps as such Bank shall reasonably request to assist such Bank to recover such Taxes.
(f) If the Company is required to pay additional amounts to or for the account of any Bank pursuant to this Section 8.04, then such Bank will change the jurisdiction of its Applicable Lending Office if, in the sole judgment of such Bank, such change (i) will eliminate or reduce any such additional payment which may thereafter accrue and (ii) is not otherwise disadvantageous to such Bank.
SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate
Loans. If (i) the obligation of any Bank to make, or to continue or convert
outstanding Loans as or to, Euro-Dollar Loans has been suspended pursuant to
Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03 or
8.04 with respect to its Euro-Dollar Loans and the Company shall, by at least
five Euro-Dollar Business Days' prior notice to such Bank through the Agent,
have elected that the provisions of this Section shall apply to such Bank, then,
all Loans which would otherwise be made by such Bank as (or continued as or
converted to) Euro-Dollar Loans shall be made instead as Base Rate Loans (on
which interest and principal shall be payable contemporaneously with the related
Fixed Rate Loans of the other Banks). If such Bank notifies the Company that the
circumstances giving rise to such suspension or demand for compensation no
longer exist, the principal amount of each such Base Rate Loan shall be
converted into a Euro-Dollar Loan on the first day of the next succeeding
Interest Period applicable to the related Euro-Dollar Loans of the other Banks.
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of the Company or the Agent, at its address, facsimile number or telex number set forth on the signature pages hereof, (y) in the case of any Bank, at its address,
facsimile number or telex number set forth in its Administrative Questionnaire
or (z) in the case of any party, such other address, facsimile number or telex
number as such party may hereafter specify for the purpose by notice to the
Agent and the Company. Each such notice, request or other communication shall be
effective (i) if given by telex, when such telex is transmitted to the telex
number specified in this Section and the appropriate answerback is received,
(ii) if given by facsimile transmission, when transmitted to the facsimile
number specified in this Section and confirmation of receipt is received, (iii)
if given by mail, 72 hours after such communication is deposited in the mails
with first class postage prepaid, addressed as aforesaid or (iv) if given by any
other means, when delivered at the address specified in this Section; provided
that notices to the Agent under Article 2 or Article 8 shall not be effective
until received.
SECTION 9.02. No Waivers. No failure or delay by the Agent or any Bank in exercising any right, power or privilege hereunder or under any Note shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
SECTION 9.03. Expenses; Indemnification. (a) The Company shall pay (i) all reasonable out-of-pocket expenses of the Agent, including fees and disbursements of special counsel for the Agent, in connection with the preparation and administration of this Agreement, any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all reasonable out-of-pocket expenses incurred by the Agent and each Bank, including (without duplication) the fees and disbursements of outside counsel and the allocated cost of inside counsel, in connection with such Event of Default and collection, bankruptcy, insolvency and other enforcement proceedings resulting therefrom.
(b) The Company agrees to indemnify the Agent and each Bank, their respective affiliates and the respective directors, officers, agents and employees of the foregoing (each an "INDEMNITEE") and hold each Indemnitee harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel, which may be incurred by such Indemnitee in connection with any investigative, administrative or judicial proceeding (whether or not such Indemnitee shall be designated a party thereto) brought or threatened relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans hereunder; provided that no Indemnitee shall have the right to be indemnified hereunder for such Indemnitee's own gross negligence or willful misconduct as determined by a court of competent jurisdiction.
SECTION 9.04. Sharing of Set-offs. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest then due with respect to any Loan held by it which is greater than the proportion received by any other
Bank in respect of the aggregate amount of principal and interest then due with respect to any Loan held by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Loans held by the other Banks, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Loans held by the Banks shall be shared by the Banks pro rata; provided that nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Company other than its indebtedness hereunder. The Company agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Loan, if acquired pursuant to the foregoing arrangements or if the Company has otherwise received notice of the granting of such participation, may exercise rights of set-off or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of the Company in the amount of such participation.
SECTION 9.05. Amendments and Waivers. Any provision of this Agreement
or the Notes may be amended or waived if, but only if, such amendment or waiver
is in writing and is signed by the Company and the Required Banks (and, if the
rights or duties of the Agent are affected thereby, by the Agent); provided that
no such amendment or waiver shall, unless signed by all the Banks, (i) increase
or decrease the Commitment of any Bank (except for a ratable decrease in the
Commitments of all Banks) or subject any Bank to any additional obligation, (ii)
reduce the principal of or rate of interest on any Loan or any fees hereunder,
(iii) postpone the date fixed for any payment of principal of or interest on any
Loan or any fees hereunder or for termination of any Commitment or (iv) change
the percentage of the Commitments or of the aggregate unpaid principal amount of
the Loans, or the number of Banks, which shall be required for the Banks or any
of them to take any action under this Section or any other provision of this
Agreement.
SECTION 9.06. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Company may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other institutions (each a "PARTICIPANT") participating interests in its Commitment or any or all of its Loans. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Company and the Agent, such Bank shall remain responsible for the performance of its obligations hereunder, and the Company and the Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Company hereunder including,
without limitation, the right to approve any amendment, modification or waiver
of any provision of this Agreement; provided that such participation agreement
may provide that such Bank will not agree to any modification, amendment or
waiver of this Agreement described in clause (i), (ii), (iii) or (iv) of Section
9.05 without the consent of the Participant. The Company agrees that each
Participant shall, to the extent provided in its participation agreement, be
entitled to the benefits of Article 8 with respect to its participating
interest. An assignment or other transfer which is not permitted by subsection
(c) or (d) below shall be given effect for purposes of this Agreement only to
the extent of a participating interest granted in accordance with this
subsection (b).
(c) Any Bank may at any time assign to one or more banks or other institutions (each an "ASSIGNEE") all, or a proportionate part (equivalent to an initial Commitment of not less than $10,000,000) of all, of its rights and obligations under this Agreement and its Note, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit G hereto executed by such Assignee and such transferor Bank, with (and subject to) the subscribed consent (which may not be unreasonably withheld) of the Company (so long as no Event of Default exists) and the Agent; provided that, if an Assignee is an Approved Fund, an affiliate of such transferor Bank or was a Bank immediately before such assignment, no such consent shall be required, and provided further that such assignment may, but need not, include rights of the transferor Bank in respect of outstanding Competitive Bid Loans. Upon execution and delivery of such instrument and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Agent and the Company shall make appropriate arrangements so that, if required and requested, a new Note is issued to the Assignee. In connection with any such assignment, the transferor Bank shall pay to the Agent an administrative fee for processing such assignment in the amount of $2,500. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall deliver to the Company and the Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 8.04.
(d) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Note to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's rights shall be entitled to receive any greater payment under Section 8.03 or 8.04 than such Bank would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Company's prior written consent or by reason of the provisions of Section 8.02, 8.03 or 8.04 requiring such Bank to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist.
(f) The Agent, acting solely for this purpose as an agent of the Company, shall maintain at one of its offices in the State of Delaware or New York a copy of each Assignment and Assumption Agreement delivered to it and a register for the recordation of the names and addresses of the Banks, and the Commitments of, and principal amount of the Loans owing to, each Bank pursuant to the terms hereof from time to time (the "REGISTER"). The entries in the Register shall be conclusive, and the Company, the Agent and the Banks may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Bank hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Company and any Bank, at any reasonable time and from time to time upon reasonable prior notice.
SECTION 9.07. Designated Lenders. (a) Subject to the provisions of this
subsection (a), any Bank may at any time designate an Eligible Designee to
provide all or a portion of the Loans to be made by such Bank pursuant to this
Agreement; provided that such designation shall not be effective unless the
Company and the Agent consent thereto (which consents shall not be unreasonably
withheld). When a Bank and its Eligible Designee shall have signed an agreement
substantially in the form of Exhibit H hereto (a "DESIGNATION AGREEMENT") and
the Company and the Agent shall have signed their respective consents thereto,
such Eligible Designee shall become a Designated Lender for purposes of this
Agreement. The Designating Lender shall thereafter have the right to permit such
Designated Lender to provide all or a portion of the Loans to be made by such
Designating Lender pursuant to Section 2.01 or 2.03, and the making of such
Loans or portion thereof shall satisfy the obligation of the Designating Lender
to the same extent, and as if, such Loans or portion thereof were made by the
Designating Lender. As to any Loans or portion thereof made by it, each
Designated Lender shall have all the rights that a Bank making such Loans or
portion thereof would have had under this Agreement and otherwise; provided that
(x) its voting rights under this Agreement shall be exercised solely by its
Designating Lender and (y) its Designating Lender shall remain solely
responsible to the other parties hereto for the performance of such Designated
Lender's obligations under this Agreement, including its obligations in respect
of the Loans or portion thereof made by it. No additional Note shall be required
to evidence the Loans or portion thereof made by a Designated Lender; and the
Designating Lender shall be deemed to hold its Note as agent for its Designated
Lender to the extent of the Loans or portion thereof funded by such Designated
Lender. Each Designating Lender shall act as administrative agent for its
Designated Lender and give and receive notices and other communications on its
behalf. Any payments for the account of any Designated Lender shall be paid to
its Designating Lender as administrative agent for such Designated Lender and
neither the Company nor the Agent shall be responsible for any Designating
Lender's application of such payments. In addition, any Designated Lender may, with notice to (but without the prior written consent of) the Company and the Agent, (i) assign all or portions of its interest in any Loans to its Designating Lender or to any financial institutions consented to by the Company and the Agent that provide liquidity and/or credit facilities to or for the account of such Designated Lender to support the funding of Loans or portions thereof made by it and (ii) disclose on a confidential basis pursuant to a confidentiality agreement satisfactory in form and substance to the Company any non-public information relating to its Loans or portions thereof to any rating agency, commercial paper dealer or provider of any guarantee, surety, credit or liquidity enhancement to such Designated Lender.
(b) Each party to this Agreement agrees that it will not institute against, or join any other person in instituting against, any Designated Lender any bankruptcy, insolvency, reorganization or other similar proceeding under any federal or state bankruptcy or similar law, for one year and a day after all outstanding senior indebtedness of such Designated Lender is paid in full. The Designating Lender for each Designated Lender agrees to indemnify, save, and hold harmless each other party hereto for any loss, cost, damage and expense arising out of its inability to institute any such proceeding against such Designated Lender. This subsection (b) shall survive the termination of this Agreement.
SECTION 9.08. Collateral. Each of the Banks represents to the Agent and each of the other Banks that it in good faith is not relying upon any "margin stock" (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement.
SECTION 9.09. Governing Law; Submission to Jurisdiction. This Agreement and each Note shall be governed by and construed in accordance with the laws of the State of New York. The Company hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. The Company irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum.
SECTION 9.10. Counterparts; Integration. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof.
SECTION 9.11. Waiver of Jury Trial. EACH OF THE COMPANY, THE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
NEW ROCKWELL COLLINS, INC.
(to be renamed Rockwell Collins, Inc.)
By:
----------------------------------------
Title:
Address:
Attention:
Telecopy:
COMMITMENTS
$60,000,000 THE CHASE MANHATTAN BANK
By:
----------------------------------------
Title:
$45,000,000 BANK OF AMERICA, N.A.
By:
----------------------------------------
Title:
$45,000,000 THE INDUSTRIAL BANK OF JAPAN, LTD.
By:
----------------------------------------
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Title:
$45,000,000 UBS WARBURG
By:
----------------------------------------
Title:
$37,500,000 BANK ONE, N.A.
By:
-----------------------------------------
Title:
$37,500,000 CITICORP USA INC. (CUSA)
By:
-----------------------------------------
Title:
$37,500,000 FIRST UNION NATIONAL BANK
By:
-----------------------------------------
Title:
$37,500,000 MELLON BANK, N.A.
By:
-----------------------------------------
Title:
$37,500,000 WELLS FARGO BANK,
NATIONAL ASSOCIATION
By:
-----------------------------------------
Title:
By:
-----------------------------------------
|
Title:
$25,000,000 THE BANK OF NEW YORK
By:
-----------------------------------------
Title:
$25,000,000 CREDIT LYONNAIS NEW YORK BRANCH
By:
-----------------------------------------
Title:
$25,000,000 FIRSTAR BANK, N.A.
By:
-----------------------------------------
Title:
$25,000,000 KEY BANK NATIONAL ASSOCIATION
By:
-----------------------------------------
Title:
$17,500,000 THE MITSUBISHI TRUST
AND BANKING CORPORATION
By:
-----------------------------------------
Title:
-----------------
TOTAL COMMITMENTS
$500,000,000
===============
|
THE CHASE MANHATTAN BANK, as Agent
Address:
Attention:
Telecopy:
Exhibit 10.9.2
[5/30/01]
$500,000,000
FORM OF
FIVE-YEAR
CREDIT AGREEMENT
dated as of May 30, 2001
among
New Rockwell Collins, Inc.
