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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2005. Commission file number 1-12383
 
Rockwell Automation, Inc.
(Exact name of registrant as specified in its charter)
     
Delaware   25-1797617
(State or other jurisdiction of
incorporation or organization) 		  (I.R.S. Employer
Identification No.)
777 East Wisconsin Avenue
Suite 1400
Milwaukee, Wisconsin
(Address of principal executive offices) 		  53202
(Zip Code)
Registrant’s telephone number, including area code:
(414) 212-5299 (Office of the Secretary)
 
Securities registered pursuant to Section 12(b) of the Act:
     
Title of each class   Name of each exchange on which registered
     
Common Stock, $1 Par Value (including the associated Preferred Share Purchase Rights)   New York, Pacific and London Stock Exchanges
 
Securities registered pursuant to Section 12(g) of the Act:
None
          Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes  þ           No  o
          Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.     Yes  o           No  þ
          Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ           No  o
          Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.      þ
          Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes  þ           No  o
          Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  o           No  þ
          The aggregate market value of registrant’s voting stock held by non-affiliates of registrant on March 31, 2005 was approximately $10.4 billion.
          179,136,454 shares of registrant’s Common Stock, par value $1 per share, were outstanding on October 31, 2005.
DOCUMENTS INCORPORATED BY REFERENCE
          Certain information contained in the Proxy Statement for the Annual Meeting of Shareowners of registrant to be held on February 1, 2006 is incorporated by reference into Part III hereof.
 
 

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PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Item 4A. Executive Officers of the Company
PART II
Item 5. Market for the Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Item 9B. Other Information
PART III
Item 10. Directors and Executive Officers of the Company
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions
Item 14. Principal Accountant Fees and Services
PART IV
Item 15. Exhibits and Financial Statement Schedule
SIGNATURES

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PART I
FORWARD-LOOKING STATEMENTS
          This Annual Report contains statements (including certain projections and business trends) accompanied by such phrases as “believe”, “estimate”, “expect”, “anticipate”, “will”, “intend” and other similar expressions, that are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected as a result of certain risks and uncertainties, many of which are beyond our control, including but not limited to:
 
          • 
economic and political changes in global markets where we compete, such as currency exchange rates, inflation rates, interest rates, recession, local laws, regulations and policies of foreign governments and other external factors we cannot control;
 
 
          • 
successful development of advanced technologies, demand for and market acceptance of new and existing products;
 
 
          • 
general global and regional economic, business or industry conditions, including levels of capital spending in industrial markets;
 
 
          • 
the availability, effectiveness and security of our information technology systems;
 
 
          • 
competitive product and pricing pressures;
 
 
          • 
disruption of our operations due to natural disasters, acts of war, strikes, terrorism, or other causes;
 
 
          • 
intellectual property infringement claims by others and the ability to protect our intellectual property;
 
 
          • 
regulatory and legislative changes related to the reporting and funding of pension and health care obligations;
 
 
          • 
our ability to successfully address claims by taxing authorities in the various jurisdictions where we do business;
 
 
          • 
our ability to attract and retain qualified personnel;
 
 
          • 
the uncertainties of litigation;
 
 
          • 
disruption of our North American distribution channel;
 
 
          • 
the availability and price of components and materials; and
 
 
          • 
other risks and uncertainties, including but not limited to those detailed from time to time in our Securities and Exchange Commission filings.
          These forward-looking statements reflect our beliefs as of the date of filing this report. We undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. See Item 1 Risk Factors for additional information.
Item 1. Business
General
          Rockwell Automation, Inc. (the Company or Rockwell Automation) is a leading global provider of industrial automation power, control and information products and services. The Company was incorporated in Delaware in 1996 and is the successor to the former Rockwell International Corporation as the result of a tax-free reorganization completed on December 6, 1996, pursuant to which the Company divested its former aerospace and defense businesses (the A&D Business) to The Boeing Company (Boeing). The predecessor corporation was incorporated in 1928.
          On September 30, 1997, we completed the spinoff of our automotive component systems business into an independent, separately traded, publicly held company named Meritor Automotive, Inc. (Meritor). On July 7,

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2000, Meritor and Arvin Industries, Inc. merged to form ArvinMeritor, Inc. (ArvinMeritor). On December 31, 1998, we completed the spinoff of our semiconductor systems business (Semiconductor Systems) into an independent, separately traded, publicly held company named Conexant Systems, Inc. (Conexant). On June 29, 2001, we completed the spinoff of our Rockwell Collins avionics and communications business into an independent, separately traded, publicly held company named Rockwell Collins, Inc. (Rockwell Collins). In September 2004, we sold our FirstPoint Contact business. Additional information related to this divestiture is contained in Note 13 in the Financial Statements.
          As used herein, the terms “we”, “us”, “our”, the “Company” or “Rockwell Automation” include subsidiaries and predecessors unless the context indicates otherwise. Information included in this Annual Report on Form 10-K refers to our continuing businesses unless otherwise indicated.
          Where reference is made in any Item of this Annual Report on Form 10-K to information under specific captions in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ( MD&A ), or in Item 8. Financial Statements and Supplementary Data (the Financial Statements), or to information in our Proxy Statement for the Annual Meeting of Shareowners of the Company to be held on February 1, 2006 (the 2006 Proxy Statement), such information is incorporated therein by such reference. All date references to years refer to our fiscal year unless otherwise stated.
Operating Segments
          We have two operating segments: Control Systems and Power Systems. In 2005, our total sales were $5.0 billion. Financial information with respect to our operating segments, including their contributions to sales and operating earnings for each of the three years in the period ended September 30, 2005, is contained under the caption Results of Operations in MD&A, and in Note 18 in the Financial Statements.
Control Systems
          Control Systems is our largest operating segment with 2005 sales of $4.1 billion (82 percent of our total sales) and approximately 17,000 employees at September 30, 2005. Control Systems supplies industrial automation products, systems, software and services focused on helping customers control and improve manufacturing processes. The operating segment includes two main business groups: the Components and Packaged Applications Group (CPAG) and the Automation Control and Information Group (ACIG).
          CPAG supplies industrial components, power control and motor management products, and packaged and engineered products and systems. CPAG’s sales account for approximately 40 percent of Control Systems’ sales.
          ACIG’s core products are used primarily to control and monitor industrial plants and processes and typically consist of a processor, software and input/output (I/ O) devices. ACIG’s integrated architecture and Logix controllers perform multiple types of control applications, including discrete, batch, continuous process, drive system, motion and machine safety across various factory floor operations. ACIG’s sales account for approximately 45 percent of Control Systems’ sales.
          In addition, Control Systems’ offering also includes services and solutions, such as multi-vendor customer support, training, automation systems integration, asset management, and manufacturing information solutions for discrete and targeted batch process industries. Control Systems’ service and solution offerings compete with Emerson Electric Co., General Electric Company, Invensys, Siemens AG and other system integrators.

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          The following is a summary of the major products and services and major competitors of Control Systems’ two main business groups:
         
Business Group   Major Products/Services   Major Competitors
         
CPAG   Motor starters
Contactors
Push buttons
Signaling devices
Termination and protection devices
Relays and timers
Condition sensors
Adjustable speed drives
Motor control centers
Drive systems 		  ABB, Ltd.
Schneider Electric SA
Siemens AG
 
ACIG   Controllers
Control platforms
Software
Input/output devices
High performance rotary and linear
  motion control systems
Electronic operator interface devices
Sensors
Industrial computers
Machine safety components 		  Emerson Electric Co.
Mitsubishi
Omron
Schneider Electric SA
Siemens AG
 
          Depending on the product or service involved, Control Systems’ competitors range from large diversified businesses that sell products outside of industrial automation, to smaller companies specializing in niche products and services. Factors that influence Control Systems’ competitive position are its broad product portfolio and scope of solutions, technology leadership, knowledge of customer applications, large installed base, established distribution network, quality of products and services, price and global presence.
          Control Systems’ products are marketed primarily under the Allen-Bradley and Rockwell Software brand names. Major markets served include consumer products, transportation, oil and gas, mining, metals and forest products.
          In North America, Control Systems’ products are sold primarily through independent distributors that typically do not carry products that compete with Allen-Bradley products. Large systems and service offerings are sold principally through a direct sales force, though opportunities are sometimes sourced through distributors or system integrators. Product sales outside the United States occur through a combination of direct sales, sales through distributors and sales through system integrators.
          In 2005, sales in the United States accounted for 56 percent of Control Systems’ sales. Outside the U.S., Control Systems’ primary markets were Canada, China, the United Kingdom, Germany, Italy, Mexico, Australia and Korea.
          Control Systems is headquartered in Milwaukee, Wisconsin and has operations in North America, Europe, Asia-Pacific and Latin America.
Power Systems
          Power Systems recorded 2005 sales of $0.9 billion (18 percent of our total sales) and had approximately 4,000 employees at September 30, 2005. Power Systems consists of two business groups: Dodge mechanical (Mechanical) and Reliance electrical (Electrical).

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          The following is a summary of the major products and services and major competitors of the Power Systems operating segment:
         
Business Group   Major Products/ Services   Major Competitors
         
Mechanical
  Mounted bearings
Gear reducers
Mechanical drives
Conveyor pulleys
Couplings
Bushings
Clutches
Motor brakes 		  Emerson Electric Co.
Rexnord Corporation
SEW — Eurodrive
SKF
 
Electrical
  Industrial and engineered motors
Adjustable speed drives
Repair services
Motor and mechanical maintenance solutions
Training
Consulting services to OEMs,
  end-users and distributors 		  A.O. Smith Corporation
Baldor Electric Company
Emerson Electric Co.
Regal-Beloit Corporation
Siemens AG
 
          Depending on the product involved, Power Systems’ competitors range from large diversified businesses that sell products outside of industrial automation, to smaller companies specializing in niche products and services. Factors that influence Power Systems’ competitive position are product quality, installed base, price and our established distributor network. While Power Systems’ competitive position is strong in North America, it is limited somewhat by its small presence outside the United States.
          Mechanical’s products are marketed primarily under the Dodge brand name while Electrical’s products are marketed primarily under the Reliance Electric brand name. Major markets served include mining, cement, aggregates, environmental, forest products, food/beverage, oil and gas, metals and material handling.
          Mechanical’s products are sold primarily through distributors while Electrical’s products are sold primarily through a direct sales force.
          In 2005, sales in the United States accounted for 87 percent of Power Systems’ sales. Outside the U.S., Power Systems’ primary markets were Canada, China and Mexico.
          Power Systems is headquartered in Greenville, South Carolina and has operations in North America, Europe and Asia-Pacific.
Geographic Information
          In 2005, sales in the United States accounted for 62 percent of our total sales. Our principal markets outside the United States are in Canada, China, the United Kingdom, Germany, Italy, Mexico, Australia and Korea. See Risk Factors below for a discussion of risks associated with our operations outside of the United States.
          Sales and property information by major geographic area for each of the three years in the period ended September 30, 2005 is contained in Note 18 in the Financial Statements.

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Research and Development
          Our research and development spending is (in millions):
                         
    Year Ended September 30,
     
    2005   2004   2003
             
          Control Systems
  $ 128.2     $ 111.8     $ 111.9  
          Power Systems
    10.4       9.9       9.7  
                         
    $ 138.6     $ 121.7     $ 121.6  
                         
          Customer-sponsored research and development was not significant in 2005, 2004 or 2003.
Employees
          At September 30, 2005, we had approximately 21,000 employees. Approximately 14,000 were employed in the United States, and, of these employees, about 7 percent were represented by various local or national unions.
Raw Materials and Supplies
          We purchase many items of equipment, components and materials used in the production of our products from others. The raw materials essential to the conduct of each of our business segments generally are available at competitive prices. Although we have a broad base of suppliers and subcontractors, we depend upon the ability of our suppliers and subcontractors to meet performance and quality specifications and delivery schedules. See Risk Factors below for a discussion of risks associated with our reliance on third party suppliers.
Backlog
          Our total order backlog was $772.5 million at September 30, 2005 and $500.4 million at September 30, 2004. Backlog is not necessarily indicative of results of operations for future periods due to the short-cycle nature of most of our sales activities.
Environmental Protection Requirements
          Information about the effect on the Company and its manufacturing operations of compliance with environmental protection requirements and resolution of environmental claims is contained in Note 17 in the Financial Statements. See also Item 3. Legal Proceedings.
Patents, Licenses and Trademarks
          We own or license numerous patents and patent applications related to our products and operations. Various claims of patent infringement and requests for patent indemnification have been made to us. We believe that none of these claims will have a material adverse effect on our financial condition. See Item 3. Legal Proceedings. While in the aggregate our patents and licenses are important in the operation of our business, we do not believe that loss or termination of any one of them would materially affect our business or financial condition. See Risk Factors below for a discussion of risks associated with our intellectual property.
          The Company’s name and its registered trademark “Rockwell Automation” is important to each of our business segments. In addition, we own other important trademarks we use for certain products and services, such as “Allen-Bradley” and “A-B” for electronic controls and systems for industrial automation, “Reliance” and “Reliance Electric” for electric motors and drives and “Dodge” for mechanical power transmission products.

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Seasonality
          Our business segments are not subject to significant seasonality.
Risk Factors
We generate a substantial portion of our revenues from international sales and are subject to the risks of doing business outside of the United States.
          Approximately 38 percent of our revenues in 2005 were outside of the U.S. Future growth rates and success of our business depend in large part on continued growth in our non-U.S. operations. Numerous risks and uncertainties affect our non-U.S. operations. These risks and uncertainties include changes in political, economic and social environments, local labor conditions, changes in laws, regulations and policies of foreign governments, as well as U.S. laws affecting activities of U.S. companies abroad, including tax laws and enforcement of contract and intellectual property rights. In addition, we are affected by changes in foreign currency exchange rates, inflation rates and interest rates. Additionally, cash generated in non-U.S. jurisdictions may be difficult to transfer to the U.S. in a tax-efficient manner.
An inability to anticipate changes in customer preferences could result in decreased demand for our products.
          Our success depends in part on our ability to anticipate and offer products that appeal to the changing needs and preferences of our customers in the various markets we serve. Developing new products requires high levels of innovation and the development process is often lengthy and costly. If we are not able to anticipate, identify, develop and market products that respond to changes in customer preferences, demand for our products could decline and our operating results would be adversely affected.
General economic, business or industry conditions may result in a decrease in our revenues and profitability.
          Demand for our products is sensitive to changes in levels of global industrial production. As economic activity slows down, companies tend to reduce their levels of capital spending, resulting in decreased demand for our products. If this occurs, our revenues and profitability may be negatively affected.
Information technology infrastructure failures could significantly affect our business.
          We depend heavily on our information technology infrastructure in order to achieve our business objectives. If we experience a problem that impairs this infrastructure, such as a computer virus, a problem with the functioning of an important IT application, or an intentional disruption of our IT systems by a third party, the resulting disruptions could impede our ability to record or process orders, manufacture and ship in a timely manner, or otherwise carry on our business in the ordinary course. Any such events could cause us to lose customers or revenue and could require us to incur significant expense to eliminate these problems and address related security concerns.
          We are in the process of introducing a global Enterprise Resource Planning (ERP) system that will redesign and deploy new processes, organization structures, and a common information system over a period of several years. As we implement the ERP system, the new system may not perform as expected. This could have an adverse effect on our business.
The global industrial automation power, control and information products and services industry is highly competitive.
          We face strong competition in all of our market segments. Price competition in our various industries is intense and pricing pressures from competitors and customers are increasing. We expect that the level of competition will remain high in the future, which could limit our ability to maintain or increase our market share or profitability.

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The growth of our Control Systems solutions offerings may create additional risks.
          Risks inherent in the sale of systems and solutions include assuming greater responsibility for project completion and success, defining and controlling contract scope, efficient execution of projects, and the efficiency and quality of our subcontractors. Our inability to control, manage, and mitigate these risks could adversely affect our results of operations.
Natural disasters, terrorism, acts of war, international conflicts or other disruptions to our operations could harm our business.
          Natural disasters, acts or threats of war or terrorism, international conflicts, and the actions taken by the United States and other governments in response to such events could cause damage or disrupt our business operations, our suppliers, or our customers, and could create political or economic instability, any of which could have an adverse effect on our business. Although it is not possible to predict such events or their consequences, these events could decrease demand for our products, could make it difficult or impossible for us to deliver products, or could disrupt our supply chain.
The inability to secure and maintain rights to intellectual property could harm our business and our customers.
          We own the rights to many patents, trademarks, brand names and trade names that are important to our business. The loss of patents or licenses used in principal portions of our business may have an adverse effect on our results of operations. Expenses related to enforcing our intellectual property rights could be significant. In addition, others may assert intellectual property infringement claims against us or our customers. We sometimes provide a limited intellectual property indemnity in connection with our terms and conditions of sale to our customers and in other types of contracts with third parties. Indemnification payments and legal costs to defend claims could have an adverse effect on our business.
Future legislation or regulations intended to reform the funding and reporting of pension benefit plans could adversely affect our operating results and cash flows, as could changes in market conditions that impact the assumptions we use to measure our liabilities under these plans.
          Legislators and agencies of the U.S. government have proposed legislation and regulations to amend, restrict or eliminate various features of, and mandate additional funding of, pension benefit plans. If legislation or new regulations are adopted, we may be required to contribute additional cash to these plans, in excess of our current estimates. Market volatility in interest rates, investment returns and other factors could also adversely affect the funded status of our pension plans. Moreover, future changes to the accounting and reporting standards related to pension plans could create significant volatility in our operating results.
The inability to successfully defend claims from taxing authorities related to our current and divested businesses could adversely affect our operating results and financial position.
          We conduct business in many countries, which requires us to interpret the income tax laws and rulings in each of those taxing jurisdictions. Due to the subjectivity of tax laws between those jurisdictions as well as the subjectivity of factual interpretations, our estimates of income tax liabilities may differ from actual payments or assessments. Claims from taxing authorities related to these differences could have an adverse impact on our operating results and financial position. In connection with the divestiture of certain businesses in prior years, we retained tax liabilities and the rights to tax refunds for periods before the divestitures. As a result, from time to time, we may be required to make payments related to tax matters associated with those divested businesses.
Our failure to attract and retain qualified personnel could lead to a loss of revenue or profitability.
          Our success depends in part on the efforts and abilities of our senior management team and key employees. Their skills, experience and industry contacts significantly benefit our operations and

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administration. The failure to attract and retain members of our senior management team and key employees could have a negative effect on our operating results.
Potential liabilities and costs from litigation (including asbestos claims) could adversely affect our business.
          Various lawsuits, claims and proceedings have been or may be asserted against us relating to the conduct of our business, including those pertaining to product liability, safety and health, employment and contract matters. We have been named as a defendant in lawsuits alleging personal injury as a result of exposure to asbestos that was used in certain components of our products many years ago. The uncertainties of litigation (including asbestos claims) and the uncertainties related to the collection of insurance coverage make it difficult to accurately predict the ultimate resolution thereof.
Potential liabilities and costs relating to environmental remediation could adversely affect our business.
          Our operations, both in the United States and abroad, are subject to regulation by various environmental regulatory authorities concerned with the impact of the environment on human health, the limitation and control of emissions and discharges into the air, ground and waters, the quality of air and bodies of water, and the handling, use and disposal of specified substances. Environmental laws and regulations can be complex and may change. Our financial responsibility for the cleanup or other remediation of contaminated property or for natural resource damages can extend to previously owned or used properties, waterways and properties owned by unrelated companies or individuals, as well as properties currently owned and used by us, regardless of whether the contamination is attributable to prior owners.
          We have been named as a potentially responsible party at cleanup sites and may be in the future as well, and the costs associated with these current and future sites may be significant.
Risks associated with acquisitions could have an adverse effect on us.
          We have acquired, and anticipate continuing to acquire, businesses in an effort to enhance shareowner value. Acquisitions involve risks and uncertainties, including:
 
          • 
difficulties integrating the acquired company, retaining the acquired business’ customers, and achieving the expected benefits of the acquisition, such as revenue increases, cost savings, and increases in geographic or product presence, in the desired time frames, if at all;
 
 
          • 
loss of key employees of the acquired business;
 
 
          • 
implementing and maintaining consistent standards, controls, procedures, policies and information systems; and
 
 
          • 
diversion of management’s attention from other business concerns.
          Future acquisitions could cause us to incur additional debt, dilution, contingent liabilities, increased interest expense, and amortization expenses related to intangible assets. Impairment losses on goodwill and intangible assets with an indefinite life, or restructuring charges, could also occur as a result of acquisitions.
A disruption to our distribution channel could have an adverse effect on our operating results.
          In North America, approximately 75 percent of our sales are through a limited number of third party distributors. While we maintain the right to appoint new distributors, any unplanned disruption to the existing channel could adversely affect our revenues and profitability. A disruption could be caused by the sale of a distributor to a competitor, financial instability of the distributor, or other unforeseen events.

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Our reliance on third party suppliers creates certain risks and uncertainties.
          Our manufacturing processes require that we purchase a high volume of equipment, components and materials from third party suppliers. Our reliance on these suppliers involves certain risks, including:
 
          • 
the cost of these purchases may change due to inflation, exchange rates and other factors;
 
 
          • 
poor quality can adversely affect the reliability and reputation of our products; and
 
 
          • 
a shortage of components or materials could adversely affect our manufacturing efficiencies and delivery capabilities, which could reduce sales and profitability.
          Any of these uncertainties could adversely affect our profitability and ability to compete. We also maintain several single-source supplier relationships, because either alternative sources are not available or the relationship is advantageous due to performance, quality, support, delivery, capacity, or price considerations. Unavailability or delivery delays of single-source components or products could adversely affect our ability to ship the related product in desired quantities and in a timely manner. The effect of unavailability or delivery delays would be more severe if associated with our higher volume and more profitable products. Even where alternative sources of supply are available, qualifying the alternative suppliers and establishing reliable supplies could cost more or could result in delays and a possible loss of revenues.
Available Information
          We maintain an Internet site at http://www.rockwellautomation.com . Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the Exchange Act), as well as our annual report to shareowners and Section 16 reports on Forms 3, 4 and 5, are available free of charge on this site as soon as reasonably practicable after we file or furnish these reports with the Securities and Exchange Commission (SEC). All reports we file with the SEC are also available free of charge via EDGAR through the SEC’s website at http://www.sec.gov . Our Guidelines on Corporate Governance and charters for our Board Committees are also available at our Internet site. These Guidelines and charters are also available in print to any shareowner upon request. The information contained on and linked from our Internet site is not incorporated by reference into this Form 10-K.
          The certifications of our Chief Executive Officer and Chief Financial Officer required pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are included as Exhibits to this Annual Report on Form 10-K and were included as Exhibits to each of our Quarterly Reports on Form 10-Q filed with the SEC during 2005. Our Chief Executive Officer certified to the New York Stock Exchange (NYSE) on March 2, 2005, pursuant to Section 303A.12 of the NYSE’s listing standards, that he was not aware of any violation by the Company of the NYSE’s corporate governance listing standards as of that date.
Item 2. Properties
          At September 30, 2005, we operated 69 plants, principally in North America. We also had 278 sales and administrative offices and a total of 37 warehouses, service centers, and other facilities. The aggregate floor space of our facilities was approximately 14.1 million square feet. Of this floor space, we owned approximately 52 percent and leased approximately 48 percent. Manufacturing space occupied approximately 6.6 million square feet. Our Control Systems segment occupied approximately 3.7 million square feet, and our Power Systems segment occupied the remaining approximately 2.9 million square feet of manufacturing space. At September 30, 2005, approximately 0.7 million square feet of floor space was not in use, principally in owned facilities.
          In November 2005, we sold and leased back 24 properties in North America comprising approximately 3.8 million square feet. See Note 20 in the Financial Statements for additional information.
          There are no major encumbrances (other than financing arrangements, which in the aggregate are not significant) on any of our plants or equipment. In our opinion, our properties have been well maintained, are in sound operating condition and contain all equipment and facilities necessary to operate at present levels.

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Item 3. Legal Proceedings
           Rocky Flats Plant. On January 30, 1990, a civil action was brought in the United States District Court for the District of Colorado against us and another former operator of the Rocky Flats Plant (the Plant), Golden, Colorado, that we operated from 1975 through December 31, l989 for the Department of Energy (DOE). The action alleges the improper production, handling and disposal of radioactive and other hazardous substances, constituting, among other things, violations of various environmental, health and safety laws and regulations, and misrepresentation and concealment of the facts relating thereto. The plaintiffs, who purportedly represent two classes, sought compensatory damages of $250 million for diminution in value of real estate and other economic loss; the creation of a fund of $150 million to finance medical monitoring and surveillance services; exemplary damages of $300 million; CERCLA response costs in an undetermined amount; attorneys’ fees; an injunction; and other proper relief. On February 13, 1991, the court granted certain of the motions of the defendants to dismiss the case. The plaintiffs subsequently filed a new complaint, and on November 26, 1991, the court granted in part a renewed motion to dismiss. The remaining portion of the case is pending before the court. On October 8, 1993, the court certified separate medical monitoring and property value classes. Trial began on October 11, 2005. Effective August 1, 1996, the DOE assumed control of the defense of the contractor defendants, including us, in the action. Beginning on that date, the costs of our defense, which had previously been reimbursed to us by the DOE, have been and are being paid directly by the DOE. We believe that we are entitled under applicable law and our contract with the DOE to be indemnified for all costs and any liability associated with this action.
          On November 13, 1990, we were served with another civil action brought against us in the same court by James Stone, claiming to act in the name of the United States, alleging violations of the U.S. False Claims Act in connection with our operation of the Plant (and seeking treble damages and forfeitures) as well as a personal cause of action for alleged wrongful termination of employment. On August 8, 1991, the court dismissed the personal cause of action. On December 6, 1995, the DOE notified us that it would no longer reimburse costs incurred by us in defense of the action. On November 19, 1996, the court granted the Department of Justice leave to intervene in the case on the government’s behalf. On April 1, 1999 a jury awarded the plaintiffs approximately $1.4 million in damages. On May 18, 1999, the court entered judgment against us for approximately $4.2 million, trebling the jury’s award as required by the False Claims Act, and imposing a civil penalty of $15,000. If the judgment is affirmed on appeal, Mr. Stone will also be entitled to an award of attorneys’ fees but the court refused to award fees until appeals from the judgment have been exhausted. On September 24, 2001, a panel of the 10th Circuit Court of Appeals affirmed the judgment. On November 2, 2001, we filed a petition for rehearing with the Court of Appeals seeking reconsideration of that portion of the decision holding that the relator, Mr. Stone, is entitled to an award of attorneys’ fees. On March 4, 2002, the Court of Appeals remanded the case to the trial court for the limited purpose of making findings of fact and conclusions of law pertaining to Mr. Stone’s relator status and, the trial court having made findings of fact on the issue, on March 15, 2004, a panel of the Court of Appeals again ruled that Mr. Stone is entitled to an award of attorneys’ fees. We believe that ruling is in error and have petitioned the 10th Circuit Court of Appeals for en banc review. We believe that we are entitled under applicable law and our contract with the DOE to be indemnified for all costs and any liability associated with this action, and intend to file a claim with the DOE seeking reimbursement. We believe that an outcome adverse to us will not have a material effect on our business or financial condition.
          On January 8, 1991, we filed suit in the United States Claims Court against the DOE, seeking recovery of $6.5 million of award fees that we allege are owed to us under the terms of our contract with the DOE for management and operation of the Plant during the period October 1, 1988 through September 30, 1989. On July 17, 1996, the government filed an amended answer and counterclaim against us alleging violations of the U.S. False Claims Act previously asserted in the civil action described in the preceding paragraph. On May 4, 2005, we filed another claim with the DOE, seeking recovery of $11.3 million in unreimbursed costs incurred in defense of the Stone suit described in the preceding paragraph. On September 30, 2005, the DOE denied that claim, a denial we intend to appeal, and simultaneously filed a motion in the Court of Claims suit seeking leave to amend its answer and counterclaim to seek repayment of $4 million in previously reimbursed Stone

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defense costs or an offset of that amount against any judgment we might obtain against the DOE on our claim for award fees.
           Russellville. On March 24, 1997, the Circuit Court of Franklin County, Kentucky in Commonwealth of Kentucky, Natural Resources and Environmental Protection Cabinet vs. Rockwell , an action filed in 1986 seeking remediation of PCB contamination resulting from unpermitted discharges of PCBs from a plant in Russellville, Kentucky owned and operated by our Measurement & Flow Control Division prior to its divestiture in March 1989, entered judgment establishing PCB cleanup levels for the former plant site and certain offsite property and ordering additional characterization of possible contamination in the Mud River and its flood plain. The Court deferred any decision on the imposition of civil penalties pending implementation of an appropriate remediation program. On August 13, 1999, the Court of Appeals affirmed the trial court’s judgment, a ruling that the Supreme Court of the State of Kentucky has let stand. We have been proceeding with remediation and characterization efforts consistent with the trial court’s ruling.
           Solaia Technology LLC. We are a party in several suits in which Solaia Technology LLC (Solaia) is adverse. Solaia is a single-purpose entity formed to license US Patent No. 5,038,318 (the ’318 patent). Solaia acquired the ’318 patent from Schneider Automation, Inc., a competitor of ours in the field of factory automation. Schneider has retained certain interests in the ’318 patent, including a share in Solaia’s licensing income. Solaia has asserted that the ’318 patent covers computer controlled factory automation systems used throughout most modern factories in the United States.
          Solaia has issued hundreds of demand letters to a wide range of factory owners and operators, and has filed a series of lawsuits against over 40 companies alleging patent infringement. A significant number of the companies sued by Solaia have chosen to settle the claims for amounts that we believe are notably smaller than the likely legal costs of successfully defending Solaia’s claims in court. Recently, Solaia has dismissed its lawsuits against several of the companies that chose not to settle.
          In a suit filed by Solaia on July 2, 2002 in Chicago, Solaia Technology LLC v. ArvinMeritor, Inc., et al. (02-C-4704, N.D. Ill.) (Chicago patent suit), Solaia accused sixteen companies of infringing the ’318 patent. We made arrangements with ArvinMeritor, which owns and operates our former automotive business, to undertake ArvinMeritor’s defense of Solaia’s patent claims to seek to assure that Solaia’s infringement claim against ArvinMeritor could be finally and actually adjudicated in the Chicago patent suit. In that case, Solaia responded on May 12, 2003 by suing us directly for direct patent infringement, demanding material monetary damages. We believe that Solaia’s claim against us in the Chicago patent suit is wholly without merit and baseless. On March 28, 2005, the court granted ArvinMeritor’s motion for summary judgment that the accused ArvinMeritor systems did not infringe the ’318 patent. On the same date, the court denied Solaia’s motion for summary judgment that the accused Rockwell systems infringed the ’318 patent. Additional summary judgment motions, in which we seek dismissal of Solaia’s claims against us, remain pending.
          We sought to protect our customers from Solaia’s claims by bringing an action in federal court in Milwaukee against Solaia, its law firm Niro, Scavone, Haller & Niro, and Schneider Automation, Rockwell Automation, Inc., et al. v. Schneider Automation, Inc., et al (Case No. 02-C-1195 E.D. Wis.) (the Milwaukee action). Pursuant to our claims of tortious interference, civil conspiracy and violations of federal antitrust and unfair competition laws, we are seeking monetary damages and other relief arising from the infringement claims Solaia has made against our customers.
          In January 2003, Solaia filed a lawsuit in federal court in Chicago against us and several others, Solaia Technology LLC v. Rockwell Automation, Inc., et al., (Case No. 03-C-566 N.D. Ill.), alleging federal antitrust and unfair competition violations, tortious interference, defamation and other claims. We deny any liability under those claims. Solaia’s antitrust and tort case has now been transferred to the federal court in Milwaukee (Case No. 03-C-939, E.D. Wis.) and effectively consolidated with the Milwaukee action, and all proceedings in Milwaukee have been administratively stayed.
          In December 2003, Solaia filed a state court action in Cook County, Illinois alleging tortious interference claims against us and one of our former officers. This action was removed from state court and, as with

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Solaia’s January 2003 suit, has been transferred to the federal court in Milwaukee (Case No. 04-C-368, E.D. Wis.).
          All of the Milwaukee cases are in their earliest stages. The federal court in Milwaukee has stayed all three cases in Milwaukee pending developments in the Chicago patent suit.
           Asbestos. Like thousands of other companies, we (including our subsidiaries) have been named as a defendant in lawsuits alleging personal injury as a result of exposure to asbestos that was used in certain components of our products many years ago. Currently there are thousands of claimants in lawsuits that name us as defendants, together with hundreds of other companies. The great bulk of the complaints, however, do not identify any of our products or specify which of these claimants, if any, were exposed to asbestos attributable to our products; and past experience has shown that the vast majority of the claimants will never identify any of our products. In addition, when our products appear to be identified, they are frequently from divested businesses, and we are indemnified for most of the costs. For those claimants who do show that they worked with our products, we nevertheless believe we have meritorious defenses, in substantial part due to the integrity of our products, the encapsulated nature of any asbestos-containing components, and the lack of any impairing medical condition on the part of many claimants. We defend those cases vigorously. Historically, we have been dismissed from the vast majority of these claims with no payment to claimants.
          We have maintained insurance coverage that we believe covers indemnity and defense costs, over and above self-insured retentions, for most of these claims. We initiated litigation in the Milwaukee County Circuit Court on February 12, 2004 to enforce the insurance policies against Nationwide Indemnity Company and Kemper Insurance, the insurance carriers that provided liability insurance coverage to our former Allen-Bradley subsidiary. As a result, the insurance carriers have paid some past defense and indemnity costs and have agreed to pay the substantial majority of future defense and indemnity costs for Allen-Bradley asbestos claims, subject to policy limits. If either carrier becomes insolvent or the policy limits of either carrier are exhausted, our share of future defense and indemnity costs may increase. However, coverage under excess policies may be available to pay some or all of these costs.
          The uncertainties of asbestos claim litigation and the long term solvency of our insurance companies make it difficult to predict accurately the ultimate outcome of asbestos claims. That uncertainty is increased by the possibility of adverse rulings or new legislation affecting asbestos claim litigation or the settlement process. Subject to these uncertainties and based on our experience defending asbestos claims, we do not believe these lawsuits will have a material adverse effect on our financial condition.
           Other. Various other lawsuits, claims and proceedings have been or may be instituted or asserted against us relating to the conduct of our business, including those pertaining to product liability, environmental, safety and health, intellectual property, employment and contract matters. Although the outcome of litigation cannot be predicted with certainty and some lawsuits, claims or proceedings may be disposed of unfavorably to us, we believe the disposition of matters that are pending or asserted will not have a material adverse effect on our business or financial condition.

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Item 4. Submission of Matters to a Vote of Security Holders
          No matters were submitted to a vote of security holders during the fourth quarter of 2005.
Item 4A.      Executive Officers of the Company
          The name, age, office and position held with the Company and principal occupations and employment during the past five years of each of the executive officers of the Company as of October 31, 2005 are:
         
Name, Office and Position, and Principal Occupations and Employment   Age
     
Keith D. Nosbusch  — Chairman of the Board of Rockwell Automation since February 2005, and President and Chief Executive Officer of Rockwell Automation since February 2004; Senior Vice President of Rockwell Automation and President, Rockwell Automation Control Systems prior thereto
    54  
John D. Cohn  — Senior Vice President, Strategic Development and Communications of Rockwell Automation
    51  
Kent G. Coppins  — Vice President and General Tax Counsel of Rockwell Automation since June 2001; Associate General Tax Counsel of Rockwell Automation prior thereto
    52  
Theodore D. Crandall  — Senior Vice President of Rockwell Automation since February 2004 and Senior Vice President, Components and Packaged Applications Group of Rockwell Automation Control Systems prior thereto
    50  
David M. Dorgan  — Vice President and Controller of Rockwell Automation since June 2001; Director, Headquarters Finance of Rockwell Automation Control Systems prior thereto
    41  
Steven A. Eisenbrown  — Senior Vice President of Rockwell Automation since February 2004 and Senior Vice President, Automation Control and Information Group of Rockwell Automation Control Systems prior thereto
    52  
James V. Gelly  — Senior Vice President and Chief Financial Officer of Rockwell Automation since January 2004; Vice President and Treasurer of Honeywell International (diversified technology and manufacturing) prior thereto
    45  
Douglas M. Hagerman  — Senior Vice President, General Counsel and Secretary of Rockwell Automation since May 2004; Litigation partner at Foley & Lardner LLP (law firm) and Co-Chair of the Securities Litigation, Enforcement and Regulation Practice Group prior thereto
    44  
Mary Jane Hall  — Senior Vice President, Human Resources of Rockwell Automation since February 2004; Vice President of Rockwell Automation from June 2001 to February 2004; Senior Vice President, Human Resources of Rockwell Automation Control Systems from January 2001 to February 2004; Vice President, Human Resources of Rockwell Automation Control Systems prior thereto
    62  
James E. Hart  — Vice President, Finance of Rockwell Automation since February 2004; Vice President, Finance and Procurement of Rockwell Automation Control Systems from April 2001 to February 2004; Vice President, Strategic Sourcing and Chief Procurement Officer of Rockwell Automation prior thereto
    56  
John P. McDermott  — Senior Vice President, Global Sales and Solutions of Rockwell Automation Control Systems since October 2005 and Senior Vice President of Rockwell Automation since February 2004; Senior Vice President, Global Manufacturing Solutions Group of Rockwell Automation Control Systems from November 2002 to October 2005; Senior Vice President, Americas Sales of Rockwell Automation Control Systems prior thereto
    47  
John M. Miller  — Vice President and Chief Intellectual Property Counsel of Rockwell Automation since October 2004; Associate Intellectual Property Counsel of Rockwell Automation prior
thereto
    38  
Timothy C. Oliver  — Vice President and Treasurer of Rockwell Automation since May 2004; Vice President, Investor Relations and Financial Planning of Raytheon Company (manufacturer of defense electronics and business aviation aircraft) from March 2001 to May 2004; Director of Finance for Aviation Aftermarket business of Honeywell International (diversified technology and manufacturing) prior thereto
    37  

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Name, Office and Position, and Principal Occupations and Employment — (Continued)   Age
     
Rondi Rohr-Dralle  — Vice President, Corporate Development of Rockwell Automation since June 2001; Vice President, Finance of Rockwell Automation Control Systems, Global Manufacturing Solutions Group prior thereto
    49  
Robert A. Ruff  — Senior Vice President of Rockwell Automation since February 2004 and Senior Vice President of Americas Sales of Rockwell Automation Control Systems since November 2002; Regional Vice President-Detroit Region Sales of Rockwell Automation Control Systems from February 2001 to November 2002; Vice President-Eastern U.S. Region Sales of Rockwell Automation Control Systems prior thereto
    57  
A. Lawrence Stuever  — Vice President and General Auditor of Rockwell Automation since June 2003; Vice President, Compensation of Rockwell Automation prior thereto
    53  
Joseph D. Swann  — Senior Vice President of Rockwell Automation since June 2001 and President, Rockwell Automation Power Systems since June 1998
    64  
          There are no family relationships, as defined by applicable SEC rules, between any of the above executive officers and any other executive officer or director of the Company. No officer of the Company was selected pursuant to any arrangement or understanding between the officer and any person other than the Company. All executive officers are elected annually.
PART II
Item 5. Market for the Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
          The principal market on which our common stock is traded is the New York Stock Exchange. We intend to delist our common stock from the Pacific Exchange and the London Stock Exchange in 2006. On October 31, 2005, there were 34,125 shareowners of record of our common stock.
          The following table sets forth the high and low sales price of our common stock on the New York Stock Exchange – Composite Transactions reporting system during each quarter of our fiscal years ended September 30, 2005 and 2004:
                                       
          2005   2004
               
  Fiscal Quarters       High   Low   High   Low
                       
           First   $ 49.97     $ 37.72     $ 36.10     $ 26.16  
  Second     63.30       45.40       37.00       28.45  
  Third     58.40       45.49       37.56       30.89  
  Fourth     55.25       48.16       39.72       35.05  
          The declaration and payment of dividends by the Company is at the sole discretion of our Board of Directors. During 2005, we declared and paid aggregate cash dividends of $0.78 per common share ($0.165 for each of the first and second quarters and $0.225 for each of the third and fourth quarters). During each of the previous two years (2004 and 2003), we declared and paid aggregate cash dividends of $0.66 per common share ($0.165 per quarter).

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          The table below sets forth information with respect to purchases made by or on behalf of the Company of shares of Company common stock during the three months ended September 30, 2005:
                                     
                Total Number    
                of Shares    
                Purchased as   Maximum Number
        Total       Part of Publicly   of Shares that may
        Number of   Average   Announced   yet be Purchased
        Shares   Price Paid   Plans or   Under the Plans or
Period       Purchased (1)   per Share (2)   Programs   Programs (3)
                     
July 1-31, 2005     565,400     $ 52.3622       565,400       2,237,000  
August 1-31, 2005     1,142,741       51.4539       1,137,000       1,100,000  
September 1-30, 2005     392,100       52.9182       392,100       8,776,900  
                             
  Total     2,100,241       51.9718       2,094,500          
                             
 
(1)
All of the shares purchased during the quarter ended September 30, 2005 were acquired pursuant to the repurchase program described in (3) below, except for 5,741 shares that were acquired in August 2005 from an employee. These shares were acquired in connection with a stock swap exercise of employee stock options and the surrender of shares to us to pay the exercise price.
 
(2)
Average price paid per share includes brokerage commissions.
 
(3)
On September 8, 2005, we initiated a 9 million share repurchase program effective through September 30, 2006 that was approved by our Board of Directors, replacing our former 9 million share repurchase program in effect since December 2, 2004. At the time of the termination and replacement of our former repurchase program, 931,000 shares remained subject to repurchase under the former program. The new program allows management to repurchase shares at its discretion, except during quarter-end “quiet periods”, defined as the period of time from quarter-end until two days following the filing of our quarterly earnings results with the SEC on Form 8-K. During quarter-end quiet periods, shares are repurchased at our broker’s discretion pursuant to a share repurchase plan subject to previously established price and volume parameters.
Item 6. Selected Financial Data
          The following table sets forth selected consolidated financial data of our continuing operations. The data should be read in conjunction with MD&A and the Financial Statements. The consolidated statement of operations data for each of the five years in the period ended September 30, 2005, the related consolidated balance sheet data and other data have been derived from our audited consolidated financial statements.
                                           
    Year Ended September 30,
     
    2005(a)   2004(b)   2003(c)   2002(d)   2001(e)
                     
    (in millions, except per share data)
Consolidated Statement of Operations Data:
                                       
Sales
  $ 5,003.2     $ 4,411.1     $ 3,992.3     $ 3,775.7     $ 4,134.8  
Interest expense
    45.8       41.7       52.5       66.1       83.2  
Income from continuing operations before accounting change
    518.4       354.1       281.4       223.7       120.7  
Earnings per share from continuing operations before accounting change:
                                       
 
Basic
    2.83       1.91       1.51       1.21       0.66  
 
Diluted
    2.77       1.85       1.48       1.19       0.65  
Cumulative effect of accounting change per diluted share(f)
    —       —       —       (0.58 )     —  
Cash dividends per share
    0.78       0.66       0.66       0.66       0.93  
Consolidated Balance Sheet Data: (at end of period)
                                       
Total assets
  $ 4,525.1     $ 4,213.3     $ 4,006.3     $ 3,955.8     $ 4,043.7  
Short-term debt
    1.2       0.2       8.7       161.6       10.4  
Long-term debt
    748.2       757.7       764.0       766.8       909.3  
Shareowners’ equity
    1,649.1       1,861.0       1,586.8       1,609.0       1,600.5  
Other Data:
                                       
Capital expenditures
  $ 124.1     $ 98.0     $ 107.6     $ 99.6     $ 155.7  
Depreciation
    150.8       159.7       168.5       178.4       190.2  
Goodwill and trademark amortization(f)
    —       —       —       —       55.5  
Other intangible asset amortization
    20.4       27.0       22.1       19.3       16.3  

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(a)
Includes a reduction in the income tax provision of $19.7 million, or $0.10 per diluted share, primarily related to the resolution of claims and other tax matters in connection with the closure of the 1998 through 2002 federal audit. Additionally, includes a benefit of $12.3 million ($8.4 million after tax, or $0.04 per diluted share) related to insurance settlements and $21.5 million of costs ($14.2 million after tax, or $0.08 per diluted share) related to special charges as further detailed in Note 19 in the Financial Statements.
 
(b)
Includes a reduction in the income tax provision of $46.3 million, or $0.24 per diluted share, related to the resolution of certain tax matters as well as state tax refunds.
 
(c)
Includes a reduction in the income tax provision of $69.4 million, or $0.37 per diluted share, related to the settlement of a U.S. federal research and experimentation credit refund claim.
 
(d)
Includes a reduction in the income tax provision of $48.2 million, or $0.26 per diluted share, from the resolution of certain tax matters and income of $9.4 million ($7.2 million after tax, or $0.04 per diluted share) from the favorable settlement of intellectual property matters.
 
(e)
Includes special items of $73.1 million ($48.0 million after tax, or $0.26 per diluted share) and a reduction in the income tax provision of $21.6 million, or $0.12 per diluted share, from the resolution of certain tax matters. Special items include charges of $91.1 million ($59.9 million after tax, or $0.32 per diluted share) for a comprehensive restructuring program, which were partially offset by income of $18.0 million ($11.9 million after tax, or $0.06 per diluted share) resulting from the favorable settlement of an intellectual property matter.
 
(f)
Effective October 1, 2001, we adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (SFAS 142). As a result of adopting SFAS 142, we no longer amortize goodwill and certain trademarks that have been deemed to have an indefinite useful life, resulting in a decrease in amortization expense beginning in 2002. In addition, in 2002 we recorded pre-tax impairment charges of $128.7 million ($107.8 million after tax, or $0.58 per diluted share) in connection with the adoption of SFAS 142. These charges have been recorded as the cumulative effect of accounting change.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
Non-GAAP Measures
          The following discussion includes sales excluding the effect of changes in currency exchange rates and free cash flow, which are non-GAAP measures. See Supplemental Sales Information for a reconciliation of reported sales to sales excluding the effect of changes in currency exchange rates in addition to a discussion of why we believe this non-GAAP measure is useful to investors. See Financial Condition for a reconciliation of cash flows from operating activities to free cash flow and a discussion of why we believe this non-GAAP measure is useful to investors.
Overview
          Overall demand for our products is driven by:
            • 
Investments in capacity, including upgrades, modifications, and expansions of existing manufacturing facilities, and the creation of new manufacturing facilities;
 
            • 
Industry factors that include our customers’ new product introductions, trends in the actual and forecasted demand for our customers’ products or services, and the regulatory and competitive environments in which our customers operate;
 
            • 
Levels of global industrial production; and
 
            • 
Regional factors that include local political, social, regulatory and economic circumstances.
U.S. Industrial Economic Trends
          In 2005, sales in the U.S. accounted for more than 60 percent of our total sales. The trend of improving conditions experienced in the U.S. manufacturing economy during 2004 continued into 2005, as reflected in the various indicators we use to gauge the direction and momentum of our served markets. These indicators include:
            • 
Industrial equipment spending, which is an economic statistic compiled by the Bureau of Economic Analysis (“BEA”). This statistic provides insight into spending trends in the broad U.S. industrial economy, which includes our primary customer base. This measure, over the longer term, has proven to have reasonable predictive value, and to be a good directional indicator of our growth trend.
 
            • 
Capacity utilization, which is an indication of plant operating activity published by the Federal Reserve. Historically there has been a meaningful correlation between capacity utilization and the level of capital investment made by our customers in their manufacturing base.
 
            • 
The purchasing managers’ index (PMI), published by the Institute for Supply Management (ISM), which is an indication of the level of manufacturing activity in the U.S. According to the ISM, a PMI measure above 50 indicates that the manufacturing economy is generally expanding while a measure below 50 indicates that it is generally contracting.

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          The table below depicts the continued gradual improvement in U.S. industrial equipment spending (expressed in billions of USD), capacity utilization (expressed as a percentage), and the continued expansion in manufacturing activity, as indicated by the PMI (expressed as defined above) since December 2002.
                           
    Industrial        
    Equipment   Capacity    
    Spending   Utilization    
    (in billions)   (percent)   PMI
             
Fiscal 2005                        
 
September 2005
  $ 162.6       78.6       59.4  
 
June 2005
    154.9       79.8       53.8  
 
March 2005
    161.3       79.5       55.2  
 
December 2004
    152.6       79.2       57.3  
Fiscal 2004                        
 
September 2004
    149.3       78.0       59.1  
 
June 2004
    139.5       77.8       61.2  
 
March 2004
    145.3       77.4       62.3  
 
December 2003
    137.1       76.8       62.1  
Fiscal 2003                        
 
September 2003
    140.8       75.8       55.1  
 
June 2003
    139.3       74.9       50.4  
 
March 2003
    139.7       75.2       46.4  
 
December 2002
    136.9       75.2       52.5  
Note: Economic indicators are subject to revisions by the issuing organizations.
Non-U.S. Regional Trends
          Outside the U.S., demand is principally driven by the strength of the industrial economy in each region and by our customers’ ability and propensity to invest in their manufacturing assets. These customers may include both multinational companies with expanding global presence and growing indigenous companies. Recent strength in demand has, in part, been driven by investment in infrastructure in developing economies, in basic materials production capacity in response to higher-end product pricing and in expanding consumer markets.
          The table below presents our actual sales for the year ended September 30, 2005 by geographic region and the change in sales from the year ended September 30, 2004 (in millions, except percentages):
                         
            Change
            Excluding the
            Effect of Changes
        Change vs.   in Currency Exchange
    Year Ended   Year Ended   Rates vs. Year Ended
    September 30, 2005   September 30, 2004   September 30, 2004 (1)
             
United States and Canada
  $ 3,477.2       13%       12%  
Europe, Middle East and Africa
    823.5       6%       1%  
Asia-Pacific
    483.1       21%       16%  
Latin America
    219.4       34%       27%  
                         
Total sales
  $ 5,003.2       13%       11%  
                         
 
(1)   See Supplemental Sales Information for information on this non-GAAP measure.
Industry Views
          We serve customers in a wide range of industries including consumer products, transportation, basic materials, and oil and gas. During 2005 we benefited from growing demand in most of the industries we serve.

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          Our consumer products customers are engaged in the food and beverage, brewing, consumer packaged goods and life sciences industries. As automation is key to their ability to differentiate their product offerings, their investment is generally less cyclical than heavy manufacturing customers.
          Factors such as customer investment in new model introductions and more flexible manufacturing technologies affect our sales to transportation customers.
          Our customers in basic materials industries, including mining, aggregates, metals, forest products and cement, all benefit from higher commodities prices and higher global demand for basic materials, both of which encourage investment in capacity and productivity in these industries.
          As energy prices rise, customers in the oil and gas industry increase their investment in production and transmission capacity. In addition, higher energy prices have historically caused customers across all industries to consider new investment in more energy-efficient manufacturing processes and technologies, such as intelligent motor controls.
Outlook for 2006
          The following is a summary of our objectives for 2006:
 
          • 
Sustain the growth of our Logix platform by accelerating the proliferation and adoption of our integrated architecture features and functionality, and by aggressively pursuing growth in an expanded addressable market;
 
 
          • 
Continue our geographic expansion and growth, particularly in emerging economies;
 
 
          • 
Demonstrate and expand our industry specific domain expertise and solutions capability; and
 
 
          • 
Drive continued cost productivity.
          Our outlook for 2006 assumes that the economic environment will remain favorable and that a continuing industrial recovery will result in growth during 2006. While we expect demand for our products to benefit from this trend, we also assume that our growth will vary, and may exceed or lag trend levels in any given quarter.
          As of the date of filing this report, based upon current economic activities and business trends, we expect to grow revenue in 2006 by 7 to 9 percent, excluding the effect of changes in currency exchange rates. As of the date hereof, we also expect full year 2006 diluted earnings per share to be in the range of $3.00 to $3.10, and plan to generate free cash flow of approximately $280 million, after giving effect to our $450 million voluntary contribution to our U.S. qualified pension trust in October 2005.

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Summary of Results of Operations
                             
    Year Ended September 30,
     
    2005   2004   2003
             
    (in millions)
Sales:
                       
 
Control Systems
  $ 4,123.6     $ 3,658.6     $ 3,287.4  
 
Power Systems
    879.6       752.5       704.9  
                         
   
Total
  $ 5,003.2     $ 4,411.1     $ 3,992.3  
                         
Segment operating earnings(a):
                       
 
Control Systems
  $ 756.9     $ 527.9     $ 397.6  
 
Power Systems
    110.3       67.5       54.6  
                         
   
Total
    867.2       595.4       452.2  
Purchase accounting depreciation and amortization
    (14.7 )     (27.3 )     (26.9 )
General corporate—net
    (69.7 )     (88.3 )     (66.8 )
Loss on disposition of a business
    —       —       (8.4 )
Interest expense
    (45.8 )     (41.7 )     (52.5 )
                         
Income from continuing operations before income taxes
    737.0       438.1       297.6  
Provision for income taxes
    (218.6 )     (84.0 )     (16.2 )
                         
Income from continuing operations
    518.4       354.1       281.4  
Income from discontinued operations(b)
    21.6       60.8       5.0  
                         
Net income
  $ 540.0     $ 414.9     $ 286.4  
                         
 
(a) Information regarding how we define segment operating earnings is included in Note 18 in the Financial Statements.
 