(to be renamed Rockwell Collins, Inc.),
The Banks Listed Herein
and
The Chase Manhattan Bank,
as Agent
J.P. Morgan Securities Inc.,
Sole Lead Arranger and Bookrunner
TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions......................................................... 1
SECTION 1.02. Accounting Terms and Determinations................................. 11
SECTION 1.03. Types of Borrowings................................................. 11
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend................................................. 11
SECTION 2.02. Notice of Committed Borrowing....................................... 12
SECTION 2.03. Competitive Bid Borrowings.......................................... 12
SECTION 2.04. Notice to Banks; Funding of Loans................................... 15
SECTION 2.05. Notes............................................................... 16
SECTION 2.06. Maturity of Loans................................................... 17
SECTION 2.07. Interest Rates...................................................... 17
SECTION 2.08. Method of Electing Interest Rates................................... 19
SECTION 2.09. Facility Fee........................................................ 20
SECTION 2.10. Optional Termination or Reduction of Commitments.................... 20
SECTION 2.11. Scheduled Termination of Commitments................................ 21
SECTION 2.12. Optional Prepayments................................................ 21
SECTION 2.13. General Provisions as to Payments................................... 21
SECTION 2.14. Funding Losses...................................................... 22
SECTION 2.15. Computation of Interest and Fees.................................... 22
SECTION 2.16. Regulation D Compensation........................................... 22
SECTION 2.17. Commitment Increase; Additional Banks............................... 23
ARTICLE 3
CONDITIONS
SECTION 3.01. Effectiveness....................................................... 24
SECTION 3.02. Borrowings.......................................................... 24
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Existence and Power....................................... 25
SECTION 4.02. Corporate and Governmental Authorization; No Contravention.......... 25
SECTION 4.03. Binding Effect...................................................... 25
SECTION 4.04. Financial Information............................................... 26
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PAGE
SECTION 4.05. Litigation.......................................................... 26
SECTION 4.06. Environmental Matters............................................... 26
ARTICLE 5
COVENANTS
SECTION 5.01. Information......................................................... 27
SECTION 5.02. Maintenance of Existence............................................ 27
SECTION 5.03. Compliance with Laws................................................ 27
SECTION 5.04. Use of Proceeds..................................................... 28
SECTION 5.05. Debt to Capitalization.............................................. 28
SECTION 5.06. Mergers, Consolidations and Sales of Assets......................... 28
SECTION 5.07. Limitations on Liens................................................ 29
SECTION 5.08. Limitations on Sale and Lease-Back.................................. 31
SECTION 5.09. Limitations on Change in Subsidiary Status.......................... 32
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default................................................... 33
SECTION 6.02. Notice of Default................................................... 34
ARTICLE 7
THE AGENT
SECTION 7.01. Appointment and Authorization....................................... 34
SECTION 7.02. Agent and Affiliates................................................ 34
SECTION 7.03. Action by Agent..................................................... 35
SECTION 7.04. Consultation with Experts........................................... 35
SECTION 7.05. Liability of Agent.................................................. 35
SECTION 7.06. Indemnification..................................................... 35
SECTION 7.07. Credit Decision..................................................... 35
SECTION 7.08. Successor Agent..................................................... 36
SECTION 7.09. Agent's Fee......................................................... 36
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair............ 36
SECTION 8.02. Illegality.......................................................... 37
SECTION 8.03. Increased Cost and Reduced Return................................... 37
SECTION 8.04. Taxes............................................................... 39
SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans........... 40
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PAGE
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices............................................................. 41
SECTION 9.02. No Waivers.......................................................... 41
SECTION 9.03. Expenses; Indemnification........................................... 41
SECTION 9.04. Sharing of Set-offs................................................. 42
SECTION 9.05. Amendments and Waivers.............................................. 42
SECTION 9.06. Successors and Assigns.............................................. 42
SECTION 9.07. Designated Lenders.................................................. 44
SECTION 9.08. Collateral.......................................................... 45
SECTION 9.09. Governing Law; Submission to Jurisdiction........................... 45
SECTION 9.10. Counterparts; Integration........................................... 46
SECTION 9.11. Waiver of Jury Trial................................................ 46
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Pricing Schedule
Exhibit A - Note Exhibit B - Competitive Bid Quote Request Exhibit C - Invitation for Competitive Bid Quotes Exhibit D - Competitive Bid Quote Exhibit E - Opinion of General Counsel of the Company Exhibit F - Opinion of Special Counsel for the Agent Exhibit G - Assignment and Assumption Agreement Exhibit H - Designation Agreement |
FIVE-YEAR
CREDIT AGREEMENT
|
AGREEMENT dated as of May 30, 2001 among NEW ROCKWELL COLLINS, INC. (to be renamed Rockwell Collins, Inc.), the BANKS listed on the signature pages hereof and THE CHASE MANHATTAN BANK, as Agent.
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have the following meanings:
"ABSOLUTE RATE AUCTION" means a solicitation of Competitive Bid Quotes setting forth Competitive Bid Absolute Rates pursuant to Section 2.03.
"ADDITIONAL BANK" means any financial institution that becomes a Bank for purposes hereof in connection with an increase in the aggregate amount of the Commitments pursuant to Section 2.17.
"ADMINISTRATIVE QUESTIONNAIRE" means, with respect to each Bank, an administrative questionnaire in the form prepared by the Agent and submitted to the Agent (with a copy to the Company) duly completed by such Bank.
"AGENT" means The Chase Manhattan Bank in its capacity as agent for the Banks hereunder, and its successors in such capacity.
"APPLICABLE LENDING OFFICE" means, with respect to any Bank, (i) in the case of its Base Rate Loans, its Domestic Lending Office, (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of its Competitive Bid Loans, its Competitive Bid Lending Office.
"APPROVED FUND" means any Fund that is administered or managed by (i) a Bank, (ii) an affiliate of a Bank or (iii) an entity or an affiliate of an entity that administers or manages a Bank.
"ASSIGNEE" has the meaning set forth in Section 9.06(c).
"BANK" means each bank listed on the signature pages hereof, each Additional Bank, each Assignee which becomes a Bank pursuant to Section 9.06(c), and their respective successors.
"BASE RATE" means, for any day, a rate per annum equal to the higher of
(i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal
Funds Rate for such day.
"BASE RATE LOAN" means a Committed Loan that bears interest at the Base Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or Article 8.
"BORROWING" has the meaning set forth in Section 1.03.
"COMMISSION" means the Securities and Exchange Commission, or any successor to its duties under the Securities Exchange Act of 1934.
"COMMITMENT" means (i) with respect to each Bank, the amount set forth opposite the name of such Bank on the signature pages hereof, (ii) with respect to each Additional Bank which becomes a Bank pursuant to Section 2.17, the amount of the Commitment thereby assumed by it or (iii) with respect to any Assignee, the amount of the transferor Bank's Commitment assigned to such Assignee pursuant to Section 9.06(c), in each case as such amount may be reduced from time to time pursuant to Section 2.10, increased from time to time pursuant to Section 2.17 or changed as a result of an assignment pursuant to Section 9.06(c).
"COMMITTED LOAN" means a loan made by a Bank pursuant to Section 2.01(a); provided that, if any such loan or loans (or portions thereof) are combined or subdivided pursuant to a Notice of Interest Rate Election, the term "Committed Loan" shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be.
"COMPANY" means New Rockwell Collins, Inc. (to be renamed Rockwell Collins, Inc.), a Delaware corporation incorporated in March 2001, and its successors.
"COMPANY'S INFORMATION STATEMENT" means the Information Statement on Form 10, as filed by the Company with the SEC on April 12, 2001 in connection with the Contribution and the Distribution.
"COMPETITIVE BID ABSOLUTE RATE" has the meaning set forth in Section 2.03(d).
"COMPETITIVE BID ABSOLUTE RATE LOAN" means a loan made or to be made by a Bank pursuant to an Absolute Rate Auction.
"COMPETITIVE BID LENDING OFFICE" means, as to each Bank, its Domestic Lending Office or such other office, branch or affiliate of such Bank as it may hereafter designate as its Competitive Bid Lending Office by notice to the Company and the Agent; provided that any Bank may from time to time by notice to the Company and the Agent designate separate Competitive Bid Lending
Offices for its Competitive Bid LIBOR Loans, on the one hand, and its Competitive Bid Absolute Rate Loans, on the other hand, in which case all references herein to the Competitive Bid Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require.
"COMPETITIVE BID LIBOR LOAN" means a loan made or to be made by a Bank pursuant to a LIBOR Auction (including such a loan bearing interest at the Base Rate pursuant to Section 8.01(a)).
"COMPETITIVE BID LOAN" means a Competitive Bid LIBOR Loan or a Competitive Bid Absolute Rate Loan.
"COMPETITIVE BID MARGIN" has the meaning set forth in Section 2.03(d).
"COMPETITIVE BID QUOTE" means an offer by a Bank to make a Competitive Bid Loan in accordance with Section 2.03.
"CONSOLIDATED DEBT" means, at any date, the Debt of the Company and its Restricted Subsidiaries, as consolidated and determined as of such date in accordance with GAAP.
"CONSOLIDATED FUNDED DEBT" means, at any date, the Funded Debt of the Company and its Restricted Subsidiaries, as consolidated and determined as of such date in accordance with GAAP.
"CONSOLIDATED SUBSIDIARY" means, as to any Person, at any date any Subsidiary or other entity the accounts of which would be consolidated with those of such Person in its consolidated financial statements if such statements were prepared as of such date.
"CONTRIBUTION" means the contribution by Rockwell International of Rockwell Collins to the Company, as more fully described in the Company's Information Statement.
"DEBT" of any Person means, at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee which are capitalized in accordance with GAAP, (v) all non-contingent obligations of such Person to reimburse any bank or other Person in respect of amounts paid under a letter of credit or similar instrument, (vi) all Debt secured by a Lien on any asset of such Person, whether or not such Debt is otherwise an obligation of such Person, and (vii) all Guarantees by such Person of Debt of another Person (each such Guarantee to constitute Debt in an amount equal to the amount of such other Person's Debt Guaranteed thereby).
"DEFAULT" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default.
"DESIGNATED LENDER" means, with respect to any Designating Lender, an Eligible Designee designated by it pursuant to Section 9.07(a) as a Designated Lender for purposes of this Agreement.
"DESIGNATING LENDER" means, with respect to each Designated Lender, the Bank that designated such Designated Lender pursuant to Section 9.07(a).
"DISTRIBUTION" means the pro rata distribution of all the issued and outstanding shares of common stock of the Company to the shareowners of Rockwell International, as described in the Company's Information Statement.
"DOMESTIC BUSINESS DAY" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close.
"DOMESTIC LENDING OFFICE" means, as to each Bank, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Bank may hereafter designate as its Domestic Lending Office by notice to the Company and the Agent.
"EFFECTIVE DATE" means the date this Agreement becomes effective in accordance with Section 3.01.
"ELIGIBLE DESIGNEE" means a special purpose corporation that (i) is organized under the laws of the United States or any state thereof, (ii) is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and (iii) issues (or the parent of which issues) commercial paper rated at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's.
"ENVIRONMENTAL LAWS" means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to the environment or the effect of the environment on human health or to emissions, discharges or releases of pollutants, contaminants, Hazardous Substances or wastes into the environment, including (without limitation) ambient air, surface water, ground water or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, Hazardous Substances or wastes or the clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute.
"EURO-DOLLAR BUSINESS DAY" means any Domestic Business Day on which commercial banks are open for international business (including dealings in dollar deposits) in London.
"EURO-DOLLAR LENDING OFFICE" means, as to each Bank, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Dollar Lending Office) or such other office, branch or affiliate of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Company and the Agent.
"EURO-DOLLAR LOAN" means a Committed Loan that bears interest at a Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election.
"EURO-DOLLAR MARGIN" has the meaning set forth in Section 2.07(b).
"EURO-DOLLAR RATE" means a rate of interest determined pursuant to
Section 2.07(b) on the basis of the London Interbank Offered Rate.
"EURO-DOLLAR REFERENCE BANKS" means the principal London offices of The Chase Manhattan Bank, Bank of America, N.A. and Citibank, N.A., and "Euro-Dollar Reference Bank" means any of the foregoing.
"EURO-DOLLAR RESERVE PERCENTAGE" has the meaning set forth in Section 2.16.
"EVENTS OF DEFAULT" has the meaning set forth in Section 6.01.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day, provided that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to The Chase Manhattan Bank on such day on such transactions as determined by the Agent.
"FIXED RATE LOANS" means Euro-Dollar Loans or Competitive Bid Loans (excluding Competitive Bid LIBOR Loans bearing interest at the Base Rate pursuant to Section 8.01(a)) or any combination of the foregoing.
"FUND" means any Person (other than a natural Person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.
"FUNDED DEBT" of any Person means, at any date of computation, all indebtedness for borrowed money of such Person which by its terms matures more than 12 months after such date or which is extendible or renewable at the option of such Person to a time more than 12 months after such date; provided, however, that (i) Funded Debt shall include all obligations in respect of lease rentals which under GAAP appear on a balance sheet of such Person as a liability item other than a current liability, (ii) in the case of the Company, Funded Debt shall not include Subordinated Debt and (iii) outstanding preferred stock of a Restricted Subsidiary that is not owned by the Company or a Wholly-Owned Restricted Subsidiary shall be deemed to constitute a principal amount of Funded Debt equal to the par value or involuntary liquidation value, whichever amount is higher, of such preferred stock.
"GAAP" means generally accepted accounting principles as in effect from time to time, applied on a basis consistent (except for changes concurred in by the Company's independent public accountants) with the most recent audited consolidated financial statements of the Company and its Consolidated Subsidiaries delivered to the Banks.
"GROUP OF LOANS" means, at any time, a group of Loans consisting of (i) all Committed Loans which are Base Rate Loans at such time or (ii) all Euro- Dollar Loans having the same Interest Period at such time; provided that, if a Committed Loan of any particular Bank is converted to or made as a Base Rate Loan pursuant to Article 8, such Loan shall be included in the same Group or Groups of Loans from time to time as it would have been in if it had not been so converted or made.
"GUARANTEE" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt of any other Person; provided that the term "GUARANTEE" shall not include endorsements for collection or deposit in the ordinary course of business. The term "GUARANTEE" used as a verb has a corresponding meaning.
"HAZARDOUS SUBSTANCES" means any toxic, radioactive, caustic or otherwise hazardous substance, including petroleum, its derivatives and by-products and other hydrocarbons, or any substance having any constituent elements displaying any of the foregoing characteristics.
"INDEMNITEE" has the meaning set forth in Section 9.03(b).
"INTEREST PERIOD" means: (1) with respect to each Euro-Dollar Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing or on the date specified in an applicable Notice of Interest Rate Election and ending one, two, three or six months thereafter, as the Company may elect in such notice; provided that:
(a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business
Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; and
(b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Euro-Dollar Business Day of a calendar month;
(2) with respect to each Competitive Bid LIBOR Borrowing, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending such whole number of months thereafter as the Company may elect in accordance with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; and
(b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Euro-Dollar Business Day of a calendar month;
(3) with respect to each Competitive Bid Absolute Rate Borrowing, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending such number of days thereafter (but not less than 7 days) as the Company may elect in accordance with Section 2.03; provided that any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day;
provided further that no Interest Period applicable to any Loan may end after the Termination Date.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as amended, or any successor statute.
"LIBOR AUCTION" means a solicitation of Competitive Bid Quotes setting forth Competitive Bid Margins based on the London Interbank Offered Rate pursuant to Section 2.03.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, or any other type of preferential arrangement that has substantially the same practical effect as a security interest, in respect of such asset. For purposes hereof, the Company or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement relating to such asset.
"LOAN" means a Committed Loan or a Competitive Bid Loan and "LOANS" means Committed Loans or Competitive Bid Loans or any combination of the foregoing.
"LONDON INTERBANK OFFERED RATE" has the meaning set forth in Section 2.07(b).
"MATERIAL DEBT" means a Single Issue (other than the Notes) of the Company and/or one or more of its Subsidiaries in a principal amount exceeding $50,000,000.
"NOTES" means promissory notes of the Company, substantially in the form of Exhibit A hereto, evidencing the obligation of the Company to repay the Loans, and "NOTE" means any one of such promissory notes issued hereunder.
"NOTICE OF BORROWING" means a Notice of Committed Borrowing (as defined in Section 2.02) or a Notice of Competitive Bid Borrowing (as defined in Section 2.03(f)).
"NOTICE OF INTEREST RATE ELECTION" has the meaning specified in Section 2.09.
"PARENT" means, with respect to any Bank, any Person controlling such Bank.
"PARTICIPANT" has the meaning set forth in Section 9.06(b).
"PERSON" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.
"PRICING SCHEDULE" means the Schedule attached hereto identified as such.
"PRIME RATE" means the rate of interest publicly announced by The Chase Manhattan Bank from time to time as its Prime Rate.
"PRINCIPAL PROPERTY" means any real property (including buildings and
other improvements) of the Company or any Restricted Subsidiary whether
currently owned or hereafter acquired (other than any property hereafter
acquired for the control or abatement of atmospheric pollutants or contaminants
or water, noise, odor or other pollution, or for purposes of developing a
cogeneration facility or a small power production facility as such terms are
defined in the Public Utility Regulatory Policies Act of 1978, as amended) which
(i) has, at any date of determination, a book value in excess of 5% of
Shareowners' Equity and (ii) in the opinion of the board of directors of the
Company (or any duly
authorized committee thereof) is of material importance to the total business conducted by the Company and its Restricted Subsidiaries as a whole.
"QUARTERLY PAYMENT DATES" means each March 31, June 30, September 30 and December 31.
"REGULATION T, U OR X" means Regulation T, U or X of the Board of Governors of the Federal Reserve System, as in effect from time to time.
"REQUIRED BANKS" means at any time Banks having more than 50% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, holding more than 50% of the aggregate unpaid principal amount of the Loans.
"RESTRICTED SUBSIDIARY"" means any Subsidiary of the Company other than an Unrestricted Subsidiary.
"REVOLVING CREDIT PERIOD" means the period from and including the Effective Date to but excluding the Termination Date.
"ROCKWELL COLLINS" means the avionics and communications business and certain other assets and liabilities of Rockwell International.
"ROCKWELL INTERNATIONAL" means Rockwell International Corporation, a Delaware corporation.
"SEC" means the Securities and Exchange Commission.
"SECURED DEBT" means indebtedness for borrowed money of the Company or a Restricted Subsidiary (other than indebtedness owed by a Restricted Subsidiary to the Company, by a Restricted Subsidiary to another Restricted Subsidiary or by the Company to a Restricted Subsidiary), which is secured by (a) a mortgage or other lien on any Principal Property of the Company or a Restricted Subsidiary or (b) a pledge, lien or other security interest on any shares of stock or indebtedness of a Restricted Subsidiary. The amount of Secured Debt at any time outstanding shall be the amount then owing thereon by the Company or a Restricted Subsidiary.
"SHAREOWNERS' EQUITY" means, at any date of computation, the aggregate of capital stock, capital surplus and earned surplus, after deducting the cost of shares of capital stock of the Company held in its treasury, of the Company and its Restricted Subsidiaries, as consolidated and determined in accordance with GAAP.
"SALE AND LEASE-BACK TRANSACTION" has the meaning specified in Section 5.08.
"SINGLE ISSUE" means indebtedness for borrowed money arising in a single transaction or a series of related transactions. Indebtedness issued in discrete
offerings but governed by a single shelf indenture shall not be aggregated as a Single Issue, but indebtedness owing to multiple lenders under parallel agreements comprising a single private placement and indebtedness arising from multiple takedowns under a single or a series of related commitments from one or more lenders shall be so aggregated.
"SUBORDINATED DEBT" means any unsecured Debt of the Company which: (1) has a final maturity subsequent to the Termination Date; (2) does not provide for mandatory payment or retirement prior to said date, whether by means of serial maturities or sinking fund or other analogous provisions or plan, fixed or contingent, requiring, or which on the happening of a contingency may require, the payment or retirement of such Debt in amounts which as of any particular time would aggregate more than such portion of the original principal amount thereof as is obtained by multiplying such original principal amount by a fraction the numerator of which shall be the number of months elapsed from the date of creation of such Debt to such time and the denominator of which shall be the number of months from the date of creation thereof to the final maturity thereof; and (3) is expressly made subordinate and junior in right of payment to the Loans and such other Debt of the Company (except other Subordinated Debt) as may be specified in the instruments evidencing the Subordinated Debt or the indenture or other similar instrument under which it is issued (which indenture or other instrument shall be binding on all holders of such Subordinated Debt).
"SUBSIDIARY" means, as to any Person, any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person; unless otherwise specified, "SUBSIDIARY" means a Subsidiary of the Company.
"TERMINATION DATE" means May 30, 2006, or, if such day is not a Euro- Dollar Business Day, the next preceding Euro-Dollar Business Day.
"TOTAL CAPITALIZATION" means, at any date, the sum (without duplication) of (i) Consolidated Debt as of such date and (ii) all preferred stock of the Company and its Restricted Subsidiaries and the consolidated shareowners' equity of the Company and its Restricted Subsidiaries as of the date of the Company's most recent financial statements referred to in Section 4.04 or delivered pursuant to Section 5.01.
"UNITED STATES" means the United States of America, including the States and the District of Columbia, but excluding its territories and possessions.
"UNRESTRICTED SUBSIDIARY" means (a) any Subsidiary which, in accordance with the provisions of this Agreement, has been designated by the Company as an Unrestricted Subsidiary after the Effective Date, unless and until such Subsidiary shall, in accordance with the provisions of this Agreement, be designated by the Company as a Restricted Subsidiary; and (b) any corporation of which any one or more Unrestricted Subsidiaries directly or indirectly own outstanding shares of capital stock having voting power sufficient to elect, under
ordinary circumstances (not dependent upon the happening of a contingency), a majority of the directors.
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" means a Restricted Subsidiary all of the outstanding capital stock of which, other than directors' qualifying shares, and all of the Funded Debt of which, shall at the time be owned by the Company or by one or more Wholly-Owned Restricted Subsidiaries, or by the Company in conjunction with one or more Wholly-Owned Restricted Subsidiaries.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with GAAP.
SECTION 1.03. Types of Borrowings. The term "BORROWING" denotes the aggregation of Loans of one or more Banks to be made to the Company pursuant to Article 2 on a single date, all of which Loans are of the same type (subject to Article 8) and, except in the case of Base Rate Loans, have the same initial Interest Period. Borrowings are classified for purposes of this Agreement either by reference to the pricing of Loans comprising such Borrowing (e.g., a "EURO-DOLLAR BORROWING" is a Borrowing comprised of Euro-Dollar Loans) or by reference to the provisions of Article 2 under which participation therein is determined (i.e., a "COMMITTED BORROWING" is a Borrowing under Section 2.01 in which all Banks participate in proportion to their Commitments, while a "COMPETITIVE BID BORROWING" is a Borrowing under Section 2.03 in which the Bank participants are determined on the basis of their bids in accordance therewith).
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend. (a) During the Revolving Credit
Period each Bank severally agrees, on the terms and conditions set forth in this
Agreement, to make loans to the Company pursuant to this Section from time to
time in amounts such that the aggregate principal amount of Committed Loans by
such Bank at any one time outstanding shall not exceed the amount of its
Commitment. Within the foregoing limits, the Company may borrow under this
Section 2.01(a), repay, or to the extent permitted by Section 2.12, prepay Loans
and reborrow at any time during the Revolving Credit Period under this Section
2.01(a).
(b) Each Borrowing under this Section 2.01 shall be in an aggregate principal amount of $25,000,000 or any larger multiple of $1,000,000 (except that any such Borrowing may be in the aggregate amount available in accordance
with Section 3.02(b)) and shall be made from the several Banks ratably in proportion to their respective Commitments.
SECTION 2.02. Notice of Committed Borrowing. The Company shall give the Agent notice (a "NOTICE OF COMMITTED BORROWING") not later than 10:30 A.M. (New York City time) on (x) the date of each Base Rate Borrowing and (y) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying:
(a) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Base Rate Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing,
(b) the aggregate amount of such Borrowing,
(c) whether the Loans comprising such Borrowing are to bear interest initially at the Base Rate or a Euro-Dollar Rate, and
(d) in the case of a Euro-Dollar Borrowing, the duration of the initial Interest Period applicable thereto, subject to the provisions of the definition of Interest Period.
SECTION 2.03. Competitive Bid Borrowings. (a) The Competitive Bid Option. In addition to Committed Borrowings pursuant to Section 2.01, the Company may, as set forth in this Section, request the Banks during the Revolving Credit Period to make offers to make Competitive Bid Loans to the Company. The Banks may, but shall have no obligation to, make such offers and the Company may, but shall have no obligation to, accept any such offers in the manner set forth in this Section.
(b) Competitive Bid Quote Request. When the Company wishes to request offers to make Competitive Bid Loans under this Section, it shall transmit to the Agent by telex or facsimile transmission a Competitive Bid Quote Request substantially in the form of Exhibit B hereto so as to be received no later than 10:30 A.M. (New York City time) on (x) the fifth Euro-Dollar Business Day prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction or (y) the Domestic Business Day next preceding the date of Borrowing proposed therein, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Company and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Competitive Bid Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective) specifying:
(i) the proposed date of Borrowing, which shall be a Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic Business Day in the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be $25,000,000 or a larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period, and
(iv) whether the Competitive Bid Quotes requested are to set forth a Competitive Bid Margin or a Competitive Bid Absolute Rate.
The Company may request offers to make Competitive Bid Loans for more than one Interest Period in a single Competitive Bid Quote Request. No Competitive Bid Quote Request shall be given within five Euro-Dollar Business Days (or such other number of days as the Company and the Agent may agree) of any other Competitive Bid Quote Request.