(b)
In September 2004, we sold our FirstPoint Contact business for cash and a note convertible into a minority interest in the corporate parent of the buyer of the business resulting in a gain of $33.5 million ($32.1 million after tax, or $0.17 per diluted share). In September 2005, the note was converted to non-voting equity shares accounted for under the cost method. The results of operations of FirstPoint Contact and the gain on sale are included in Income from discontinued operations. Additional information related to Income from discontinued operations is included in Note 13 in the Financial Statements.
     2005 Compared to 2004
                         
(in millions, except per share amounts)   2005   2004   Increase
 
Sales
  $ 5,003.2     $ 4,411.1     $ 592.1  
Income from continuing operations
    518.4       354.1       164.3  
Diluted earnings per share from continuing operations
    2.77       1.85       0.92  
 
          Sales increased 13 percent compared to 2004 driven by double digit growth at both Control Systems and Power Systems. Two percentage points of the growth was due to the effect of changes in currency exchange rates, primarily resulting from the strength of the major European currencies and the Canadian dollar in relation to the U.S. dollar. Sales rose by double digit percentages in all regions except for EMEA where difficult economic conditions dampened growth in the major economies of Western Europe, primarily France, Germany and the U.K. The emerging economies in Asia-Pacific, led by China and India, experienced particularly strong growth. Strength of the oil and gas and mining industries in Latin America and oil and gas industry in Canada contributed to particularly strong sales growth in those regions.
          Sales in the global water/ wastewater, oil and gas, aggregate and cement, and mining industries grew at a rate higher than our annual growth rate of 13 percent. Sales in the food and transportation industries grew at rates approximate to our annual growth rate, while sales in life sciences, semiconductor, and beverage grew at a rate less than our annual growth rate.

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          Income from continuing operations benefited from higher volume, productivity programs and favorable pricing offset slightly by inflation in comparison to the prior year. Additionally, income from continuing operations in 2005 includes $19.7 million ($0.10 per share) of tax benefits related to the resolution of claims and other tax matters in connection with the closure of the 1998 through 2002 federal audit and $8.4 million after-tax ($0.04 per share) of benefits related to insurance settlements, offset by $14.2 million after-tax ($0.08 per share) related to special charges associated with restructuring activities in Europe and a U.S. plant closing. Income from continuing operations in 2004 includes $46.3 million ($0.24 per share) of tax benefits related to the resolution of certain tax matters and state tax refunds, offset by $16.3 million after-tax ($0.09 per share) of special facilities related charges.
  Control Systems
                         
(in millions, except percentages)   2005   2004   Increase
 
Sales
  $ 4,123.6     $ 3,658.6     $ 465.0  
Segment operating earnings
    756.9       527.9       229.0  
Segment operating margin
    18.4 %     14.4 %     4.0pts  
 
          Control Systems sales increased 13 percent compared to 2004. Three percentage points of the sales increase was due to the effect of changes in currency exchange rates, primarily resulting from the relative strength of the major European currencies and the Canadian dollar in relation to the U.S. dollar. Sales of our Logix offering grew by more than 26 percent compared to 2004, which was somewhat offset by a decline in our legacy control platform products that are being replaced by Logix. Growth in sales of our Logix offering was driven by our introduction of new functionality and an expanded addressable market. Our intelligent motor control products also delivered significantly higher revenue driven by strong sales to extraction-based and heavy industrial customers. Higher commodity prices and a renewed investment in energy efficiency programs led to the strong demand from these customers.
          Segment operating earnings increased by 43 percent compared to 2004. The increase in segment operating earnings is due to higher volume, cost productivity and favorable pricing that was somewhat offset by inflation. Control Systems 2005 results include $12.3 million (pre-tax) of benefits related to insurance settlements offset by $16.5 million (pre-tax) of special charges associated with realignment of administrative functions and a reduction in workforce in Europe. Prior year segment operating earnings includes a $26.3 million (pre-tax) charge related to a facilities rationalization program.
  Power Systems
                         
(in millions, except percentages)   2005   2004   Increase
 
Sales
  $ 879.6     $ 752.5     $ 127.1  
Segment operating earnings
    110.3       67.5       42.8  
Segment operating margin
    12.5 %     9.0 %     3.5pts  
 
          Power Systems sales increased 17 percent compared to 2004 with growth in both our Dodge mechanical and Reliance electrical business groups. Growth was driven by demand from the power-centric customers in heavy, extraction-based industries such as mining and oil and gas. Higher commodity prices are causing the segment’s predominantly U.S. based customers to invest in capacity expansion after several years of under-investment and reduced capital spending.
          Power Systems operating earnings grew 63 percent due to higher volume, favorable pricing and productivity somewhat offset by inflation and significantly higher material costs. Segment operating earnings in 2005 include a charge of $5.0 million (pre-tax) associated with a facility closure and the corresponding write-down of property to its fair value compared to $4.0 million (pre-tax) of charges related to restructuring activities in 2004.

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General Corporate — Net
          General corporate expenses were $69.7 million in 2005 compared to $88.3 million in 2004. Expense dropped primarily due to decreased environmental costs, lower contributions to our charitable corporation and increased interest income.
Interest Expense
          Interest expense was $45.8 million in 2005 compared to $41.7 million in 2004, primarily due to higher interest rates associated with our interest rate swap (see Note 6 in the Financial Statements).
     2004 Compared to 2003
                         
(in millions, except per share amounts)   2004   2003   Increase
 
Sales
  $ 4,411.1     $ 3,992.3     $ 418.8  
Income from continuing operations
    354.1       281.4       72.7  
Diluted earnings per share from continuing operations
    1.85       1.48       0.37  
 
          Sales increased 10 percent compared to 2003 driven by growth at both Control Systems and Power Systems. Three percentage points of the growth was due to the effect of changes in currency exchange rates.
          Income from continuing operations in 2004 included $46.3 million ($0.24 per share) of tax benefits related to the resolution of certain tax matters as well as the benefit of state tax refunds. The 2003 results included a tax benefit of $69.4 million ($0.37 per share) related to the settlement of a U.S. federal research and experimentation credit refund claim.
  Control Systems
                         
(in millions, except percentages)   2004   2003   Increase
 
Sales
  $ 3,658.6     $ 3,287.4     $ 371.2  
Segment operating earnings
    527.9       397.6       130.3  
Segment operating margin
    14.4 %     12.1 %     2.3pts  
 
          Control Systems sales increased 11 percent compared to 2003. Four percentage points of the sales increase was due to the effect of changes in currency exchange rates, primarily resulting from the relative strength of the euro to the U.S. dollar. Sales outside of the U.S. increased 15 percent (6 percent excluding the effect of changes in currency exchange rates) and U.S. sales increased 8 percent.
          Control Systems experienced sales growth in all regions with exceptional strength in the emerging economies of Asia and Latin America where we continued to increase market penetration. Sales growth was primarily driven by maintenance related and smaller productivity related projects. These projects were the result of pent-up demand after the period of under-investment in productive assets during 2002 and 2003. In addition to these investments, we experienced an increase in activity related to larger scale projects in the second half of fiscal year 2004. These larger projects were driven by our customers’ requirements for incremental productivity improvements and capacity optimization.
          Our Logix platform business continued its strong growth with an increase of 30 percent over 2003. Industrial components and adjustable speed drives experienced double-digit growth as well. These gains were partially offset by moderate declines in drive systems and legacy control platforms.
          Segment operating margins increased due to higher volume, favorable product mix and productivity improvements. Volume leverage improved during the year due to our continuing productivity efforts and ongoing facility rationalization programs.

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  Power Systems
                         
(in millions, except percentages)   2004   2003   Increase
 
Sales
  $ 752.5     $ 704.9     $ 47.6  
Segment operating earnings
    67.5       54.6       12.9  
Segment operating margin
    9.0 %     7.7 %     1.3pts  
 
          Power Systems sales increased 7 percent compared to 2003. The Mechanical and Electrical business groups contributed about equally to the growth. The sales increase was mainly the result of volume strength in the second half of 2004. Higher global demand for basic materials and subsequent higher prices for these materials encouraged significant investment in capacity optimization and productivity and drove our sales.
          Significant cost and productivity initiatives launched in the second quarter of 2004, financial leverage on incremental volume and price increases more than offset rising raw material prices, resulting in the improved segment operating margin.
General Corporate — Net
          General corporate expenses were $88.3 million in 2004 compared to $66.8 million in 2003. Expense in 2004 includes charges of $16.4 million due to higher estimated costs for environmental remediation at several legacy sites, $7.0 million of contributions to our charitable corporation and $5.0 million of costs associated with corporate staff changes. Expense in 2003 included a charge of $4.7 million due to higher estimated future costs for environmental remediation at a legacy site.
Loss on Disposition of a Business
          In the second quarter of 2003, we sold a majority of our ownership interest in Reliance Electric Limited Japan (REJ) resulting in a loss of $8.4 million ($2.5 million after tax, or $0.01 per diluted share). The cash proceeds from the transaction totaled $10.4 million.
Interest Expense
          Interest expense was $41.7 million in 2004 compared to $52.5 million in 2003. The decrease was the result of the retirement at maturity of the $150.0 million principal amount of 6.80% notes in April 2003, the benefit of an interest rate swap (see Note 6 in the Financial Statements) and lower average short-term borrowings.
Discontinued Operations
          See Note 13 and Note 16 in the Financial Statements for information regarding discontinued operations.
Income Taxes
          During 2005, we recognized tax benefits of $19.7 million ($0.10 per diluted share) related to the resolution of claims and other tax matters in connection with the closure of the federal audit cycle for the years 1998 through 2002.
          In 2004, we recognized tax benefits of $46.3 million ($0.24 per diluted share) related to the following items:
            • 
$34.5 million resulting from the resolution of certain tax matters primarily related to former businesses. A majority of the benefits recognized related to non-U.S. tax matters in addition to an agreement with a taxing authority related to the treatment of an investment;
 
 
          • 
$4.3 million related to additional state tax benefits associated with the U.S. research and experimentation credit refund claim in 2003 (see discussion below); and
 
 
          • 
$7.5 million related to a refund from the State of California for the period 1989 to 1991.

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          During 2003, we recognized a net tax benefit of $69.4 million ($0.37 per diluted share) related to a U.S. federal research and experimentation credit refund claim and a tax benefit of approximately $2.6 million as a result of our ability to utilize certain capital loss carryforwards for which a valuation allowance had been previously provided.
          The full year effective tax rate for 2005 was 29.7 percent as compared to 19.2 percent for 2004. The discrete items described above decreased the effective tax rate by 2.6 percent in 2005 and 10.5 percent in 2004. The full year effective tax rate for 2003 was 5.4 percent, including the effect of the research and experimentation settlement (23.3 percent benefit) and the utilization of capital loss carryforwards (0.9 percent benefit).
          See Note 16 in the Financial Statements for a reconciliation of the United States statutory tax rate to the effective tax rate.
          Current and projected growth in income in higher tax jurisdictions has resulted, and may continue to result, in an increasing effective tax rate over time. We expect that the effective income tax rate in 2006 will be approximately 33.5 percent, excluding the income tax expense or benefit related to discrete items, if any, that will be separately reported or reported net of their related tax effects.
          See Note 13 and Note 16 in the Financial Statements for information on tax matters related to discontinued operations.
Financial Condition
          The following is a summary of our cash flows from operating, investing and financing activities, as reflected in the Consolidated Statement of Cash Flows (in millions):
                           
    Year Ended September 30,
     
    2005   2004   2003
             
Cash provided by (used for):
                       
 
Operating activities
  $ 638.9     $ 596.9     $ 419.9  
 
Investing activities
    (122.8 )     (65.2 )     (131.4 )
 
Financing activities
    (550.6 )     (312.0 )     (335.3 )
 
Effect of exchange rate changes on cash
    (3.1 )     1.8       (31.0 )
                         
Cash (used for) provided by continuing operations
  $ (37.6 )   $ 221.5     $ (77.8 )
                         
 
The following table summarizes free cash flow (in millions):
                       
Cash provided by operating activities
  $ 638.9     $ 596.9     $ 419.9  
Capital expenditures
    (124.1 )     (98.0 )     (107.6 )
                         
Free cash flow
  $ 514.8     $ 498.9     $ 312.3  
                         
          Our definition of free cash flow, which is a non-GAAP financial measure, takes into consideration capital investment required to maintain the operations of our businesses and execute our strategy. In our opinion, free cash flow provides useful information to investors regarding our ability to generate cash from business operations that is available for acquisitions and other investments, service of debt principal, dividends and share repurchases. We use free cash flow as one measure to monitor and evaluate performance. Our definition of free cash flow may be different from definitions used by other companies.
          Free cash flow was $514.8 million for the year ended September 30, 2005 compared to $498.9 million for the year ended September 30, 2004. Increased pre-tax earnings more than offset the increase in voluntary contributions to our U.S. pension plan ($150.0 million in 2005 compared to $125.0 million in 2004), capital spending and working capital needs. The increased capital spending includes investments in information technology and certain long-lived asset replacements.

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          When necessary, we utilize commercial paper as our principal source of short-term financing. At September 30, 2005 and 2004, we had no commercial paper borrowings outstanding. During 2005 we had no commercial paper borrowings and during 2004 we did not have significant commercial paper borrowings due to our cash position.
          In January 2004, we repaid our $8.4 million of industrial development revenue bonds prior to maturity using cash on hand. In April 2003, we repaid our $150.0 million principal amount of 6.80% notes at maturity using a combination of cash on hand and commercial paper borrowings.
          In 2005, we repurchased approximately 9.8 million shares of our common stock at a cost of $499.2 million, compared to repurchases of approximately 7.5 million shares of our common stock at a cost of $258.4 million in 2004. We anticipate repurchasing stock in 2006, the amount of which will depend ultimately on business conditions, stock price and other cash requirements. At September 30, 2005 we had authorization from our Board of Directors to purchase up to approximately 8.8 million additional shares through September 30, 2006.
          In October 2005, we contributed $450 million to our U.S. qualified pension trust. The contribution was funded with a combination of cash on hand and $300 million of commercial paper borrowings. In November 2005, we sold 24 owned properties in a sale-leaseback transaction for net cash proceeds of approximately $148 million. The cash proceeds were used to repay commercial paper borrowings.
          We expect future significant uses of cash to include capital expenditures, dividends to shareowners, repayments of short-term borrowings, acquisitions of businesses and repurchases of common stock and may include additional contributions to our pension plans. We expect capital expenditures in 2006 to be about $150 million. We expect that each of these future uses of cash will be funded by existing cash balances, cash generated by operating activities, commercial paper borrowings, a new issue of debt or issuance of other securities.
          In addition to cash generated by operating activities, we have access to existing financing sources, including the public debt markets and unsecured credit facilities with various banks. Our debt-to-total capital ratio was 31.2 percent at September 30, 2005 and 28.9 percent at September 30, 2004.
          In October 2004, we entered into a five-year $600.0 million unsecured revolving credit facility that replaced our then existing $675.0 million unsecured credit facilities. Borrowings under our credit facility bear interest based on short-term money market rates in effect during the period the borrowings are outstanding. The terms of our credit facility contain a covenant under which we would be in default if our debt-to-total capital ratio were to exceed 60 percent. In addition to our $600.0 million credit facility, short-term unsecured credit facilities of approximately $115 million at September 30, 2005 were available to foreign subsidiaries.
          The following is a summary of our credit ratings as of September 30, 2005:
                             
        Short-Term   Long-Term
             
Credit Rating Agency       Rating   Outlook   Rating   Outlook
                     
Standard & Poor’s   A-1     Stable     A     Stable  
Moody’s   P-2     Stable     A3     Stable  
Fitch Ratings   F1     Stable     A     Stable  
          Moody’s changed its long-term outlook from negative to stable during the second quarter of 2005 to reflect our leading position in the global industrial automation market, our healthy balance sheet and solid cash flow generation.
          Among other things, we can draw our credit facility as a standby liquidity facility, to repay our outstanding commercial paper as it matures. This access to funds to repay maturing commercial paper is an important factor in maintaining the ratings set forth in the table above that have been given to our commercial paper. Under our current policy with respect to these ratings, we expect to limit our other borrowings under the credit facility, if any, to amounts that would leave enough credit available under the facility so that we could borrow, if needed, to repay all of our then outstanding commercial paper as it matures.

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          If our access to the commercial paper market is adversely affected due to a change in market conditions or otherwise, we would expect to rely on a combination of available cash and the unsecured committed credit facilities to provide short-term funding. In such event, the cost of borrowings under the unsecured committed credit facilities could be higher than the cost of commercial paper borrowings.
          Cash dividends to shareowners were $142.7 million ($0.78 per share) in 2005 and $122.5 million ($0.66 per share) in 2004. Although declaration and payment of dividends are at the sole discretion of our Board of Directors, we expect to continue to pay quarterly dividends in 2006 of $0.225 per outstanding share.
          Certain of our contractual cash obligations at September 30, 2005 are:
                                                           
        Payments by Period
         
    Total   2006   2007   2008   2009   2010   Thereafter
                             
Long-term debt and interest(a)
  $ 2,192.7     $ 48.7     $ 48.7     $ 387.9     $ 27.1     $ 27.1     $ 1,653.2  
Minimum operating lease payments(b)
    206.5       51.5       45.2       37.3       26.4       15.0       31.1  
                                                         
 
Total
  $ 2,399.2     $ 100.2     $ 93.9     $ 425.2     $ 53.5     $ 42.1     $ 1,684.3  
                                                         
 
(a)
The amounts for long-term debt assume that the respective debt instruments will be outstanding until their scheduled maturity dates. The amounts include interest, but exclude the amounts to be received under an interest rate swap, the $(6.3) million fair value adjustment recorded for the interest rate swap as permitted by SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities , and the unamortized discount of $45.5 million. See Note 6 in the Financial Statements for additional information regarding our long-term debt.
 
(b) See Note 20 in the Financial Statements for information regarding our November 2005, sale-leaseback transaction.
    
          We sponsor pension and other postretirement benefit plans for certain employees. See Note 12 in the Financial Statements for information regarding these plans and expected future cash outflows related to the plans.
          At September 30, 2005, we and Rockwell Collins each guarantee one-half of a lease agreement for one of Rockwell Scientific Company LLC’s (RSC) facilities. The total future minimum payments under the lease are $4.8 million. The lease agreement has a term that ends in December 2011. In addition, we share equally with Rockwell Collins in providing a $6.0 million line of credit to RSC, which bears interest at the greater of our or Rockwell Collins’ commercial paper borrowing rate. At September 30, 2005 and 2004, there were no outstanding borrowings under this line of credit.
Supplemental Sales Information
          We translate sales of subsidiaries operating outside of the United States using exchange rates effective during the respective period. Therefore, reported sales are affected by changes in currency rates, which are outside of our control. We believe that sales excluding the effect of changes in currency exchange rates, which is a non-GAAP financial measure, provides useful information to investors because it reflects regional performance from the activities of our businesses without the effect of changes in currency rates. We use sales excluding the effect of changes in currency exchange rates to monitor and evaluate our regional performance. We determine the effect of changes in currency exchange rates by translating the respective period’s sales using the same currency exchange rates as were in effect in the preceding year. We attribute sales to the geographic regions based on the country of origin.

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          The following is a reconciliation of our reported sales to sales excluding the effect of changes in currency exchange rates (in millions):
                                                 
    Year Ended September 30, 2005   Year Ended September 30, 2004
         
        Sales       Sales
        Excluding       Excluding
        the Effect       the Effect
        of Changes       of Changes
        in Currency       in Currency
        Currency   Exchange       Currency   Exchange
    Sales   Translation   Rates   Sales   Translation   Rates
                         
US
  $ 3,058.8     $ —     $ 3,058.8     $ 2,727.0     $ —     $ 2,727.0  
Canada
    418.4       (32.4 )     386.0       339.8       (30.9 )     308.9  
Europe, Middle East and Africa
    823.5       (36.4 )     787.1       779.6       (83.1 )     696.5  
Asia-Pacific
    483.1       (20.5 )     462.6       400.4       (21.0 )     379.4  
Latin America
    219.4       (11.1 )     208.3       164.3       2.5       166.8  
                                                 
Total Company Sales
  $ 5,003.2     $ (100.4 )   $ 4,902.8     $ 4,411.1     $ (132.5 )   $ 4,278.6  
                                                 
          The following is a reconciliation of reported sales of our Control Systems segment to sales excluding the effect of changes in currency exchange rates (in millions):
                                                 
    Year Ended September 30, 2005   Year Ended September 30, 2004
         
        Sales       Sales
        Excluding       Excluding
        the Effect       the Effect
        of Changes       of Changes
        in Currency       in Currency
        Currency   Exchange       Currency   Exchange
    Sales   Translation   Rates   Sales   Translation   Rates
                         
US
  $ 2,275.5     $ —     $ 2,275.5     $ 2,054.2     $ —     $ 2,054.2  
Canada
    370.0       (28.7 )     341.3       302.4       (27.4 )     275.0  
Europe, Middle East and Africa
    815.4       (36.1 )     779.3       766.0       (81.6 )     684.4  
Asia-Pacific
    457.7       (20.3 )     437.4       382.9       (21.0 )     361.9  
Latin America
    205.0       (11.0 )     194.0       153.1       1.7       154.8  
                                                 
Total Control Systems Sales
  $ 4,123.6     $ (96.1 )   $ 4,027.5     $ 3,658.6     $ (128.3 )   $ 3,530.3  
                                                 
Critical Accounting Policies and Estimates
          We have prepared the consolidated financial statements in accordance with accounting principles generally accepted in the United States, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the periods reported. Actual results could differ from those estimates. We believe the following critical accounting policies could have the most significant effect on our reported results or require subjective or complex judgments by management.
Retirement Benefits
Pension Benefits
          Pension costs and obligations are actuarially determined and are influenced by assumptions used to estimate these amounts, including the discount rate, the expected rate of return on plan assets, the assumed annual compensation increase rate, retirement rate, mortality rate and employee turnover rate. Changes in any of the assumptions and the amortization of differences between the assumptions and actual experience will affect the amount of pension expense recognized in future periods.
          Our global pension expense in 2005 was $66.2 million compared to $68.8 million in 2004. Approximately 80 percent of our 2005 global pension expense relates to our U.S. qualified pension plan. The actuarial

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assumptions used to determine our 2005 U.S. pension expense included the following: discount rate of 6.25 percent (compared to 6.00 percent for 2004); expected rate of return on plan assets of 8.50 percent (compared to 8.50 percent for 2004); and an assumed compensation increase rate of 4.50 percent (compared to 4.50 percent for 2004).
          In 2005, we made voluntary contributions of $150.0 million to our primary U.S. qualified pension plan trust compared to $125.0 million in 2004.
          We estimate our pension expense will be approximately $82 million in 2006, an increase of approximately $16 million over 2005. Our estimated 2006 pension expense reflects the following changes in the U.S. pension plan:
 
          • 
the net cost related to changes in actuarial assumptions;
 
 
          • 
the benefit of a $100 million contribution in September 2005 and a $450 million contribution in October 2005; and
 
 
          • 
the benefit related to a plan amendment that eliminates the early retirement subsidy for certain employees.
          For 2006, changes in actuarial assumptions include a 100 basis point reduction in our discount rate to 5.25 percent from the 6.25 percent used in 2005. The discount rate is set as of our June 30th measurement date and was determined by modeling a portfolio of bonds that match the expected cash flow of our benefit plans. Our assumed rate of return on plan assets will remain at 8.50 percent, consistent with 2005. We considered actual returns on plan assets over the long term as well as the current and expected mix of plan investments in setting this assumption. We have assumed a compensation increase rate of 4.06 percent in 2006, compared to 4.50 percent used in 2005. We established this rate using an analysis of all elements of employee compensation that are considered pension eligible earnings. Additionally, in establishing our 2006 pension assumptions, we performed an actuarial experience study that changed other assumptions including retirement rate, employee turnover rate, and mortality rate as a result of utilizing the RP2000 table projected forward 10 years.
          Effective for 2006, we amended our U.S. pension plan to eliminate the early retirement subsidy for certain employees. The effect of the amendment is a reduction of approximately $70 million in our pension benefit obligation and a corresponding reduction in annual pension expense recognized over the average remaining service life of plan participants.
          The following chart illustrates the estimated change in benefit obligation and net periodic pension cost assuming a change of 25 basis points in the assumptions for our U.S. pension plans (in millions):
                 
    Pension Benefits
     
    Change in   Change in
    Projected Benefit   Net Periodic
    Obligation   Benefit Cost
         
Discount Rate
  $ 75.5     $ 8.1  
Rate of Return
    —       4.1  
          Additional information regarding pension benefits, including our pension obligation and minimum pension liability adjustment, is contained in Note 12 in the Financial Statements.
Other Postretirement Benefits
          We estimate, with the assistance of third party actuarial consultants, the costs and obligations for postretirement benefits other than pensions using assumptions, including the discount rate and, for plans other than our primary U.S. postretirement healthcare benefit program, expected trends in the cost for healthcare services. Changes in these assumptions and differences between the assumptions and actual experience will affect the amount of postretirement benefit expense recognized in future periods. The discount rate used to calculate our 2005 other postretirement benefits expense was 6.25 percent (compared to 6.00 percent in

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2004). For 2006, the discount rate assumption for other postretirement benefit expense will decrease to 5.0 percent.
          Effective October 1, 2002, we amended our primary U.S. postretirement healthcare benefit program in order to mitigate our share of the increasing cost of postretirement healthcare services. As a result of this amendment to our primary U.S. program, there is no increase in healthcare costs resulting from healthcare inflationary trends as of January 1, 2005.
          Net periodic benefit cost in 2005 was $24.9 million compared to $23.4 million in 2004.
          We expect net periodic benefit cost in 2006 of approximately $36 million and the estimated postretirement projected benefit obligation to approximate $425 million. The expected increases are primarily due to the decrease in discount rate (as of our June 30, 2005 measurement date) by 125 basis points to 5.0 percent.
          Additional information regarding postretirement benefits is contained in Note 12 in the Financial Statements.
Revenue Recognition
          We record sales of products and services, representing approximately 90% of our consolidated sales, when all of the following have occurred: an agreement of sale exists; pricing is fixed or determinable; collection is reasonably assured; and product has been delivered and acceptance has occurred, as may be required according to contract terms, or services have been rendered.
          We recognize substantially all of the remainder of our sales on construction-type contracts using either the percentage-of-completion or completed contract methods of accounting. We record sales relating to these contracts using the percentage-of-completion method when we determine that progress towards completion is reasonably and reliably estimable; we use the completed contract method for all others. Under the percentage-of-completion method, we recognize sales and gross profit as work is performed using either (i) the relationship between actual costs incurred and total estimated costs at completion or (ii) units-of-delivery. Under the percentage-of-completion method, we adjust sales and gross profit for revisions of estimated total contract costs or revenue in the period the change is identified. We record estimated losses on contracts when they are identified.
          We use contracts and customer purchase orders to determine the existence of an agreement of sale. We use shipping documents and customer acceptance, when applicable, to verify delivery. We assess whether the fee is fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. We assess collectibility based on the creditworthiness of the customer as determined by credit evaluations and analysis, as well as the customer’s payment history.
Returns, Rebates and Incentives
          Our primary incentive program provides distributors with cash rebates or account credits based on agreed amounts that vary depending on the end user or original equipment manufacturing (OEM) customer to whom our distributor ultimately sells the product. We also offer various other incentive programs that provide distributors and direct sale customers with cash rebates, account credits or additional products and services based on meeting specified program criteria. Certain distributors are offered a right to return product, subject to contractual limitations.
          We record accruals for customer returns, rebates and incentives at the time of revenue recognition based primarily on historical experience. Adjustments to the accrual may be required if actual returns, rebates and incentives differ from historical experience or if there are changes to other assumptions used to estimate the accrual. A critical assumption used in estimating the accrual for our primary distributor rebate program is the time period from when revenue is recognized to when the rebate is processed. If the time period were to change by 10 percent, the effect would be an adjustment to the accrual of approximately $5.0 million.

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          Returns, rebates and incentives are recognized as a reduction of sales if distributed in cash or customer account credits. Rebates and incentives are recognized in cost of sales for additional products and services to be provided. Accruals are reported as a current liability in our balance sheet or, where a right of set-off exists, as a reduction of accounts receivable. The accrual for customer returns, rebates and incentives was $117.6 million at September 30, 2005 and $86.1 million at September 30, 2004, of which $9.4 million at September 30, 2005 and $7.8 million at September 30, 2004 was included as an offset to accounts receivable.
Impairment of Long-Lived Assets
          We evaluate the recoverability of the carrying amount of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable through future cash flows. We evaluate the recoverability of goodwill and other intangible assets with indefinite useful lives annually or more frequently if events or circumstances indicate that an asset might be impaired. We use judgment when applying the impairment rules to determine when an impairment test is necessary. Factors we consider that could trigger an impairment review include significant underperformance relative to historical or forecasted operating results, a significant decrease in the market value of an asset, a significant change in the extent or manner in which an asset is used and significant negative industry or economic trends.
          Impairment losses are measured as the amount by which the carrying value of an asset exceeds its estimated fair value. To determine fair value, we must make estimates of the future cash flows related to the asset being reviewed. These estimates require assumptions about demand for our products and services, future market conditions and technological developments. Other assumptions include the discount rate and future growth rates.
          We perform our annual impairment test on non-amortized intangible assets during the second quarter of our fiscal year. As of the second quarter of 2005, the estimated fair value of our Reliance trademark exceeded its $72.8 million net book value. We calculated the estimated fair value with the assistance of third party valuation specialists. Either an increase in the discount rate or a decrease in planned future growth or profitability of our Electrical (Reliance) business group could result in an impairment charge to write down the book value of the Reliance trademark to the revised estimated fair value.
Litigation, Claims and Contingencies
          We record liabilities for litigation, claims and contingencies when an obligation is probable and when we have a basis to reasonably estimate the value of an obligation. We also record liabilities for environmental matters based on estimates for known environmental remediation exposures utilizing information received from independent environmental consultants. The liabilities include accruals for sites we currently own and third-party sites where we were determined to be a potentially responsible party. At third-party sites where more than one potentially responsible party has been identified, we record a liability for our estimated allocable share of costs related to our involvement with the site as well as an estimated allocable share of costs related to the involvement of insolvent or unidentified parties. At environmental sites where we are the only responsible party, we record a liability for the total estimated costs of remediation. We do not discount future expenditures for environmental remediation obligations to their present value. Environmental liability estimates may be affected by changing determinations of what constitutes an environmental exposure or an acceptable level of cleanup. To the extent that remediation procedures change, additional contamination is identified, or the financial condition of other potentially responsible parties is adversely affected, the estimate of our environmental liabilities may change.
          The reserve for environmental matters, net of related receivables, was $39.3 million at September 30, 2005 and $38.8 million at September 30, 2004. During 2005, we recorded adjustments totaling $8.5 million to increase the environmental reserves related to several legacy sites compared to 2004 adjustments of $16.9 million.
          Our recorded liability for environmental matters almost entirely relates to businesses formerly owned by us (legacy businesses) for which we retained the responsibility to remediate. The nature of our current business is such that the likelihood of new environmental exposures that could result in a significant charge to

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earnings is low. As a result of remediation efforts at legacy sites and limited new environmental matters, we expect that gradually, over a long period of time, our environmental obligations will decline. However, changes in remediation procedures at existing legacy sites or discovery of contamination at additional sites could result in increases to our environmental obligations.
          Various lawsuits, claims and proceedings have been or may be instituted or asserted against us relating to the conduct of our business, including those pertaining to product liability. As described in Item 3. Legal Proceedings, we have been named as a defendant in lawsuits alleging personal injury as a result of exposure to asbestos that was used in certain components of our products many years ago. See Item 3 for further discussion.
          Our principal self-insurance programs include product liability where we are self-insured up to a specified dollar amount. Claims exceeding this amount up to specified limits are covered by policies purchased from commercial insurers. We estimate the reserve for product liability claims, excluding asbestos, with the assistance of a third party actuarial consultant using our claims experience for the periods being valued. Adjustments to the product liability reserves may be required to reflect emerging claims experience and other factors such as inflationary trends or the outcome of claims. The reserve for product liability claims was $29.5 million at September 30, 2005 and $32.3 million at September 30, 2004.
          Additional information regarding litigation, claims and contingencies is contained in Note 17 in the Financial Statements.
Income Taxes
          We operate in numerous taxing jurisdictions and are subject to regular examinations by various U.S. Federal, state and foreign jurisdictions for various tax periods. Additionally, we have retained tax liabilities and the rights to tax refunds in connection with various divestitures of businesses in prior years. Our income tax positions are based on research and interpretations of the income tax laws and rulings in each of the jurisdictions in which we do business. Due to the subjectivity of interpretations of laws and rulings in each jurisdiction, the differences and interplay in tax laws between those jurisdictions as well as the inherent uncertainty in estimating the final resolution of complex tax audit matters, our estimates of income tax liabilities may differ from actual payments or assessments.
          While we have support for the positions taken on our tax returns, taxing authorities are increasingly asserting interpretations of laws and facts and challenging cross jurisdictional transactions. Cross jurisdictional transactions between our subsidiaries involving the transfer price for products, services, and/or intellectual property as well as various U.S. state tax matters comprise our more significant income tax exposures. We regularly assess our position with regard to tax exposures and record liabilities for these uncertain tax positions and related interest and penalties, if any, according to the principles of SFAS No. 5, Accounting for Contingencies. We have recorded an accrual of $103.1 million at September 30, 2005 that reflects our estimate of the likely outcome of current and future audits and is recorded in Other liabilities in our Consolidated Balance Sheet. A final determination of these tax audits or changes in our estimates may result in additional future income tax expense or benefit.
          We have recorded a valuation allowance of $55.5 million at September 30, 2005 for the majority of our deferred tax assets related to net operating loss carryforwards, capital loss carryforwards and state tax credit carryforwards (Carryforwards) based on the projected profitability of the entity in the respective tax jurisdiction. The valuation allowance is based on an evaluation of the uncertainty of the amounts of the Carryforwards that are expected to be realized. Our income would increase if we determine we will be able to utilize more Carryforwards than currently expected.
          At the end of each interim reporting period, we estimate the effective tax rate expected to apply to the full fiscal year. The estimated effective tax rate contemplates the expected jurisdiction where income is earned as well as tax planning strategies. Current and projected growth in income in higher tax jurisdictions has resulted, and may continue to result, in an increasing effective tax rate over time. If the actual results differ from our estimates, we may have to adjust the effective tax rate in the interim period such determination is made.

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          Additional information regarding income taxes is contained in Note 16 in the Financial Statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
          We are exposed to market risk during the normal course of business from changes in interest rates and foreign currency exchange rates. We manage exposure to these risks through a combination of normal operating and financing activities and derivative financial instruments in the form of interest rate swap contracts and foreign currency forward exchange contracts.
Interest Rate Risk
          In addition to existing cash balances and cash provided by normal operating activities, we use a combination of short-term and long-term debt to finance operations. We are exposed to interest rate risk on certain of these debt obligations.
          Our short-term debt obligations relate to commercial paper borrowings and bank borrowings. At September 30, 2005 and 2004, we had no commercial paper or bank borrowings outstanding. During 2005, we had no commercial paper borrowings. In 2004, the weighted average commercial paper borrowing was $1.8 million. Changes in market interest rates on commercial paper borrowings affect our results of operations. If market interest rates would have averaged 10 percent higher than actual levels in either 2005 or 2004, the effect on our results of operations would not have been significant.
          In October 2005, we issued $300 million of unsecured commercial paper obligations with maturities of 1 to 28 days. We used the proceeds of the commercial paper to partially fund a $450 million voluntary contribution to our U.S. qualified pension plan trust made on October 11, 2005. As these obligations mature, we anticipate issuing additional short-term commercial paper obligations to refinance all or part of these borrowings.
          We had outstanding fixed rate long-term debt obligations with carrying values of $748.2 million at September 30, 2005 and $757.7 million at September 30, 2004. The fair value of this debt was $826.2 million at September 30, 2005 and $837.1 million at September 30, 2004. The potential reduction in fair value on such fixed-rate debt obligations from a hypothetical 10 percent increase in market interest rates would not be material to the overall fair value of the debt. We currently have no plans to repurchase our outstanding fixed-rate instruments and, therefore, fluctuations in market interest rates would not have an effect on our results of operations or shareowners’ equity.
          In September 2002, we entered into an interest rate swap contract that effectively converted our $350.0 million aggregate principal amount of 6.15% notes, payable in 2008, to floating rate debt based on six-month LIBOR. The floating rate was 6.23 percent at September 30, 2005. A hypothetical 10 percent change in market interest rates would not be significant to the overall fair value of the swap or our results of operations.
Foreign Currency Risk
          We are exposed to foreign currency risks that arise from normal business operations. These risks include the translation of local currency balances of 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 and foreign currency forward exchange contracts to manage our exposure on transactions denominated in currencies other than the applicable functional currency. In addition, we enter into contracts to hedge certain forecasted intercompany transactions expected to occur within the next four years. Contracts are executed with creditworthy banks and are denominated in currencies of major industrial countries. We do not enter into derivative financial instruments for speculative purposes. We do not hedge our exposure to the translation of reported results of foreign subsidiaries from local currency to United States dollars. A 10 percent adverse change in the underlying foreign currency exchange rates would not be significant to our financial condition or results of operations.

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          We record all derivatives on the balance sheet at fair value regardless of the purpose for holding them. Derivatives that are not designated as hedges for accounting purposes 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. We recognize the ineffective portion of a derivative’s change in fair value in earnings immediately.
          At September 30, 2005 and 2004, we had outstanding foreign currency forward exchange contracts primarily consisting of contracts to exchange the euro, Swiss franc, Canadian dollar, British pound sterling, and Australian dollar for U.S. dollars. 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 percent adverse change in underlying foreign currency exchange rates associated with these contracts would not be significant to our financial condition or results of operations.

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Item 8. Financial Statements and Supplementary Data
CONSOLIDATED BALANCE SHEET
(in millions)
                   
    September 30,
     
    2005   2004
         
Assets
Current Assets
               
Cash and cash equivalents
  $ 463.6     $ 473.8  
Receivables
    799.6       719.9  
Inventories
    569.9       574.3  
Deferred income taxes
    169.4       132.7  
Other current assets
    184.0       125.4  
                 
 
Total current assets
    2,186.5       2,026.1  
                 
Property, net
    774.5       804.5  
Goodwill
    811.9       811.1  
Other intangible assets, net
    307.0       323.8  
Deferred income taxes
    66.3       12.1  
Prepaid pension
    200.5       68.8  
Other assets
    178.4       166.9  
                 
 
Total
  $ 4,525.1     $ 4,213.3  
                 
 
Liabilities and Shareowners’ Equity
Current Liabilities
               
Short-term debt
  $ 1.2     $ 0.2  
Accounts payable
    388.5       362.2  
Compensation and benefits
    214.4       202.3  
Income taxes payable
    5.4       8.3  
Other current liabilities
    331.3       290.6  
                 
 
Total current liabilities
    940.8       863.6  
                 
Long-term debt
    748.2       757.7  
Retirement benefits
    977.5       505.6  
Other liabilities
    209.5       225.4  
Commitments and contingent liabilities (Note 17)
               
 
Shareowners’ Equity
               
Common stock (shares issued: 216.4)
    216.4       216.4  
Additional paid-in capital
    1,122.7       1,050.6  
Retained earnings
    2,493.5       2,255.7  
Accumulated other comprehensive loss
    (501.5 )     (226.8 )
Unearned restricted stock compensation
    (1.7 )     (1.1 )
Common stock in treasury, at cost (shares held: 2005, 36.7; 2004, 32.6)
    (1,680.3 )     (1,433.8 )
                 
 
Total shareowners’ equity
    1,649.1       1,861.0  
                 
 
Total
  $ 4,525.1     $ 4,213.3  
                 
See Notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENT OF OPERATIONS
(in millions, except per share amounts)
                           
    Year Ended September 30,
     
    2005   2004   2003
             
Sales
  $ 5,003.2     $ 4,411.1     $ 3,992.3  
Cost of sales
    (3,109.1 )     (2,848.3 )     (2,681.0 )
                         
 
Gross profit
    1,894.1       1,562.8       1,311.3  
Selling, general and administrative expenses
    (1,120.8 )     (1,058.6 )     (967.7 )
Other income (expense) (Note 15)
    9.5       (24.4 )     6.5  
Interest expense
    (45.8 )     (41.7 )     (52.5 )
                         
Income from continuing operations before income taxes
    737.0       438.1       297.6  
Income tax provision (Note 16)
    (218.6 )     (84.0 )     (16.2 )
                         
Income from continuing operations
    518.4       354.1       281.4  
Income from discontinued operations (Note 13)
    21.6       60.8       5.0  
                         
Net income
  $ 540.0     $ 414.9     $ 286.4  
                         
Basic earnings per share:
                       
Continuing operations
  $ 2.83     $ 1.91     $ 1.51  
Discontinued operations
    0.12       0.33       0.03  
                         
Net income
  $ 2.95     $ 2.24     $ 1.54  
                         
Diluted earnings per share:
                       
Continuing operations
  $ 2.77     $ 1.85     $ 1.48  
Discontinued operations
    0.11       0.32       0.03  
                         
Net income
  $ 2.88     $ 2.17     $ 1.51  
                         
Weighted average outstanding shares:
                       
Basic
    183.1       185.5       185.4  
                         
Diluted
    187.2       191.1       190.1  
                         
See Notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
                               
    Year Ended September 30,
     
    2005   2004   2003
             
Continuing Operations:
                       
Operating Activities:
                       
 
Net income
  $ 540.0     $ 414.9     $ 286.4  
 
Income from discontinued operations
    (21.6 )     (60.8 )     (5.0 )
                         
 
Income from continuing operations
    518.4       354.1       281.4  
                         
 
Adjustments to arrive at cash provided by operating activities:
                       
   
Depreciation
    150.8       159.7       168.5  
   
Amortization of intangible assets
    20.4       27.0       22.1  
   
Income tax matters
    (19.7 )     (46.3 )     (69.4 )
   
Pension and postretirement benefit expense
    91.1       92.2       70.7  
   
Pension trust contributions
    (185.6 )     (157.3 )     (65.9 )
   
Deferred income taxes
    115.8       63.6       26.4  
   
Net loss on dispositions of property and business (Note 15)
    4.7       24.3       12.2  
   
Income tax benefit from the exercise of stock options
    72.1       40.2       20.9  
   
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and foreign currency adjustments:
                       
     
Receivables
    (56.4 )     (48.2 )     (13.0 )
     
Inventories
    9.0       (28.5 )     20.3  
     
Accounts payable
    20.7       37.1       6.9  
     
Compensation and benefits
    12.3       35.2       7.7  
     
Income taxes
    (46.4 )     7.2       (32.8 )
     
Other assets and liabilities
    (68.3 )     36.6       (36.1 )
                         
     
Cash Provided by Operating Activities
    638.9       596.9       419.9  
                         
Investing Activities:
                       
 
Capital expenditures
    (124.1 )     (98.0 )     (107.6 )
 
Acquisition of businesses, net of cash acquired
    (5.4 )     —       (25.7 )
 
Proceeds from sales of business and property
    7.4       32.4       6.6  
 
Other investing activities
    (0.7 )     0.4       (4.7 )
                         
     
Cash Used for Investing Activities
    (122.8 )     (65.2 )     (131.4 )
                         
Financing Activities:
                       
 
Issuance (repayments) of debt
    1.0       (8.4 )     (153.4 )
 
Cash dividends
    (142.7 )     (122.5 )     (122.4 )
 
Purchases of treasury stock
    (499.2 )     (258.4 )     (128.4 )
 
Proceeds from the exercise of stock options
    91.6       78.5       70.4  
 
Other financing activities
    (1.3 )     (1.2 )     (1.5 )
                         
     
Cash Used for Financing Activities
    (550.6 )     (312.0 )     (335.3 )
                         
Effect of exchange rate changes on cash
    (3.1 )     1.8       (31.0 )
                         
Cash (Used for) Provided by Continuing Operations
    (37.6 )     221.5       (77.8 )
Discontinued Operations:
                       
 
Cash Provided by Discontinued Operating Activities
    27.4       27.2       16.2  
 
Cash Used for Discontinued Investing Activities
    —       (1.3 )     (1.2 )
                         
Cash Provided by Discontinued Operations
    27.4       25.9       15.0  
                         
(Decrease) Increase in Cash
    (10.2 )     247.4       (62.8 )
Cash and Cash Equivalents at Beginning of Year
    473.8       226.4       289.2  
                         
Cash and Cash Equivalents at End of Year
  $ 463.6     $ 473.8     $ 226.4  
                         
See Notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENT OF SHAREOWNERS’ EQUITY
(in millions, except per share amounts)
                         
    Year Ended September 30,
     
    2005   2004   2003
             
Common Stock (no shares issued during years)
  $ 216.4     $ 216.4     $ 216.4  
                         
Additional Paid-In Capital
                       
Beginning balance
    1,050.6       1,007.5       986.6  
Shares delivered under incentive plans
    72.1       40.2       20.9  
Other
    —       2.9       —  
                         
Ending balance
    1,122.7       1,050.6       1,007.5  
                         
Retained Earnings
                       
Beginning balance
    2,255.7       2,143.0       2,165.3  
Net income
    540.0       414.9       286.4  
Cash dividends (2005, $0.78 per share; 2004 and 2003, $0.66 per share)
    (142.7 )     (122.5 )     (122.4 )
Shares delivered under incentive plans
    (159.5 )     (179.7 )     (186.3 )
                         
Ending balance
    2,493.5       2,255.7       2,143.0  
                         
Accumulated Other Comprehensive Loss
                       
Beginning balance
    (226.8 )     (343.8 )     (193.8 )
Other comprehensive (loss) income
    (274.7 )     117.0       (150.0 )
                         
Ending balance
    (501.5 )     (226.8 )     (343.8 )
                         
Unearned Restricted Stock Compensation
                       
Beginning balance
    (1.1 )     —       (0.2 )
Restricted stock compensation expense
    0.9       0.6       0.5  
Restricted stock grants
    (1.5 )     (1.7 )     (0.3 )
                         
Ending balance
    (1.7 )     (1.1 )     —  
                         
Treasury Stock
                       
Beginning balance
    (1,433.8 )     (1,436.3 )     (1,565.3 )
Purchases
    (499.2 )     (258.4 )     (128.4 )
Shares delivered under incentive plans
    252.7       260.9       257.4  
                         
Ending balance
    (1,680.3 )     (1,433.8 )     (1,436.3 )
                         
Total Shareowners’ Equity
  $ 1,649.1     $ 1,861.0     $ 1,586.8  
                         
See Notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in millions)
                           
    Year Ended September 30,
     
    2005   2004   2003
             
Net income
  $ 540.0     $   414.9     $ 286.4  
Other comprehensive (loss) income:
                       
 
Minimum pension liability adjustments (net of tax (benefit) expense of $(185.0), $42.1 and $(106.9))
    (293.4 )     68.2       (169.9 )
 
Currency translation adjustments (net of tax expense of $0, $0, and $25.0)
    7.1       34.0       34.1  
 
Net change in unrealized losses on cash flow hedges (net of tax expense (benefit) of $6.9, $8.6 and $(9.0))
    11.4       14.2       (14.9 )
 
Net change in unrealized losses on investment securities
    0.2       0.6       0.7  
                         
Other comprehensive (loss) income
    (274.7 )     117.0       (150.0 )
                         
Comprehensive income
  $ 265.3     $ 531.9     $ 136.4  
                         
See Notes to Consolidated Financial Statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation and Accounting Policies
          Rockwell Automation, Inc. (the Company or Rockwell Automation) is a leading global provider of industrial automation power, control and information products and services.
Basis of Presentation
          Except as indicated, amounts reflected in the consolidated financial statements or the notes thereto relate to our continuing operations. Certain prior year amounts have been reclassified to conform to the current year presentation.
          In September 2004, we sold our FirstPoint Contact business. FirstPoint Contact is classified as a discontinued operation in the consolidated financial statements for all periods presented.
Principles of Consolidation
          The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned and controlled majority owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Investments in affiliates over which we have the ability to exert significant influence, but that we do not control and are not the primary beneficiary of, including Rockwell Scientific Company LLC (RSC), are accounted for using the equity method of accounting. Accordingly, our proportional share of the respective affiliate’s earnings or losses is included in other income (expense) in the Consolidated Statement of Operations. Investments in affiliates over which we do not have the ability to exert significant influence are accounted for using the cost method of accounting. These affiliated companies are not material individually or in the aggregate to our financial position, results of operations or cash flows.
Use of Estimates
          The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the periods reported. Actual results could differ from those estimates. We use estimates in accounting for, among other items, customer returns, rebates and incentives; allowance for doubtful accounts; excess and obsolete inventory; impairment of long-lived assets; product warranty obligations; retirement benefits; litigation, claims and contingencies, including environmental matters; and income taxes. We account for changes to estimates and assumptions prospectively when warranted by factually based experience.
Revenue Recognition
          We record sales of products and services, representing approximately 90 percent of our consolidated sales, when all of the following have occurred: an agreement of sale exists; pricing is fixed or determinable; collection is reasonably assured; and product has been delivered and acceptance has occurred, as may be required according to contract terms, or services have been rendered.
          We recognize substantially all of the remainder of our sales on construction-type contracts using either the percentage-of-completion or completed contract method of accounting. We record sales relating to these contracts using the percentage-of-completion method when we determine that progress towards completion is reasonably and reliably estimable; we use the completed contract method for all others. Under the percentage-of-completion method, we recognize sales and gross profit as work is performed using either (i) the relationship between actual costs incurred and total estimated costs at completion or (ii) units-of-delivery. Under the percentage-of-completion method, we adjust sales and gross profit for revisions of estimated total contract costs or revenue in the period the change is identified. We record estimated losses on contracts when they are identified.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
1. Basis of Presentation and Accounting Policies — (Continued)
     
          We use contracts and customer purchase orders to determine the existence of an agreement of sale. We use shipping documents and customer acceptance, when applicable, to verify delivery. We assess whether the fee is fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. We assess collectibility based on the creditworthiness of the customer as determined by credit evaluations and analysis, as well as the customer’s payment history.
          Shipping and handling costs billed to customers are included in sales and the related costs are included in cost of sales in the Consolidated Statement of Operations.
Returns, Rebates and Incentives
          Our primary incentive program provides distributors with cash rebates or account credits based on agreed amounts that vary depending on the end user or original equipment manufacturer (OEM) customer to whom our distributor ultimately sells the product. We also offer various other incentive programs that provide distributors and direct sale customers with cash rebates, account credits or additional products and services based on meeting specified program criteria. Certain distributors are offered a right to return product, subject to contractual limitations.
          We record accruals for customer returns, rebates and incentives at the time of revenue recognition based primarily on historical experience. Returns, rebates and incentives are recognized as a reduction of sales if distributed in cash or customer account credits. Rebates and incentives are recognized in cost of sales for additional products and services to be provided. Amounts are accrued at the time of recognition of our sale to a distributor or direct sale customer. Accruals are reported as a current liability in our balance sheet or, where a right of set-off exists, as a reduction of accounts receivable.
Cash and Cash Equivalents
          Cash and cash equivalents include time deposits and certificates of deposit with original maturities of three months or less.
Receivables
          We record allowances for doubtful accounts based on customer-specific analysis and general matters such as current assessments of past due balances and economic conditions. Receivables are stated net of allowances for doubtful accounts of $18.4 million at September 30, 2005 and $25.2 million at September 30, 2004. In addition, receivables are stated net of an allowance for certain customer returns, rebates and incentives of $9.4 million at September 30, 2005 and $7.8 million at September 30, 2004.
Inventories
          Inventories are stated at the lower of cost or market using the first-in, first-out (FIFO) method. Market is determined on the basis of estimated realizable values.
Property
          Property is stated at cost. We calculate depreciation of property using the straight-line method over 15 to 40 years for buildings and improvements, 3 to 14 years for machinery and equipment and 3 to 10 years for computer hardware and software. We capitalize significant renewals and enhancements and write off replaced units. We expense maintenance and repairs, as well as renewals of minor amounts.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
1. Basis of Presentation and Accounting Policies — (Continued)
Intangible Assets
          Goodwill and other intangible assets generally result from business acquisitions. We account for business acquisitions by allocating the purchase price to tangible and intangible assets acquired and liabilities assumed at their fair values, the excess of the purchase price over the allocated amount is recorded as goodwill.
          Statement of Financial Accounting Standard (SFAS) No. 142, Goodwill and Other Intangible Assets , requires goodwill and other intangible assets with indefinite useful lives to be reviewed for impairment annually or more frequently if events or circumstances indicate an impairment may be present, rather than amortized as previous standards required. Any excess in carrying value over the estimated fair value is charged to results of operations.
          We amortize distributor networks, computer software products, patents and other intangible assets with finite useful lives on a straight-line basis over their estimated useful lives, generally ranging from 3 to 40 years.
Impairment of Long-Lived Assets
          We evaluate the recoverability of the recorded amount of long-lived assets whenever events or changes in circumstances indicate that the recorded amount of an asset may not be fully recoverable. An impairment is assessed when the undiscounted expected future cash flows derived from an asset are less than its carrying amount. If we determine that an asset is impaired, we measure the impairment to be recognized as the amount by which the recorded amount of the asset exceeds its fair value. We report assets to be disposed of at the lower of the recorded amount or fair value less cost to sell. We determine fair value using a discounted future cash flow analysis or other accepted valuation techniques.
          During 2004, we sold a facility in a sale-leaseback transaction with a third party resulting in a $20.6 million pre-tax loss. The net cash proceeds from the sale were $19.0 million.
Derivative Financial Instruments
          We use derivative financial instruments in the form of foreign currency forward exchange contracts and interest rate swap contracts to manage foreign currency and interest rate risks. We use foreign currency forward exchange contracts to offset changes in the amount of future cash flows associated with intercompany transactions expected to occur within the next four years (cash flow hedges) and changes in the fair value of certain assets and liabilities resulting from intercompany loans and other transactions with third parties denominated in foreign currencies. We sometimes use interest rate swap contracts to manage the balance of fixed and floating rate debt. Our accounting method for derivative financial instruments is based upon the designation of such instruments as hedges under accounting principles generally accepted in the United States. It is our policy 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.
Foreign Currency Translation
          We translate assets and liabilities of subsidiaries operating outside of the United States with a functional currency other than the U.S. dollar into U.S. dollars using exchange rates at the end of the respective period. We translate sales, costs and expenses at average exchange rates effective during the respective period. We report foreign currency translation adjustments as a component of other comprehensive income. Currency transaction gains and losses are included in the results of operations in the period incurred.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
1. Basis of Presentation and Accounting Policies — (Continued)
Research and Development Expenses
          We expense research and development (R&D) costs as incurred; these costs were $138.6 million in 2005, $121.7 million in 2004 and $121.6 million in 2003. We include R&D expenses in cost of sales in the Consolidated Statement of Operations.
Income Taxes
          We record a liability for income tax exposures when they are probable and the amount can be reasonably estimated. Tax benefits related to claims are also recognized when they become probable and reasonably estimable. The determination of probability and the estimate of the liability or tax benefit reflect the relevant tax law as applied to us taking into account the particular country, state, or other taxing authority.
Earnings Per Share
          We present basic and diluted earnings per share (EPS) amounts. Basic EPS is calculated by dividing net income by the weighted average number of common shares outstanding during the year. Diluted EPS amounts are based upon the weighted average number of common and common equivalent shares outstanding during the year. The effect of stock options represents the entire difference between basic and diluted EPS. We use the treasury stock method to calculate the effect of outstanding stock options. Stock options for which the exercise price exceeds the average market price (out-of-the-money options) over the period have an antidilutive effect on EPS, and accordingly, we exclude them from the calculation. Antidilutive options for the years ended September 30, 2005 (20,013 shares), 2004 (51,938 shares) and 2003 (1,073,119 shares) were excluded from the diluted EPS calculation.
Stock-Based Compensation
          We account for stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees . We grant stock options at prices equal to the fair market value of our common stock on the grant dates; therefore we do not recognize compensation expense in connection with stock options granted to employees. We recognize compensation expense on grants of restricted stock during the period of the employee’s service.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
1. Basis of Presentation and Accounting Policies — (Continued)
     