(c) Invitation for Competitive Bid Quotes. Promptly upon receipt of a Competitive Bid Quote Request, the Agent shall send to the Banks by telex or facsimile transmission an Invitation for Competitive Bid Quotes substantially in the form of Exhibit C hereto, which shall constitute an invitation by the Company to each Bank to submit Competitive Bid Quotes offering to make the Competitive Bid Loans to which such Competitive Bid Quote Request relates in accordance with this Section.
(d) Submission and Contents of Competitive Bid Quotes. (i) Each Bank
may submit a Competitive Bid Quote containing an offer or offers to make
Competitive Bid Loans in response to any Invitation for Competitive Bid Quotes.
Each Competitive Bid Quote must comply with the requirements of this subsection
(d) and must be submitted to the Agent by telex or facsimile transmission at its
offices specified in or pursuant to Section 9.01 not later than (x) 2:00 P.M.
(New York City time) on the fourth Euro-Dollar Business Day prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (y) 9:30 A.M. (New
York City time) on the proposed date of Borrowing, in the case of an Absolute
Rate Auction (or, in either case, such other time or date as the Company and the
Agent shall have mutually agreed and shall have notified to the Banks not later
than the date of the Competitive Bid Quote Request for the first LIBOR Auction
or Absolute Rate Auction for which such change is to be effective); provided
that Competitive Bid Quotes submitted by the Agent (or any affiliate of the
Agent) in the capacity of a Bank may be submitted, and may only be submitted, if
the Agent or such affiliate notifies the Company of the terms of the offer or
offers contained therein not later than (x) one hour prior to the deadline for
the other Banks, in the case of a LIBOR Auction or (y) 15 minutes prior to the
deadline for the other Banks, in the case of an Absolute Rate Auction. Subject
to Articles 3 and 6, any Competitive Bid Quote so made shall be irrevocable
except with the written consent of the Agent given on the instructions of the
Company.
(ii) Each Competitive Bid Quote shall be in substantially the form of Exhibit D hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Competitive Bid Loan for which each such offer is being made, which principal amount (w)
may be greater than or less than the Commitment of the quoting Bank, (x) must be $5,000,000 or a larger multiple of $1,000,000, (y) may not exceed the principal amount of Competitive Bid Loans for which offers were requested and (z) may be subject to an aggregate limitation as to the principal amount of Competitive Bid Loans for which offers being made by such quoting Bank may be accepted,
(C) in the case of a LIBOR Auction, the margin above or below the applicable London Interbank Offered Rate (the "COMPETITIVE BID MARGIN") offered for each such Competitive Bid Loan, expressed as a percentage (specified to the nearest 1/10,000th of 1%) to be added to or subtracted from such base rate,
(D) in the case of an Absolute Rate Auction, the rate of interest per annum (specified to the nearest 1/10,000th of 1%) (the "COMPETITIVE BID ABSOLUTE RATE") offered for each such Competitive Bid Loan, and
(E) the identity of the quoting Bank.
A Competitive Bid Quote may set forth up to five separate offers by the quoting Bank with respect to each Interest Period specified in the related Invitation for Competitive Bid Quotes.
(iii) Any Competitive Bid Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit D hereto or does not specify all of the information required by subsection (d)(ii);
(B) contains qualifying, conditional or similar language;
(C) proposes terms other than or in addition to those set forth in the applicable Invitation for Competitive Bid Quotes; or
(D) arrives after the time set forth in subsection (d)(i).
(e) Notice to Company. The Agent shall promptly notify the Company of the terms (x) of any Competitive Bid Quote submitted by a Bank that is in accordance with subsection (d) and (y) of any Competitive Bid Quote that amends, modifies or is otherwise inconsistent with a previous Competitive Bid Quote submitted by such Bank with respect to the same Competitive Bid Quote Request. Any such subsequent Competitive Bid Quote shall be disregarded by the Agent unless such subsequent Competitive Bid Quote is submitted solely to correct a manifest error in such former Competitive Bid Quote. The Agent's notice to the Company shall specify (A) the aggregate principal amount of Competitive Bid Loans for which offers have been received for each Interest Period specified in the related Competitive Bid Quote Request, (B) the respective
principal amounts and Competitive Bid Margins or Competitive Bid Absolute Rates, as the case may be, so offered and (C) if applicable, limitations on the aggregate principal amount of Competitive Bid Loans for which offers in any single Competitive Bid Quote may be accepted.
(f) Acceptance and Notice by Company. Not later than 10:30 A.M. (New York City time) on (x) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Company and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Competitive Bid Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective), the Company shall notify the Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection (e). In the case of acceptance, such notice (a "NOTICE OF COMPETITIVE BID BORROWING") shall specify the aggregate principal amount of offers for each Interest Period that are accepted. A failure by the Company to notify the Agent as aforesaid shall constitute non-acceptance of the offers so notified to it. The Company may accept any Competitive Bid Quote in whole or in part; provided that:
(i) the aggregate principal amount of each Competitive Bid Borrowing may not exceed the applicable amount set forth in the related Competitive Bid Quote Request,
(ii) the principal amount of each Competitive Bid Borrowing must be $25,000,000 or a larger multiple of $1,000,000,
(iii) acceptance of offers may only be made on the basis of ascending Competitive Bid Margins or Competitive Bid Absolute Rates, as the case may be, and
(iv) the Company may not accept any offer that is described in subsection (d)(iii) or that otherwise fails to comply with the requirements of this Agreement.
(g) Allocation by Agent. If offers are made by two or more Banks with the same Competitive Bid Margins or Competitive Bid Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Competitive Bid Loans in respect of which such offers are accepted shall be allocated by the Agent among such Banks as nearly as possible (in multiples of $1,000,000, as the Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determinations by the Agent of the amounts of Competitive Bid Loans shall be conclusive in the absence of manifest error.
SECTION 2.04. Notice to Banks; Funding of Loans. (a) Upon receipt of a Notice of Borrowing, the Agent shall promptly notify each Bank of the contents
thereof and of such Bank's share (if any) of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Company.
(b) Not later than 12:00 Noon (New York City time) on the date of each Borrowing, each Bank participating therein shall (except as provided in subsection (c) of this Section) make available its share of such Borrowing, in Federal or other funds immediately available in New York City, to the Agent at its address referred to in Section 9.01. Unless the Agent determines that any applicable condition specified in Article 3 has not been satisfied, the Agent will make the funds so received from the Banks available to the Company at the Agent's aforesaid address.
(c) Unless the Agent shall have received notice from a Bank prior to
the date of any Borrowing (or, in the case of a Base Rate Borrowing, prior to
12:00 Noon (New York City time) on the date of such Borrowing) that such Bank
will not make available to the Agent such Bank's share of such Borrowing, the
Agent may assume that such Bank has made such share available to the Agent on
the date of such Borrowing in accordance with subsections (b) and (c) of this
Section 2.04 and the Agent may, in reliance upon such assumption, make available
to the Company on such date a corresponding amount. If and to the extent that
such Bank shall not have so made such share available to the Agent, such Bank
and the Company severally agree to repay to the Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Company until the date such amount is
repaid to the Agent, at (i) in the case of the Company, a rate per annum equal
to the higher of the Federal Funds Rate and the interest rate applicable thereto
pursuant to Section 2.07 and (ii) in the case of such Bank, the Federal Funds
Rate. If such Bank shall repay to the Agent such corresponding amount, such
amount so repaid shall constitute such Bank's Loan included in such Borrowing
for purposes of this Agreement.
SECTION 2.05. Notes. (a) Each Bank may, by notice to the Company and
the Agent, request that (i) its Loans be evidenced by a single Note payable to
the order of such Bank for the account of its Applicable Lending Office in an
amount equal to the aggregate unpaid principal amount of such Bank's Loans or
(ii) its Loans of a particular type or types be evidenced by a separate Note in
an amount equal to the aggregate unpaid principal amount of such Loans. Each
reference in this Agreement to the "NOTE" of such Bank shall be deemed to refer
to and include any or all of such Notes, as the context may require.
(b) Upon receipt of each Bank's Note pursuant to Section 3.01(b), the Agent shall forward such Note to such Bank. Each Bank shall record the date, amount, type and maturity of each Loan made by it and the date and amount of each payment of principal made by the Company with respect thereto, and may, if such Bank so elects in connection with any transfer or enforcement of its Note, endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding; provided that the failure of any Bank to make, or any error in making, any such
recordation or endorsement shall not affect the obligations of the Company hereunder or under the Notes. Each Bank is hereby irrevocably authorized by the Company so to endorse its Note and to attach to and make a part of its Note a continuation of any such schedule as and when required. The Agent shall also record the date, amount, type and maturity of each Loan made by any Bank hereunder and the date and amount of each payment of principal made by the Company to the Agent with respect thereto.
SECTION 2.06. Maturity of Loans. (a) Each Committed Loan shall mature, and the principal amount thereof shall be due and payable (together with interest accrued thereon) on the Termination Date.
(b) Each Competitive Bid Loan shall mature, and the principal amount thereof shall be due and payable (together with accrued interest thereon) on the last day of the Interest Period applicable thereto.
SECTION 2.07. Interest Rates. (a) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the Base Rate for such day. Such interest shall be payable at maturity, quarterly in arrears on each Quarterly Payment Date and, with respect to the principal amount of any Base Rate Loan that is prepaid or converted to a Euro-Dollar Loan, on the date of such prepayment or conversion. Any overdue principal of or interest on any Base Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the rate otherwise applicable to Base Rate Loans for such day.
(b) Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for each day during each Interest Period applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such day plus the London Interbank Offered Rate applicable to such Interest Period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof.
"EURO-DOLLAR MARGIN" means a rate per annum determined in accordance with the Pricing Schedule.
The "LONDON INTERBANK OFFERED RATE" applicable to any Interest Period means the rate per annum appearing on the Screen at approximately 11:00 a.m. (London time) two Euro-Dollar Business Days before the first day of such Interest Period as the rate per annum for deposits in dollars with a maturity comparable to such Interest Period. If no rate appears on the Screen for the necessary period, then the "London Interbank Offered Rate" with respect to such Interest Period shall be the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which deposits in dollars are offered by each of the Euro-Dollar Reference Banks in the London interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of such Interest Period in an amount approximately equal to the
principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period.
The "SCREEN" means Telerate Page 3750; provided that the Agent may nominate an alternative source of screen rates if such page is replaced by another which display rates for inter-bank deposits offered by leading banks in London.
(c) Any overdue principal of or interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the higher of (i) the sum of 2% plus the Euro-Dollar Margin for such day plus the London Interbank Offered Rate applicable to the Interest Period for such Loan and (ii) the sum of 2% plus the Euro-Dollar Margin for such day plus the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (x) the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which one day (or, if such amount due remains unpaid more than three Euro-Dollar Business Days, then for such other period of time not longer than six months as the Agent may select) deposits in dollars in an amount approximately equal to such overdue payment due to each of the Euro-Dollar Reference Banks are offered by such Euro-Dollar Reference Bank in the London interbank market for the applicable period determined as provided above by (y) 1.00 minus the Euro-Dollar Reserve Percentage (or, if the circumstances described in clause (a) or (b) of Section 8.01 shall exist, at a rate per annum equal to the sum of 2% plus the rate applicable to Base Rate Loans for such day).
(d) Subject to Section 8.01(a), each Competitive Bid LIBOR Loan shall
bear interest on the outstanding principal amount thereof, for the Interest
Period applicable thereto, at a rate per annum equal to the sum of the London
Interbank Offered Rate for such Interest Period (determined in accordance with
Section 2.07(b) as if the related Competitive Bid LIBOR Borrowing were a
Committed Euro-Dollar Borrowing) plus (or minus) the Competitive Bid Margin
quoted by the Bank making such Loan in accordance with Section 2.03. Each
Competitive Bid Absolute Rate Loan shall bear interest on the outstanding
principal amount thereof, for the Interest Period applicable thereto, at a rate
per annum equal to the Competitive Bid Absolute Rate quoted by the Bank making
such Loan in accordance with Section 2.03. Such interest shall be payable for
each Interest Period on the last day thereof and, if such Interest Period is
longer than three months, at intervals of three months after the first day
thereof. Any overdue principal of or interest on any Competitive Bid Loan shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to the sum of 2% plus the Base Rate for such day.
(e) The Agent shall determine each interest rate applicable to the Loans hereunder. The Agent shall give prompt notice to the Company and the participating Banks of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error.
(f) Each Euro-Dollar Reference Bank agrees to use its best efforts to furnish quotations to the Agent as contemplated by this Section. If any Euro- Dollar Reference Bank does not furnish a timely quotation, the Agent shall determine the relevant interest rate on the basis of the quotation or quotations furnished by the remaining Euro-Dollar Reference Bank or Banks or, if none of such quotations is available on a timely basis, the provisions of Section 8.01 shall apply.