          The following table illustrates the effect on net income and earnings per share as if the fair value-based method provided by SFAS No. 123, Accounting for Stock-Based Compensation , had been applied for all outstanding and unvested awards in each year (in millions, except per share amounts):
                           
    2005   2004   2003
             
Net income, as reported
  $ 540.0     $ 414.9     $ 286.4  
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects
    0.6       3.3       0.3  
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects
    (18.8 )     (15.2 )     (5.3 )
                         
Pro forma net income
  $ 521.8     $ 403.0     $ 281.4  
                         
Earnings per share:
                       
 
Basic — as reported
  $ 2.95     $ 2.24     $ 1.54  
                         
 
Basic — pro forma
  $ 2.85     $ 2.17     $ 1.52  
                         
 
Diluted — as reported
  $ 2.88     $ 2.17     $ 1.51  
                         
 
Diluted — pro forma
  $ 2.79     $ 2.11     $ 1.48  
                         
          Pro forma net income for 2005 includes an additional $4.9 million after tax of compensation expense, recognized in the second quarter of 2005, for retirement eligible stock option participants. Previously we reported compensation expense for these participants over the vesting period. Stock options granted to retirement eligible plan participants who retire under our retirement plans on or after the first anniversary of the grant date continue to vest post-retirement in accordance with plan provisions and agreements related thereto. If the plan participant retires less than twelve months from the grant date, the options under that grant are forfeited. Stock compensation expense on grants to plan participants who are retirement eligible on the grant date or who will be retirement eligible in less than twelve months from the grant date is reported in pro forma net income over the twelve month period from the grant date. We report stock compensation expense on grants to plan participants who become retirement eligible between twelve and thirty-six months after the grant date in pro forma net income over the period from grant date to the retirement eligibility date.
          Pro forma net income for 2004 includes $3.6 million after tax of expense related to performance-vesting options that vested in the first quarter of 2004 as a result of the market price of our common stock reaching a specified level for a pre-determined period of time.
          Net income, as reported and pro forma net income in 2004 include $2.9 million (before and after tax) of compensation expense resulting from modifications made to certain stock options in connection with the sale of our FirstPoint Contact business.
          See Recent Accounting Pronouncements for further discussion of stock-based compensation.
          The per share weighted average fair value of options granted was $12.60 in 2005, $7.20 in 2004 and $2.98 in 2003.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
1. Basis of Presentation and Accounting Policies — (Continued)
     
          We estimated the fair value of each option on the date of grant using the Black-Scholes pricing model and the following assumptions:
                         
    2005   2004   2003
             
Average risk-free interest rate
    3.59 %     3.17 %     2.59 %
Expected dividend yield
    1.50 %     2.34 %     4.22 %
Expected volatility
    0.31       0.31       0.30  
Expected term (years)
    5       5       5  
Product and Workers’ Compensation Liabilities
          We record accruals for product and workers’ compensation claims in the period in which they are probable and reasonably estimable. Our principal self-insurance programs include product liability and workers’ compensation where we self-insure up to a specified dollar amount. Claims exceeding this amount up to specified limits are covered by policies purchased from commercial insurers. We estimate the liability for the majority of the self-insured claims with the assistance of a third party actuarial consultant using our claims experience for the periods being valued.
Environmental Matters
          We record accruals for environmental matters in the period in which our responsibility is probable and the cost can be reasonably estimated. We make changes to the accruals in the periods in which the estimated costs of remediation change. At environmental sites for which more than one potentially responsible party has been identified, we record a liability for our estimated allocable share of costs related to our involvement with the site as well as an estimated allocable share of costs related to the involvement of insolvent or unidentified parties. At environmental sites for which we are the only responsible party, we record a liability for the total estimated costs of remediation. We do not discount to their present value future expenditures for environmental remediation obligations. If we determine that recovery from insurers or other third parties is probable, we record a receivable for the estimated recovery.
Recent Accounting Pronouncements
          In March 2005, the FASB issued Interpretation No. 47 (FIN 47) to clarify the guidance included in SFAS No. 143, Accounting for Asset Retirement Obligations. FIN 47 requires companies to recognize a liability for the fair value of a legal obligation to perform asset retirement activities that are conditional on a future event if the amount can be reasonably estimated. If amounts cannot be reasonably estimated, certain disclosures will be required about the unrecognized asset retirement obligations. The interpretation must be adopted in the fourth quarter of 2006. We are currently evaluating the interpretation to determine the effect on our financial statements and related disclosures.
          In December 2004, the FASB issued the revised SFAS No. 123, Share-Based Payment (SFAS 123(R)). SFAS 123(R) requires compensation cost related to share-based payment transactions, including stock options and restricted stock, to be recognized in the financial statements. Compensation cost will be measured based on the grant-date fair value of the instruments issued using an option pricing model and will be recognized over the requisite service period. We are required to implement SFAS 123(R) for our 2006 fiscal year. SFAS 123(R) will apply to all awards granted after the implementation date and to previously-granted awards unvested as of the implementation date. The effect of adoption of SFAS 123(R) is currently estimated to be approximately $17 to $20 million ($0.09 to $0.11 per share) after-tax for 2006. However, our actual share-based compensation expense in 2006 depends on a number of factors, including fair value of awards at the time of grant.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
1. Basis of Presentation and Accounting Policies — (Continued)
     
          In November 2004, the FASB issued SFAS No. 151, Inventory Costs (SFAS 151). SFAS 151 requires that abnormal amounts of idle facility expense, freight, handling costs and spoilage be recognized as current-period charges. Further, SFAS 151 requires the allocation of fixed production overhead to inventory based on the normal capacity of the production facilities. Unallocated overhead must be recognized as an expense in the period in which it is incurred. SFAS 151 is effective for inventory costs incurred beginning in the first quarter of 2006. We do not believe the adoption of SFAS 151 will have a material effect on our financial statements and related disclosures.
2. Acquisitions of Businesses
2005 Acquisitions
          On September 1, 2005, our Power Systems segment acquired the assets of Quality Rewind & Electric, Inc.’s motor repair and management business based in Ft. McMurray, Alberta, Canada.
2003 Acquisitions
          In March 2003, our Control Systems segment acquired certain assets and assumed certain liabilities of Weidmüller Holding AG’s (Weidmüller) North American business. In February 2003, our Control Systems segment acquired substantially all of the assets and assumed certain liabilities of Interwave Technology, Inc., a consulting integrator focusing on manufacturing solutions. The aggregate cash purchase price of these businesses was $25.7 million. Amounts recorded for liabilities assumed were approximately $1.0 million.
          The results of operations of these businesses have been included in the Consolidated Statement of Operations since their respective dates of acquisition. Pro forma financial information and allocation of the purchase price for these acquisitions is not presented as the combined effect of these acquisitions was not material to our results of operations or financial position.
3. Goodwill and Other Intangible Assets
          The changes in the carrying amount of goodwill for the years ended September 30, 2004 and 2005 are (in millions):
                         
    Control   Power    
    Systems   Systems   Total
             
Balance as of September 30, 2003
  $ 653.1     $ 145.1     $ 798.2  
Translation and other
    12.9       —       12.9  
                         
Balance as of September 30, 2004
    666.0       145.1       811.1  
                         
Acquisition of business
    —       4.3       4.3  
Translation and other
    (3.6 )     0.1       (3.5 )
                         
Balance as of September 30, 2005
  $ 662.4     $ 149.5     $ 811.9  
                         
          We performed our annual evaluation of goodwill and indefinite life intangible assets for impairment during the second quarter of 2005 and concluded that no impairments existed.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
3. Goodwill and Other Intangible Assets — (Continued)
     
          Other intangible assets consist of (in millions):
                           
    September 30, 2005
     
    Carrying   Accumulated    
    Amount   Amortization   Net
             
Amortized intangible assets:
                       
 
Distributor networks
  $ 117.7     $ 87.1     $ 30.6  
 
Computer software products
    123.9       69.9       54.0  
 
Patents
    39.3       36.3       3.0  
 
Other
    84.1       75.5       8.6  
                         
 
Total amortized intangible assets
    365.0       268.8       96.2  
Intangible assets not subject to amortization
    210.8       —       210.8  
                         
Total
  $ 575.8     $ 268.8     $ 307.0  
                         
                           
    September 30, 2004
     
    Carrying   Accumulated    
    Amount   Amortization   Net
             
Amortized intangible assets:
                       
 
Distributor networks
  $ 117.7     $ 84.6     $ 33.1  
 
Computer software products
    113.4       57.6       55.8  
 
Patents
    39.3       35.4       3.9  
 
Other
    93.2       73.0       20.2  
                         
 
Total amortized intangible assets
    363.6       250.6       113.0  
Intangible assets not subject to amortization
    210.8       —       210.8  
                         
Total
  $ 574.4     $ 250.6     $ 323.8  
                         
          Computer software products amortization expense was $14.8 million in 2005, $16.0 million in 2004 and $13.8 million in 2003.
          The Allen-Bradley, Reliance and Dodge trademarks have been determined to have an indefinite life, and therefore are not subject to amortization.
          Estimated amortization expense is $17.2 million in 2006, $17.1 million in 2007, $16.5 million in 2008, $12.8 million in 2009, and $11.5 million in 2010.
4. Inventories
          Inventories consist of (in millions):
                 
    September 30,
     
    2005   2004
         
Finished goods
  $ 189.6     $ 218.7  
Work in process
    149.3       135.4  
Raw materials, parts, and supplies
    231.0       220.2  
                 
Inventories
  $ 569.9     $ 574.3  
                 
          We report inventories net of the allowance for excess and obsolete inventory of $45.9 million at September 30, 2005 and $46.2 million at September 30, 2004.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
5. Property
          Property consists of (in millions):
                   
    September 30,
     
    2005   2004
         
Land
  $ 32.3     $ 32.4  
Buildings and improvements
    464.5       458.0  
Machinery and equipment
    1,645.8       1,606.0  
Construction in progress
    37.0       43.3  
                 
 
Total
    2,179.6       2,139.7  
Less accumulated depreciation
    1,405.1       1,335.2  
                 
Property, net
  $ 774.5     $ 804.5  
                 
6. Long-term Debt
          Long-term debt consists of (in millions):
                   
    September 30,
     
    2005   2004
         
6.15% notes, payable in 2008
  $   343.7     $   353.7  
6.70% debentures, payable in 2028
    250.0       250.0  
5.20% debentures, payable in 2098
    200.0       200.0  
Unamortized discount
    (45.5 )     (46.0 )
                 
 
Total
    748.2       757.7  
Less current portion
    —       —  
                 
Long-term debt
  $ 748.2     $ 757.7  
                 
          In September 2002, we entered into an interest rate swap contract (the Swap) that effectively converted our $350.0 million aggregate principal amount of 6.15% notes, payable in 2008, to floating rate debt based on six-month LIBOR. The floating rate was 6.23 percent at September 30, 2005 and 4.27 percent at September 30, 2004. As permitted by SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133), as amended, we have designated the Swap as a fair value hedge. Accordingly, the fair value of the Swap was recorded in other (liabilities) assets on the Consolidated Balance Sheet with a corresponding adjustment to the carrying value of the underlying debt at September 30, 2005 and 2004. The fair value of the Swap, based upon quoted market prices for contracts with similar maturities, was $(6.3) million at September 30, 2005 and $3.7 million at September 30, 2004.
          On October 26, 2004, we entered into a five-year $600.0 million unsecured revolving credit facility. Borrowings under our credit facility bear interest based on short-term money market rates in effect during the period the borrowings are outstanding. The terms of our credit facility contain a covenant under which we would be in default if our debt-to-total capital ratio were to exceed 60 percent. In addition to our $600.0 million credit facility, short-term unsecured credit facilities of approximately $115 million at September 30, 2005 were available to foreign subsidiaries. There were no significant commitment fees or compensating balance requirements under any of our credit facilities. Borrowings under our credit facilities during 2005 were not significant.
          Interest payments were $45.6 million during 2005, $40.9 million during 2004 and $54.7 million during 2003.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
7. Other Current Liabilities
          Other current liabilities consist of (in millions):
                 
    September 30,
     
    2005   2004
         
Advance payments from customers and deferred revenue
  $ 78.2     $ 63.5  
Customer returns, rebates and incentives
    108.2       78.3  
Unrealized losses on foreign exchange contracts (Note 9)
    4.0       12.0  
Product warranty obligations (Note 8)
    36.3       28.9  
Taxes other than income taxes
    42.8       34.8  
Other
    61.8       73.1  
                 
Other current liabilities
  $ 331.3     $ 290.6  
                 
8. Product Warranty Obligations
          We record a liability for product warranty obligations at the time of sale to a customer based upon historical warranty experience. Most of our products are covered under a warranty period that runs for twelve months from either the date of sale or from installation to an end-user or OEM customer. We also record a liability for specific warranty matters when they become known and reasonably estimable. Our product warranty obligations are included in other current liabilities in the Consolidated Balance Sheet.
          Changes in the product warranty obligations are (in millions):
                 
    September 30,
     
    2005   2004
         
Balance at beginning of period
  $ 28.9     $ 29.3  
Warranties recorded at time of sale
    51.0       30.8  
Adjustments to pre-existing warranties
    (0.7 )     (1.1 )
Payments
    (42.9 )     (30.1 )
                 
Balance at end of period
  $ 36.3     $ 28.9  
                 
9. Financial Instruments
          Our financial instruments include long-term debt, foreign currency forward exchange contracts and an interest rate swap. The following is a summary of the carrying value and fair value of our financial instruments (in millions):
                                 
    September 30, 2005   September 30, 2004
         
    Carrying   Fair   Carrying   Fair
    Value   Value   Value   Value
                 
Long-term debt
  $ (748.2 )   $ (826.2 )   $ (757.7 )   $ (837.1 )
Foreign currency forward exchange contracts
    18.2       18.2       (7.8 )     (7.8 )
Interest rate swap
    (6.3 )     (6.3 )     3.7       3.7  
          We base the fair value of long-term debt upon quoted market prices for the same or similar issues. We base the fair value of foreign currency forward exchange contracts on quoted market prices for contracts with similar maturities.
          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, 2005 and 2004, we had outstanding foreign currency forward exchange contracts primarily consisting of contracts for the euro, Swiss franc,

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
9. Financial Instruments — (Continued)
Canadian dollar, British pound sterling and Australian dollar. The foreign currency forward exchange contracts are recorded in other current assets in the amounts of $22.2 million as of September 30, 2005 and $4.2 million as of September 30, 2004 and other current liabilities in the amounts of $4.0 million as of September 30, 2005 and $12.0 million as of September 30, 2004. We do not anticipate any material adverse effect on our results of operations or financial position relating to these foreign currency forward exchange contracts. We have designated certain foreign currency forward exchange contracts related to forecasted intercompany transactions as cash flow hedges. The amount recognized in earnings as a result of the ineffectiveness of cash flow hedges was not significant.
10. Shareowners’ Equity
Common Stock
          At September 30, 2005, the authorized stock of the Company consisted of one billion shares of common stock, par value $1.00 per share, and 25 million shares of preferred stock, without par value. At September 30, 2005, 20.3 million shares of common stock were reserved for various incentive plans.
          Changes in outstanding common shares are summarized as follows (in millions):
                         
    2005   2004   2003
             
Beginning balance
    183.8       185.6       185.8  
Treasury stock purchases
    (9.8 )     (7.5 )     (5.6 )
Shares delivered under incentive plans
    5.7       5.7       5.4  
                         
Ending balance
    179.7       183.8       185.6  
                         
Preferred Share Purchase Rights
          Each outstanding share of common stock provides the holder with one Preferred Share Purchase Right (Right). The Rights will become exercisable only if a person or group, without the approval of the board of directors, acquires, or offers to acquire, 20 percent or more of the common stock, although the board of directors is authorized to reduce the 20 percent threshold for triggering the Rights to not less than 10 percent. Upon exercise, each Right entitles the holder to 1/100th of a share of Series A Junior Participating Preferred Stock of the Company (Junior Preferred Stock) at a price of $250, subject to adjustment.
          Upon an acquisition of the Company, each Right (other than Rights held by the acquirer) will generally be exercisable for $500 worth of either common stock of the Company or common stock of the acquirer for $250. In certain circumstances, each Right may be exchanged by the Company for one share of common stock or 1/100th of a share of Junior Preferred Stock. The Rights will expire on December 6, 2006, unless earlier exchanged or redeemed at $0.01 per Right.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
10. Shareowners’ Equity — (Continued)
Accumulated Other Comprehensive Loss
          Accumulated other comprehensive loss consists of (in millions):
                 
    September 30,
     
    2005   2004
         
Minimum pension liability adjustments (Note 12)
  $ (424.6 )   $ (131.2 )
Accumulated currency translation adjustments
    (84.2 )     (91.3 )
Net unrealized gains (losses) on cash flow hedges
    7.2       (4.2 )
Unrealized gains (losses) on investment securities
    0.1       (0.1 )
                 
Accumulated other comprehensive loss
  $ (501.5 )   $ (226.8 )
                 
          Unrealized losses on cash flow hedges of $11.2 million ($6.8 million after tax) in 2005 and $36.6 million ($22.1 million after tax) in 2004 were reclassified into earnings and offset gains on the hedged items.
          Approximately $4.6 million ($2.8 million after tax) of the net unrealized gains on cash flow hedges as of September 30, 2005 will be reclassified into earnings during 2006. We expect that these unrealized gains will be offset when the hedged items are recognized in earnings.
11. Stock Options
          We have granted options to purchase our common stock under various incentive plans and by board action to directors, officers and other key employees at prices equal to the fair market value of the stock on the grant dates. The plans provide that the option price for certain options granted under the plans may be paid in cash, shares of common stock or a combination thereof.
          Under our 2000 Long-Term Incentives Plan, we are authorized to grant up to 24.0 million shares of our common stock as non-qualified options, incentive stock options, stock appreciation rights and restricted stock. Shares available for future grant or payment under various incentive plans were approximately 8.0 million at September 30, 2005. None of our employee incentive plans presently permits options to be granted after November 30, 2009. Stock options generally expire ten years from the grant date and vest over three years.
          Information relative to stock options is as follows (shares in thousands):
                                                   
    2005   2004   2003
             
        Wtd. Avg.       Wtd. Avg.       Wtd. Avg.
        Exercise       Exercise       Exercise
    Shares   Price   Shares   Price   Shares   Price
                         
Number of shares under option:
                                               
 
Outstanding at beginning of year
    14,082     $ 18.17       16,860     $ 14.88       19,775     $ 14.27  
 
Granted
    2,449       44.11       3,168       28.24       2,883       15.69  
 
Exercised
    (5,703 )     16.18       (5,676 )     13.87       (5,416 )     13.03  
 
Canceled or expired
    (126 )     22.11       (270 )     21.09       (382 )     15.57  
                                           
 
Outstanding at end of year
    10,702       25.12       14,082       18.17       16,860       14.88  
                                           
 
Exercisable at end of year
    5,478       16.96       8,562       15.57       9,980       14.67  
                                           

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
11. Stock Options — (Continued)
     
          The following table summarizes information about stock options outstanding at September 30, 2005 (shares in thousands; remaining life in years):
                                               
        Option   Wtd. Avg.   Wtd. Avg.   Option   Wtd. Avg.
        Shares   Remaining   Exercise   Shares   Exercise
Range of Exercise Prices       Outstanding   Life   Price   Exercisable   Price
                         
$5.85 to $11.71     1,244       4.6     $ 11.47       1,244     $ 11.47  
$11.72 to $17.56     3,060       5.8       14.88       2,238       14.65  
$17.57 to $23.42     1,386       3.9       20.50       1,366       20.48  
$23.43 to $35.12     2,586       7.7       28.27       628       28.38  
$35.13 to $58.54     2,426       9.1       44.10       2       39.10  
                                   
          10,702                       5,478          
                                       
          The closing price of our common stock on September 30, 2005 was $52.90.
12. Retirement Benefits
          We sponsor funded and unfunded pension plans and other postretirement benefit plans for our employees. The pension plans cover most of our employees and provide for monthly pension payments to eligible employees after retirement. Pension benefits for salaried employees generally are based on years of credited service and average earnings. Pension benefits for hourly employees are primarily based on specified benefit amounts and years of service. Our policy with respect to funding our pension obligations is to fund the minimum amount required by applicable laws and governmental regulations. We may, however, at our discretion, fund amounts in excess of the minimum amount required by laws and regulations, as we did in 2005 and 2004. Other postretirement benefits are primarily in the form of retirement medical plans that cover most of our United States employees and provide for the payment of certain medical costs of eligible employees and dependents after retirement.
          The components of net periodic benefit cost are (in millions):
                                                   
    Pension Benefits   Other Postretirement Benefits
         
    2005   2004   2003   2005   2004   2003
                         
Service cost
  $ 60.8     $ 62.2     $ 50.3     $ 5.1     $ 5.8     $ 5.8  
Interest cost
    120.2       110.6       102.0       20.9       19.9       23.4  
Expected return on plan assets
    (132.9 )     (119.8 )     (115.6 )     —       —       —  
Amortization:
                                               
 
Prior service cost
    1.7       1.8       1.4       (13.3 )     (13.8 )     (12.2 )
 
Net transition asset
    (0.2 )     (1.8 )     (2.4 )     —       —       —  
 
Net actuarial loss
    16.6       15.8       5.9       12.2       11.5       12.1  
                                                 
Net periodic benefit cost
  $ 66.2     $ 68.8     $ 41.6     $ 24.9     $ 23.4     $ 29.1  
                                                 
          Included in this net periodic benefit cost table and Income from discontinued operations in the Consolidated Statement of Operations is pre-tax pension benefit cost of $2.8 million and $1.8 million for the years ended September 30, 2004 and 2003, respectively, and pre-tax other postretirement benefit cost of $1.1 million and $0.2 million for the years ended September 30, 2004 and 2003, respectively, related to FirstPoint Contact. We retained the pension liability related to the eligible FirstPoint Contact participants and the other postretirement benefit liability for eligible retirees through the date of sale, which will result in ongoing net periodic benefit cost for us. Also in 2004, we recognized a pension curtailment loss of $0.4 million and an other postretirement benefits curtailment gain of $2.3 million related to the sale of our FirstPoint

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
12. Retirement Benefits — (Continued)
Contact business that is reflected in Income from discontinued operations in the Consolidated Statement of Operations.
          Benefit obligation, plan assets, funded status, and net liability information is summarized as follows (in millions):
                                     
        Other Postretirement
    Pension Benefits   Benefits
         
    2005   2004   2005   2004
                 
Benefit obligation at beginning of year
  $ 2,054.9     $ 1,919.2     $ 349.7     $ 345.2  
Service cost
    60.8       62.2       5.1       5.8  
Interest cost
    120.2       110.6       20.9       19.9  
Discount rate change
    325.5       (73.8 )     47.3       (8.6 )
Actuarial losses
    107.8       68.4       50.2       34.9  
Plan amendments
    (70.0 )     0.8       —       —  
Medicare subsidy effect
    —       —       (13.5 )     (16.9 )
Divestiture
    —       (9.5 )     —       (0.3 )
Plan participant contributions
    4.8       4.9       9.1       6.1  
Benefits paid
    (81.3 )     (75.1 )     (43.3 )     (36.9 )
Currency translation and other
    (2.0 )     47.2       0.6       0.5  
                                 
Benefit obligation at end of year
    2,520.7       2,054.9       426.1       349.7  
                                 
Plan assets at beginning of year
    1,548.8       1,248.2       —       —  
Actual return on plan assets
    134.4       187.5       —       —  
Company contributions
    75.6       152.2       34.2       30.8  
Plan participant contributions
    4.8       4.9       9.1       6.1  
Benefits paid
    (81.3 )     (75.1 )     (43.3 )     (36.9 )
Currency translation and other
    (2.3 )     31.1       —       —  
                                 
Plan assets at end of year
    1,680.0       1,548.8       —       —  
                                 
Funded status of plans
    (840.7 )     (506.1 )     (426.1 )     (349.7 )
Contributions after measurement date
    117.5       —       —       —  
Unamortized amounts:
                               
 
Prior service cost
    (60.6 )     11.2       (90.9 )     (104.4 )
 
Net transition liability
    1.5       1.2       —       —  
 
Net actuarial losses
    894.8       481.0       304.6       232.6  
                                 
Net amount on balance sheet
  $ 112.5     $ (12.7 )   $ (212.4 )   $ (221.5 )
                                 
Net amount on balance sheet consists of:
                               
Prepaid pension
  $ 200.5     $ 68.8     $ —     $ —  
Total retirement benefit liability
    (780.4 )     (305.1 )     (212.4 )     (221.5 )
Deferred tax asset
    266.4       81.4       —       —  
Intangible asset
    1.4       11.0       —       —  
Accumulated other comprehensive loss
    424.6       131.2       —       —  
                                 
Net amount on balance sheet
  $ 112.5     $ (12.7 )   $ (212.4 )   $ (221.5 )
                                 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
12. Retirement Benefits — (Continued)
     
          During 2005, we recorded an increase to our minimum pension liability of $468.8 million resulting primarily from the discount rate change. Considering the increase of the deferred tax asset of $185.0 million resulting from the increase of our minimum pension liability and the decrease in the intangible pension asset of $9.6 million, the net decrease to shareowners’ equity (reflected as an increase in accumulated other comprehensive loss) was $293.4 million.
          Effective for 2006, we amended our U.S. pension plan to eliminate the early retirement subsidy for certain employees. The effect of the amendment is a reduction in the pension obligation of approximately $70 million and a corresponding reduction in annual pension expense recognized over the average remaining service life of plan participants.
          In 2005, we made voluntary contributions of $150.0 million to our U.S. qualified pension plan trust, including $100.0 million contributed in the fourth quarter. We also made contributions of $17.5 million to our non-U.S. pension plan trusts in the fourth quarter of 2005. In 2004, we contributed $125.0 million to our U.S. qualified pension plan trust.
          The accumulated benefit obligation for our pension plans is $2,357.1 million as of the 2005 measurement date and $1,768.1 million as of the 2004 measurement date.
          We use an actuarial measurement date of June 30 to measure our benefit obligations and to calculate our net periodic benefit cost for pension and other postretirement benefits.
Net Periodic Benefit Cost Assumptions
          Significant assumptions used in determining net periodic benefit cost for the period ended September 30 are (in weighted averages):
                                                 
    Pension Benefits   Other Postretirement Benefits
    September 30,   September 30,
         
    2005   2004   2003   2005   2004   2003
                         
U.S. Plans
                                               
Discount rate
    6.25 %     6.00 %     7.00 %     6.25 %     6.00 %     6.60 % (1)
Expected return on plan assets
    8.50 %     8.50 %     8.50 %     —       —       —  
Compensation increase rate
    4.50 %     4.50 %     4.50 %     —       —       —  
Non-U.S. Plans
                                               
Discount rate
    5.03 %     4.89 %     5.12 %     6.25 %     6.25 %     6.50 %
Expected return on plan assets
    6.25 %     6.35 %     6.75 %     —       —       —  
Compensation increase rate
    2.62 %     2.96 %     3.38 %     —       —       —  

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
12. Retirement Benefits — (Continued)
Net Benefit Obligation Assumptions
          Significant assumptions used in determining the benefit obligations are (in weighted averages):
                                 
            Other
        Postretirement
    Pension Benefits   Benefits
    September 30,   September 30,
         
    2005   2004   2005   2004
                 
U.S. Plans
                               
Discount rate
    5.25 %     6.25 %     5.00 %     6.25 %
Compensation increase rate
    4.06 %     4.50 %     —       —  
Healthcare cost trend rate (2)
    —       —       11.0 %     11.00 %
Non-U.S. Plans
                               
Discount rate
    4.19 %     5.03 %     5.00 %     6.25 %
Compensation increase rate
    2.62 %     2.62 %     —       —  
Healthcare cost trend rate (3)
    —       —       8.75 %     9.50 %
 
(1) 
As a result of a plan amendment adopted effective October 1, 2002, and in accordance with SFAS No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions, our postretirement healthcare liabilities were recalculated as of the date of the amendment using a 6.5 percent discount rate, the discount rate applicable at the date of the plan amendment. The related net periodic benefit cost in 2003 of $29.1 million consists of expense using a 7.0 percent discount rate for the period July 1, 2002 through September 30, 2002 and expense using a 6.5 percent discount rate for the period October 1, 2002 through June 30, 2003.
 
(2) 
The healthcare cost trend rate reflects the estimated increase in gross medical claims costs as required to be disclosed by SFAS No. 132, Employers’ Disclosures about Pensions and Other Postretirement Benefits. As a result of the plan amendment adopted effective October 1, 2002, our effective per person retiree medical cost increase is zero percent beginning in 2005 for the majority of our postretirement benefit plans. For our other plans, we assume gross healthcare cost trend rate will decrease to 5.5% in 2011.
 
(3) 
Decreasing to 4.25% in 2011.
    
          Effective October 1, 2002, we amended our United States postretirement healthcare benefit program in to order mitigate the increasing cost of postretirement healthcare services. Effective January 1, 2004, we began contributing 50 percent of the amount in excess of the 2003 per capita amount. However, our calendar 2004 contribution was limited to a 7.5 percent increase from the 2003 per capita amount. Effective January 1, 2005, we limit our future per capita maximum contribution to our calendar 2004 per capita contribution.
          As a result of the finalization during 2005 of the rules for the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act), we have included an additional reduction in our accumulated projected benefit obligation of $13.5 million as of September 30, 2005 related to certain Other Postretirement Benefit plans. A reduction in our accumulated projected benefit obligation of $16.9 million was included as of September 30, 2004. Net periodic postretirement benefit cost in 2005 decreased by $2.0 million and is expected to decrease in 2006 by an additional $1 million as a result of the Act. There was no adjustment to net periodic postretirement benefit cost in 2004.
          In determining the expected long-term rate of return on assets assumption, we equally consider the historical performance and the future expected performance for returns for each asset category, as well as the target asset allocation of the pension portfolios. We consulted with and considered the opinions of financial and other professionals in developing appropriate return assumptions. This resulted in the selection of the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
12.    Retirement Benefits — (Continued)
weighted average long-term rate of return on assets assumption. Our weighted-average asset allocations at September 30, by asset category, are:
                                       
          Allocation   Target   September 30,
  Asset Category       Range   Allocation   2005   2004
                       
           Equity Securities     50% - 80%       66 %     64 %     65 %
  Debt Securities     20% - 50%       33 %     35 %     33 %
  Other     0% - 20%       1 %     1 %     2 %
          The investment objective for pension funds related to our defined benefit plans is to meet the plan’s benefit obligations, while maximizing the long-term growth of assets without undue risk. We strive to achieve this objective by investing plan assets within target allocation ranges and diversification within asset categories. Target allocation ranges are guidelines that are adjusted periodically based on ongoing monitoring by plan fiduciaries. Investment risk is controlled by rebalancing to target allocations on a periodic basis and ongoing monitoring of investment manager performance relative to the investment guidelines established for each manager.
          As of September 30, 2005 and 2004, our pension plans do not own our common stock.
          In certain non-U.S. countries in which we operate, there are no legal requirements or financial incentives provided to companies to pre-fund pension obligations. In these instances, we typically make benefit payments directly from cash as they become due, rather than by creating a separate pension fund.
Estimated Future Payments
          We contributed $450 million to our U.S. pension plan trust in October 2005. In addition, we expect to contribute approximately $25 million related to our worldwide pension plans and $30.2 million to our postretirement benefit plans in 2006.
          The following benefit payments, which include employees’ expected future service, as applicable, are expected to be paid (in millions):
                   
          Other Postretirement
      Pension Benefits   Benefits
           
          
2006
  $ 92.3     $ 30.2  
 
2007
    96.9       29.6  
 
2008
    103.1       29.6  
 
2009
    109.2       29.7  
 
2010
    115.8       30.1  
 
2011 - 2015
    705.0       154.6  
Other Postretirement Benefits
          A one-percentage point change in assumed healthcare cost trend rates would have the following effect (in millions):
                                   
      One-Percentage   One-Percentage
      Point Increase   Point Decrease
           
      2005   2004   2005   2004
                   
          
Increase (decrease) to total of service and interest cost components
  $ 1.2     $ 1.0     $ (1.0 )   $ (0.9 )
 
Increase (decrease) to postretirement benefit obligation
    20.2       12.6       (19.1 )     (10.8 )

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
12. Retirement Benefits — (Continued)
Pension Benefits
          Information regarding our pension plans with accumulated benefit obligations in excess of the fair value of plan assets (underfunded plans) as of the 2005 and 2004 measurement dates (June 30) are as follows (in millions):
                 
    2005   2004
         
Projected benefit obligation
  $ 2,279.5     $ 1,730.2  
Accumulated benefit obligation
    2,138.4       1,489.7  
Fair value of plan assets
    1,442.3       1,233.2  
Defined Contribution Savings Plans
          We also sponsor certain defined contribution savings plans for eligible employees. Expense related to these plans was $24.5 million in 2005, $25.2 million in 2004, and $24.2 million in 2003.
13. Discontinued Operations
          The following is a summary of the composition of income from discontinued operations included in the Consolidated Statement of Operations (in millions):
                         
    2005   2004   2003
             
FirstPoint Contact net income from operations
  $ —     $ 5.7     $ 0.6  
FirstPoint Contact gain on sale (net of tax expense of $1.4)
    —       32.1       —  
Tax matters (see Note 16)
    21.6       18.4       —  
Rocky Flats
    —       4.6       4.4  
                         
Income from discontinued operations
  $ 21.6     $ 60.8     $ 5.0  
                         
FirstPoint Contact
          In 2004, we sold our FirstPoint Contact business for cash proceeds and a note convertible into a minority interest in the corporate parent of the buyer. The value assigned to the convertible note on the date of the transaction was approximately $27.0 million. In September 2005, the note was converted to non-voting equity shares, accounted for under the cost method. The historical cost value of $27.0 million was used to value the equity shares at the date of conversion. No fair value was available for this investment as the equity shares are not publicly traded. Accordingly, it is not practicable to estimate that value. The results of operations of FirstPoint Contact for 2003 and 2004, as well as the gain on the sale, are reflected in Income from Discontinued Operations in the Consolidated Statement of Operations.
          Summarized results of FirstPoint Contact are as follows (in millions):
                 
    2004   2003
         
Sales
  $ 105.5     $ 111.8  
Income before income taxes
    9.4       1.1  
Net income
    5.7       0.6  
Rocky Flats
          In 2004, we recorded a benefit of $7.6 million ($4.6 million after tax) as a result of a final judgment in a defense claim legal proceeding related to our former operation of the Rocky Flats facility of the Department of

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
13. Discontinued Operations — (Continued)
Energy. This amount is in addition to income of $7.3 million ($4.4 million after tax) recognized in 2003 related to the Rocky Flats defense claim legal proceeding.
14. Related Party Transactions
          We own 50 percent of RSC. This ownership interest is accounted for using the equity method. Our investment in RSC of $58.8 million at September 30, 2005 and $57.5 million at September 30, 2004 is included in Other assets in the Consolidated Balance Sheet.
          We have an agreement with RSC pursuant to which RSC performs research and development services for us. We incurred $2.8 million in 2005, $3.7 million in 2004 and $3.0 million in 2003 for research and development services performed by RSC. At September 30, 2005, the amounts due to or from RSC were not significant. At September 30, 2004, the amount due to RSC for research and development services was $0.7 million. At September 30, 2004, the amount due from RSC for cost sharing arrangements was not significant.
          We share equally with Rockwell Collins, Inc. (Rockwell Collins), which owns 50 percent of RSC, in providing a $6.0 million line of credit to RSC which bears interest at the greater of our or Rockwell Collins’ commercial paper borrowing rate. At September 30, 2005 and 2004, there were no outstanding borrowings on the line of credit. In addition, we and Rockwell Collins each guarantee one-half of a lease agreement for one of RSC’s facilities. The total future minimum lease payments under the lease are $4.8 million. The lease agreement has a term that ends in December 2011.
          We own 25 percent of CoLinx, LLC (CoLinx), a company that provides logistics and e-commerce services. This ownership interest is accounted for using the equity method. We paid CoLinx $18.2 million in 2005, $17.1 million in 2004 and $15.2 million in 2003, primarily for logistics services. In addition, CoLinx paid us approximately $2.8 million in 2005, $2.2 million in 2004 and $2.4 million in 2003 for the use of facilities we own and other services. The amounts due to and from CoLinx at September 30, 2005 and 2004 were not significant.
15. Other Income (Expense)
          The components of other income (expense) are (in millions):
                         
    2005   2004   2003
             
Net loss on dispositions of property and businesses
  $ (4.7 )   $ (24.3 )   $ (12.2 )
Intellectual property settlements
    —       0.3       1.4  
Interest income
    10.6       5.6       5.8  
Royalty income
    2.4       2.6       1.9  
Earnings on equity method investments
    3.8       3.2       3.2  
Other
    (2.6 )     (11.8 )     6.4  
                         
Other income (expense)
  $ 9.5     $ (24.4 )   $ 6.5  
                         
          During 2004, we sold a facility in a sale-leaseback transaction with a third party resulting in a $20.6 million pre-tax loss. The net cash proceeds from the sale were $19.0 million.
          During 2003, we sold a majority of our ownership interest in Reliance Electric Limited Japan (REJ) resulting in a loss of $8.4 million ($2.5 million after tax, or $0.01 per diluted share). The loss includes a $9.3 million non-cash charge related to the impairment of the Reliance trademark. The cash proceeds from the transaction totaled $10.4 million.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
16. Income Taxes
          The components of the income tax provision are as follows (in millions):
                           
    2005   2004   2003
             
Current:
                       
 
United States
  $ 50.8     $ 32.3     $ (35.4 )
 
Non-United States
    56.6       (5.8 )     28.7  
 
State and local
    (4.6 )     (6.1 )     (3.5 )
                         
Total current
    102.8       20.4       (10.2 )
Deferred:
                       
 
United States
    112.0       53.4       23.3  
 
Non-United States
    (5.8 )     6.0       (0.3 )
 
State and local
    9.6       4.2       3.4  
                         
Total deferred
    115.8       63.6       26.4  
                         
Income tax provision
  $ 218.6     $ 84.0     $ 16.2  
                         
          During 2005, we recognized a net tax benefit of $19.7 million in income from continuing operations and $21.6 million in income from discontinued operations related to current and former businesses. The net tax benefits included in income from continuing operations are primarily related to the resolution of claims and other tax matters in connection with the closure of the federal audit cycle for the years 1998 through 2002. In addition, these net tax benefits include the effect of the true-up of estimated tax audit contingency accruals in connection with closure of the 1998 through 2002 audit. The net tax benefits included in discontinued operations relate primarily to the closure of the 1998 through 2002 audit ($7.5 million), a prior year state tax refund of a divested business ($11.3 million) and the resolution of various other tax matters of divested businesses ($2.8 million).
          During 2004, we recognized tax benefits of $46.3 million in income from continuing operations and $18.4 million in income from discontinued operations related to the following items:
            • 
$34.5 million resulting from the resolution of certain tax matters, in part related to former businesses. A majority of the benefits recognized related to non-U.S. tax matters in addition to an agreement with a taxing authority related to the treatment of an investment. Of this amount, $11.5 million is reflected as a reduction of the United States income tax provision; $21.3 million is reflected as a reduction of the non-United States income tax provision; and $1.7 million is reflected as reduction of the state and local income tax provision;
 
            • 
$4.3 million related to additional state tax benefits associated with the U.S. research and experimentation credit refund claim in 2003 (see discussion below); and
 
            • 
$25.9 million related to a refund from the State of California for the period 1989 to 1991. Of this amount, $7.5 million is included as a reduction in the income tax provision and $18.4 million is included in Income from discontinued operations.
 
          During 2003, we recognized in earnings a tax benefit of $69.4 million related to a federal research and experimentation credit refund claim for the years 1997 through 2001. Of this amount, $66.4 million is reflected as a reduction of the United States income tax provision and $3.0 million is reflected as a reduction of the state and local income tax provision.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
16. Income Taxes — (Continued)
     
          Net current deferred income tax assets at September 30, 2005 and 2004 consist of the tax effects of temporary differences related to the following (in millions):
                   
      2005   2004
           
          
Compensation and benefits
  $ 56.3     $ 20.5  
 
Product warranty costs
    12.9       11.3  
 
Inventory
    25.7       26.4  
 
Allowance for doubtful accounts
    12.3       11.1  
 
Net operating loss carryforwards
    3.5       3.5  
 
State tax credit carryforwards
    1.3       1.1  
 
Other — net
    57.4       58.8  
                   
 
Current deferred income tax assets
  $ 169.4     $ 132.7  
                   
          Net long-term deferred income tax assets/ (liabilities) at September 30, 2005 and 2004 consist of the tax effects of temporary differences related to the following (in millions):
      2005   2004
           
 
Retirement benefits
  $ 152.6     $ 135.0  
 
Property
    (105.4 )     (125.2 )
 
Intangible assets
    (30.2 )     (22.1 )
 
Net operating loss carryforwards
    31.6       19.4  
 
Capital loss carryforwards
    46.5       58.4  
 
State tax credit carryforwards
    11.9       9.1  
 
Other — net
    14.8       0.5  
                   
 
Subtotal
    121.8       75.1  
 
Valuation allowance
    (55.5 )     (63.0 )
                   
 
Long-term deferred income tax assets
  $ 66.3     $ 12.1  
                   
          Total deferred tax assets were $426.8 million at September 30, 2005 and $355.1 million at September 30, 2004. Total deferred tax liabilities were $135.6 million at September 30, 2005 and $147.3 million at September 30, 2004.
          We reclassified our tax audit accrual as of September 30, 2004 from Deferred income taxes (non-current) to Other liabilities in the Consolidated Balance Sheet. The reclassification resulted in a remaining net non-current deferred tax asset of $12.1 million at September 30, 2004, which is reported as a non-current asset in the Consolidated Balance Sheet.
          We believe it is more likely than not that we will realize current and long-term deferred tax assets through the reduction of future taxable income, other than as reflected below for tax attributes to be carried forward. Significant factors we considered in determining the probability of the realization of the deferred tax assets include: (a) our historical operating results ($261.0 million of United States taxable income over the past three years), (b) expected future earnings, and (c) the extended period of time over which the retiree medical benefits will be paid.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
16. Income Taxes — (Continued)
     
          Net operating loss, capital loss and tax credit carryforwards, valuation allowances and the related carryforward periods at September 30, 2005 are (in millions):
                             
        Tax        
        Benefit   Valuation   Carryforward
Tax Attribute to be Carried Forward       Amount   Allowance   Period Ends
                 
Non-United States net operating loss   $ 2.2     $ (2.2 )     2008-2012  
Non-United States net operating loss     17.5       (7.3 )     Indefinite  
Non-United States capital loss     29.8       (29.1 )     Indefinite  
United States net operating loss     1.7       —       2019-2025  
United States capital loss     16.7       (16.7 )     2007-2009  
State and local net operating loss     13.7       (0.2 )     2006-2025  
State tax credit     13.2       —       2006-2020  
                       
Total   $ 94.8     $ (55.5 )        
                       
          We have a valuation allowance at September 30, 2005 as noted above for carryforwards for which future use is uncertain.
          During 2005, the valuation allowance decreased by $7.5 million as a result of a basis adjustment in connection with the filing of the 2004 income tax return related to the sale of FirstPoint Contact and the recording of a valuation allowance for non-U.S. net operating losses.
          We operate in numerous taxing jurisdictions and are subject to regular examinations by various U.S. Federal, state and foreign jurisdictions for various tax periods. Additionally, we have retained tax liabilities and the rights to tax refunds in connection with various divestitures of businesses in prior years. Our income tax positions are based on research and interpretations of the income tax laws and rulings in each of the jurisdictions in which we do business. Due to the subjectivity of interpretations of laws and rulings in each jurisdiction, the differences and interplay in tax laws between those jurisdictions as well as the inherent uncertainty in estimating the final resolution of complex tax audit matters, our estimates of income tax liabilities may differ from actual payments or assessments.
          Cross jurisdictional transactions between our subsidiaries involving the transfer price for products, services, and/or intellectual property as well as various U.S. state tax matters comprise our more significant income tax exposures. We regularly assess our position with regard to tax exposures and record liabilities for these uncertain tax positions and related interest and penalties, if any, according to the principles of SFAS No. 5, Accounting for Contingencies. We have recorded an accrual of $103.1 million and $111.7 million at September 30, 2005 and 2004, respectively, that reflects our estimate of the likely outcome of current and future audits and is recorded in Other liabilities in our Consolidated Balance Sheet. The change in the accrual reflects a reduction of $34.6 million related primarily to settlement of the 1998 — 2002 U.S. federal audit, offset by an increase of $26.0 million to the accrual for changes in estimates and additional interest related to previously identified income tax exposures. A final determination of these tax audits or changes in our estimates may result in additional future income tax expense or benefit.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
16. Income Taxes — (Continued)
     
          The effective income tax rate differed from the United States statutory tax rate for the reasons set forth below:
                           
      2005   2004   2003
               
          
Statutory tax rate
    35.0%       35.0%       35.0%  
 
State and local income taxes
     2.1       2.8       1.3  
 
Non-United States taxes
    (0.5)       (3.0)       0.6  
 
Foreign tax credit utilization
    (0.9)       (0.2)       (0.8)  
 
Employee stock ownership plan benefit
    (0.5)       (0.9)       (1.4)  
 
Tax refund claims
    (1.6)       (3.7)       (2.4)  
 
Utilization of foreign loss carryforwards
    (0.1)       (0.3)       (1.0)  
 
Utilization of capital loss carryforwards
     —       0.8       (1.7)  
 
Tax benefits on export sales
    (0.9)       (2.1)       (0.8)  
 
Research and experimentation refund claim
     —       (2.3)       (23.3)  
 
Resolution of prior period tax matters
    (4.2)       (8.3)       0.6  
 
Other
    1.3       1.4       (0.7)  
                           
 
Effective income tax rate
    29.7%       19.2%       5.4%  
                           
          We calculated the income tax provisions based upon the following components of income from continuing operations before income taxes (in millions):
                           
      2005   2004   2003
               
          
United States income
  $ 610.0     $ 319.8     $ 205.6  
 
Non-United States income
    127.0       118.3       92.0  
                           
 
Total
  $ 737.0     $ 438.1     $ 297.6  
                           
          We have not provided U.S. deferred taxes on cumulative earnings of non-U.S. affiliates that have been reinvested indefinitely. These earnings relate to ongoing operations and at September 30, 2005, were approximately $510.0 million. Because of the availability of U.S. foreign tax credits, it is not practicable to determine the U.S. or state income tax liabilities that would be payable if such earnings were not reinvested indefinitely. Deferred taxes are provided for non-U.S. affiliates when we plan to remit those earnings.
          Income taxes paid were $134.8 million during 2005, $30.0 million during 2004 and $84.5 million during 2003.
17. Commitments and Contingent Liabilities
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 and will continue to have an effect 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 have been designated as a potentially responsible party at 12 Superfund sites, excluding sites as to which our records disclose no involvement or as to which our potential liability has been finally determined and assumed by third parties. We estimate the total reasonably possible costs we could incur for the remediation of Superfund sites at September 30, 2005 to be $7.1 million, of which $3.8 million has been accrued.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
17. Commitments and Contingent Liabilities — (Continued)
     
          Various other lawsuits, claims and proceedings have been asserted against us alleging violations of federal, state and local environmental protection requirements, or seeking remediation of alleged environmental impairments, principally at previously owned properties. As of September 30, 2005, we have estimated the total reasonably possible costs we could incur from these matters to be $82.5 million. We have recorded environmental accruals for these matters of $34.3 million. In addition to the above matters, we assumed certain other environmental liabilities in connection with the 1995 acquisition of Reliance. We are indemnified by ExxonMobil Corporation (Exxon) for substantially all costs associated with these Reliance matters. At September 30, 2005, we have recorded a liability of $22.6 million and a receivable of $21.4 million for these Reliance matters. We estimate the total reasonably possible costs for these matters to be $35.0 million for which we are substantially indemnified by Exxon.
          Based on our assessment, 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 liquidity and capital resources, competitive position or financial condition. We cannot assess the possible effect of compliance with future requirements.
Lease Commitments
          Rental expense was $88.0 million in 2005; $85.2 million in 2004; and $80.7 million in 2003. Minimum future rental commitments under operating leases having noncancelable lease terms in excess of one year aggregated $206.5 million as of September 30, 2005 and are payable as follows (in millions):
         
2006
  $ 51.5  
2007
    45.2  
2008
    37.3  
2009
    26.4  
2010
    15.0  
Beyond 2010
    31.1  
         
Total
  $ 206.5  
         
          Commitments from third parties under sublease agreements having noncancelable lease terms in excess of one year aggregated $13.6 million as of September 30, 2005 and are receivable through 2010 at approximately $2.7 million per year. Most leases contain renewal options for varying periods, and certain leases include options to purchase the leased property.
Other Matters
          Various lawsuits, claims and proceedings have been or may be instituted or asserted against us relating to the conduct of our business, including those pertaining to product liability, safety and health, intellectual property, employment and contract matters. Although the outcome of litigation cannot be predicted with certainty and some lawsuits, claims or proceedings may be disposed of unfavorably to us, we believe the disposition of matters that are pending or asserted will not have a material adverse effect on our business or financial condition.
          We (including our subsidiaries) have been named as a defendant in lawsuits alleging personal injury as a result of exposure to asbestos that was used in certain components of our products many years ago. Currently there are thousands of claimants in lawsuits that name us as defendants, together with hundreds of other companies. The great bulk of the complaints, however, do not identify any of our products or specify which of these claimants, if any, were exposed to asbestos attributable to our products; and past experience has shown

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
17. Commitments and Contingent Liabilities — (Continued)
that the vast majority of the claimants will never identify any of our products. In addition, when our products appear to be identified, they are frequently from divested businesses, and we are indemnified for most of the costs. For those claimants who do show that they worked with our products, we nevertheless believe we have meritorious defenses, in substantial part due to the integrity of our products, the encapsulated nature of any asbestos-containing components, and the lack of any impairing medical condition on the part of many claimants. We defend those cases vigorously. Historically, we have been dismissed from the vast majority of these claims with no payment to claimants.
          We have maintained insurance coverage that we believe covers indemnity and defense costs, over and above self-insured retentions, for most of these claims. We initiated litigation in the Milwaukee County Circuit Court on February 12, 2004 to enforce the insurance policies against Nationwide Indemnity Company and Kemper Insurance, the insurance carriers that provided liability insurance coverage to our former Allen-Bradley subsidiary. As a result, the insurance carriers have paid some past defense and indemnity costs and have agreed to pay the substantial majority of future defense and indemnity costs for Allen-Bradley asbestos claims, subject to policy limits. If either carrier becomes insolvent or the policy limits of either carrier are exhausted, our share of future defense and indemnity costs may increase. However, coverage under excess policies may be available to pay some or all of these costs.
          The uncertainties of asbestos claim litigation and the long term solvency of our insurance companies make it difficult to predict accurately the ultimate outcome of asbestos claims. That uncertainty is increased by the possibility of adverse rulings or new legislation affecting asbestos claim litigation or the settlement process. Subject to these uncertainties and based on our experience defending asbestos claims, we do not believe these lawsuits will have a material adverse effect on our financial condition.
          In connection with the divestiture of our former aerospace and defense businesses (the A&D Business) to The Boeing Company (Boeing), we agreed to indemnify Boeing for certain matters related to operations of the A&D Business for periods prior to the divestiture. In connection with the spinoffs of our former automotive component systems business, semiconductor systems business and Rockwell Collins avionics and communications business, the spun-off companies have agreed to indemnify us for substantially all contingent liabilities related to the respective businesses, including environmental and intellectual property matters.
          We have, from time to time, divested certain of our businesses. In connection with such divestitures, lawsuits, claims and proceedings may be instituted or asserted against us related to the period that we owned the businesses.
          In many countries we provide a limited intellectual property indemnity as part of our terms and conditions of sale. We also at times provide limited intellectual property indemnities in other contracts with third parties, such as contracts concerning: the development and manufacture of our products; the divestiture of businesses; and the licensing of intellectual property. Due to the number of agreements containing such provisions, we are unable to estimate the maximum potential future payments. However, we believe that future payments, if any, would not be material to our business or financial condition.
18. Business Segment Information
          Rockwell Automation is a provider of industrial automation power, control and information products and services. We are organized based upon products and services and have two operating segments: Control Systems and Power Systems.
Control Systems
          The Control Systems operating segment supplies industrial automation products, systems, software and services focused on helping customers control and improve manufacturing processes. Control Systems

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
18. Business Segment Information — (Continued)
includes two main business groups: the Components and Packaged Applications Group (CPAG) and the Automation Control and Information Group (ACIG).
          CPAG supplies industrial components, power control and motor management products, and packaged and engineered products and systems. It supplies motor starters, contactors, push buttons, signaling devices, termination and protection devices, relays and timers, condition sensors, adjustable speed drives, motor control centers and drive systems. CPAG’s sales account for approximately 40 percent of Control Systems’ sales.
          ACIG’s core products are used primarily to control and monitor industrial plants and processes and typically consist of a processor, software and input/output (I/ O) devices. ACIG’s integrated architecture and Logix controllers perform multiple types of control applications, including discrete, batch, continuous process, drive system, motion and machine safety across various factory floor operations. ACIG’s products include controllers, control platforms, I/ O devices, high performance rotary and linear motion control systems, electronic operator interface devices, sensors, industrial computers and machine safety components. ACIG’s sales account for approximately 45 percent of Control Systems’ sales.
          In addition, Control Systems’ offering also includes services and solutions, such as multi-vendor customer support, training, automation systems integration, asset management, and manufacturing information solutions for discrete and targeted batch process industries.
Power Systems
          The Power Systems operating segment consists of two business groups: Dodge mechanical (Mechanical) and Reliance electrical (Electrical).
          Mechanical’s products include mounted bearings, gear reducers, mechanical drives, conveyor pulleys, couplings, bushings, clutches and motor brakes. Electrical’s products include industrial and engineered motors, adjustable speed drives, product repair, motor and mechanical maintenance solutions, training and consulting services to OEM’s, end-users and distributors.
          The following tables reflect the sales and operating results of our reportable segments for the years ended September 30 (in millions):
                             
    2005   2004   2003
             
Sales:
                       
 
Control Systems
  $ 4,154.4     $ 3,692.6     $ 3,313.9  
 
Power Systems
    899.3       770.0       724.1  
 
Intersegment sales
    (50.5 )     (51.5 )     (45.7 )
                         
   
Total
  $ 5,003.2     $ 4,411.1     $ 3,992.3  
                         
Segment operating earnings:
                       
 
Control Systems
  $ 756.9     $ 527.9     $ 397.6  
 
Power Systems
    110.3       67.5       54.6  
                         
   
Total
    867.2       595.4       452.2  
Purchase accounting depreciation and amortization
    (14.7 )     (27.3 )     (26.9 )
General corporate — net
    (69.7 )     (88.3 )     (66.8 )
Loss on disposition of a business (Note 15)
    —       —       (8.4 )
Interest expense
    (45.8 )     (41.7 )     (52.5 )
                         
Income from continuing operations before income taxes
  $ 737.0     $ 438.1     $ 297.6  
                         

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
18. Business Segment Information — (Continued)
     
          Among other considerations, we evaluate performance and allocate resources based upon segment operating earnings before income taxes, interest expense, costs related to corporate offices, certain non-recurring corporate initiatives, gains and losses from the disposition of businesses, earnings and losses from equity affiliates that are not considered part of the operations of a particular segment and incremental acquisition related expenses resulting from purchase accounting adjustments such as intangible asset amortization, depreciation, inventory and purchased research and development charges. Depending on the product, intersegment sales are either at a market price or cost plus a mark-up, which does not necessarily represent a market price. In preparing the segment information, we use accounting policies consistent with those described in Note 1.
          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):
                               
    2005   2004   2003
             
Identifiable assets:
                       
 
Control Systems
  $ 2,484.2     $ 2,442.1     $ 2,424.0  
 
Power Systems
    867.8       850.2       854.7  
 
Corporate
    1,173.1       921.0       727.6  
                         
     
Total
  $ 4,525.1     $ 4,213.3     $ 4,006.3  
                         
Depreciation and amortization:
                       
 
Control Systems
  $ 115.1     $ 121.4     $ 122.1  
 
Power Systems
    38.2       35.2       38.2  
 
Corporate
    3.2       2.8       3.4  
                         
   
Total
    156.5       159.4       163.7  
 
Purchase accounting depreciation and amortization
    14.7       27.3       26.9  
                         
   
Total
  $ 171.2     $ 186.7     $ 190.6  
                         
Capital expenditures for property:
                       
 
Control Systems
  $ 89.7     $ 70.7     $ 78.1  
 
Power Systems
    21.1       26.9       28.7  
 
Corporate
    13.3       0.4       0.8  
                         
   
Total
  $ 124.1     $ 98.0     $ 107.6  
                         
          Identifiable assets at Corporate consist principally of cash, net deferred income tax assets, property and the 50 percent ownership interest in RSC.
          We conduct a significant portion of our business activities outside the United States. The following tables present sales and property by geographic region (in millions):
                                                   
    Sales   Property
         
    2005   2004   2003   2005   2004   2003
                         
United States
  $ 3,058.8     $ 2,727.0     $ 2,530.2     $ 661.4     $ 683.2     $ 793.2  
Canada
    418.4       339.8       303.8       23.7       21.5       21.5  
Europe, Middle East and Africa
    823.5       779.6       685.4       57.6       70.0       76.8  
Asia-Pacific
    483.1       400.4       330.7       19.1       18.6       16.8  
Latin America
    219.4       164.3       142.2       12.7       11.2       8.8  
                                                 
 
Total
  $ 5,003.2     $ 4,411.1     $ 3,992.3     $ 774.5     $ 804.5     $ 917.1  
                                                 
          We attribute sales to the geographic regions based on the country of origin.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
19. Quarterly Financial Information (Unaudited)
                                           
    2005 Quarters    
         
    First   Second(a)(b)   Third   Fourth(c)   2005
                     
    (in millions, except per share amounts)
Sales
  $ 1,184.9     $ 1,218.4     $ 1,264.7     $ 1,335.2     $ 5,003.2  
Gross profit
    449.1       455.9       481.0       508.1       1,894.1  
Income from continuing operations before income taxes
    179.6       180.6       191.2       185.6       737.0  
Income from continuing operations
    122.1       142.5       127.3       126.5       518.4  
Income from discontinued operations(d)
    11.3       7.5       —       2.8       21.6  
Net income
    133.4       150.0       127.3       129.3       540.0  
Basic earnings per share:
                                       
 
Continuing operations
    0.66       0.77       0.70       0.70       2.83  
 
Discontinued operations(d)
    0.06       0.04       —       0.02       0.12  
 
Net income
    0.72       0.81       0.70       0.72       2.95  
Diluted earnings per share:
                                       
 
Continuing operations
    0.65       0.75       0.68       0.69       2.77  
 
Discontinued operations(d)
    0.06       0.04       —       0.01       0.11  
 
Net income
    0.71       0.79       0.68       0.70       2.88  
Income from continuing operations for 2005 includes:
            (a) 
a net tax benefit of $19.7 million ($0.10 per diluted share) primarily related to the resolution of claims and other tax matters in connection with the closure of the federal audit cycle for the years 1998 through 2002;
 
            (b) 
an insurance claim of $11.4 million ($7.8 million after tax, or $0.04 per diluted share) related to the recovery of previously incurred legal costs;
 
            (c) 
special charges of $21.5 million ($14.2 million after tax, or $0.08 per diluted share) associated with realignment of administrative functions and a reduction of workforce in Europe in our Control Systems segment and a facility closure in our Power Systems segment. Segment operating earnings of Control Systems and Power Systems include these special charges of $16.5 million and $5.0 million, respectively, for the quarter ended September 30, 2005. The special charges are included in the Consolidated Statement of Operations for the year ended September 30, 2005 in cost of sales and selling, general and administrative expenses in the amounts of $9.4 million and $12.1 million, respectively. We expect that total cash expenditures (after-tax) in connection with these actions will be approximately $11.4 million related to employee severance and separation costs and will be mostly incurred during the first half of 2006. Non-cash charges of $2.8 million after-tax relate to a write-down of property to its fair value, determined by management using customary valuation techniques.
 
            (d) 
see Note 13 for additional information on discontinued operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
19. Quarterly Financial Information (Unaudited) — (Continued)
                                           
    2004 Quarters    
         
    First(a)   Second   Third(b)   Fourth(c)(d)   2004
                     
    (in millions, except per share amounts)
Sales
  $ 990.3     $ 1,079.6     $ 1,135.0     $ 1,206.2     $ 4,411.1  
Gross profit
    329.9       383.8       411.9       437.2       1,562.8  
Income from continuing operations before income taxes
    75.4       106.2       129.8       126.7       438.1  
Income from continuing operations
    57.1       74.9       125.5       96.6       354.1  
Income from discontinued operations(e)
    5.1       3.4       0.9       51.4       60.8  
Net income
    62.2       78.3       126.4       148.0       414.9  
Basic earnings per share:
                                       
 
Continuing operations
    0.30       0.40       0.68       0.52       1.91  
 
Discontinued operations(e)
    0.03       0.02       —       0.28       0.33  
 
Net income
    0.33       0.42       0.68       0.80       2.24  
Diluted earnings per share:
                                       
 
Continuing operations
    0.29       0.39       0.66       0.51       1.85  
 
Discontinued operations(e)
    0.03       0.02       —       0.27       0.32  
 
Net income
    0.32       0.41       0.66       0.78       2.17  
Income from continuing operations for 2004 includes:
 
          (a) 
a net tax benefit of $4.3 million ($0.02 per diluted share) related to additional state tax benefits associated with a previously reported U.S. federal research and experimentation credit refund claim;
 
 
          (b) 
a tax benefit of $34.5 million ($0.18 per diluted share) related to the resolution of certain tax matters;
 
 
          (c) 
a tax benefit of $7.5 million ($0.04 per diluted share) related to tax refunds from the State of California;
 
 
          (d) 
charges of $26.3 million ($16.3 million after tax, or $0.09 per diluted share) associated with an ongoing facilities rationalization program.
 
 
          (e) 
see Note 13 for additional information on discontinued operations.
20. Subsequent Events
          In November 2005, the Company completed a sale-leaseback transaction of 24 properties, including the land, buildings and improvements affixed to the properties. The lease terms vary from five to fifteen years depending on the property and will be classified as operating leases. The net proceeds on sale were approximately $148 million, which were used to repay commercial paper borrowings. Three of the sold properties resulted in a loss of $2.0 million that will be recognized in our first quarter of 2006, the remaining properties resulted in a gain on sale of $36 million that will be amortized to rent expense over the term of the respective leases. The average operating lease commitment for the first five years is $12 million per year and $10 million per year thereafter.
          On October 11, 2005, we issued unsecured commercial paper obligations of $300.0 million with various maturities of between 1 and 28 days. We used the proceeds to partially fund a $450 million voluntary contribution to our U.S. qualified pension trust.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareowners of
Rockwell Automation, Inc.
Milwaukee, Wisconsin
          We have audited the accompanying consolidated balance sheet of Rockwell Automation, Inc. and subsidiaries (the “Company”) as of September 30, 2005 and 2004, and the related consolidated statements of operations, shareowners equity, cash flows, and comprehensive income for each of the three years in the period ended September 30, 2005. Our audits also included the financial statement schedule listed in the Index at Item 15(a) (2). These financial statements and financial statement schedule are the responsibility of the Company’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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
          In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at September 30, 2005 and 2004, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2005, 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 consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
          We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) the effectiveness of the Company’s internal control over financial reporting as of September 30, 2005, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated November 10, 2005 expressed an unqualified opinion on management’s assessment of the Company’s internal control over financial reporting.
Deloitte & Touche LLP
Milwaukee, Wisconsin
November 10, 2005

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
          None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
          We carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness, as of September 30, 2005, of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of September 30, 2005.
Management’s Report on Internal Control Over Financial Reporting
          We are responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based upon that evaluation, management has concluded that our internal control over financial reporting was effective as of September 30, 2005.
          Our assessment of the effectiveness of our internal control over financial reporting as of September 30, 2005 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report that is included below.
          Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control Over Financial Reporting
          During 2005, we continued to make improvements to the design and effectiveness of our internal controls over financial reporting, including those related to our information technology systems, as part of a previously existing overall program on internal control and as part of the process of preparing for compliance with Section 404 of the Sarbanes-Oxley Act of 2002. Some of these changes, especially to our internal controls related to information technology systems, could be deemed to have materially improved our internal control over financial reporting. We anticipate that we will continue to make improvements.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareowners of
Rockwell Automation, Inc.
Milwaukee, Wisconsin
          We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that Rockwell Automation, Inc. and subsidiaries (the “Company”) maintained effective internal control over financial reporting as of September 30, 2005, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.
          We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.
          A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
          Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
          In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of September 30, 2005, is fairly stated, in all material respects, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2005, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
          We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended September 30, 2005 of the Company and our report dated November 10, 2005, expressed an unqualified opinion on those financial statements and financial statement schedule.
Deloitte & Touche LLP
Milwaukee, Wisconsin
November 10, 2005

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Item 9B.      Other Information
          None.
PART III
Item 10. Directors and Executive Officers of the Company
          See the information under the captions Election of Directors, Information as to Nominees for Directors and Continuing Directors, Board of Directors and Committees and Section 16(a) Beneficial Ownership Reporting Compliance in the 2006 Proxy Statement.
          No nominee for director was selected pursuant to any arrangement or understanding between the nominee and any person other than the Company pursuant to which such person is or was to be selected as a director or nominee. See also the information with respect to executive officers of the Company under Item 4A of Part I hereof.
          We have adopted a code of ethics that applies to our executive officers, including the principal executive officer, principal financial officer and principal accounting officer. A copy of our code of ethics is posted on our Internet site at http://www.rockwellautomation.com . In the event that we amend or grant any waiver from, a provision of the code of ethics that applies to the principal executive officer, principal financial officer or principal accounting officer and that requires disclosure under applicable SEC rules, we intend to disclose such amendment or waiver and the reasons therefor on our Internet site.
Item 11. Executive Compensation
          See the information under the captions Executive Compensation, Option Grants, Aggregated Option Exercises and Fiscal Year-End Values and Retirement Plans in the 2006 Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
          See the information under the captions Stock Ownership by Certain Beneficial Owners and Ownership by Management of Equity Securities in the 2006 Proxy Statement.
          The following table provides information as of September 30, 2005 about our common stock that may be issued upon the exercise of options, warrants and rights granted to employees, consultants or directors under all of our existing equity compensation plans, including our 2000 Long-Term Incentives Plan, 1995 Long-Term Incentives Plan, 2003 Directors Stock Plan and 1995 Directors Stock Plan.
                             
                Number of Securities
                Remaining Available for
                Future Issuance under
        Number of Securities to   Weighted Average   Equity Compensation
        be issued upon Exercise   Exercise Price of   Plans (excluding
        of Outstanding Options,   Outstanding Options,   Securities reflected
        Warrants and Rights   Warrants and Rights   in Column (a))
Plan Category       (a)   (b)   (c)
                 
Equity compensation plans approved by shareowners
    10,667,127 (1)   $ 25.15       8,026,232 (2)
Equity compensation plans not approved by shareowners
    35,000 (3)     16.45       —  
                         
Total     10,702,127     $ 25.12       8,026,232  
                         
 
(1)  Represents outstanding options under our 1995 Long-Term Incentives Plan, 2000 Long-Term Incentives Plan, 2003 Directors Stock Plan and 1995 Directors Stock Plan.

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(2) 
Includes 7,612,490 and 413,742 shares available for future issuance under our 2000 Long-Term Incentives Plan and our 2003 Directors Stock Plan, respectively.
 
(3) 
On July 31, 2001, each non-employee director received a grant of options to purchase 7,000 shares of our common stock at an exercise price of $16.05 per share pursuant to Board resolutions. On February 6, 2002, a new non-employee director received a grant of options to purchase 7,000 shares of our common stock at an exercise price of $18.05 per share pursuant to Board resolutions. The options became exercisable in substantially equal installments on the first, second and third anniversaries of the grant date and expire ten years from the grant date.
Item 13. Certain Relationships and Related Transactions
          See the information under the caption Board of Directors and Committees in the 2006 Proxy Statement.
Item 14. Principal Accountant Fees and Services
          See the information under the caption Proposal to Approve the Selection of Auditors in the 2006 Proxy Statement.

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PART IV
Item 15. Exhibits and Financial Statement Schedule
  (a)  Financial Statements, Financial Statement Schedule and Exhibits
  (1)  Financial Statements (all financial statements listed below are those of the Company and its consolidated subsidiaries).
  Consolidated Balance Sheet, September 30, 2005 and 2004
 
  Consolidated Statement of Operations, years ended September 30, 2005, 2004 and 2003
 
  Consolidated Statement of Cash Flows, years ended September 30, 2005, 2004 and 2003
 
  Consolidated Statement of Shareowners’ Equity, years ended September 30, 2005, 2004 and 2003
 
  Consolidated Statement of Comprehensive Income, years ended September 30, 2005, 2004 and 2003
 
  Notes to Consolidated Financial Statements
 
  Report of Independent Registered Public Accounting Firm
  (2)  Financial Statement Schedule for the years ended September 30, 2005, 2004 and 2003
         
    Page
     
Schedule II — Valuation and Qualifying Accounts
    S-1  
  Schedules not filed herewith are omitted because of the absence of conditions under which they are required or because the information called for is shown in the consolidated financial statements or notes thereto.
  (3)  Exhibits
         
  3-a-1    
Restated Certificate of Incorporation of the Company, filed as Exhibit 3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002, is hereby incorporated by reference.
 
  3-b-l    
By-Laws of the Company, as amended November 3, 2004, filed as Exhibit 3.2 to the Company’s Current Report on Form 8-K dated November 4, 2004, are hereby incorporated by reference.
 
  4-a-1    
Rights Agreement, dated as of November 30, 1996, between the Company and Mellon Investor Services LLC (formerly named ChaseMellon Shareholder Services, L.L.C.), as rights agent, filed as Exhibit 4-c to Registration Statement No. 333-17031, is hereby incorporated by reference.
 
  4-b-1    
Indenture dated as of December 1, 1996 between the Company and JPMorgan Chase (formerly The Chase Manhattan Bank, successor to Mellon Bank, N.A.), as Trustee, filed as Exhibit 4-a to Registration Statement No. 333-43071, is hereby incorporated by reference.
 
  4-b-2    
Form of certificate for the Company’s 6.15% Notes due January 15, 2008, filed as Exhibit 4-a to the Company’s Current Report on Form 8-K dated January 26, 1998, is hereby incorporated by reference.
 
  4-b-3    
Form of certificate for the Company’s 6.70% Debentures due January 15, 2028, filed as Exhibit 4-b to the Company’s Current Report on Form 8-K dated January 26, 1998, is hereby incorporated by reference.
          
 
          * Management contract or compensatory plan or arrangement.

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  4-b-4    
Form of certificate for the Company’s 5.20% Debentures due January 15, 2098, filed as Exhibit 4-c to the Company’s Current Report on Form 8-K dated January 26, 1998, is hereby incorporated by reference.
 
  *l0-a-1    
Copy of the Company’s 1995 Long-Term Incentives Plan, as amended, filed as Exhibit l0-b-1 to the Company’s Annual Report on Form 10-K for the year ended September 30, 1998, is hereby incorporated by reference.
 
  *10-a-2    
Form of Stock Option Agreement under the Company’s 1995 Long-Term Incentives Plan, filed as Exhibit 10-b-5 to the Company’s Annual Report on Form 10-K for the year ended September 30, 1998, is hereby incorporated by reference.
 
  *10-a-3    
Form of Restricted Stock Agreement under the Company’s 1995 Long-Term Incentives Plan, filed as Exhibit 10-e to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 1996, is hereby incorporated by reference.
 
  *10-a-4    
Copy of Restricted Stock Agreement dated December 3, 1997 between the Company and Don H. Davis, Jr., filed as Exhibit 10-c-5 to the Company’s Annual Report on Form 10-K for the year ended September 30, 1997, is hereby incorporated by reference.
 
  *10-a-5    
Copy of resolutions of the Board of Directors of the Company, adopted December 1, 1999, amending the Company’s 1995 Long-Term Incentives Plan, filed as Exhibit 10-b-8 to the Company’s Annual Report on Form 10-K for the year ended September 30, 2002, is hereby incorporated by reference.
 
  *10-a-6    
Memorandum of Proposed Amendments to the Rockwell International Corporation 1995 Long-Term Incentives Plan approved and adopted by the Board of Directors of the Company on June 6, 2001 in connection with the spinoff of Rockwell Collins, filed as Exhibit 10-b-8 to the Company’s Annual Report on Form 10-K for the year ended September 30, 2001, is hereby incorporated by reference.
 
  *10-a-7    
Copy of resolutions of the Board of Directors of the Company, adopted November 6, 2002, amending the Company’s 1995 Long-Term Incentives Plan, filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2002, is hereby incorporated by reference.
 
  *10-a-8    
Copy of resolutions of the Compensation and Management Development Committee of the Board of Directors of the Company, adopted June 4, 2003, amending the restricted stock agreements of Don H. Davis, Jr., filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, is hereby incorporated by reference.
 
  *10-b-l    
Copy of the Company’s Directors Stock Plan, as amended February 2, 2000, filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2000, is hereby incorporated by reference.
 
  *10-b-2    
Forms of Restricted Stock Agreements under the Company’s Directors Stock Plan between the Company and each of William H. Gray, III, William T. McCormick, Jr., and Joseph F. Toot, Jr., filed as Exhibit 10-f to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 1996, are hereby incorporated by reference.
 
  *10-b-3    
Form of Stock Option Agreement under the Directors Stock Plan, filed as Exhibit 10-c-4 to the Company’s Annual Report on Form 10-K for the year ended September 30, 2000, is hereby incorporated by reference.
          
 
          * Management contract or compensatory plan or arrangement.

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  *10-b-4    
Form of Restricted Stock Agreement under the Directors Stock Plan for restricted stock granted between February 2, 2000 and February 6, 2002, filed as Exhibit 10-c-5 to the Company’s Annual Report on Form 10-K for the year ended September 30, 2000, is hereby incorporated by reference.
 
  *10-b-5    
Form of Restricted Stock Agreement for payment of portion of annual retainer for Board service by issuance of shares of restricted stock, filed as Exhibit 10-c-6 to the Company’s Annual Report on Form 10-K for the year ended September 30, 2000, is hereby incorporated by reference.
 
  *10-b-6    
Form of Stock Option Agreement for options granted on July 31, 2001 and February 6, 2002 for service on the Board between the Company and each of the Company’s Non-Employee Directors, filed as Exhibit 10-c-7 to the Company’s Annual Report on Form 10-K for the year ended September 30, 2001, is hereby incorporated by reference.
 
  *10-b-7    
Copy of resolution of the Board of Directors of the Company, adopted on December 4, 2002, amending the Company’s Directors Stock Plan, filed as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, is hereby incorporated by reference.
 
  *10-b-8    
Copy of the Company’s 2003 Directors Stock Plan, filed as Exhibit 4-d to the Company’s Registration Statement on Form S-8 (No. 333-101780), is hereby incorporated by reference.
 
  *10-b-9    
Form of Restricted Stock Agreement under Section 6 of the 2003 Directors Stock Plan, filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, is hereby incorporated by reference.
 
  *10-b-10    
Form of Stock Option Agreement under Sections 7(a)(i) and 7(a)(ii) of the 2003 Directors Stock Plan, filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, is hereby incorporated by reference.
 
  *10-b-11    
Memorandum of Amendments to the Company’s 2003 Directors Stock Plan approved and adopted by the Board of Directors of the Company on April 25, 2003, filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, is hereby incorporated by reference.
 
  *10-b-12    
Form of Restricted Stock Agreement under Section 8(a)(i) of the 2003 Directors Stock Plan, filed as Exhibit 10-c-14 to the Company’s Annual Report on Form 10-K for the year ended September 30, 2003, is hereby incorporated by reference.
 
  *10-b-13    
Amendments to Restricted Stock Agreements with William H. Gray, III, William T. McCormick, Jr., Joseph F. Toot, Jr., and Don H. Davis, Jr., filed as Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, are hereby incorporated by reference.
 
  *10-b-14    
Summary of Non-Employee Director Compensation and Benefits, filed as Exhibit 10 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, is hereby incorporated by reference.
 
  *10-c-1    
Copy of resolution of the Board of Directors of the Company, adopted November 6, 1996, adjusting outstanding awards under the Company’s (i) 1988 Long-Term Incentives Plan, (ii) 1995 Long-Term Incentives Plan and (iii) Directors Stock Plan, filed as Exhibit 4-g-2 to Registration Statement No. 333-17055, is hereby incorporated by reference.
          
 
          * Management contract or compensatory plan or arrangement.

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  *10-c-2    
Copy of resolution of the Board of Directors of the Company, adopted September 3, 1997, adjusting outstanding awards under the Company’s (i) 1988 Long-Term Incentives Plan, (ii) 1995 Long-Term Incentives Plan and (iii) Directors Stock Plan, filed as Exhibit 10-e-3 to the Company’s Annual Report on Form 10-K for the year ended September 30, 1997, is hereby incorporated by reference.
 
  *10-c-3    
Memorandum of Adjustments to Outstanding Options Under Rockwell International Corporation’s 1988 Long-Term Incentives Plan, 1995 Long-Term Incentives Plan and Directors Stock Plan approved and adopted by the Board of Directors of the Company in connection with the spinoff of Conexant, filed as Exhibit 10-d-3 to the Company’s Annual Report on Form 10-K for the year ended September 30, 1999, is hereby incorporated by reference.
 
  *10-c-4    
Description of amendments to certain Restricted Stock Agreements between the Company and each of Betty C. Alewine, William T. McCormick, Jr., Bruce M. Rockwell and Joseph F. Toot, Jr., filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated April 7, 2005, is hereby incorporated by reference.
 
  *10-d-1    
Copy of the Company’s 2000 Long-Term Incentives Plan, as amended through February 4, 2004, filed as Exhibit 10-e-1 to the Company’s Annual Report on 10-K for the year ended September 30, 2004, is hereby incorporated by reference.
 
  *10-d-2    
Memorandum of Proposed Amendments to the Rockwell International Corporation 2000 Long-Term Incentives Plan approved and adopted by the Board of Directors of the Company on June 6, 2001, in connection with the spinoff of Rockwell Collins, filed as Exhibit 10-e-4 to the Company’s Annual Report on Form 10-K for the year ended September 30, 2001, is hereby incorporated by reference.
 
  *10-d-3    
Forms of Stock Option Agreements under the Company’s 2000 Long-Term Incentives Plan, filed as Exhibit 10-e-6 to the Company’s Annual Report on Form 10-K for the year ended September 30, 2002, are hereby incorporated by reference.
 
  *10-d-4    
Memorandum of Adjustments to Outstanding Options under Rockwell International Corporation’s 1988 Long-Term Incentives Plan, 1995 Long-Term Incentives Plan, 2000 Long-Term Incentives Plan and Directors Stock Plan approved and adopted by the Board of Directors of the Company on June 6, 2001, in connection with the spinoff of Rockwell Collins, filed as Exhibit 10-e-6 to the Company’s Annual Report on Form 10-K for the year ended September 30, 2001, is hereby incorporated by reference.
 
  *10-d-5    
Copy of resolutions of the Compensation and Management Development Committee of the Board of Directors of the Company adopted December 5, 2001, amending certain outstanding awards under the Company’s 1995 Long-Term Incentives Plan and 2000 Long-Term Incentives Plan, filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2001, is hereby incorporated by reference.
 
  *10-d-6    
Memorandum of Amendments to Outstanding Restricted Stock Agreements under the Company’s 1995 Long-Term Incentives Plan and 2000 Long-Term Incentives Plan, approved and adopted by the Compensation and Management Development Committee of the Board of Directors of the Company on November 7, 2001, filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2001, is hereby incorporated by reference.
          
 
          * Management contract or compensatory plan or arrangement.

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  *10-d-7    
Form of Restricted Stock Agreement under the Company’s 2000 Long-Term Incentives Plan, filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2001, is hereby incorporated by reference.
 
  *10-d-8    
Memorandum of Amendments to the Rockwell Automation, Inc. 2000 Long-Term Incentives Plan, as amended, filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K dated April 7, 2005, is hereby incorporated by reference.
 
  *10-e    
Copy of resolutions of the Compensation and Management Development Committee of the Board of Directors of the Company, adopted February 5, 2003, regarding the Corporate Office vacation plan, filed as Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, is hereby incorporated by reference.
 
  *10-f    
Copy of the Company’s Deferred Compensation Plan, filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2003, is hereby incorporated by reference.
 
  *10-g-1    
Copy of resolutions of the Board of Directors of the Company, adopted November 3, 1993, providing for the Company’s Deferred Compensation Policy for Non-Employee Directors, filed as Exhibit 10-h-l to the Company’s Annual Report on Form 10-K for the year ended September 30, 1994 (File No. 1-1035), is hereby incorporated by reference.
 
  *10-g-2    
Copy of resolutions of the Compensation Committee of the Board of Directors of the Company, adopted July 6, 1994, modifying the Company’s Deferred Compensation Policy for Non-Employee Directors, filed as Exhibit 10-h-2 to the Company’s Annual Report on Form 10-K for the year ended September 30, 1994 (File No. 1-1035), is hereby incorporated by reference.
 
  *10-g-3    
Copy of resolutions of the Board of Directors of New Rockwell International Corporation, adopted December 4, 1996, providing for its Deferred Compensation Policy for Non-Employee Directors, filed as Exhibit 10-i-3 to the Company’s Annual Report on Form 10- K for the year ended September 30, 1996, is hereby incorporated by reference.
 
  *l0-h-1    
Copy of the Company’s Annual Incentive Compensation Plan for Senior Executive Officers, as amended December 3, 2003, filed as Exhibit 10-i-1 to the Company’s Annual Report for the year ended September 30, 2004, is hereby incorporated by reference.
 
  *l0-h-2    
Copy of the Company’s Incentive Compensation Plan, filed as Exhibit 10 to the Company’s Current Report on Form 8-K dated September 7, 2005, is hereby incorporated by reference.
 
  *10-h-3    
Description of the Company’s incentive compensation program for fiscal year 2005 and the performance measures and goals therefor and for the Company’s Annual Incentive Compensation Plan for Senior Executives for fiscal year 2005, contained in the Company’s Current Report on Form 8-K dated December 7, 2004, is hereby incorporated by reference.
 
  *10-i-1    
Restricted Stock Agreement dated December 6, 1995 between the Company and Don H. Davis, Jr., filed as Exhibit 10-1-1 to the Company’s Annual Report on Form 10-K for the year ended September 30, 1995 (File No. 1-1035), is hereby incorporated by reference.
 
  *10-i-2    
Copy of Restricted Stock Agreement dated January 5, 2004, between the Company and James V. Gelly, filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2003, is hereby incorporated by reference.
          
 
          * Management contract or compensatory plan or arrangement.

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  *10-j-1    
Form of Change of Control Agreement between the Company and each of Don H. Davis, Jr., John D. Cohn and Joseph D. Swann, filed as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2001, is hereby incorporated by reference.
 
  *10-j-2    
Form of Change of Control Agreement between the Company and certain other officers of the Company, filed as Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2001, is hereby incorporated by reference.
 
  *10-j-3    
Copy of Restricted Stock Agreement dated February 5, 2004 between the Company and Keith D. Nosbusch, filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, is hereby incorporated by reference.
 
  *10-j-4    
Agreement dated as of January 27, 2004, between the Company and Michael A. Bless, filed as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, is hereby incorporated by reference.
 
  *10-j-5    
Copy of Restricted Stock Agreement dated May 1, 2004 between the Company and Douglas M. Hagerman, filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, is hereby incorporated by reference.
 
  *10-j-6    
Form of Change of Control Agreement dated as of May 1, 2004 between the Company and each of James V. Gelly and Douglas M. Hagerman, filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, is hereby incorporated by reference.
 
  *10-j-7    
Copy of Change of Control Agreement dated as of June 2, 2004 between the Company and Keith D. Nosbusch, filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, is hereby incorporated by reference.
 
  *10-j-8    
Agreement dated as of May 27, 2004 between the Company and William J. Calise, Jr., filed as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, is hereby incorporated by reference.
 
  *l0-j-9    
Agreement dated January 26, 2005 by and between the Company and Don H. Davis, Jr., filed as Exhibit 10 to the Company’s Quarterly Report of Form 10-Q for the quarter ended December 31, 2004, is hereby incorporated by reference.
 
  10-k-1    
Agreement and Plan of Distribution dated as of December 6, 1996, among Rockwell International Corporation (renamed Boeing North American, Inc.), the Company (formerly named New Rockwell International Corporation), Allen-Bradley Company, Inc., Rockwell Collins, Inc., Rockwell Semiconductor Systems, Inc., Rockwell Light Vehicle Systems, Inc. and Rockwell Heavy Vehicle Systems, Inc., filed as Exhibit l0-b to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 1996, is hereby incorporated by reference.
 
  10-k-2    
Post-Closing Covenants Agreement dated as of December 6, 1996, among Rockwell International Corporation (renamed Boeing North American, Inc.), The Boeing Company, Boeing NA, Inc. and the Company (formerly named New Rockwell International Corporation), filed as Exhibit 10-c to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 1996, is hereby incorporated by reference.
          
 
          * Management contract or compensatory plan or arrangement.

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  10-k-3    
Tax Allocation Agreement dated as of December 6, 1996, among Rockwell International Corporation (renamed Boeing North American, Inc.), the Company (formerly named New Rockwell International Corporation) and The Boeing Company, filed as Exhibit 10-d to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 1996, is hereby incorporated by reference.
 
  10-l-l    
Distribution Agreement dated as of September 30, 1997 by and between the Company and Meritor Automotive, Inc., filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K dated October 10, 1997, is hereby incorporated by reference.
 
  10-l-2    
Employee Matters Agreement dated as of September 30, 1997 by and between the Company and Meritor Automotive, Inc., filed as Exhibit 2.2 to the Company’s Current Report on Form 8-K dated October 10, 1997, is hereby incorporated by reference.
 
  10-l-3    
Tax Allocation Agreement dated as of September 30, 1997 by and between the Company and Meritor Automotive, Inc., filed as Exhibit 2.3 to the Company’s Current Report on Form 8-K dated October 10, 1997, is hereby incorporated by reference.
 
  10-m-1    
Distribution Agreement dated as of December 31, 1998 by and between the Company and Conexant Systems, Inc., filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K dated January 12, 1999, is hereby incorporated by reference.
 
  10-m-2    
Amended and Restated Employee Matters Agreement dated as of December 31, 1998 by and between the Company and Conexant Systems, Inc., filed as Exhibit 2.2 to the Company’s Current Report on Form 8-K dated January 12, 1999, is hereby incorporated by reference.
 
  10-m-3    
Tax Allocation Agreement dated as of December 31, 1998 by and between the Company and Conexant Systems, Inc., filed as Exhibit 2.3 to the Company’s Current Report on Form 8-K dated January 12, 1999, is hereby incorporated by reference.
 
  10-n-1    
Distribution Agreement dated as of June 29, 2001 by and among the Company, Rockwell Collins, Inc. and Rockwell Scientific Company LLC, filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K dated July 11, 2001, is hereby incorporated by reference.
 
  10-n-2    
Employee Matters Agreement dated as of June 29, 2001 by and among the Company, Rockwell Collins, Inc. and Rockwell Scientific Company LLC, filed as Exhibit 2.2 to the Company’s Current Report on Form 8-K dated July 11, 2001, is hereby incorporated by reference.
 
  10-n-3    
Tax Allocation Agreement dated as of June 29, 2001 by and between the Company and Rockwell Collins, Inc., filed as Exhibit 2.3 to the Company’s Current Report on Form 8-K dated July 11, 2001, is hereby incorporated by reference.
 
  10-o    
Five-Year Credit Agreement dated as of October 26, 2004 among the Company, the Banks listed therein and JPMorgan Chase Bank, as Administrative Agent, filed as Exhibit 99 to the Company’s Current Report on Form 8-K dated October 27, 2004, is hereby incorporated by reference.
 
  l0-p    
Purchase and Sale Agreement dated as of August 24, 2005 by and between the Company and First Industrial Acquisitions, Inc., including the form of Lease Agreement attached as Exhibit I thereto, together with the First Amendment to Purchase and Sale Agreement dated as of September 30, 2005 and the Second Amendment to Purchase and Sale Agreement dated as of October 31, 2005.
          
 
          * Management contract or compensatory plan or arrangement.

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  12    
Computation of Ratio of Earnings to Fixed Charges for the Five Years Ended September 30, 2005.
 
  21    
List of Subsidiaries of the Company.
 
  23    
Consent of Independent Registered Public Accounting Firm.
 
  24    
Powers of Attorney authorizing certain persons to sign this Annual Report on Form 10-K on behalf of certain directors and officers of the Company.
 
  31.1    
Certification of Periodic Report by the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
 
  31.2    
Certification of Periodic Report by the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
 
  32.1    
Certification of Periodic Report by the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
  32.2    
Certification of Periodic Report by the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
          
 
          * Management contract or compensatory plan or arrangement.

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SIGNATURES
     
           Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
             
    Rockwell Automation, Inc.    
    By   /s/ James V. Gelly
 
James V. Gelly
Senior Vice President and
Chief Financial Officer
(principal financial officer) 		   
 
    By   /s/ David M. Dorgan
 
David M. Dorgan
Vice President and Controller
(principal accounting officer) 		   
Dated: November 10, 2005
           Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on the 10th day of November 2005 by the following persons on behalf of the registrant and in the capacities indicated.
         
    Keith D. Nosbusch*
Chairman of the Board,
President and
Chief Executive Officer
(principal executive officer)
and Director 		   
 
    Betty C. Alewine*
Director 		   
 
    Don H. Davis, Jr.*
Director 		   
 
    Verne G. Istock*
Director 		   
 
    Barry C. Johnson*
Director 		   
 
    William T. McCormick, Jr .*
Director 		   
 
    Bruce M. Rockwell *
Director 		   
 
    David B. Speer*
Director 		   
 
    Joseph F. Toot, Jr.*
Director 		   
 
    Kenneth F. Yontz*
Director 		   
 
*By
  /s/ Douglas M. Hagerman
 
Douglas M. Hagerman, Attorney-in-fact** 		   
**By authority of powers of attorney filed herewith

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SCHEDULE II
ROCKWELL AUTOMATION, INC.
VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended September 30, 2005, 2004 and 2003
                                           
        Additions        
                 
    Balance at   Charged to   Charged to       Balance at
    Beginning   Costs and   Other       End of
Description   of Year   Expenses   Accounts   Deductions(b)   Year
                     
    (in millions)
*Year ended September 30, 2005
                                       
 
Allowance for doubtful accounts(a)
  $ 28.0     $ 4.4     $ —     $ 11.2     $ 21.2  
 
Allowance for customer returns, rebates and incentives
    86.1       367.1       11.3 (c)     346.9       117.6  
 
Allowance for excess and obsolete inventory
    46.2       18.0       0.2       18.5       45.9  
 
Valuation allowance for deferred tax assets
    63.0       5.5       —       13.0       55.5  
*Year ended September 30, 2004
                                       
 
Allowance for doubtful accounts(a)
  $ 29.5     $ 8.5     $ —     $ 10.0     $ 28.0  
 
Allowance for customer returns, rebates and incentives
    75.4       237.1       —       226.4       86.1  
 
Allowance for excess and obsolete inventory
    53.4       14.3       0.7       22.2       46.2  
 
Valuation allowance for deferred tax assets
    46.8       26.1       3.7       13.6       63.0  
*Year ended September 30, 2003
                                       
 
Allowance for doubtful accounts(a)
  $ 43.6     $ 3.5     $ 1.6     $ 19.2     $ 29.5  
 
Allowance for customer returns, rebates and incentives
    75.1       160.7       —       160.4       75.4  
 
Allowance for excess and obsolete inventory
    50.9       15.2       1.9       14.6       53.4  
 
Valuation allowance for deferred tax assets
    51.7       3.8       —       8.7       46.8  
 
(a)
Includes allowances for current and other long-term receivables.
 
(b)
Consists of amounts written off for the allowance for doubtful accounts and excess and obsolete inventory, customer account credits for customer returns, rebates and incentives and adjustments resulting from our ability to utilize foreign tax credits, capital losses, or net operating loss carryforwards for which a valuation allowance had previously been recorded.
 
(c)
Represents reclassification of amounts reported in other balance sheet accounts in prior years.
 
*
Amounts reported relate to continuing operations in all periods presented.

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INDEX TO EXHIBITS*
     
Exhibit No.   Exhibit
     
l0-p
 
Purchase and Sale Agreement dated as of August 24, 2005 between the Company and First Industrial Acquisitions, Inc., including the Lease Agreement attached as Exhibit I.
 
12
 
Computation of Ratio of Earnings to Fixed Charges for the Five Years Ended September 30, 2005.
 
21
 
List of Subsidiaries of the Company.
 
23
 
Consent of Independent Registered Public Accounting Firm.
 
24
 
Powers of Attorney authorizing certain persons to sign this Annual Report on Form 10-K on behalf of certain directors and officers of the Company.
 
31.1
 
Certification of Periodic Report by the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
 
31.2
 
Certification of Periodic Report by the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
 
32.1
 
Certification of Periodic Report by the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
32.2
 
Certification of Periodic Report by the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
*  See Part IV, Item 15(a)(3) for exhibits incorporated by reference.
 

E XHIBIT 10-p
A UGUST 19, 2005
Purchase and Sale Agreement
This Purchase and Sale Agreement (this “ Agreement ”) is made as of the 24th day of August, 2005 (the “ Effective Date ”), by and between Rockwell Automation, Inc., a Delaware corporation, formerly known as “Rockwell International Corporation” (“ Seller ”) and First Industrial Acquisitions, Inc. , a Maryland corporation (“ Buyer ”).
In consideration of this Agreement, Seller and Buyer (together, the “ Parties ”) agree as follows:
  1.   Sale of Subject Property.
(a)      Identification of Subject Property. Seller agrees to sell to Buyer, and Buyer agrees to purchase from Seller, all of Seller’s right, title, and interest in and to the following property (collectively, “ Subject Property ”):
          (1)      Land . Fee simple absolute title to such parcels of real property as are depicted, legally described, or otherwise identified on the Exhibit A attached to and made a part of this Agreement, together with all of Seller’s right, title, and interest in and to all of the following: (i) any privileges, profits, easements, interests, or rights that are in any manner appurtenant thereto; (ii) all of the beds of any streets within or adjoining such real property, up to the center of such beds; and (iii) all awards for any future taking or condemnation affecting such real property or affecting street beds to which the owner of such real property is entitled; all of which collectively shall be referred to as the “ Land ”;
          (2)      Improvements . All buildings and other improvements and fixtures located, as of the Effective Date, upon the Land, including, without limitation, all of Seller’s right, title, and interest in and to the following: (i) any mechanical systems structurally incorporated into such buildings, improvements, or fixtures (such as heating and air conditioning, mechanical, electrical, and plumbing systems); (ii) any facilities used to provide any utility service, ventilation, or municipal services to such buildings, improvements, or fixtures (including, without limitation, all water, sewer, gas, electricity, and other utility pipes and lines and all other facilities therein or appurtenant thereto); and (iii) any and all shrubbery and plantings forming a part thereof, all of which included items shall collectively be referred to as the “ Improvements ”; and
          (3)      Replacements. All repairs, refurbishments, additions, supplements, and replacements to the Improvements made between the Effective Date and the Closing Date (as defined below), all of which included items shall collectively be referred to as the “ Replacements. ”
(b)      Transfer of Subject Property by Related Entities . Buyer understands that all or part of the Subject Property may be titled in various subsidiaries or affiliates (whether one or more, the “ Related Entities ”) of the Seller. In all such instances, Seller shall cause the

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appropriate Related Entities to convey their interests to Buyer pursuant to the terms of this Agreement.
(c)      Property not Conveyed. The Parties agree, and Buyer hereby expressly acknowledges, that the definition of “Subject Property” set forth in this Section 1 is not intended to include, and thus that Seller shall not transfer to Buyer (whether at Closing or otherwise), either (i) any tangible personal property of Seller (save only for such Due Diligence Documents as may be in Seller’s possession or under its control on the Closing Date), or (ii) any intangible property of Seller. Accordingly, this Agreement shall not govern any interest of Seller whatsoever in any of the following, whether located (on the Effective Date or on the Closing Date) in or upon the Subject Property or located (on the Effective Date or on the Closing Date) elsewhere in contemplation of delivery to the Subject Property: any machinery, equipment, trade fixtures, furnishings, parts, tools, engineering and yard drawings, or other items of tangible or intangible personal property; any work in process; any inventory held for use or resale; and any raw materials, finished product, supply, packaging items, business-related signage, or similar items with respect to the business conducted by the Seller at or from the Subject Property.
  2.   Purchase Price .
(a)      Price . Buyer shall pay to Seller at Closing, as consideration for Buyer’s purchase of the Subject Property, the sum (in United States Dollars) indicated as the “Total Purchase Price” on the Exhibit B attached to and made a part of this Agreement (“ Purchase Price ”). The Parties further hereby agree that such Purchase Price shall be allocated among the discrete fee simple absolute estates comprising the Subject Property according to the schedule set forth on the Exhibit B attached to and made a part of this Agreement.
(b)      Earnest Money . Within two (2) days after the Effective Date, Buyer shall deposit the sum of Five Million and No/100 United States Dollars (USD 5,000,000.00) (“ Original Earnest Money ”) with Chicago Title Insurance Company, a Missouri corporation (“ Title Company ”). Furthermore, within two (2) days after the earlier to occur of (i) Buyer’s waiver or satisfaction of all due diligence conditions set forth in Section 4 of this Agreement or (ii) passage of the Contingency Date under this Agreement, Buyer shall deposit the sum of Two Million Five Hundred Thousand and No/100 United States Dollars (USD 2,500,000.00) (“ Additional Earnest Money ”) with the Title Company. The Original Earnest Money and the Additional Earnest Money (together, the “ Earnest Money ”) shall be deposited in an interest-bearing escrow account with the Title Company to be held in a joint order escrow to be entered into between Seller and Buyer with Escrowee pursuant to an Earnest Money Escrow Agreement in the form set forth on the Exhibit C attached to and made a part of this Agreement (the “ Escrow Agreement ”). The Earnest Money shall be credited against the Purchase Price at Closing, or, if not so credited, otherwise disbursed according to the terms of the Escrow Agreement. Any interest earned on the Earnest Money shall belong to Buyer.
  3.   Title and Survey .
(a)      Delivery . Buyer’s obligation to consummate the transaction contemplated by this Agreement shall be subject to Buyer’s review of certain Commitments, Title Documents,

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and Surveys, as set forth in this Section. Accordingly, before 5:00 p.m. CDT on September 23, 2005, Seller shall furnish to Buyer (or cause to be delivered to Buyer) the following materials:
          (1)      Title Commitments . Current commitments (altogether, the “ Commitments ”) from the Title Company to issue an owner’s policy of title insurance (ALTA Form B-1992, revised 10-17-92) for each discrete legal parcel of the Subject Property (such policies, as issued, together with all Endorsements required under Section 9 of this Agreement, being known under this Agreement as the “ Title Policies ”), which Commitments shall show fee simple absolute title in and to all Subject Property to be vested in Seller (or in one of the Related Entities), and which Commitments shall respectively further state insured amounts that match, on a parcel-by-parcel basis, the allocation schedule set forth on Exhibit B to this Agreement;
          (2)      Title Documents . Copies of all documents identified in the respective Schedules B-II of the Commitments as non-standard exceptions to the proposed coverages of the Title Policies (“ Title Documents ”); and
          (3)      Surveys . Current surveys of all Subject Property (“ Surveys ”), which Surveys shall be certified to Buyer, Seller, and the Title Company with the form of certification set forth on Exhibit D attached to and made a part of this Agreement.
(b)      Defects . If the Commitments or Title Documents shall show any exception(s) to title other than the exceptions that are specifically listed on the Exhibit E attached to and made a part of this Agreement (altogether, the “ Listed Encumbrances ”), or if the Surveys shall disclose any condition (other than a Listed Encumbrance) that is not reasonably satisfactory to Buyer, then Buyer may notify Seller, before 5:00 p.m. CDT on October 7, 2005 (the “ Disapproval Deadline ”), of any such exceptions and/or conditions to which Buyer objects (individually a “ Disapproved Matter ” and collectively the “ Disapproved Matters ”). Any condition(s) disclosed on the Commitments, Title Documents, or Surveys and not objected to by Buyer in writing as a Disapproved Matter by the Disapproval Deadline shall be deemed a Permitted Encumbrance under this Agreement.
          (1)      Financial Disapproved Matters . Any Disapproved Matter that may be removed by Seller’s payment of a sum certain (i) that is stated by the pertinent Listed Encumbrance or (ii) that may be determined by reference to the source instrument that created the obligation secured by the Listed Encumbrance (in each instance, individually a “ Financial Disapproved Matter ” and collectively the “ Financial Disapproved Matters ”) shall be addressed either ( w ) by Seller’s applying the Purchase Price first to the payment of such sum(s) certain on the Closing Date or ( x ) by Seller’s securing, at its expense, an endorsement (in form reasonably acceptable to Buyer) to the Title Policies removing or insuring over such Financial Disapproved Matter(s).
          (2)      Nonfinancial Disapproved Matters . As to every Disapproved Matter that is not a Financial Disapproved Matter (individually a “ Nonfinancial Disapproved Matter ” and collectively the “ Nonfinancial Disapproved Matters ”), Seller shall, between receipt of Buyer’s written notice of Disapproved Matters and the Closing Date (as postponed, if at all, pursuant to the terms of this Agreement) exercise good faith efforts to either (i) cause the

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Title Company to remove from the Commitments and the Surveys, at Seller’s sole expense, every such Nonfinancial Disapproved Matter, or (ii) obtain, at Seller’s sole expense, an endorsement (in form reasonably acceptable to Buyer) to the pertinent Commitment(s) providing affirmative title insurance coverage reasonably acceptable to Buyer insuring against the effect of every such Nonfinancial Disapproved Matter.
                    (A)     When all Nonfinancial Disapproved Matters shall be so removed or endorsed over and all Financial Disapproved Matters shall have been addressed in accordance with Section 3(b)(1), above, then Buyer’s title and survey objections noticed under this Section 3 shall be deemed fully satisfied, the date of which satisfaction shall be the later to occur of (i) the date on which the last of the then-outstanding Nonfinancial Disapproved Matters is so removed or (ii) the date on which the Title Company issues an endorsement (in form reasonably satisfactory to Buyer) to the relevant Commitment(s) removing or insuring over the last of the then-outstanding Nonfinancial Disapproved Matters.
                    (B)     If all Nonfinancial Disapproved Matters shall not then be so removed or endorsed over, Seller shall provide to Buyer, in a notice delivered to Buyer not less than two (2) nor more than four (4) days before the Closing Date, an itemized list of such Nonfinancial Disapproved Matters as have not, on the date of such notice, been so removed and endorsed over (individually an “ Uncured Title Matter ” and collectively the “ Uncured Title Matters ”), identifying with such itemization all discrete parcels of the Subject Property as then remain subject to Uncured Title Matters (the “ Postponed Parcel(s) ”). On the Closing Date, Seller shall also
                      (i) As to all of the Subject Property other than the Postponed Parcel(s), complete Closing as required under this Agreement; and
                      (ii) As to the Postponed Parcel(s), deliver to Buyer a written notice (a “ Postponed Parcel Notice ”) of Seller’s election (in Seller’s sole discretion): ( w ) to postpone the Closing Date as to one or more identified Postponed Parcel(s) to a specified date (the “ Postponed Closing Date ”) not later than November 18, 2005; and/or ( x ) to remove one or more identified Postponed Parcel(s) from the Subject Property under this Agreement (individually an “ Eliminated Postponed Parcel ” and collectively the “ Eliminated Postponed Parcels ”).
Seller shall deliver a Postponed Parcel Notice with respect to every Postponed Parcel, and in its Postponed Parcel Notice shall elect either of ( w ) or ( x ), above, with respect to each Postponed Parcel.
                    (C)     As to the Eliminated Postponed Parcel(s), Buyer may elect, by delivering written notice (a “ Postponed Parcel Waiver Notice ”) of such election to Seller within three (3) days after Seller’s delivery of the Postponed Parcel Notice, to consummate Buyer’s acquisition, pursuant to the terms of this Agreement, of any one or more Eliminated Postponed Parcels, which Eliminated Postponed Parcel(s) to be so acquired (individually a “ Restored Postponed Parcel ” and collectively the “ Restored Postponed Parcels ”) shall be specifically identified by Buyer in the Postponed Parcel Waiver Notice. (If Buyer’s Postponed

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Parcel Waiver Notice shall not state Buyer’s election to consummate Buyer’s acquisition of all Eliminated Postponed Parcels, then Seller’s election under ( x ), above, shall continue to apply to those of the Eliminated Postponed Parcels not specified by Buyer as Restored Postponed Parcels, whereupon neither Party shall have any further obligations hereunder with respect to any Eliminated Postponed Parcel(s) not so specified as Restored Postponed Parcels, save only for such obligation and liabilities as may expressly survive the termination of this Agreement.) The transfer of the Restored Postponed Parcel(s) shall be closed on the Postponed Closing Date—or, if Seller shall not have identified a Postponed Closing Date in its Postponed Parcel Notice, on a date mutually agreed between Buyer and Seller, which date shall be no later than November 18, 2005—without any reduction in the aggregate Purchase Price allocated (as specified on the attached Exhibit B ) to the Restored Postponed Parcels, according to the terms of Section 9 of this Agreement. Buyer shall then take all Restored Postponed Parcels subject to all Uncured Title Matters encumbering such Restored Postponed Parcels as of the Closing Date, which Uncured Title Matters shall be considered additional Permitted Exceptions for which Seller shall have neither any further obligation whatsoever nor any liability whatsoever for any loss, damage, or diminution in value arising with respect to such Uncured Title Matters.
                    (D)     As to all Postponed Parcel(s) other than the Restored Postponed Parcel(s) and the Eliminated Postponed Parcel(s), Seller shall, between delivery of the Postponed Parcel Notice and the Postponed Closing Date, make reasonable and diligent efforts to cause the Title Company to remove or endorse over all Uncured Title Matters affecting the identified Postponed Parcel(s), and Seller and Buyer shall, on the Postponed Closing Date, immediately complete closing, according to the terms of Section 9 of this Agreement, on all of the Postponed Parcel(s) as to which no Uncured Title Matters then remain. If Seller shall not, despite its reasonable and diligent efforts, cause the Title Company, by the Postponed Closing Date, to remove or endorse over (in form reasonably satisfactory to Buyer) all Uncured Title Matters concerning the Postponed Parcel(s), then Seller may elect, in Seller’s sole discretion and on written notice to Buyer (a “ Final Postponement Notice ”) delivered on the Postponed Closing Date, either ( y ) to remove from the Subject Property under this Agreement such Postponed Parcel(s) as shall remain subject to any Uncured Title Matter on the Postponed Closing Date, or ( z ) to not remove from the Subject Property under this Agreement such Postponed Parcel(s) as shall then remain subject to any Uncured Title Matter. Buyer shall have three (3) days after delivery of the Final Postponement Notice to elect, at its option, and as its sole remedy hereunder, either ( aa ) to terminate this Agreement as to such Postponed Parcel(s) as then remain subject to any Uncured Title Matter, whereupon neither Party shall have any further obligations hereunder with respect to such Postponed Parcel(s), save only for such obligation and liabilities as may expressly survive the termination of this Agreement, or ( bb ) to waive the requirement that Seller cause the Title Company to remove or endorse over such Uncured Title Matter and, no later than November 30, 2005, to complete Closing on such Postponed Parcel(s) without any reduction in the aggregate Purchase Price allocated (as specified on the attached Exhibit B ) to those Postponed Parcel(s); provided that, if Buyer shall not, within the pertinent three (3) day notice period, provide Seller with written notice of Buyer’s electing one of the listed options with respect to each of the Postponed Parcels as to which Uncured Title Matters remain outstanding, then Buyer shall irrevocably be deemed to have agreed to accept title to the pertinent Postponed Parcel(s) subject to every Uncured Title Matter remaining on the Commitments and Surveys, and