SECTION 2.08. Method of Electing Interest Rates. (a) The Loans included in each Committed Borrowing shall bear interest initially at the type of rate specified by the Company in the applicable Notice of Committed Borrowing. Thereafter, the Company may from time to time elect to change or continue the type of interest rate borne by each Group of Loans (subject to Section 2.08(d) and the provisions of Article 8), as follows:
(i) if such Loans are Base Rate Loans, the Company may elect to convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business Day; and
(ii) if such Loans are Euro-Dollar Loans, the Company may elect to convert such Loans to Base Rate Loans or continue such Loans as Euro-Dollar Loans for an additional Interest Period, in each case as of the last day of the then current Interest Period applicable thereto.
Each such election shall be made by delivering a notice (a "NOTICE OF INTEREST RATE ELECTION") to the Agent not later than 12:00 noon (New York City time) on the third Euro-Dollar Business Day before the conversion or continuation selected in such notice is to be effective. A Notice of Interest Rate Election may, if it so specifies, apply to only a portion of the aggregate principal amount of the relevant Group of Loans; provided that (i) such portion is allocated ratably among the Loans comprising such Group and (ii) the portion to which such Notice applies, and the remaining portion to which it does not apply, are each at least $25,000,000 (unless such portion is comprised of Base Rate Loans). If no such notice is timely received before the end of an Interest Period for any Group of Euro-Dollar Loans, the Company shall be deemed to have elected that, at the end of such Interest Period, such Group of Loans be continued as Euro-Dollar Loans for an additional Interest Period of one month (subject to the provisions of the definition of Interest Period).
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such notice applies;
(ii) the date on which the conversion or continuation selected in such notice is to be effective, which shall comply with the applicable clause of Section 2.08(a);
(iii) if the Loans comprising such Group are to be converted, the new type of Loans and, if the Loans resulting from such conversion are to be Euro-Dollar Loans, the duration of the next succeeding Interest Period applicable thereto; and
(iv) if such Loans are to be continued as Euro-Dollar Loans for an additional Interest Period, the duration of such additional Interest Period.
Each Interest Period specified in a Notice of Interest Rate Election shall comply with the provisions of the definition of Interest Period.
(c) Promptly after receiving a Notice of Interest Rate Election from the Company pursuant to Section 2.08(a), the Agent shall notify each Bank of the contents thereof and such notice shall not thereafter be revocable by the Company.
(d) The Company shall not be entitled to elect to convert any Committed Loans to, or continue any Committed Loans for an additional Interest Period as, Euro-Dollar Loans if (i) the aggregate principal amount of any Group of Euro- Dollar Loans created or continued as a result of such election would be less than $25,000,000 or (ii) a Default shall have occurred and be continuing when the Company delivers notice of such election to the Agent.
(e) If any Committed Loan is converted to a different type of Loan, the Company shall pay, on the date of such conversion, the interest accrued to such date on the principal amount being converted.
SECTION 2.09. Facility Fee. The Company shall pay to the Agent for the
account of the Banks ratably a facility fee at the Facility Fee Rate (determined
daily in accordance with the Pricing Schedule). Such facility fee shall accrue
(i) from and including the Effective Date to but excluding the Termination Date
(or earlier date of termination of the Commitments in their entirety), on the
daily aggregate amount of the Commitments (whether used or unused) and (ii) from
and including the Termination Date or such earlier date of termination to but
excluding the date the Loans shall be repaid in their entirety, on the daily
aggregate outstanding principal amount of the Loans. Accrued fees under this
Section shall be payable quarterly in arrears on each Quarterly Payment Date and
upon the date of termination of the Commitments in their entirety (and, if
later, the date the Loans shall be repaid in their entirety).
SECTION 2.10. Optional Termination or Reduction of Commitments. During the Revolving Credit Period, the Company may, upon at least three Domestic Business Days' notice to the Agent, (i) terminate the Commitments at any time, if no Loans are outstanding at such time or (ii) ratably reduce from time to time by an aggregate amount of $25,000,000 or any larger multiple thereof, the aggregate amount of the Commitments in excess of the aggregate outstanding principal amount of the Loans.
SECTION 2.11. Scheduled Termination of Commitments. The Commitments shall terminate on the Termination Date.
SECTION 2.12. Optional Prepayments. (a) Subject in the case of any
Euro-Dollar Loans to Section 2.14, the Company may (i) upon at least one
Domestic Business Day's notice to the Agent, prepay any Group of Base Rate Loans
(or any Competitive Bid Borrowing bearing interest at the Base Rate pursuant to
Section 8.01(a)) or (ii) upon at least three Euro-Dollar Business Days' notice
to the Agent, prepay any Group of Euro-Dollar Loans, in each case in whole at
any time, or from time to time in part in amounts aggregating $25,000,000 or any
larger multiple of $1,000,000, by paying the principal amount to be prepaid
together with accrued interest thereon to the date of prepayment. Each such
optional prepayment shall be applied to prepay ratably the Loans of the several
Banks included in such Group (or Borrowing).
(b) Except as provided in Section 2.12(a), the Company may not prepay all or any portion of the principal amount of any Competitive Bid Loan prior to the maturity thereof.
(c) Upon receipt of a notice of prepayment pursuant to this Section, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share (if any) of such prepayment and such notice shall not thereafter be revocable by the Company.
SECTION 2.13. General Provisions as to Payments. (a) The Company shall make each payment of principal of, and interest on, the Loans and of fees hereunder, not later than 12:00 Noon (New York City time) on the date when due, in Federal or other funds immediately available in New York City, to the Agent at its address referred to in Section 9.01. The Agent will promptly distribute to each Bank its ratable share of each such payment received by the Agent for the account of the Banks. Whenever any payment of principal of, or interest on, the Base Rate Loans or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. Whenever any payment of principal of, or interest on, the Competitive Bid Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time.
(b) Unless the Agent shall have received notice from the Company prior to the date on which any payment is due to the Banks hereunder that the Company will not make such payment in full, the Agent may assume that the Company has
made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent that the Company shall not have so made such payment, each Bank shall repay to the Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Agent, at the Federal Funds Rate.
SECTION 2.14. Funding Losses. If the Company makes any payment of principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is converted to a different type of Loan (whether such payment or conversion is pursuant to Article 2, 6 or 8 or otherwise) on any day other than the last day of the Interest Period applicable thereto, or the last day of an applicable period fixed pursuant to Section 2.07(c), or if the Company fails to borrow, prepay, convert or continue any Fixed Rate Loans after notice has been given to any Bank in accordance with Section 2.04(a), 2.08(c) or 2.12(c), the Company shall reimburse each Bank within 15 days after demand for any resulting loss or expense incurred by it (or by an existing or prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or conversion or failure to borrow, prepay, convert or continue; provided that such Bank shall have delivered to the Company a certificate as to the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error.
SECTION 2.15. Computation of Interest and Fees. Interest based on the Prime Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day).
SECTION 2.16. Regulation D Compensation. Each Bank may require the
Company to pay, contemporaneously with each payment of interest on the Euro-
Dollar Loans, additional interest on the related Euro-Dollar Loan of such Bank
at a rate per annum determined by such Bank up to but not exceeding the excess
of (i) (A) the applicable London Interbank Offered Rate divided by (B) one minus
the Euro-Dollar Reserve Percentage over (ii) the applicable London Interbank
Offered Rate. Any Bank wishing to require payment of such additional interest
(x) shall so notify the Company and the Agent, in which case such additional
interest on the Euro-Dollar Loans of such Bank shall be payable to such Bank at
the place indicated in such notice with respect to each Interest Period
commencing at least three Euro-Dollar Business Days after the giving of such
notice and (y) shall notify the Company at least five Euro-Dollar Business Days
prior to each date on which interest is payable on the Euro-Dollar Loans of the
amount then due it under this Section.
"EURO-DOLLAR RESERVE PERCENTAGE" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor), for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of "EUROCURRENCY LIABILITIES" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents).
SECTION 2.17. Commitment Increase; Additional Banks. (a) The Company may, upon at least 30 days' notice to the Agent (which shall promptly provide a copy of such notice to the Banks), propose to increase the aggregate amount of the Commitments to an amount not to exceed $625,000,000 (the amount of any such increase, the "COMMITMENT INCREASE"). Each Bank party to this Agreement at such time shall have the right (but no obligation), for a period of 15 days following its receipt of such notice from the Agent, to elect by notice to the Company and the Agent to increase its Commitment by a principal amount up to that amount which bears the same ratio to the Commitment Increase as its then existing Commitment bears to the aggregate Commitments then existing.
(b) If any Bank party to this Agreement shall not elect to increase its
Commitment by the full amount permitted by subsection (a) of this Section, the
Company with the consent of the Agent may designate one or more other banks or
other financial institutions (which may be, but need not be, one or more of the
existing Banks) which at the time agree in the case of any such bank that is an
existing Bank to increase its Commitment and, in the case of any other such bank
(an "ADDITIONAL BANK"), to become a party to this Agreement. The sum of the
increases in the Commitments of the existing Banks pursuant to this subsection
(b) plus the Commitments of the Additional Banks shall not in the aggregate
exceed the unsubscribed amount of the Commitment Increase.
(c) An increase in the aggregate amount of the Commitments pursuant to this Section 2.17 shall become effective upon the receipt by the Agent of an agreement in form and substance satisfactory to the Agent signed by the Company, by each Additional Bank and by each other Bank whose Commitment is to be increased, setting forth the new Commitments of such Banks and setting forth the agreement of each Additional Bank to become a party to this Agreement and to be bound by all the terms and provisions hereof, together with such evidence of appropriate corporate authorization on the part of the Company with respect to the Commitment Increase and such opinions of counsel for the Company with respect to the Commitment Increase as the Agent may reasonably request.
(d) Upon any increase in the aggregate amount of the Commitments pursuant to this Section 2.17, within five Domestic Business Days, in the case of Base Rate Loans then outstanding, and at the end of the then current Interest
Period with respect thereto, in the case of Euro-Dollar Loans then outstanding, the Company shall prepay or repay such Loans in their entirety and, to the extent the Company elects to do so and subject to the conditions specified in Article 3 of this Agreement, the Company shall reborrow Committed Loans from the Banks in proportion to their respective Commitments after giving effect to such increase, until such time as all outstanding Committed Loans are held by the Banks in such proportion.
ARTICLE 3
CONDITIONS
SECTION 3.1. Effectiveness. This Agreement shall become effective on the date that each of the following conditions shall have been satisfied (or waived in accordance with Section 9.05):
(a) receipt by the Agent of counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Agent in form satisfactory to it of telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party);
(b) receipt by the Agent of an opinion of the General Counsel of the Company, substantially in the form of Exhibit E hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request;
(c) receipt by the Agent of an opinion of Davis Polk & Wardwell, special counsel for the Agent, substantially in the form of Exhibit F hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request;
(d) receipt by the Agent of all documents the Agent may reasonably request relating to the existence of the Company, the corporate authority for and the validity of this Agreement and the Notes, and any other matters relevant hereto, all in form and substance satisfactory to the Agent; and
provided that this Agreement shall not become effective or be binding on any party hereto unless all of the foregoing conditions are satisfied not later than June 15, 2001. The Agent shall promptly notify the Company and the Banks of the Effective Date, and such notice shall be conclusive and binding on all parties hereto.
SECTION 3.02. Borrowings. The obligation of any Bank to make a Loan on the occasion of any Borrowing is subject to the satisfaction of the following conditions:
(a) receipt by the Agent of a Notice of Borrowing as required by
Section 2.02 or 2.03, as the case may be;
(b) the fact that, immediately after such Borrowing, the aggregate outstanding principal amount of the Loans will not exceed the aggregate amount of the Commitments;
(c) the fact that, immediately before and after such Borrowing, no Default shall have occurred and be continuing;
(d) the fact that the representations and warranties of the Company contained in this Agreement (other than the representations and warranties set forth in Sections 4.04, 4.05 and 4.06, which are made only as of the date hereof) shall be true on and as of the date of such Borrowing; and
(e) receipt by the Agent of evidence satisfactory to it of the consummation of the Contribution substantially as contemplated by the Company's Information Statement.
Each Borrowing hereunder shall be deemed to be a representation and warranty by the Company on the date of such Borrowing as to the facts specified in clause (d) of this Section.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware, and has all corporate powers and will have on and as of the Effective Date all material governmental licenses, authorizations, consents and approvals required to carry on its business.
SECTION 4.02. Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by the Company of this Agreement and the Notes are within the Company's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official, do not contravene any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Company and do not contravene, or constitute a material default under, any debt instrument known to the Company to be binding upon it.
SECTION 4.03. Binding Effect. This Agreement constitutes a valid and binding agreement of the Company and each Note, when executed and delivered in accordance with this Agreement, will constitute a valid and binding obligation of the Company, in each case enforceable in accordance with its terms.
SECTION 4.04. Financial Information. (a) The statement of assets and liabilities of Rockwell Collins as of September 30, 2000 and the related statements of operations, cash flows and changes in Rockwell International's invested equity and comprehensive income for the fiscal year then ended, reported on by independent public accountants and set forth in the Company's Information Statement, a copy of which has been delivered to each of the Banks, fairly present, in all material respects, in conformity with GAAP, the assets and liabilities of Rockwell Collins as of such date and its results of operations, cash flows and changes in Rockwell International's invested equity and comprehensive income for such fiscal year.