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shall complete Closing on all such Postponed Parcels by November 30, 2005 without any reduction in the aggregate Purchase Price allocated (as provided on the attached Exhibit B ) to the Postponed Parcels, all Uncured Title Matters thereafter being considered additional Permitted Exceptions for which Seller shall have neither any further obligation whatsoever nor any liability whatsoever for any loss, damage, or diminution in value arising with respect to such Uncured Title Matters.
          (3)      Modification with Respect to Postponed Parcel(s) . If Seller shall at any time exercise any right under this Agreement to remove any Postponed Parcel(s) from the Subject Property under this Agreement (and Buyer does not timely elect to instead proceed to acquire such Postponed Parcel(s) subject to whatever Uncured Title Matters then encumber it), or if Buyer shall at any time exercise any right hereunder to terminate this Agreement as to any Postponed Parcel(s), then the Parties shall timely execute a written modification to this Agreement, which modification shall (i) appropriately modify the depictions, legal descriptions, and other identifications set forth on the attached Exhibit A to this Agreement, and (ii) reduce the Purchase Price (or, in the case of a delay in closing as to any Postponed Parcel(s), the then-outstanding portion thereof) by a sum equal to the amount of the Purchase Price allocated, on the attached Exhibit B , to the Postponed Parcel(s) so removed.
  4.   Buyer’s Due Diligence .
(a)      Document Review .
          (1)     Seller shall on the Effective Date commence diligent efforts (which efforts shall continue through, and be completed by, the fourteenth (14 th ) day after the Effective Date) to make available to Buyer, for review at reasonable times up to and including the earlier to occur of the Contingency Date or Disapproval Deadline, complete copies of such documents and materials as Seller may actually maintain, and as shall be reasonably available to Seller, from among those listed on the Exhibit G attached to and made a part of this Agreement (altogether, to the extent required of Seller to be made available, the “ Due Diligence Documents ”). Such Due Diligence Documents shall be provided to Buyer, in paper and/or electronic format, for Buyer’s review at one or more secured locations specified by Seller; if Buyer shall wish to have Buyer’s own photocopies or paper-based reproductions of Due Diligence Documents so provided, Buyer shall provide to Seller, before the Disapproval Deadline, one or more lists of Due Diligence Documents to be photocopied or reproduced, and Seller shall thereafter promptly provide to Buyer such photocopies or reproductions, subject only to Buyer’s expressed agreement to reimburse Seller for Seller’s actual and documented out-of-pocket expenses incurred in producing such photocopies and reproductions. Buyer acknowledges that Seller may or may not maintain records of every type listed on the attached Exhibit G , and thus agrees that Seller shall have no obligation whatsoever to create, begin to maintain, or deliver or make available to Buyer pursuant to this Section 4(a) any documents or materials other than those that have been or are maintained by Seller in the ordinary course of Seller’s business.
          (2)     Without in any other way modifying Seller’s obligations under Section 4(a)(1) of this Agreement, and without in any way modifying Buyer’s covenants and obligations under this Agreement (including, without limitation, Buyer’s covenants and

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obligations under Section 20(a) of this Agreement) with respect to the Due Diligence Documents, Seller specifically hereby agrees, as part of Seller’s diligent efforts under Section 4(a)(1), above, as follows: that Seller, within five (5) days after the Effective Date, shall transmit to Buyer in electronic format complete copies of such documents and materials as Seller may actually maintain, and as shall be reasonably available to Seller, from among (as contemplated under item 5 of the Exhibit G attached to and made a part of this Agreement ) “any and all written, third-party reports and data, and of any agency correspondence received by Seller within two (2) years immediately preceding the Effective Date, regarding soil conditions, ground water, wetlands, underground storage tanks, subsurface conditions and/or other environmental or physical conditions relating to the Subject Property, in Seller’s possession or control.”
(b)      Inspections and Testing . When, after the Effective Date, Buyer shall deliver to Seller a duly executed copy of a Temporary Access Agreement in the form set forth on the Exhibit H attached to and made a part of this Agreement, Buyer and Buyer’s contractors shall thereafter have the right to enter upon the Subject Property at all reasonable times between the Effective Date and the Contingency Date to perform such inspections and assessments of the Subject Property as Buyer may deem reasonably necessary to satisfy Buyer with respect to the physical condition of the Subject Property. Notwithstanding the foregoing, however, Buyer’s right to inspect and test the Subject Property under this Agreement shall be subject to the following conditions: (i) that Buyer shall notify Seller in writing at least twenty-four (24) hours before conducting any such inspections or tests; (ii) that Buyer and its agents, representatives, consultants, and employees shall, when conducting any such inspections or tests upon the Subject Property, at all times be accompanied by an employee or authorized agent of Seller (which employee or agent shall be made regularly and readily available for such purpose); (iii) that Buyer shall, promptly upon completing any inspections and tests hereunder, restore at its sole expense any part of the Subject Property altered or disturbed by such inspections and tests to the condition that existed before any such inspections or testing; (i) that Buyer shall not collect samples of materials from the Subject Property without Seller’s prior written consent, which consent shall not be unreasonably withheld or delayed; (v) that Buyer shall keep the results and analysis of any evaluation, testing, inspection, or assessment strictly in confidence; and (vi) that each of the terms and obligations under this Section 4(b), together with all terms and obligations of any Temporary Access Agreement signed by Seller, shall expressly survive any termination of this Agreement and any Closing of the transaction contemplated by this Agreement.
          (1)     Buyer’s rights under this Section 4 shall include the right to conduct non-invasive physical inspections of, and to conduct so-called “Phase I” environmental site assessments with respect to, the Subject Property.
          (2)     Buyer’s rights under this Section 4 shall also include the right, with Seller’s written consent (which consent Seller shall not unreasonably withhold, condition, or delay), to conduct so-called “Phase II” environmental assessments (the “ Phase II Assessments ”) with respect to the Subject Property, provided, however, that such right shall in every instance be expressly subject to the following conditions: (i) that, in addition to Buyer’s employees, Buyer may engage, as its agent(s), representative(s), and consultant(s) for inspections and tests permitted under this Section 4(b), only one or more of the firms listed on the Exhibit F attached to and made a part of this Agreement (the “ Authorized Consultants ”); (ii) that Buyer and Seller

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shall each designate a single employee to be responsible for coordinating Buyer’s completion of the desired Phase II Assessments; and (iii) that every contract for a desired Phase II Assessment shall expressly ( aa ) provide that Buyer alone shall be responsible for all payments and financial obligations of every kind arising under such contract and ( bb ) notify all Authorized Consultants supplying materials or labor with respect to such contract that they shall have no right to lien either Seller or the Subject Property for any obligation arising under such contract. The Parties thus agree that Seller’s refusal to consent to Buyer’s conducting a Phase II Assessment with respect to any one or more discrete parcels of the Subject Property shall necessarily not be deemed unreasonable if such refusal is based on Buyer’s failure to satisfy any of the conditions listed above.
          (3)     Before commencing a Phase II Assessment with respect to any discrete parcel of the Subject Property (a “ Proposed Phase II Assessment ”), Buyer shall submit to Seller such materials as shall fairly summarize the scope and detail of the work intended with respect to such Proposed Phase II Assessment. Seller shall review the summary materials submitted by Buyer and shall promptly either (i) deliver to Buyer written notice of Seller’s consent to the Proposed Phase II Assessment or (ii) inform Buyer of Seller’s denial of such consent, and the reasons for such denial, after which the Parties shall negotiate, promptly and in good faith, for such modifications to the Proposed Phase II Assessment as shall be a predicate to Seller’s consent to the Proposed Phase II Assessment. If, however, after the good faith negotiations contemplated under this Section 4(b)(3), Buyer wishes to conduct any Proposed Phase II Assessment pursuant to a scope of work beyond a scope mutually agreed between Buyer and Seller, then either Party shall have the right to terminate this Agreement by delivering written notice of such termination to the other Party before the Contingency Date.
          (4)     Buyer’s Phase II Assessments shall not vary materially from the scope and detail consented to by Seller under Section 4(b)(3), above, and Buyer shall provide all test results, reports, and other data generated by the Phase II Assessments to Seller promptly upon Buyer’s receiving (or, if it be the case, creating) the same. If the results of any Phase II Assessment indicate or evidence any or all of ( x ) a Release having occurred at any portion(s) of the Subject Property; ( y ) a Hazardous Condition existing at any portion(s) of the Subject Property; or ( z ) any violation of Environmental Law existing at any portion of the Subject Property (in each instance, an “ Environmental Condition ”), then the Parties shall thereafter negotiate, promptly and in good faith, during any period remaining up to and including the Contingency Date for a mutually satisfactory resolution that shall address all Environmental Conditions.
(c)      Buyer’s Due Diligence Condition . Buyer’s obligation to consummate the transaction contemplated by this Agreement shall be subject to Buyer’s finding satisfactory both its review of the Due Diligence Documents under Section 4(a) of this Agreement and its evaluations, testing, inspections, and assessments under Section 4(b) of this Agreement.
          (1)     If Buyer shall not be satisfied with either or both of (i) its review of the Due Diligence Documents under Section 4(a) of this Agreement or (ii) its evaluations, testing, inspections, and assessments under Section 4(b) of this Agreement, Buyer may, no later than 5:00 p.m. CDT on the forty-fifth (45 th ) day after the Effective Date (the “ Contingency

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Date ”), terminate this Agreement by giving written notice (a “ Termination Notice ”) to Seller of Buyer’s election to do so. Buyer’s Termination Notice shall be accompanied by a written statement identifying the bases under Sections 4(a) and 4(b) upon which Buyer is terminating this Agreement, though it shall be expressly understood and agreed that Seller shall have no right to challenge the bases identified under Sections 4(a) and 4(b) for Buyer’s termination, as set forth in the Termination Notice.
          (2)     If a Termination Notice timely delivered by Buyer shall certify to Seller that Buyer’s election to terminate this Agreement is based upon both (i) the existence of a documented Environmental Condition, and (ii) the failure of the Parties to negotiate (as required under Section 4(b)(3) of this Agreement) a mutually satisfactory resolution that shall address all Environmental Conditions, then (A) Buyer shall promptly deliver to Seller a complete copy of the environmental engineering report(s) issued to Buyer and advising of the existence of such Environmental Conditions (“ Environmental Reports ”), and (B) Seller shall reimburse Buyer for the reasonable out-of-pocket costs that Buyer shall have actually incurred in order to perform any Phase II Assessment at those portions of the Subject Property at which the Environmental Conditions exist and to procure the Environmental Reports. The reimbursement required under (B) above shall be made within ten (10) days after Buyer delivers to Seller both the Environmental Reports and the billing statement(s) from the environmental engineer(s) that performed the pertinent Phase II Assessments and prepared the Environmental Reports. Buyer acknowledges and agrees that the Environmental Reports shall constitute a portion of the Confidential Information and shall be governed by the terms of Section 20(a) of this Agreement. The foregoing obligations of (A) and (B) shall survive any termination of this Agreement.
          (3)     Upon Seller’s receiving a Termination Notice in the form contemplated by Section 4(c)(1), the Earnest Money shall be returned to Buyer and neither Party shall have any further liability to the other hereunder (except as specifically provided in this Agreement). If Buyer fails to timely give such written notice to Seller by 5:00 p.m. CDT on the Contingency Date, Buyer shall be deemed to have fully waived and satisfied Buyer’s condition under this Section 5(c), the Additional Earnest Money shall be payable in accordance with Section 2 of this Agreement, and all Earnest Money shall then (subject only to the provisions of Section 11 of this Agreement and to the satisfaction or waiver, by Buyer, of all of Buyer’s conditions set forth in Section 15(b), below) become nonrefundable to Buyer.
  5.   Approval by Seller’s Board.
(a)      Seller’s Resolution Condition. Seller’s obligation to consummate the transaction contemplated by this Agreement shall be subject to Seller’s board of directors approving, no later than 5:00 p.m. CDT on September 16, 2005, a formal resolution (the “ Resolution ”) that provides substantially as follows:
          (1)     That Seller is authorized to sell or cause to be sold the Subject Property as set forth in this Agreement, and to leaseback the Subject Property to Seller (or an affiliated entity) on substantially the terms provided in the form of Lease Agreement set forth on the Exhibit I attached to and made a part of this Agreement (the “ Form Lease ”); and

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          (2)     that Seller is authorized to take or cause to be taken such action or actions and to execute and deliver or cause to be executed and delivered such instruments, certificates, and other documents, as may be appropriate to carry out the purposes and intent of the foregoing resolution, including, without limitation, the negotiation, execution, and delivery of agreements (including, without limitation, the Leases) providing for the sale and back of the Subject Property and other agreements in connection therewith, in each case containing such terms and conditions as may be appropriate.
(b)      Return of Materials and Reimbursement. If the Resolution shall not be approved by Seller’s board of directors by 5:00 p.m. CDT on September 16, 2005, then (i) this Agreement shall automatically be null and void, and hence of no further force or effect, and (ii) Seller shall reimburse Buyer for the reasonable out-of-pocket costs that Buyer shall have actually incurred from and after the Effective Date in exercising Buyer’s rights of inspection, review, and testing under Sections 4(a) and 4(b) of this Agreement. Such required reimbursement shall be made within ten (10) days after Buyer delivers to Seller all reports and materials of every kind received by Buyer in connection with Buyer’s exercising Buyer’s rights under Section 4 of this Agreement , together with written billing statement(s) from all third parties prepared such reports or materials on Buyer’s behalf. Buyer acknowledges and agrees that all such reports and materials shall constitute a portion of the Confidential Information and shall be governed by the terms of Section 20(a) of this Agreement. The foregoing obligations of this Section 5(b) shall survive any termination of this Agreement.
  6.   Representations and Warranties .
(a)      By Seller . Seller represents and warrants to Buyer that all of the following are true and correct on and as of the Effective Date, shall continue to be true and correct as of the Closing, and shall survive Closing and the recording of the Deeds (defined below) for a period of ninety (90) days after Closing:
          (1)     Seller is a duly organized corporation validly existing under the laws of the State of Delaware; Seller has the requisite power and authority to enter into and perform this Agreement; Seller’s Closing Documents (as defined in Section 9(a) hereof) have been or will be duly authorized by all necessary action on the part of Seller and have been or will be duly executed and delivered; execution, delivery, and performance by Seller of such documents will not conflict with or result in a violation of Seller’s organizational documents, or of any judgment, order, or decree of any court or arbiter to which Seller is a party; such documents are valid and binding obligations of Seller, and are enforceable against Seller in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, creditor’s rights, and other similar laws and subject to any consents that may be required from any third parties.
          (2)     Seller is not a “foreign person,” “foreign partnership,” “foreign trust,” or “foreign estate” as those terms are defined in Section 1445 of the Internal Revenue Code.

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          (3)     There is no action, litigation, condemnation, or proceeding of any kind pending against Seller that would have a material and adverse affect on either or both of (i) the ability of Seller to perform its obligations under this Agreement, and (ii) the continuing operation of the Subject Property in the manner in which it is operated as of the date of this Agreement.
          (4)     Excepting only this Agreement, Seller is not a party to any contract, agreement, or commitment to sell, convey, assign, transfer, provide rights of first refusal, or other similar rights or otherwise dispose of any portion or portions of the Subject Property.
          (5)     To Seller’s Knowledge, the Due Diligence Documents supplied to Buyer pursuant to this Agreement are, except as expressly otherwise disclosed in writing by Seller when supplied to Buyer, complete copies of all Due Diligence Documents in Seller’s possession.
          (6)     To Seller’s Knowledge, Seller has not, except as may be disclosed by the Due Diligence Documents, received written notice of any zoning, subdivision, environmental, building code, health, or fire safety violation from any Governmental Authority.
          (7)     To Seller’s Knowledge, Seller has not, except as may be disclosed by the Due Diligence Documents, received any written notice of levy of special assessments of any nature with respect to the Subject Property or any part thereof, nor any written notice of any special assessments being contemplated with respect to the Subject Property.
          (8)     To Seller’s Knowledge, except as actually disclosed by any Due Diligence Documents or by any physical inspection of the Subject Property conducted by Buyer under Section 4 of this Agreement (including, without limitation, any so-called “Phase I” environmental site assessments and any Phase II Assessments):
                    (A)     There have been no past, and Seller has not received any written notice of any pending or threatened: (a) claims, complaints, notices, correspondence or requests for information received by Seller with respect to any violation or alleged violation of any Environmental Law or Environmental Permit or with respect to any corrective or remedial action for or cleanup of the Subject Property or any portion thereof, and (b) written correspondence, claims, complaints, notices, or requests for information from or to Seller regarding any actual, potential or alleged liability or obligation under or violation of any Environmental Law or Environmental Permit with respect to the Subject Property or any portion thereof; and
                    (B)     Seller has not received, and does not have in its possession or control, any written notice alleging or advising the existence of any PCBs or friable or damaged asbestos at the Subject Property; Seller has not removed (or required or requested the removal of) any PCBs or damaged or friable asbestos from the Subject Property; and there have never been any PCBs or damaged or friable asbestos at the Subject Property.

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(b)      By Buyer .
          (1)     Buyer represents and warrants to Seller that the following are true and correct on and as of the Effective Date and shall continue to be true and correct as of the Closing: (i) Buyer is a duly organized corporation validly existing and in good standing under the laws of the State of Maryland; (ii) Buyer has the requisite power and authority to enter into this Agreement (including, without limitation, the Earnest Money Escrow Agreement attached as Exhibit C , the Temporary Access Agreement attached as Exhibit H and the Lease Agreement attached as Exhibit I ); (iii) Buyer’s Closing Documents (as defined in Section 9(b) hereof) have been or will be duly authorized by all necessary action on the part of Buyer and have been or will be duly executed and delivered; (iv) the execution, delivery and performance by Buyer of such documents will not conflict with or result in violation of Buyer’s organizational documents or any judgment, order or decree of any court or arbiter to which Buyer is a party; and (v) such documents are valid and binding obligations of Buyer, and are enforceable against Buyer in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, creditor’s rights and other similar Laws and Regulations.
          (2)     Buyer represents and warrants to Seller (i) that, to Buyer’s Knowledge, Buyer is in compliance with the requirements of Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001) (the “ Order ”) and other similar requirements contained in the rules and regulations of the Office of Foreign Assets Control, Department of the Treasury (“ OFAC ”) and in any enabling legislation or other Executive Orders or regulations in respect thereof (the Order and such other rules, regulations, legislation, or orders are collectively called the “ Orders ”), and (ii) that, to Buyer’s Knowledge, neither Buyer nor any beneficial owner of Buyer:
                    (A)     is listed on the Specially Designated Nationals and Blocked Persons List maintained by OFAC pursuant to the Order and/or on any other list of terrorists or terrorist organizations maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable Orders (such lists are collectively referred to as the “ Lists ”);
                    (B)     is a person who has been determined by competent authority to be subject to the prohibitions contained in the Orders;
                    (C)     is owned or controlled by, nor acts for or on behalf of, any person or entity on the Lists or any other person or entity who has been determined by competent authority to be subject to the prohibitions contained in the Orders; or
                    (D)     shall transfer or permit the transfer of any interest in Buyer or any beneficial owner in Buyer to any person or entity who is, or any of whose beneficial owners are, listed on the Lists.
Buyer further hereby covenants and agrees that if Buyer obtains knowledge that Buyer or any of its beneficial owners becomes listed on the Lists or is indicted, arraigned, or custodially detained on charges involving money laundering or predicate crimes to money laundering, Buyer shall use its best efforts to immediately notify Seller in writing, and in such event, Seller shall have the

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right, immediately upon delivery of written notice thereof to Buyer, to terminate this Agreement without penalty or liability to Buyer. The representations and warranties set forth in this Section 6(b) shall be deemed to be remade as of Closing and shall survive the Closing and delivery of the Deeds.
  7.   [Intentionally Omitted.]
8.           Closing Date . The closing of the purchase and sale contemplated by this Agreement (the “ Closing ”) shall occur on a date agreed between Buyer and Seller, which date shall be no later than October 17, 2005 (the “ Closing Date ”), at the office of the Title Company at 171 North Clark Street in Chicago, Illinois, or at such other place as the Parties may mutually agree, unless postponed or otherwise adjusted pursuant to the terms of this Agreement. The Parties hereby agree that, in addition to Seller’s rights to postpone the Closing arising under any other Section of this Agreement (including, without limitation, Section 4 hereunder), Seller may, upon written notice delivered to Buyer not less than fifteen (15) days before the Closing Date, unilaterally elect to postpone the Closing Date to a specified date not later than November 18, 2005.
  9.   Closing Deliveries .
(a)      Seller’s Closing Deliveries . At Closing, Seller shall execute and deliver to Buyer, or cause to be executed and delivered to Buyer, all of the following (collectively, “ Seller’s Closing Documents ”):
          (1)      Deeds . Special Warranty Deeds conveying to Buyer all of the Subject Property, free and clear of all encumbrances claimed by, through or under Seller, except only the Permitted Encumbrances (altogether, the “ Deeds ”).
          (2)      FIRPTA Affidavit . An affidavit of non-foreign status properly containing such information as is required by IRC Section 1445(b)(2) and its regulations.
          (3)      Title-related Documents . Such affidavits of Seller or other documents as may be reasonably required by the Title Company to record the Deeds and issue the Title Policies required by this Agreement.
          (4)      Certificate . A certificate signed by an authorized agent of Seller and dated as of the Closing Date reaffirming the truth, correctness, and completeness of all of Seller’s representations and warranties under Section 6(a) of this Agreement.
          (5)      Files and Records . Copies of all Due Diligence Documents in Seller’s possession on the Closing Date.
          (6)      Resolutions . Corporate resolutions of Seller in such form as may be reasonably satisfactory to the Title Company to evidence Seller’s authority to transfer the Property.

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          (7)      Gap Affidavit . If required by the Title Company, for each Seller, a “gap” affidavit executed by such Seller and in form and substance reasonably acceptable to the Title Company to permit removal (by a so-called “gap” endorsement) of the standard exception from coverage for defects, liens, encumbrances, adverse claims, or other matters, if any, created, first appearing in the public records, or attaching subsequent to the effective date of the Title Commitment but before the date Buyer acquires for value the estate covered by the Title Policy.
          (8)      Plans and Specifications . All plans and specifications related to the Subject Property, to the extent in Seller’s actual possession and or under Seller’s control on the Closing Date.
          (9)      Certificate of Occupancy . A certificate of occupancy (or comparable permit or license) with respect to each property comprising the Subject Property, to the extent in Seller’s actual possession or under Seller’s control on the Closing Date.
In addition, Seller shall at Closing cause the Title Company to deliver to Buyer the Title Policies required by this Agreement (with “extended coverage” over the standard exceptions for gap matters, municipal fees and charges, mechanics’ and materialmen’s liens, rights or claims of parties in possession, matters that would be disclosed by current surveys of the Subject Property, easements, and adverse claims), together with the following endorsements (or the substantial, local equivalent of such endorsements) relating to the Subject Property, to the extent that such endorsements are customarily available in the respective jurisdictions in which the Subject Property is located (altogether, the “ Endorsements ”): (i) an ALTA 9 (owner’s) restrictions, encroachments, and minerals endorsement; (ii) an ALTA zoning 3.1 endorsement (with parking); (iii) an endorsement assuring that the property insured by the Title Policies is the same as the property described in the Surveys; (iv) an access endorsement; (v) a tax parcel endorsement; (vi) a contiguity endorsement (if applicable); (vii) a subdivision or plat act endorsement; and (viii) a utility facilities endorsement.
Seller acknowledges that Buyer shall itself secure issuance of any so-called “Fairway” and “successor owner” endorsements that Buyer may desire with respect to the Subject Property. Accordingly, to the extent that Seller may do so without incurring any material cost, expense, risk of claim, or liability, Seller shall reasonably cooperate with Buyer’s efforts to secure such endorsements.
(b)      Failure to Secure Endorsements.
          (1)     If, despite Seller’s reasonable efforts, Seller shall, as of the date that is two (2) days before the original Closing Date, be unsuccessful in efforts to secure issuance of any requisite Endorsement(s) with respect to any one or more of the discrete parcels comprising the Subject Property (in each instance, a “ Title Defective Parcel ,” and collectively the “ Title Defective Parcels ”), then Seller shall:
(i) As to all of the Subject Property other than the Title Defective Parcel(s), complete Closing, on such Closing Date, as required under this Agreement; and

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(ii) As to the Title Defective Parcel(s), deliver to Buyer, not less than two (2) nor more than four (4) days before such Closing Date, a written notice (a “ Title Defective Notice ”) of Seller’s election (in Seller’s sole discretion): ( w ) to postpone the Closing Date as to one or more identified Title Defective Parcel(s) to a Postponed Closing Date not later than November 18, 2005; and/or ( x ) to remove one or more identified Title Defective Parcel(s) from the Subject Property under this Agreement (individually an “ Eliminated Defective Parcel ” and collectively the “ Eliminated Defective Parcels ”).
Seller shall deliver a Title Defective Notice with respect to every Title Defective Parcel, and in its Title Defective Notice shall elect either of ( w ) or ( x ), above., with respect to each Title Defective Parcel.
          (2)     As to the Eliminated Defective Parcel(s), Buyer may elect, by delivering written notice (a “ Defective Parcel Waiver Notice ”) of such election to Seller within three (3) days after Seller’s delivery of the Title Defective Parcel Notice, to consummate Buyer’s acquisition, pursuant to the terms of this Agreement, of any one or more Title Defective Parcels, which Eliminated Defective Parcel(s) to be so acquired (individually a “ Restored Defective Parcel ” and collectively the “ Restored Defective Parcels ”) shall be specifically identified by Buyer in the Defective Parcel Waiver Notice. (If Buyer’s Defective Parcel Waiver Notice shall not state Buyer’s election to consummate Buyer’s acquisition of all Eliminated Defective Parcels, then Seller’s election under ( x ), above, shall continue to apply to those of the Eliminated Defective Parcels not specified by as Restored Defective Parcels, whereupon neither Party shall have any further obligations hereunder with respect to such Eliminated Defective Parcel(s) not so specified as Restored Defective Parcels, save only for such obligation and liabilities as may expressly survive the termination of this Agreement.) The transfer of the Restored Defective Parcel(s) shall be closed on the Postponed Closing Date—or, if Seller shall not have identified a Postponed Closing Date in its Defective Parcel Waiver Notice, on a date mutually agreed between Buyer and Seller, which date shall be no later than November 18, 2005—without any reduction in the aggregate Purchase Price allocated (as specified on the attached Exhibit B ) to the Restored Defective Parcel(s), according to the terms of Section 9 of this Agreement. Buyer shall then take all Restored Defective Parcels without the requisite Endorsement(s), the lack of which Endorsement(s) shall be considered additional Permitted Exceptions for which Seller shall have neither any further obligation whatsoever nor any liability whatsoever for any loss, damage, or diminution in value with respect to the Subject Property.
          (3)     As to all Title Defective Parcel(s) other than the Restored Defective Parcel(s) and the Eliminated Defective Parcel(s), Seller shall, between delivery of the Title Defective Notice and the Postponed Closing Date, make reasonable and diligent efforts to cause the Title Company to issue all requisite Endorsements affecting the identified Title Defective Parcel(s), and Seller and Buyer shall, on the Postponed Closing Date, immediately complete closing, according to the terms of Section 9 of this Agreement, on all of the Title Defective Parcel(s) as to which the requisite Endorsement(s) have been secured. If Seller shall not, despite its reasonable and diligent efforts, cause the Title Company, by the Postponed Closing Date, to issue the requisite Endorsement(s) as to the Title Defective Parcel(s), then Seller may elect, in Seller’s sole discretion and on written notice to Buyer (a “ Final Defective Notice ”)

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delivered on the Postponed Closing Date, either ( y ) to remove from the Subject Property under this Agreement such Title Defective Parcel(s) as shall remain without the requisite Endorsement(s) on the Postponed Closing Date, or ( z ) to not remove from the Subject Property under this Agreement such Title Defective Parcel(s) as shall then remain without the requisite Endorsement(s). Buyer shall have three (3) days after delivery of the Final Defective Notice to elect, at its option, and as its sole remedy hereunder, either ( aa ) to terminate this Agreement as to any Title Defective Parcel(s) as then still lack the requisite Endorsement(s), whereupon neither Party shall have any further obligations hereunder with respect to such Title Defective Parcel(s), save only for such obligation and liabilities as may expressly survive the termination of this Agreement, or ( bb ) to waive the requirement that Seller cause the Title Company to issue the requisite Endorsement(s) as to any Title Defective Parcel(s), and, no later than November 30, 2005, to complete Closing on such Title Defective Parcel(s) without any reduction in the aggregate Purchase Price allocated (as specified in the attached Exhibit B ) to those Title Defective Parcel(s); provided that, if Buyer shall not, within the pertinent three (3) day notice period, provide Seller with written notice of Buyer’s electing one of the listed options with respect to each of the Title Defective Parcels as shall yet remain without the requisite Endorsement(s), then Buyer shall irrevocably be deemed to have agreed to accept title to the pertinent Title Defective Parcel(s) without the requisite Endorsement(s) and shall complete closing on all such Title Defective Parcels no later than November 30, 2005 without any reduction in the aggregate Purchase Price allocated (as specified in the attached Exhibit B ) to the Title Defective Parcel(s), the lack of such Endorsement(s) being considered additional Permitted Exceptions for which Seller shall have neither any further obligation whatsoever nor any liability whatsoever for any loss, damage, or diminution in value with respect to the Subject Property.
          (4)     If Seller shall at any time exercise any right under this Agreement to remove any Title Defective Parcel(s) from the Subject Property under this Agreement (and Buyer does not timely elect to instead proceed to acquire such Title Defective Parcel(s) notwithstanding the lack of the requisite Endorsement(s)), or if Buyer shall at any time exercise any right hereunder to terminate this Agreement as to any Title Defective Parcel(s), then the Parties shall timely execute a written modification to this Agreement, which modification shall (i) appropriately modify the depictions, legal descriptions, and other identifications set forth on the attached Exhibit A to this Agreement, and (ii) reduce the Purchase Price (or, in the case of a delay in closing as to any Title Defective Parcel(s), the then-outstanding portion thereof) by a sum equal to the amount of the Purchase Price allocated, on the attached Exhibit B , to the Title Defective Parcel(s) so removed.
(c)      Buyer’s Closing Deliveries . At Closing, Buyer will execute and deliver to Seller, or cause to be executed and delivered to Seller, all of the following (collectively, “ Buyer’s Closing Documents ”):
          (1)      Purchase Price . The Purchase Price, less the Earnest Money and Additional Earnest Money, plus or minus prorations and other adjustments, if any, by wire transfer of immediately available funds.

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          (2)      Title Documents . Such affidavits of Buyer or other documents as may be reasonably required by the Title Company in order to record the Deeds and issue the Title Policies (with Endorsements) required by this Agreement.
          (3)      Certificate . A certificate signed by an authorized agent of Buyer and dated as of the Closing Date reaffirming the truth, correctness, and completeness of all Buyer’s representations and warranties under Sections 6(b) of this Agreement.
(d)      Joint Closing Deliveries. At Closing, Seller and Buyer shall jointly execute and deliver the following:
          (1)      Closing Statement . A closing and proration statement, prepared by Seller and reasonably acceptable to Buyer, evidencing the Purchase Price, all payments with respect to Financial Disapproved Matters under Section 3 of this Agreement, all prorations described in Section 10 of this Agreement, and any other items customarily set down in such a statement.
          (2)      Real Estate Transfer Returns . Properly completed copies of any real estate transfer return, gains tax form, or other documentation required by any state in which the Subject Property shall be located as a condition to transfer of the Subject Property or recording of any Deeds.
          (3)      Leases . Lease agreements for the Subject Property in substantially the form and substance of the Form Lease (the “ Leases ”). (Seller has advised Buyer that either the Related Entity that shall convey one or more discrete parcel(s) of the Subject Property pursuant to this Agreement or another Related Entity directly or indirectly wholly owned by Seller shall, under the Leases, be the identified Tenant entity that shall lease such one or more discrete parcel(s) back from Buyer pursuant to the Leases.)
          (4)      Environmental Documents . Environmental transfer documents required by any state in which the Subject Property shall be located as a condition to transfer of the Subject Property or recording of any Deeds.
          (5)      Miscellaneous . Such other documents, instruments, and affidavits as shall be reasonably necessary to consummate the transaction contemplated by this Agreement (including, without limitation, a written assignment conveying to Buyer all of Seller’s right, title, and interest in and to any contract or license concerning the Subject Property that may freely be transferred without the consent or approval of any third party).
(e)      Escrow Closing . This transaction shall be closed through a so-called “New York-style” escrow closing with the escrow department of the Title Company in accordance with the general provisions of the Title Company’s usual form of deed and money escrow agreement (modified, as appropriate, to accommodate a “New York-style” closing), and with such special provisions inserted in the escrow agreement as may be required to conform to this Agreement, and subject to the terms of a separate money lender’s escrow, if any. The attorneys for both Seller and Buyer are authorized to sign the escrow agreement. Upon the

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creation of such escrow, payment of the Purchase Price and delivery of the Deeds shall be made through the escrow. The cost of the escrow shall be divided equally between Seller and Buyer, but Buyer shall be responsible for any costs associated with a separate money lender’s escrow. This Agreement shall not be merged into nor in any manner superseded by the escrow agreement.
10.     Costs and Prorations . The Parties shall pay, adjust, and apportion all expenses with respect to the Subject Property as follows:
(a)      Adjustments and Prorations .
          (1)      Real Estate Taxes and Special Assessments . All accrued general real estate and ad valorem taxes for the year of Closing applicable to the Subject Property shall be prorated on an accrual basis, using actual final tax bills, if available prior to Closing. If such bills are not available, then such taxes shall be prorated on the basis of the most currently available tax bills for the Subject Property and promptly re-prorated upon the issuance of final bills therefor, and any amounts due from any Party to the other shall be paid in cash at that time. Prior to or at Closing, Seller shall pay or have paid all general real estate and ad valorem tax bills that are due and payable prior to or on the Closing Date and shall furnish evidence of such payment to Buyer and the Title Company. Special assessments that are pending, certified, or become a lien against the Subject Property prior to Closing shall be apportioned at the Closing under a “due date” method of proration, with Seller paying all installments initially due at or prior to Closing and Buyer paying all installments initially due after the Closing. Such other items that are customarily prorated in transactions of this nature shall be ratably prorated. The amount of such prorations shall be adjusted in cash after Closing, as and when complete and accurate information becomes available, though in no event more than two (2) years after the Closing Date. Seller and Buyer agree to cooperate and use their good faith efforts to make such adjustments no later than thirty (30) days after final bills therefore are available. All of Seller’s and Buyer’s respective rights and obligations under this Section 10(a) shall survive Closing and delivery of the Deeds.
          (2)      Utility Charges/Operation Expenses . Seller shall pay all utility charges and other operating expenses attributable to the Subject Property up to and including the Closing Date, and Buyer shall pay all utility charges and other operating expenses attributable to the Property after the Closing Date.
          (3)      Rent. The tenant(s) under the Leases shall prepay all rent due under the Leases for the month in which Closing shall occur.
Except only as expressly provided otherwise in this Agreement, all prorations provided for herein shall be final.
For purposes of calculating prorations, Seller shall be deemed to be in title to the Property, and therefore entitled to the income therefrom and responsible for the expenses thereof, up to 11:59:59 p.m. on the day immediately preceding the Closing Date (or Postponed Closing Date, as the case may be), and Buyer to be in title to the Property thereafter. All prorations shall be made on the basis of the actual number of days of the year and month that have elapsed as of

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the Closing Date (or Postponed Closing Date, as the case may be). Except as otherwise stated above, the amount of prorations shall, if necessary, be adjusted in cash after Closing, as and when complete and accurate information becomes available, though in no event more than two (2) years after Closing.
(b)      Closing Costs .
          (1)      Title Insurance and Surveys . Seller shall pay the cost of the Title Policies required under this Agreement. Buyer shall pay the cost of the Endorsements to the Title Policies, all costs of any title insurance policies insuring the interests of Buyer’s lender (if any), and the cost of the Surveys.
          (2)      Closing Fee . Seller and Buyer will each pay one-half of any reasonable and customary closing fee charged by the Title Company (including, without limitation, any reasonable and customary fee for an escrow closing under Section 9(d) of this Agreement).
          (3)      Transfer Tax . With respect to any real estate transfer fee, transfer tax, or other fee charged by any pertinent Governmental Authority as an incident to transfer of title in the Subject Property (in each instance, a “ Transfer Tax ”), the Parties agree as follows: (i) that Seller shall pay any Transfer Tax owing with respect to transfer of title in any Subject Property located in the States of Georgia, Illinois, Iowa, Michigan, Nebraska, North Carolina, Ohio, South Carolina, and Wisconsin; (ii) that Buyer shall pay any Transfer Tax owing with respect to transfer of title in Subject Property located in the States of Alabama and Tennessee; and (iii) that Buyer and Seller shall each pay one-half of any Transfer Tax owing with respect to transfer of title in any Subject Property located in the States of Indiana, Louisiana, New Hampshire, Oregon, Pennsylvania, and Texas, and in the Province of Ontario.
          (4)      Recording Costs . Seller shall pay the recording fees owing to record any documents, other than the Deeds, necessary to secure issuance of the Title Policies in the form required by this Agreement. Buyer shall pay recording fees owing to record the Deeds.
          (5)      Attorney’s Fees . Each Party shall pay its own attorneys fees.
          (6)      Other Costs . All other costs shall be allocated in accordance with the customs prevailing in similar transactions in the area of the Subject Property.
(c)      Tax Actions. Buyer acknowledges that, after Closing, Seller may, in its sole discretion, and at its sole expense, continue, conclude, or settle (i) the protest of ad valorem taxes on the Property filed or commenced before the Effective Date and (ii) the pursuit of any ad valorem tax benefits, discounts, or relief filed or commenced before the Effective Date (together, the “ Tax Actions ”), and that Buyer shall make reasonable efforts to cooperate with Seller’s efforts to so continue, conclude, or settle any Tax Actions. Seller shall keep Buyer apprised of the status of all such Tax Actions. Seller acknowledges that between the Effective Date and the Closing Date, Seller shall not commence any new protest of ad valorem taxes on the Property without Buyer’s written consent in advance of such commencement. If, after Closing, Buyer

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shall continue any Tax Actions commenced before the Effective Date, the Parties agree that they shall, upon completion of such Tax Actions, prorate (as specified under Section 10(a)), an amount equal to (i) the award or refund from the Tax Actions less (ii) the sum of Seller’s and Buyer’s fees and costs, including attorney’s fees, incurred in connection with the Tax Actions. The provisions of this Section 10(c) shall survive the Closing.
11.     Default .
(a)     If Buyer defaults in its obligation to consummate this Agreement, Seller shall be entitled, at Seller’s sole election, to one of the following remedies: (i) to terminate this Agreement and assert a claim for damages for Seller’s actual, out-of-pocket costs and expenses incurred in connection with this Agreement and for Seller’s other actual damages suffered or incurred as a direct result of Buyer’s default hereunder; which claim shall not exceed a limit equal to the amount of the Earnest Money; or (ii) to pursue an action for specific performance on this Agreement.
(b)     If Seller defaults in its obligation to consummate this Agreement, Buyer shall be entitled, as Buyer’s sole remedy for such default, at Buyer’s sole election, to one of the following remedies: (i) to terminate this Agreement, receive the return of the Earnest Money (together with any interest earned thereon), and assert a claim for damages for Buyer’s actual, out-of-pocket costs and expenses incurred in connection with this Agreement and for Buyer’s other actual damages suffered or incurred as a direct result of Seller’s default hereunder, which claim shall not exceed a limit equal to the amount of the Earnest Money; or (ii) to receive the return of the Earnest Money and file an action for specific performance of this Agreement.
12.     Casualty and Condemnation .
(a)      Election. If, between the Effective Date and the Closing Date, the Subject Property shall be subject to a Casualty or a Taking, Seller shall notify Buyer of such Casualty or Taking within two (2) days of its occurrence, and further shall, on or before the earlier to occur of (i) the Closing Date or (ii) ten (10) days after providing Buyer notice of such Casualty or Taking, deliver to Buyer a written notice of Seller’s intention, at its sole discretion, either:
          (1)     to settle the adjustment of such Casualty or Taking before the Closing Date, and thereafter, at Closing, to deliver to Buyer (i) all Casualty or Condemnation Proceeds (together with a credit against the Purchase Price for the amount of Seller’s deductible amount on the policy that insures a pertinent Casualty) and (ii) a cash payment equal to the Estimated Reduction Amount;
          (2)     to consummate the transaction contemplated by this Agreement without settling the adjustment of such Casualty or Taking before the Closing Date, in which event Buyer shall receive a closing credit against the Purchase Price in an amount equal to the cost of restoring the Subject Property, as mutually agreed between Buyer and Seller, acting reasonably; or

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          (3)     to specify for removal from the transaction contemplated by this Agreement any Affected Property, and thereafter to close on the remainder of the Subject Property according to the terms of this Agreement.
If Seller shall elect to settle the adjustment of a Casualty or Taking before the Closing Date, Closing may be postponed by Seller for not more than sixty (60) days, but in no event later than December 30, 2005, to allow for such settlement. If Seller shall elect to remove from the Subject Property any Affected Property, conveying the remaining Subject Property as required under this Agreement, then the Parties shall at Closing execute a written modification to this Agreement, which modification shall (i) appropriately modify the depictions, legal descriptions, and other identifications set forth on the attached Exhibit A to this Agreement, and (ii) reduce the Purchase Price by a sum equal to the amount of the Purchase Price allocated, on the attached Exhibit B , to the Affected Property so removed.
(b)      Definitions .
          (1)     “ Affected Property ” shall mean any parcel comprising the Subject Property at which or to which any Casualty or Taking occurs prior to Closing.
          (2)     “ Casualty ” shall mean the occurrence of any Material damage or Material destruction to, or the suffering of any Material casualty by, any discrete parcel(s) of the Subject Property.
          (3)     “ Casualty or Condemnation Proceeds ” shall mean, with respect to a Taking or a Casualty, the amount of any insurance proceeds, condemnation awards or other proceeds or awards resulting from such Casualty or Condemnation which Seller receives or to which Seller is entitled.
          (4)     “ Estimated Reduction Amount ” shall mean, with respect to a Casualty or Taking, the difference between (i) the Casualty or Condemnation Proceeds and (ii) if greater than the Casualty or Condemnation Proceeds, (A) in the event of a Casualty, the cost of making all restorations and repairs to the Subject Property necessary to restore or repair, to the extent reasonably practical, the Subject Property to the same condition as existed immediately before such Casualty, including the amount of any actual damage or loss suffered by the Subject Property or its owner in connection with such Casualty, restoration, or repair, or (B) in the event of a Taking, the loss in value to the Subject Property plus actual damage suffered by the Subject Property or its owner in connection with such Taking (including, without limitation, the costs of any restorations and repairs required to restore and repair the Property, to the extent reasonably practical, to the same condition and utility as existed before such Taking)—in either instance (whether (A) or (B)), as such cost (or loss in value, as the case may be) may be reasonably estimated by a certified appraiser selected by Seller and reasonably acceptable to Buyer.
          (5)     “ Material ” shall mean, as to a given Affected Property, having a cost to repair or replace that exceeds five percent (5.0%) of the portion of the Purchase Price allocated to such Affected Property, or having incurred such damage, destruction, condemnation, or eminent domain as shall preclude an Affected Property’s being restored to a condition (i) that

21

 

would be, when restored, substantially comparable to the condition that existed on the Effective Date and (ii) that would comply, when restored, with all then-applicable Laws and Regulations.
          (6)     “ Taking ” shall mean the occurrence of any Material taking (or pending or threatened taking which has not been consummated) by eminent domain or condemnation by any public authority or by any similar proceeding of any Affected Property.
(c)      Lease Agreements . If Buyer is required, under the foregoing provisions, to consummate its acquisition of an Affected Property, the Seller shall cause the Lease(s) for such Affected Property(ies) to be executed and delivered to Buyer at Closing and there shall be no abatement whatsoever of any Rent (as defined in the Form Lease) due under such Lease(s).
13.     Broker’s Commission . Seller represents and warrants to Buyer that, in connection with the transaction contemplated by this Agreement, no third party broker or finder has been engaged or consulted by Seller or is entitled to compensation or commission in connection herewith other than CB Richard Ellis, Inc. (“ Broker ”), and that Seller shall pay the Broker’s commission at Closing. Seller shall defend, indemnify, and hold harmless Buyer from and against any and all claims of any broker, finder, or third party other than Broker claiming any right to commission or compensation by or through acts of Seller in connection herewith. Buyer represents and warrants to Seller that, in connection with the transaction contemplated by this Agreement, no third party broker or finder (other than Broker) has been engaged or consulted by Buyer or is entitled to compensation or commission in connection herewith. Buyer shall thus defend, indemnify, and hold harmless Seller from and against any and all claims of any broker, finder, or third party other than Broker claiming any right to commission or compensation by or through acts of Buyer in connection herewith.
14.     Indemnification .
(a)      Seller’s Indemnity .
          (1)     For the period specified hereunder, Seller shall indemnify and hold Buyer, its officers, directors, employees, agents, advisors, representatives, and affiliates (collectively “ Buyer Indemnitees ”) harmless from and against, and shall defend promptly the Buyer Indemnitees from and reimburse the Buyer Indemnitees for, any and all losses, actual damages, costs, expenses, liabilities, obligations, and claims of any kind (including, without limitation, reasonable attorneys’ fees and other costs and expenses) (collectively, “ Damages ”), but expressly excluding any incidental or consequential damages of any kind, that the Buyer Indemnitees may at any time suffer or incur, or become subject to, as a result or arising out of or in connection with:
                    (A)      For a period of ninety (90) days after Closing — any misrepresentation, breach, or inaccuracy (whether on the Effective Date or on the Closing Date) of any of the representations and warranties made by Seller in or pursuant to this Agreement, other than any such misrepresentation, breach, or inaccuracy (or any fact or circumstance the existence of which would constitute such a misrepresentation, breach, or inaccuracy) of which Buyer shall become aware between the Effective Date and the Closing Date, as to which

22

 

misrepresentation, breach, or inaccuracy Buyer shall be deemed to have fully waived all claims; and
                    (B)      For a period of two (2) years after Closing —any failure by Seller to carry out, perform, satisfy, and discharge any of its covenants, agreements, undertakings, liabilities, or obligations under this Agreement (other than those listed in Section 14(a)(1)(A), as to which the period of ninety (90) days there specified shall limit Seller’s indemnity), or under any of the documents (other than any Leases) delivered by Seller pursuant to this Agreement.
          (2)     Buyer shall as soon as reasonably practicable notify Seller of any claim, demand, action, or proceeding for which indemnification will be sought under this Section 14(a) of this Agreement; provided that failure to give such notice shall not release the Seller of its indemnification obligations under this Agreement except to the extent that such failure shall result in a failure of actual notice to the Seller and the Seller shall be materially damaged as a direct result of such failure to give notice. If such claim, demand, action, or proceeding is a third party claim, demand, action, or proceeding, Seller shall have the right at its expense to assume the defense thereof using counsel reasonably acceptable to Buyer, and Buyer shall have the right to participate, at its own expense, with respect to any such third party claim, demand, action, or proceeding. The assumption of such defense by the Seller shall not constitute an admission that such third party claim demand, action, or proceeding is indemnifiable pursuant to this Section 14(a). If Buyer shall in good faith determine that the conduct of the defense of any claim subject to indemnification hereunder or any proposed settlement of any such claim by the Seller might be expected to affect adversely the Buyer’s tax liability or the ability of the Buyer to conduct its business, or that the Buyer may have available to it one or more defenses or counterclaims that are inconsistent with one or more of those that may be available to the Seller in respect of such claim or any litigation relating thereto, Buyer shall have the right at all times to take over and assume control over the defense, settlement, negotiations or litigation relating to any such claim, at the sole cost of the Seller, provided that if the Buyer does so take over and assume control, the Buyer shall not settle such claim or litigation without the written consent of the Seller, such consent not to be unreasonably withheld. If Seller has the right to assume the defense of a claim and chooses not to do so, or if Seller does not have the right to assume the defense of a claim, Seller may participate in the contest and defense of such claim at its sole cost and expense, but Buyer Indemnitees shall have full authority to determine all actions with respect thereto, subject to the necessity of obtaining the other parties’ consent with respect to any settlements.
          (3)     Each Party defending a claim shall keep the other Party informed of the progress of the claim, including complying with all reasonable requests for copies of documents related to the claim under this Section 14(a) and the opportunity, from time to time, to consult with counsel defending such claim. In connection with any such third party claim, demand, action, or proceeding, the Parties shall cooperate with each other and provide each other with access to relevant books and records in their possession.
          (4)     Except with the prior written consent of the Buyer, the Seller, in the defense of any such claim or litigation, shall not consent to entry of any judgment or enter into any settlement that provides for injunctive or other nonmonetary relief affecting the Buyer or

23

 

the Subject Property, or that does not include as an unconditional term thereof the giving by each claimant or plaintiff to the Buyer Indemnitees of a release from all liability with respect to such claim or litigation.
          (5)     Notwithstanding any other provision of this Agreement, Seller’s total liability under Section 14(a)(1)(A), above, for any misrepresentation, breach, or inaccuracy of any of the representations and warranties made by Seller in or pursuant to this Agreement shall not in any event exceed, in the aggregate, the sum of Five Million and No/100 United States Dollars (USD 5,000,000.00).
(b)      Buyer’s Indemnity .
          (1)     For a period of two (2) years following the Closing Date, Buyer shall indemnify and hold Seller, its officers, directors, employees, agents, advisors, representatives, and affiliates (collectively “ Seller Indemnitees ”) harmless from and against, and shall defend promptly the Seller Indemnitees from and reimburse the Seller Indemnitees for, any Damages that the Seller Indemnitees may at any time suffer or incur, or become subject to, as a result or arising out of or in connection with:
                    (A)     Any misrepresentation, breach or inaccuracy (whether on the Effective Date or on the Closing Date) of any of the representations and warranties made by Buyer in or pursuant to this Agreement;
                    (B)     Any failure by Buyer to carry out, perform, satisfy, and discharge any of its or their covenants, agreements, undertakings, liabilities, or obligations under this Agreement (including, without limitation, the Earnest Money Escrow Agreement attached as Exhibit C , the Temporary Access Agreement attached as Exhibit H and the Lease Agreement attached as Exhibit I ) or under any of the documents (other than any Leases) delivered by Buyer pursuant to this Agreement; or
                    (C)     Buyer’s activities (including, without limitation, the activities of Buyer’s contractors, agents, employees, and assignees) under Section 4 of this Agreement.
          (2)     Seller shall as soon as reasonably practicable notify Buyer of any claim, demand, action, or proceeding for which indemnification will be sought under this Section 14(b) of this Agreement; provided that failure to give such notice shall not release the Buyer of its indemnification obligations under this Agreement except to the extent that such failure shall result in a failure of actual notice to the Buyer and the Buyer shall be materially damaged as a direct result of such failure to give notice. If such claim, demand, action, or proceeding is a third party claim, demand, action, or proceeding, Buyer shall have the right at its expense to assume the defense thereof using counsel reasonably acceptable to Seller, and Seller shall have the right to participate, at its own expense, with respect to any such third party claim, demand, action, or proceeding. The assumption of said defense by the Buyer shall not constitute an admission that such third party claim demand, action, or proceeding is indemnifiable pursuant to this Section 14(b). If Seller shall in good faith determine that the conduct of the defense of any claim subject