(b) The unaudited statement of assets and liabilities of Rockwell Collins as of December 31, 2000 and the related unaudited consolidated statements of operations, cash flows and changes in Rockwell International's invested equity and comprehensive income for the three months then ended, set forth in the Company's Information Statement fairly present, in all material respects, in conformity with GAAP applied on a basis consistent with the financial statements referred to in subsection (a) of this Section, the assets and liabilities of Rockwell Collins as of such date and its results of operations, cash flows and changes in Rockwell International's invested equity and comprehensive income for such three-month period (subject to normal year-end adjustments).
(c) As of the Effective Date, there will have been no material adverse change in the financial condition, business or operations of Rockwell Collins from that reflected in the Company's Information Statement.
SECTION 4.05. Litigation. Except as disclosed in the Company's Information Statement, there is no action, suit or proceeding pending against, or to the knowledge of the Company threatened against or affecting, the Company or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official, in which there is a reasonable probability of an adverse decision which could materially adversely affect the business or consolidated financial position of the Company and its Consolidated Subsidiaries, considered as a whole, or which in any manner draws into question the validity of this Agreement or the Notes.
SECTION 4.06. Environmental Matters. Expenditures by the Company and its Consolidated Subsidiaries for environmental capital investment and remediation necessary to comply with present Environmental Laws and other expenditures for the resolution of existing environmental claims known to the Company are not expected by management of the Company to have a material adverse effect on the business or financial condition of the Company and its Consolidated Subsidiaries, taken as a whole.
ARTICLE 5
COVENANTS
The Company agrees that, so long as any Bank has any Commitment hereunder or any amount payable hereunder remains unpaid:
SECTION 5.01. Information. The Company will deliver to each of the Banks:
(a) within 120 days after the end of each fiscal year of the Company, the Company's Annual Report to Shareowners and annual report on Form 10-K for such fiscal year, as filed with the Commission;
(b) within 60 days after the end of each of the first three quarters of each fiscal year of the Company, the Company's quarterly report on Form 10-Q for such fiscal quarter, as filed with the Commission;
(c) simultaneously with the delivery of each set of financial statements referred to in clause (a), a certificate of the chief financial officer, the treasurer or the controller of the Company stating whether any Default exists on the date of such financial statements;
(d) within 10 days after the chief financial officer, the treasurer or the controller of the Company obtains knowledge of any Default, if such Default is then continuing, a certificate of the chief financial officer, the treasurer or the controller of the Company setting forth the details thereof;
(e) promptly upon the filing thereof, copies of all reports on Form 8-K (or its equivalent) which the Company shall have filed with the Commission; and
(f) from time to time such additional information regarding the financial position or business of the Company and its Subsidiaries as the Agent, at the request of any Bank, may reasonably request.
SECTION 5.02. Maintenance of Existence. The Company will preserve, renew and keep in full force and effect its corporate existence and its rights, privileges and franchises necessary or desirable in the normal conduct of business; provided that nothing in this Section 5.02 shall prohibit a merger or consolidation permitted by Section 5.06.
SECTION 5.03. Compliance with Laws. The Company will comply in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, environmental laws and ERISA and the rules and regulations thereunder) except where (i) the necessity of compliance therewith is contested in good faith by appropriate proceedings or (ii) non-compliance would not, in the reasonable judgment of the Company, have a material adverse effect on the financial
condition, business or operation of the Company and its Consolidated Subsidiaries, considered as a whole.
SECTION 5.04. Use of Proceeds. The proceeds of the Loans made under this Agreement will be used by the Company for its general corporate purposes, including but not limited to commercial paper backstop, acquisitions and stock repurchases. None of such proceeds will be used in violation of Regulation T, U or X of the Board of Governors of the Federal Reserve System.
SECTION 5.05. Debt to Capitalization. Consolidated Debt will at no time after the Contribution exceed 60% of Total Capitalization.
SECTION 5.06. Mergers, Consolidations and Sales of Assets. (a) The Company shall not consolidate with or merge into any other corporation or convey or transfer its properties and assets substantially as an entirety to any Person, unless
(1) the corporation formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer the properties and assets of the Company substantially as an entirety shall be a corporation organized and existing under the laws of the United States or any State or the District of Columbia, and shall expressly assume, in form satisfactory to the Agent, the due and punctual payment of the principal of (and premium, if any) and interest, if any, on all the Loans and the performance of every covenant of this Agreement on the part of the Company to be performed or observed;
(2) immediately after giving effect to such transaction, no Default shall have occurred and be continuing; and
(3) the Company shall have delivered to the Agent a certificate of a duly authorized officer of the Company and an opinion of legal counsel to the Company (which shall be reasonably acceptable to the Agent), each stating that such consolidation, merger, conveyance or transfer comply with this Section 5.06(a) and that all conditions precedent herein provided for relating to such transaction have been complied with.
(b) Upon any consolidation or merger, or any conveyance or transfer of the properties and assets of the Company substantially as an entirety in accordance with Section 5.06(a), the successor corporation formed by such consolidation or into which the Company is merged or to which such conveyance or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Agreement with the same effect as if such successor corporation had been named as the Company herein, and thereafter the predecessor corporation shall be relieved of all obligations and covenants under this Agreement and the Notes and may be liquidated and dissolved.
(c) If, upon any consolidation or merger of the Company with or into any corporation, or upon the conveyance or transfer by the Company of its properties and assets substantially as an entirety in accordance with Section 5.06(a) to any Person, any Principal Property owned by the Company or a Restricted Subsidiary immediately prior thereto would thereupon become subject to any Lien not permitted by Section 5.07, the Company will, prior to such consolidation, merger, conveyance or transfer, secure the due and punctual payment of the principal of (and premium, if any) and interest, if any, on the Loans then outstanding (equally and ratably with any other Debt of the Company then entitled to be so secured) by a direct Lien on such Principal Property, together with any other properties and assets of the Company or of any such Restricted Subsidiary, whichever shall be the owner of any such Principal Property, which would thereupon become subject to any such Lien, prior to all Liens other than any theretofore existing thereon.
SECTION 5.07. Limitations on Liens. The Company shall not at any time create, incur, assume or suffer to exist, and shall not cause, suffer or permit a Restricted Subsidiary to create, incur, assume or suffer to exist, any Secured Debt without making effective provision (and the Company covenants that in such case it will make or cause to be made effective provision) whereby the Loans then outstanding shall be secured equally and ratably with such Secured Debt, so long as such Secured Debt shall exist; provided, however, that this Section 5.07 shall not prevent any of the following:
(a) (i) any Lien on any property hereafter acquired (including acquisition through merger or consolidation) or constructed by the Company or a Restricted Subsidiary and created contemporaneously with, or within twelve months after, such acquisition or the completion of construction to secure or provide for the payment of all or any part of the purchase price of such property or the cost of construction thereof, as the case may be; or (ii) any mortgage on property (including any unimproved portion of partially improved property) of the Company or a Restricted Subsidiary created within twelve months of completion of construction of a new plant or plants on such property to secure all or part of the cost of such construction; or (iii) the acquisition of property subject to any Lien upon such property existing at the time of acquisition thereof, whether or not assumed by the Company or such Restricted Subsidiary;
(b) Liens on capital stock hereafter acquired by the Company or any Restricted Subsidiary, provided that the aggregate cost to the Company and its Restricted Subsidiaries of all capital stock subject to such Liens does not exceed 10% of Shareowners' Equity;
(c) any Lien securing Debt of a corporation which is a successor to the Company to the extent permitted by Section 5.06; or securing Debt of a Restricted Subsidiary outstanding at the time it became a Restricted Subsidiary; or securing Debt of any Person outstanding at the time it is merged with, or all or substantially all of its properties are acquired by, the Company or any Restricted Subsidiary, provided that such Lien does not extend to any other properties of the
Company or any Restricted Subsidiary; or existing on the property or on the outstanding shares or Debt of a corporation at the time it becomes a Restricted Subsidiary; or created, incurred or assumed in connection with any industrial revenue bond, pollution control bond or similar financing arrangement between the Company or any Restricted Subsidiary and any Federal, State or municipal government or other governmental body or agency;
(d) any Lien created in connection with any extension, renewal or refunding (or successive extensions, renewals or refundings), in whole or in part, of any Debt secured by a Lien permitted by the foregoing provisions of this Section 5.07 upon the same property theretofore subject thereto (plus improvements on such property), provided that the amount of such Debt outstanding at that time shall not be increased;
(e) Liens or deposits made in connection with contracts (which term includes subcontracts under such contracts) with or made at the request of the United States or any department or agency thereof, insofar as such Liens or deposits relate to property manufactured, installed or constructed by or to be supplied by, or property furnished to, the Company or a Restricted Subsidiary pursuant to, or to enable the performance of, such contracts, or property the manufacture, installation, construction or acquisition of which is financed pursuant to, or to enable the performance of, such contracts; or deposits or Liens, made pursuant to such contracts, of or upon moneys advanced or paid pursuant to, or in accordance with the provisions of, such contracts, or of or upon any materials or supplies acquired for the purpose of the performance of such contracts; or the assignment or pledge, to the extent permitted by law, of the right, title and interest of the Company or a Restricted Subsidiary in and to any such contract, or in and to any payments due or to become due thereunder, to secure Debt incurred for funds or other property supplied, constructed or installed for or in connection with the performance by the Company or such Restricted Subsidiary of its obligations under such contracts;
(f) mechanics', materialmen's, carriers' or other like Liens, and pledges or deposits made in the ordinary course of business to obtain the release of any such Liens or the release of property in the possession of a common carrier; good faith deposits in connection with tenders, leases of real estate or bids or contracts (other than contracts involving the borrowing of money); pledges or deposits to secure public or statutory obligations; deposits to secure (or in lieu of) surety, stay, appeal or customs bonds; and deposits to secure the payment of taxes, assessments, customs duties or other similar charges;
(g) any Lien arising by reason of deposits with, or the giving of any form of security to, any governmental agency or any body created or approved by law or governmental regulation, which is required by law or governmental regulation as a condition to the transaction of any business, or the exercise of any privilege or license, or to enable the Company or a Restricted Subsidiary to maintain self-insurance or to participate in any arrangements established by law
to cover any insurance risks or in connection with workmen's compensation, unemployment insurance, old age pensions, social security or similar matters;
(h) the Liens of taxes, assessments or other governmental charges or levies not at the time due, or the validity of which is being contested in good faith;
(i) judgment Liens, so long as the finality of such judgment is being contested in good faith and execution thereon is stayed;
(j) easements or similar encumbrances, the existence of which does not impair the use of the property subject thereto for the purposes for which it is held or was acquired;
(k) the landlord's interest under any lease of property;
(l) leases granted to others in the ordinary course of business;
(m) Sale and Lease-Back Transactions to the extent permitted by Section 5.08; and
(n) contracts for the manufacture, construction, installation or supply of property, products or services providing for a Lien upon advance, progress or partial payments made pursuant to such contracts and upon any material or supplies acquired, manufactured, constructed, installed or supplied in connection with the performance of such contracts to secure such advance, progress or partial payments.
Notwithstanding the foregoing provisions of this Section 5.07, the Company and any one or more Restricted Subsidiaries may create, incur, assume or suffer to exist Secured Debt which would otherwise be subject to the foregoing restrictions in an aggregate amount which, together with all other Secured Debt of the Company and its Restricted Subsidiaries which would otherwise be subject to the foregoing restrictions (not including Secured Debt permitted under clauses (a) through (o) above) and the aggregate value of the Sale and Lease-Back Transactions (as defined in Section 5.08) in existence at such time (not including Sale and Lease-Back Transactions the proceeds of which have been or will be applied in accordance with clause (b) of Section 5.08), does not at the time exceed 10% of Shareowners' Equity.
SECTION 5.08. Limitations on Sale and Lease-Back. The Company will not, and will not permit any Restricted Subsidiary to, sell or transfer (except to the Company or one or more Restricted Subsidiaries, or both) any Principal Property owned by it and which has been in full operation for more than 180 days prior to such sale or transfer with the intention (i) of taking back a lease on such property, except a lease for a temporary period (not exceeding 36 months), and (ii) that the use by the Company or such Restricted Subsidiary of such property will be discontinued on or before the expiration of the term of such lease (any such transaction being herein referred to as a "SALE AND LEASE-BACK TRANSACTION"), unless
(a) the Company or such Restricted Subsidiary would be entitled, pursuant to the provisions of Section 5.07 hereof, to incur Secured Debt equal in amount to the amount realized or to be realized upon such sale or transfer secured by a mortgage on the property to be leased without equally and ratably securing the Loans; or
(b) the Company or a Restricted Subsidiary shall, within 180 days of the effective date of any such transaction, apply an amount equal to the value of the property so leased (i) to the retirement (other than any mandatory retirement) of Consolidated Funded Debt or Debt then outstanding of the Company or any Restricted Subsidiary that was Funded Debt at the time it was created (other than Consolidated Funded Debt or such other Debt owned by the Company or any Restricted Subsidiary), or (ii) to the purchase of Principal Property having a value at least equal to the value of such property; provided, however, that the amount to be so applied pursuant to the preceding clause (i) or (ii) shall be reduced by (A) the principal amount of any Loans repaid within 180 days of the effective date of any such transaction and (B) the principal amount of Consolidated Funded Debt or Debt that was Funded Debt at the time it was created (other than Loans) retired by the Company or a Restricted Subsidiary within 180 days of the effective date of any such transaction; or
(c) the Sale and Lease-Back Transaction involved was an industrial revenue bond, pollution control bond or similar financing arrangement between the Company or any Restricted Subsidiary and any Federal, State or municipal government or other governmental body or agency.