24

 

to indemnification hereunder or any proposed settlement of any such claim by the Buyer might be expected to affect adversely the Seller’s tax liability or the ability of the Seller to conduct its business, or that the Seller may have available to it one or more defenses or counterclaims that are inconsistent with one or more of those that may be available to the Buyer in respect of such claim or any litigation relating thereto, the Seller shall have the right at all times to take over and assume control over the defense, settlement, negotiations or litigation relating to any such claim at the sole cost of the Buyer provided that if the Seller does so take over and assume control, the Seller shall not settle such claim or litigation without the written consent of the Buyer, such consent not to be unreasonably withheld. If Buyer has the right to assume the defense of a claim and chooses not to do so, or if Buyer does not have the right to assume the defense of a claim, Buyer may participate in the contest and defense of such claim at its sole cost and expense, but Seller Indemnitees shall have full authority to determine all actions with respect thereto, subject to the necessity of obtaining the other Party’s consent with respect to any settlements.
          (3)     Each Party defending a claim under this Section 14(b) shall keep the other Party informed of the progress of the claim, including complying with all reasonable requests for copies of documents related to the claim and the opportunity, from time to time, to consult with counsel defending the claim. In connection with any such third party claim, demand, action, or proceeding, the Parties shall cooperate with each other and provide each other with access to relevant books and records in their possession.
          (4)     Except with the prior written consent of the Seller, the Buyer, in the defense of any such claim or litigation, shall not consent to entry of any judgment or enter into any settlement that provides for injunctive or other nonmonetary relief affecting the Seller or the Subject Property, or that does not include as an unconditional term thereof the giving by each claimant or plaintiff to the Seller Indemnitees of a release from all liability with respect to such claim or litigation.
(c)      Survival . This Section 14 shall survive the termination of this Agreement or the Closing of the transaction contemplated by this Agreement.
(d)      Lease Agreements . The provisions of this Section 14 shall not be applicable to the Lease Agreements and any obligations imposed thereunder.
15.     Conditions Precedent to Closing .
(a)      Seller’s Conditions . The obligation of Seller to sell and convey the Subject Property under this Agreement is subject to the satisfaction of each and every one of the following conditions precedent or conditions concurrent, the satisfaction of which may be waived only in writing by Seller:
          (1)     Buyer shall have delivered the Buyer’s Closing Documents required under Section 9 of this Agreement;
          (2)     Buyer shall have performed all of Buyer’s covenants and obligations under this Agreement with respect to Closing;

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          (3)     Buyer’s warranties and representations set forth herein shall be true and correct as of the Closing Date;
          (4)     Seller’s Board of Directors shall, no later than September 16, 2005, have approved in all respects, as provided under Section 5 of this Agreement, Seller’s consummation of the transaction contemplated by this Agreement;
          (5)     At no time between the Effective Date and the Closing Date shall any of the following have been done by or against or with respect to Buyer: (i) the commencement of a case under Title 11 of the U.S. Code, as now constituted or hereafter amended, or under any other applicable federal or state bankruptcy law or other similar law; (ii) the appointment of a trustee or receiver of any property interest; or (iii) an assignment for the benefit of creditors; and
          (6)     Buyer, after having received from Seller, not less than five (5) days before the Closing Date, written notice of Buyer’s default in any of its covenants or obligations under this Agreement, shall not have failed to cure such default.
Buyer hereby covenants that Buyer shall exercise all reasonable and diligent efforts to cause the conditions set forth in this Section 15(a) to be fully satisfied by the Closing Date.
(b)      Buyer’s Conditions . The obligation of Buyer to purchase and accept the Property under this Agreement is subject to the satisfaction of each and every one of the following conditions precedent or conditions concurrent, the satisfaction of which may be waived only in writing by the Buyer:
          (1)     Seller shall have delivered the Seller’s Closing Documents required under Section 9 of this Agreement;
          (2)     Seller shall have performed all of Seller’s covenants and obligations under this Agreement with respect to Closing;
          (3)     Seller’s warranties and representations set forth herein shall be true and correct as of the Closing Date;
          (4)     That at no time between the Effective Date and the Closing Date shall any of the following have been done by or against or with respect to Seller: (1) the commencement of a case under Title 11 of the U.S. Code, as now constituted or hereafter amended, or under any other applicable federal or state bankruptcy law or other similar law; (ii) the appointment of a trustee or receiver of any property interest; or (iii) an assignment for the benefit of creditors;
          (5)     Seller, after having received from Buyer, not less than five (5) days before the Closing Date, written notice of Seller’s default in any of its covenants or obligations under this Agreement, shall not have failed to cure such default; and

26

 

          (6)     The Subject Property shall be in substantially the same condition as on the Effective Date, subject only to any Casualty, any Taking, and any other event(s) that shall not (in the aggregate, if more than one) have resulted in a Material Adverse Change.
Seller hereby covenants that Seller shall exercise all reasonable and diligent efforts to cause the conditions set forth in this Section 15(b) to be fully satisfied by the Closing Date.
The conditions set forth in this Section 15(b) shall not be deemed unsatisfied by Seller’s failure to cause the Title Company to deliver any one or more of the Title Policies at Closing, provided that Seller shall cause to be delivered at Closing an insured written commitment (also known as a “marked-up” title commitment) to issue all such Title Policies.
(c)      Waiver . Either Party may at any time or times, at its election, waive any of the conditions to its obligations hereunder, but any such waiver shall be effective only if contained in a writing signed by such party. No such waiver shall reduce the rights or remedies of a Party by reason of any breach by the other Party (but if a condition is waived, the Party waiving the same may not rescind this Agreement on the basis of the failure of such waived condition). If for any reason any item required to be delivered to a Party by the other Party shall not be delivered when required, then such other Party shall—except as expressly otherwise provided under this Agreement—nevertheless remain obligated to deliver the same to the first Party.
16.     Assignment .
(a)      Generally . The terms, conditions and covenants of this Agreement shall be binding upon and shall inure to the benefit of the Parties and their respective nominees, successors, beneficiaries and assigns. Except as expressly provided below, Buyer may not assign its rights under this Agreement without the prior written consent of Seller, which consent may be withheld, conditioned, or delayed in Seller’s sole discretion. In the event of a permitted assignment of this Agreement by Buyer, Buyer’s permitted assignee shall be deemed to be the Buyer hereunder for all purposes hereof, and shall have all rights of Buyer hereunder, though the assignor shall not be released from any liabilities or obligations arising out of this Agreement
(b)      Expressly Permitted and Prohibited Assignments .
          (1)      Assignments Expressly Permitted. Provided that any such assignment shall be in a duly executed written instrument that shall contain (i) the permitted assignee’s expressed covenant to assume all of Buyer’s covenants and obligations as to all payment and performance arising under this Agreement, and (ii) Buyer’s expressed covenant to remain liable for any permitted assignee’s failure to duly perform any covenant or obligation as to payment and performance arising under this Agreement, Buyer may (subject to the preemptive limitations set forth in Section 16(a)(2), below), before any Closing hereunder, assign its rights under this Agreement, without Seller’s prior written consent, to any of the following: (A) any third party intermediary in connection with a tax-deferred exchange, for a First Industrial Affiliate, pursuant to Section 1031 of the Internal Revenue Code ; (B) First Industrial Realty Trust, Inc., a Maryland corporation (“ First Industrial ”), or to any corporate or partnership entity

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affiliated with, or related to, First Industrial (any such entity, a “ First Industrial Affiliate ”); or (C) any corporate, partnership, or limited liability entity in which First Industrial or an Affiliate is a partner, co-venturer, shareholder, or member (any such entity, a “ First Industrial Venture Partner ”). No such assignee shall accrue any obligations or liabilities hereunder until the effective date of such assignment, which effective date shall in every instance be before the date of any Closing hereunder. In the event of any such permitted assignment of this Agreement by Buyer, Buyer’s assignee shall be deemed to be the Buyer hereunder for all purposes hereof, and shall have all rights of Buyer hereunder (including, but not limited to, the right of further assignment), provided that any further assignee(s) of Buyer’s assignee(s) shall, notwithstanding any assignment permitted under this Section 16, at all times be jointly and severally liable with Buyer for payment and performance of all covenants and obligations arising under this Agreement. If a First Industrial Affiliate or First Industrial Venture Partner shall be an assignee under this Section 16, that assignee shall have the benefit of all of the representations, warranties and rights which, by the terms of this Agreement, are incorporated herein or relate to the conveyance in question, including, without limitation, all guaranties and indemnities granted to Buyer hereunder or in connection herewith to any trust, corporation, partnership, or limited liability company controlling, controlled by, or under common control with Buyer.
          (2)      Assignments Unconditionally Prohibited. Without regard to an entity’s otherwise being a permitted assignee under Section 16(b)(1), above, no assignment shall be permitted in any instance to any of the following (in each instance, a “ Prohibited Assignee ”): ( x ) any entity listed on Appendix C to the Form Lease, ( y ) any entity controlled by, in common control with, or controlling any entity listed on Appendix C to the Form Lease, or ( z ) any successor or assign of any of the foregoing.
(c)      Transfer to Designee . In addition to its right of assignment, Buyer shall also have the right, exercisable before Closing, to designate any permitted assignee under this Section 16 as the grantee or transferee of any or all of the conveyances, transfers, and assignments to be made by Seller at Closing hereunder, independent of, or in addition to, any assignment of this Agreement. If a permitted assignee shall be designated as a transferee hereunder, that transferee shall have the benefit of all of the representations and rights which, by the terms of this Agreement, are incorporated in or relate to the conveyance in question.
(d)      Notice of Assignment or Transfer . Notwithstanding anything to the contrary contained herein, Buyer shall deliver to Seller written notice of any assignment or transfer at least five (5) days before the effective date of such assignment or transfer.
17.     Notices . Any notice or other communication in connection with this Agreement shall be in writing and shall be sent by United States Certified Mail, return receipt requested, postage prepaid, by UPS Next Day Air ® (or by other nationally recognized overnight courier service guarantying next business day delivery), by telecopy, or by personal delivery, properly addressed as follows:
     
If to Seller:
  Rockwell Automation, Inc.
Mr. Denis DeCamp
Director — Real Estate

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  1201 South Second Street
Milwaukee, Wisconsin 53204
FAX: 414-382-3900
 
   
With a copy to:
  Rockwell Automation, Inc.
James F. Rosenow, Esq.
Associate General Counsel
1201 South Second Street
Milwaukee, Wisconsin 53204
FAX: 414-382-3900
 
   
And to:
  Quarles & Brady LLP
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attn: Michael J. Ostermeyer
FAX: 414-978-8956
 
   
If to Buyer:
  First Industrial Acquisitions, Inc.
311 South Wacker Drive
Suite 4000
Chicago, Illinois 60606
Attn: Chief Investment Officer
FAX: 312-922-9796
 
   
and a copy to:
  Barack Ferrazzano Kirschbaum
     Perlman & Nagelberg LLP
333 West Wacker Drive
Suite 2700
Chicago, Illinois 60606
Attn: Suzanne Bessette-Smith
FAX: 312-984-3150
All notices shall be deemed given three (3) days following deposit in the United States mail with respect to certified or registered letters, one (1) day following deposit if delivered to an overnight courier guaranteeing next day delivery, and on the same day if sent by personal delivery or telecopy (with proof of transmission and have copy delivered by overnight courier). Attorneys for each Party shall be authorized to give notices for each such party. Any Party may change its address for the service of notice generally, or for the service of specified notices under this Agreement, by giving written notice of such change to the other Party, in any manner above specified.
18.     “As Is” Sale . Except as otherwise expressly set forth in Section 6(a) hereof, Seller has made no warranties or representations, written or oral, express or implied, in any way

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related to the Subject Property including, without limitation, the condition of the Subject Property or any of its improvements, fixtures or systems, the presence or absence of any Hazardous Material(s) in, at, under or migrating to or from the Subject Property, the Subject Property’s compliance or noncompliance with any Laws and Regulations including, without limitation, any Environmental Laws, or the suitability or fitness of the Subject Property for any particular purpose. Except as otherwise expressly set forth in Section 6(a) hereof, Buyer agrees to purchase the Subject Property in its “AS-IS” condition. Subject only to (i) the specific warranties and representations made in Section 6(a) of this Agreement, (ii) Buyer’s satisfaction or waiver of the specific conditions precedent to Buyer’s obligation to close, as specified in this Agreement, and (iii) the limited indemnities expressly provided by Seller under this Agreement, Buyer hereby fully and forever waives, releases, discharges, and acquits Seller from any and all claims, actions, costs, damages, expenses, fees, fines, liabilities, losses, obligations, penalties, and suits, known or unknown, foreseen or unforeseen (including but not limited to, claims based on contract, right of contribution, common law and/or federal, state or local statute or ordinance, but specifically excluding claims based on Seller’s fraud), in any way arising out of, relating to or resulting from any misrepresentation, or any other tort alleged to have been committed by Seller in connection with or related to the sale of the Subject Property to Buyer, the condition of the Subject Property or connected with Buyer’s acquisition, ownership, development or use of the Subject Property. The Purchase Price for the Subject Property takes into account and shall sufficiently compensate Buyer for all the terms of the conveyance including, without limitation, Buyer’s obligation to accept the Subject Property in an “AS-IS” condition and Buyer’s waiver, release, discharge and acquittal of Seller.
In addition, except as otherwise expressly set forth in Section 6(a) of this Agreement, Seller has made no warranties or representations, written or oral, express or implied, in any way related to the documents that Seller has delivered or is required to deliver pursuant to this Agreement, including, without limitation, the accuracy or completeness of such documents. Except as otherwise expressly required under Section 6(a)(5) of this Agreement, Buyer agrees to receive any such documents in their “AS-IS” condition, in the same manner and to the same extent as Buyer has agreed to purchase the Subject Property in its “AS-IS” condition.
19.     Definitions .
(a)      Generally Defined Terms . For purposes of this Agreement, the terms set forth below shall have the stated meanings:
           “Buyer’s Knowledge” shall mean the actual knowledge of Mr. Johansson Yap, Chief Investment Officer for First Industrial Realty Trust, Inc.
           “Days” shall mean every calendar day. If, however, a “day” specified for action under this Agreement shall fall on a Saturday, Sunday, or legal holiday of the United States of America, the pertinent deadline shall be deemed to be the next occurring calendar day that is not a Saturday, Sunday, or legal holiday of the United States of America.
           “Governmental Authority” shall mean any agency, commission, department or body of any municipal, township, county, local, state or Federal governmental or

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quasi-governmental regulatory unit, entity or authority having jurisdiction or authority over all or any portion of the Subject Property or the management, operation, use or improvement thereof.
           “Laws and Regulations” shall mean every applicable law, ordinance, regulation, order, rule, judgment, requirement, consent agreement, or other declaration or measure of any Governmental Authority, and the orders, rules and regulations of the Board of Fire Underwriters where the Subject Property is situated, or of any other body now or hereafter constituted exercising lawful or valid authority over the Subject Property, or any portion thereof, or of the sidewalks, curbs, roadways, alleys, entrances or railroad track facilities adjacent or appurtenant thereto, or exercising authority with respect to the use or manner of use of the Subject Property, or such adjacent or appurtenant facilities.
           “Material Adverse Change” shall mean (i) any change in the physical condition, efficiency, operation, or utility of the Subject Property that would have a material adverse effect on the Subject Property’s operating capacity as of the Effective Date, and (ii) any materially adverse effect or change in the ability of Seller to consummate the transaction contemplated by this Agreement.
           “Seller’s Knowledge” shall mean the actual knowledge of Mr. Denis DeCamp, Director of Corporate Real Estate for Rockwell Automation, Inc.
(b)      Other Defined Terms . The following terms shall have the meanings defined for such terms in the Sections set forth below:
     
Term   Section
 
Additional Earnest Money
  2(b)
Affected Property
  12(b)(1)
Agreement
  Recitals
Authorized Consultants
  4(b)(2)
Broker
  13
Buyer
  Recitals
Buyer’s Closing Documents
  9(c)
Buyer Indemnitees
  14(a)(1)
Buyer’s Parties
  20(a)(1)
Casualty
  12(b)(2)
Casualty or Condemnation Proceeds
  12(b)(3)
Closing
  8
Closing Date
  8
Commitments
  3(a)(1)
Confidential Information
  20(a)
Container
  Exhibit J
Contingency Date
  4(c)(1)
Damages
  14(a)(1)
Deeds
  9(a)(1)
Defective Parcel Waiver Notice
  9(b)(2)
Disapproval Deadline
  3(b)

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Term   Section
 
Disapproved Matters
  3(b)
Due Diligence Documents
  4(a)(1)
Earnest Money
  2(b)
Effective Date
  Recitals
Eliminated Defective Parcels
  9(b)(1)(ii)
Eliminated Postponed Parcels
  3(b)(2)(B)(ii)
Endorsements
  9(a)(9)
Environmental Condition
  4(b)(4)
Environmental Law
  Exhibit J
Environmental Permit
  Exhibit J
Environmental Reports
  4(c)(2)
Escrow Agreement
  2(b)
Estimated Reduction Amount
  12(b)(4)
Final Defective Notice
  9(b)(3)
Final Postponement Notice
  3(b)(2)(D)
Financial Disapproved Matters
  3(b)(1)
First Industrial
  16(b)(1)
First Industrial Affiliate
  16(b)(1)
First Industrial Venture Partner
  16(b)(1)
Form Lease
  5(a)(1)
Hazardous Condition
  Exhibit J
Hazardous Material
  Exhibit J
Improvements
  1(a)(2)
Land
  1(a)(1)
Leases
  9(d)(3)
Listed Encumbrances
  3(b)
Lists
  6(b)(2)(A)
Material
  12(b)(5)
Nonfinancial Disapproved Matters
  3(b)(2)
OFAC
  6(b)(2)
Orders
  6(b)(2)
Original Earnest Money
  2(b)
Parties
  Recitals
Phase II Assessments
  4(b)(2)
Postponed Closing Date
  3(b)(2)(B)(ii)
Postponed Parcel Notice
  3(b)(2)(B)(ii)
Postponed Parcels
  3(b)(2)(B)
Postponed Parcel Waiver Notice
  3(b)(2)(C)
Proposed Phase II Assessment
  4(b)(3)
Prohibited Assignee
  16(b)(2)
Purchase Price
  2(a)
Related Entities
  1(b)
Release
  Exhibit J
Replacements
  1(a)(3)
Resolution
  5(a)

32

 

     
Term   Section
 
Restored Defective Parcels
  9(b)(2)
Restored Postponed Parcels
  3(b)(2)(C)
Seller
  Recitals
Seller’s Closing Documents
  9(a)
Seller Indemnitees
  14(b)(1)
Subject Property
  1(a)
Surveys
  3(a)(3)
Taking
  12(b)(6)
Tax Actions
  10(c)
Termination Notice
  4(c)(1)
Title Defective Notice
  9(b)(1)(ii)
Title Defective Parcels
  9(b)(1)
Title Company
  2(b)
Title Documents
  3(a)(2)
Title Policies
  3(a)(1)
Transfer Tax
  10(b)(3)
Uncured Title Matters
  3(b)(2)(B)
20.     Miscellaneous .
(a)      Confidentiality. Buyer acknowledges that Buyer shall, during the course of this Agreement, receive, have access to, and produce certain information concerning Seller and the Subject Property that is, by its nature, confidential (the “ Confidential Information ”), which Confidential Information shall include, without limitation, (i) every Due Diligence Document, (ii) every document, chart, result, summary, written report, or other data with respect to any test, inspection, or study performed by Buyer pursuant to this Agreement (including pursuant to a Temporary Access Agreement of even date herewith), (iii) all other information obtained by Buyer with respect to the Property between the Effective Date and the last date of any Closing under this Agreement, and (iv) until such time as Seller shall have satisfied Seller’s condition under Section 5(a) of this Agreement, all terms, conditions, and covenants of this Agreement, together with the fact of Buyer’s and Seller’s negotiations and agreement with respect to the same. Confidential Information shall not include, however, any information or documentation that is publicly available, or that is made public by any person or entity other than Buyer or Buyer’s Parties, or that is made known or provided to any of Buyer or Buyer’s Parties under circumstances where ( y ) a third party providing information or documentation fails to identify the same as Confidential Information and ( z ) Buyer has no reasonable basis to know that such third party is disclosing Confidential Information. Buyer understands and acknowledges that the Confidential Information is unique and valuable to Seller, and that the Confidential Information is being made accessible to Buyer in strict confidence solely for the limited purpose of assisting Buyer in assessing Buyer’s purchase of the Property, as contemplated under this Agreement.. Accordingly:
          (1)      Buyer’s Covenant of Confidence. Except only (i) with respect to disclosures, in the ordinary course of Buyer’s business, to Buyer’s attorneys, consultants, Venture Partner(s), accountants, lenders, directors, partners, and employees (altogether, “ Buyer’s

33

 

Parties ”) (each of which shall, before receiving any Confidential Information, be advised of all Buyer’s covenants, conditions, and obligations set forth in this Section 20(a), and of the obligation to observe all such covenants, conditions, and obligations to the same extent as Buyer), and (ii) as otherwise expressly required by any Laws and Regulations, Buyer shall not disclose, directly or indirectly, or induce or permit any others (including, without limitation, any Buyer’s Parties) to disclose, directly or indirectly, any of the Confidential Information in any way to anyone without the prior written approval of Seller. Buyer further agrees not to intentionally or negligently use or permit the Confidential Information to be used (including, without limitation, by any of the Buyer’s Parties) in any manner detrimental to the Property, the Seller, or the Seller’s interest in the Property.
If Buyer is required by Laws and Regulations to disclose any Confidential Information that, save for the compulsion of such Laws and Regulations, would not be disclosed by Buyer under the terms of this Section 20(a), Buyer shall promptly inform Seller of such pending disclosure and the Parties shall cooperate in limiting (as far as possible) the amount of disclosed Confidential Information and in obtaining an appropriate protective order or similar protective measures.
          (2)      Buyer’s Indemnification. Buyer hereby promises to indemnify and hold harmless Seller against any loss, cost, or damage resulting to Seller as a direct result of any unauthorized use or disclosure of the Confidential Information by Buyer or Buyer’s Parties.
          (3)      Equitable Remedies. Buyer acknowledges that any unauthorized disclosure or use of the Confidential Information would cause the Seller irreparable injury and loss. Accordingly, Buyer agrees that, in the event of a breach or a threatened breach by Buyer of any provision of this Agreement, Seller shall be entitled to an injunction restraining Buyer from the disclosure or unauthorized use of any of the Confidential Information.
          (4)      Return of Confidential Information. Upon termination of this Agreement (if any), Buyer shall promptly deliver to Seller all copies of the Confidential Information.
          (5)      No Representation or Warranty of Seller. Except as may be expressly provided to the contrary in Section 6(a) of this Agreement, Seller’s furnishing of any Confidential Information shall not be, and shall not be interpreted as, any representation or warranty of any kind by Seller, by its directors, officers, or employees, by any of Seller’s brokers or other agents engaged by Seller related to or involving the Subject Property, or by any other representative of Seller who discusses the Subject Property with or provides information to Buyer or Buyer’s representatives. Further, the Confidential Information does not purport to be all-inclusive or to contain all of the information that a prospective purchaser may desire or require. While the Confidential Information has been gathered from sources that are deemed reliable, Seller—with the exception only of any representation or warranty of Seller expressly set forth in Section 6(a) of this Agreement—makes no representation or warranty, express or implied, as to the accuracy or completeness of this information, and no liability of any kind whatsoever is assumed by Seller and its agents with respect thereto.

34

 

All obligations of this Section 20(a) shall survive any termination of this Agreement. In addition, if any Postponed Parcel(s) or Title Defective Parcel(s) shall be removed from the Subject Property under this Agreement, all obligations of this Section 20(a) shall, with respect to all Parcel(s) so removed, survive the Closing of this Agreement.
(b)      Construction. The Parties acknowledge that each Party and its counsel have reviewed and approved this Agreement, and the Parties hereby agree that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting Party shall not be employed in the interpretation of this Agreement or any amendments or exhibits hereto. The Parties further acknowledge that titles and headings to sections and subsections in this Agreement are for purposes of reference only and shall in no way limit, define, or otherwise affect construction of this Agreement.
(c)      Entire Agreement. This Agreement contains the entire agreement between the Parties regarding the Property and supersedes all prior agreements, whether written or oral, between the Parties regarding the same subject. This Agreement may only be modified in writing.
(d)      Exhibits. The following Exhibits are attached to this Agreement and are hereby incorporated into this Agreement by reference: Exhibit A (Depictions, Legal Descriptions, and Other Identifications of the Subject Property); Exhibit B (Purchase Price Allocation); Exhibit C (Form of Earnest Money Escrow Agreement); Exhibit D (Form of Surveyor’s Certification); Exhibit E (Listed Encumbrances); Exhibit F (List of Authorized Environmental Contractors); Exhibit G (List of Due Diligence Documents); Exhibit H (Form of Temporary Access Agreement; Exhibit I (Form of Lease Agreement); and Exhibit J (Environmental Definitions).
(e)      Facsimile Signatures . Buyer and Seller agree that signatures on documents delivered by facsimile transmission shall be binding on all Parties, and respectively agree to provide an originally signed copy of any document delivered by facsimile within five (5) days after such delivery.
(f)      Governing Law. This Agreement and the legal relations between the Parties hereto shall be governed by and construed in accordance with the laws of the State of Wisconsin.
(g)      No Reliance. Except for any assignees permitted under this Agreement: (i) no third party is entitled to rely on any of the representations, warranties, or agreements of the Parties contained in this Agreement; and (ii) the Parties assume no liability to any third party because of any such reliance.
(h)      No Waiver. No waiver by any Party of the performance or satisfaction of any covenant or condition shall be valid unless in writing and shall not be considered to be a waiver by such Party of any other covenant or condition hereunder.

35

 

(i)      Possession; Risk of Loss. Seller shall deliver to Buyer possession of the Subject Property on the Closing Date, subject to Permitted Exceptions. All risk of loss or damage with respect to the Property shall pass from Seller to Buyer on the Closing Date.
(j)      Relationship of the Parties. The Parties acknowledge that neither Party is an agent for the other Party and that neither Party shall or can bind or enter into agreements for the other Party.
(k)      Severability . If any provision, clause or part of this Agreement, or application of the same under certain circumstances, is held invalid, the remainder of this Agreement and the application of such provision, clause, or part under other circumstances shall not be affected.
(l)      Successors. This Agreement shall bind and inure to the benefit of the Parties hereto and to their respective legal representatives, successors and permitted assigns.
(m)      Survival. Except for (i) the post-closing obligations of Buyer and Seller under this Agreement, and (ii) as otherwise specifically provided in this Agreement, none of the agreements, warranties, or representations contained herein shall survive Closing.
(n)      Termination. Upon termination of this Agreement for any reason, Buyer shall return to Seller with reasonable promptness all Due Diligence Documents and copies thereof (including the Title Commitment and the Seller’s Survey).
(o)      Time. Time is of the essence in the performance of each Party’s obligations hereunder.
21.     Effectiveness. This Agreement shall be effective only if signed by both Parties or if signed in counterpart by both Parties.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.
             
BUYER:
  SELLER:
First Industrial Acquisitions, Inc.,
  Rockwell Automation, Inc. ,
a Maryland corporation
  a Delaware corporation
 
           
By:
    By:  
Print Name:
    Print Name:  
Its:
    Its:  
 
           
Attest:
    Attest:  
Print Name:
    Print Name:  
Its:
    Its:  

36

 

EXHIBIT I
Lease Agreement
by and between
 
as Landlord
and
[Rockwell Automation, Inc ., a Delaware corporation ]
[specified Rockwell Automation affiliate , a __________ corporation ]
as Tenant
Leased Premises: ___________________________
Dated as of: ____________, 2005

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BASIC LEASE INFORMATION
This Basic Lease Information is attached to and incorporated by reference to a Lease Agreement between Landlord and Tenant as defined below. The Basic Lease Information is incorporated into and made a part of the Lease Agreement. If any conflict exists between any Basic Lease Information and the other terms of the Lease Agreement, then the Basic Lease Information shall control.
     
Lease Date:
  _________, 2005
 
   
Landlord:
  ___________________________
 
   
Tenant:
  [Rockwell Automation, Inc., a Delaware corporation]
[specified Rockwell Automation affiliate, a ___]
 
   
Guarantor:
  [If Tenant is a Rockwell Automation affiliate: Rockwell Automation, Inc., a Delaware corporation]
 
[If Tenant is Rockwell Automation, Inc.: None]
 
   
Premises:
   
 
   
Initial Term:
  [Specify agreed Initial Term, which shall vary, depending on the Leased Premises, according to the schedule set forth on Schedule A to this Lease]
 
Commencement Date:
  [Closing Date]
 
   
Expiration Date:
   
 
   
Tenant Termination
Rights:
  [Appropriate time frames to be inserted, depending on each Initial Term 1 ]. As provided in Section 5 of this Lease, all termination rights are subject to Tenant’s timely delivering twelve (12) months’ prior written notice of termination, as well as to Tenant’s payment of a Termination Fee in an amount equal to one year’s Basic Rent, half of which Termination Fee shall be paid with delivery of a Termination Notice, and the balance of which shall be paid on the Termination Date.
 
   
Initial Term
Basic Rent:
  [Specify agreed monthly payment of Basic Rent, which shall vary, depending on the Leased Premises, according to the schedule set forth on Schedule A to this Lease]
 
   
Renewal Terms:
  Four (4) consecutive terms of five (5) Lease Years each
 
1   In a 5 year term, accelerated termination shall be permitted upon expiration of 3 rd year of term; in a 10 year term, accelerated termination shall be permitted upon expiration of 7 th year of term; in a 15 year term, accelerated termination shall be permitted upon expiration of 12 th year of term.

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Renewal Term
  Renewal Term:   Basic Rent
Basic Rent:
  First:   100% of Initial Term Basic Rent
 
  Second:   107.5% of First Renewal Term’s Basic Rent
 
  Third:   107.5% of Second Renewal Term’s Basic Rent
 
  Fourth:   107.5% of Third Renewal Term’s Basic Rent
Threshold Amount:   [Parties will agree upon appropriate amount for each leasehold, on an
individual basis]
 
       
Broker/Agent:   CB Richard Ellis
 
       
Tenant’s Address:
       
 
       
Landlord’s Address:
       

I-3

 

This Lease Agreement (this “ Lease ”), made as of this ___day of _________, 2005, between _________ (“ Landlord ”) and [ Rockwell Automation, Inc , a Delaware corporation][specified Rockwell Automation affiliate, a ___corporation] (“ Tenant ”).
In consideration of the rents and provisions herein stipulated to be paid and performed, Landlord and Tenant hereby covenant and agree as follows:
1.      Certain Definitions and Basic Provisions . The definitions and basic provisions set forth in the Basic Lease Information attached hereto are incorporated herein by reference for all purposes. Additionally, the following terms shall have the following meanings when used in this Lease:
“ Additional Rent ” shall mean all amounts due by Tenant under this Lease excepting only Basic Rent, provided that “Additional Rent” hereunder shall not in any instance include any building or account management, building or account administration, or similar fee of any kind.
“ Alterations ” shall mean all changes, additions or improvements to, all alterations, reconstructions, renewals, replacements or removals of and all substitutions or replacements for any of the Improvements, both interior and exterior, structural and non-structural, and ordinary and extraordinary.
“ Appurtenances ” shall mean all tenements, hereditaments, easements, rights-of-way, rights, privileges in and to the Land, including (a) easements over other lands granted by any Easement Agreement and (b) any streets, ways, alleys, vaults, gores or strips of land adjoining the Land.
“ Basic Rent ” shall mean the Initial Term Basic Rent, as defined in Paragraph 6 and the Basic Lease Information, and the Renewal Term Basic Rent, as defined in Paragraph 6 and the Basic Lease Information.
“ Basic Rent Payment Dates ” shall mean the Basic Rent Payment Dates as defined in Paragraph 6.
“ Casualty ” shall mean any injury or damage to the Leased Premises, whether by fire or other casualty, that shall result in damage the cost to repair which shall exceed One Hundred Thousand and No/100 United States Dollars (USD 100,000.00).
“ Commencement Date ” shall mean the Commencement Date as defined in Paragraph 5 and the Basic Lease Information.
“ Condemnation ” shall mean (a) any taking of all or a portion of the Leased Premises (i) in or by condemnation or other eminent domain proceedings pursuant to any Law, general or special, or (ii) by reason of any agreement with any condemnor in settlement of or under threat of any such condemnation or other eminent domain proceeding, or (b) any de facto condemnation. The Condemnation shall be considered to have taken place as of the later of the date actual physical possession is

I-4

 

taken by the condemnor, or the date on which the right to compensation and damages accrues under the law applicable to the Leased Premises.
“ Condemnation Notice ” shall mean notice or knowledge of the institution of or intention to institute any proceeding for Condemnation.
“ Default Rate ” shall mean the Default Rate as defined in Paragraph 7(a)(ii).
“ Easement Agreement ” shall mean any conditions, covenants, restrictions, easements, declarations, licenses and other agreements listed as Permitted Encumbrances or as may hereafter affect the Leased Premises.
“ Environmental Law ” shall mean (i) whenever enacted or promulgated, any applicable federal, state, and local law, statute, ordinance, rule, regulation, license, permit, authorization, approval, consent, court order, judgment, decree, injunction, code, requirement or agreement with any governmental entity, (x) relating to pollution (or the cleanup thereof), or the protection of air, water, vapor, surface water, groundwater, drinking water supply, land (including land surface or subsurface), plant, aquatic and animal life from injury caused by a Hazardous Substance or (y) concerning exposure to, or the use, containment, storage, recycling, reclamation, reuse, treatment, generation, discharge, transportation, processing, handling, labeling, production, disposal or remediation of any Hazardous Substance or Hazardous Condition, in each case as amended and as now or hereafter in effect, and (ii) any common law or equitable doctrine (including, without limitation, injunctive relief and tort doctrines such as negligence, nuisance, trespass and strict liability) that impose liability or obligations or injuries or damages due to or as a result of the presence of, exposure to, or ingestion of, any Hazardous Substance. The term Environmental Law includes, without limitation, the federal Comprehensive Environmental Response Compensation and Liability Act of 1980, the Superfund Amendments and Reauthorization Act, the federal Water Pollution Control Act, the federal Clean Air Act, the federal Clean Water Act, the federal Resources Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste Amendments to RCRA), the federal Solid Waste Disposal Act, the federal Toxic Substance Control Act, the federal Insecticide, Fungicide and Rodenticide Act, the federal Occupational Safety and Health Act of 1970, the federal National Environmental Policy Act and the federal Hazardous Materials Transportation Act, each as amended and as now or hereafter in effect and any similar state or local Law.
“ Environmental Violation ” shall mean any of the following that shall occur (or have occurred) at any time during the Term or during the occupancy of the Leased Premises, prior to the Commencement Date, by Tenant (including any entity that controls, is controlled by, or is under common control with Tenant):
          (i)     Any direct or indirect discharge, disposal, spillage, emission, escape, pumping, pouring, injection, leaching, release, seepage, filtration or transporting of any Hazardous Substance at, upon, under, onto or within the Leased Premises, or from the Leased Premises to the environment, to the extent that the same

I-5

 

either (1) violates any applicable Environmental Law or (2) is so in excess of any reportable quantity established under any Environmental Law that such excess quantity ( x ) would require remediation under any applicable Environmental Law or ( y ) would be likely to result in any liability to any federal, state or local government or any other Person for the costs of any removal or remedial action or natural resources damage or for bodily injury or property damage;
          (ii)     the abandonment or discarding of any barrels, containers or other receptacles containing any Hazardous Substances in violation of any applicable Environmental Laws;
          (iii)     any activity, occurrence or condition which is likely to result in any liability, cost or expense to Landlord or any other owner or occupier of the Leased Premises, or which would result in a creation of a lien on the Leased Premises under any applicable Environmental Law; or
          (iv)     any violation of or noncompliance with any applicable Environmental Law.
“ Event of Default ” shall mean an Event of Default as defined in Paragraph 21.
“ Expiration Date ” shall mean the Expiration Date as defined in Paragraph 5 and the Basic Lease Information.
“ GAAP ” shall mean Generally Accepted Accounting Principles, consistently applied.
[“ Guarantor ” shall mean Rockwell Automation, Inc. if Tenant is a subsidiary thereof, together with any other Person that after the date hereof executes a Guaranty Agreement.]
[“ Guaranty ” shall mean the Guaranty Agreement dated as of the date hereof from Guarantor to Landlord.] [Guaranty shall be in substantially the form set forth on the attached Schedule B .]
“ Hazardous Condition ” means any condition which would support any claim or liability under any Environmental Law, including the presence of underground storage tanks in violation of any applicable Environmental Law.
“ Hazardous Substance ” means (i) any substance, material, product, petroleum, petroleum product, derivative, compound or mixture, mineral (including asbestos), chemical, gas, medical waste, or other pollutant, in each case whether naturally occurring, man-made or the by-product of any process, that is toxic, harmful or hazardous to the environment or public health or safety or (ii) any substance supporting a claim under any Environmental Law. Hazardous Substances include, without limitation, any toxic or hazardous waste, pollutant, contaminant, industrial waste, petroleum or petroleum-derived substances or waste, radioactive materials, asbestos, asbestos

I-6

 

containing materials, urea formaldehyde foam insulation, lead, and polychlorinated biphenyls.
“ Impositions ” shall mean the Impositions as defined in Paragraph 9.
“ Improvements ” shall mean the Improvements as defined in Paragraph 2 and Paragraph 31(h).
“ Initial Term ” shall mean the Initial Term as defined in Paragraph 5 and the Basic Lease Information.
“ Initial Term Basic Rent ” shall mean the Initial Term Basic Rent, as defined in Paragraph 6 and the Basic Lease Information.
“ Insurance Requirements ” shall mean the requirements of all insurance policies maintained in accordance with this Lease.
“ Land ” shall mean the Land as defined in Paragraph 2 and legally described on Appendix A .
“ Landlord Indemnified Parties ” shall mean the Landlord Indemnified Parties as defined in Paragraph 15(a) of this Lease Agreement.
“ Law ” shall mean any constitution, statute, rule of law, code, ordinance, order, judgment, decree, injunction, rule, regulation, or administrative or judicial determination, even if unforeseen or extraordinary, of every duly constituted governmental authority, court or agency, now or hereafter enacted or in effect.
“ Lease ” shall mean this Lease Agreement.
“ Lease Year ” shall mean, with respect to the first Lease Year, the period commencing on the Commencement Date and ending at midnight on the last day of the twelfth (12 th ) consecutive calendar month following the month in which the Commencement Date occurred, and each succeeding twelve (12) month period during the Term.
“ Leased Premises ” shall mean the Leased Premises as defined in Paragraph 2.
“ Legal Requirements ” shall mean the requirements of all present and future Laws (including but not limited to Environmental Laws) and all covenants, restrictions and conditions now or hereafter of record which may be applicable to Tenant or to the Leased Premises, or to the use, manner of use, occupancy, possession, operation, maintenance, alteration, repair or restoration of the Leased Premises.
“ LIBOR ” shall mean the London Inter Bank Offer Rate for one-year obligations, as published, from time to time, in The Wall Street Journal as the “LIBOR Rate (1 yr.)” in its column entitled “Money Rates.” In the event The Wall Street Journal

I-7

 

ceases publication or ceases to publish the “LIBOR Rate (1 yr.)” as described above, LIBOR shall be Federal Discount Rate as published, from time to time, in The Wall Street Journal as the “Federal Discount Rate” in its column entitled “Money Rates.”
“ Mortgage ” shall mean a Mortgage as defined in Paragraph 28(a).
“ Net Award ” shall mean (a) the entire award payable to Landlord by reason of a Condemnation whether pursuant to a judgment or by agreement or otherwise, or (b) the entire proceeds of any insurance required under Paragraph 16(a) (to the extent payable to Landlord), less any reasonable expenses incurred by Landlord in collecting such award or proceeds.
“ Partial Casualty ” shall mean any Casualty which does not constitute a Termination Event.
“ Partial Condemnation ” shall mean any Condemnation which does not constitute a Termination Event.
“ Permitted Encumbrances ” shall mean those covenants, restrictions, reservations, liens, conditions and easements and other encumbrances listed on Appendix B hereto (but such listing shall not be deemed to revive any such encumbrances that have expired or terminated or are otherwise invalid or unenforceable).
“ Permitted Third Party Transferee ” shall mean the Permitted Third Party Transferee as defined in Paragraph 20(g).
“ Person ” shall mean an individual, partnership, association, limited liability company, corporation or other entity.
“ Present Value ” of any amount shall mean such amount discounted by a rate per annum which is, at the time such present value is determined, the lower of (a) the Prime Rate or (b) LIBOR plus two hundred (200) basis points.
“ Prime Rate ” shall mean the interest rate per annum as published, from time to time, in The Wall Street Journal as the “Prime Rate” in its column entitled “Money Rates”. In the event The Wall Street Journal ceases publication or ceases to publish the “Prime Rate” as described above, the Prime Rate shall be the average per annum discount rate (the “ Discount Rate ”) on ninety-one (91) day bills (“ Treasury Bills ”) issued from time to time by the United States Treasury at its most recent auction, plus three hundred (300) basis points. If no such 91-day Treasury Bills are then being issued, the Discount Rate shall be the discount rate on Treasury Bills then being issued for the period of time closest to ninety-one (91) days.
“ Purchase Agreement ” shall mean the Purchase Agreement as defined in Paragraph 12(d).
“ Renewal Notice ” shall mean each Renewal Notice as defined in Paragraph 5(b).

I-8

 

“ Renewal Term ” shall mean each Renewal Term as defined in Paragraph 5 and the Basic Lease Information.
“ Renewal Term Basic Rent ” shall mean the Renewal Term Basic Rent, as defined in Paragraph 6 and the Basic Lease Information
“ Rent ” shall mean, collectively Basic Rent and Additional Rent.
“ Restoration Fund ” shall mean Restoration Fund as defined in Paragraph 19(a).
“ Site Assessment ” shall mean Site Assessment as defined in Paragraph 10(c).
“ State ” shall mean the state in which the Leased Premises are located.
“ Surviving Obligations ” shall mean any obligations of Tenant under this Lease which arise on or prior to the expiration or prior termination of this Lease or which survive such expiration or termination by their own terms.
“ Term ” shall mean the Initial Term and every exercised Renewal Term.
“ Termination Date ” shall mean the Termination Date as defined in Paragraph 5(e).
“ Termination Event ” shall mean a Termination Event as defined in Paragraph 18.
“ Termination Notice ” shall mean Termination Notice as defined in Paragraph 18.
“ Threshold Amount ” shall mean the amount as set forth in the Basic Lease Information.
2.      Demise of Premises . Landlord hereby demises and lets to Tenant, and Tenant hereby takes and leases from Landlord, for the Term and upon the provisions hereinafter specified, the following described property (hereinafter referred to as the “ Leased Premises ” which premises shall include:
          (i)     Such parcel(s) of real property as are depicted, legally described, or otherwise identified on the Appendix A attached to and made a part of this Lease, together with all of Landlord’s right, title, and interest in and to all of the following: (a) any privileges, profits, easements, interests, or rights that are in any manner appurtenant thereto; and (b) all of the beds of any streets within or adjoining such real property, up to the center of such beds; all of which collectively shall be referred to as the “ Land ”; and

I-9

 

          (ii)     All buildings and other improvements and fixtures located, as of the Commencement Date, upon the Land, including, without limitation, all of Landlord’s right, title, and interest in and to the following: (a) any mechanical systems structurally incorporated into such buildings, improvements, or fixtures (such as heating and air conditioning, mechanical, electrical, and plumbing systems); (b) any facilities used to provide any utility service, ventilation, or municipal services to such buildings, improvements, or fixtures (including, without limitation, all water, sewer, gas, electricity, and other utility pipes and lines and all other facilities therein or appurtenant thereto); and (c) any and all shrubbery and plantings forming a part thereof, all of which included items shall collectively be referred to as the “ Improvements. ”
  3.   Title and Condition .
(a)     The Leased Premises are demised and let subject to (i) the rights of any Persons in possession of the Leased Premises, (ii) the existing state of title of the Leased Premises, including any Permitted Encumbrances, (iii) any state of facts which an accurate survey or physical inspection of the Leased Premises might show, (iv) all Legal Requirements, including any existing violation of any thereof, and (v) the condition of the Leased Premises as of the commencement of the Term, without representation or warranty by Landlord.
(b)     LANDLORD LEASES AND WILL LEASE AND TENANT TAKES AND WILL TAKE THE LEASED PREMISES AS IS . TENANT ACKNOWLEDGES THAT LANDLORD HAS NOT MADE AND WILL NOT MAKE, NOR SHALL LANDLORD BE DEEMED TO HAVE MADE, ANY WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO THE LEASED PREMISES, INCLUDING ANY WARRANTY OR REPRESENTATION AS TO (i) ITS FITNESS, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE, (ii) THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, (iii) THE EXISTENCE OF ANY DEFECT, LATENT OR PATENT, (iv) LANDLORD’S TITLE THERETO, (v) VALUE, (vi) COMPLIANCE WITH SPECIFICATIONS, (vii) LOCATION, (viii) USE, (ix) CONDITION, (x) MERCHANTABILITY, (xi) QUALITY, (xii) DESCRIPTION, (xiii) DURABILITY (xiv) OPERATION (xv) THE EXISTENCE OF ANY HAZARDOUS SUBSTANCE, OR (xvi) COMPLIANCE OF THE LEASED PREMISES WITH ANY LAW OR LEGAL REQUIREMENT; AND ALL RISKS INCIDENT THERETO ARE TO BE BORNE BY TENANT. IN THE EVENT OF ANY DEFECT OR DEFICIENCY IN THE LEASED PREMISES OF ANY NATURE, WHETHER LATENT OR PATENT, LANDLORD SHALL NOT HAVE ANY RESPONSIBILITY OR LIABILITY WITH RESPECT THERETO AS TO TENANT, OR FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING STRICT LIABILITY IN TORT). THE PROVISIONS OF THIS PARAGRAPH 3(b) HAVE BEEN NEGOTIATED, AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY WARRANTIES BY LANDLORD TO TENANT, EXPRESS OR IMPLIED, WITH RESPECT TO THE LEASED PREMISES, ARISING PURSUANT TO THE UNIFORM COMMERCIAL CODE OR ANY OTHER LAW NOW OR HEREAFTER IN EFFECT OR ARISING OTHERWISE.

I-10

 

(c)     Tenant acknowledges that (i) fee simple title (both legal and equitable) to the Leased Premises is in Landlord and that Tenant has only the leasehold right of possession and use of the Leased Premises as provided herein.
(d)     Landlord hereby assigns to Tenant, without recourse or warranty, all assignable warranties, guaranties, indemnities and similar rights (collectively “ Warranties ”) which Landlord may have against any manufacturer, seller, engineer, contractor or builder in respect of the Leased Premises. Such assignment shall remain in effect until the expiration or earlier termination of this Lease, whereupon such assignment shall cease and all of said Warranties shall automatically revert to Landlord.
  4.   Use of Leased Premises; Quiet Enjoyment .
(a)     Tenant may occupy and use the Leased Premises for manufacturing, office, and/or warehouse/distribution, and/or any other use permitted under Law or Legal Requirements, and for no other purpose without the written consent of Landlord, which consent shall not unreasonably be conditioned, withheld, or delayed; provided, however, that Tenant shall not use or occupy or permit the Leased Premises to be used or occupied, nor do or permit anything to be done in or on the Leased Premises, in a manner which would violate any Law or Legal Requirement.
(b)     Subject to the provisions hereof, so long as no Event of Default has occurred and is continuing, Tenant shall quietly hold, occupy and enjoy the Leased Premises throughout the Term, without any hindrance, ejection or molestation by Landlord or those claiming by, through or under Landlord, provided that Landlord or its agents may enter upon and examine the Leased Premises at reasonable times and upon reasonable prior notice to Tenant (except in the case of any emergency, in which event no notice shall be required) for the purpose of inspecting the Leased Premises, verifying compliance or non-compliance by Tenant with its obligations hereunder and the existence or non-existence of an Event of Default or event which with the passage of time and/or notice would constitute an Event of Default, showing the Leased Premises to prospective lenders and purchasers and taking such other action with respect to the Leased Premises as is permitted by any provision hereof.
  5.   Term .
(a)     Subject to the provisions hereof, Tenant shall have and hold the Leased Premises for an initial term (such term, as extended or renewed in accordance with the provisions hereof, being called the “ Initial Term ”) commencing on the Commencement Date and ending on the Expiration Date as set forth in the Basic Lease Information.
(b)     Provided that if, on or prior to the Expiration Date or any other Renewal Date (as hereinafter defined) this Lease shall not have been terminated pursuant to any provision hereof, then Tenant shall have the options to extend this Lease as provided in the Basic Lease Information (each such extension, a “ Renewal Term ”). Tenant shall exercise its option to extend the Term for each Renewal Term only by

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giving written notice (in each instance, a “ Renewal Notice ”) to Landlord no later than twelve (12) months prior to the scheduled expiration of the Initial Term or the then-current Renewal Term, as the case may be. Notwithstanding the requirement of this Paragraph 5(b) that Tenant shall exercise its option to extend the Term, if at all, by delivering a Renewal Notice to Landlord no later than twelve (12) months prior to the scheduled expiration of the Initial Term (or, if applicable, the then-current Renewal Term), Landlord and Tenant acknowledge that Tenant’s inadvertent failure to timely provide a Renewal Notice would be unduly punitive, and thus further agree that the option(s) to renew accorded Tenant under this Paragraph 5(b) shall not in any event expire until Landlord shall have provided Tenant both (i) written notice that the deadline for Tenant’s timely delivery of the Renewal Notice has lapsed and (ii) ten (10) days after Tenant’s receipt of Landlord’s lapse notice to deliver the requisite Renewal Notice. If Tenant shall deliver the requisite Renewal Notice within such ten (10) day period after receiving Landlord’s lapse notice, Landlord agrees that such Renewal Notice shall be deemed timely. It shall be a condition precedent to Tenant’s right to deliver a Renewal Notice that there shall not, at the date on which Tenant delivers the Renewal Notice, exist an Event of Default by Tenant under this Lease. It shall further be a condition precedent to Tenant’s entitlement to commence a Renewal Term that there shall not, at the date on which the relevant Renewal Term commences, exist an Event of Default by Tenant under this Lease.
(c)     Any such extensions of the Term shall be subject to all of the provisions of this Lease, as the same may be amended, supplemented or modified.
(d)     If Tenant fails to exercise its option pursuant to Paragraph 5(b) to have the Term extended, then Landlord shall have the right during the remainder of the Term then in effect and, in any event, Landlord shall have the right during the last year of the Term, to (i) advertise the availability of the Leased Premises for sale or reletting and to erect upon the Leased Premises signs indicating such availability and (ii) subject to the expressed limitations set forth below, show the Leased Premises to any Permitted Third Party Transferees (and agents of the same) who are prospective purchasers or tenants, doing so at reasonable times upon reasonable prior notice to Tenant. In the exercise of said rights, Landlord shall provide Tenant at least two (2) business days’ notice in advance of any such showing, shall assure that every Person viewing the Leased Premises observe all reasonable safety rules specified by Tenant, and shall not unreasonably interfere with the operation of Tenant’s business at the Leased Premises. In addition, Landlord acknowledges that Tenant shall have the right to designate specified areas of the Leased Premises as restricted from access during such showings, and that no prospective purchaser, tenant, or agent viewing the Leased Premises pursuant to this Paragraph 5(d) shall be allowed to view any areas so designated unless the Person(s) to be shown the same shall first execute a confidentiality agreement, in a form then provided by Landlord that is reasonably acceptable to Landlord and Tenant, establishing the confidentiality of information that such Person(s) may gain during any viewing of the Leased Premises with respect to Tenant’s occupancy, operations, business and manufacturing processes, lines of business, inventory, materials, and personnel thereon.