The term "value" shall mean, with respect to a Sale and Lease-Back Transaction, as of any particular time, the amount equal to the greater of (i) the net proceeds of the sale of the property leased pursuant to such Sale and Lease-Back Transaction or (ii) the fair value of such property at the time of entering into such Sale and Lease-Back Transaction, as determined by the board of directors of the Company (or a duly authorized committee thereof), in either case divided first by the number of full years of the term of the lease and then multiplied by the number of full years of such term remaining at the time of determination, without regard to any renewal or extension options contained in the lease.
SECTION 5.09. Limitations on Change in Subsidiary Status. The Company may designate any Subsidiary as an Unrestricted Subsidiary or as a Restricted Subsidiary, subject to the provisions set forth below:
(a) the Company will not permit any Subsidiary to be designated as an Unrestricted Subsidiary unless at the time of such designation the Subsidiary so designated does not own, directly or indirectly, any capital stock of any Restricted Subsidiary or any Funded Debt or Secured Debt of the Company or any Restricted Subsidiary;
(b) the Company will not permit any Restricted Subsidiary to be designated as, or otherwise to become, an Unrestricted Subsidiary unless
immediately after such Restricted Subsidiary becomes an Unrestricted Subsidiary, no Default shall exist;
(c) the Company will not permit any Unrestricted Subsidiary to be designated as a Restricted Subsidiary unless immediately after such Unrestricted Subsidiary becomes a Restricted Subsidiary, no Default shall exist; and
(d) promptly after the designation of any Subsidiary as an Unrestricted Subsidiary or as a Restricted Subsidiary, there shall be filed with the Agent, a certificate of a duly authorized officer of the Company stating that the provisions of this Section have been complied with in connection with such designation.
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following events ("EVENTS OF DEFAULT") shall have occurred and be continuing:
(a) the Company shall fail to pay when due any principal of any Loan, or shall fail to pay within 10 days of the due date thereof any interest on any Loan, any fees or any other amount payable hereunder;
(b) the Company shall fail to observe or perform any covenant or agreement contained in Article 5 for 90 days after notice thereof has been given to the Company by the Agent at the request of any Bank;
(c) any representation or warranty made by the Company (i) in Article 4 or (ii) pursuant to Section 3.02 on the date of any Borrowing shall prove to have been incorrect in any material respect when made (or deemed made);
(d) the Company or any of its Subsidiaries shall fail to pay the principal of or interest on Material Debt when due, or within any applicable grace period, in accordance with the instrument or agreement under which the same was created;
(e) any event or condition shall occur (including failure to pay principal or interest) which results in the acceleration of the maturity of Material Debt;
(f) the entry of a decree or order for relief by a court having jurisdiction in the premises in respect of the Company in an involuntary case under the Federal bankruptcy laws, as now constituted or hereafter amended, or any other applicable Federal or State bankruptcy, insolvency or other similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 90 consecutive days; or
(g) the commencement by the Company of a voluntary case under the Federal bankruptcy laws, as now constituted or hereafter amended, or any other applicable Federal or State bankruptcy, insolvency or other similar law, or the consent by it to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action;
then, and in every such event, the Agent shall (i) if requested by Banks having more than 50% in aggregate amount of the Commitments, by notice to the Company terminate the Commitments and they shall thereupon terminate, and (ii) if requested by Banks holding more than 50% in aggregate principal amount of the Loans, by notice to the Company declare the Loans (together with accrued interest thereon) to be, and the Loans shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company; provided that in the case of any of the Events of Default specified in clause (f) or (g) above, without any notice to the Company or any other act by the Agent or the Banks, the Commitments shall thereupon terminate and the Loans (together with accrued interest thereon) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company.
SECTION 6.02. Notice of Default. The Agent shall give notice to the Company under Section 6.01(b) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof.
ARTICLE 7
THE AGENT
SECTION 7.01. Appointment and Authorization. Each Bank irrevocably appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the Notes as are delegated to the Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto.
SECTION 7.02. Agent and Affiliates. The Chase Manhattan Bank shall have the same rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the same as though it were not the Agent, and The Chase Manhattan Bank and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Company or any Subsidiary or affiliate of the Company as if it were not the Agent hereunder.
SECTION 7.03. Action by Agent. The obligations of the Agent hereunder are only those expressly set forth herein. Without limiting the generality of the foregoing, the Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article 6.
SECTION 7.04. Consultation with Experts. The Agent may consult with legal counsel (who may be counsel for the Company), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts.
SECTION 7.05. Liability of Agent. Neither the Agent nor any of its
affiliates nor any of their respective directors, officers, agents or employees
shall be liable for any action taken or not taken by it in connection herewith
(i) with the consent or at the request of the Required Banks or, when expressly
required hereby, all the Banks or (ii) in the absence of its own gross
negligence or willful misconduct. Neither the Agent nor any of its affiliates
nor any of their respective directors, officers, agents or employees shall be
responsible for or have any duty to ascertain, inquire into or verify (i) any
statement, warranty or representation made in connection with this Agreement or
any borrowing hereunder; (ii) the performance or observance of any of the
covenants or agreements of the Company; (iii) the satisfaction of any condition
specified in Article 3, except receipt of items required to be delivered to the
Agent; or (iv) the validity, effectiveness or genuineness of this Agreement, the
Notes or any other instrument or writing furnished in connection herewith. The
Agent shall not incur any liability by acting in reliance upon any notice,
consent, certificate, statement, or other writing (which may be a bank wire,
telex, facsimile transmission or similar writing) believed by it to be genuine
or to be signed by the proper party or parties.
SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance with its Commitment, indemnify the Agent, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Company) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitee's gross negligence or willful misconduct) that such indemnitees may suffer or incur in connection with this Agreement or any action taken or omitted by such indemnitees hereunder.
SECTION 7.07. Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement.
SECTION 7.08. Successor Agent. The Agent may resign at any time by giving 30 days' notice thereof to the Banks and the Company. Upon any such resignation, the Required Banks shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Required Banks, and shall have accepted such appointment, within 30 days after the retiring Agent gives notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $50,000,000. Upon the acceptance of its appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent.
SECTION 7.09. Agent's Fee. The Company shall pay to the Agent for its own account fees in the amounts and at the times previously agreed upon between the Company and the Agent.
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period for any Fixed Rate Loans:
(a) the Agent is advised by the Euro-Dollar Reference Banks that deposits in dollars (in the applicable amounts) are not being offered to the Euro- Dollar Reference Banks in the relevant market for such Interest Period, or
(b) in the case of Euro-Dollar Loans, Banks having 50% or more of the aggregate amount of the Commitments advise the Agent that the London Interbank Offered Rate as determined by the Agent will not adequately and fairly reflect the cost to such Banks of funding their Euro-Dollar Loans for such Interest Period,
the Agent shall forthwith give notice thereof to the Company and the Banks, whereupon until the Agent notifies the Company that the circumstances giving rise to such suspension no longer exist, (i) the obligations of the Banks to make Euro-Dollar Loans, or to continue or convert outstanding Loans as or into Euro-Dollar Loans, shall be suspended and (ii) each outstanding Euro-Dollar Loan shall be converted into a Base Rate Loan on the last day of the then current Interest Period applicable thereto. Unless the Company notifies the Agent at least two Domestic Business Days before the date of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on
such date, (i) if such Fixed Rate Borrowing is a Euro-Dollar Borrowing, such Borrowing shall instead be made as a Base Rate Borrowing and (ii) if such Fixed Rate Borrowing is a Competitive Bid LIBOR Borrowing, the Competitive Bid LIBOR Loans comprising such Borrowing shall bear interest for each day from and including the first day to but excluding the last day of the Interest Period applicable thereto at the Base Rate for such day.
SECTION 8.02. Illegality. (a) If, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and such Bank shall so notify the Agent, the Agent shall forthwith give notice thereof to the other Banks and the Company, whereupon until such Bank notifies the Company and the Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans, or to convert outstanding Loans into Euro-Dollar Loans or continue outstanding Loans as Euro-Dollar Loans, shall be suspended. Before giving any notice to the Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not, in the sole judgment of such Bank, be otherwise disadvantageous to such Bank.
(b) If such notice is given, each Euro-Dollar Loan of such Bank then outstanding shall be converted to a Base Rate Loan either (i) on the last day of the then current Interest Period applicable to such Euro-Dollar Loan if such Bank may lawfully continue to maintain and fund such Loan as a Euro-Dollar Loan to such day or (ii) immediately if such Bank shall determine that it may not lawfully continue to maintain and fund such Loan as a Euro-Dollar Loan to such day. Interest and principal on any such Base Rate Loan shall be payable on the same dates as, and on a pro rata basis with, the interest and principal payable on the related Euro-Dollar Loans of the other Banks.
SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after (x) the date hereof, in the case of any Committed Loan or any obligation to make Committed Loans or (y) the date of the related Competitive Bid Quote, in the case of any Competitive Bid Loan, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding
with respect to any Euro-Dollar Loan any such requirement included in an applicable Euro-Dollar Reserve Percentage), special deposit, insurance assessment or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its Applicable Lending Office) or on the London interbank market any other condition affecting its Fixed Rate Loans, its Note or its obligation to make Fixed Rate Loans and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Agent), the Company shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction.
(b) If any Bank shall have determined that, after the date hereof, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any such law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency has or would have the effect of reducing the rate of return on capital of such Bank (or its Parent) as a consequence of such Bank's obligations hereunder to a level below that which such Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank (with a copy to the Agent), the Company shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its Parent) for such reduction.
(c) Each Bank will promptly notify the Company and the Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the sole judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods. Notwithstanding the foregoing subsections (a) and (b) of this Section 8.03, the Company shall only be obligated to compensate any Bank for any amount arising or accruing during (i) any time or period commencing not more than 90 days prior to the date on which such Bank notifies the Agent and the Company that it proposes to demand such compensation and identifies to the Agent and the Company the statute, regulation or other basis upon which the claimed compensation is or will be based and (ii) any time or period during which, because of the retroactive application of such
statute, regulation or other such basis, such Bank did not know that such amount would arise or accrue.
SECTION 8.04. Taxes. (a) For purposes of this Section 8.04, the following terms have the following meanings:
"TAXES" means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings with respect to any payment by the Company pursuant to this Agreement or under any Note, and all liabilities with respect thereto, excluding (i) in the case of each Bank and the Agent, taxes imposed on its income, and franchise or similar taxes imposed on it, by a jurisdiction under the laws of which such Bank or the Agent (as the case may be) is organized or in which its principal executive office is located or, in the case of each Bank, in which its Applicable Lending Office is located or by any State, possession or territory of the United States in which such Bank or the Agent (as the case may be) is doing business and (ii) in the case of each Bank, any United States withholding tax imposed on such payments but only to the extent that such Bank is subject to United States withholding tax at the time such Bank first becomes a party to this Agreement.
"OTHER TAXES" means any present or future stamp or documentary taxes and any other excise or property taxes, or similar charges or levies, which arise from any payment made pursuant to this Agreement or under any Note or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note.
(b) Any and all payments by the Company to or for the account of any
Bank or the Agent hereunder or under any Note shall be made without deduction
for any Taxes or Other Taxes; provided that, if the Company shall be required by
law to deduct any Taxes or Other Taxes from any such payments, (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 8.04) such Bank or the Agent (as the case may be) receives an
amount equal to the sum it would have received had no such deductions been made,
(ii) the Company shall make such deductions, (iii) the Company shall pay the
full amount deducted to the relevant taxation authority or other authority in
accordance with applicable law and (iv) the Company shall furnish to the Agent,
at its address referred to in Section 9.01, the original or a certified copy of
a receipt evidencing payment thereof.
(c) The Company agrees to indemnify each Bank and the Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 8.04) paid by such Bank or the Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be paid within 15 days after such Bank or the Agent (as the case may be) makes demand therefor.
(d) Each Bank organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Bank listed on the signature pages hereof and on or prior to the date on which it becomes a Bank in the case of each other Bank, and from time to time thereafter if requested in writing by the Company (but only so long as such Bank remains lawfully able to do so), shall provide the Company with Internal Revenue Service form W-8BEN or W-8ECI, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Bank is entitled to benefits under an income tax treaty to which the United States is a party which exempts the Bank from United States withholding tax or reduces the rate of withholding tax on payments of interest for the account of such Bank or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States.