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(e)     Tenant shall have the option (“ Termination Right ”) to terminate this Lease at [insert permitted termination date, based on Initial Term Lease, as described in the Basic Lease Information] (“ Termination Date ”). If Tenant elects to exercise the Termination Right, Tenant shall deliver written notice to Landlord (“ Termination Notice ”) at least twelve (12) months before the Termination Date. Additionally, if Tenant desires to exercise the Termination Right, Tenant shall be obligated to pay to Landlord a termination fee in an amount equal to the product of (i) twelve (12) times (ii) the monthly Initial Term Basic Rent (“ Termination Fee ”). Fifty percent (50%) of the Termination Fee is due and payable simultaneously with the delivery of the Termination Notice and fifty percent (50%) of the Termination Fee is due on the Termination Date. If Tenant fails to timely and properly exercise its Termination Right, then Tenant shall automatically be deemed to have irrevocably waived the Termination Right. It shall be a condition precedent to Tenant’s right to deliver a Termination Notice that there shall not, at the date on which Tenant delivers the Termination Notice, exist an Event of Default by Tenant under this Lease. It shall further be a condition precedent to Tenant’s entitlement to terminate this Lease on the Termination Date that there shall not, at the date on the Termination Date, exist an Event of Default by Tenant under this Lease. Upon the Termination Date, all obligations and liabilities of Tenant hereunder shall terminate except any Surviving Obligations.
6.      Basic Rent . Tenant shall pay or cause to be paid to Landlord, as annual rent for the Leased Premises, the following amounts, which amounts shall be payable in equal monthly installments commencing on the Commencement Date and continuing on the first day of each calendar month thereafter during the Term (each such day being a “ Basic Rent Payment Date ”): During the Initial Term, the Initial Term Basic Rent, as set forth in the Basic Lease Information; and during a Renewal Term, the Renewal Term Basic Rent for the pertinent Renewal Term, as set forth the Basic Lease Information. (Both the Initial Term Basic Rent and the Renewal Term Basic Rent, in the amounts payable under this Lease, shall be known for purposes of this Lease as the “ Basic Rent ”.) Each such rental payment shall be made to Landlord at its address set forth in the Basic Lease Information and/or to such other Persons, at such addresses as Landlord may direct by fifteen (15) days’ prior written notice to Tenant. Pro rata Basic Rent for the period from the date hereof through the last day of the month hereof shall be paid on the date hereof.
  7.   Late Charge; Default Rate .
(a)     Tenant shall pay and discharge:
          (i)     after the date all or any portion of any installment of Basic Rent is due and not paid, an amount equal to five percent (5%) of the amount of such unpaid installment or portion thereof, provided, however, that with respect to the first two late payments of all or any portion of any installment of Basic Rent in any Lease Year, such late charge shall not be due and payable unless the Basic Rent has not been paid within ten (10) days following the due date thereof; and

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          (ii)     interest at the rate (the “ Default Rate ”) of three percent (3%) over the Prime Rate per annum on the following sums until paid in full: (A) all overdue installments of Basic Rent not paid within ten (10) days after the respective due dates thereof, and (B) all amounts of Additional Rent relating to obligations which Landlord shall have paid on behalf of Tenant not paid within fifteen (15) days of the respective due dates.
(b)     Tenant shall pay and discharge any Additional Rent within fifteen (15) days after Landlord’s written demand for payment thereof.
(c)     In no event shall amounts payable under Paragraph 7(a)(i) and (ii) exceed the maximum amount permitted by applicable law.
  8.   Net Lease; Non-Terminability .
(a)     This is a net lease and all Rent shall be paid without notice or demand and, without set-off, counterclaim, recoupment, abatement, suspension, deferment, diminution, deduction, reduction or defense (collectively, a “ Set-Off ”), except as otherwise expressly provided in this Lease.
(b)     Except as otherwise expressly provided herein, this Lease and the rights of Landlord and the obligations of Tenant hereunder shall not be affected by any event or for any reason or cause whatsoever foreseen or unforeseen.
(c)     The obligations of Tenant hereunder shall be separate and independent covenants and agreements, all Rent shall continue to be payable in all events (or, in lieu thereof, Tenant shall pay amounts equal thereto), and the obligations of Tenant hereunder shall continue unaffected unless the requirement to pay or perform the same shall have been terminated pursuant to an express provision of this Lease. All Rent payable by Tenant hereunder shall constitute “rent” for all purposes (including Section 502(b)(6) of the Federal Bankruptcy Code).
(d)     Except as otherwise expressly provided herein, Tenant shall have no right and hereby waives all rights which it may have under any Law (i) to quit, terminate or surrender this Lease or the Leased Premises, or (ii) to any Set-Off of any Rent.
9.      Payment of Impositions . Tenant shall pay and discharge, prior to delinquency, all taxes (including real and personal property, franchise, sales, gross receipts and rent taxes), all charges for any easement or agreement maintained for the benefit of the Leased Premises, all assessments and levies, all permit, inspection and license fees, all rents and charges for water, sewer, utility and communication services relating to the Leased Premises, and all other public charges whether of a like or different nature, even if unforeseen or extraordinary, imposed upon or assessed against (i) Tenant, (ii) Tenant’s possessory interest in the Leased Premises, (iii) the Leased Premises, or (iv) Landlord as a result of or arising in respect of the ownership, occupancy, leasing, use, or possession of the Leased Premises, any activity conducted on the Leased Premises, or the Rent (collectively, the “ Impositions ”); provided, that nothing herein shall obligate

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Tenant to pay any of the following: (A) income, excess profits or other taxes of Landlord which are determined on the basis of Landlord’s net income or net worth (unless such taxes are in lieu of or a substitute for any other tax, assessment or other charge upon or with respect to the Leased Premises which, if it were in effect, would be payable by Tenant under the provisions hereof or by the terms of such tax, assessment or other charge); (B) any estate, inheritance, succession, gift or similar tax imposed on Landlord; (C) any capital gains tax imposed on Landlord in connection with the sale of the Leased Premises to any Person; (D) any transfer taxes or fees due in connection with a sale or transfer of the Leased Premises to any Person; (E) any mortgage registration tax or fee with respect to any financing obtained by Landlord; or (F) any other Impositions of any kind caused by, resulting from, or imposed as an incident to Landlord’s sole dealing with respect to the Leased Premises. If any Imposition may be paid in installments, Tenant shall have the option to pay such Imposition in installments; in such event, Tenant shall be liable only for those installments which accrue during the Term. Tenant shall prepare and file all tax reports required by governmental authorities which relate to the Impositions. Promptly upon Tenant’s payment of any Impositions, Tenant shall deliver to Landlord copies of receipts or other evidence of such payment.
  10.   Compliance with Laws and Easement Agreements; Environmental Matters .
(a)     Tenant shall, at its expense, comply with and conform to, and cause the Leased Premises and any other Person occupying any part of the Leased Premises to comply with and conform to, Insurance Requirements and Legal Requirements (including all applicable Environmental Laws). Tenant shall not at any time (i) cause, permit or suffer to occur or exist any Environmental Violation or (ii) permit any sublessee, assignee or other Person occupying the Leased Premises under or through Tenant to cause, permit or suffer to occur or exist any Environmental Violation. Tenant shall be solely responsible for the cure or remediation of, and Tenant hereby covenants and agrees that it shall promptly correct, cure and remediate, so far as may be required by any applicable Environmental Laws, any Environmental Violation that is discovered to exist at any time during the Term; provided, however, that Tenant shall not in completing such cure or remediation be deemed to waive any right Tenant may have to pursue any action or remedy against any person or entity with respect to such Environmental Violation and to Tenant’s cure or remediation thereof, and indeed such right shall expressly be retained by Tenant alone.
(b)     Tenant, at its sole cost and expense, will at all times promptly and faithfully abide by, discharge and perform all of the covenants, conditions and agreements contained in any Easement Agreement on the part of Landlord or the occupier to be kept and performed thereunder. Tenant will not alter, modify, amend or terminate any Easement Agreement, give any consent or approval thereunder, or enter into any new Easement Agreement without, in each case, the prior written consent of Landlord, which consent shall not unreasonably be conditioned, withheld, or delayed.
(c)     Upon prior written notice from Landlord, Tenant shall permit such Persons as Landlord may designate (“ Site Reviewers ”) to visit the Leased Premises and

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perform environmental site investigations and assessments (“ Site Assessments ”) on the Leased Premises (i) for the purpose of determining whether there exists on the Leased Premises any Environmental Violation, (ii) in connection with any sale, financing or refinancing of the Leased Premises, (iii) if an Event of Default exists, or (iv) at any other time that, in the opinion of Landlord, a reasonable basis exists to believe that an Environmental Violation exists. Such Site Assessments may include both above and below the ground testing for Environmental Violations and such other tests as may be necessary, in the reasonable opinion of the Site Reviewers, to conduct the Site Assessments. Tenant shall supply to the Site Reviewers such historical and operational information regarding the Leased Premises as may be reasonably requested by the Site Reviewers to facilitate the Site Assessments, and shall make available for meetings with the Site Reviewers appropriate personnel having knowledge of such matters. The cost of any Site Assessments shall be paid by Landlord, unless it is determined that Tenant is in violation of any applicable Environmental Law, in which event Tenant shall pay the reasonable cost thereof.
(d)     If Tenant fails to reasonably comply with any requirement of any applicable Environmental Law in connection with any Environmental Violation which occurs or is found to exist, Landlord shall have the right (but not the obligation) to take such actions as Landlord shall deem reasonably necessary or advisable in order to cure such Environmental Violation in the manner, and to the extent, required by any applicable Environmental Laws. Any reasonable and out-of-pocket expenses actually incurred by Landlord pursuant to the preceding sentence shall constitute Additional Rent under this Lease, and thus shall be due and payable to Landlord pursuant to Paragraph 7(b) of this Lease. Tenant shall, however, assume all rights of action or remedy against every person or entity with respect to every Environmental Violation for which Tenant shall reimburse Landlord any expenses as Additional Rent under this Lease.
(e)     Tenant shall notify Landlord, in writing with reasonable detail, immediately after becoming aware of any Environmental Violation or noncompliance with any of the covenants contained in this Paragraph 10 and shall forward to Landlord promptly within ten (10) business days of receipt thereof copies of all orders, reports, notices, permits, applications or other communications relating to any such violation or noncompliance.
  11.   Liens; Recording .
(a)     Other than in connection with the granting of a leasehold mortgage pursuant to the express provisions of Paragraph 20(f) of this Lease, Tenant shall not, directly or indirectly, create or permit to be created or to remain and shall promptly discharge or remove any lien, levy or encumbrance on the Leased Premises or on any Rent or any other sums payable by Tenant under this Lease, other than the Permitted Encumbrances and any mortgage, lien, encumbrance or other charge created by or resulting from any act or omission of Landlord. NOTICE IS HEREBY GIVEN THAT LANDLORD SHALL NOT BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO TENANT OR TO ANYONE HOLDING OR OCCUPYING THE LEASED PREMISES THROUGH OR UNDER

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TENANT, AND THAT NO MECHANICS’ OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF LANDLORD IN AND TO THE LEASED PREMISES. LANDLORD MAY AT ANY TIME POST ANY NOTICES ON THE LEASED PREMISES REGARDING SUCH NON-LIABILITY OF LANDLORD.
(b)     At the request of Landlord or Tenant, Tenant and Landlord shall execute, deliver and record, file or register (collectively, “ record ”) all such instruments as may be required or permitted by any present or future Law in order to evidence the respective interests of Landlord and Tenant in the Leased Premises, and shall cause a memorandum of this Lease, and any supplement hereto or thereto, to be recorded in such manner and in such places as may be required or permitted by any present or future Law in order to protect the validity and priority of this Lease.
  12.   Maintenance and Repair .
(a)     Subject to the provisions of Paragraphs 12(b) and 12(c) below, Tenant shall at all times maintain the Leased Premises in as good repair and appearance as such Leased Premises is in on the date hereof and fit to be used for the intended use thereof in accordance with the practices generally recognized as then acceptable by other companies in its industry and operating comparable real properties in the geographic region in which the Leased Premises is located, reasonable wear and tear excepted. Without limitation of Tenant’s general obligations under this Paragraph 12(a), Tenant further covenants and agrees that, throughout the Term, Tenant shall act diligently and in good faith to make determinations as to when any one or more of the structural components or building systems comprising portions of the Leased Premises (e.g. roof, heating, ventilating, air conditioning, asphalt parking lot) has/have reached, or is/are nearing, the end of the useful life of the particular structural component(s) or building system(s), and Tenant shall be responsible for the prompt replacement of (rather than the further repair of) the structural component(s) and/or building system(s) that has reached or is nearing, in Tenant’s reasonable discretion, the end of its respective use life. Tenant shall promptly make all repairs or replacement of every kind and nature, whether foreseen or unforeseen, which may be required to comply with the foregoing requirements of this Paragraph 12(a). Subject to the provisions of Paragraphs 12(b) and 12(c) below, Landlord shall not be required to make any repair, whether foreseen or unforeseen, or to maintain the Leased Premises in any way, and Tenant hereby expressly waives any right which may be provided for in any Law now or hereafter in effect to make repairs at the expense of Landlord or to require Landlord to make repairs. Any repairs made by Tenant pursuant to this Paragraph 12(a) shall be made in conformity with the provisions of Paragraph 13.
(b)     Notwithstanding any provision to the contrary contained in this Lease (except Paragraph 12(c), below), Tenant shall not, during the final two (2) Lease Years of the Term, be required to make any replacements to the Improvements and/or the Leased Premises that would be considered capital expenditures under GAAP. Rather, subject only to Paragraph 12(c) below, in all such instances first occurring during the last two (2) Lease Years of the Term in which (i) a replacement is required (despite Tenant’s

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compliance with its obligations under Paragraph 12(a) above), (ii) a replacement shall constitute a capital expenditure (as determined in accordance with GAAP), and (iii) Tenant shall not yet have delivered a Renewal Notice pursuant to Paragraph 5(b) of this Lease, Landlord shall be obligated to make such replacements at Landlord’s expense, and Tenant shall pay to Landlord, as Additional Rent, only Tenant’s Share (as defined below) of the cost of such replacement(s) as provided herein. “Tenant’s Share” of the cost of each applicable capital replacement required to be made by Landlord during the last two (2) Lease Years of the Term shall be calculated by multiplying the actual, out-of-pocket cost to Landlord of that particular capital replacement (which cost shall not include any management fee, installation surcharge, or soft cost of any kind imposed by Landlord, as opposed to a third party, with respect to such capital replacement) by a fraction, the numerator of which shall be the remaining number of years in the Term of this Lease at the time the pertinent capital replacement is commenced, and the denominator of which shall be the useful life (in years) of the replacement then in question, determined in accordance with GAAP. Tenant’s Share of the cost of each applicable capital replacement shall constitute Additional Rent, but any Additional Rent due under this Paragraph 12(b) shall be payable within thirty (30) days after Tenant’s receipt from Landlord of reasonable written evidence showing Landlord’s (i) payment of the total cost of the replacement and (ii) determination of Tenant’s Share of the cost thereof calculated in accordance with the provisions hereof.
(c)     The provisions of Paragraph 12(b) shall, in all events and instances, be subject to the following limitations (such that if there is a conflict between the provisions of Paragraph 12(b) and those of this Paragraph 12(c), the provisions of this Paragraph 12(c) shall control in all events):
          (i)     If Landlord incurs a cost generally considered a capital expenditure under GAAP (a “ Capital Expenditure ”) at any time during the last two (2) Lease Years of the Term, and if Landlord has billed to Tenant Tenant’s Share of such capital expenditure, calculated in accordance with the preceding provisions of Paragraph 12(b), and if after Landlord incurs such Capital Expenditure, Tenant shall deliver a Renewal Notice pursuant to Paragraph 5(b) of this Lease, Tenant shall be obligated to pay to Landlord, as Additional Rent pursuant to Paragraph 7(b), the difference between (x) the actual total cost of the Capital Expenditure paid by Landlord less (y) the payment previously made to Landlord by Tenant representing Tenant’s Share of such capital expenditure, calculated in accordance with the preceding provisions of Paragraph 12(b);
          (ii)     If Tenant timely delivers a Renewal Notice, then from and after the delivery of such Renewal Notice, Landlord shall have no obligation to perform or incur capital expenditures under Paragraph 12(b) during the remainder of the then-applicable Term, prior to the commencement of the then-applicable Renewal Term; and
          (iii)     If the need for any capital replacement during the final two (2) Lease Years is based upon the expiration of the useful life of the structural or mechanical component in question (e.g. roof, HVAC system, asphalt parking lot), as reasonably determined by Landlord, and such expiration shall be the direct result of

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Tenant’s failure to timely comply with the maintenance requirements of Paragraph 12(a), then the provisions of Paragraph 12(b) shall not apply, and Tenant shall be solely responsible for the prompt and proper replacement (in accordance with the requirements of Paragraph 13) of that structural or mechanical component of the Leased Premises for which the useful life has expired or shall expire during the final two (2) Lease Years, as reasonably determined by Landlord.
(d)     Landlord hereby covenants that Landlord shall not take any action to terminate, nor permit by Landlord’s failure or inaction any termination of, any contractual right (including, without limitation, any warranty) arising under any maintenance-related or repair-related permit, license, or contract conveyed to Landlord under Section 9(a)(5) of Purchase and Sale Agreement dated as of August 1, 2005 between Rockwell Automation, Inc. and First Industrial Acquisitions, Inc. (“ Purchase Agreement ”). In addition, Landlord acknowledges that Tenant shall be authorized to act as Landlord’s attorney-in-fact for the purposes of all such permits, licenses, and contracts.
  13.   Alterations and Improvements .
(a)     Tenant shall have the right, with no consent of Landlord being required, to make Alterations (whether structural or non-structural) that do not cost in excess of the Threshold Amount as set forth in the Basic Lease Information; provided, however, that any such Alterations shall be substantially completed, according to the requirements set forth in Paragraph 13(c) of this Lease, before the Expiration Date.
(b)     If the cost of any Alterations is in excess of the Threshold Amount, or if Tenant shall wish to construct upon the Land any additional buildings, Tenant shall satisfy the following requirements.
          (i)     Before commencing any Alterations, Tenant shall furnish Landlord with (A) detailed plans and specifications of the proposed Alterations and (B) a surety company performance bond, naming Landlord as a beneficiary, that is issued by a surety company licensed to do business in the state in which the Leased Premises are located, that is in an amount equal to the estimated cost of such Alterations, and that guarantees the completion of such Alterations, within a reasonable time after their commencement, free and clear of all mechanic’s liens or other liens, encumbrances, security interests, and charges. Tenant shall prosecute all Alterations with reasonable dispatch, excepting only delays due to strikes, lockouts, acts of God, inability to obtain labor or materials, governmental restrictions or similar causes beyond the control of Tenant; provided, however, that any such Alterations shall be substantially completed, according to the requirements set forth in Paragraph 13(c) of this Lease, before the Expiration Date.
          (ii)     At all times during the construction of the Alterations, Tenant shall maintain, at its sole expense (or shall require that its contractor(s) maintain, at its or their sole expense), one or more policies of builder’s risk insurance that shall satisfy the requirements of Paragraph 16(a)(vi) of this Lease.

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          (iii)     No Alterations shall be in or connect the Improvements with any property, building, or other improvement located outside the boundaries of the parcel(s) of real property depicted, legally described, or otherwise identified on the Appendix A attached to and made a part of this Lease, nor shall the same obstruct or interfere with any existing easement.
Provided that Tenant shall submit the required documents with respect to the proposed Alterations, Landlord shall grant its written approval. Except for those Alterations required by Law or for which Landlord has agreed in writing that removal will not be required, Landlord shall have the right to require Tenant to remove any Alterations upon expiration of the Term. At the time Tenant requests Landlord’s consent to construct an Alteration or at other times, Landlord shall, if requested by Tenant, address whether the Alteration must be removed or not at the end of the Term. Removal, if required, shall be at Tenant’s sole cost and expense, and Tenant shall further be required, at Tenant’s expense, to repair to Landlord’s reasonable satisfaction any damage caused to the Leased Premises as a direct result of such removal.
(c)     If Tenant makes any Alterations pursuant to this Paragraph 13 or as required by Paragraphs 10, 12(a) or 17, or otherwise constructs any expansion or addition to the Leased Premises (such Alterations and actions being hereinafter collectively referred to as “ Work ”), then, before commencing any Work, Tenant shall provide Landlord with written notice of the scope and purpose of the Work, and all of the following requirements shall apply: (i) the market value of the Leased Premises shall not be lessened by any such Work, nor shall the usefulness or structural integrity of the Leased Premises be impaired, (ii) all such Work shall be performed by Tenant in a good and workmanlike manner, (iii) all such Work shall be expeditiously completed in compliance with all Legal Requirements, (iv) all such Work shall comply with the requirements of all insurance policies required to be maintained by Tenant under this Lease, (v) Tenant shall promptly discharge or remove all liens filed against the Leased Premises arising out of such Work, (vi) Tenant shall procure and pay for all permits and licenses required in connection with any such Work, and (vii) upon substantial completion of any Work, Tenant shall deliver to Landlord as-built drawings of the Work so completed.
14.     Permitted Contests . Notwithstanding any other provision of this Lease, Tenant shall not be required to (a) pay any Imposition, (b) discharge or remove any lien referred to in Paragraphs 11 or 13, or (c) comply with any Laws or Easements as provided in Paragraph 10 (such non-compliance with the terms hereof being hereinafter referred to collectively as “ Permitted Violations ”), so long as Tenant shall contest, in good faith, the existence, amount or validity thereof, the amount of the damages caused thereby, or the extent of its or Landlord’s liability therefor, by appropriate proceedings which shall operate during the pendency thereof to prevent or stay (i) the collection of, or other realization upon, the Permitted Violation so contested, (ii) the sale, forfeiture or loss of the Leased Premises or any Rent to satisfy or to pay any damages caused by any Permitted Violation, (iii) any interference with the use or occupancy of the Leased Premises, or (iv) any interference with the payment of any Rent. Tenant shall provide Landlord security or other evidence of Tenant’s financial wherewithal which is

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satisfactory, in Landlord’s reasonable judgment, to assure that such Permitted Violation is corrected, including all costs, interest and penalties that may be incurred or become due in connection therewith. While any proceedings which comply with the requirements of this Paragraph 14 are pending and the required security is held by Landlord or satisfactory evidence of Tenant’s financial wherewithal has been provided, Landlord shall not have the right to correct any Permitted Violation thereby being contested unless Landlord is required by law to correct such Permitted Violation and Tenant’s contest does not prevent or stay such requirement as to Landlord. Each such contest shall be promptly and diligently prosecuted by Tenant to a final conclusion, except that Tenant, so long as the conditions of this Paragraph 14 are at all times complied with, has the right to attempt to settle or compromise such contest through negotiations. Tenant shall pay any and all losses, judgments, decrees and costs in connection with any such contest and shall, promptly after the final determination of such contest, fully pay and discharge the amounts which shall be levied, assessed, charged or imposed or be determined to be payable therein or in connection therewith, together with all penalties, fines, interest and costs thereto or in connection therewith, and perform all acts the performance of which shall be ordered or decreed as a result thereof. No such contest shall subject Landlord to the risk of any civil or criminal liability.
  15.   Indemnification .
(a)     Except with respect to, and to the extent of, the negligence or willful acts or omissions of Landlord, Tenant shall pay, protect, indemnify, defend, save and hold harmless Landlord and the partners, members, shareholders, officers, directors, managers, agents and employees of Landlord (collectively, “ Landlord Indemnified Parties ”) from and against any and all liabilities, losses, damages, penalties, costs (including reasonable attorneys’ fees and costs), causes of action, suits, claims, demands or judgments of any nature whatsoever, howsoever caused, without regard to the form of action and whether based on strict liability, gross negligence, negligence or any other theory of recovery at law or in equity, arising from (i) any matter pertaining to the use, non-use, occupancy, operation, management, condition, maintenance, repair or restoration of the Leased Premises, (ii) any violation by Tenant of any provision of this Lease, any contract or agreement to which Tenant is a party and which affects the Leased Premises or Landlord, any Legal Requirements or any Permitted Encumbrance, or (iii) any Environmental Violation, including (A) liability for response costs and for costs of removal and remedial action incurred by the United States Government, any state or local governmental unit or any other Person, or damages from injury to or destruction or loss of natural resources, including the reasonable costs of assessing such injury, destruction or loss, incurred pursuant to Section 107 of CERCLA, or any successor section or act or provision of any similar state or local Law, (B) liability for costs and expenses of abatement, correction or clean-up, fines, damages, response costs or penalties which arise from the provisions of any of the other Environmental Laws and (C) liability for personal injury or property damage arising under any statutory or common-law tort theory, including damages assessed for the maintenance of a public or private nuisance or for carrying on of a dangerous activity. Notwithstanding the foregoing, however, Tenant shall not have any responsibility or liability hereunder to the Landlord Indemnified Parties for any incidental or consequential damages of any kind.

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(b)     In case any action or proceeding is brought against Landlord by reason of any such claim, (i) Tenant may, except in the event of a conflict of interest or a dispute between Tenant and Landlord, retain its own counsel and defend such action (it being understood that Landlord may employ counsel of its choice to monitor the defense of any such action, the cost of which shall be paid by Landlord), and (ii) Landlord shall notify Tenant to resist or defend such action or proceeding by retaining counsel reasonably satisfactory to the Landlord, and Landlord will cooperate and assist in the defense of such action or proceeding if reasonably requested to do so by Tenant. In the event of a conflict of interest or dispute, Landlord shall have the right to select counsel, and the reasonable cost of such counsel shall be paid by Tenant.
(c)     The obligations of Tenant under this Paragraph 15 shall survive any termination, expiration or rejection in bankruptcy of this Lease.
  16.   Insurance .
(a)     Subject to the provisions of Paragraph 16(k) below, Tenant shall maintain the following insurance on or in connection with the Leased Premises:
          (i)     Insurance against physical loss or damage to the Improvements as provided under a standard “All Risk” property policy including but not limited to flood (to the extent that the Leased Premises is in a flood zone) and earthquake coverage (to the extent the Leased Premises is in an earthquake zone) in amounts not less than the actual replacement cost of the Improvements. Such policies shall contain Replacement Cost and Agreed Amount Endorsements.
          (ii)     Commercial General Liability Insurance against claims for personal and bodily injury, death or property damage occurring on, in or as a result of the use of the Leased Premises, in an amount not less than $1,000,000 per occurrence with excess liability coverage of not less than $10,000,000 per occurrence/annual aggregate.
          (iii)     Workers’ Compensation insurance covering all individuals employed by Tenant in connection with any work done on or about any of the Leased Premises for which claims for death, disease or bodily injury may be asserted against Landlord, Tenant or the Leased Premises in such amounts as required by applicable Law, or in lieu of such Workers’ Compensation Insurance, a program of self-insurance complying with the rules, regulations and requirements of the appropriate agency of the State in which the Leased Premises is located.
          (iv)     Comprehensive Boiler and Machinery Insurance in an amount not less than $1,000,000 per accident for damage to property.
          (v)     Business Interruption Insurance at limits to cover all Rent due during the period of repair or restoration after a Casualty in the amount of all Basic Rent, taxes and insurance premiums required hereunder for a twelve (12) month period. Such insurance shall name Landlord as loss payee solely with respect to Rent payable to or for the benefit of the Landlord under this Lease.

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          (vi)     During any period in which substantial Alterations at the Leased Premises are being undertaken, builder’s risk insurance covering the total completed value including any “soft costs” with respect to the Improvements being altered or repaired (on a completed value), replacement cost of work performed and equipment, supplies and materials furnished in connection with such construction or repair or repair of Improvements, together with such “soft cost” endorsements and such other endorsements as Landlord may reasonably require and general liability, and workers’ compensation insurance with respect to the Improvements being constructed, altered or repaired.
          (vii)     Such other insurance (or other terms with respect to any insurance required pursuant to this Paragraph 16, including without limitation amounts of coverage or form of mortgagee clause) on or in connection with the Leased Premises as Landlord may reasonably require, which at the time is usual and commonly obtained in connection with properties similar in type of building size, use and location to the Leased Premises and by companies the size and nature of Tenant.
(b)     To the extent Tenant is required to carry the insurance required by Paragraph 16(a), such insurance shall be written by companies which have a Best’s relating of A-:VII or above or a comparable claims paying ability assigned by Standard & Poor’s Corporation or equivalent rating agency and are admitted in, and approved to write insurance policies by, the State Insurance Department for the state in which the Leased Premises is located. Provided Tenant is required to maintain such insurance, the insurance policies (i) shall be for such terms as Landlord may reasonably approve and (ii) shall be in amounts sufficient at all times to satisfy any coinsurance requirements thereof. To the extent Tenant is required to carry the insurance required under Paragraph 16(a), the insurance referred to in Paragraphs 16(a)(i), 16(a)(iv) and 16(a)(vi) shall name Landlord as loss payee and Tenant as its interest may appear, and the insurance referred to in Paragraph 16(a)(ii) shall name Landlord as additional insured to the extent of Tenant’s negligence, and the insurance referred to in Paragraph 16(a)(v) shall name Landlord as a loss payee. With respect to the insurance Tenant is required to carry, if said insurance or any part thereof shall expire, be withdrawn, or become void or voidable, Tenant shall immediately obtain new or additional insurance that shall satisfy the requirements of this Paragraph 16.
(c)     Each policy required by any provision of Paragraph 16(a), except clause (iii) thereof, shall provide that it may not be cancelled, substantially modified or allowed to lapse on any renewal date except after thirty (30) days’ prior notice to Landlord. Each such policy shall also provide that any loss otherwise payable thereunder shall be payable notwithstanding (i) any act or omission of Landlord or Tenant which might, absent such provision, result in a forfeiture of all or a part of such insurance payment, (ii) the occupation or use of any of the Leased Premises for purposes more hazardous than those permitted by the provisions of such policy, or (iii) any change in title to or ownership of the Leased Premises.

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(d)     Tenant shall pay as they become due all premiums for the insurance required by Paragraph 16(a), shall renew or replace each policy and deliver to Landlord original certificates evidencing such insurance.
(e)     Any insurance which Tenant is required to obtain pursuant to Paragraph 16(a) may be carried under a “blanket” or umbrella policy or policies covering other properties or liabilities of Tenant, provided that such “blanket” or umbrella policy or policies otherwise comply with the provisions of this Paragraph 16 and provided further that Tenant shall provide to Landlord a Statement of Values which shall be amended as necessary based on Replacement Cost Valuations. A certificate evidencing such insurance shall promptly be delivered to Landlord.
(f)     Tenant shall promptly comply with and conform in all material respects to (i) the provisions of each insurance policy required by this Paragraph 16 and (ii) the reasonable requirements of the insurers thereunder applicable to Landlord, Tenant or the Leased Premises or to the use, manner of use, occupancy, possession, operation, maintenance, alteration or repair of the Leased Premises.
(g)     Tenant shall not carry separate insurance concurrent in form or contributing in the event of a Casualty with that required in this Paragraph 16 unless (i) Landlord is included therein as an insured, with loss payable as provided herein, and (ii) such separate insurance complies with the other provisions of this Paragraph 16. Tenant shall immediately notify Landlord of such separate insurance and shall deliver to Landlord a certificate evidencing such insurance.
(h)     Tenant waives all rights of subrogation against the Landlord as may be applicable to any insurer and will enforce such waivers in policy provisions.
(i)     All proceeds of any insurance required under Paragraph 16(a) shall be payable as follows:
          (i)     Proceeds payable under clauses (ii), (iii) and (iv) of Paragraph 16(a) and proceeds attributable to the general liability coverage of Builder’s Risk insurance under clause (vi) of Paragraph 16(a) shall be payable to the Person entitled to receive such proceeds.
          (ii)     Proceeds of insurance under clause (i) of Paragraph 16(a) and proceeds attributable to Builder’s Risk insurance (other than its general liability coverage provisions) under clause (vi) of Paragraph 16(a) shall be payable to Landlord and applied as set forth in Paragraph 17 or, if applicable, Paragraph 18. Tenant shall apply the Net Award to restoration of the Leased Premises in accordance with the applicable provisions of this Lease unless a Termination Event shall have occurred.
(j)     Notwithstanding any provision to the contrary, it is understood that so long as the Tenant or any applicable Guarantor (if any) maintains a tangible net worth of at least $500,000,000, then Tenant shall be permitted to decline to carry any of said coverages and shall not be bound by any deductible limits. The remaining provisions of Paragraphs 16(b)-(j) shall only be applicable to the insurance policies as required under

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Paragraph 16(a) above in the event that Tenant or any applicable Guarantor (if any) fails to maintain a tangible net worth of at least $500,000,000, provided, however, that to the extent that Tenant does maintain insurance policies with respect to any of the risks described in Paragraph 16(a), the provisions of Paragraph 16(b) as to the naming of loss payees and additional insureds, and Paragraphs 16(c), 16(d), 16(f), 16(g), 16(h) and 16(i) shall be applicable thereto. It is understood that with respect to any losses for which there is not insurance coverage, Tenant and any Guarantor (if any) under this Lease shall be responsible for the payment of such losses.
  17.   Casualty and Condemnation .
(a)     Tenant shall give Landlord prompt notice of any Casualty. So long as no Event of Default exists, and provided that Tenant waives its right (if any) to deliver a Termination Notice, Tenant is hereby authorized to adjust, collect and compromise all claims under any of the insurance policies required by Paragraph 16(a) and to execute and deliver on behalf of Landlord all necessary proofs of loss, receipts, vouchers and releases required by the insurers. Any final adjustment, settlement or compromise of any claim in excess of the Threshold Amount shall be subject to the prior written approval of Landlord. If an Event of Default exists, or if Tenant fails or refuses to waive its right, if any, to deliver a Termination Notice, Tenant shall not be entitled to adjust, collect or compromise any such claim or to participate with Landlord in any adjustment, collection and compromise of the Net Award payable in connection with a Casualty. Tenant agrees to sign, upon the request of Landlord, all proper proofs of loss, receipts, vouchers and releases.
(b)     Tenant, promptly upon receiving a Condemnation Notice, shall notify Landlord and Lender thereof. So long as no Event of Default exists, and provided that Tenant waives its right (if any) to deliver a Termination Notice, Tenant is authorized to collect, settle and compromise the amount of any Net Award. If an Event of Default exists, or if Tenant fails or refuses to waive its right, if any, to deliver a Termination Notice, Landlord shall be authorized to collect, settle and compromise the amount of any Net Award and Tenant shall not be entitled to participate with Landlord in any Condemnation proceeding or negotiations under threat thereof, or to contest the Condemnation or the amount of the Net Award therefor. No agreement with any condemnor in settlement of or under threat of any Condemnation shall be made by Tenant without the written consent of Landlord, which consent shall not unreasonably be conditioned, withheld, or delayed. Subject to the provisions of this Paragraph 17(b), Tenant hereby irrevocably assigns to Landlord any award or payment to which Tenant is or may be entitled by reason of any Condemnation, whether the same shall be paid or payable for Tenant’s leasehold interest hereunder or otherwise; but nothing in this Lease shall impair Tenant’s right to any award or payment on account of Tenant’s trade fixtures, equipment or other tangible property, moving expense, loss of business, or other relocation benefits available to Tenant under applicable Law, to the extent that and so long as (i) Tenant shall have the right to make, and does make, a separate claim therefor against the condemnor and (ii) such claim does not in any way reduce either the amount of the award otherwise payable to Landlord for the Condemnation of Landlord’s interest

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in the Leased Premises or the amount of the award (if any) otherwise payable for the Condemnation of Tenant’s leasehold interest hereunder.
(c)     If any Partial Casualty (whether or not insured against) or Partial Condemnation shall occur, this Lease shall continue, notwithstanding such event, and there shall be no abatement or reduction of any Monetary Obligations except to the extent of any insurance proceeds received by Landlord under Paragraph 16(a)(v) and in the event of a Partial Condemnation there shall be an equitable reduction in the Basic Rent due by Tenant under this Lease. Promptly after such Partial Casualty or Partial Condemnation, Tenant, as required in Paragraph 12, shall commence and diligently continue to restore the Leased Premises as nearly as possible to its value, condition and character immediately prior to such event (assuming the Leased Premises to have been in the condition required by this Lease). So long as no Event of Default exists, Landlord shall promptly pay to Tenant, to the extent actually received by (or for the benefit of) Landlord, the following amounts: (i) any Net Award (including any award delivered by Tenant to Landlord pursuant to Section 12(a) of the Purchase Agreement) up to and including the Threshold Amount; and (ii) any credit amount (including, without limitation, any Estimated Reduction Amount) allowed Landlord under Section 12(a) of the Purchase Agreement. Thereafter, Tenant shall restore the Leased Premises in accordance with the requirements of Paragraph 13(c) of this Lease, any balance to be paid to Landlord. Any Net Award in excess of the Threshold Amount shall (unless such Casualty resulting in the Net Award is a Termination Event) be made available by Landlord to Tenant, to the extent actually received by Landlord, for the restoration of the Leased Premises pursuant to and in accordance with and subject to the provisions of Paragraph 19 hereof. If any Casualty or Condemnation which is not a Partial Casualty or Partial Condemnation shall occur, Tenant shall comply with the terms and conditions of Paragraph 18.
  18.   Termination Events .
If (i) all of the Leased Premises shall be taken by a Condemnation or (ii) any substantial portion (as mutually and reasonably determined by Landlord and Tenant) of the Leased Premises shall be taken (either permanently or for a period at least equal to the remainder of the Term) by a Condemnation or (iii) all or any substantial portion (as mutually and reasonably determined by Landlord and Tenant) of the Leased Premises shall be totally damaged or destroyed by a Casualty and, in any such case, Tenant certifies and covenants to Landlord that it will forever abandon operations at the Leased Premises (each of the events described in the above clauses (i), (ii), and (iii) shall hereinafter be referred to as a “ Termination Event ”), then Tenant at Tenant’s election may terminate this Lease by so advising Landlord in a written notice (“ Termination Notice ”) delivered within thirty (30) days after the occurrence of the Condemnation or Casualty in question. In such event this Lease shall terminate on the date of the pertinent Casualty or Condemnation, and Rent shall be appropriately prorated as of such termination date. In the event of such termination all proceeds and awards with respect to the Leased Premises shall be payable to Landlord, provided that in the event of self-insurance, Tenant shall pay to Landlord the proceeds of insurance which would have been paid if there had not been self-insurance, and, notwithstanding any date set forth in

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the Termination Notice, this Lease shall not terminate (nor shall there be any abatement of Tenant’s obligation to pay Rent) until Landlord receives such payment, in full. Upon such termination of the Lease, Tenant shall have no further obligations under the Lease except for the Surviving Obligations.
  19.   Restoration .
(a)     Landlord shall hold any Net Award in excess of the Threshold Amount in a fund (the “ Restoration Fund ”) and disburse amounts from the Restoration Fund in accordance with the following conditions:
          (i)     prior to commencement of restoration, the architects, contracts, contractors, plans and specifications for the restoration shall have been approved by Landlord.
          (ii)     at the time of any disbursement, no mechanics’ or materialmen’s liens shall have been filed against the Leased Premises and remain undischarged;
          (iii)     disbursement shall be made from time to time in an amount not exceeding the cost of work completed since the last disbursement, upon receipt of (A) satisfactory evidence, including architects’ certificates, of the stage of completion, the estimated total cost of completion and performance of the work to date in a good and workmanlike manner in accordance with the contracts, plans and specifications, (B) waivers of liens, (C) contractors’ and subcontractors’ sworn statements as to completed work and the cost thereof for which payment is requested, (D) a satisfactory bringdown of title insurance and (E) other evidence of cost and payment so that Landlord can verify that the amounts disbursed from time to time are represented by work that is completed, in place and free and clear of mechanics’ and materialmen’s lien claims;
          (iv)     each request for disbursement shall be accompanied by a certificate of Tenant, signed by an officer of Tenant, describing the work for which payment is requested, stating the cost incurred in connection therewith, stating that Tenant has not previously received payment for such work and, upon completion of the work, also stating that the work has been fully completed and complies with the applicable requirements of this Lease;
          (v)     the Restoration Fund shall not be commingled with Landlord’s other funds and shall bear interest at applicable current money market rates; and
          (vi)     such other reasonable conditions as Landlord may impose.
(b)     Prior to commencement of restoration and at any time during restoration, if the estimated cost of completing the restoration work free and clear of all liens, as reasonably determined by Landlord, exceeds the amount of the Net Award available for such restoration, the amount of such excess shall, upon demand by Landlord, be paid by Tenant to Landlord to be added to the Restoration Fund. Any sum

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so added by Tenant which remains in the Restoration Fund upon completion of restoration shall be refunded to Tenant. For purposes of determining the source of funds with respect to the disposition of funds remaining after the completion of restoration, the Net Award shall be deemed to be disbursed prior to any amount added by Tenant.
(c)     If any sum remains in the Restoration Fund after completion of the restoration and any refund to Tenant pursuant to Paragraph 19(b), such sum shall be retained by Landlord.
  20.   Assignment and Subletting .
(a)     Tenant shall not have the right to assign this Lease or sublet any portion of the Leased Premises except as otherwise expressly set forth in this Paragraph 20.
(b)     Tenant shall have the right upon thirty (30) days prior written notice to Landlord with no consent of Landlord being required, to assign this Lease and/or sublease all or any portion of the Leased Premises to any one or more subtenants.
(c)     If Tenant assigns all its rights and interest under this Lease, the assignee under such assignment shall expressly assume all the obligations of Tenant hereunder arising after the date of such assignment, by a written instrument (in form reasonably satisfactory to Landlord) delivered to Landlord at the time of such assignment. Each sublease shall be subject and subordinate to the provisions of this Lease. Except in the case of (i) an assignment to a Person with a publicly traded unsecured senior debt rating not lower than the unsecured debt rating of Rockwell Automation, Inc. as of the date of assignment, or (ii) an assignment to an entity controlled by, in common control with, or controlling Tenant, or an entity in which Tenant holds at least a fifty percent (50%) beneficial interest, no such assignment shall affect or reduce any of the obligations of Tenant hereunder or the Guarantor (if any) under the Guaranty (if any), and all such obligations of Tenant and Guarantor (if any) shall continue in full force and effect as obligations of a principal and not as obligations of a guarantor, as if no assignment had been made. In the event of an assignment to (i) a Person meeting the listed debt ratings or (ii) an entity controlled by, in common control with, or controlling Tenant, or in which Tenant holds at least a fifty percent (50%) beneficial interest, the Tenant shall be released from liability under this Lease and the Guarantor (if any) shall be released from liability under the Guaranty (if any) . In the event of sublease, neither Tenant nor Guarantor (if any) shall be released from liability.
(d)     Tenant shall, within ten (10) days after the execution and delivery of any assignment or sublease, deliver a duplicate original copy thereof to Landlord which, in the event of an assignment, shall be in recordable form.
(e)     As security for performance of its obligations under this Lease, Tenant hereby grants, conveys and assigns to Landlord all right, title and interest of Tenant in and to all subleases now in existence or hereafter entered into for any or all of the Leased Premises, any and all extensions, modifications and renewals thereof and all

I-28

 

rents, issues and profits therefrom. Landlord hereby grants to Tenant a license to collect and enjoy all rents and other sums of money payable under any sublease of any of the Leased Premises, provided, however, that if an Event of Default occurs, Landlord shall have the absolute right upon notice to Tenant and any subtenants to revoke said license and to collect such rents and sums of money and to apply same to the amounts due by Tenant under this Lease. Tenant shall not accept any rents under any sublease more than thirty (30) days in advance of the accrual thereof.
(f)     Tenant shall have the right to grant a leasehold mortgage on, or to pledge its leasehold interest in, the Leased Premises and on any subleases, in connection with financing obtained by Tenant and/or any applicable Guarantor (if any), subject however to the terms of this Lease, and subject to Landlord’s approval of the documentation evidencing such leasehold lien, which approval shall not be unreasonably withheld, conditioned, or delayed. No such leasehold mortgage shall permit the leasehold mortgagee to interfere, in any way, with Landlord’s right, title and interest in and to the Leased Premises. Any entity that becomes a successor tenant under this Paragraph 20(f) shall be required to be in compliance with all of the terms of this Lease.
(g)     Landlord may sell, convey, or otherwise transfer all or any part of Landlord’s interest in the Leased Premises at any time without Tenant’s consent to any third party other than (a) an entity listed on the attached Appendix C, (b) any entity controlled by, in common control with, or controlling any entity listed on the attached Appendix C , or (c) a successor or assign of any of the foregoing (each entity so permitted as a transferee being known for purposes of this Lease as a “ Permitted Third Party Transferee ”). In the event of any sale, conveyance or other transfer to a Permitted Third Party Transferee, Tenant shall attorn to any Permitted Third Party Transferee as Landlord so long as such Permitted Third Party Transferee and Landlord notify Tenant in writing of such transfer, and, at the request of Landlord, Tenant will execute such documents confirming the agreement referred to above. If Landlord shall sell, convey, or otherwise transfer (or attempt to sell, convey, or otherwise transfer) all or any part of Landlord’s interest in the Leased Premises at any time, without Tenant’s consent, to any Person other than a Permitted Third Party Transferee, Tenant shall, at its election, have every right and remedy provided at law, in equity, or elsewhere herein for a breach of this Lease.
  21.   Events of Default .
The occurrence of any one or more of the following shall, at the sole option of Landlord, constitute an “ Event of Default ” under this Lease:
(a)     a failure by Tenant to make any payment of Rent when and as the same shall become due and payable and such failure shall continue for a period of ten (10) days after written notice thereof is given by Landlord to Tenant; provided however, that if Tenant fails to pay Basic Rent when due under this Lease more than two (2) times in any consecutive twelve (12) month period, no further written notice shall be required, as to a failure to timely pay Basic Rent;

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(b)     a failure by Tenant to perform and observe, or a violation or breach of, any other provision hereof not otherwise specifically mentioned in this Paragraph 21 and such failure shall continue for a period of thirty (30) days after written notice thereof is given by Landlord to Tenant, or in the case of such failure which cannot with due diligence and in good faith be cured within said thirty (30) day period and Tenant fails to proceed promptly and with due diligence and in good faith to cure the same and thereafter to prosecute the curing of such default with due diligence and in good faith, it being intended that in connection with a default not susceptible of being cured with due diligence and in good faith within thirty (30) days that the time allowed Tenant within which to cure the same be extended for such period as may be necessary for the curing thereof promptly with due diligence and in good faith;
(c)     Tenant shall (i) voluntarily be adjudicated a bankrupt or insolvent, (ii) seek or consent to the appointment of a receiver or trustee for itself or for the Leased Premises, (iii) file a petition seeking relief under the bankruptcy or other similar laws of the United States, any state or any jurisdiction, or (iv) make a general assignment for the benefit of creditors;
(d)     a court shall enter an order, judgment or decree appointing, without the consent of Tenant, a receiver or trustee for it or for the Leased Premises or approving a petition filed against Tenant which seeks relief under the bankruptcy or other similar laws of the United States, any state or any jurisdiction, and such order, judgment or decree shall remain undischarged or unstayed for sixty (60) days after it is entered;
(e)     Tenant shall be liquidated or dissolved or shall begin proceedings towards its liquidation or dissolution;
(f)     the estate or interest of Tenant in the Leased Premises shall be levied upon or attached in any proceeding and such estate or interest is about to be sold or transferred or such process shall not be vacated or discharged within sixty (60) days after it is made; or
(g)     an Event of Default (as defined in the Guaranty (if any)) beyond any applicable cure period shall occur under the Guaranty (if any).
  22.   Remedies and Damages Upon Default .
(a)     Upon an Event of Default, Landlord may, at its election, exercise any one or more of the following described remedies, in addition to all other rights and remedies provided at law, in equity or elsewhere herein;
          (i)     Landlord may terminate this Lease by giving to Tenant written notice of Landlord’s election to do so, in which event the Term and all right, title and interest of Tenant hereunder shall end on the date stated in such notice;
          (ii)     Landlord may terminate the right of Tenant to possession of the Leased Premises without terminating this Lease, by giving written notice to Tenant that Tenant’s right of possession shall end on the date stated in such notice, whereupon

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the right of Tenant to possession of the Leased Premises or any part thereof shall cease on the date stated in such notice;
          (iii)     Landlord may enforce the provisions of this Lease and may enforce and protect the rights of Landlord by a suit or suits in equity or at law for the performance of any covenant or agreement herein, and for the enforcement of any other appropriate legal or equitable remedy, including without limitation (A) injunctive relief, (B) recovery of all moneys due or to become due from Tenant under any of the provisions of this Lease, and (C) any other damages incurred by Landlord by reason of Tenant’s default under this Lease; provided, however, that Tenant shall not have any responsibility or liability hereunder to Landlord for any incidental or consequential damages of any kind; and
          (iv)     Landlord may reenter and take possession of the Leased Premises or any part of the Leased Premises, repossess the same, expel Tenant and those claiming through or under Tenant and remove the effects of both or either, using such force for such purposes as may be necessary, to the extent permitted by applicable Law, without being liable for prosecution, without being deemed guilty of any manner of trespass, and without prejudice to any remedies for arrears of Rent or other amounts payable under this Lease or as a result of any other breach of this Lease.
(b)     Should Landlord elect to reenter as provided herein with or without terminating this Lease, or should Landlord take possession pursuant to legal proceedings or pursuant to any notice provided by law, Landlord may, from time to time, without terminating this Lease, rent the Leased Premises or any part of the Leased Premises, for such term or terms (which may be greater or less than the period which would otherwise have constituted the balance of the Term) and on such conditions and upon such other terms (which may include concessions of free rent and alteration and repair of the Leased Premises) as Landlord, in its reasonable discretion, may determine, and Landlord may collect and receive the rent due in connection therewith. Landlord shall not be required to accept any tenant offered by Tenant or any third party or observe any instruction given by Tenant relative to such reletting. Landlord shall however use commercially reasonable efforts to mitigate damages to the extent required by applicable Law. Landlord will not be responsible or liable for failure to relet the Leased Premises, or any part of the Leased Premises, or for any failure to collect any rent due upon such reletting. No such reentry or taking of possession by Landlord will be construed as an election on Landlord’s part to terminate this Lease unless a written notice of such intention is given to Tenant. Landlord reserves the right following any such reentry or reletting to exercise its right to terminate this Lease by giving Tenant such written notice, in which event this Lease will terminate as specified in such notice.
(c)     Landlord shall be entitled to the following damages:
          (i)     In the event that Landlord does not terminate this Lease, but on the contrary elects to take possession of the Leased Premises, then, in addition to all other rights and remedies of Landlord, Tenant shall pay to Landlord (A) Rent and other sums as provided in this Lease that would be payable under this Lease if such

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repossession had not occurred, less (B) the net proceeds, if any, of any reletting of the Leased Premises after deducting all of Landlord’s reasonable expenses in connection with such reletting, including without limitation, all repossession costs, brokerage commissions, reasonable attorneys’ fees, expenses of employees, alteration and repair costs and expenses of preparation for such reletting. If, in connection with any such reletting, the new lease term extends beyond the Term, a fair apportionment of the rent received from such reletting will be made in determining the net proceeds from such reletting. Tenant will pay such Rent and other sums to Landlord monthly on the day on which such sums would have been payable under the Lease if possession had not been retaken.
          (ii)     In the event that Landlord elects to terminate this Lease, then, in addition to all other rights and remedies of Landlord, Tenant shall remain liable to pay to Landlord as damages an amount equal to (A) all Rent due hereunder accrued and unpaid for the period up to and including the termination date, plus (B) all other additional sums payable by Tenant and/or which Tenant is liable or in respect of which Tenant has agreed to indemnify Landlord under any of the provisions of this Lease which may then be owing and unpaid, plus (C) all costs and expenses, including, without limitation, court costs and reasonable attorneys’ fees incurred by Landlord in the enforcement of any of its rights and remedies hereunder, plus (D) the Present Value of the excess, if any, of (1) all Rent provided to be paid for the remainder of the Initial Term (or, if applicable, the then-current Renewal Term) over (2) the then fair market rental value of the Leased Premises for the same period.
                    In the alternative, Landlord shall have the right, from time to time, to recover from Tenant upon demand, and Tenant shall remain liable to pay Landlord for (A) all Rent and other amounts due and owing under this Lease not previously paid pursuant to the provisions of this Lease, plus (B) damages equal to the sum of (1) all Rent and all other sums which would have accrued under this Lease after the date of termination had it not been terminated, less (2) such amounts as Landlord may actually receive from reletting after first paying all costs of such reletting, including, without limitation, the expenses set forth in Paragraph 22(c)(i) and the net amounts of rent collected remaining after such expenses shall operate only as an offsetting credit against the amount due hereunder with any excess or residue belonging solely to Landlord. Such damages shall be due and payable as such sums would have been due under the Lease.
(d)     Notwithstanding anything to the contrary herein contained, Landlord may, in lieu of or in addition to any of the foregoing remedies and damages, exercise any remedies and collect any damages available to it at law or in equity, provided that Tenant shall not have any responsibility or liability to Landlord hereunder, at law, or in equity for any incidental or consequential damages of any kind. If Landlord is unable to obtain full satisfaction pursuant to the exercise of any remedy, it may pursue any other remedy which it has hereunder, at law, or in equity, excepting only that Landlord shall not under any circumstances have any claim for, nor shall Tenant under any circumstances be responsible for, any incidental or consequential damages of any kind.

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(e)     No termination of this Lease, repossession or reletting of any of the Leased Premises, exercise of any remedy or collection of any damages pursuant to this Paragraph 22 shall relieve Tenant of any Surviving Obligations.
(f)     WITH RESPECT TO ANY REMEDY OR PROCEEDING OF LANDLORD OR TENANT HEREUNDER, LANDLORD AND TENANT HEREBY WAIVE THE SERVICE OF NOTICE WHICH MAY BE REQUIRED BY ANY APPLICABLE LAW AND ANY RIGHT TO A TRIAL BY JURY.
(g)     Upon the occurrence of any Event of Default, Landlord shall have the right (but no obligation) to perform any act required of Tenant hereunder and, if performance of such act requires that Landlord enter the Leased Premises, Landlord may enter the Leased Premises for such purpose.
(h)     No failure of Landlord (i) to insist at any time upon the strict performance of any provision of this Lease or (ii) to exercise any option, right, power or remedy contained in this Lease shall be construed as a waiver, modification or relinquishment thereof. A receipt by Landlord of any sum in satisfaction of any Rent with knowledge of the breach of any provision hereof shall not be deemed a waiver of such breach, and no waiver by Landlord of any provision hereof shall be deemed to have been made unless expressed in a writing signed by Landlord.
(i)     Tenant hereby waives and surrenders, for itself and all those claiming under it, including creditors of all kinds, any right and privilege which it or any of them may have under any present or future Law or redeem the Leased Premises or to have a continuance of this Lease after termination of this Lease or of Tenant’s right of occupancy or possession pursuant to any court order or any provision hereof.
(j)     Except as otherwise provided herein, all remedies are cumulative and concurrent and no remedy is exclusive of any other remedy. Each remedy may be exercised at any time an Event of Default has occurred and is continuing and may be exercised from time to time. No remedy shall be exhausted by any exercise thereof.
23.     Notices . All notices, demands, requests, consents, approvals, offers, statements and other instruments or communications required or permitted to be given pursuant to the provisions of this Lease shall be in writing and shall be deemed to have been given and received for all purposes (i) when delivered in person or by a commercial overnight delivery service, (ii) five (5) business days after being deposited in the United States mail, by registered or certified mail, return receipt requested, postage prepaid, addressed to the other party at its address stated in the Basic Lease Information, or (iii) when delivery is refused. For the purposes of this Paragraph, any party may substitute from time to time another address for its address by giving fifteen (15) days’ notice of the new address to the other party, in the manner provided above.
24.     Estoppel Certificate . At any time upon not less than ten (10) days’ prior written request by either Landlord or Tenant (the “ Requesting Party ”) to the other party (the “ Responding Party ”), the Responding Party shall deliver to the Requesting Party a

I-33

 

statement in writing, executed by an authorized officer of the Responding Party, certifying (a) that, except as otherwise specified, this Lease is unmodified and in full force and effect, (b) the dates to which Basic Rent and Additional Rent have been paid, (c) that, to the knowledge of the signer of such certificate and except as otherwise specified, no default by either Landlord or Tenant exists hereunder, and (d) such other matters as the Requesting Party may reasonably request. Any such statements by the Responding Party, may be relied upon by the Requesting Party, any Person whom the Requesting Party notifies the Responding Party in its request for the Certificate is an intended recipient or beneficiary of the Certificate, any lender or their assignees, any prospective purchaser or mortgagee, any assignee of Tenant’s interest in this Lease and any sublessee.
  25.   Surrender; Holdover .
(a)     Upon the expiration or earlier termination of this Lease, Tenant shall peaceably leave and surrender the Leased Premises to Landlord in the same condition in which the Leased Premises was at the commencement of this Lease, except as repaired, rebuilt, restored, altered, replaced or added to as permitted or required by any provision of this Lease, and except for ordinary wear and tear. Upon such surrender, Tenant shall (a) remove from the Leased Premises all property which is owned by Tenant or third parties other than Landlord and (b) repair any damage caused by such removal. Property not so removed shall become the property of Landlord, and Landlord may thereafter cause such property to be removed from the Leased Premises. The reasonable cost of removing and disposing of such property and repairing any damage to any of the Leased Premises caused by such removal shall be paid by Tenant to Landlord upon demand. Landlord shall not in any manner or to any extent be obligated to reimburse Tenant for any such property which becomes the property of Landlord pursuant to this Paragraph 25.
(b)     If Tenant shall be permitted to retain possession of the Leased Premises after the termination of the Term of this Lease, then Tenant shall pay to Landlord the Basic Rent and all other amounts due under this Lease (including, without limitation, all Additional Rent due from time to time), computed on a per month basis, for each month or part thereof that Tenant remains in possession. Basic Rent so owing shall be paid at the following rates: (i) during the first six (6) months of any such holdover, at a monthly rate equal to 110% of the Basic Rent payable monthly during the last Lease Year before termination; and (ii) thereafter, during the remainder of any such holdover, at a monthly rate equal to 125% of the Basic Rent payable monthly during the last Lease Year before termination. Any holdover of this Lease shall be deemed a month-to-month tenancy.
26.     No Merger of Title . There shall be no merger of the leasehold estate created by this Lease with the fee estate in the Leased Premises by reason of the fact that the same Person may acquire or hold or own, directly or indirectly, (a) the leasehold estate created hereby or any part thereof or interest therein and (b) the fee estate in the Leased Premises or any part thereof or interest therein, unless and until all Persons having any interest in the interests described in (a) and (b) above which are sought to be

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merged shall join in a written instrument effecting such merger and shall duly record the same.
  27.   Non-Recourse as to Landlord .
Anything contained herein to the contrary notwithstanding, any claim based on or in respect of any liability of Landlord under this Lease shall be enforced only against the Leased Premises and not against any other assets, properties or funds of (a) Landlord or (b) any director, member, officer, general partner, limited partner, employee or agent of Landlord.
  28.   Subordination, Non-Disturbance and Attornment .
(a)     This Lease and all rights of Tenant therein, and all interest or estate of Tenant in the Leased Premises, or any portion of the same, shall be subject and subordinate to the lien of any mortgage, deed of trust, security instrument, or other document of like nature (a “ Mortgage ”) that may at any time be placed upon the Leased Premises, or any portion of the same, by Landlord, and to any replacements, renewals, amendments, modifications, extensions, or refinancing of any such instrument, and to each and every advance made under any Mortgage. Tenant agrees that it shall, at any time and from time to time, given a reasonable period after Landlord’s written request for the same, execute and deliver to Landlord any instruments that may be reasonably required for the purpose of subjecting and subordinating this Lease to the lien of any such Mortgage.
(b)     As a condition of Tenant’s agreement to subordinate this Lease pursuant to Paragraph 28(a), however, and as an independent obligation under this Lease, Landlord and Tenant further agree that, so long as Tenant is not in default (beyond any applicable notice, grace, and cure period) in the payment of Basic Rent or Additional Rent, or in the performance of any covenants, conditions, provisions, terms, or agreements to be performed and observed by Tenant under this Lease, no such agreement to subordinate this Lease, nor any holder or beneficiary of the same, shall interfere with, hinder, or molest Tenant’s right to quiet enjoyment under this Lease, nor the right of Tenant to continue to occupy the Leased Premises and to conduct its business upon the same in accordance with the covenants, conditions, provisions, terms, and agreements of this Lease. Further, no lien of any Mortgage shall affect Tenant’s trade fixtures or other personal property (including, without limitation, any property acknowledged under Paragraph 31(h) of this Lease to be retained by Tenant) located at any time in or on the Leased Premises. Landlord shall, at Tenant’s written request, cause any person holding at any time any Mortgage affecting the Demised Premises to execute and deliver (within a reasonable period after such mortgagee’s written request for the same) a written subordination, non-disturbance, and attornment agreement in a form reasonably satisfactory to Tenant, together with any other instrument that Tenant may reasonably request to evidence the terms, conditions, and covenants of this Paragraph 17.
(c)     If any mortgagee shall succeed to the rights of Landlord under this Lease or to ownership of the Leased Premises, whether through possession or foreclosure

I-35

 

or the delivery of a deed to all or any part of the Leased Premises, then, upon the written request of such mortgagee so succeeding to Landlord’s rights hereunder, Tenant shall attorn to and recognize such mortgagee as Tenant’s landlord under this Lease, and shall execute and deliver (within a reasonable period after such mortgagee’s written request for the same) any instrument that such mortgagee may reasonably request to evidence such attornment (whether before or after making of the Mortgage). In the event of any other transfer of Landlord’s interest hereunder to a Permitted Third Party Transferee, upon the written request of the Permitted Third Party Transferee and Landlord, Tenant shall attorn to and recognize such Permitted Third Party Transferee as Tenant’s landlord under this Lease and shall promptly execute and deliver (within a reasonable period after such mortgagee’s written request for the same) any instrument that such transferee and Landlord may reasonably request to evidence such attornment.
29.     Tax Treatment; Reporting . Landlord and Tenant each acknowledge that each shall treat this transaction as a true lease for state law purposes and shall report this transaction as a Lease for Federal income tax purposes. For Federal income tax purposes each shall report this Lease as a true lease with Landlord as the owner of the Leased Premises and Tenant as the lessee of such Leased Premises including: (1) treating Landlord as the owner of the property eligible to claim depreciation deductions under the Internal Revenue Code of 1986 (the “ Code ”) with respect to the Leased Premises, (2) Tenant reporting its Rent payments as rent expense under the Code, and (3) Landlord reporting the Rent payments as rental income.
  30.   [ Intentionally omitted .]
 
  31.   Miscellaneous .
(a)     The paragraph headings in this Lease are used only for convenience in finding the subject matters and are not part of this Lease or to be used in determining the intent of the parties or otherwise interpreting this Lease.
(b)     As used in this Lease, the singular shall include the plural and any gender shall include all genders as the context requires and the following words and phrases shall have the following meanings: (i) “including” shall mean “including without limitation”; (ii) “provisions” shall mean “provisions, terms, agreements, covenants and/or conditions”; (iii) “lien” shall mean “lien, charge, encumbrance, title retention agreement, pledge, security interest, Mortgage and/or deed of trust”; and (iv) “obligation” shall mean “obligation, duty, agreement, liability, covenant and/or condition”.
(c)     Any act which Landlord is permitted to perform under this Lease may be performed at any time and from time to time by Landlord or any Person designated by Landlord. Landlord shall not unreasonably withhold, condition or delay its consent or approval whenever such consent or approval is required under this Lease. Time is of the essence with respect to the performance by Tenant of its obligations under this Lease.

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(d)     Landlord shall in no event be construed for any purpose to be a partner, joint venturer or associate of Tenant or of any subtenant, operator, concessionaire or licensee of Tenant with respect to the Leased Premises or otherwise in the conduct of their respective businesses.
(e)     This Lease and any documents which may be executed by Tenant and Landlord on or about the effective date hereof constitute the entire agreement between the parties and supersede all prior understandings and agreements, whether written or oral, between the parties hereto relating to the Leased Premises and the transactions provided for herein. Landlord and Tenant are business entities having substantial experience with the subject matter of this Lease and have each fully participated in the negotiation and drafting of this Lease. Accordingly, this Lease shall be construed without regarding to the rule that ambiguities in a document are to be construed against the drafter.
(f)     This Lease may be modified, amended, discharged or waived only by an agreement in writing signed by the party against whom enforcement of any such modification, amendment, discharge or waiver is sought.
(g)     It is confirmed that Tenant may erect such signs on the exterior or interior of the Improvements or on any part of the Leased Premises which do not violate applicable Laws or Permitted Encumbrances. Tenant shall obtain all necessary permits and approvals required under applicable Laws.
(h)     Landlord owns and shall continue to own, and to have complete control over, subject only to the terms of this Lease, all Improvements. It is acknowledged, however, that, as set forth in Section 1 of the Purchase Agreement, Tenant retains ownership of all tangible personal property and all intangible property of Tenant, including all tangible personal property and all intangible property located at the Leased Premises immediately before the Commencement Date. Accordingly, this Lease shall not govern any interest of Tenant in any of the following (whether located in or upon the Leased Premises or located elsewhere in contemplation of delivery to the Leased Premises), and thus Tenant may remove any of the following at any time from the Leased Premises: any machinery, equipment, trade fixtures, furnishings, parts, tools, engineering and yard drawings, or other items of tangible or intangible personal property; any work in process; any inventory held for use or resale; and any raw materials, finished product, supply, packaging items, business-related signage, or similar items with respect to the business conducted by the Tenant at or from the Leased Premises.
(i)     The covenants of this Lease shall run with the land and bind the parties hereto and their respective successors and assigns and all present and subsequent encumbrancers and subtenants of the Leased Premises, and shall inure to the benefit of the parties hereto and their respective successors and assigns.
(j)     Notwithstanding any provision in this Lease to the contrary, all Surviving Obligations of Tenant shall survive the expiration or termination of this Lease.

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(k)     If any one or more of the provisions contained in this Lease shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Lease, but this Lease shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.
(l)     All Appendices attached hereto are incorporated herein as if fully set forth herein.
(m)     This Lease shall be governed by and construed and enforced in accordance with the Laws of the State.
(n)     Upon not less than ten (10) days prior written request by either party, Buyer and Seller shall execute and deliver to each other a written memorandum of lease, prepared by the requesting party and in recordable form, setting forth the following: (i) the date of this Lease; (ii) the parties to this Lease; (iii) the Term; (iv) the legal description of the Leased Premises; (v) the existence (if any) of Tenant’s options to renew the Term; (vi) the restrictions arising under Paragraph 20(g) and Appendix C to this Lease; and (vii) such other matters as may reasonably be requested to be stated in such a memorandum. Either party may, at its sole cost, record a memorandum so prepared and executed.
  32.   [ADD APPLICABLE LOCAL LAW PROVISIONS]
IN WITNESS WHEREOF , Landlord and Tenant have caused this Lease to be duly executed under seal as of the day and year first above written.
             
LANDLORD:
  TENANT:
     
a
      a    
 
By:
      By:    
Print Name:
    Print Name:  
Its:
      Its:    
 
Attest:
      Attest:    
Print Name:
    Print Name:  
Its:
      Its:    

I-38

 

First Amendment to Purchase and Sale Agreement
This First Amendment to Purchase and Sale Agreement (this “ First Amendment ”) is made as of the 30 th day of September, 2005 (the “ Amendment Date ”), by and between Rockwell Automation, Inc., a Delaware corporation, formerly known as “Rockwell International Corporation” (“ Seller ”) and First Industrial Acquisitions, Inc. , a Maryland corporation (“ Buyer ”), together known for purposes of this First Amendment as the “ Parties .”
A.  The Parties, as of August 24, 2005 (the “Effective Date”), entered into a Purchase and Sale Agreement (the “ Original Purchase Agreement ”) for Seller’s sale to Buyer, and Buyer’s purchase from Seller, of certain Subject Property defined with particularity in the Original Purchase Agreement.
B.  The Parties now wish (i) to memorialize their mutual understanding of the status of certain conditions arising under the Original Purchase Agreement, and (ii) to modify the Original Purchase Agreement to the extent expressly set forth in this First Amendment.
Now, therefore, in consideration of the sum of Ten and No/100 United States Dollars (USD 10.00), and of other good and valuable consideration, the receipt and sufficiency of which the Parties hereby acknowledge, the Parties hereby agree to amend, and thus hereby do amend, the Original Purchase Agreement (which, as modified by this First Amendment, shall be known under this First Amendment as the “ Purchase Agreement ”), as set forth below.
1. Modifications to the Original Purchase Agreement. The Parties hereby agree that the Original Purchase Agreement shall be modified as follows:
a.  Line 28 of page 2 (Section 2(b)) of the Original Purchase Agreement is hereby deleted and the following is inserted in that place: “(ii) passage of the Contingency Date under this Agreement, though in no instance later than October 31, 2005 , Buyer shall deposit the sum of Two”.
b.  Lines 1-2 of page 3 (Section 3(a)) of the Original Purchase Agreement is hereby modified by deleting therefrom the date “September 23, 2005” and by inserting the following date in that place: “September 30, 2005”.
c.  Line 21 of page 3 (Section 3(b)) of the Original Purchase Agreement are hereby modified by deleting therefrom the date “October 7, 2005” and by inserting the following date in that place: “October 14, 2005”.
d.  Lines 15-16 of page 4 (Section 3(b)(2)(B)) of the Original Purchase Agreement are hereby modified by deleting therefrom the phrase “not less than two (2) nor more than four (4) days before the Closing Date,” and by inserting the following phrase in that place: “no later than October 25, 2005”.

1

 

e.  Lines 27-28 of page 4 (Section 3(b)(2)(B)(ii)) of the Original Purchase Agreement are hereby modified by deleting therefrom the date “November 18, 2005” and by inserting the following date in that place: “December 2, 2005”.
f.  Line 36 of page 4 (Section 3(b)(2)(C)) of the Original Purchase Agreement is hereby modified by deleting therefrom the phrase “three (3) days after Seller’s delivery” and by inserting the following phrase in that place: “five (5) days after Seller’s delivery”.
g.  Lines 9-10 of page 5 (Section 3(b)(2)(C)) of the Original Purchase Agreement are hereby modified by deleting therefrom the date “November 18, 2005” and by inserting the following date in that place: “December 2, 2005”.
h.  Line 38 of page 5 and line 1 of page 6 (Section 3(b)(2)(D)) of the Original Purchase Agreement are hereby modified by deleting therefrom, respectively, the date “November 30, 2005” and by inserting the following date in those places: “December 19, 2005”.
i.  Line 42 of page 8 (Section 4(c)(1)) of the Original Purchase Agreement is hereby modified by deleting therefrom the phrase “the forty-fifth (45 th ) day after the Effective Date” and by inserting the following phrase in that place: “October 31, 2005”.
j.  Line 8 of page 13 (Section 8) of the Original Purchase Agreement is hereby modified by deleting therefrom the date “October 17, 2005” and by inserting the following date in that place: “November 2, 2005”.
k.  Line 13 of page 13 (Section 8) of the Original Purchase Agreement is hereby modified by deleting therefrom the phrase “not less than fifteen (15) days before the Closing Date” and by inserting the following phrase in that place: “no later than October 18, 2005”.
l.  Lines 14-15 of page 13 (Section 8) of the Original Purchase Agreement are hereby modified by deleting therefrom the date “November 18, 2005” and by inserting the following date in that place: “December 2, 2005”.
m.  Lines 32-33 of page 14 (Section 9(b)(1)) of the Original Purchase Agreement are hereby modified by deleting therefrom the phrase “the date that is two (2) days before the original Closing Date,” and by inserting the following phrase in that place: “October 25, 2005”.
n.  Line 5 of page 15 (Section 9(b)(1)(ii)) of the Original Purchase Agreement is hereby modified by deleting therefrom the date “November 18, 2005” and by inserting the following date in that place: “December 2, 2005”.
o.  Line 14 of page 15 (Section 9(b)(2)) of the Original Purchase Agreement is hereby modified by deleting therefrom the phrase “three (3) days after Seller’s delivery” and by inserting the following phrase in that place: “five (5) days after Seller’s delivery”.
p.  Line 27 of page 15 (Section 9(b)(2)) of the Original Purchase Agreement is hereby modified by deleting therefrom the date “November 18, 2005” and by inserting the following date in that place: “December 2, 2005”.

2

 

q.  Lines 11-12 of page 16 (Section 9(b)(3)) of the Original Purchase Agreement are hereby modified by deleting therefrom the date “November 30, 2005” and by inserting the following date in that place: “December 19, 2005”.
2. Satisfaction and Waiver of Conditions.
a. Title and Survey. Buyer hereby acknowledges that Seller timely furnished to Buyer, as required under Section 3 of the Original Purchase Agreement, all Title Commitments, Title Documents, and Surveys.
b. Due Diligence Documents. Buyer hereby acknowledges that, to Buyer’s Knowledge, Seller timely made the efforts required under Section 4(a) of the Original Purchase Agreement with respect to Due Diligence Documents to be provided for Buyer’s review.
c. Seller’s Resolution. The Parties hereby acknowledge the timely satisfaction of Seller’s resolution condition under Section 5 of the Original Purchase Agreement.
3. Effectiveness. This First Amendment shall be effective only if signed by both Parties, or if signed in counterpart by both Parties.
4. Construction and Defined Terms. The Original Purchase Agreement and this First Amendment shall constitute and be construed as a single instrument. Accordingly, (i) any term in this First Amendment (capitalized or not) that is specifically defined in the Original Purchase Agreement shall—unless such term shall be specifically defined in this First Amendment—have the definition given to it in the Original Purchase Agreement, and (ii) if any provision in this First Amendment shall conflict with or contradict any provision in the Original Purchase Agreement, then the provision in this First Amendment shall control the interpretation of such Original Purchase Agreement and this First Amendment together as a single instrument.
5. Ratification. Except as modified by this First Amendment, the Original Purchase Agreement shall continue in full force and effect, shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns, and is hereby ratified and confirmed by the Parties.
[ signatures on next page ]

3

 

IN WITNESS WHEREOF, the Parties have executed this First Amendment as of the Amendment Date.
             
BUYER:
  SELLER:
First Industrial Acquisitions, Inc.,
  Rockwell Automation, Inc. ,
a Maryland corporation
  a Delaware corporation
 
           
By:
    By:  
 
Print Name:
    Print Name:  
 
Its:
    Its:  

4

 

Second Amendment to Purchase and Sale Agreement
This Second Amendment to Purchase and Sale Agreement (this “ Second Amendment ”) is made as of the 31 st day of October, 2005 (the “ Second Amendment Date ”), by and between Rockwell Automation, Inc., a Delaware corporation, formerly known as “Rockwell International Corporation” (“ Seller ”) and First Industrial Acquisitions, Inc. , a Maryland corporation (“ Buyer ”), together known for purposes of this First Amendment as the “ Parties .”
A.  The Parties, as of August 24, 2005, entered into a Purchase and Sale Agreement (the “ Original Purchase Agreement ”) for Seller’s sale to Buyer, and Buyer’s purchase from Seller, of certain Subject Property defined with particularity in the Original Purchase Agreement.
B.  The Parties, as of September 30, 2005, entered into a First Amendment to Purchase and Sale Agreement (the “ First Amendment ”) (i) to memorialize their mutual understanding of the status of certain conditions arising under the Original Purchase Agreement, and (ii) to modify the Original Purchase Agreement to the extent otherwise expressly set forth in the First Amendment.
C.  The Parties now wish further to modify the Original Purchase Agreement and the First Amendment to the extent expressly set forth in this Second Amendment. Accordingly, the Original Purchase Agreement, as modified by the First Amendment and by this Second Amendment, shall be known hereunder as the “ Purchase Agreement. ”
Now, therefore, in consideration of the sum of Ten and No/100 United States Dollars (USD 10.00), and of other good and valuable consideration, the receipt and sufficiency of which the Parties hereby acknowledge, the Parties hereby agree to amend, and thus hereby do amend, the Original Purchase Agreement and the First Amendment as specifically set forth below.
1. Modifications to the Original Purchase Agreement and First Amendment. The Parties hereby agree that the Original Purchase Agreement and the First Amendment (respectively, as indicated below) shall be modified as follows:
a.  Line 28 of page 1 of the First Amendment (modifying page 2, line 28, Section 2(b) of the Original Purchase Agreement) is hereby modified by deleting therefrom the date “ October 31, 2005 ” and by inserting the following date in that place: “ November 1, 2005 ”.
b.  Line 18 of page 2 of the First Amendment (modifying page 13, line 8, Section 8 of the Original Purchase Agreement) is hereby modified by deleting therefrom the date “November 2, 2005” and by inserting the following date in that place: “November 9, 2005”.
c.  The following is hereby added to the Original Purchase Agreement as Subsection (a)(9) to Section 6 (“Representations and Warranties”):

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“(9) To Seller’s Knowledge:
(A) Such discrete parcel(s) of the Subject Property as is (or are) commonly known as 3240 South 78 th Street in the 40 th Ward of the City of Philadelphia, State of Pennsylvania (altogether, the “ Philadelphia Property ”), is zoned by the Philadelphia Zoning Code as lying within zoning classification “G-2 (Industrial)”; except to the extent any such violation may already have been cured or otherwise addressed by Seller, Seller has received no written notice declaring Seller’s use of the Philadelphia Property, as of the Effective Date, to be in violation of any City of Philadelphia zoning code or ordinance governing permitted uses in such zoning classification; and, except to the extent any such violation may already have been cured or otherwise addressed by Seller, Seller has received no written notice of any uncorrected violation of any “housing, building, safety or fire ordinances” (within the meaning of 21 Pennsylvania Consolidated Statutes § 613.1(a)) with respect to the Philadelphia Property; and
(B) The discrete parcel(s) of the Subject Property as is (or are) commonly known as 320 Museum Road in Chartiers Township, Washington County, State of Pennsylvania (the “ Washington Property ”), is zoned by the zoning ordinances that prevail in Chartiers Township as lying within zoning classification “I-1 (Industrial)”; except to the extent any such violation may already have been cured or otherwise addressed by Seller, Seller has received no written notice declaring Seller’s use of the Washington Property, as of the Effective Date, to be in violation of any zoning code or ordinance that prevails in Chartiers Township and that governs permitted uses in such zoning classification; and, except to the extent any such violation may already have been cured or otherwise addressed by Seller, Seller has received no written notice of any uncorrected violation of any “housing, building, safety or fire ordinances” (within the meaning of 21 Pennsylvania Consolidated Statutes § 613.1(a)) with respect to the Washington Property.”
d.  Section 9(a)(9) of the Original Purchase Agreement (“Certificate of Occupancy”) is hereby deleted.
e.  Exhibit B to the Original Purchase Agreement (“Purchase Price Allocation”) is hereby deleted and the Exhibit B attached to this Second Amendment is inserted in that place.
f.  Schedule A (“Agreed Schedule of Initial Term Basic Rent”) of Exhibit I to the Original Purchase Agreement (“Form of Lease Agreement”) is hereby deleted and the Schedule A attached to this Second Amendment is inserted in that place.

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2. Satisfaction and Waiver of Conditions.
a. Satisfaction of Seller Obligations.
(1)  Buyer hereby acknowledges that Seller, on October 25, 2005, duly and timely delivered to Buyer, and that Buyer then timely received from Seller, the following (altogether, the “ Disapproved Matters Reply ”): (i) the notice of Uncured Title Matters and listing of Postponed Parcels contemplated under Section 3(b)(2)(B) of Original Purchase Agreement, and (ii) the listing of Title Defective Parcels, together with the listing of Seller’s inability to secure issuance of certain Endorsements with respect to such Title Defective Parcels (the “ Missing Endorsements ”), contemplated under Section 9(b)(2)(ii) of the Original Purchase Agreement.
(2)  The Parties hereby further acknowledge and agree that the Disapproved Matters Reply shall be deemed to have included the following information at Page 2 thereof:
     
Title Defective Parcel   Missing Endorsement(s)
 
Oregon, Portland
  ALTA 9 (owner’s) restrictions, encroachments, and minerals; tax parcel; subdivision or plat act
b. Due Diligence Condition. Buyer hereby expressly waives and declares fully satisfied all of Buyer’s due diligence rights and conditions arising under Section 4 of the Original Purchase Agreement (as previously modified by the First Amendment), including, without limitation, the entirety of Buyer’s due diligence condition under Section 4(c) of the Original Purchase Agreement.
c. Disapproved Matters. Except to the extent that Seller, as of the Second Amendment Date, (i) may already have caused the Title Company and/or the Surveyor to remove from the Commitments and/or the Surveys any Disapproved Matter raised as an objection in Buyer’s written notice (dated October 14, 2005) under Section 3(b) of the Original Agreement (the “ Disapproved Matters Notice ”), or (ii) may have obtained one or more endorsements to the pertinent Commitment(s) providing affirmative title insurance coverage insuring against the effect of any such Disapproved Matter, Buyer hereby expressly waives Buyer’s right further to object to any Uncured Title Matters or Missing Endorsements listed in the Disapproved Matters Reply, or to object to Seller’s efforts to remove, cure, or insure over any of the same. Further, Buyer agrees (i) that (with only the limited exceptions produced by Seller’s past efforts, as enumerated under (i) and (ii), above, of this Section 2(c)) all such Uncured Title Matters shall be Permitted Encumbrances under the Purchase Agreement, and (ii) that Seller shall not be in default of any covenant or obligation under the Purchase Agreement if Seller shall deliver the Title Policies without the Missing Endorsements. Notwithstanding the foregoing, however, Seller hereby agrees that, as provided in Section 3(b)(2) of the Original Agreement, Seller shall continue, prior to the Closing Date, to use good faith efforts to assist Buyer in addressing and resolving any Uncured Title Matters or Missing Endorsements that are listed in the Disapproved Matters Reply and that yet remain outstanding; provided, however, that Seller shall not have any obligation to expend any monies to so assist Buyer, and that Seller shall not, as a result of its

3

 

agreement to so assist Buyer, be required actually to resolve, procure affirmative insurance over, or procure an Endorsement over, any Uncured Title Matters or Missing Endorsements listed in the Disapproved Matters Reply.
3. Additional Provisions.
a. Good Faith Efforts to Deliver Certificates of Occupancy. Notwithstanding that the Parties have agreed under Section 1(d) of this Second Amendment to eliminate Seller’s delivery obligation under Section 9(a)(9) of the Original Purchase Agreement, Seller agrees that it shall continue to exercise reasonable and good faith efforts to deliver to Buyer, at Closing, to the extent then in Seller’s actual possession or under Seller’s control, a copy of any existing certificate of occupancy (or comparable permit or license) with respect to each property comprising the Subject Property.
b. Escrow Closing of Philadelphia Property. The Parties hereby agree that Seller’s completing, on the Closing Date, all acts necessary to “sell” (within the meaning of 21 Pennsylvania Consolidated Statutes § 613) to Buyer the Philadelphia Property may make such sale “unlawful” under 21 Pennsylvania Consolidated Statutes § 613. Accordingly, the Parties shall at Closing execute and deliver all of Seller’s Closing Documents, Buyer’s Closing Documents, and joint delivery documents (under Section 9(d) of the Original Purchase Agreement) concerning the Philadelphia Property into a so-called “New York-style” escrow closing with the escrow department of the Title Company. Such deliveries shall be made in accordance with the general provisions of the Title Company’s usual form of deed and money escrow agreement (modified, as appropriate, to accommodate a “New York-style” closing), and with such special provisions inserted in the escrow agreement as may be required to conform to this Agreement, including, without limitation, a provision specifying that such escrow shall not close, and the Deed to the Philadelphia Property thus shall not be delivered to Buyer or released for recordation, until the Title Company shall have received from the City of Philadelphia each “certification” and “certificate” indicated for delivery under 21 Pennsylvania Consolidated Statutes § 613. The attorneys for both Seller and Buyer are authorized to sign the escrow agreement. Upon the creation of such escrow, payment of the Purchase Price allocated (under Exhibit B to Purchase Agreement) to the Philadelphia Property and delivery of the Deed to the Philadelphia Property shall be made through the escrow. The cost of the escrow shall be divided equally between Seller and Buyer. In the event, however, that Seller fails to procure the requisite certification and certificate (as referenced above) on or before December 1, 2005, then Buyer shall have the unilateral right to withdraw its deposits from the escrow.
4. Limited Post-closing Covenants of Seller. The Parties hereby agree (i) that Seller’s obligations under the Purchase and Sale Agreement shall include the obligations to perform the limited undertakings specifically enumerated in Subsections 4(a) and 4(b) below (altogether, the “ Limited Undertakings ”), and (ii) that the terms and obligations of this Section 4 shall survive Closing of the transaction, though only for the limited periods of Buyer’s obligation(s) hereunder, as such periods are expressly set forth in the following Subsections 4(a) and 4(b) (including all Attachments incorporated therein):

4

 

(a) Limited Environmental Undertaking. Seller shall, at Seller’s sole cost and expense, promptly commence, and thereafter continuously prosecute to completion (as mutually and reasonably determined by the Parties), each specific action called for in the listing set forth on the Attachment 1 attached to and made a part of this Second Amendment.
(b) Limited Capital Repair Undertaking. As to each specific action called for in Buyer’s preliminary list set forth on the Attachment 2 attached to and made a part of this Second Amendment (the “ Preliminary Action List ”), Buyer shall, within ten (10) days after Closing, submit to Seller at least one (1) written, third-party study or report obtained by Buyer and stating the need for each specific action (in each instance, an “ Action Item ”) called for in the Preliminary Action List (as to each Action Item, an “ Action Report ”).
(1)  After having received an Action Report with respect to each Action Item, Seller may independently investigate the factual predicates for each such Action Item and/or Action Report.
(A) If Seller shall, as a consequence of such investigation, determine to contest any such Action Item or Action Report, Seller shall notify Buyer in writing, no later than January 31, 2006, of each Action Item or Action Report so contested. Promptly after delivery of any such notice, representatives of both Parties shall meet at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, to exchange relevant information and to attempt to resolve Seller’s contest. If any Seller’s contest has not been resolved by February 28, 2006, or if the Parties fail to meet within a reasonable time, Seller may initiate arbitration of the dispute as provided in Section 4(b)(2).
(B) As to every Action Item not contested by Seller in writing on or before January 31, 2006, Seller shall thereafter, at Seller’s sole cost and expense, promptly commence, and thereafter continuously prosecute to completion (as mutually and reasonably determined by the Parties, each and every such Action Item.
(2)  Seller shall have the right to initiate an arbitration under Section 4(b)(1)(A) by delivering to Buyer, no later than March 1, 2006, one or more written notices (in each instance, an “ Action Report Dispute Notice ”) stating Seller’s contention that one or more specific actions set forth on the Preliminary Action List are not be necessary to render the Leased Premises as to which such specific action(s) may pertain fit to be used for Seller’s the intended use of such Leased Premises, as contemplated by the Lease for such Leased Premises, in accordance with the practices generally recognized as then acceptable by other companies in its industry and operating comparable real properties in the geographic region in which the Leased Premises are located. If Seller fails to timely deliver an Action Report Dispute Notice with respect to one or more Action Reports, then Seller shall automatically be deemed to have irrevocably waived its right to do so, and Seller shall also automatically be deemed to have accepted any Action Report with respect to which Seller fails to timely deliver an Action Report Dispute Notice, in which event Seller shall proceed, as required above, to perform the item(s)

5

 

noted in all such Action Reports with respect to which Seller fails to timely deliver an Action Report Dispute Notice.
(3)  Each contention enumerated in an Action Report Dispute Notice (in each case, an “ Action Report Dispute ”) shall be resolved by binding arbitration before the American Arbitration Association (the “ Association ”). Arbitration proceedings on each Action Report Dispute shall commence no later than thirty (30) days after delivery of the Action Report Dispute Notice that enumerates such Action Report Dispute, pursuant to the following procedure:
(A) Selection of Arbitrator . The arbitration proceeding shall be conducted in Chicago, Illinois by a single arbitrator (the “ Arbitrator ”). The Action Report Dispute Notice shall direct the Association to assemble a list of five proposed independent arbitrators, each of whom shall be a member of the Association and none of whom may be related to, or affiliated with, either Buyer or Seller. Within ten (10) days after delivery of the Action Report Dispute Notice, the Association shall deliver its list of the names of those five proposed independent arbitrators to the Parties. No later than five (5) days after delivery of said list of proposed independent arbitrators to the Parties by the Association, the Parties shall cause a meeting to occur between their respective spokespersons (or their authorized representatives), which meeting may occur telephonically or in person, whichever is mutually and reasonably acceptable to the Parties. At that meeting, the two spokespersons shall examine the list of five business names submitted by the Association and they shall each eliminate two of those names, and the sole remaining proposed arbitrator shall be the Arbitrator. In order to eliminate four of the proposed arbitrators whose names were submitted by the Association, first, the spokesperson for the Buyer shall eliminate a proposed arbitrator of his choice and then the Buyer’s spokesperson shall eliminate a proposed arbitrator of his choice. The two spokespersons shall continue to eliminate names from the Association’s list in this manner until each of them has eliminated two names, and they have selected the Arbitrator. The two spokespersons shall immediately notify the Association, in writing and by telephone, of the name of the Arbitrator, and they shall direct the Association to contact the Arbitrator in order to schedule the commencement of the arbitration proceedings within the required time period described above. In the event that the chosen Arbitrator is not available to commence the Arbitration proceedings within the thirty (30) day time limit specified herein, the Parties shall choose the last eliminated Arbitrator whose schedule permits commencement of the proceedings within such thirty (30) day period.
(B) Submission of Dispute . In connection with the arbitration proceedings, each of the Parties shall submit, in writing (up to a maximum aggregate submission length of twenty (20) pages each for Seller and Buyer), the specific requested action (if any) that it wishes to be taken with respect to the matter that is disputed, and the Arbitrator shall be obligated to choose either the Buyer’s or the Seller’s specific requested actions proposed by Buyer or Seller, without being permitted to effectuate any compromise position. In making its choice, Arbitrator shall select whichever of Buyer’s

6

 

or Seller’s specific requested actions as would more closely result in rendering the Leased Premises as to which the instant Action Report Dispute pertains fit to be used for Seller’s intended use of such Leased Premises (as contemplated by the Lease for such Leased Premises) in accordance with the practices generally recognized as then acceptable by other companies in Seller’s industry and operating comparable real properties in the geographic region in which the pertinent Leased Premises are located. Except as otherwise expressly required under this Section 4(b), and as the Parties may otherwise agree in writing, the arbitration proceeding shall be conducted in accordance with the rules of the Association then obtaining. The decision or award rendered by the Arbitrator shall be final and non-appealable and judgment may be entered upon it in accordance with applicable Illinois law in a court of competent jurisdiction.
(C) Costs of Arbitration . The Party whose requested action or decision is not selected by the Arbitrator shall bear (i) the cost of its counsel, its experts, and all of the other representatives it may retain, (ii) the reasonable and actual out-of-pocket costs of all counsel, experts, or other representatives retained by the other Party, and (iii) all other costs of prosecuting the arbitration proceeding (including, without limitation, the fees, costs, and expenses imposed or incurred by the Arbitrator).
The Parties acknowledge that the Limited Undertakings are unique and nonrecurring obligations of Seller. Accordingly, the Parties further acknowledge, and indeed expressly agree, that no duty or obligation performed by Seller as part of the Limited Undertakings shall (i) comprise or be enforced as part of any covenant(s) or obligation(s) of Seller under any of the Leases (including, without limitation, of Seller’s covenants or obligations under Paragraph 10 (“Compliance with Laws and Easement Agreements; Environmental Matters”) or Paragraph 12 (“Maintenance and Repair”) of such Leases), or (ii) be deemed in any way to constitute evidence of what the Parties intend (or intended) for the scope or nature of any of Seller’s covenants or obligations under any of the Leases (including, without limitation, of Seller’s covenants or obligations under Paragraph 10 (“Compliance with Laws and Easement Agreements; Environmental Matters”) or Paragraph 12 (“Maintenance and Repair”) of such Leases). The Parties also acknowledge that Buyer may assign pro tanto , or collaterally assign pro tanto , as the case may be—assignment(s) pro tanto in each instance affecting only such discrete parcel(s) of the Subject Property in which such assignee or collateral assignee shall be assigned an interest—to Buyer’s successors, assigns and lenders, Buyer’s rights to enforce the Limited Undertakings and the provisions of this Section 4 against Seller.
5. Leases. Seller acknowledges that Seller’s counsel has delivered drafts of the Leases to Buyer’s counsel, and Buyer’s counsel is now in the process of having those drafts reviewed by Buyer’s local counsel in the various jurisdictions with respect only to matters of local law. Seller hereby agrees that, prior to Closing, Seller shall use reasonable and good faith efforts to work with Buyer to address any comments that Buyer receives from its local counsel with respect to the enforceability of the Leases under local law.
6. Effectiveness. This Second Amendment shall be effective only if signed by both Parties, or if signed in counterpart by both Parties.

7

 

7. Construction and Defined Terms. The Original Purchase Agreement, the First Amendment, and this Second Amendment shall constitute and be construed as a single instrument. Accordingly, (i) any term in this Second Amendment (capitalized or not) that is specifically defined in the Original Purchase Agreement shall—unless such term shall be specifically defined in this Second Amendment—have the definition given to it in the Original Purchase Agreement, and (ii) if any provision in this Second Amendment shall conflict with or contradict any provision in the Original Purchase Agreement (as previously modified by the First Amendment), then the provision in this Second Amendment shall control the interpretation of such Original Purchase Agreement and First Amendment with this Second Amendment together as a single instrument.
8. Ratification. Except as modified by this Second Amendment, the Original Purchase Agreement (as previously modified by the First Amendment) shall continue in full force and effect, shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns, and is hereby ratified and confirmed by the Parties.
[ Signatures begin on page 9 of this Second Amendment. ]

8

 

IN WITNESS WHEREOF, the Parties have executed this Second Amendment as of the Second Amendment Date.
             
BUYER:
  SELLER:
First Industrial Acquisitions, Inc.,
  Rockwell Automation, Inc. ,
a Maryland corporation
  a Delaware corporation
 
           
By:
    By:  
Print Name:
    Print Name:  
Its:
    Its:  

9

 

Exhibit 12
ROCKWELL AUTOMATION, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
                                         
    Fiscal Year Ended September 30,  
    2005     2004     2003     2002     2001  
 
                                       
Earnings available for fixed charges:
                                       
Income from continuing operations before income taxes
  $ 737.0     $ 438.1     $ 297.6     $ 229.2     $ 161.3  
Adjustments:
                                       
Undistributed (income) loss of affiliates
    (3.8 )     (3.2 )     (3.2 )     (1.2 )     0.6  
Minority interest in income (losses) of subsidiaries
    —       —       1.1       (1.0 )     1.2  
 
                             
 
                                       
 
  $ 733.2     $ 434.9     $ 295.5     $ 227.0     $ 163.1  
 
                             
 
                                       
Add fixed charges included in earnings:
                                       
Interest expense
  $ 45.8     $ 41.7     $ 52.5     $ 66.1     $ 83.2  
Interest element of rentals
    43.1       41.4       38.6       38.9       39.4  
 
                             
 
                                       
Total
    88.9       83.1       91.1       105.0       122.6  
 
                             
 
                                       
Total earnings available for fixed charges
  $ 822.1     $ 518.0     $ 386.6     $ 332.0     $ 285.7  
 
                             
 
                                       
Fixed charges:
                                       
Fixed charges included in earnings
  $ 88.9     $ 83.1     $ 91.1     $ 105.0     $ 122.6  
Capitalized interest
    1.0       —       —       —       —  
 
                             
Total fixed charges
  $ 89.9     $ 83.1     $ 91.1     $ 105.0     $ 122.6  
 
                             
 
                                       
Ratio of earnings to fixed charges (1)
    9.1       6.2       4.2       3.2       2.3  
 
                             
 
  (1)   In computing the ratio of earnings to fixed charges, earnings are defined as income from continuing operations before income taxes, adjusted for minority interest in income or loss of subsidiaries, undistributed earnings of affiliates, and fixed charges exclusive of capitalized interest. Fixed charges consist of interest on borrowings and that portion of rentals deemed representative of the interest factor.

 

 

Exhibit 21
ROCKWELL AUTOMATION, INC.
LIST OF SUBSIDIARIES OF THE COMPANY
AS OF SEPTEMBER 30, 2005
                 
    Percentage of Voting  
    Securities Owned By  
             
Name and Jurisdiction   Registrant     Subsidiary  
Anorad Corporation (New York)
    100 %        
Anorad Israel Ltd. (Israel)
            100 %
Anorad Europe BV (Netherlands)
            100 %
Electronics Corporation of America (International) (Massachusetts)
    100 %*        
Entek IRD International Corporation (Ohio)
    100 %*        
IRD Mechanalysis, Inc. (Ohio)
            100 %*
Entek IRD International Limited (England)
            100 %
W Interconnections, Inc. (Delaware)
    100 %        
W Interconnections S.A. de C.V. (Mexico)
            100 %
W Interconnections Canada Inc. (Canada)
            100 %
Rockwell Automation Sales Company, LLC (Delaware)
    100 %        
Reliance Electric Company (Delaware)
    100 %        
REC Holding, Inc. (Delaware)
            100 %
RAS Co. Ltd. (Japan)
            95 %
Federal Pacific Electric Co. (Delaware)
            100 %
Reliance Electric Technologies, LLC (Delaware)
            100 %
Vermont Reserve Insurance Company (Vermont)
            100 %
Rockwell Software Inc. (Delaware)
    100 %*        
Allen-Bradley Technical Services, Inc. (Wisconsin)
    100 %        
Rockwell Automation (Xiamen) Ltd. (China)
    100 %        
Rockwell Automation do Brasil Ltda. (Brazil)
    100 %        
Rockwell Comercia e Servicos de Automacao Ltda. (Brazil)
            100 %
Rockwell Automation de Venezuela, C.A. (Venezuela)
    100 %        
Rockwell Automation de Peru S.A. (Peru)
            100 %
Rockwell Automation Southeast Asia Pte. Ltd. (Singapore)
    100 %        
Rockwell Automation (Malaysia) SDN. BHD. (Malaysia)
            100 %
Rockwell Automation (Philippines) Inc. (Philippines)
            100 %
PT Rockwell Automation Indonesia (Indonesia)
            100 %
Rockwell Automation Asia Pacific Limited (Hong Kong)
    96.52 %     3.48 %
Rockwell Automation Power Systems (Shanghai) Company Limited (China)
    100 %        
Rockwell Automation Australia Ltd. (Australia)
    100 %        
Rockwell Automation (N.Z.) Ltd. (New Zealand)
            100 %
Rockwell Tecate S.A. de C.V. (Mexico)
    99 %     1 %
Grupo Industrias Reliance S.A. de C.V. (Mexico)
    100 %        
Dodge de Mexico S.A. de C.V. (Mexico)
            100 %
Industrias Reliance S.A. de C.V. (Mexico)
            100 %
Rockwell Automation de Mexico S.A. de C.V. (Mexico)
            100 %
Allen-Bradley Company (Nevada)
    100 %        
Rockwell International Corporation (Nevada)
    100 %        

 

 

                 
    Percentage of Voting  
    Securities Owned By  
             
Name and Jurisdiction   Registrant     Subsidiary  
ROK III Acquisition Corporation (Delaware)
    100 %        
Atomics International, Inc. (Delaware)
    100 %*        
Nuad Corporation (Delaware)
    100 %        
Rockwell Automation Taiwan Co., Ltd. (Taiwan)
            100 %
Rockwell Automation, Inc. (South Dakota)
    100 %        
Rockwell Services, Inc. (Delaware)
    100 %        
Goss Processing Systems, Inc. (Delaware)
    100 %        
Rockwell Automation Holdings, Inc. (Delaware)
    100 %        
Rockwell FSC Ltd. (Barbados)
    100 %        
Rockwell Automation Technologies, Inc. (Ohio)
    100 %        
Rockwell Automation International Holdings LLC (Delaware)
    89 %     11 %
Rockwell Automation Argentina S.A. (Argentina)
            100 %
Rockwell Automation European Headquarters S.A./N.V. (Belgium)
    0.04 %     99.96 %
Rockwell Automation Control Systems (Shanghai) Company Limited (China)
            100 %
Rockwell Automation Puerto Rico, Inc. (Puerto Rico)
            100 %
Rockwell Automation S.r.l. (Italy)
            100 %
Rockwell Automation Japan Co., Ltd. (Japan)
            100 %
Rockwell Automation Thai Co. Ltd. (Thailand)
            100 %
Rockwell Otomasyon Ticaret A.S. (Turkey)
            100 %
Rockwell Automation Holdings GmbH (Germany)
            100 %
Rockwell Automation Germany GmbH (Germany)
            100 %
Rockwell International GmbH (Germany)
            100 %
Propack Data GmbH (Germany)
            100 %
Propack Data Corporation (Delaware)
            100 %*
Propack Data Italia S.r.l. (Italy)
            100 %
Propack Data Limited (England)
            100 %
Propack Data Schweiz GmbH (Switzerland)
            100 %
Propack Data SAS (France)
            100 %
Rockwell Automation (Proprietary) Ltd. (South Africa)
            100 %
ATW Properties (Pty.) Ltd. (South Africa)
            100 %
Rockwell Automation GesmbH (Austria)
            100 %
Rockwell Automation Chile S. A. (Chile)
            100 %
Rockwell Automation Research (Shanghai) Company Limited (China)
            100 %
Rockwell Automation Manufacturing (Shanghai) Limited (China)
            100 %
Rockwell Columbia S.A. (Columbia)
            100 %
Rockwell Automation India Ltd. (India)
            100 %
Rockwell Samsung Automation Ltd. (Korea)
            100 %
Rockwell Automation Holdings B.V. (Netherlands)
            100 %
Rockwell Automation B.V. (Netherlands)
            100 %
Rockwell Automation A.B. (Sweden)
            100 %
Rockwell Automation A.G. (Switzerland)
            100 %
Rockwell Automation Limited (Ireland)
            100 %
Breter S.r.L. (Italy)
            100 %
Rockwell Automation LDA (Portugal)
            100 %
Sprecher & Schuh, Inc. (New York)
    100 %        
Rockwell International Overseas Corp. (Delaware)
    100 %        
Rockwell Automation Canada Holdings ULC (Canada)
    89 %     11 %
Rockwell Automation Canada Inc. (Canada)
            100 %
Rockwell Automation Canada Nova Scotia Co. (Canada)
            100 %
Rockwell Automation Canada Control Systems (Canada)
            100 %
Rockwell European Holdings Ltd. (England)
    89 %     11 %

 

 

                 
    Percentage of Voting  
    Securities Owned By  
             
Name and Jurisdiction   Registrant     Subsidiary  
Rockwell Automation S.A. (Spain)
          100 %
Rockwell International Limited (England)
            100 %
Rockwell Automation Pension Trustees Limited (England)
            100 %
Rockwell Automation S.A./ N.V. (Belgium)
            100 %
Siralop Limited (England)
            100 %
Rockwell Automation Ltd. (England)
            100 %
Rockwell Automation SAS (France)
            100 %
Rockwell Automation Europe B.V. (Netherlands)
            100 %
Rockwell Automation s.r.o. (Czech Republic)
            100 %
Rockwell Automation A/S (Denmark)
            100 %
Rockwell Automation Sp.zo.o. (Poland)
            100 %
Rockwell Automation Slovakia s.r.o. (Slovakia)
            100 %
Rockwell Automation Services s.r.o. (Czech Republic)
            100 %
Black Gauntlet Limited (England)
            100 %
EJA Engineering Ltd. (England)
            100 %
EJA Limited (England)
            100 %
Listed above are the subsidiaries included in our consolidated financial statements. This list does not include subsidiaries over which we do not have a controlling financial interest. These excluded subsidiaries, considered in the aggregate, do not constitute a significant subsidiary.
*Subsidiaries merged into Rockwell Automation, Inc. effective September 30, 2005.

 

 

Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement Nos. 333-17031, 333-17055, 333-17405, 333-89219, 333-93593, 333-34826, 333-38444, 333-101780, 333-113041 and 333-125702 on Form S-8 and Nos. 333-24685 and 333-43071 on Form S-3 of Rockwell Automation, Inc. of our reports dated November 10, 2005, relating to the financial statements and financial statement schedule of Rockwell Automation, Inc. and management’s report on the effectiveness of internal control over financial reporting appearing in this Annual Report on Form 10-K of Rockwell Automation, Inc. for the year ended September 30, 2005.
DELOITTE & TOUCHE LLP
Milwaukee, WI
November 10, 2005

 

 

Exhibit 24
POWER OF ATTORNEY
      I, the undersigned Director and/or Officer of Rockwell Automation, Inc., a Delaware corporation (the Company), hereby constitute DOUGLAS M. HAGERMAN and JAMES V. GELLY, and each of them singly, my true and lawful attorneys with full power to them and each of them to sign for me, and in my name and in the capacity or capacities indicated below,
  1.   the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2005 and any amendments thereto;
 
  2.   any and all amendments (including supplements and post-effective amendments) to the Registration Statement on Form S-3 (Registration No. 333-43071) registering debt securities of the Company in an aggregate principal amount of up to $1,000,000,000 and any shares of Common Stock, par value $1 per share, of the Company (including the associated Preferred Share Purchase Rights) (collectively, the Common Stock) issuable or deliverable upon conversion or exchange of any such debt securities that are convertible into or exchangeable for Common Stock;
 
  3.   any and all amendments (including supplements and post-effective amendments) to
  a)   the Registration Statements on Form S-8 registering securities to be sold under the Company’s 2000 Long-Term Incentives Plan (Registration Nos. 333-38444 and 333-113041);
 
  b)   the Registration Statement on Form S-8 registering securities to be sold under the Company’s 1995 Long-Term Incentives Plan and 1988 Long-Term Incentives Plan (Registration No. 333-17055);
 
  c)   the Registration Statement on Form S-8 registering securities to be sold pursuant to the Company’s Salaried Retirement Savings Plan, as amended, the Company’s Retirement Savings Plan for Certain Employees, as amended, and the Company’s Non-Represented Hourly Retirement Savings Plan, as amended (Registration No. 333-17031);
 
  d)   the Registration Statement on Form S-8 registering securities to be sold pursuant to the Company’s Employee Savings and Investment Plan for Represented Hourly Employees, as amended (Registration No. 333-17405);
 
  e)   the Registration Statement on Form S-8 registering securities to be sold pursuant to the Company’s Retirement Savings Plan for Represented Hourly Employees, as amended (Registration No. 333-89219);

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  f)   the Registration Statement on Form S-8 relating to the Company’s Deferred Compensation Plan (Registration No. 333-34826);
 
  g)   the Registration Statement on Form S-8 registering securities to be sold under the Company’s Directors Stock Plan (Registration No. 333-93593);
 
  h)   the Registration Statement on Form S-8 registering securities to be sold pursuant to the Company’s 2003 Directors Stock Plan (Registration No. 333-101780); and
 
  i)   the Registration Statement on Form S-8 registering securities to be sold pursuant to Non-Employee Director Stock Options Granted on July 31, 2001 and February 6, 2002 (Registration No. 333-125702); and
  4.   any and all amendments (including supplements and post-effective amendments) to the Registration Statement on Form S-3 Registration No. 333-24685) registering
  a)   certain shares of Common Stock acquired or which may be acquired by permitted transferees upon the exercise of transferable options assigned or to be assigned to them by certain participants in the Company’s 1988 Long-Term Incentives Plan in accordance with that Plan; and
 
  b)   the offer and resale by any such permitted transferee who may be deemed to be an “affiliate” of the Company within the meaning of Rule 405 under the Securities Act of 1933, as amended (an Affiliate Selling Shareowner), of Common Stock so acquired or which may be acquired by such Affiliate Selling Shareowner upon exercise of any such transferable option.
         
Signature   Title   Date
 
       
/s/ Keith D. Nosbusch
 
Keith D. Nosbusch
  Chairman of the Board, President and Chief Executive Officer (principal executive officer)   November 2, 2005
 
       
/s/ Betty C. Alewine
 
Betty C. Alewine
  Director   November 2, 2005

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/s/ Don H. Davis, Jr.
 
Don H. Davis, Jr.
  Director   November 2, 2005
 
       
/s/ Verne G. Istock
 
Verne G. Istock
  Director   November 2, 2005
 
       
/s/ Barry C. Johnson
 
Barry C. Johnson
  Director   November 2, 2005
 
       
/s/ William T. McCormick, Jr.
 
William T. McCormick, Jr.
  Director   October 28, 2005
 
       
/s/ Bruce M. Rockwell
 
Bruce M. Rockwell
  Director   November 2, 2005
 
       
/s/ David B. Speer
 
David B. Speer
  Director   November 2, 2005
 
       
/s/ Joseph F. Toot, Jr.
 
Joseph F. Toot, Jr.
  Director   November 2, 2005
 
       
/s/ Kenneth F. Yontz
 
Kenneth F. Yontz
  Director   November 2, 2005
 
       
/s/ James V. Gelly
 
James V. Gelly
  Senior Vice President and Chief Financial Officer (principal financial officer)   November 8, 2005

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/s/ Douglas M. Hagerman
 
Douglas M. Hagerman
  Senior Vice President, General Counsel and Secretary   November 4, 2005
 
       
/s/ David M. Dorgan
 
David M. Dorgan
  Vice President and Controller (principal accounting officer)   November 4, 2005

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Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
       
 I, Keith D. Nosbusch, Chairman, President and Chief Executive Officer of Rockwell Automation, Inc., certify that:
  1. 
I have reviewed this annual report on Form 10-K of Rockwell Automation, Inc.;
 
  2. 
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
  3. 
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
  4. 
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
  5. 
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
 
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 10, 2005
  /s/ Keith D. Nosbusch
 
 
  Keith D. Nosbusch
  Chairman, President and
  Chief Executive Officer
 

Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, James V. Gelly, Senior Vice President and Chief Financial Officer of Rockwell Automation, Inc., certify that:
 
1. 
I have reviewed this annual report on Form 10-K of Rockwell Automation, Inc.;
 
  2. 
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
  3. 
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
  4. 
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
  5. 
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
 
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 10, 2005
  /s/ James V. Gelly
 
 
  James V. Gelly
  Senior Vice President and
  Chief Financial Officer
 

Exhibit 32.1
CERTIFICATION OF PERIODIC REPORT
I, Keith D. Nosbusch, Chairman, President and Chief Executive Officer of Rockwell Automation, Inc. (the “Company”), hereby certify pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
(1) the Annual Report on Form 10-K of the Company for the year ended September 30, 2005 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: November 10, 2005
  /s/ Keith D. Nosbusch
 
 
  Keith D. Nosbusch
  Chairman, President and
  Chief Executive Officer
 

Exhibit 32.2
CERTIFICATION OF PERIODIC REPORT
I, James V. Gelly, Senior Vice President and Chief Financial Officer of Rockwell Automation, Inc. (the “Company”), hereby certify pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
(1) the Annual Report on Form 10-K of the Company for the year ended September 30, 2005 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: November 10, 2005
  /s/ James V. Gelly
 
 
  James V. Gelly
  Senior Vice President and
  Chief Financial Officer