(e) For any period with respect to which a Bank has failed to provide the Company with the appropriate form pursuant to Section 8.04(d) (unless such failure is due to a change in treaty, law or regulation occurring subsequent to the date on which such form originally was required to be provided), such Bank shall not be entitled to indemnification under Section 8.04(b) or (c) with respect to Taxes imposed by the United States; provided that if a Bank, which is otherwise exempt from or subject to a reduced rate of withholding tax, becomes subject to Taxes because of its failure to deliver a form required hereunder, the Company shall take such steps as such Bank shall reasonably request to assist such Bank to recover such Taxes.
(f) If the Company is required to pay additional amounts to or for the account of any Bank pursuant to this Section 8.04, then such Bank will change the jurisdiction of its Applicable Lending Office if, in the sole judgment of such Bank, such change (i) will eliminate or reduce any such additional payment which may thereafter accrue and (ii) is not otherwise disadvantageous to such Bank.
SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate
Loans. If (i) the obligation of any Bank to make, or to continue or convert
outstanding Loans as or to, Euro-Dollar Loans has been suspended pursuant to
Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03 or
8.04 with respect to its Euro-Dollar Loans and the Company shall, by at least
five Euro-Dollar Business Days' prior notice to such Bank through the Agent,
have elected that the provisions of this Section shall apply to such Bank, then,
all Loans which would otherwise be made by such Bank as (or continued as or
converted to) Euro-Dollar Loans shall be made instead as Base Rate Loans (on
which interest and principal shall be payable contemporaneously with the related
Fixed Rate Loans of the other Banks). If such Bank notifies the Company that the
circumstances giving rise to such suspension or demand for compensation no
longer exist, the principal amount of each such Base Rate Loan shall be
converted into a Euro-Dollar Loan on the first day of the next succeeding
Interest Period applicable to the related Euro-Dollar Loans of the other Banks.
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of the Company or the Agent, at its address, facsimile number or telex number set forth on the signature pages hereof, (y) in the case of any Bank, at its address, facsimile number or telex number set forth in its Administrative Questionnaire or (z) in the case of any party, such other address, facsimile number or telex number as such party may hereafter specify for the purpose by notice to the Agent and the Company. Each such notice, request or other communication shall be effective (i) if given by telex, when such telex is transmitted to the telex number specified in this Section and the appropriate answerback is received, (ii) if given by facsimile transmission, when transmitted to the facsimile number specified in this Section and confirmation of receipt is received, (iii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iv) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Agent under Article 2 or Article 8 shall not be effective until received.
SECTION 9.02. No Waivers. No failure or delay by the Agent or any Bank in exercising any right, power or privilege hereunder or under any Note shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
SECTION 9.03. Expenses; Indemnification. (a) The Company shall pay (i) all reasonable out-of-pocket expenses of the Agent, including fees and disbursements of special counsel for the Agent, in connection with the preparation and administration of this Agreement, any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all reasonable out-of-pocket expenses incurred by the Agent and each Bank, including (without duplication) the fees and disbursements of outside counsel and the allocated cost of inside counsel, in connection with such Event of Default and collection, bankruptcy, insolvency and other enforcement proceedings resulting therefrom.
(b) The Company agrees to indemnify the Agent and each Bank, their respective affiliates and the respective directors, officers, agents and employees of the foregoing (each an "INDEMNITEE") and hold each Indemnitee harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel, which may be incurred by such Indemnitee in connection with any investigative, administrative or judicial proceeding (whether or not such
Indemnitee shall be designated a party thereto) brought or threatened relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans hereunder; provided that no Indemnitee shall have the right to be indemnified hereunder for such Indemnitee's own gross negligence or willful misconduct as determined by a court of competent jurisdiction.
SECTION 9.04. Sharing of Set-offs. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest then due with respect to any Loan held by it which is greater than the proportion received by any other Bank in respect of the aggregate amount of principal and interest then due with respect to any Loan held by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Loans held by the other Banks, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Loans held by the Banks shall be shared by the Banks pro rata; provided that nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Company other than its indebtedness hereunder. The Company agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Loan, if acquired pursuant to the foregoing arrangements or if the Company has otherwise received notice of the granting of such participation, may exercise rights of set-off or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of the Company in the amount of such participation.
SECTION 9.05. Amendments and Waivers. Any provision of this Agreement
or the Notes may be amended or waived if, but only if, such amendment or waiver
is in writing and is signed by the Company and the Required Banks (and, if the
rights or duties of the Agent are affected thereby, by the Agent); provided that
no such amendment or waiver shall, unless signed by all the Banks, (i) increase
or decrease the Commitment of any Bank (except for a ratable decrease in the
Commitments of all Banks) or subject any Bank to any additional obligation, (ii)
reduce the principal of or rate of interest on any Loan or any fees hereunder,
(iii) postpone the date fixed for any payment of principal of or interest on any
Loan or any fees hereunder or for termination of any Commitment or (iv) change
the percentage of the Commitments or of the aggregate unpaid principal amount of
the Loans, or the number of Banks, which shall be required for the Banks or any
of them to take any action under this Section or any other provision of this
Agreement.
SECTION 9.06. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Company may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "PARTICIPANT") participating interests in its Commitment or
any or all of its Loans. In the event of any such grant by a Bank of a
participating interest to a Participant, whether or not upon notice to the
Company and the Agent, such Bank shall remain responsible for the performance of
its obligations hereunder, and the Company and the Agent shall continue to deal
solely and directly with such Bank in connection with such Bank's rights and
obligations under this Agreement. Any agreement pursuant to which any Bank may
grant such a participating interest shall provide that such Bank shall retain
the sole right and responsibility to enforce the obligations of the Company
hereunder including, without limitation, the right to approve any amendment,
modification or waiver of any provision of this Agreement; provided that such
participation agreement may provide that such Bank will not agree to any
modification, amendment or waiver of this Agreement described in clause (i),
(ii), (iii) or (iv) of Section 9.05 without the consent of the Participant. The
Company agrees that each Participant shall, to the extent provided in its
participation agreement, be entitled to the benefits of Article 8 with respect
to its participating interest. An assignment or other transfer which is not
permitted by subsection (c) or (d) below shall be given effect for purposes of
this Agreement only to the extent of a participating interest granted in
accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other institutions (each an "ASSIGNEE") all, or a proportionate part (equivalent to an initial Commitment of not less than $10,000,000) of all, of its rights and obligations under this Agreement and its Note, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit G hereto executed by such Assignee and such transferor Bank, with (and subject to) the subscribed consent (which may not be unreasonably withheld) of the Company (so long as no Event of Default exists) and the Agent; provided that, if an Assignee is an Approved Fund, an affiliate of such transferor Bank or was a Bank immediately before such assignment, no such consent shall be required, and provided further that such assignment may, but need not, include rights of the transferor Bank in respect of outstanding Competitive Bid Loans. Upon execution and delivery of such instrument and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Agent and the Company shall make appropriate arrangements so that, if required and requested, a new Note is issued to the Assignee. In connection with any such assignment, the transferor Bank shall pay to the Agent an administrative fee for processing such assignment in the amount of $2,500. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall deliver to the Company and the Agent certification as to exemption from deduction or
withholding of any United States federal income taxes in accordance with Section 8.04.
(d) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Note to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's rights shall be entitled to receive any greater payment under Section 8.03 or 8.04 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Company's prior written consent or by reason of the provisions of Section 8.02, 8.03 or 8.04 requiring such Bank to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist.
(f) The Agent, acting solely for this purpose as an agent of the Company, shall maintain at one of its offices in the State of Delaware or New York a copy of each Assignment and Assumption Agreement delivered to it and a register for the recordation of the names and addresses of the Banks, and the Commitments of, and principal amount of the Loans owing to, each Bank pursuant to the terms hereof from time to time (the "REGISTER"). The entries in the Register shall be conclusive, and the Company, the Agent and the Banks may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Bank hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Company and any Bank, at any reasonable time and from time to time upon reasonable prior notice.
SECTION 9.07. Designated Lenders. (a) Subject to the provisions of this
subsection (a), any Bank may at any time designate an Eligible Designee to
provide all or a portion of the Loans to be made by such Bank pursuant to this
Agreement; provided that such designation shall not be effective unless the
Company and the Agent consent thereto (which consents shall not be unreasonably
withheld). When a Bank and its Eligible Designee shall have signed an agreement
substantially in the form of Exhibit H hereto (a "DESIGNATION AGREEMENT") and
the Company and the Agent shall have signed their respective consents thereto,
such Eligible Designee shall become a Designated Lender for purposes of this
Agreement. The Designating Lender shall thereafter have the right to permit such
Designated Lender to provide all or a portion of the Loans to be made by such
Designating Lender pursuant to Section 2.01 or 2.03, and the making of such
Loans or portion thereof shall satisfy the obligation of the Designating Lender
to the same extent, and as if, such Loans or portion thereof were made by the
Designating Lender. As to any Loans or portion thereof made by it, each
Designated Lender shall have all the rights that a Bank making such Loans or
portion thereof would have had under this Agreement and otherwise; provided that
(x) its voting rights under this Agreement shall be exercised solely by its
Designating Lender and (y) its Designating Lender shall remain solely
responsible to the other parties hereto for the performance of such Designated
Lender's obligations under this Agreement, including its obligations in respect of the Loans or portion thereof made by it. No additional Note shall be required to evidence the Loans or portion thereof made by a Designated Lender; and the Designating Lender shall be deemed to hold its Note as agent for its Designated Lender to the extent of the Loans or portion thereof funded by such Designated Lender. Each Designating Lender shall act as administrative agent for its Designated Lender and give and receive notices and other communications on its behalf. Any payments for the account of any Designated Lender shall be paid to its Designating Lender as administrative agent for such Designated Lender and neither the Company nor the Agent shall be responsible for any Designating Lender's application of such payments. In addition, any Designated Lender may, with notice to (but without the prior written consent of) the Company and the Agent, (i) assign all or portions of its interest in any Loans to its Designating Lender or to any financial institutions consented to by the Company and the Agent that provide liquidity and/or credit facilities to or for the account of such Designated Lender to support the funding of Loans or portions thereof made by it and (ii) disclose on a confidential basis pursuant to a confidentiality agreement satisfactory in form and substance to the Company any non-public information relating to its Loans or portions thereof to any rating agency, commercial paper dealer or provider of any guarantee, surety, credit or liquidity enhancement to such Designated Lender.
(b) Each party to this Agreement agrees that it will not institute against, or join any other person in instituting against, any Designated Lender any bankruptcy, insolvency, reorganization or other similar proceeding under any federal or state bankruptcy or similar law, for one year and a day after all outstanding senior indebtedness of such Designated Lender is paid in full. The Designating Lender for each Designated Lender agrees to indemnify, save, and hold harmless each other party hereto for any loss, cost, damage and expense arising out of its inability to institute any such proceeding against such Designated Lender. This subsection (b) shall survive the termination of this Agreement.
SECTION 9.08. Collateral. Each of the Banks represents to the Agent and each of the other Banks that it in good faith is not relying upon any "margin stock" (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement.
SECTION 9.09. Governing Law; Submission to Jurisdiction. This Agreement and each Note shall be governed by and construed in accordance with the laws of the State of New York. The Company hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. The Company irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum.
SECTION 9.10. Counterparts; Integration. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof.
SECTION 9.11. Waiver of Jury Trial. EACH OF THE COMPANY, THE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
NEW ROCKWELL COLLINS, INC.
(to be renamed Rockwell Collins, Inc.)
By:
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Title:
Address:
Attention:
Telecopy:
COMMITMENTS
$60,000,000 THE CHASE MANHATTAN BANK
By:
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Title:
$45,000,000 BANK OF AMERICA, N.A.
By:
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Title:
$45,000,000 THE INDUSTRIAL BANK OF JAPAN, LTD.
By:
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Title:
$45,000,000 UBS WARBURG
By:
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Title:
$37,500,000 BANK ONE, N.A.
By:
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Title:
$37,500,000 CITICORP USA INC. (CUSA)
By:
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Title:
$37,500,000 FIRST UNION NATIONAL BANK
By:
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Title:
$37,500,000 MELLON BANK, N.A.
By:
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Title:
$37,500,000 WELLS FARGO BANK,
NATIONAL ASSOCIATION
By:
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Title:
By:
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Title:
$25,000,000 THE BANK OF NEW YORK
By:
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Title:
$25,000,000 CREDIT LYONNAIS NEW YORK BRANCH
By:
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Title:
$25,000,000 FIRSTAR BANK, N.A.
By:
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Title:
$25,000,000 KEY BANK NATIONAL ASSOCIATION
By:
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Title:
$17,500,000 THE MITSUBISHI TRUST
AND BANKING CORPORATION
By:
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Title:
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TOTAL COMMITMENTS
$500,000,000
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THE CHASE MANHATTAN BANK, as Agent
Address:
Attention:
Telecopy: