-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, S38q9pzL5bOfqAj9ncVI83K091qPf1yiJqF5bBe9rhj5oPOceVl1c+Qc3boNEcas I6wMrVHK+xCW4bzNk7O+Vg== 0000950128-94-000174.txt : 19941222 0000950128-94-000174.hdr.sgml : 19941222 ACCESSION NUMBER: 0000950128-94-000174 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 22 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941221 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROCKWELL INTERNATIONAL CORP CENTRAL INDEX KEY: 0000084636 STANDARD INDUSTRIAL CLASSIFICATION: GUIDED MISSILES & SPACE VEHICLES & PARTS [3760] IRS NUMBER: 951054708 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-01035 FILM NUMBER: 94565629 BUSINESS ADDRESS: STREET 1: 2201 SEAL BEACH BOULEVARD CITY: SEAL BEACH STATE: CA ZIP: 90740 BUSINESS PHONE: 4125654004 MAIL ADDRESS: STREET 1: 2201 SEAL BEACH BOULEVARD CITY: SEAL BEACH STATE: CA ZIP: 90740 FORMER COMPANY: FORMER CONFORMED NAME: NORTH AMERICAN AVIATION INC DATE OF NAME CHANGE: 19671017 10-K 1 ROCKWELL INTERNATIONAL 10-K 1 [CONFORMED COPY] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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, 1994. COMMISSION FILE NUMBER 1-1035 ------------------------ ROCKWELL INTERNATIONAL CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 95-1054708 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 2201 SEAL BEACH BOULEVARD, 90740-8250 SEAL BEACH, CALIFORNIA (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (412) 565-4090 (OFFICE OF THE SECRETARY) ------------------------ SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON WHICH TITLE OF EACH CLASS REGISTERED - --------------------------------------------- ------------------------------------ $4.75 Convertible Preferred Stock, Series A New York and Boston Stock Exchanges $1.35 Convertible Preferred Stock, Series B New York Stock Exchange Common Stock, $1 Par Value New York, Boston, Chicago, Pacific, Philadelphia, Basel, Frankfurt, Geneva, Lausanne, London, Tokyo, Toronto and Zurich Stock Exchanges 8 7/8% Notes due September 15, 1999 New York Stock Exchange 8 3/8% Notes due February 15, 2001 New York Stock Exchange 6 3/4% Notes due September 15, 2002 New York Stock Exchange
------------------------ SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: CLASS A COMMON STOCK, $1 PAR VALUE (TITLE OF CLASS) 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 X No 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. [ X ] The aggregate market value of registrant's voting stock held by non-affiliates of registrant at November 30, 1994, was approximately $7.2 billion. 181,360,245 shares of registrant's Common Stock, par value $1 per share, and 36,477,298 shares of registrant's Class A Common Stock, par value $1 per share, were outstanding on November 30, 1994. DOCUMENTS INCORPORATED BY REFERENCE Proxy Statement for the Annual Meeting of Shareowners of registrant to be held on February 1, 1995. Certain information therein is incorporated by reference into Part III hereof. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 PART I ITEM 1. BUSINESS. Rockwell International Corporation (the Company or Rockwell), a Delaware corporation incorporated in 1928, is a diversified corporation engaged in research, development and manufacture of many products for commercial and government markets. In fiscal 1994, 65% of the Company's total sales were made to U.S. commercial and international customers, 20% of the Company's total sales were made under United States Government defense contracts and subcontracts, and 15% of the Company's total sales were made under contracts with the National Aeronautics and Space Administration (NASA) for space activities. As used herein, the terms the "Company" or "Rockwell" (and in Item 8, the "company") include subsidiaries and predecessors unless the context indicates otherwise. For purposes hereof, whenever 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 (the MD&A) or in specific notes of the NOTES TO FINANCIAL STATEMENTS (the NOTES TO FINANCIAL STATEMENTS) included in Item 8, FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA or under specific captions and on specific pages of the Proxy Statement for the Annual Meeting of Shareowners of the Company to be held on February 1, 1995 (the 1995 Proxy Statement), such information shall be deemed to be incorporated therein by such reference. BUSINESS SEGMENTS The Company operates in four business segments, which are engaged in research, development and manufacture of diversified products as follows: Electronics--industrial automation equipment and systems; avionics products and systems and related communications technologies primarily used in commercial and military aircraft; semiconductor-based subsystems including fax and data modems, global positioning system receiver engines and gallium arsenide devices; and defense electronics systems and products for precision guidance and control, for tactical weapons, and for command, control, communications and intelligence. Aerospace--manned and unmanned space systems, rocket engines, military aircraft and modifications, military and commercial aircraft structural components, advanced space-based surveillance systems and high-energy laser and other directed-energy programs. Automotive--components and systems for heavy- and medium-duty trucks, buses, trailers and heavy-duty off-highway vehicles (Heavy Vehicle Systems); and components and systems for light trucks and passenger cars (Light Vehicle Systems). Graphic Systems--high-speed printing presses and related graphic arts equipment. Financial information with respect to the Company's business segments, including their contributions to sales and operating earnings and their identifiable assets for the three years ended September 30, 1994 is contained under the captions RESULTS OF OPERATIONS, Sales and Earnings by Business Segment, 1994 Compared to 1993 and 1993 Compared to 1992 in the MD&A, on pages 15-17 hereof, and in Note 22 of the NOTES TO FINANCIAL STATEMENTS on pages 31-32 hereof. Information with respect to the Company's total backlog at September 30, 1994 is contained under the caption RESULTS OF OPERATIONS, Backlog in the MD&A on page 19 hereof. Additional information with respect to the Company's sales under United States Government contracts is contained in Notes 14 and 22 of the NOTES TO FINANCIAL STATEMENTS on pages 27 and 31-32, respectively, hereof and under the caption RESULTS OF OPERATIONS, Government Contracts in the MD&A on page 19 hereof. 2 3 Electronics The sales and operating earnings of the businesses that comprise the Company's Electronics business segment for the three fiscal years ended September 30, 1994 were as follows:
1994 1993 1992 ------- ------- ------- (IN MILLIONS) Sales: Automation....................................... $ 2,085 $ 1,716 $ 1,471 Avionics......................................... 1,233 1,192 1,322 Telecommunications............................... 699 545 449 Defense Electronics.............................. 998 1,213 1,378 ------- ------- ------- Total............................................ $ 5,015 $ 4,666 $ 4,620 ====== ====== ====== Operating Earnings............................... $ 688.0 $ 598.1 $ 485.4 ====== ====== ======
Automation. The Company's automation products include programmable controllers, man-machine interface devices, communications networks, programming and application software, drives and drive systems, sensing and motor control devices, machine vision, computer numerical control systems, data acquisition products and global support services. The Company is a leader in plant floor automation, focusing on helping customers control processes and become more competitive through increased flexibility, improved productivity and information flow. Avionics. Rockwell's Avionics businesses provide flight control, display, navigation, voice and data communication and other systems for large commercial aircraft, regional airliners, corporate jets and turboprops and government applications as well as military Global Positioning System (GPS) user equipment. In the face of a lethargic market for new large commercial aircraft, the Company is introducing new products for customer installation in both new and existing aircraft, expanding market penetration for Rockwell's digital avionics systems in regional airline and corporate aircraft, expanding into Russia, Eastern Europe and China, and developing new markets in land transportation and commercial GPS applications. The sales and operating earnings of the Company's Avionics businesses for fiscal 1994 were adversely affected by continuing weak air transport markets and investments in new product development to address the growing land transport electronics market. Telecommunications. In telecommunications, the Company is the world leader in fax and data modems and produces other advanced semiconductor devices to process, transmit and receive all types of information. Rockwell's leadership stems from continuous product improvement, new product development and expansion into related products. Rockwell's switching systems business pioneered systems for handling large volumes of telephone calls at telephone companies, airlines, hotels, telemarketing bureaus and similar high call volume businesses. Defense Electronics. Rockwell provides a wide range of electronics products for defense markets worldwide. These products include command, control and communications devices and systems, aircraft upgrades and modifications, tactical weapons, space defense sensors and electronics, submarine navigation and guidance systems, naval combat systems, sensors and a growing number of commercial products. The Company continued in fiscal 1994 as the sole source producer of the AGM-130, a precision guided standoff weapon system; the prime contractor for the AGM-114F HELLFIRE anti-armor weapon system; the producer of the GBU-15 guided weapon; the prime contractor for the Australian New Submarine Program Combat System and F-111C Aircraft Modernization Program; the world leader in very low frequency airborne communications; and a leader in the military satellite communication terminals market for major programs like MILSTAR and the Army SMART-T contract. 3 4 Aerospace The sales and operating earnings of the businesses that comprise the Company's Aerospace business segment for the three fiscal years ended September 30, 1994 were as follows:
1994 1993 1992 ------- ------ ------- (IN MILLIONS) Sales: Space Systems.................................... $ 2,044 $2,279 $ 2,372 Aircraft......................................... 583 727 797 ------- ------ ------- Total............................................ $ 2,627 $3,006 $ 3,169 ====== ====== ====== Operating Earnings............................... $ 372.2 $369.2 $ 327.9 ====== ====== ======
Space Systems. The Company is a world leader in spacecraft and rocket propulsion systems. Its space systems businesses built and perform support, maintenance and modification work for the Space Shuttle orbiters, their main engines and the Shuttle flight program. They also design the power system for the space station, build propulsion systems for Atlas and Delta expendable launch vehicles, and develop advanced technologies for national defense and space programs such as the National Aero-Space Plane (NASP), for which the Company also manages the program office. The Company is one of NASA's largest contractors in terms of dollar volume. Aircraft. The Company's aircraft operations design, build and modify military aircraft and supply metal and composite military and commercial aerostructures. Current activities include support and modification of the B-1B Lancer bomber, advanced technology programs including the NASP and X-31 experimental aircraft, and aerostructures for Boeing 737, 747 and 777 aircraft. Rockwell is also competing for the Joint Primary Aircraft Training System. Automotive The sales and operating earnings of the businesses that comprise the Company's Automotive business segment for the three years ended September 30, 1994 were as follows:
1994 1993 1992 ------- ------- ------- (IN MILLIONS) Sales: Heavy Vehicle Systems............................ $ 1,744 $ 1,455 $ 1,373 Light Vehicle Systems............................ 1,082 1,081 1,060 ------- ------- ------- Total............................................ $ 2,826 $ 2,536 $ 2,433 ====== ====== ====== Operating Earnings............................... $ 130.8 $ 126.1 $ 96.0 ====== ====== ======
Heavy Vehicle Systems. Automotive's heavy vehicle systems business is among the world's leading independent producers of components for heavy- and medium-duty trucks, buses, trailers and heavy-duty off-highway vehicles. Rockwell is the leading supplier of heavy truck and trailer axles, brakes and anti-lock braking systems in North America and completes its drivetrain product offering with clutch and transmission products. The North American heavy-duty truck market continued the recovery begun in fiscal 1993 after a multi-year depression. North American factory sales totaled a record 215,000 units, compared with 180,000 the previous year. Sales of medium-duty trucks, used primarily for short hauls and local delivery, were 125,000 units, up from 109,300 in fiscal 1993. Trailer sales rose to a record 255,000 units, up from 197,000 in the prior year. Light Vehicle Systems. The Company's light vehicle systems business is a leading supplier of sunroof, door, access control, seat adjuster and suspension components and systems, electronics and wheels to the world's passenger car and light truck industries. In the face of continuing customer pressure for reduced cost, the Company is emphasizing product enhancements which provide added value and concentrating its 4 5 resources on the systems and electronics product lines. For example, Rockwell is moving from providing just individual components toward more comprehensive systems with various power and electronic options. In addition, the Company sold its automotive plastics business during fiscal 1994. The Company also continues building relationships and joint ventures which respond to customer needs for suppliers who provide global design, engineering, manufacturing and service support. North American passenger car sales were up strongly in fiscal 1994 over the prior year, and those in Europe increased modestly. Graphic Systems The sales and operating earnings (adjusted as noted on page 15) of the Company's Graphic Systems business segment for the three fiscal years ended September 30, 1994 were as follows:
1994 1993 1992 ------- ------- ------- (IN MILLIONS) Sales............................................ $ 655 $ 632 $ 688 ----- ----- ----- ----- ----- ----- Operating Earnings............................... $31.2 $14.8 $21.5 ----- ----- ----- ----- ----- -----
Graphic Systems is the world's leading supplier of web offset presses for newspaper and commercial printing. Three out of four U.S. daily newspapers and many prestigious newspapers in 100 other countries are printed on Rockwell presses. The Company's commercial presses are used to produce advertising inserts, catalogs, magazines and books. Over the past several years, when the markets worldwide for the Company's graphic systems products suffered their worst recession in 50 years, Graphic Systems substantially lowered its cost structure and downsized its manufacturing capacity to reflect market realities. Key research and development programs were sustained through that recession, however, resulting in new products that positioned Graphic Systems to meet the changing performance needs of its customers. COMPETITIVE POSTURE The Company competes with many manufacturers which, depending on the product involved, range from large diversified enterprises comparable in scope and resources to the Company to smaller companies specializing in particular products. Factors which affect the Company's competitive posture are its research and development efforts, the quality of its products and services and its marketing and pricing strategies. For the United States Government's fiscal year ended September 30, 1993 (the latest year for which data have been published), the Company was awarded the largest dollar volume of NASA's prime contracts and the 16th largest dollar volume of prime contracts for the Defense Department. The products of the Company's Electronics and Graphic Systems business segments are sold by their own sales forces and through distributors and agents. The Company's automotive components primarily are sold directly to original equipment manufacturers, some of which also are competitors in that they produce for their own use many of the products manufactured by the Company. Management believes that the Company is one of the largest independent manufacturers of automotive components and parts in North America and the world's largest manufacturer of web offset printing presses. GOVERNMENT CONTRACTING RISKS In addition to normal business risks, companies engaged in supplying military and space equipment to the United States Government are subject to unusual risks, including dependence on Congressional appropriations and administrative allotment of funds, changes in governmental procurement legislation and regulations and other policies which may reflect military and political developments, significant changes in contract scheduling, complexity of designs and the rapidity with which they become obsolete, constant necessity for design improvements, intense competition for available United States Government business necessitating increases in time and investment for design and development, difficulty of forecasting costs and schedules when bidding on developmental and highly sophisticated technical work and other factors characteristic of the industry. Changes are customary over the life of United States Government contracts, particularly development contracts, and generally result in adjustments of contract prices. Additional information on the 5 6 Company's pending claims for termination costs and certain contractual disputes is contained under the caption RESULTS OF OPERATIONS, Government Contracts in the MD&A on page 19 hereof. Moreover, various claims (whether based on United States Government or Company audits and investigations or otherwise) have been or may be instituted or asserted against the Company related to its United States Government contract work, including claims based on business practices and cost classifications. Although such claims are usually resolved by detailed fact-finding and negotiation, on those occasions when they are not so resolved, civil or criminal legal or administrative proceedings may ensue. Depending on the circumstances and the outcome, such proceedings could result in fines, the cancellation of or suspension of payments under one or more United States Government contracts, suspension or debarment proceedings affecting potential further business with the United States Government, or alteration of the Company's procedures relating to the performance or obtaining of United States Government contracts. Management of the Company believes there are no claims, audits or investigations currently pending which will have a material adverse effect on either the Company's business or its financial condition. ACQUISITIONS AND DISPOSITIONS The Company regularly considers the acquisition or development of new businesses and reviews the prospects of its existing businesses to determine whether any of them should be modified, sold or otherwise discontinued. The Company purchased and sold the assets or stock of several businesses during fiscal 1994. In December 1994 the Company acquired approximately 62% of the outstanding common stock on a fully-diluted basis (constituting approximately 88% of the outstanding voting common stock) of Reliance Electric Company (Reliance), a major manufacturer of industrial products and telecommunications equipment with annual sales of $1.7 billion. Pursuant to a merger agreement between the Company and Reliance, the Company intends to effect in early 1995 a merger in which Reliance will become a wholly-owned subsidiary of the Company. The aggregate purchase price for Reliance will be approximately $1.6 billion. The Company intends to divest Reliance's telecommunications business, which has annual sales of approximately $440 million. Certain financial information regarding Reliance and certain unaudited pro forma financial information in respect of the Company and Reliance is included in the Company's Current Report on Form 8-K dated and filed December 21, 1994. GEOGRAPHIC INFORMATION The Company conducts operations in the United States and in 35 foreign countries. Selected financial information by major geographic area for the three years ended September 30, 1994 is contained in Note 22 of the NOTES TO FINANCIAL STATEMENTS on page 32 hereof. The Company's principal markets outside the United States are in Australia, Brazil, Canada, France, Germany, Italy, Japan, the Netherlands, Spain and the United Kingdom. In addition to normal business risks, operations outside the United States are subject to other risks including, among other factors, the political, economic and social environments, governmental laws and regulations, and currency revaluations and fluctuations. RESEARCH AND DEVELOPMENT Information with respect to research and development efforts of the Company, which are conducted principally under United States Government contracts, is contained in Note 16 of the NOTES TO FINANCIAL STATEMENTS on page 28 hereof. The Company's Science Center conducts a basic research program to support the strategies of the operating businesses. At September 30, 1994, the Company employed approximately 14,200 professional engineers and scientists and 3,400 supporting technical personnel, most of whom are engaged in a wide variety of activities on United States Government contracts and subcontracts. 6 7 EMPLOYEES At September 30, 1994, the Company had 71,891 employees, of whom 18,913 were employed outside the United States. RAW MATERIALS AND SUPPLIES Raw materials essential to the conduct of all the Company's business segments generally are available at competitive prices. Many items of equipment and components used in the production of the Company's products in all the Company's business segments are purchased from others. In addition, the Company's Aerospace business segment and the Defense Electronics and Avionics businesses in the Electronics business segment generally subcontract major portions of systems. Although the Company has a broad base of suppliers and subcontractors, it is dependent upon the ability of its suppliers and subcontractors to meet performance and quality specifications and delivery schedules. ENVIRONMENTAL PROTECTION REQUIREMENTS Information with respect to the effect on the Company and its manufacturing operations of compliance with environmental protection requirements and resolution of environmental claims is contained under the caption RESULTS OF OPERATIONS, Environmental Issues in the MD&A, on pages 18-19 hereof. See also Item 3, LEGAL PROCEEDINGS, on pages 8-9 hereof. PATENTS, LICENSES AND TRADEMARKS Numerous patents and patent applications are owned by the Company and utilized in its activities and manufacturing operations. It also is licensed under patents owned by others. Various claims of patent infringement have been made against the Company. Management believes that none of these claims will have a material adverse effect on the consolidated financial statements of the Company. While in the aggregate the Company's patents and licenses are considered important in the operation of its business, management does not consider them of such importance that loss or termination of any one of them would materially affect the Company's business. The Company's name, its registered trademarks "Rockwell" and "Rockwell International" and its symbol are important to all of its business segments. In addition, the Company owns a large number of other important trademarks applicable to only certain of its products, such as "Collins" for navigation and communication equipment, "Allen-Bradley" and "A-B" for electronic controls and systems for industrial automation and "Goss" for printing presses. SEASONALITY None of the Company's business segments is seasonal. ITEM 2. PROPERTIES. At September 30, 1994, the Company operated 168 plants and research and development facilities throughout the United States and in Europe, Brazil, Venezuela, Canada, Mexico, Australia and the Far East. It also had approximately 300 sales offices, warehouses and service centers. These facilities had an aggregate floor space of approximately 43.6 million square feet. Of this floor space, approximately 71% was owned by the Company and approximately 23% was leased, with the balance being made available under facilities contracts for use in the performance of United States Government contracts. At September 30, 1994, 3.1 million square feet of this floor space (including 2.6 million square feet in Company-owned facilities) were not in use, with 68% of this unused space being in facilities previously used under United States Government contracts. There are no major encumbrances (other than financing arrangements which in the aggregate are not material) on any of the Company's plants or equipment. In the opinion of management, the Company's properties have 7 8 been well maintained, are in sound operating condition and contain all equipment and facilities necessary to operate at present levels. A summary of floor space of these facilities at September 30, 1994 is as follows:
COMPANY- GOVERNMENT- OWNED LEASED FURNISHED LOCATION AND SEGMENTS FACILITIES FACILITIES FACILITIES TOTAL - ---------------------------------------------------- -------- ---------- ----------- ----- (IN MILLIONS OF SQUARE FEET) United States: Electronics....................................... 9.9 3.7 13.6 Aerospace......................................... 6.4 2.7 2.9 12.0 Automotive........................................ 4.3 0.2 4.5 Graphic Systems................................... 1.2 0.3 1.5 Europe: Electronics....................................... 0.3 1.3 1.6 Automotive........................................ 3.7 0.3 4.0 Graphic Systems................................... 0.9 0.9 South America: Electronics....................................... 0.1 0.1 Automotive........................................ 2.0 2.0 Canada and other areas: Electronics....................................... 0.3 0.7 1.0 Automotive........................................ 0.9 0.1 1.0 Graphic Systems................................... 0.1 0.1 Corporate Offices (including centralized computing and certain research and development facilities)....................................... 0.8 0.5 1.3 -------- --- --- ----- Total..................................... 30.8 9.9 2.9 43.6 ======= ======= ========= ====
ITEM 3. LEGAL PROCEEDINGS. Rocky Flats Plant. On January 30, 1990, two civil actions were brought in the United States District Court for the District of Colorado against the Company and another former operator of the Rocky Flats Plant (the Plant), Golden, Colorado, operated from 1975 through December 31, 1989 by the Company for the Department of Energy (DOE). Both actions allege 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. One action, brought by residents and owners of property near the Plant, on their own behalf and purportedly on behalf of two classes, seeks 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 residents' 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 residents' case is pending before the Court. On October 8, 1993, the Court certified separate medical monitoring and property value classes. The case is currently in discovery, and trial has been set for February 12, 1996. In the second action, five present or former employees of the Plant and labor organizations representing a few of the Plant's employees, on their own behalf and purportedly on behalf of two classes of present and former employees of the Plant, sought the creation of a fund to finance reasonable medical monitoring and surveillance services, unspecified compensatory and exemplary damages and other proper relief. On March 28, 1991, the Court dismissed the employees' case. On October 26, 1993, the United States Court of Appeals for the Tenth Circuit affirmed the judgment of the District Court. The Court denied the plaintiffs' petition for rehearing and suggestion for rehearing en banc on December 20, 1993, and the plaintiffs did not file a petition 8 9 for certiorari to the United States Supreme Court. Accordingly, the dismissal of the employees' case is now final. On November 13, 1990, the Company was served with a summons and complaint in another civil action, which the Company believes is totally without merit, brought against the Company 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 the Company's operation of the Plant (and seeking treble damages and forfeitures) as well as a personal cause of action for alleged wrongful termination of employment, seeking reinstatement with back pay and other unspecified damages. On August 8, 1991, the Court dismissed the personal cause of action. On February 2, 1994, the Court denied Rockwell's motion to dismiss the complaint for lack of subject matter jurisdiction, and discovery is proceeding. The Company believes that it is entitled under applicable law and its contract with the DOE to be indemnified for all costs and any liability associated with each of these civil actions, and the Company has been reimbursed for all such costs incurred to date. Hanford Nuclear Reservation. On August 6, 1990 and August 9, 1990, civil actions were filed in the United States District Court for the Eastern District of Washington against the Company and the present and other former operators of the DOE's Hanford Nuclear Reservation (Hanford), Hanford, Washington. The Company operated part of Hanford for the DOE from 1977 through June 1987. Both actions purport to be brought on behalf of various classes of persons and numerous individual plaintiffs who resided, worked, owned or leased real property, or operated businesses, at or near Hanford or downwind or downriver from Hanford, at any time since 1944. The actions allege the improper handling and disposal of radioactive and other hazardous substances, in violation of federal and state environmental, health and safety laws and regulations, and assert various statutory and common law claims, including claims for negligence, strict liability, trespass, nuisance, infliction of emotional distress, civil conspiracy and misrepresentation and concealment of the alleged hazards generated at Hanford. The relief sought includes unspecified compensatory and punitive damages for personal injuries and for economic losses, including lost income and diminution in value of businesses and property, orders of abatement, creation of a fund to finance monitoring services and scientific studies of adverse health effects, and various injunctive and other equitable relief. These actions and the follow-on claims described below have been (and any additional follow-on claims that may be filed are expected to be) consolidated in the United States District Court for the Eastern District of Washington under the name In re Hanford Nuclear Reservation Litigation. On or about December 7, 1994 the Consolidated Tribes and Bands of the Yakama Indian Nation filed a motion to intervene as a party plaintiff in the consolidated litigation, joining in the allegations and claims made by the other plaintiffs and asserting on behalf of the approximately 8,500 members of the Yakama Indian Nation claims for damage to natural foods, impairment of food gathering rights and impairment of access to ancestral lands. Other cases asserting similar claims (the follow-on claims) on behalf of the same and similarly situated individuals and groups have been filed from time to time since August 1990, and may continue to be filed from time to time in the future. Because the claims and classes of claimants included in the actions described in the preceding paragraph are so broadly defined, the follow-on claims filed as of December 21, 1994 have not altered, and possible future follow-on claims are not expected to alter, in any material respect the scope of the litigation. Effective October 1, 1994, the DOE assumed control of the defense of certain of the contractor defendants (including the Company) in the In re Hanford Nuclear Reservation Litigation. Beginning on that date, the costs of the Company's defense, which had previously been reimbursed to the Company by the DOE, have been and are being paid directly by the DOE. The Company believes it is entitled under applicable law and its contracts with the DOE to be indemnified for all costs and any liability associated with these actions. Other. Various other lawsuits, claims and proceedings have been or may be instituted or asserted against the Company relating to the conduct of its business, including those pertaining to product liability, environmental, safety and health, employment, and government contract matters. Although the outcome of litigation cannot be predicted with certainty and some lawsuits, claims or proceedings may be disposed of 9 10 unfavorably to the Company, management believes the disposition of matters which are pending or asserted will not have a material adverse effect on the Company's financial statements. 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 the 1994 fiscal year. ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY. The name, age, positions and offices 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 November 30, 1994 are as follows:
NAME, OFFICE AND POSITION, AND PRINCIPAL OCCUPATIONS AND EMPLOYMENT AGE ----------------------------------------------------------------------------- --- DONALD R. BEALL--Chairman of the Board and Chief Executive Officer of Rockwell................................................................... 56 W. MICHAEL BARNES--Senior Vice President, Finance & Planning and Chief Financial Officer of Rockwell since July 1991; Vice President, Business Development and Planning of Rockwell prior thereto......................... 52 KENT M. BLACK--Executive Vice President and Chief Operating Officer of Rockwell................................................................... 55 WILLIAM J. CALISE, JR.--Senior Vice President, General Counsel and Secretary of Rockwell since November 1994; senior partner of Chadbourne & Parke (law firm) prior thereto........................................................ 56 ROBERT L. CATTOI--Senior Vice President and Technical Adviser to the Office of the Chairman of Rockwell since March 1994; Senior Vice President, Research and Engineering of Rockwell from November 1993 to March 1994 and prior to June 1991; Senior Vice President, Research, Engineering & Manufacturing Processes of Rockwell from June 1991 through October 1993.... 68 LEE H. CRAMER--Vice President and Treasurer of Rockwell...................... 49 DON H. DAVIS, JR.--Executive Vice President and Chief Operating Officer of Rockwell since January 1994; Senior Vice President and President, Automation of Rockwell from June 1993 to January 1994; President of Allen-Bradley from July 1989 to January 1994............................... 54 THOMAS L. GUNCKEL, II--Senior Vice President, Research, Engineering and Operations of Rockwell since June 1994; Senior Vice President, Research and Engineering of Rockwell from March 1994 to June 1994; Vice President and General Manager, Autonetics Electronic Systems Division of Rockwell prior thereto.................................................................... 58 CHARLES H. HARFF--Senior Vice President and Special Counsel of Rockwell since November 1994; Senior Vice President, General Counsel and Secretary of Rockwell prior thereto.............................................................. 65 SAM F. IACOBELLIS--Executive Vice President and Deputy Chairman for Major Programs of Rockwell since June 1993; Executive Vice President and Chief Operating Officer of Rockwell prior thereto................................ 65 LAWRENCE J. KOMATZ--Vice President and Controller of Rockwell................ 52 RICHARD R. MAU--Senior Vice President, Communications of Rockwell............ 63 JAMES A. MCDIVITT--Senior Vice President, Government Operations and International of Rockwell since November 1990; Senior Vice President, Government Operations of Rockwell prior thereto............................ 65 JOHN A. MCLUCKEY--Senior Vice President and President, Defense Systems of Rockwell since June 1993; President, Defense Electronics of Rockwell from March 1990 through June 1993; President, Autonetics Electronic Systems Division of Rockwell prior thereto......................................... 54 ROBERT H. MURPHY--Senior Vice President, Organization and Human Resources of Rockwell................................................................... 56 WILLIAM A. SANTE, II--General Auditor of Rockwell............................ 51
10 11
NAME, OFFICE AND POSITION, AND PRINCIPAL OCCUPATIONS AND EMPLOYMENT AGE ----------------------------------------------------------------------------- --- JOHN R. STOCKER--Vice President--Law of Rockwell since November 1994; Vice President and Associate General Counsel of Rockwell prior thereto.......... 53 CHARLES C. STOOPS, JR.--General Tax Counsel of Rockwell...................... 61
There are no family relationships, as defined, between any of the above executive officers. No officer of the Company was selected pursuant to any arrangement or understanding between him and any person other than the Company. All executive officers are elected annually. PART II ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The principal market on which the Company's Common Stock, par value $1 per share, is traded is the New York Stock Exchange. The Company's Common Stock, par value $1 per share, is also traded on the Boston, Chicago, Pacific and Philadelphia Stock Exchanges as well as certain stock exchanges outside the United States as set forth on the cover of this Report. There is no trading market for the Class A Common Stock, par value $1 per share, but a sale may be effected by selling the Common Stock into which Class A Common Stock is convertible. On November 30, 1994, there were 74,660 shareowners of record of the Company's Common Stock and 57,750 shareowners of record of the Company's Class A Common Stock. The following table sets forth the high and low trading price of the Company's Common Stock on the New York Stock Exchange--Composite Transactions during each quarter of the Company's fiscal years ended September 30, 1994 and 1993:
1994 1993 ------------ ------------ FISCAL QUARTERS HIGH LOW HIGH LOW ------------------------------------------ ---- --- ---- --- First..................................... 38 1/2 33 29 3/8 25 Second.................................... 44 1/8 35 3/8 31 27 7/8 Third..................................... 41 34 1/2 34 7/8 29 7/8 Fourth.................................... 37 7/8 33 1/2 36 3/4 30 1/2
During fiscal year 1994 the Company repurchased, through daily open-market purchases, 4.1 million shares of Common Stock. Shares repurchased under the program are to be used for employee stock option and other benefit and compensation plans, conversion of the Company's convertible securities and other corporate purposes. The following table sets forth the aggregate quarterly dividends per common share (comprised of the Common Stock and Class A Common Stock) during each of the Company's five fiscal years ended September 30, 1994:
DIVIDENDS PER FISCAL YEAR COMMON SHARE -------------------------------------------------------------- ------------- 1994.......................................................... $1.02 1993.......................................................... 0.96 1992.......................................................... 0.92 1991.......................................................... 0.86 1990.......................................................... 0.80
11 12 ITEM 6. SELECTED FINANCIAL DATA. Set forth below is selected financial data for the Company for each of its last five fiscal years: SELECTED FINANCIAL DATA ROCKWELL INTERNATIONAL CORPORATION ------------------------------------------------------------------- (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
1994 1993 1992 1991 1990 - -------------------------------------------------------------------------------------------------------------- SUMMARY OF OPERATIONS Sales of ongoing businesses $11,123 $10,840 $10,910 $11,437 $ 11,760 Cost of sales 8,675 8,539 8,810 9,189 9,354 Selling, general and administrative expenses 1,412 1,374 1,332 1,371 1,428 Operating earnings of ongoing businesses 1,222 1,108 931 1,131 1,229 Net income 634 562 483* 601 624 Earnings per common share Primary 2.87 2.55 2.16* 2.57 2.56 Fully diluted 2.82 2.51 2.14* 2.54 2.53 Cash dividends 225 211 206 202 196 Per common share 1.02 .96 .92 .86 .80 Average common shares outstanding (in millions) 221 220 224 234 244 - -------------------------------------------------------------------------------------------------------------- FINANCIAL POSITION AT SEPTEMBER 30 Current assets $ 4,928 $ 4,946 $ 4,839 $ 4,823 $ 4,775 Current liabilities 3,020 2,946 3,112 3,322 3,843 Working capital 1,908 2,000 1,727 1,501 932 Ratio of current assets to current liabilities 1.63 1.68 1.55 1.45 1.24 Property - net 2,383 2,326 2,375 2,461 2,668 Total assets 9,861 9,695 9,731 9,376 9,635 Long-term debt 831 1,028 1,035 740 553 Ratio of total debt to shareowners' equity .30 .40 .43 .24 .32 Shareowners' equity 3,356 2,956 2,778 4,224 4,186 Per common share 15.32 13.35 12.58 18.48 17.49 - -------------------------------------------------------------------------------------------------------------- OTHER STATISTICAL DATA Backlog at September 30 $10,751 $13,135 $14,564 $16,468 $ 15,487 Payrolls and fringe benefits 4,189 4,285 4,470 4,786 4,942 Depreciation expense 436 432 454 498 500 Capital expenditures 568 433 386 484 538 Number of employees at September 30 71,891 77,028 78,685 87,004 101,923 ============================================================================================================== * EXCLUDES THE ONE-TIME CHARGE RELATED TO THE CHANGE IN ACCOUNTING FOR RETIREMENT MEDICAL BENEFITS (SEE NOTE 1 TO FINANCIAL STATEMENTS). INCLUDING THE EFFECT OF THIS ACCOUNTING CHANGE THE COMPANY HAD A NET LOSS FOR 1992 OF $1,036 MILLION, OR $4.62 PER SHARE.
12 13 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. OVERVIEW Rockwell again achieved solid earnings growth in 1994 and met or exceeded the financial goals the Company's management has set as a key part of its long-term strategy to continuously enhance shareowner value. The strength of Rockwell's financial condition provides the Company the liquidity for profitable growth, such as the recent acquisition of Reliance Electric Company, a major manufacturer of industrial products and telecommunications equipment, which will cost $1.6 billion. Management believes the combination of the Company's Allen-Bradley Automation business with Reliance Electric will expand a formidable worldwide industrial automation franchise that will significantly increase shareowner value. The acquisition will increase the Company's total annual sales by $1.2 billion and is expected to have a positive earnings impact in the first full year after the acquisition. The Company's 1994 earnings per share increased 13 percent from 1993, the second consecutive year Rockwell has achieved double-digit earnings per share growth. The Company's long-term goal is for average annual earnings per share growth, from the 1992 base, in the low double-digit range. In 1994 the Company reached a return on shareowners' equity of 20 percent, which puts it near the top of U.S. businesses. Management's long-term goal is to continue generating return on shareowners' equity in the 18 to 20 percent range. Total 1994 year-end debt was $1 billion, down from $1.2 billion a year ago. During the year the Company redeemed its $200 million 7 1/2% notes, which had been payable in 1997. The Company's debt to total capital ratio, debt as a percent of shareowners' equity plus debt, decreased from 29 percent in 1993 to 23 percent in 1994. Management's goal is to maintain a conservative 25 to 35 percent debt to total capital ratio which will provide flexibility to increase debt when opportunities for attractive acquisitions or investments arise. With the acquisition of Reliance Electric, the Company's debt to total capital ratio will temporarily increase to about 47 percent. With the strong annual cash flow of Rockwell's businesses and management's intention to sell Reliance's telecommunications segment, management expects the debt to total capital ratio will return to the 25 to 35 percent goal within a short period of time. The Company's "free cash flow" before acquisitions of businesses and financing activities was $456 million in 1994 and has totaled $983 million over the past two years. Management's goal is to generate free cash flow of at least $400 million a year. Looking ahead to 1995, assuming continued moderate growth in the U.S. and world economies, management believes the Company will again achieve its earnings per share, return on equity, and cash generation goals. FINANCIAL CONDITION The Company's financial condition remained very strong in 1994. Its businesses have consistently generated the cash necessary to fund substantial investments in innovative new products, advanced technologies and manufacturing processes and aggressive global marketing initiatives necessary to meet the Company's long-term growth objectives and to sustain its favorable competitive positions. Rockwell is among the top ranked companies in research and development. It invested $595 million in Company funded research and development in 1994. In addition, the Company spent $1 billion in research and development under contracts sponsored primarily by the U.S. Government. Company funded research and development in 1994 was 5.3 percent of sales, but was nearly 7 percent in the high-growth and very profitable Automation and Telecommunications businesses. Capital expenditures rose to $568 million in 1994 compared to $433 million in 1993. Substantially all of 1994's capital expenditures were for new facilities and equipment to support growth initiatives, to lower product cost and to improve product quality. Approximately 50 percent of the Company's 1994 capital 13 14 expenditures were spent by the Automation and Telecommunications businesses. In 1995, capital spending is planned to approximate the same level as 1994. Another important use of the Company's cash is payment of dividends and stock repurchases. In 1994 cash dividend payments totaled a record $225 million, or 36 percent of net income. The Company also resumed its common stock repurchase program in the first quarter of 1994 after being out of the market in most of 1993. Since the Company started this program in 1984, it has purchased a total of 110 million shares of common stock at an average price of $22.57 per share. To provide financing for the acquisition of Reliance Electric as well as normal working capital requirements, the Company in November 1994 replaced its existing $.6 billion lines of credit with two new credit agreements with various banks. The credit facilities total $1.5 billion and $1 billion with terms of five years and one year, respectively, and may be used to support commercial paper borrowings as well as for bank borrowings. The Company has obtained approximately $975 million of the funds required for the acquisition of Reliance Electric from private placements of the Company's commercial paper notes with financial institutions. At September 30, 1994 the Company's long-term debt was rated AA/Aa3 by the rating agencies and its commercial paper had the highest possible rating. Following the Company's execution of its merger agreement with Reliance Electric, Standard & Poor's changed the Company's long-term debt rating from AA to AA- while Moody's and Duff & Phelps reaffirmed their ratings of Aa3 and AA, respectively. 14 15 RESULTS OF OPERATIONS Sales and Earnings by Business Segment
YEARS ENDED SEPTEMBER 30, --------------------------------------------------- 1994 1993 1992 1991 1990 ------- ------- ------- ------- ------- (IN MILLIONS) SALES Electronics Automation............................. $ 2,085 $ 1,716 $ 1,471 $ 1,387 $ 1,418 Avionics............................... 1,233 1,192 1,322 1,368 1,363 Telecommunications..................... 699 545 449 413 384 Defense Electronics.................... 998 1,213 1,378 1,477 1,342 ------- ------- ------- ------- ------- Total................................ 5,015 4,666 4,620 4,645 4,507 ------- ------- ------- ------- ------- Aerospace Space Systems.......................... 2,044 2,279 2,372 2,644 2,895 Aircraft............................... 583 727 797 891 886 ------- ------- ------- ------- ------- Total................................ 2,627 3,006 3,169 3,535 3,781 ------- ------- ------- ------- ------- Automotive Heavy Vehicle Systems.................. 1,744 1,455 1,373 1,363 1,547 Light Vehicle Systems.................. 1,082 1,081 1,060 932.... 958 ------- ------- ------- ------- ------- Total................................ 2,826 2,536 2,433 2,295 2,505 ------- ------- ------- ------- ------- Graphic Systems........................... 655 632 688 962 967 ------- ------- ------- ------- ------- Sale of ongoing businesses.................. 11,123 10,840 10,910 11,437 11,760 Divested businesses......................... 490 619 ------- ------- ------- ------- ------- Total................................ $11,123 $10,840 $10,910 $11,927 $12,379 ======= ======= ======= ======= ======= OPERATING EARNINGS Electronics............................... $ 688.0 $ 598.1 $ 485.4 $ 547.7 $ 534.1 Aerospace................................. 372.2 369.2 327.9 408.9 446.9 Automotive................................ 130.8 126.1 96.0 53.0 129.7 Graphic Systems........................... 31.2 14.8 21.5 121.0 118.6 ------- ------- ------- ------- ------- Operating Earnings of ongoing businesses.... 1,222.2 1,108.2 930.8 1,130.6 1,229.3 Divested businesses......................... 30.0 384.7 53.7 Restructuring of businesses................. (271.5) General corporate--net...................... (104.3) (100.0) (75.0) (85.2) (86.7) Interest expense............................ (96.6) (104.1) (107.4) (135.1) (144.3) Provision for income taxes.................. (387.2) (342.2) (295.4) (423.0) (427.7) ------- ------- ------- ------- ------- Total................................ $ 634.1 $ 561.9 $ 483.0 $ 600.5 $ 624.3 ======= ======= ======= ======= ======= - --------- Earnings of the Graphic Systems segment have been adjusted to include interest income related to customer financing receivables as follows (in millions): 1994, $11; 1993, $18.5; 1992, $16.8; 1991, $15.8; and 1990, $19.1. Total earnings for 1992 exclude the one-time charge related to the change in accounting for retirement medical benefits (see Note 1 to Financial Statements). Divested businesses include the sales, operating earnings and gains on sales of significant businesses and product lines sold by the company (see Note 22 to Financial Statements). Restructuring of businesses relates to the business segments as follows (in millions): Automotive, $194.5; Graphic Systems, $49.6; Electronics, $17.9; and General corporate--net, $9.5.
1994 Compared to 1993 Sales in 1994 increased three percent from 1993, even though 1994 sales by the Aerospace and Defense Electronics businesses declined 14 percent from a year ago due to the continuing reduction in government spending in defense and space programs. 15 16 All of the Company's commercial businesses achieved higher sales in 1994 led by significant increases in Automation, Telecommunications and Heavy Vehicle Systems. Automation sales increased 22 percent and Telecommunications sales increased 28 percent due to strong markets and new product driven increased market shares. Sales of Heavy Vehicle Systems increased 20 percent reflecting the strong North American truck markets. In 1994 sales to U.S. commercial and international customers were 65 percent of the Company's total sales, up from 61 percent in 1993. Sales to the U.S. Department of Defense declined to 20 percent of total sales from 23 percent in 1993, while sales to NASA were 15 percent compared to 16 percent in 1993. Rockwell's 1994 international sales totaled $3.5 billion, the highest in the Company's history. Net income for 1994 increased 13 percent over 1993. Earnings increases were recorded by all four of the Company's business segments and, within the segments, seven of the nine business units. Only Avionics and Aircraft had lower earnings. Electronics. 1994 earnings increased 15 percent from 1993 due to the record sales and earnings performance of the Automation and Telecommunications businesses, as well as higher earnings by Defense Electronics resulting from excellent performance and cost containment programs. Although the general aviation and government avionics product lines had increased sales and earnings in 1994, total Avionics earnings were below 1993 due to weak air transport markets and investments in new product development to address the growing land transportation electronics market. Automation had an outstanding year with strong demand for Allen-Bradley products in all of its primary markets worldwide. For the year, Automation's incoming orders averaged $8.8 million per day, up 21 percent from 1993 and international sales surpassed 30 percent of total sales for the first time. During the year, Telecommunications experienced strong demand for its data modems, principally in the fast growing personal computer market. The business shipped over 15 million data modems in 1994 compared to approximately 9 million in 1993, and shipped 8 million facsimile machine modems compared to 6 million in 1993. In September the business launched its next generation very high-speed data modems which will be ramped up to full production by the end of the first half of fiscal 1995. Aerospace. 1994 earnings were slightly ahead of last year even though sales declined due to the continuing reduction in government spending on defense and space programs. Higher earnings of the Space Systems business, primarily due to favorable contract performance and continuing cost reduction programs, more than offset lower volume-related earnings by the Aircraft business. Automotive. Both the Heavy Vehicle Systems and Light Vehicle Systems businesses had small earnings increases in 1994 as compared to 1993. Significant 1994 gains in Heavy Vehicle Systems earnings attributable to the strong North American truck markets were largely offset by higher product warranty provisions. The product warranty provisions include higher than anticipated costs related to the business' extended warranty program as well as a charge to recognize the cost of inspections and potential field modifications of certain transmission products. In Light Vehicle Systems, higher 1994 earnings from increased North American sales and a gain on the sale of its plastics business more than offset the effect of weak international markets and investments in automotive electronics. Graphic Systems. Earnings in 1994 more than doubled from 1993 due to improved profitability in all its product lines. Over the past several years this business has substantially lowered its cost structure and downsized its manufacturing capacity to reflect market realities. 1993 Compared to 1992 Sales for 1993 were slightly below 1992. Sales of Aerospace and Defense Electronics were down due to the decline in government spending on defense and space programs. Graphic Systems and Avionics sales were also down due to depressed markets for printing presses and commercial aircraft, respectively. 16 17 Sales increases in 1993 were recorded by Automation and Telecommunications due to strengthening markets and increased market shares, and by Automotive, due to strong North American truck markets. In 1993 three of the Company's four business segments--Electronics, Aerospace and Automotive--recorded double-digit earnings increases over 1992. Electronics. Earnings in 1993 were up 23 percent from 1992, reflecting substantial earnings improvements by Automation and Telecommunications due to increased sales. Defense Electronics earnings were also up slightly for the year while Avionics earnings were down modestly, both excellent performances considering sales for these businesses were down due to adverse market conditions. In Avionics, lower earnings resulting from the depressed commercial airline market were offset to a large extent by improved performance in the general aviation and government avionics product lines. Aerospace. 1993 earnings were up 13 percent, even though lower government spending reduced sales. Both the Space Systems and Aircraft businesses reported higher earnings primarily due to cost containment initiatives, including significantly lowered health care costs. Earnings of Aircraft also were up due to improved performance. Automotive. 1993 earnings increased 31 percent due to strengthening North American truck markets, the benefits of restructuring actions and cost containment programs. Graphic Systems. 1993 earnings were down substantially from 1992 primarily due to a 26 percent decrease in newspaper printing press sales. Income Taxes The Company's consolidated effective income tax rate in 1994 was 37.9% compared to 37.8% in 1993. In 1993 the tax rate was reduced by a one-time adjustment of the Company's deferred income tax asset accounts to reflect the increase in the 1993 U.S. statutory income tax rate. In 1994 the Company's tax rate was reduced by lower foreign income taxes, primarily due to tax strategy initiatives, including the consolidation of certain foreign subsidiaries. Management expects that the Company's 1995 tax rate will continue to benefit from these initiatives and will approximate the 1994 rate. At September 30, 1994, the Company had unrecognized tax benefits from foreign net operating loss and foreign tax credit carryforwards of approximately $90 million. These benefits are available, over the next several years, to reduce future income taxes. In 1993 the Company filed a research and experimentation tax credit refund claim for the years 1981 through 1991. In 1994 a small portion of the claim was favorably resolved and the remaining portion, approximately $90 million including interest, related to fixed-price government contracts was disallowed. The Company has appealed this decision to the Internal Revenue Service Appeals Office. Pensions In 1994, the Company merged its 33 qualified defined benefit pension plans in the United States into one pension plan. Combining these pension plans did not change the pension benefits of the Company's employees or retirees, but it does strengthen the overall funding status of the plans and reduces administrative costs. At September 30, 1994, the Company's pension plans are overfunded by more than $1 billion based on actual benefits earned to date and by $614 million after considering the effect of projected compensation increases on benefits earned. The Company has reported net pension income since adopting the pension accounting standard in 1987, primarily due to the requirement to recognize the initial net asset (pension assets in excess of pension liabilities at date of adoption) over the average remaining service life of active employees. The Company is recognizing its initial net asset of $1.7 billion over a 13 year amortization period (see Note 18 to Financial Statements). The yearly amortization benefit of this initial net asset is largely related to the Company's Aerospace and Defense Electronics businesses. 17 18 Health Care In response to escalating medical costs, Rockwell has made amendments during the past three years to its medical benefit plans that are designed to limit the growth in the Company's future cost, while still providing access to quality care for employees and retirees. The Company's medical payments for active and retired employees totaled $455 million in 1992, but have decreased to $433 million in 1994. This decrease reflects the effect of plan amendments as well as lower active employee headcounts. On a per capita basis the Company's total medical payments have remained constant over the past three years, clearly indicating the Company is containing the growth in health care costs. The initial retirement medical benefit liability of $2.5 billion recorded by the Company in 1992, upon adoption of the accounting standard on retirement medical benefits, has been reduced by over $400 million as a result of plan amendments. This reduction is being amortized into income over 3 to 12 years in accordance with the standard's requirements and has resulted in reduced retirement medical expense (see Note 17 to Financial Statements). The yearly amortization of the retirement medical benefit liability reduction is largely related to the Company's Aerospace and Defense Electronics businesses. Environmental Issues Federal, state and local requirements relating to the discharge of substances into the environment, the disposal of hazardous wastes and other activities affecting the environment have had and will continue to have an impact on the manufacturing operations of the Company. Thus far, compliance with environmental requirements and resolution of environmental claims have been accomplished without material effect on the Company's liquidity and capital resources, competitive position or financial statements. It is difficult to estimate the timing and ultimate amount of environmental costs to be incurred in the future due to uncertainties about the status of the law, regulations, technology and information related to individual sites. Nevertheless, to assess the materiality for financial statement disclosure purposes, management estimates the total reasonably possible remediation costs that could be incurred by the Company. In the determination of such estimates consideration is given to the professional judgment of the Company's environmental engineers, in consultation with outside environmental specialists when necessary, and counsel, as well as assessments as to the likelihood that other companies which have been designated potentially responsible parties (PRPs) have the financial resources and commitment to fulfill their obligations at Superfund sites where they and the Company may be jointly and severally liable. For certain sites only a range of reasonably possible costs can be estimated. In these cases, the top end of the range is included in management's estimate of total reasonably possible costs; however, in the determination of accruals the low end of the range is accrued as prescribed by generally accepted accounting principles. The Company records accruals for environmental issues in the accounting period in which the Company's responsibility is established and the cost can be reasonably estimated. The Company records receivables for expected recoveries from third parties only when it is probable that such parties will fulfill their obligation to pay and have the financial resources to do so. The Company has been designated as a PRP at 35 Superfund sites, excluding sites as to which the Company's records disclose no involvement or as to which the Company's potential liability has been finally determined. Management estimates the total reasonably possible costs the Company could incur for the remediation of Superfund sites at September 30, 1994 to be about $55 million, of which $31 million has been accrued. Various other lawsuits, claims and proceedings have been asserted against the Company alleging violations of federal, state or local environmental protection requirements or seeking remediation of alleged environmental impairments. For these matters management has estimated the total reasonably possible costs the Company could incur at September 30, 1994 to be about $75 million, of which $48 million has been accrued. Based on its assessment, management believes that the Company's expenditures for environmental capital investment and remediation necessary to comply with present regulations governing environmental 18 19 protection and other expenditures for the resolution of environmental claims will not have a material adverse effect on the Company's liquidity and capital resources, competitive position or financial statements. Management cannot assess the possible effect of compliance with future requirements. Government Contracts The Company's government contract operations are subject to U.S. Government investigations of business practices and audits of contract performance and cost classification from which claims have been or may be asserted against the Company. Although such claims are usually resolved through fact-finding and negotiation, civil, criminal or administrative proceedings may result and a contractor can be fined, as well as be suspended or debarred from government contracts. Management believes there are no claims, audits or investigations currently pending against the Company which will have a material adverse effect on either the Company's business or its financial condition. As a result of contract funding constraints and reprioritization of defense programs, the U.S. Government has terminated for its convenience several of the Company's contracts. The Company has filed claims for termination costs it believes are reimbursable under the contract terms. At September 30, 1994, such outstanding termination claims aggregated approximately $150 million, net of $53 million collected through progress payments. In addition, the Company has submitted claims aggregating $224 million, which will be increased in 1995 when it files an amended claim, with respect to contractual disputes on its AC-130U Gunship full-scale development and production contracts. The Company's financial statements have been prepared on the basis of reasonable estimates, supported by the opinion of outside legal counsel, of the revenue expected to be recovered from these claims. At September 30, 1994, receivables include $201 million relating to these claims, a major portion of which relates to the AC-130U Gunship claim. While management cannot reasonably estimate the length of time that will be required to resolve its claims or whether they will be resolved through negotiation or litigation, it believes their resolution will not have a material adverse effect on the Company's financial statements. Other Matters The January 1994 Southern California earthquake caused more than $70 million in damage to the Company's facilities, principally at Rocketdyne. Almost all these costs are being reimbursed through insurance or as allowable costs on government contracts. The Company's world headquarters, a major research and development center and a number of the administrative and manufacturing facilities of the Aerospace, Defense Electronics and Telecommunications businesses are located near major earthquake faults in Southern California. While there is a risk of significant losses in the event of future major earthquakes, management believes it is unlikely such events, considering insurance and entitlement to cost recovery under government contracts, would have a material effect on the Company's financial condition. Backlog The Company's 1994 year-end backlog was $10.8 billion compared to last year's $13.1 billion. The decline in 1994 backlog is attributable to the reduction in government spending in defense and space programs. This year's backlog includes $4 billion of commercial orders, $2 billion of funded government orders and $4.8 billion of unfunded government orders. Funded government orders include amounts that have been appropriated by Congress and allotted under contracts by the procuring government agency. Typically only a portion of the price of a large government contract is funded at the time work commences. For the unfunded portion of government orders, there is no assurance that congressional appropriations or agency allotments requisite for funding will be forthcoming. All government contracts, whether funded or unfunded, can be curtailed or terminated at the convenience of the government. 19 20 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. STATEMENT OF CONSOLIDATED INCOME ROCKWELL INTERNATIONAL CORPORATION ------------------------------------------------------------------ (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED SEPTEMBER 30 1994 1993 1992 - --------------------------------------------------------------------------------------------------------- REVENUES Sales $11,123.3 $10,840.0 $10,909.7 Other income 81.4 80.9 117.4 ------------------------------------------------------------------------------------- Total revenues 11,204.7 10,920.9 11,027.1 - --------------------------------------------------------------------------------------------------------- COSTS AND Cost of sales 8,675.2 8,538.5 8,809.5 EXPENSES Selling, general and administrative 1,411.6 1,374.2 1,331.8 Interest 96.6 104.1 107.4 ------------------------------------------------------------------------------------- Total costs and expenses 10,183.4 10,016.8 10,248.7 ------------------------------------------------------------------------------------- Income before income taxes 1,021.3 904.1 778.4 Provision for income taxes 387.2 342.2 295.4 - --------------------------------------------------------------------------------------------------------- INCOME BEFORE CHANGE IN ACCOUNTING 634.1 561.9 483.0 - --------------------------------------------------------------------------------------------------------- Cumulative effect of change in accounting for retirement medical benefits (1,519.0) - --------------------------------------------------------------------------------------------------------- NET INCOME (LOSS) $ 634.1 $ 561.9 $(1,036.0) ========================================================================================================= EARNING PER Primary: COMMON SHARE Before change in accounting $2.87 $2.55 $ 2.16 Cumulative effect of change in accounting for retirement medical benefits (6.78) ------------------------------------------------------------------------------------- Net income (loss) $2.87 $2.55 $(4.62) ===================================================================================== Fully diluted: Before change in accounting $2.82 $2.51 $ 2.14 Cumulative effect of change in accounting for retirement medical benefits (6.70) ------------------------------------------------------------------------------------- Net income (loss) $2.82 $2.51 $(4.56) ========================================================================================================= AVERAGE COMMON Primary 220.5 219.8 223.6 SHARES OUTSTANDING Fully diluted 224.5 224.3 226.1 =========================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 20 21 CONSOLIDATED BALANCE SHEET ROCKWELL INTERNATIONAL CORPORATION --------------------------------------------------------------------- (IN MILLIONS)
SEPTEMBER 30 1994 1993 - --------------------------------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash (includes time deposits and certificates of deposit: 1994, $486.8 million; 1993, $588.9 million) $ 628.3 $ 772.8 Receivables 2,267.2 2,209.1 Inventories 1,532.8 1,430.8 Other current assets 499.5 533.7 -------------------------------------------------------------------- --------------------- Total current assets 4,927.8 4,946.4 ------------------------------------------------------------------------------------------ PROPERTY Land 116.6 104.3 Land and leasehold improvements 155.3 161.0 Buildings 1,378.9 1,383.9 Machinery and equipment 2,949.7 2,844.8 Office and data processing equipment 1,224.5 1,265.8 Construction in progress 335.4 258.3 ------------------------------------------------------------------------------------------ Total 6,160.4 6,018.1 Less accumulated depreciation 3,777.0 3,692.3 ------------------------------------------------------------------------------------------ Net property 2,383.4 2,325.8 ------------------------------------------------------------------------------------------ INTANGIBLE ASSETS 777.0 777.1 ------------------------------------------------------------------------------------------ OTHER ASSETS 1,772.6 1,645.5 ------------------------------------------------------------------------------------------ TOTAL $9,860.8 $9,694.8 ========================================================================================== - --------------------------------------------------------------------------------------------------------------- LIABILITIES AND CURRENT LIABILITIES SHAREOWNERS' Short-term debt $ 160.2 $ 166.4 EQUITY Accounts payable - trade 976.9 859.8 Accrued compensation and benefits 668.8 710.1 Advance payments from customers 294.6 362.7 Accrued income taxes 137.6 94.1 Other current liabilities 781.7 752.8 ------------------------------------------------------------------------------------------ Total current liabilities 3,019.8 2,945.9 ------------------------------------------------------------------------------------------ LONG-TERM DEBT 831.0 1,028.2 ------------------------------------------------------------------------------------------ ACCRUED RETIREMENT BENEFITS 2,414.8 2,541.0 ------------------------------------------------------------------------------------------ OTHER LIABILITIES 239.6 223.7 ------------------------------------------------------------------------------------------ SHAREOWNERS' EQUITY Preferred stock (liquidation value - $5.9 million) 1.4 1.5 Common Stock (shares issued - 209.5 million) 209.5 209.5 Class A Common Stock (shares issued: 1994, 36.9 million; 1993, 41.6 million) 36.9 41.6 Additional paid-in capital 174.0 164.3 Retained earnings 3,762.3 3,471.9 Currency translation and pension adjustments (97.1) (196.8) Common Stock in treasury, at cost (shares held: 1994, 27.8 million; 1993, 30.1 million) (731.4) (736.0) ------------------------------------------------------------------------------------------ Total shareowners' equity 3,355.6 2,956.0 ------------------------------------------------------------------------------------------ TOTAL $9,860.8 $9,694.8 ===============================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 21 22 STATEMENT OF CONSOLIDATED CASH FLOWS ROCKWELL INTERNATIONAL CORPORATION -------------------------------------------------------------------- (IN MILLIONS)
YEARS ENDED SEPTEMBER 30 1994 1993 1992 - --------------------------------------------------------------------------------------------------------------- OPERATING Net income (loss) $ 634.1 $ 561.9 $(1,036.0) ACTIVITIES Adjustments to net income (loss) to arrive at cash provided by operating activities: Depreciation 436.3 432.1 454.0 Amortization of intangible assets 57.6 58.8 104.1 Deferred income taxes 43.6 (1.2) (10.7) Net pension income and contributions (123.1) (120.9) (149.1) Cumulative effect of change in accounting 1,519.0 Changes in assets and liabilities, excluding effects of acquisitions, divestitures and foreign currency adjustments: Receivables (28.6) 97.6 243.1 Inventories (88.3) 12.4 (24.4) Accounts payable - trade 98.9 (4.3) (82.7) Accrued compensation and benefits (43.1) 32.1 (22.5) Advance payments from customers (80.9) (48.5) (31.7) Income taxes 68.0 12.2 (242.4) Other assets and liabilities (53.9) (102.0) (18.8) ------------------------------------------------------------------------------------------ CASH PROVIDED BY OPERATING ACTIVITIES 920.6 930.2 701.9 - --------------------------------------------------------------------------------------------------------------- INVESTING Property additions (567.7) (433.2) (386.4) ACTIVITIES Acquisition of businesses (19.7) (117.7) (23.1) Proceeds from the disposition of: Businesses 73.0 67.7 Property 30.5 29.8 27.4 ------------------------------------------------------------------------------------------ CASH USED FOR INVESTING ACTIVITIES (483.9) (521.1) (314.4) - --------------------------------------------------------------------------------------------------------------- FINANCING Decrease in short-term borrowings (28.7) (15.0) (149.6) ACTIVITIES Payments of long-term debt (232.5) (13.1) (35.8) Long-term borrowings 22.1 2.3 314.3 ------------------------------------------------------------------------------------------ Net (decrease) increase in debt (239.1) (25.8) 128.9 Purchase of treasury stock (154.9) (64.9) (230.4) Dividends (225.2) (211.4) (206.1) Reissuance of common stock 38.0 63.2 18.9 ------------------------------------------------------------------------------------------ CASH USED FOR FINANCING ACTIVITIES (581.2) (238.9) (288.7) ------------------------------------------------------------------------------------------ (DECREASE) INCREASE IN CASH (144.5) 170.2 98.8 CASH AT BEGINNING OF YEAR 772.8 602.6 503.8 ------------------------------------------------------------------------------------------ CASH AT END OF YEAR $ 628.3 $ 772.8 $ 602.6 =============================================================================================================== - --------------------------------------------------------------------------------------------------------------- FREE CASH FLOW An internal performance measurement utilized by the company is "free cash flow" which we define to include the following: Cash provided by operating activities $ 920.6 $ 930.2 $ 701.9 Property additions (567.7) (433.2) (386.4) Proceeds from the disposition of businesses and property 103.5 29.8 95.1 ----------------------------------------------------------------------------------------- FREE CASH FLOW $ 456.4 $ 526.8 $ 410.6 ===============================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 22 23 STATEMENT OF CONSOLIDATED SHAREOWNERS' ROCKWELL INTERNATIONAL CORPORATION EQUITY -------------------------------------------------------------------- (IN MILLIONS)
YEARS ENDED SEPTEMBER 30 1994 1993 1992 - ---------------------------------------------------------------------------------------------------------------- PREFERRED STOCK Beginning balance $ 1.5 $ 1.7 $ 1.7 Conversions into common stock (0.1) (0.2) ------------------------------------------------------------------------------------------ Ending balance 1.4 1.5 1.7 - ---------------------------------------------------------------------------------------------------------------- COMMON STOCK (No shares issued during periods) 209.5 209.5 209.5 - ---------------------------------------------------------------------------------------------------------------- CLASS A Beginning balance 41.6 46.7 54.4 COMMON STOCK Conversions into Common Stock (4.9) (5.8) (8.0) Other 0.2 0.7 0.3 ------------------------------------------------------------------------------------------ Ending balance 36.9 41.6 46.7 - ---------------------------------------------------------------------------------------------------------------- ADDITIONAL Beginning balance 164.3 145.2 137.6 PAID-IN CAPITAL Exercise of stock options and stock appreciation rights 9.7 19.1 7.6 ------------------------------------------------------------------------------------------ Ending balance 174.0 164.3 145.2 - ---------------------------------------------------------------------------------------------------------------- RETAINED Beginning balance 3,471.9 3,261.0 4,692.1 EARNINGS Net income (loss) 634.1 561.9 (1,036.0) Cash dividends: Common (per share: 1994, $1.02; 1993, $.96; 1992, $.92) (224.9) (211.1) (205.8) Preferred (per share: Series A - $4.75, Series B - $1.35) (0.3) (0.3) (0.3) Treasury stock reissuances (118.5) (139.6) (189.0) ------------------------------------------------------------------------------------------ Ending balance 3,762.3 3,471.9 3,261.0 - ---------------------------------------------------------------------------------------------------------------- CURRENCY Beginning balance (196.8) (17.0) (21.5) TRANSLATION AND Currency translation 20.2 (114.0) (4.7) PENSION ADJUSTMENTS Pension adjustment 79.5 (65.8) 9.2 ------------------------------------------------------------------------------------------ Ending balance (97.1) (196.8) (17.0) - ---------------------------------------------------------------------------------------------------------------- TREASURY STOCK Beginning balance (736.0) (869.1) (850.1) Purchases (154.9) (64.9) (230.4) Reissuances, principally Class A Common Stock conversions 159.5 198.0 211.4 ------------------------------------------------------------------------------------------ Ending balance (731.4) (736.0) (869.1) ------------------------------------------------------------------------------------------ TOTAL SHAREOWNERS' EQUITY $3,355.6 $2,956.0 $ 2,778.0 ================================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 23 24 NOTES TO FINANCIAL STATEMENTS ROCKWELL INTERNATIONAL CORPORATION 1. FINANCIAL STATEMENT PRESENTATION Significant accounting policies are SET FORTH IN CAPITAL LETTERS as an integral part of the notes to financial statements to which the policies relate. Certain prior year amounts have been reclassified to conform with current year presentation. In 1992, the company adopted Financial Accounting Standards Board Statement No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," resulting in a one-time charge to earnings of $1,519 million, or $6.78 per share, after a deferred tax benefit of $931 million. The company also adopted Statement No. 109, "Accounting for Income Taxes," which did not have a material effect on 1992 income before change in accounting. 2. ACQUISITION OF RELIANCE ELECTRIC COMPANY On November 21, 1994, the company announced it had entered into a definitive agreement to acquire all shares of common stock of Reliance Electric Company (Reliance), a major manufacturer of industrial products and telecommunications equipment with annual sales of $1.7 billion, at a price of $31 per share of Class A and Class B common stock and an equivalent price ($83.95) for Class C common stock. The offer has a total transaction value of approximately $1.6 billion and is expected to be completed in early 1995. The company will finance this acquisition utilizing its credit agreements (see Note 8). The company has announced its intention to divest Reliance's telecommunications business which has annual sales of approximately $440 million. 3. RECEIVABLES Receivables are summarized as follows (in millions):
- -------------------------------------------------------- SEPTEMBER 30 1994 1993 - -------------------------------------------------------- Accounts and notes receivable: Commercial, less allowance for doubtful accounts (1994, $68.0; 1993, $47.3) $1,364.2 $1,258.2 United States Government 128.1 149.0 Unbilled costs and accrued profits, less related progress payments (1994, $387.4; 1993, $550.5) 774.9 801.9 - -------------------------------------------------------- Receivables $2,267.2 $2,209.1 ========================================================
Unbilled costs and accrued profits consist principally of revenues recognized on United States Government contracts under the percentage-of-completion (cost-to-cost) method of accounting (see Note 14). Unbilled costs and accrued profits, less related progress payments, are billed in accordance with applicable contract terms. Unbilled costs and accrued profits include $201 million relating to claims subject to negotiation or settlement with customers. These claims include amounts which are not expected to be received within one year. 4. INVENTORIES Inventories are summarized as follows (in millions):
- -------------------------------------------------------- SEPTEMBER 30 1994 1993 - -------------------------------------------------------- Finished goods $ 355.5 $ 330.3 Long-term contracts in process 300.0 338.2 Work in process 619.5 508.7 Raw materials, parts and supplies 472.6 492.4 - -------------------------------------------------------- Total 1,747.6 1,669.6 Less allowance to adjust the carrying value of certain inventories (1994, $556.6; 1993, $509.0) to a LIFO basis 67.8 67.2 - -------------------------------------------------------- Remainder 1,679.8 1,602.4 Less related progress payments 147.0 171.6 - -------------------------------------------------------- Inventories $1,532.8 $1,430.8 ========================================================
INVENTORIES ARE STATED AT THE LOWER OF COST (USING LIFO, FIFO OR AVERAGE METHODS) OR MARKET (DETERMINED ON THE BASIS OF ESTIMATED REALIZABLE VALUES), LESS RELATED PROGRESS PAYMENTS RECEIVED. Pursuant to contract provisions the United States Government has title to, or a security interest in, certain inventories as a result of progress payments. Long-term contracts in process consist of inventoried costs principally relating to fixed-price-type contracts with the United States Government. SUCH INVENTORIED COSTS INCLUDE DIRECT COSTS OF MANUFACTURING, ENGINEERING AND TOOLING, AND ALLOCABLE OVERHEAD COSTS INCLUDING GENERAL AND ADMINISTRATIVE EXPENSES ALLOWABLE IN ACCORDANCE WITH UNITED STATES GOVERNMENT CONTRACT COST PRINCIPLES. IN ACCORDANCE WITH INDUSTRY PRACTICE, SUCH INVENTORIED COSTS INCLUDE AMOUNTS WHICH ARE NOT EXPECTED TO BE REALIZED WITHIN ONE YEAR. 24 25 General and administrative expenses related to United States Government contracts incurred and charged to inventoried costs were $478.5 million, $520.1 million and $530.7 million in 1994, 1993 and 1992, respectively. General and administrative expenses remaining in inventoried costs before consideration of progress payments were estimated at $76 million and $68 million at September 30, 1994 and 1993, respectively. Inventories do not include any material amounts of unamortized tooling, learning curve and other deferred costs, or claims or other similar items subject to uncertainty concerning their realization. 5. PROPERTY AND DEPRECIATION PROPERTY IS STATED AT COST. DEPRECIATION OF PROPERTY IS PROVIDED BASED ON ESTIMATED USEFUL LIVES GENERALLY USING ACCELERATED AND STRAIGHT-LINE METHODS. SIGNIFICANT RENEWALS AND BETTERMENTS ARE CAPITALIZED AND REPLACED UNITS ARE WRITTEN OFF. MAINTENANCE AND REPAIRS, AS WELL AS RENEWALS OF MINOR AMOUNT, ARE CHARGED TO EXPENSE. Maintenance and repairs were $229.3 million in 1994, $219.1 million in 1993 and $240.2 million in 1992. 6. INTANGIBLE ASSETS Intangible assets are summarized as follows (in millions):
- -------------------------------------------------------- SEPTEMBER 30 1994 1993 - -------------------------------------------------------- Goodwill, less accumulated amortization (1994, $174.0; 1993, $149.2) $589.3 $581.5 Patents, product technology and other intangibles, less accumulated amortization (1994, $348.7; 1993, $321.2) 187.7 195.6 - -------------------------------------------------------- Intangible assets $777.0 $777.1 ========================================================
GOODWILL REPRESENTS THE EXCESS OF THE COST OF PURCHASED BUSINESSES OVER THE FAIR VALUE OF THEIR NET ASSETS AT DATE OF ACQUISITION AND GENERALLY IS BEING AMORTIZED BY THE STRAIGHT-LINE METHOD OVER PERIODS RANGING FROM 10 TO 40 YEARS. PATENTS, PRODUCT TECHNOLOGY AND OTHER INTANGIBLES RELATE PRINCIPALLY TO ALLEN-BRADLEY AND ARE BEING AMORTIZED ON A STRAIGHT-LINE BASIS OVER THEIR ESTIMATED USEFUL LIVES, GENERALLY RANGING FROM 5 TO 20 YEARS. Management periodically reviews the realizability of goodwill and other intangible assets based on an evaluation of remaining useful lives, cash flows and profitability projections. Historically, acquired businesses have generated sufficient returns to recover the cost of intangible assets. 7. OTHER ASSETS Other assets are summarized as follows (in millions):
- -------------------------------------------------------------- SEPTEMBER 30 1994 1993 - -------------------------------------------------------------- Prepaid pension costs (see Note 18) $1,214.6 $1,079.9 Net deferred income taxes (see Note 19) 299.7 324.0 Customer finance receivables 137.3 150.5 Investments and other assets 121.0 91.1 - -------------------------------------------------------------- Other assets $1,772.6 $1,645.5 ==============================================================
Customer finance receivables are collateralized installment notes held by the company's finance subsidiary. 8. SHORT-TERM DEBT Short-term debt consisted of the following (in millions):
- -------------------------------------------------------- SEPTEMBER 30 1994 1993 - -------------------------------------------------------- Short-term bank borrowings, principally foreign $145.2 $159.0 Current portion of long-term debt 15.0 7.4 - -------------------------------------------------------- Short-term debt $160.2 $166.4 ========================================================
At September 30, 1994 the company had $630 million of unsecured lines of credit with various banks. There were no significant commitment fees or compensating balance requirements under the lines of credit which were typically established or renewed for one-year periods. There were no borrowings under the lines of credit at September 30, 1994. In November 1994 the company entered into two credit agreements with various banks to provide financing for the acquisition of Reliance Electric Company and to replace the existing lines of credit described above. The facilities total $1.5 billion and $1 billion with terms of five years and one year, respectively. There were no significant commitment fees under these facilities. Short-term credit facilities available to foreign subsidiaries amounted to $483 million at September 30, 1994 and consisted of arrangements for which there are no significant commitment fees. 25 26 NOTES TO FINANCIAL STATEMENTS ROCKWELL INTERNATIONAL CORPORATION 9. OTHER CURRENT LIABILITIES Other current liabilities are summarized as follows (in millions):
- -------------------------------------------------------------- SEPTEMBER 30 1994 1993 - -------------------------------------------------------------- Accounts payable - other $227.0 $191.8 Accrued product warranties 217.4 165.6 Accrued taxes other than income taxes 81.8 80.7 Other 255.5 314.7 - -------------------------------------------------------------- Other current liabilities $781.7 $752.8 ==============================================================
10. LONG-TERM DEBT Long-term debt consisted of the following (in millions):
- -------------------------------------------------------------- SEPTEMBER 30 1994 1993 - -------------------------------------------------------------- 7 1/2% notes, redeemed in March 1994 $ 200.0 8 7/8% notes, payable in 1999 $300.0 300.0 8 3/8% notes, payable in 2001 200.0 200.0 6 3/4% notes, payable in 2002 300.0 300.0 Other obligations, principally foreign 46.0 35.6 - -------------------------------------------------------------- Total 846.0 1,035.6 Less current portion 15.0 7.4 - -------------------------------------------------------------- Long-term debt $831.0 $1,028.2 ==============================================================
Interest payments on short- and long-term borrowings were $97.9 million in 1994, $110 million in 1993 and $101.5 million in 1992. At September 30, 1994 aggregate maturities of long-term debt during the five years ending September 30, 1999 were as follows (in millions): 1995, $15; 1996, $13.9; 1997, $5.9; 1998, $4; and 1999, $303.6. 11. FINANCIAL INSTRUMENTS The company's financial instruments include cash, notes receivable, short- and long-term debt and foreign currency forward exchange contracts. At September 30, 1994, the carrying values of the company's financial instruments approximate their fair values based on current market prices and rates. It is the policy of the company not to enter into derivative financial instruments for speculative purposes. The company does enter into foreign currency forward exchange contracts to protect itself from adverse currency rate fluctuations on firm and identifiable foreign currency com- mitments entered into in the ordinary course of business. These foreign currency forward exchange contracts are executed with creditworthy banks for terms of generally less than six months and are denominated in currencies of major industrial countries. Outstanding foreign currency forward exchange contracts amounted to $256 million at September 30, 1994. The company does not anticipate any material adverse effect on its results of operations or finan- cial position relating to these foreign currency forward exchange contracts. 12. CAPITAL STOCK The authorized stock of the company consists of 600 million shares of Common Stock and 200 million shares of Class A Common Stock, each with a $1 par value, and 12 million shares of preferred stock without par value. The Class A Common Stock is substantially identical to the Common Stock except that each share of Class A Common Stock entitles the holder to ten votes on all matters on which holders of Common Stock are entitled to vote, is not transferable except in certain limited circumstances and is convertible at any time into Common Stock on a share-for-share basis. The aggregate liquidation value of all shares of preferred stock that may be issued in series from time to time cannot at any time exceed $650 million. At September 30, 1994, 13.9 million shares of common stock were reserved for various employee incentive plans and conversions of preferred stock. Each share of Series A Preferred Stock is convertible (subject to adjustment under certain conditions) into 9.8985 shares each of Common Stock and Class A Common Stock. Each share of Series B Preferred Stock is convertible (subject to adjustment under certain conditions) into 3.6 shares each of Common Stock and Class A Common Stock. The Series A and B preferred stocks are stated in the accompanying financial statements at the aggregate par value of the number of shares of common stock into which such preferred stocks are convertible. The company may redeem Series A and Series B preferred stocks at $100 and $36 per share, respectively. Changes in outstanding common shares are summarized as follows (in millions):
- ------------------------------------------------------------------ 1994 1993 1992 - ------------------------------------------------------------------ Beginning balance 221.0 220.3 228.2 Treasury stock purchases (4.1) (2.3) (8.9) Other, principally stock option exercises 1.7 3.0 1.0 - ------------------------------------------------------------------ Ending balance 218.6 221.0 220.3 ==================================================================
26 27 Outstanding common stock at September 30,1994 consisted of 181.7 million shares of Common Stock and 36.9 million shares of Class A Common Stock. There were also outstanding at September 30, 1994, 28,640 shares of Series A Preferred Stock and 85,059 shares of Series B Preferred Stock. 13. EMPLOYEE STOCK OPTIONS Options to purchase common stock of the company have been granted under various incentive plans to officers and other key employees at prices equal to or above the fair market value of such stock on the dates the options were granted. The plans provide that the option price for certain options granted under the plans may be paid in cash, the company's common stock or a combination thereof. Information relative to employee stock options is as follows (in thousands):
- ------------------------------------------------------------------ 1994 1993 1992 - ------------------------------------------------------------------ Number of shares under option: Outstanding at beginning of year 9,676 9,659 7,374 Granted 2,157 2,781 3,315 Exercised (1,401) (2,647) (868) Expired (96) (99) (152) Surrendered upon exercise of stock appreciation rights (18) (10) - ------------------------------------------------------------------ Outstanding at end of year 10,336 9,676 9,659 ================================================================== Exercisable at end of year 8,222 6,915 6,357 ==================================================================
The ranges of exercise prices per share for options outstanding are as follows:
- ------------------------------------------------------------------ SEPTEMBER 30 1994 1993 1992 - ------------------------------------------------------------------ High $41.88 $31.50 $31.50 Low $16.75 $13.13 $12.59 ==================================================================
Options outstanding and exercisable at September 30, 1994 included 597,456 related to Class A Common shares. Shares available for future grant or payment under various incentive plans were 2.1 million and 4.3 million at September 30, 1994 and 1993, respectively. Certain of the options granted have related stock appreciation rights which permit an optionee to surrender all or a portion of an exercisable stock option and exercise the related stock appreciation right. An optionee exercising a stock appreciation right receives, at the company's option, cash or shares of common stock, or a combination thereof, of a value equal to the excess of the fair market value of the company's common stock on the date of exercise over the option price. Outstanding options expire at various dates from July 10, 1995 to July 6, 2004. None of the incentive plans presently permit options to be granted after September 30, 1997. Stock appreciation rights outstanding at September 30, 1994 are related to options for 119,820 common shares having option prices ranging from $17.50 to $22.75 per share. 14. CONTRACT SALES SALES UNDER FIXED-PRICE CONTRACTS ARE GENERALLY RECORDED UPON DELIVERY. SALES UNDER ALL COST-TYPE AND CERTAIN FIXED-PRICE-TYPE CONTRACTS REQUIRING PERFORMANCE OVER SEVERAL PERIODS ARE ACCOUNTED FOR UNDER THE PERCENTAGE- OF-COMPLETION (COST-TO-COST) METHOD OF ACCOUNTING. EXPECTED PROFITS OR LOSSES ON CONTRACTS ARE BASED ON THE COMPANY'S ESTIMATES OF TOTAL SALES VALUES AND COSTS AT COMPLETION. THESE ESTIMATES ARE REVIEWED AND REVISED PERIODICALLY THROUGHOUT THE LIVES OF THE CONTRACTS, AND ADJUSTMENTS RESULTING FROM SUCH REVISIONS ARE RECORDED IN THE PERIODS IN WHICH THE REVISIONS ARE MADE. IN CERTAIN CASES THE ESTIMATED SALES VALUES INCLUDE AMOUNTS EXPECTED TO BE REALIZED FROM CONTRACT ADJUSTMENTS OR CLAIMS SUBJECT TO NEGOTIATIONS OR LEGAL PROCEEDINGS. LOSSES ON CONTRACTS ARE RECORDED IN FULL AS THEY ARE IDENTIFIED. Sales under United States Government contracts accounted for 35 percent of total sales in 1994, 39 percent in 1993 and 43 percent in 1992. United States Government sales by contract type were as follows:
- ------------------------------------------------------------------ 1994 1993 1992 - ------------------------------------------------------------------ Cost 68% 65% 59% Firm-fixed-price 25 27 31 Fixed-price-incentive 7 8 10 - ------------------------------------------------------------------ Total 100% 100% 100% ==================================================================
The major portion of work performed for the United States Government is under contracts that contain cost or performance incentives or both. These incentives provide for increases in fees or profits for surpassing stated targets or other criteria, or for decreases in fees or profits for failure to achieve such targets or other criteria. PERFORMANCE INCENTIVES, FOR WHICH A REASONABLE PREDICTION OF ACCOMPLISHMENT CANNOT BE MADE IN ADVANCE, ARE INCLUDED IN SALES AT THE TIME THERE IS SUFFICIENT INFORMATION TO RELATE ACTUAL PERFORMANCE TO TARGETS OR OTHER CRITERIA. 27 28 NOTES TO FINANCIAL STATEMENTS ROCKWELL INTERNATIONAL CORPORATION 15. RENTAL AND LEASE INFORMATION The company leases certain facilities and equipment under operating leases, many of which contain renewal options and escalation clauses. Total rental expense on operating leases (net of immaterial income from sublease rentals) was $119.7 million, $117.6 million and $131.9 million in 1994, 1993 and 1992, respectively. Contingent rentals under operating leases were not significant. Minimum future rental commitments under operating leases having noncancelable lease terms in excess of one year aggregated $286.4 million as of September 30,1994 and are payable as follows (in millions): 1995, $64.8; 1996, $48.7; 1997, $38.1; 1998, $28.2; 1999, $15.4; and after 1999, $91.2. 16. RESEARCH AND DEVELOPMENT COSTS The company performs research and development under both company-initiated programs and contracts with others, primarily the United States Government. Company-initiated programs include research and development for commercial products and independent research and development and bid and proposal work related to government products or services. A large portion of the cost incurred for independent research and development and bid and proposal work is recoverable through overhead cost allowances on government contracts. Research and development costs incurred by the company aggregated approximately $1.6 billion in 1994, $1.6 billion in 1993 and $1.5 billion in 1992. A significant portion of these expenditures was incurred under research and development contracts for Space Shuttle, Space Station, aircraft and missile systems, ballistic missile defense projects, and defense electronics. The portion of research and development costs representing company-initiated programs was $595.3 million in 1994, $587.3 million in 1993 and $498.7 million in 1992. 17. RETIREMENT MEDICAL PLANS The company has retirement medical plans which cover most of its United States employees and provide for the payment of medical costs of eligible employees and dependents upon retirement. The components of retirement medical expense are as follows (in millions):
- --------------------------------------------------------------- 1994 1993 1992 - --------------------------------------------------------------- Service cost - benefits attributed to service during the period $ 18.2 $ 20.5 $ 33.3 Interest accrued on accumulated retirement medical obligation 160.0 186.5 210.7 Amortization of plan amendments and net actuarial gains (55.7) (28.9) - --------------------------------------------------------------- Retirement medical expense $122.5 $178.1 $244.0 ===============================================================
Retirement medical expense decreased in 1994 and 1993 primarily due to cost reductions resulting from amendments to company sponsored medical plans and lower than anticipated health care cost trend rates. The company's retirement medical obligation consisted of the following (in millions):
- --------------------------------------------------------------- SEPTEMBER 30 1994 1993 - --------------------------------------------------------------- Accumulated retirement medical obligation: Retirees $1,656.2 $1,647.6 Employees eligible to retire 150.6 182.4 Employees not eligible to retire 243.5 316.6 - --------------------------------------------------------------- Total 2,050.3 2,146.6 Unamortized amounts: Plan amendments 358.8 391.4 Net actuarial gains 97.9 41.2 - --------------------------------------------------------------- Recorded liability $2,507.0 $2,579.2 - --------------------------------------------------------------- Assumptions used (June 30 measurement date): Discount rate 8.25% 7.75% Health care cost trend rates 8.5%* 10.0%* =============================================================== * DECREASING TO 5.5% AFTER 2015.
28 29 The unamortized amounts for plan amendments and net actuarial gains represent the unrecognized accumulated cost reductions resulting primarily from plan amendments and lower than anticipated health care cost trend rates, respectively. The accumulated cost reductions pertaining to plan amendments will be recognized over the next 3 to 12 years and, accordingly, reduce retirement medical expense. The unamortized amount for net actuarial gains will be considered in the determination of retirement medical expense in the future. Changing the health care cost trend rates by one percentage point would change the accumulated retirement medical obligation at September 30, 1994 by approximately $145 million and would change retirement medical expense by approximately $15 million. 18. RETIREMENT PENSION PLANS The company has pension plans which cover most of its employees and provide for monthly pension payments to eligible employees upon retirement. Pension benefits for salaried employees generally are based on years of credited service and average earnings. Pension benefits for hourly employees generally are based on specified benefit amounts and years of service. The company's policy is to fund its pension plans generally in amounts computed actuarially using the entry-age normal method. Net pension income consisted of the following (in millions):
- --------------------------------------------------------------- 1994 1993 1992 - --------------------------------------------------------------- Service cost - benefits earned during the year $(128.1) $(112.5) $(117.5) Interest accrued on projected benefit obligation (557.4) (552.7) (534.6) Assumed return on plan assets 669.1 637.9 621.2 Initial net asset amortization 137.0 137.2 137.9 Prior service cost amortization (25.0) (35.1) (36.3) Net actuarial loss amortization (69.8) (18.8) (15.9) - --------------------------------------------------------------- Net pension income $ 25.8 $ 56.0 $ 54.8 ===============================================================
Upon adoption of the current pension accounting standard in 1987 the fair value of pension plan assets exceeded projected pension benefit liabilities by $1.7 billion. This initial net asset is being amortized as pension income over 13 years through 1999. Pension plan assets are primarily United States Government obligations, other fixed income investments and equity securities whose values are subject to fluctuations of the securities market. The actual return on plan assets was $128 million, $935 million and $909 million in 1994, 1993 and 1992, respectively. Differences between these actual returns and the related assumed returns on plan assets are deferred and considered in the determination of net pension income or expense in future periods. In 1994, the company merged its 33 qualified defined benefit pension plans in the United States into one pension plan. While the merger did not change the pension benefits of our employees or retirees, it does strengthen the overall funding status of our plans and reduces administrative costs. The following table reconciles the funded status of the company's overfunded pension plans to amounts included in the accompanying balance sheet with 1993 amounts reclassified to reflect the pension plan merger (in millions):
- ---------------------------------------------------------------- 1994 1993 - ---------------------------------------------------------------- Accumulated benefit obligation, principally vested $6,720.6 $6,843.1 Effects of projected compensation increases 460.3 530.6 - ---------------------------------------------------------------- Projected benefit obligation 7,180.9 7,373.7 Fair value of plan assets 7,795.0 8,146.9 - ---------------------------------------------------------------- Plan assets in excess of projected benefit obligation 614.1 773.2 Items not yet recognized in the balance sheet: Net actuarial losses (gains): Asset return 473.6 (58.5) Discount rate 384.7 822.7 Demographics 304.0 233.8 Prior service cost 95.9 102.8 Remaining initial net asset (657.7) (794.1) - ---------------------------------------------------------------- Prepaid pension costs at September 30 $1,214.6 $1,079.9 - ---------------------------------------------------------------- Assumptions used (June 30 measurement date): Discount rate 8.25% 7.75% Compensation increase rate 4.5% 4.5% Long-term rate of return on plan assets 9.0% 9.0% ================================================================
Although the company has no intention of doing so, should it terminate its qualified defined benefit pension plan, the United States Government is entitled to an equitable share of any assets remaining after providing for plan obligations. The company also sponsors certain defined contribution savings plans for eligible employees. Expense related to these plans was $88 million, $89 million and $92 million for 1994, 1993 and 1992, respectively. 29 30 NOTES TO FINANCIAL STATEMENTS ROCKWELL INTERNATIONAL CORPORATION 19. INCOME TAXES The components of the provision for income taxes are as follows (in millions):
- --------------------------------------------------------------- 1994 1993 1992 - --------------------------------------------------------------- Current: United States $218.6 $240.2 $198.6 Foreign 76.5 53.8 65.6 State and local 48.5 49.4 41.9 - --------------------------------------------------------------- Total current 343.6 343.4 306.1 - --------------------------------------------------------------- Deferred: United States 45.9 (18.6) (9.2) Foreign (7.4) 13.3 3.2 State and local 5.1 4.1 (4.7) - --------------------------------------------------------------- Total deferred 43.6 (1.2) (10.7) - --------------------------------------------------------------- Provision for income taxes $387.2 $342.2 $295.4 ===============================================================
Deferred income tax assets (future tax benefits) and liabilities (future tax costs) are determined based on differences between financial statement and tax bases of assets and liabilities using current statutory tax rates. At September 30, 1994 and 1993 the company had net deferred income tax assets included in current and long-term assets. Management believes it is more likely than not that these tax benefits will be realized through the reduction of future taxable income. Significant factors considered by management in its determination of the probability of the realization of the deferred tax assets included: (a) the historical operating results of the company ($2.2 billion of United States income before income taxes over the past three years), (b) expectations of future earnings and (c) the extended period of time over which the retirement medical liability will be paid. Net deferred income tax benefits included in Other Current Assets in the accompanying balance sheet consist of the tax effects of temporary differences related to the following (in millions):
- --------------------------------------------------------------- SEPTEMBER 30 1994 1993 - --------------------------------------------------------------- Accrued compensation and benefits $145.8 $155.5 Accrued product warranties 84.6 64.6 Other - net 58.6 73.2 - --------------------------------------------------------------- Current deferred income taxes $289.0 $293.3 ===============================================================
Net deferred income tax benefits included in long-term Other Assets in the accompanying balance sheet consist of the tax effects of temporary differences related to the following (in millions):
- --------------------------------------------------------------- SEPTEMBER 30 1994 1993 - --------------------------------------------------------------- Accrued retirement medical costs $ 901.3 $ 928.8 Pension costs (470.1) (424.7) Property (159.1) (188.1) Loss carryforwards 44.0 42.9 Foreign tax credit carryforwards 52.7 51.1 Other - net 23.3 4.2 - --------------------------------------------------------------- Subtotal 392.1 414.2 - --------------------------------------------------------------- Valuation allowance (92.4) (90.2) - --------------------------------------------------------------- Long-term deferred income taxes (see Note 7) $ 299.7 $ 324.0 ===============================================================
The valuation allowance represents the amount of tax benefits related to net operating loss and foreign tax credit carryforwards that has not yet been recognized. The carryforward periods for net operating losses and foreign tax credits generally expire over the next five years. The consolidated effective tax rate was different from the United States statutory rate for the reasons set forth below:
- --------------------------------------------------------------- 1994 1993 1992 - --------------------------------------------------------------- Statutory tax rate 35.0% 35.0% 34.0% State and local income taxes 3.4 3.9 3.2 Foreign income taxes 2.0 3.1 3.0 Utilization of foreign loss carryforwards (1.1) (1.3) Research tax credits (1.9) (1.9) (0.4) Deferred income tax rate changes (1.9) (2.1) Other 0.5 0.9 0.2 - --------------------------------------------------------------- Effective tax rate 37.9% 37.8% 37.9% ===============================================================
The income tax provisions were calculated based upon the following components of income before income taxes (in millions):
- --------------------------------------------------------------- 1994 1993 1992 - --------------------------------------------------------------- United States income $ 811.0 $742.2 $647.4 Foreign income 210.3 161.9 131.0 - --------------------------------------------------------------- Total $1,021.3 $904.1 $778.4 ===============================================================
30 31 No provision has been made for United States, state or additional foreign income taxes related to approximately $600 million of undistributed earnings of foreign subsidiaries which have been or are intended to be permanently reinvested. Income tax payments were $298.6 million in 1994, $339.6 million in 1993 and $558.2 million in 1992. In 1994, the company settled its United States income tax returns for the years 1986 through 1988 within previously established reserves. The company's United States income tax returns for the years 1989 through 1991 are currently under examination. Management believes that adequate provision for income taxes has been made for all years through 1994. 2O. EARNINGS PER COMMON SHARE Primary earnings per share of common stock, after recognition of the Series A and B preferred stock dividend requirements, are based on the weighted average number of common shares outstanding during each year. The computation does not include a negligible dilutive effect of stock options and stock appreciation rights. Fully diluted earnings per share of common stock are based on the assumption that all preferred stocks were converted at the beginning of the year and all dilutive stock options were exercised at the beginning of the year or at date of grant, if later. The computation assumes the elimination of preferred dividends. 21. CONTINGENT LIABILITIES Various lawsuits, claims and proceedings have been or may be instituted or asserted against the company relating to the conduct of its business, including those pertaining to product liability, environmental, safety and health, employment, and government contract matters. Although the outcome of litigation cannot be predicted with certainty and some lawsuits, claims or proceedings may be disposed of unfavorably to the company, management believes the disposition of matters which are pending or asserted will not have a material adverse effect on the company's financial statements. 22. BUSINESS SEGMENT INFORMATION The company's business segments are engaged in research, development and manufacture of diversified products as follows: ELECTRONICS - industrial automation equipment and systems; avionics products and systems and related communications technologies primarily used in commercial and military aircraft; semiconductor-based subsystems including fax and data modems, global positioning system receiver engines and gallium arsenide devices; and defense electronics systems and products for precision guidance and control, for tactical weapons, and for command, control, communications and intelligence. AEROSPACE - manned and unmanned space systems, rocket engines, military aircraft and modifications, military and commercial aircraft structural components, advanced space-based surveillance systems and high-energy laser and other directed-energy programs. AUTOMOTIVE - components and systems for heavy- and medium-duty trucks, buses, trailers and heavy-duty off-highway vehicles (Heavy Vehicles); and components and systems for light trucks and passenger cars (Light Vehicles). GRAPHIC SYSTEMS - high-speed printing presses and related graphic arts equipment. Divested businesses include the sales, operating earnings and gains on sales of significant businesses and product lines sold by the company. Businesses and product lines sold include the Flame Safeguard Controls product line in October 1991, the Network Transmission Systems business and Steel Castings product line in 1991 and the Sheet Fed Offset Printing Press product line in 1990. Sales and operating earnings by business segment are included in the table on page 23. The following tables provide additional segment information (in millions).
- ----------------------------------------------------------------------------------------------------------------------- ASSET INFORMATION BY SEGMENT - ----------------------------------------------------------------------------------------------------------------------- PROVISION FOR DEPRECIATION IDENTIFIABLE ASSETS AND AMORTIZATION CAPITAL EXPENDITURES -------------------------- -------------------------- -------------------------- Business Segment 1994 1993 1992 1994 1993 1992 1994 1993 1992 - ----------------------------------------------------------------------------------------------------------------------- Electronics $3,831 $3,548 $3,457 $246.4 $239.5 $281.6 $342.9 $220.7 $152.7 Aerospace 2,042 1,975 2,002 82.1 84.9 92.0 65.9 81.1 78.8 Automotive 1,378 1,342 1,571 100.0 100.0 106.6 111.6 107.2 110.3 Graphic Systems 898 937 953 29.9 30.5 36.8 11.7 12.5 21.2 - ----------------------------------------------------------------------------------------------------------------------- Business segment totals 8,149 7,802 7,983 458.4 454.9 517.0 532.1 421.5 363.0 Corporate 1,712 1,893 1,748 35.5 36.0 41.1 35.6 11.7 23.4 - ------------------------------------------------------------------------------------------------------------------------ Total $9,861 $9,695 $9,731 $493.9 $490.9 $558.1 $567.7 $433.2 $386.4 ========================================================================================================================
CORPORATE IDENTIFIABLE ASSETS INCLUDE CASH AND NET DEFERRED INCOME TAX ASSETS. 31 32 NOTES TO FINANCIAL STATEMENTS ROCKWELL INTERNATIONAL CORPORATION
- ------------------------------------------------------------------------------------------------------------------------------- 22. BUSINESS SEGMENT INFORMATION (CONTINUED) - ------------------------------------------------------------------------------------------------------------------------------- SALES, EARNINGS AND ASSETS BY GEOGRAPHIC AREA - ------------------------------------------------------------------------------------------------------------------------------- IDENTIFIABLE ASSETS ------------------------------------------------ SALES EARNINGS SEGMENTS CORPORATE ---------------------- -------------------------- ---------------------- ---------------------- Geographic Area 1994 1993 1992 1994 1993 1992 1994 1993 1992 1994 1993 1992 - ------------------------------------------------------------------------------------------------------------------------------- United States $ 8,918 $ 8,824 $ 8,869 $1,012.0 $ 925.6 $788.0 $6,220 $5,999 $6,158 $1,078 $1,325 $1,214 Canada 455 369 353 84.4 54.3 38.7 210 175 205 380 322 306 Europe 1,649 1,513 1,500 91.7 65.8 76.9 1,213 1,194 1,204 154 127 119 Asia-Pacific 455 467 471 9.2 24.5 17.0 294 243 244 96 103 105 Latin America 352 285 204 24.9 38.0 10.2 212 191 172 4 16 4 Eliminations (706) (618) (487) - ------------------------------------------------------------------------------------------------------------------------------- Total $11,123 $10,840 $10,910 $1,222.2 $1,108.2 $930.8 $8,149 $7,802 $7,983 $1,712 $1,893 $1,748 ===============================================================================================================================
UNITED STATES SALES INCLUDE EXPORT SALES TO CUSTOMERS AND INTERNATIONAL SUBSIDIARIES OF $1,280 MILLION IN 1994, $1,171 MILLION IN 1993 AND $1,011 MILLION IN 1992. The only customer which accounted for 10% or more of consolidated sales is the United States Government and its agencies. Such sales by business segment are as follows (in millions):
- --------------------------------------------------------------- SALES TO UNITED STATES GOVERNMENT - --------------------------------------------------------------- 1994 1993 1992 - --------------------------------------------------------------- Aerospace $2,439 $2,734 $2,931 Electronics 1,329 1,414 1,606 Other business segments 143 117 171 - --------------------------------------------------------------- Total $3,911 $4,265 $4,708 ===============================================================
Included in sales to the United States Government are the following major programs (in millions):
- --------------------------------------------------------------- 1994 1993 1992 - --------------------------------------------------------------- Space Shuttle $1,295 $1,380 $1,477 Space Station 329 372 300 B-1B 268 269 324 - --------------------------------------------------------------- Total $1,892 $2,021 $2,101 ===============================================================
23. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) - ------------------------------------------------------------------------------------------------------------------------------- (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) - ------------------------------------------------------------------------------------------------------------------------------- 1994 FISCAL QUARTERS 1993 FISCAL QUARTERS ------------------------------------- ------------------------------------- First Second Third Fourth 1994 First Second Third Fourth 1993 - ------------------------------------------------------------------------------------------------------------------------------- Sales $2,600.9 $2,761.5 $2,872.3 $2,888.6 $11,123.3 $2,488.6 $2,694.1 $2,813.4 $2,843.9 $10,840.0 Cost of sales 2,028.2 2,157.9 2,217.6 2,271.5 8,675.2 1,977.6 2,132.5 2,212.4 2,216.0 8,538.5 Net income 149.5 154.7 164.9 165.0 634.1 127.8 136.9 147.2 150.0 561.9 Per share: Primary .68 .70 .74 .75 2.87 .58 .63 .66 .68 2.55 Fully diluted .66 .69 .73 .74 2.82 .57 .62 .65 .67 2.51 ===============================================================================================================================
32 33 REPORTS OF MANAGEMENT AND INDEPENDENT ACCOUNTANTS MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING The consolidated financial statements of Rockwell International Corporation have been prepared by management which is responsible for their integrity and objectivity. These statements have been prepared in conformity with generally accepted accounting principles and, where appropriate, reflect estimates based on judgments of management. The company's system of internal controls is designed to provide reasonable assurance that company assets are safeguarded from loss or unauthorized use or disposition, and that transactions are executed in accordance with management's authorization and properly recorded to permit the preparation of financial statements in accordance with generally accepted accounting principles. This system is augmented by careful selection and training of qualified personnel, proper division of responsibilities, the dissemination of written policies and procedures and an internal audit program to monitor its effectiveness. The financial statements have been audited by Deloitte & Touche LLP, independent certified public accountants, whose report appears on this page. The board of directors, through its audit committee consisting of six outside directors, oversees management's financial reporting responsibilities and programs for ethical business conduct. As part of these responsibilities, the audit committee meets regularly with representatives of management, the independent accountants and the company's general auditor. The independent accountants and the company's general auditor have full and free access to the audit committee and meet with the committee both with and without the presence of management. /s/ DONALD R. BEALL DONALD R. BEALL CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER /s/ W. MICHAEL BARNES W. MICHAEL BARNES SENIOR VICE PRESIDENT FINANCE & PLANNING AND CHIEF FINANCIAL OFFICER REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Directors and Shareowners of Rockwell International Corporation: We have audited the accompanying consolidated balance sheet of Rockwell International Corporation and subsidiaries as of September 30, 1994 and 1993, and the related consolidated statements of income, shareowners' equity and cash flows for each of the three years in the period ended September 30, 1994. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Rockwell International Corporation and subsidiaries at September 30, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 1994 in conformity with generally accepted accounting principles. As discussed in Note 1 to Financial Statements, in 1992 the company changed its method of accounting for retirement medical costs to conform with Statement of Financial Accounting Standards No. 106 and its method of accounting for income taxes to conform with Statement of Financial Accounting Standards No. 109. /s/ DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP PITTSBURGH, PENNSYLVANIA NOVEMBER 1, 1994, EXCEPT NOTE 2 TO FINANCIAL STATEMENTS, AS TO WHICH THE DATE IS NOVEMBER 21, 1994 See also the table under the caption RESULTS OF OPERATIONS, Sales and Earnings by Business Segment in the MD&A on page 15 hereof. 33 34 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY. See the information under the captions NOMINEES FOR ELECTION AS DIRECTORS and INFORMATION AS TO NOMINEES FOR DIRECTORS on pages 3-7 of the 1995 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. 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 on pages 10-12 and 18, respectively, of the 1995 Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. See the information under VOTING SECURITIES and OWNERSHIP BY MANAGEMENT OF EQUITY SECURITIES on pages 3 and 9-10, respectively, of the 1995 Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. See the information under the caption CERTAIN TRANSACTIONS AND OTHER RELATIONSHIPS on page 8 of the 1995 Proxy Statement. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) Financial Statements, Financial Statement Schedules and Exhibits. (1) Financial Statements (all financial statements listed below are those of the Company and its consolidated subsidiaries and are included in Item 8 hereof). Statement of Consolidated Income, years ended September 30, 1994, 1993 and 1992. Consolidated Balance Sheet, September 30, 1994 and 1993. Statement of Consolidated Cash Flows, years ended September 30, 1994, 1993 and 1992. Statement of Consolidated Shareowners' Equity, years ended September 30, 1994, 1993 and 1992. Notes to Financial Statements. Report of Independent Certified Public Accountants. Sales and Earnings by Business Segment, years ended September 30, 1990 through 1994. (2) Financial Statement Schedules for the years ended September 30, 1994, 1993 and 1992. 34 35
PAGE ---- Report of Independent Certified Public Accountants............................... S-1 V-- Property, Plant and Equipment............................................. S-2 VI-- Accumulated Depreciation of Property, Plant and Equipment................. S-3 VIII-- Valuation and Qualifying Accounts......................................... S-4 IX-- Short-Term Borrowings..................................................... S-5
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 financial statements or notes thereto. (3) Exhibits. 3-a-1 Copy of Restated Certificate of Incorporation of the Company, as amended. 3-b-1 Copy of By-Laws of the Company. 4-a-1 Indenture dated as of October 1, 1982 between the Company and Chemical Bank, as successor by merger to Manufacturers Hanover Trust Company, as Trustee, pursuant to which the 8 7/8% Notes due September 15, 1999, the 8 3/8% Notes due February 15, 2001 and the 6 3/4% Notes due September 15, 2002 have been issued, filed as Exhibit 4-a to Registration Statement No. 33-39510, is hereby incorporated by reference. 4-a-2 First Supplemental Indenture, dated as of February 27, 1987 to the Indenture listed as Exhibit 4-a-1 above, filed as Exhibit 4-a to the Company's Current Report on Form 8-K dated March 11, 1987, is hereby incorporated by reference. 4-a-3 Form of the 8 7/8% Notes due September 15, 1999, filed as Exhibit 4-a to the Company's Current Report on Form 8-K dated September 19, 1989, is hereby incorporated by reference. 4-a-4 Form of the 8 3/8% Notes due February 15, 2001, filed as Exhibit 4-a to the Company's Current Report on Form 8-K dated February 28, 1991, is hereby incorporated by reference. 4-a-5 Form of the 6 3/4% Notes due September 15, 2002, filed as Exhibit 4-a to the Company's Current Report on Form 8-K dated September 22, 1992, is hereby incorporated by reference. *10-a-1 Copy of the Company's 1981 Incentive Stock Option Plan for Key Employees, as amended, filed as Exhibit 4-c-1 to Registration Statement No. 33-11946, is hereby incorporated by reference. *10-a-2 Form of Stock Option Agreement under the Company's 1981 Incentive Stock Option Plan for Key Employees, as amended, for options granted prior to January 1, 1986. *10-a-3 Forms of Stock Option and Stock Appreciation Rights Agreements under the Company's 1981 Incentive Stock Option Plan for Key Employees, as amended, for options and stock appreciation rights granted after December 31, 1985 and prior to February 24, 1987, filed as Exhibit 4-c-5 to Registration Statement No. 33-11946, is hereby incorporated by reference. *10-b-1 Copy of the Company's 1979 Stock Plan for Key Employees, as amended, filed as Exhibit 4-d-1 to Registration Statement No. 33-11946, is hereby incorporated by reference. *10-b-2 Form of Stock Option Agreement under the Company's 1979 Stock Plan for Key Employees, as amended, for options granted prior to January 1, 1986. --------- * Management contract or compensatory plan or arrangement.
35 36 *10-b-3 Form of Stock Option and Stock Appreciation Rights Agreement under the Company's 1979 Stock Plan for Key Employees, as amended, for options and stock appreciation rights granted prior to January 1, 1986. *10-b-4 Form of Stock Appreciation Rights Agreement under the Company's 1979 Stock Plan for Key Employees, as amended. *10-b-5 Forms of Stock Option and Stock Appreciation Rights Agreements under the Company's 1979 Stock Plan for Key Employees, as amended, for options and stock appreciation rights granted after December 31, 1985 and prior to February 24, 1987, filed as Exhibit 4-d-5 to Registration Statement No. 33-11946, is hereby incorporated by reference. *10-b-6 Forms of Stock Option and Stock Appreciation Rights Agreements under the Company's 1979 Stock Plan for Key Employees, as amended, for options and stock appreciation rights granted after February 23, 1987 and prior to December 2, 1987, filed as Exhibit 4-d-6 to Registration Statement No. 33-11946, is hereby incorporated by reference. *10-b-7 Forms of Stock Option and Stock Appreciation Rights Agreements under the Company's 1979 Stock Plan for Key Employees, as amended, for options and stock appreciation rights granted after December 1, 1987, filed as Exhibit 10-b-7 to the Company's Annual Report on Form 10-K for the year ended September 30, 1987, is hereby incorporated by reference. *10-c-1 Copy of resolution of the Board of Directors of the Company, adopted May 7, 1980, adjusting the number of shares subject to outstanding options and stock appreciation rights under the Company's 1979 Stock Option Plan for Key Employees (now the 1979 Stock Plan for Key Employees, as amended) and the number of shares transferable under the Company's Incentive Compensation Plan, filed as Exhibit 10-d-2 to the Company's Annual Report on Form 10-K for the year ended September 30, 1987, is hereby incorporated by reference. *10-c-2 Copy of resolution of the Board of Directors of the Company, adopted May 4, 1983, adjusting the number of shares subject to outstanding options and stock appreciation rights under the Company's 1981 Incentive Stock Option Plan for Key Employees, as amended, and 1979 Stock Plan for Key Employees, as amended, filed as Exhibit 4-e-5 to Registration Statement No. 33-11946, is hereby incorporated by reference. *10-c-3 Copy of resolution of the Board of Directors of the Company, adopted February 11, 1987, adjusting the number of shares subject to outstanding options and stock appreciation rights under the Company's 1981 Incentive Stock Option Plan for Key Employees, as amended, and 1979 Stock Plan for Key Employees, as amended, filed as Exhibit 4-e-6 to Registration Statement No. 33-11946, is hereby incorporated by reference. *10-d-1 Copy of the Company's 1988 Long-Term Incentives Plan, as amended through November 30, 1994. *10-d-2 Forms of Stock Option Agreement under the Company's 1988 Long-Term Incentives Plan for options granted prior to May 1, 1992, filed as Exhibit 10-d-2 to the Company's Annual Report on Form 10-K for the year ended September 30, 1988, are hereby incorporated by reference. --------- * Management contract or compensatory plan or arrangement.
36 37 *10-d-3 Forms of Stock Option and Stock Appreciation Rights Agreements under the Company's 1988 Long-Term Incentives Plan for options and stock appreciation rights granted prior to May 1, 1992, filed as Exhibit 10-d-3 to the Company's Annual Report on Form 10-K for the year ended September 30, 1988, are hereby incorporated by reference. *10-d-4 Form of Stock Option Agreement under the Company's 1988 Long-Term Incentives Plan for options granted after May 1, 1992 and prior to March 1, 1993, filed as Exhibit 28-a-1 to the Company's Form 10-Q for the quarter ended June 30, 1992, is hereby incorporated by reference. *10-d-5 Forms of Stock Option Agreement under the Company's 1988 Long-Term Incentives Plan for options granted after March 1, 1993 and prior to November 1, 1993, filed as Exhibit 28-a to the Company's Form 10-Q for the quarter ended March 31, 1993, is hereby incorporated by reference. *10-d-6 Forms of Stock Option Agreement under the Company's 1988 Long-Term Incentives Plan for options granted after November 1, 1993 and before December 1, 1994, filed as Exhibit 10-d-6 to the Company's Annual Report on Form 10-K for the year ended September 30, 1993, is hereby incorporated by reference. *10-d-7 Forms of Stock Option Agreement under the Company's 1988 Long-Term Incentives Plan for options granted after December 1, 1994. *10-e-1 Copy of the Company's 1995 Long-Term Incentives Plan. *10-e-2 Forms of Stock Option Agreement under the Company's 1995 Long-Term Incentives Plan. *10-f-1 Copy of the Company's Incentive Compensation Plan, as amended through February 23, 1987, filed as Exhibit 10-e-1 to the Company's Annual Report on Form 10-K for the year ended September 30, 1991, is hereby incorporated by reference. 10-g-1 Copy of the Company's Deferred Compensation Plan, as amended effective as of October 1, 1992, filed as Exhibit 10-g-1 to the Company's Annual Report on Form 10-K for the year ended September 30, 1993, is hereby incorporated by reference. *10-h-1 Copy of resolutions adopted by the Board of Directors of the Company on November 3, 1993 providing for the Company's Deferred Compensation Policy for Non-Employee Directors. *10-h-2 Copy of resolutions adopted by the Compensation Committee of the Board of Directors of the Company on July 5, 1994 modifying the Company's Deferred Compensation Policy for Non-Employee Directors. *10-i-1 Copy of the Company's Directors Stock Plan. *10-j-1 Copy of resolutions adopted by the Board of Directors of the Company on November 2, 1994 providing for the Company's Retirement Policy for Non-Employee Directors. 11 Computation of Earnings Per Share for the Five Years Ended September 30, 1994. 21 List of Subsidiaries of the Company. 23 Consent of independent certified public accountants. 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. --------- * Management contract or compensatory plan or arrangement.
37 38 27 Financial Data Schedule for September 30, 1994 Form 10-K 99-a-1 Copy of the Company's Savings Plan, as amended and restated as of September 30, 1994. 99-b-1 Approval dated February 25, 1994, Amending the Company's Savings Plan for Certain Represented Hourly Employees.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the last quarter of the period covered by this Report. 38 39 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 INTERNATIONAL CORPORATION By /s/ WILLIAM J. CALISE, JR. --------------------------------------- WILLIAM J. CALISE, JR. SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY Dated: December 21, 1994 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW ON THE 21ST DAY OF DECEMBER 1994 BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED. DONALD R. BEALL* CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER (PRINCIPAL EXECUTIVE OFFICER) AND DIRECTOR LEW ALLEN, JR.* DIRECTOR RICHARD M. BRESSLER* DIRECTOR JOHN J. CREEDON* DIRECTOR ROBIN CHANDLER DUKE* DIRECTOR JUDITH L. ESTRIN* DIRECTOR WILLIAM H. GRAY, III* DIRECTOR JAMES CLAYBURN LA FORCE, JR.* DIRECTOR WILLIAM T. MCCORMICK* DIRECTOR JOHN D. NICHOLS* DIRECTOR BRUCE M. ROCKWELL* DIRECTOR ROSS D. SIRAGUSA, JR.* DIRECTOR WILLIAM S. SNEATH* DIRECTOR JOSEPH F. TOOT, JR.* DIRECTOR W. MICHAEL BARNES* SENIOR VICE PRESIDENT, FINANCE & PLANNING AND CHIEF FINANCIAL OFFICER (PRINCIPAL FINANCIAL OFFICER) LAWRENCE J. KOMATZ* VICE PRESIDENT AND CONTROLLER (PRINCIPAL ACCOUNTING OFFICER)
*By /s/ WILLIAM J. CALISE, JR. ----------------------------- WILLIAM J. CALISE, JR., ATTORNEY-IN-FACT** ** BY AUTHORITY OF POWERS OF ATTORNEY FILED HEREWITH. 39 40 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ROCKWELL INTERNATIONAL CORPORATION: We have audited the consolidated balance sheet of Rockwell International Corporation and subsidiaries as of September 30, 1994 and 1993 and the related consolidated statements of income, shareowners' equity and cash flows for each of the three years in the period ended September 30, 1994, and have issued our report thereon dated November 1, 1994 except as to Note 2 to Financial Statements as to which the date is November 21, 1994; such financial statements and report are included in Items 8 and 14(a)(1) hereof. Our audits also included the financial statement schedules of Rockwell International Corporation and subsidiaries, listed in Item 14(a)(2). These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP Pittsburgh, Pennsylvania November 1, 1994, except as to Note 2 to Financial Statements as to which the date is November 21, 1994 S-1 41 SCHEDULE V ROCKWELL INTERNATIONAL CORPORATION AND CONSOLIDATED SUBSIDIARIES PROPERTY, PLANT AND EQUIPMENT FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992
BALANCE RECLASSIFICATIONS BALANCE BEGINNING RETIREMENTS AND TRANSFERS -- END OF DESCRIPTION OF YEAR ADDITIONS AND SALES ADD (DEDUCT) OTHER YEAR ----------- --------- --------- ----------- ------------------ ----- -------- (IN MILLIONS) Year ended September 30, 1994 Land.............................. $ 104.3 $ 13.2 $ 3.3 $ 2.4 $ 116.6 Land and leasehold improvements... 161.0 9.7 11.8 $(1.8) (1.8) 155.3 Buildings......................... 1,383.9 58.6 60.1 4.2 (7.7) 1,378.9 Machinery and equipment........... 2,844.8 304.4 161.1 (2.5) (35.9) 2,949.7 Office and data processing equipment....................... 1,265.8 99.1 136.8 (3.1) (0.5) 1,224.5 Construction in progress.......... 258.3 82.7 (0.4) (5.2) 335.4 -------- ------ ------ ----- ------ -------- Total...................... $6,018.1 $567.7 $373.1 $(3.6)(a) $(48.7)(b) $6,160.4 ======== ====== ====== ===== ====== ======== Year ended September 30, 1993 Land.............................. $ 97.4 $ 0.3 $ 2.0 $ 8.6 $ 104.3 Land and leasehold improvements... 164.0 6.8 9.5 $ 0.7 (1.0) 161.0 Buildings......................... 1,373.9 47.3 32.4 2.6 (7.5) 1,383.9 Machinery and equipment........... 2,833.2 235.8 179.7 (7.9) (36.6) 2,844.8 Office and data processing equipment....................... 1,291.5 111.4 125.9 1.5 (12.7) 1,265.8 Construction in progress.......... 228.7 31.6 (2.0) 258.3 -------- ------ ------ ----- ------ -------- Total...................... $5,988.7 $433.2 $349.5 $(3.1)(a) $(51.2)(b) $6,018.1 ======== ====== ====== ===== ====== ======== Year ended September 30, 1992 Land.............................. $ 97.9 $ 1.1 $ 3.3 $(1.1) $ 2.8 $ 97.4 Land and leasehold improvements... 163.7 8.2 8.6 0.7 164.0 Buildings......................... 1,338.4 59.4 36.5 5.0 7.6 1,373.9 Machinery and equipment........... 2,769.7 229.3 187.1 (3.4) 24.7 2,833.2 Office and data processing equipment....................... 1,277.1 102.9 92.3 (1.0) 4.8 1,291.5 Construction in progress.......... 240.9 (14.5) (0.5) 2.8 228.7 -------- ------ ------ ----- ------ -------- Total...................... $5,887.7 $386.4 $327.8 $(1.0)(a) $ 43.4(b) $5,988.7 ======== ====== ====== ===== ====== ======== - --------------- (a) Represents accumulated depreciation on intercompany transfers of assets at net book value. (b) Represents cost of properties of or related to:
1994 1993 1992 ------- ------- ------ (IN MILLIONS) Businesses sold...................................... $(103.9) $ -- $(14.8) Businesses acquired.................................. 17.3 56.5 22.8 ------- ------- ------ Net................................................ (86.6) 56.5 8.0 Foreign currency translation adjustments............. 37.9 (107.7) 35.4 ------- ------- ------ Total.......................................... $ (48.7) $ (51.2) $ 43.4 ======= ======= ======
The ranges of estimated useful lives used in computing depreciation were generally as follows:
YEARS ----- Land and leasehold improvements.................................. 3-50 Buildings........................................................ 10-50 Machinery and equipment.......................................... 3-18 Office and data processing equipment............................. 5-15
S-2 42 SCHEDULE VI ROCKWELL INTERNATIONAL CORPORATION AND CONSOLIDATED SUBSIDIARIES ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992
BALANCE RECLASSIFICATIONS BALANCE BEGINNING RETIREMENTS AND TRANSFERS -- END OF DESCRIPTION OF YEAR PROVISION AND SALES ADD (DEDUCT) OTHER YEAR ----------- --------- --------- ----------- ------------------ ------ -------- (IN MILLIONS) Year ended September 30, 1994 Land and leasehold improvements.................. $ 112.4 $ 10.5 $ 8.7 $(1.8) $ (1.1) $ 111.3 Buildings........................ 618.6 55.7 36.4 1.0 (5.3) 633.6 Machinery and equipment.......... 1,975.2 244.0 138.1 (1.1) (26.3) 2,053.7 Office and data processing equipment..................... 986.1 126.1 132.1 (1.7) 978.4 -------- ------ ------ ----- ------ -------- Total.................... $3,692.3 $436.3 $315.3 $(3.6)(a) $(32.7)(b) $3,777.0 ======== ====== ====== ===== ====== ======== Year ended September 30, 1993 Land and leasehold improvements.................. $ 108.7 $ 11.0 $ 6.9 $ 0.3 $ (0.7) $ 112.4 Buildings........................ 592.0 54.5 18.1 (0.1) (9.7) 618.6 Machinery and equipment.......... 1,937.5 228.7 144.5 (4.7) (41.8) 1,975.2 Office and data processing equipment..................... 975.7 137.9 120.3 1.4 (8.6) 986.1 -------- ------ ------ ----- ------ -------- Total.................... $3,613.9 $432.1 $289.8 $(3.1)(a) $(60.8)(b) $3,692.3 ======== ====== ====== ===== ====== ======== Year ended September 30, 1992 Land and leasehold improvements.................. $ 105.0 $ 11.6 $ 7.3 $(0.5) $ (0.1) $ 108.7 Buildings........................ 553.8 58.3 22.2 0.6 1.5 592.0 Machinery and equipment.......... 1,853.1 235.8 156.1 (0.1) 4.8 1,937.5 Office and data processing equipment..................... 914.6 148.3 86.9 (1.0) 0.7 975.7 -------- ------ ------ ----- ------ -------- Total.................... $3,426.5 $454.0 $272.5 $(1.0)(a) $ 6.9(b) $3,613.9 ======== ====== ====== ===== ====== ======== - --------------- (a) Represents accumulated depreciation on intercompany transfers of assets at net book value. (b) Represents accumulated depreciation of properties of or related to:
1994 1993 1992 ------ ------ ------ (IN MILLIONS) Businesses sold.............................. $(52.4) $ -- $ (7.4) Foreign currency translation adjustments..... 19.7 (60.8) 14.3 ------ ------ ------ Total.............................. $(32.7) $(60.8) $ 6.9 ====== ====== ======
S-3 43 SCHEDULE VIII ROCKWELL INTERNATIONAL CORPORATION VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992
BALANCE AT CHARGED TO CHARGED BALANCE AT BEGINNING COSTS AND TO OTHER END OF DESCRIPTION OF YEAR(A) EXPENSES ACCOUNTS(B) DEDUCTIONS YEAR(A) ----------- ---------- ---------- ----------- ---------- ---------- (IN MILLIONS) Year ended September 30, 1994: Allowance for doubtful accounts...... $56.9 $29.2 $1.1 $ 9.5(c) $78.3 (0.6)(d) Year ended September 30, 1993: Allowance for doubtful accounts...... 46.5 25.5 1.3 13.3(c) $56.9 3.1(d) Year ended September 30, 1992: Allowance for doubtful accounts...... 51.0 9.7 0.3 17.1(c) 46.5 (2.6)(d) - --------------- (a) Includes allowances for commercial, customer finance and other long-term receivables. (b) Collection of accounts previously written off. (c) Uncollectible accounts written off. (d) Consists principally of amounts relating to businesses acquired, businesses sold and foreign currency translation adjustments.
S-4 44 SCHEDULE IX ROCKWELL INTERNATIONAL CORPORATION SHORT-TERM BORROWINGS FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992
MAXIMUM AVERAGE WEIGHTED WEIGHTED AMOUNT AMOUNT AVERAGE AVERAGE OUTSTANDING OUTSTANDING INTEREST BALANCE AT INTEREST DURING DURING RATE DURING DESCRIPTION END OF YEAR RATE THE YEAR(A) THE YEAR(B) THE YEAR(C) ----------- ----------- -------- ----------- ----------- ----------- (DOLLARS IN MILLIONS) Year ended September 30, 1994: Commercial Paper..................... $ 40.0 4.9% $100.0 $ 62.6 4.2% Bank Borrowings (principally foreign)........................... 105.2 4.9 207.5 158.7 7.2 Year ended September 30, 1993: Commercial Paper..................... 50.0 4.5 3.1 Bank Borrowings (principally foreign)........................... 158.9 6.5 224.8 173.1 10.5 Year ended September 30, 1992: Commercial Paper..................... 170.0 82.1 4.1 Bank Borrowings (principally foreign)........................... 150.6 9.1 351.1 288.8 10.8 - --------------- (a) Based upon the maximum amount outstanding at any month end during the year. (b) Average amount outstanding is computed based on daily averages for commercial paper borrowings and monthly averages for bank borrowings. (c) The weighted average interest rate during the year is computed by dividing interest expense applicable to the debt by average borrowings outstanding.
S-5 EX-3.A.1 2 ROCKWELL INTERNATIONAL 10-K 1 EXHIBIT 3-a-1 RESTATED CERTIFICATE OF INCORPORATION OF ROCKWELL INTERNATIONAL CORPORATION (AS AMENDED FEBRUARY 11, 1987) ------------- FIRST: The name of the Corporation is ROCKWELL INTERNATIONAL CORPORATION SECOND: The Corporation's principal office in the State of Delaware is located at 100 West 10th Street, in the City of Wilmington, County of New Castle. The name and address of its resident agent is The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. THIRD: The nature of the business, or objects or purposes to be transacted, promoted or carried on, are: (1) To engage, directly and indirectly, in research, design, development, manufacture, acquisition, disposition, distribution and all other dealings in the fields of aircraft, launch and space vehicles, rocket propulsion, electronics and electromechanical equipment, atomic energy, missiles, components for vehicles, industrial products and equipment, farm equipment, machine parts, textile machinery, plastics and plastic products, and in all other related and unrelated fields. (2) To develop, obtain, purchase, hold, own, use, take, assign or grant licenses in respect of, and to sell, mortgage, or otherwise dispose of, letters patent of the United States or any other jurisdiction, and all rights connected therewith, patent rights, licenses and privileges, inventions, devices, processes and any improvements and modifications thereof, and copyrights, trademarks, trade names, trade symbols and other indications of origin or ownership, granted by, recognized by, or otherwise existing under the laws of the United States or any other jurisdiction. (3) To acquire the whole or any part of the property, assets, business, goodwill and rights of, and to undertake or assume the whole or any part of the bonds, mortgages, franchises, leases, contracts, indebtedness, guaranties, liabilities and obligations of, any person, firm, association, corporation, trust or organization, and to pay for the same or any part or combination thereof in cash, shares of the capital stock, bonds, debentures, notes, or other obligations of the Corporation or otherwise, or by undertaking and assuming the whole or any part of the liabilities or obligations of the transferor; and to hold or in any manner dispose of the whole or any part of the property and assets so acquired, and to conduct in any lawful manner the whole or any part of the business so acquired and to exercise all the powers necessary or convenient for the conduct of such business. (4) To borrow money and to issue bonds, debentures, notes, or other obligations of the Corporation of any nature or in any manner from time to time, and to secure the same by mortgage, pledge or other lien upon any or all of the property of every kind and designation, of the Corporation. (5) To acquire, hold, dispose of and deal in shares of its own capital stock, bonds, or other obligations from time to time to such an extent and in such manner and upon such terms as its Board of Directors shall determine; provided the Corporation shall not use its funds or property for the purchase of its own shares of capital stock when such use would cause any impairment of its capital; and provided further that shares of its own capital stock belonging to the Corporation shall not be voted directly or indirectly. 1 2 (6) To acquire, hold, dispose of and deal in all forms of securities, including, but not by way of limitation, shares, stocks, bonds, debentures, notes, scrip, mortgages, evidences of indebtedness, certificates of indebtedness and certificates of interest wherever issued or created by corporations, associations, partnerships, firms, trusts, syndicates, individuals, governments, states, municipalities or other political or governmental divisions or subdivisions, or by any combinations, organizations or entities whatsoever, or issued or created by others, irrespective of their form or the name by which they may be described, and all trust, participation and other certificates of, and receipts evidencing, interest in any such securities, and to issue in exchange therefor or in payment thereof, in any manner permitted by law, its own stock, bonds, debentures or its other obligations or securities, subject to the provisions of this certificate, or to make payment therefor by any other lawful means of payment whatsoever; to exercise any and all rights, powers, and privileges of individual ownership or interest of any and all such securities or evidences of interest therein, including the right to vote thereon and to consent and otherwise act with respect thereto; to do any and all acts and things for the preservation, protection, improvement and enhancement in value of any and all such securities or evidences of interest therein, and to aid by loan, subsidy, guaranty or otherwise those issuing, creating, or responsible for any such securities or evidences of interest therein; to acquire or become interested in any such securities or evidences of interest therein, as aforesaid, by original subscription, underwriting, loan participation in syndicates or otherwise and irrespective of whether or not such securities or evidences of interest therein be fully paid or subject to further payments; to make payments thereon as called for or in advance of calls or otherwise, and to underwrite or subscribe for the same conditionally or otherwise and either with a view to investment or for resale or for any other lawful purpose. (7) To endorse or guarantee the payment of principal, interest or dividends upon, and to guarantee the performance of sinking fund or other obligations, of any stocks, bonds, obligations or other securities or evidences of indebtedness, and to guarantee in any way permitted by law the performance of any of the contracts or other undertakings in which the Corporation may otherwise be or become interested, of any corporation, association, partnership, firm, trust, syndicate, individual, government, state, municipality or other political or governmental division or subdivision, domestic or foreign, insofar as may be permitted by law. (8) To organize or cause to be organized under the laws of the State of Delaware or any other jurisdiction a corporation or corporations for the purpose of accomplishing any or all of the objects and purposes for which the Corporation is organized, to promote, manage, control, and maintain any such corporation or corporations, and to dissolve, wind up, liquidate, reorganize, merge or consolidate any such corporation or corporations. (9) To have one or more offices within or without the State of Delaware at which meetings of stockholders and directors may be held, and all or any part of the Corporation's business may be conducted, to carry on all or any of its operations and business, and, without restriction or limit as to amount, to purchase, lease or otherwise acquire, hold, own, develop, explore, exploit, improve, operate, enjoy, control, manage or otherwise turn to account, mortgage, sell, grant, exchange, convey or otherwise dispose of real and personal property of every kind and description, within and without the United States, subject to applicable laws. (10) In general, to carry on any other business whether or not related to the foregoing and to have and exercise all the powers conferred by the laws of Delaware upon corporations formed under the General Corporation Law of the State of Delaware, and to do any or all of the things hereinbefore set forth to the same extent as natural persons could do. The foregoing clauses shall be construed as powers as well as objects and purposes, and the objects, purposes and powers specified in the foregoing clauses shall not, except where otherwise expressed, be limited or restricted by reference to, or inference from, the terms of any other clause in this Certificate of Incorporation, but each object, purpose or power stated in the foregoing clauses of this Article shall be regarded as an independent object, purpose or power. 2 3 FOURTH: The total number of shares of all classes of stock which the Corporation shall have the authority to issue is 812,000,000, of which 12,000,000 shares without par value are to be of a class designated Preferred Stock, 600,000,000 shares of the par value of $1 each are to be of a class designated Common Stock, and 200,000,000 shares of the par value of $1 each are to be of a class designated Class A Common Stock, subject, however, to the provisions of paragraph 3.4 below. Shares of stock of any class now or hereafter authorized may be issued by the Corporation from time to time for such consideration not less than the par value thereof as shall be fixed from time to time by the Board of Directors of the Corporation. Any and all shares of stock so issued for which the consideration so fixed has been paid or delivered to the Corporation shall be declared and taken to be fully paid stock and shall not be liable to any further call or assessments thereon, and the holders of such shares shall not be liable for any further payments in respect of such shares. Subscriptions to, or the purchase price of, shares of stock of the Corporation may be paid for, wholly or partly, by cash, by labor done, by personal property, or by real property or leases thereof. In the absence of actual fraud in the transaction, the judgment of the Directors as to the value of such labor, property, real estate or leases thereof shall be conclusive. Subject only to the provisions of this Article Fourth by which the initial series of Preferred Stock is created, authority is hereby vested in the Board of Directors to issue the Preferred Stock from time to time in one or more subsequent series, with such voting powers or without voting powers, and with designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, and with such dividend rights, rights on dissolution or distribution of assets, and conversion or exchange rights, and subject to redemption at such time or times and price or prices, as shall be stated and expressed in the resolution or resolutions providing for the issue of such stock adopted by the Board of Directors; provided, however, that the aggregate liquidation value of all shares of Preferred Stock outstanding at any one time shall not exceed $650,000,000. In this Article Fourth, any reference to a section or paragraph, without further attribution, within a provision relating to a particular class of stock is intended to refer solely to the specified section or paragraph of the other provisions relating to the same class of stock. COMMON STOCK AND CLASS A COMMON STOCK The Common Stock and Class A Common Stock shall have the following voting powers, designations, preferences and relative, participating, optional and other special rights, and qualifications, limitations or restrictions thereof: 1. Dividends. 1.1. Whenever the full dividends upon any outstanding Preferred Stock for all past dividend periods shall have been paid and the full dividends thereon for the then current respective dividend periods shall have been paid, or declared and a sum sufficient for the respective payments thereof set apart, the holders of shares of the Common Stock and Class A Common Stock shall be entitled to receive such dividends and distributions, payable in cash or otherwise, as may be declared thereon by the Board of Directors from time to time out of assets or funds of the Corporation legally available therefor, provided that all such dividends or distributions shall be paid or made in equal amounts, share for share, to the holders of the Common Stock and Class A Common Stock as if a single class, except that (a) in the event that any dividend, other than the initial distribution (the "Distribution") of shares of Class A Common Stock to the holders of shares of Common Stock, shall be declared in shares of Common Stock or Class A Common Stock, such dividend shall be declared at the same rate per share on Common Stock and Class A Common Stock, but the dividend payable on shares of Common Stock shall be payable in shares of Common Stock, and the dividend payable on shares of Class A Common Stock shall be payable in shares of Class A Common Stock; and (b) any dividend described in paragraph 1.2 below may be paid as therein described. If the Corporation shall in any manner split, subdivide or combine the outstanding shares of Common Stock or Class A Common Stock, the outstanding shares of the other such class of stock shall be split, subdivided or combined 3 4 in the same manner proportionately and on the same basis per share. Following the Distribution to holders of Common Stock on the record date fixed for determining the holders thereof entitled to receive the Distribution (such record date being herein referred to as the "Distribution Record Date" and each such holder being herein referred to as a "Distribution Record Date Holder"), the Corporation shall not issue any shares of Class A Common Stock except (w) pursuant to this paragraph 1.1; (x) upon conversion of Series A Stock and Series B Stock (as hereinafter defined) in accordance with this Article Fourth and of the Corporation's 4 1/4% Convertible Subordinated Debentures due February 15, 1991 ("Convertible Subordinated Debentures"); (y) upon exercise of employee stock options (whether or not outstanding or exercisable on the Distribution Record Date); and (z) in connection with any contribution made by the Corporation to any employee benefit or stock ownership plan of the Corporation. 1.2. In the event the Corporation shall distribute to the holders of the shares of Common Stock and Class A Common Stock the common stock or substantially equivalent equity securities of any subsidiary of the Corporation, the Board of Directors shall have power, but shall not be obligated, to capitalize or recapitalize such subsidiary with classes of common equity having the powers, designations, preferences, and relative, participating, optional, or other special rights and qualifications, limitations, and restrictions thereof, corresponding, respectively, insofar as practicable, to those of the Common Stock and the Class A Common Stock, and the Board of Directors of the Corporation shall have power, but shall not be obligated, to distribute to the holders of shares of the Common Stock, the shares of the subsidiary with rights corresponding to those of the Common Stock, and to distribute to the holders of shares of the Class A Common Stock, the shares of the subsidiary with rights corresponding to those of the Class A Common Stock; provided, that holders of shares of Common Stock and holders of shares of Class A Common Stock shall respectively receive the same number of shares of such subsidiary per share of Common Stock and per share of Class A Common Stock held. 2. Rights on Liquidation. In the event of any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, after the payment or setting apart for payment to the holders of any outstanding Preferred Stock of the full preferential amounts to which such holders are entitled as herein provided or referred to, all of the remaining assets of the Corporation shall belong to and be distributable in equal amounts per share to the holders of the Common Stock and the holders of Class A Common Stock, as if such classes constituted a single class. For purposes of this paragraph 2, a consolidation or merger of the Corporation with any other corporation, or the sale, transfer or lease of all or substantially all its assets shall not constitute or be deemed a liquidation, dissolution or winding-up of the Corporation. 3. Conversion of Class A Common Stock. 3.1. The holders of Class A Common Stock shall have the right, at their option, to convert any or all such shares into shares of Common Stock of the Corporation on the following terms and conditions: (i) Each share of Class A Common Stock shall be convertible, at any time, at the office of any transfer agent for shares of Common Stock of the Corporation, and at such other place or places, if any, as the Board of Directors may determine, into one fully paid and nonassessable share of Common Stock of the Corporation upon surrender at such office or other place of the certificate or certificates representing the shares of Class A Common Stock so to be converted. In no event, upon conversion of any shares of Class A Common Stock into shares of Common Stock, shall any allowance or adjustment be made in respect of dividends on the Class A Common Stock or the Common Stock. (ii) Shares of Class A Common Stock shall be deemed to have been converted and the person converting the same shall become a holder of shares of Common Stock for the purpose of receiving dividends and for all other purposes whatsoever as of the date when the certificate or certificates for the shares of Class A Common Stock to be converted are surrendered to the Corporation as provided in paragraph 3.1(v). 4 5 (iii) A number of shares of Common Stock sufficient to provide, upon the basis hereinbefore set forth, for the conversion of all shares of the Class A Common Stock outstanding shall at all times be reserved by the Corporation for the exercise of the conversion rights of the holders of shares of the Class A Common Stock. (iv) If the Corporation shall, at any time, be consolidated or merged with, or shall sell its property as an entirety or substantially as an entirety to, any other corporation or corporations, or in the event of any recapitalization or reclassification of its shares, proper provisions shall be made as a part of the terms of each such consolidation, merger, sale, recapitalization or reclassification so that the holder of any shares of the Class A Common Stock outstanding immediately prior to such consolidation, merger, sale, recapitalization or reclassification shall thereafter be entitled to and only entitled to conversion rights upon the terms and with respect to such securities of the consolidated, merged or purchasing corporation, or with respect to such securities issued upon such recapitalization or reclassification, as such holder would have been entitled to receive upon such consolidation, merger, sale, recapitalization or reclassification if such holder had exercised the conversion privilege immediately prior thereto. The provisions of this paragraph 3.1(iv) shall similarly apply to successive consolidations, mergers, sales, recapitalizations or reclassifications. (v) Before any holder of Class A Common Stock shall be entitled to convert the same into Common Stock, he shall surrender his certificate or certificates for such Class A Common Stock to the Corporation at the office of a transfer agent for the Common Stock, or at such other place or places, if any, as the Board of Directors may determine, duly endorsed or accompanied if appropriate by duly executed instruments of transfer and shall give written notice to the Corporation at said office or place that he elects so to convert the shares of Class A Common Stock represented by the certificate or certificates so surrendered. Unless the Common Stock is to be issued in the name of the registered owner of the certificates surrendered, the holder shall state in writing the name or names in which he wishes the certificate or certificates for Common Stock to be issued, and shall furnish all requisite stock transfer and stock issuance tax stamps, or funds therefor. The Corporation shall as soon as practicable after such deposit of certificates for Class A Common Stock, accompanied by the written notice above prescribed, issue and deliver, at the office or place at which such certificates were deposited, to the person for whose account Class A Common Stock was so surrendered, or to his nominee or nominees, certificates for the number of full shares of Common Stock to which he shall be entitled as aforesaid. 3.2. All outstanding shares of Class A Common Stock shall automatically, without any act or deed on the part of the Corporation or any other person, be converted into shares of Common Stock on a share-for-share basis (i) at any time after the Distribution when the total number of shares of Class A Common Stock outstanding and reserved for issuance upon conversion of Preferred Stock and Convertible Subordinated Debentures and upon exercise of employee stock options is less than 10,000,000; (ii) on the tenth anniversary of the Distribution Record Date unless prior thereto the Board of Directors shall have extended the date for such conversion on one or more occasions but in no event to a date later than the fifteenth anniversary of the Distribution Record Date; (iii) if at any time the Board of Directors, in its sole discretion, determines that there has been a material adverse change in the liquidity, marketability, or market value of the outstanding Common Stock due to a delisting of the Common Stock from a national securities exchange or a national over-the-counter listing or due to requirements under applicable state securities laws in any such case attributable to the existence of the Class A Common Stock; or (iv) if the Board of Directors, in its sole discretion, elects to effect a conversion in connection with its approval of any sale or lease of all or substantially all of the Corporation's assets or any merger, consolidation, liquidation or dissolution of the Corporation. In the event of any such automatic conversion, each stock certificate theretofore representing Class A Common Stock will thereafter represent the same number of shares of Common Stock. 5 6 3.3. The provisions of this paragraph 3 shall be in addition to the provisions of paragraphs 5.1(i)(A)(3), 5.1(ii) and 5.1(iv), which require automatic conversion of Class A Common Stock in the circumstances provided therein. 3.4. Shares of the Class A Common Stock converted into Common Stock as provided in paragraph 3.1 or paragraph 5 shall resume the status of authorized but unissued shares of Class A Common Stock. Upon any automatic conversion of Class A Common Stock into Common Stock pursuant to paragraph 3.2, the Class A Common Stock shall no longer be authorized for issuance. 4. Voting. 4.1. Except as otherwise provided by the laws of the State of Delaware or by this Article Fourth, each share of Common Stock shall entitle the holder thereof to one vote. 4.2. Except as otherwise provided by the laws of the State of Delaware or by this Article Fourth, each share of Class A Common Stock shall entitle the holder thereof to ten votes. Except as otherwise provided herein or required by law, holders of Common Stock and Class A Common Stock shall at all times vote on all matters (including the election of directors) together as one class and together with the holders of any other series or class of stock of the Corporation accorded such class voting right. 4.3. The affirmative vote of the holders of a majority of the outstanding shares of Common Stock and of Class A Common Stock, each voting separately as a class, shall be required to: (i) authorize additional shares of Class A Common Stock; (ii) modify or eliminate the last sentence of paragraph 1.1, above; or (iii) adopt any other amendment hereof that alters or changes the designations or powers or the preferences, qualifications, limitations, restrictions or the relative or special rights of either the Common Stock or the Class A Common Stock so as to affect holders of shares of such class adversely. 5. Limitations on Transfer and Issuance of Class A Common Stock. 5.1. (i) No person holding any share of Class A Common Stock may transfer, and the Corporation shall not register the transfer of such share of Class A Common Stock or any interest therein, whether by sale, assignment, gift, bequest, appointment or otherwise, except to a "Permitted Transferee" of such person. The term "Permitted Transferee" shall mean only, (A) In the case of a holder of Class A Common Stock (a "Holder") who is a natural person and the holder of record and beneficial owner of shares subject to a proposed transfer, "Permitted Transferree" means: (1) The Holder, the spouse of such Holder, any lineal descendant of a grandparent of such Holder, or any spouse of such lineal descendant (herein collectively referred to as "such Holder's Family Members"); (2) The trustee of a trust solely for the benefit of such Holder or such Holder's Family Members, provided that such trust may also grant a general or special power of appointment to one or more of such Holder's Family Members and may permit trust assets to be used to pay taxes, legacies and other obligations of the trust or of the estates of one or more of such Holder's Family Members payable by reason of the death of any of such Family Members; (3) A corporation if all of the outstanding capital stock of such corporation is beneficially owned by, or a partnership if all of the partners are and all of the partnership interests are beneficially owned by, the Holder and his Permitted Transferees determined under this paragraph 5.1(i)(A), provided that if by reason of any change in the ownership of such stock or partners or partnership interests, such corporation or partnership would no longer qualify as a Permitted Transferree of such Holder or his Permitted Transferrees, all shares of Class A Common Stock then held by such 6 7 corporation or partnership shall immediately and automatically, without further act or deed on the part of the Corporation or any other person, be converted into shares of Common Stock on a share-for-share basis, and stock certificates formerly representing such shares of Class A Common Stock shall thereupon and thereafter be deemed to represent the like number of shares of Common Stock; (4) An organization established by the Holder or such Holder's Family Members, contributions to which are deductible for federal income, estate or gift tax purposes; or (5) The executor, administrator or personal representative of the estate of such Holder or the guardian or conservator of such Holder adjudged disabled by a court of competent jurisdiction, acting in his capacity as such. (B) In the case of a Holder holding the shares subject to a proposed transfer as trustee pursuant to a trust (other than a trust described in paragraph 5.1(i)(C) below), "Permitted Transferee" means (1) the person who established such trust and (2) any Permitted Transferree of such person determined pursuant to paragraph 5.1(i)(A) above. (C) In the case of a Holder holding shares subject to a proposed transfer as trustee pursuant to a trust which was irrevocable on the Distribution Record Date, "Permitted Transferee" means (1) any person to whom or for whose benefit principal may be distributed either during or at the end of the term of such trust whether by power of appointment or otherwise (excluding beneficiaries of any employee benefit plan) and (2) any Permitted Transferree of any such person determined pursuant to paragraph 5.1(i) (A) above. (D) In the case of a Holder which is a partnership or corporation, with respect to shares of Class A Common Stock beneficial ownership of which was acquired pursuant to the Distribution or thereafter pursuant to a dividend paid in shares of Class A Common Stock or a split, subdivision or combination of shares of Class A Common Stock, or with respect to shares of Class A Common Stock beneficial ownership of which was acquired upon conversion of Convertible Subordinated Debentures or Preferred Stock or thereafter pursuant to such a dividend, split, subdivision or combination in respect of shares acquired by such conversion, "Permitted Transferee" means (1) in the case of such shares acquired pursuant to the Distribution and such shares issued in respect thereof, any partner of such partnership, or stockholder of such corporation, receiving such shares pro rata to his interest in such partnership or stock ownership in such corporation on the Distribution Record Date pursuant to a liquidating distribution or a dividend, (2) in the case of such shares acquired upon conversion and shares issued in respect thereof, any partner of such partnership, or stockholder of such corporation, receiving such shares pro rata to his interest in such partnership or stock ownership in such corporation on the date of such conversion pursuant to a liquidating distribution or a dividend or (3) in either case any Permitted Transferee of any partner or stockholder to the extent that he is a Permitted Transferee pursuant to the foregoing clauses (1) or (2), as the case may be, determined under paragraph 5.1(i)(A) above. (E) In the case of a Holder which is a corporation or partnership, with respect to shares of Class A Common Stock other than as described in paragraph 5.1(i)(D), "Permitted Transferee" means (1) any person who transferred to such corporation or partnership the shares that are the subject of the proposed transfer and (2) any Permitted Transferree of any such person determined under paragraph 5.1(i)(A) above. (F) In the case of a Holder which is an employee benefit or stock ownership plan for the benefit of employees of the Corporation or any of its subsidiaries, "Permitted Transferee" shall include any beneficiary of such plan to whom shares of stock of the Corporation may be distributed, but only as to shares so distributable. 7 8 (G) In the case of a Holder who is the executor, administrator or personal representative of the estate of a deceased Holder, guardian or conservator of the estate of a disabled Holder or who is a trustee of the estate of a bankrupt or insolvent Holder, and provided such deceased, disabled, bankrupt or insolvent Holder, as the case may be, was the record and beneficial owner of the shares subject to a proposed transfer, "Permitted Transferee" means a Permitted Transferee of such deceased, disabled, bankrupt or insolvent Holder as determined pursuant to paragraph 5.1(i)(A), (D) or (E) above, as the case may be. (ii) Notwithstanding anything to the contrary set forth herein, any holder of Class A Common Stock may pledge his shares of Class A Common Stock to a pledgee pursuant to a bona fide pledge of such shares as collateral security for indebtedness due to the pledgee, provided that such shares may not be transferred to or registered in the name of the pledgee unless such pledgee is a Permitted Transferee. In the event of foreclosure or other similar action by the pledgee, such pledged shares of Class A Common Stock shall automatically, without any act or deed on the part of the Corporation or any other person, be converted into shares of Common Stock on a share-for-share basis, unless within five business days after such foreclosure or similar event such pledged shares are returned to the pledgor or transferred to a Permitted Transferee of the pledgor. (iii) For purposes of this paragraph 5.1: (A) The relationship of any person that is derived by or through legal adoption shall be considered a natural one. (B) Each joint owner of shares of Class A Common Stock shall be considered a Holder of such shares. (C) A minor for whom shares of Class A Common Stock are held pursuant to a Uniform Gifts to Minors Act or similar law shall be considered a Holder of such shares. (D) Unless otherwise specified, the term "person" means both natural persons and legal entities. (iv) Any purported transfer of Class A Common Stock other than to a Permitted Transferee shall automatically, without any further act or deed on the part of the Corporation or any other person, result in the conversion of such shares into shares of Common Stock on a share-for-share basis, effective on the date of such purported transfer. The Corporation may, as a condition to transfer or registration of transfer of shares of Class A Common Stock to a purported Permitted Transferee, require that the record holder establish to the satisfaction of the Corporation, by filing with the transfer agent an appropriate affidavit or certificate or such other proof as the Corporation shall deem necessary, that such transferee is a Permitted Transferee. 5.2 Anything in this Article Fourth to the contrary notwithstanding, no share of Class A Common Stock may be held of record but not beneficially by a broker or dealer in securities, a bank or voting trustee or a nominee of any such, or otherwise held of record but not beneficially by a nominee of the beneficial owner of such share other than by an employee benefit or stock ownership plan of the Corporation (any such form of holding being referred to herein as holding in "street" or nominee name) and the Corporation shall issue a share of Common Stock for each share of Class A Common Stock which would otherwise be issuable to such nominee in any instance in which the Corporation reasonably believes that the proposed record holder intends to hold any such share in "street" or nominee name for the beneficial owner thereof; provided, however, that if any person establishes to the satisfaction of the Corporation in accordance with this paragraph 5.2 that he is the beneficial owner of any such share of Class A Common Stock, the Corporation shall issue such share in the name of such beneficial owner. Any such beneficial owner who desires to have shares of Class A Common 8 9 Stock issued in his name and the circumstances described in this paragraph 5.2 shall file an affidavit or certificate with the Secretary of the Corporation setting forth the name and address of such beneficial owner and certifying that he is the beneficial owner of the Common Stock, Convertible Subordinated Debenture or Preferred Stock held in "street" or nominee name in respect of which the shares of Class A Common Stock are to be issued. Any such affidavit or certificate shall be deemed filed only if it is satisfactory in form to the Corporation and received in the case of Class A Common Stock to be issued (i) in the Distribution, within 30 days after the Distribution Record Date or (ii) upon conversion of any Convertible Subordinated Debenture or Preferred Stock, at the time such security is tendered for conversion in accordance with its terms. If such affidavit or certificate shall not establish to the satisfaction of the Corporation the facts stated therein, then the Corporation shall issue Common Stock as provided in this paragraph 5.2. 5.3. The Corporation shall note on the certificates representing the shares of Class A Common Stock that there are restrictions on transfer and registration of transfer imposed by paragraphs 5.1 and 5.2. 5.4. (i) For purposes of this paragraph 5, "beneficial ownership" shall mean possession of the power to vote or to direct the vote and to dispose of or to direct the disposition of the share of Class A Common Stock in question, and a "beneficial owner" of a share of Class A Common Stock shall be the person having beneficial ownership thereof. (ii) The Board of Directors may, from time to time, establish practices and procedures and promulgate rules and regulations, in addition to those set forth in this Article Fourth, and amend or revoke any such, regarding the evidence necessary to establish entitlement of any transferee or purported transferee of Class A Common Stock to be registered as such. Should the transferee or purported transferee of any share wish to contest any decision of the Corporation on the question whether the transferee or purported transferee has established entitlement to be registered as a transferee of Class A Common Stock, then the Board of Directors shall in its sole discretion make the final determination. 6. Other Matters. 6.1. In case the Corporation shall at any time issue to the holders of its shares of Common Stock as such options or rights to subscribe for shares of Common Stock (including shares held in the Corporation's treasury) or any other security (whether of the Corporation or otherwise), the Corporation shall issue such options or rights to the holders of the Class A Common Stock and of any outstanding convertible Preferred Stock and outstanding Convertible Subordinated Debentures in the respective amounts equal to the amounts that such holders would have been entitled to receive had their respective Convertible Subordinated Debentures or shares of Class A Common Stock and convertible Preferred Stock been converted into Common Stock on the day prior to the date for the determination of the holders of Common Stock entitled to receive such options or rights. 6.2. If any Convertible Subordinated Debenture or any share of Preferred Stock shall be converted after the Distribution Record Date but before the date of the Distribution (the "Payment Date"), certificates representing shares of Common Stock or Class A Common Stock to which the holder of such Convertible Subordinated Debenture or such share shall be entitled on account of such conversion shall be delivered to such holder on the Payment Date or as soon thereafter as practicable. 6.3. In no event, upon conversion of any share of Preferred Stock into shares of Common Stock or Class A Common Stock, shall any allowance or adjustment be made in respect of dividends on the Preferred Stock, Common Stock or Class A Common Stock. 9 10 INITIAL SERIES OF $4.75 CONVERTIBLE PREFERRED STOCK There is hereby created an initial series of the Preferred Stock consisting of 1,549,467 shares, with the following voting powers, designation, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof: 1. Designation. The designation of said initial series shall be $4.75 Convertible Preferred Stock, Series A (hereinafter called Series A Stock). 2. Dividends. The holders of Series A Stock shall be entitled to cumulative dividends at the rate of $4.75 per share per annum when and as declared by the Board of Directors, payable quarterly on the first day of January, April, July, and October in each year (each such day being hereinafter called a dividend payment date). Dividends shall be cumulative on each share of Series A Stock from July 1, 1967 or from the dividend payment date next preceding the date of issuance of such share, whichever is later, except that dividends shall be cumulative from the date of issuance of any share issued on a dividend payment date and from the dividend payment date next following the date of issuance of any share issued between the record date for the determination of holders of Series A Stock entitled to receive a quarterly dividend and the dividend payment date for such quarterly dividend. Dividends at the above rate shall be cumulative whether or not the Corporation shall have had net profits or assets legally available for such dividends in any dividend period. Holders of Series A Stock shall not be entitled to any dividends other than full cumulative dividends in cash at the above rate, and shall be entitled to no interest on unpaid cumulative dividends. Unless the full amount of cumulative dividends on the Series A Stock up to and including the next following dividend payment date shall have been paid or declared and a sum sufficient for the payment thereof set apart, neither the Corporation nor any subsidiary of the Corporation shall at any time (a) set aside or apply any sum for the purchase or redemption of any outstanding capital stock of the Corporation of any class or series (whether by purchase or by redemption pursuant to any sinking fund provisions, optional redemption provisions, or otherwise), or (b) declare any dividend (other than a dividend payable in Common Stock) or set aside or apply any sum for the payment of any dividend or other distribution, on the Common Stock or any other class of stock of the Corporation except Preferred Stock. The Corporation shall not issue Preferred Stock of any series having dividend payment dates different from those of the Series A Stock and shall not issue any Preferred Stock, other than Series A Stock, unless full cumulative dividends on all outstanding shares of the Series A Stock up to and including the dividend payment date next following the date of such issue shall have been paid or declared and a sum sufficient for the payment thereof set apart; and neither the Corporation nor any subsidiary of the Corporation shall declare any dividend or set aside or apply any sum for the payment of dividends on any series of Preferred Stock other than Series A, if after giving effect to such dividend and to all dividends on the Series A Stock paid or declared and covered by a sum set aside for the payment thereof, the ratio between the unpaid cumulative dividends and the annual dividend rate on the Series A Stock would be greater than the same ratio in the case of such other series of Preferred Stock. For the purposes of the foregoing provisions a corporation is a subsidiary of another corporation (the parent) if a majority of the subsidiary's outstanding stock ordinarily entitled to vote in the election of directors (excluding stock which is entitled to vote in the election of directors only upon the happening of some contingency such as failure to pay dividends) is owned by the parent and/or one or more of its subsidiaries. A corporation is also the subsidiary of another corporation if its parent is a subsidiary of such other corporation. 3. Optional Redemption. Shares of Series A Stock may be redeemed, in whole or in part, at any time after the fifth anniversary of the date on which any shares of Series A Stock are first issued, at the option of the Company expressed by resolution of the Board of Directors, at a redemption price in accordance with the following table, plus, in each case, an amount equal to unpaid cumulative dividends accrued to the date of redemption. 10 11
IF THE DATE OF REDEMPTION IS IN THE YEAR INDICATED AFTER SHARES THE REDEMPTION PRICE OF SERIES A STOCK ARE FIRST ISSUED: SHALL BE: ----------------------------------- --------- Sixth Year ................................. $104.75 Seventh Year ............................... 104.25 Eighth Year ................................ 103.75 Ninth Year ................................. 103.25 Tenth Year ................................. 102.75 Eleventh Year .............................. 102.25 Twelfth Year ............................... 101.75 Thirteenth Year ............................ 101.25 Fourteenth Year ............................ 100.75 Fifteenth Year ............................. 100.25 Sixteenth and Following Years .............. 100.00
If less than all the outstanding shares of Series A Stock are to be redeemed, the shares to be redeemed shall be selected either by lot or pro rata in such manner as may be prescribed by resolution of the Board of Directors. Notice to the holders of shares of Series A Stock to be redeemed shall be given by mailing to such holders a notice of such redemption, first class, postage prepaid, not later than the thirtieth day, and not earlier than the sixtieth day, before the date fixed for redemption, at their last addresses as they shall appear upon the books of the Corporation. Any notice which is mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the stockholder receives such notice; and failure duly to give such notice by mail, or any defect in such notice, to any stockholder designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series A Stock. The notice of redemption to each stockholder whose shares of Series A Stock are to be redeemed shall specify the number of shares of Series A Stock of such stockholder to be redeemed, the date fixed for redemption and the redemption price at which shares of Series A Stock are to be redeemed, and shall specify where payment of the redemption price is to be made upon surrender of such shares, shall state the conversion price then in effect, and shall state that accrued dividends to the date fixed for redemption will be paid as specified in said notice, that from and after said date dividends thereon will cease to accrue, and that conversion rights of such shares shall cease and terminate at the close of business on the date fixed for redemption. In the case of each share of Series A Stock called for redemption as above provided, the Corporation shall be obligated (unless such share shall be converted on or prior to the redemption date) to pay to the holder thereof the redemption price plus accrued dividends, if any, to the redemption date, upon surrender of the certificate for such share at the office of any transfer agent for the Series A Stock, on or after the redemption date. Unless the Corporation shall default in the payment of the redemption price plus accrued dividends, if any, dividends on each share of Series A Stock so called for redemption shall cease to accrue from and after the redemption date. 4. Rights on Liquidation. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of shares of Series A Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders an amount equal to $100 per share, plus an amount equal to unpaid cumulative dividends, (and no more) before any payment shall be made to the holders of Common Stock or any other class of stock of the Company other than Preferred Stock. If the assets of the Company available for distribution to its stockholders shall be insufficient to pay in full all amounts to which the holders of Preferred Stock of all series are entitled, the amount available for distribution to stockholders shall be shared by the holders of all series of Preferred Stock pro rata according to the amounts to which the 11 12 shares of each series are entitled. For the purposes of this Section 4, a consolidation or merger of the Corporation with any other corporation, or the sale, transfer or lease of all or substantially all its assets shall not constitute or be deemed a liquidation, dissolution or winding up of the Corporation. 5. Conversion. The shares of the Series A Stock shall be convertible at the option of the respective holders thereof at an assigned value of $100 per share, at any time at the office of the transfer agent for the Series A Stock located in the Borough of Manhattan, the City and State of New York, and at such other offices or agencies of the Company, if any, as the Board of Directors may determine, into fully paid and nonassessable whole shares of Common Stock of the Corporation at the conversion price, determined as hereinafter provided, in effect at the time of conversion; provided, however, such right of conversion shall cease and terminate, as to shares called for redemption, at the close of business on the date fixed for redemption, unless default shall be made in the payment of the redemption price. 5.1. The initial price per share at which shares of Common Stock shall be delivered upon conversion (the "initial conversion price") shall be $40.41. The initial conversion price and any adjusted conversion price shall be subject to adjustment from time to time in certain instances as hereinafter provided. Upon conversion the Corporation shall make no payment or adjustment on account of dividends accrued or in arrears on (a) the shares of the Series A Stock surrendered for conversion or (b) the shares of Common Stock issued on conversion of such shares of Series A Stock, provided that a holder of Series A Stock of record on a record date for the payment of a dividend thereon shall be entitled to such dividend notwithstanding his conversion of such Series A Stock before the dividend is paid. Whenever reference is made in this Section 5 to the issue or sale of shares of Common Stock the term Common Stock shall mean stock of the Corporation of any class, whether now or hereafter authorized, which by its terms has the right to participate in the distribution of either the assets or earnings of the Corporation without limit as to amount or percentage. The Common Stock initially issuable upon conversion of shares of Series A Stock shall, however, be Capital Stock, $1 par value per share, of the Corporation as constituted on May 26, 1967. Before any holder of shares of Series A Stock shall be entitled to convert the same into Common Stock, he shall surrender the certificate or certificates for such shares of Series A Stock at one of the offices specified as provided in this Section 5, which certificate or certificates, if the Corporation shall so request, shall be duly endorsed to the Corporation or in blank or accompanied by proper instruments of transfer to the Corporation or in blank, and accompanied by funds in the amount of any tax or taxes payable or which may be payable in respect of any transfer involved in the issue and delivery of certificates for shares of Common Stock in a name other than that of the record holder of shares of Series A Stock in respect of which such shares of Common Stock are issued, and shall give written notice to the Corporation at said office that he elects so to convert said shares of Series A Stock, and shall state in writing therein the name or names in which he wishes the certificate or certificates for Common Stock to be issued. The Corporation will as soon as practicable after such deposit of certificates for shares of Series A Stock accompanied by the written notice and the statement above prescribed, issue and deliver at the office at which such certificates for shares of Series A Stock shall have been deposited to the person for whose account such shares of Series A Stock were so surrendered, or to his nominee or nominees, certificates for the number of whole shares of Common Stock to which he shall be entitled as aforesaid, together with an adjustment of any fraction of a share as hereinafter provided, if not evenly convertible. Such conversion shall be deemed to have been made as of the date of such surrender of the shares of Series A Stock to be converted; and the person or persons entitled to receive the shares of Common Stock issuable upon the conversion of such shares of Series A Stock shall be treated for all purposes as the record holder or holders of such Common Stock on such date. However, the Corporation shall not be required to convert, and no surrender of shares of Series A Stock shall be effective for that purpose, while the stock transfer books of the Corporation are closed for any purpose; but the surrender of shares of Series A Stock for conversion during any period while such books are so closed shall become effective for conversion immediately upon the reopening of such books, at the conversion price in effect at the date of such surrender. 12 13 5.2. The conversion prices, initial or adjusted, referred to herein shall be subject to adjustment from time to time as follows: 5.2.1. In case the Corporation shall at any time (a) issue or sell any shares of Common Stock without consideration, or for a consideration per share less than the conversion price, initial or adjusted, in effect immediately prior to the issuance or sale of such additional shares or (b) pay or make an extraordinary dividend or distribution on Common Stock (as defined in Subsection 5.2.2(v)), then, and thereafter successively upon each such issuance, sale, dividend or distribution, the initial or adjusted conversion price in effect immediately prior thereto (herein called the "current conversion price") shall simultaneously with such issuance, sale, dividend or distribution be reduced to a price (calculated to the nearest cent) determined by dividing (i) an amount equal to (A) the total number of shares of Common Stock outstanding when the current conversion price became effective multiplied by the current conversion price, plus (B) the aggregate of the amounts of all consideration, if any, received by the Corporation for the issuance or sale of shares of Common Stock since the current conversion price became effective, minus (C) the aggregate amount of all extraordinary dividends or distributions on Common Stock, paid by the Corporation since the current conversion price became effective, by (ii) the total number of shares of Common Stock outstanding immediately after such issuance, sale, dividend, or other distribution. For all purposes of this Section 5 there shall be deemed to have been outstanding when the initial conversion price became effective (a) all shares of Common Stock then issued and outstanding and (b) all shares of Common Stock thereafter issued by the Corporation in the special distribution of shares made to holders of record of the Capital Stock of the Corporation on the date immediately preceding the effective date of the merger of Rockwell-Standard Corporation into the Corporation. 5.2.2. Calculations pursuant to Subsection 5.2.1 shall be made in accordance with the following provisions: (i) Except to the extent provided in paragraphs (viii) and (ix) of this Subsection 5.2.2, in case of the issuance or sale of additional shares of Common Stock for cash, the consideration received by the Corporation therefor shall be deemed to be the amount of cash received by the Corporation for such shares (or, if such shares are offered by the Corporation for subscription, the subscription price, or, if such shares are sold to underwriters or dealers for public offering without a subscription offering, the initial public offering price), without deducting therefrom any compensation or discount paid or allowed to underwriters or dealers or others performing similar services or for any expenses incurred in connection therewith. (ii) Except to the extent provided in paragraphs (viii) and (ix) of this Subsection 5.2.2, in case of the issuance (otherwise than upon conversion or exchange of securities convertible into Common Stock, hereinafter called "convertible securities") or sale of additional shares of Common Stock for a consideration other than cash or a consideration a part of which shall be other than cash, the amount of the consideration other than cash received by the Corporation for such shares shall be deemed to be the fair value of such consideration as determined by the Board of Directors, irrespective of the accounting treatment thereof. (iii) Except to the extent provided in paragraphs (viii) and (ix) of this Subsection 5.2.2, in case at any time the Corporation shall in any manner (whether as a dividend or distribution on Common Stock, or otherwise) issue or grant any rights to subscribe for or to purchase, or any options for the purchase of, (A) Common Stock or (B) any convertible securities, or shall issue or sell convertible securities, and the price per share for which Common Stock is issuable upon the exercise of such rights or options or upon conversion or exchange of such convertible securities at the time such convertible securities first become convertible or exchangeable (determined by dividing (A) in the case of an issue or grant of any such rights or options, the total amount, if any, received or receivable by the Corporation as consideration for the issue or grant of such rights or options, plus the minimum aggregate amount of additional consideration payable 13 14 to the Corporation upon the exercise of such rights or options, plus, in the case of such convertible securities, the minimum aggregate amount of additional consideration, if any, payable to the Corporation upon the conversion or exchange of such convertible securities at the time such convertible securities first become convertible or exchangeable, or (B) in the case of an issue or sale of convertible securities other than where the same are issuable upon the exercise of any such rights or options, the total amount, if any, received or receivable by the Corporation as consideration for the issue or sale of such convertible securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Corporation upon the conversion or exchange of such convertible securities at the time such convertible securities first become convertible or exchangeable, by, in either such case, (C) the total maximum number of shares of Common Stock issuable upon the exercise of such rights or options or upon the conversion or exchange of such convertible securities at the time such convertible securities first become convertible or exchangeable) shall be less than the current conversion price, then the total maximum number of shares of Common Stock issuable upon the exercise of such rights or options or upon conversion or exchange of the total maximum amount of such convertible securities at the time such convertible securities first become convertible or exchangeable shall (as of the date of issue or grant of such rights or options or, in the case of the issue or sale of convertible securities other than where the same are issuable upon the exercise of rights or options, as of the date of such issue or sale) be deemed to be issued and to be outstanding for the purpose of Subsection 5.2.1 and to have been issued for said price per share; provided that, subject to the provisions of Subsection 5.2.3 below, no further adjustment of the conversion price shall be made upon the actual issue of any such Common Stock or convertible securities or upon the conversion or exchange of any such convertible securities. (iv) In the case of the issuance of additional shares of Common Stock as a dividend or as a distribution on Common Stock, the aggregate number of shares of Common Stock issued in payment of such dividend or distribution shall be deemed to have been issued on the record date for such dividend or distribution and shall be deemed to have been issued without consideration. (v) A dividend or distribution on Common Stock shall be deemed an extraordinary dividend or distribution if paid in cash otherwise than out of earned surplus or in property or securities (excluding Common Stock, convertible securities other than convertible debt securities and rights or options to subscribe for or purchase Common Stock or such convertible securities). An extraordinary dividend or distribution shall be deemed to have been paid or made on the record date therefor and the amount thereof, if payable in property, shall be deemed to be the fair value of such property on such record date, as determined by the Board of Directors. (vi) The reclassification of securities other than Common Stock into securities including Common Stock shall be deemed to involve the issuance for a consideration other than cash of such Common Stock at the close of business on the date fixed for the determination of stockholders entitled to receive such Common Stock. (vii) In the event that there shall be no record date for the determination of stockholders entitled to any dividend or distribution declared by the Corporation, the first business day during which the stock transfer books of the Corporation shall be closed for the purpose of such determination shall be deemed to be the record date for the determination of stockholders entitled to such dividend or distribution. (viii) In case the Corporation shall issue any shares of Common Stock pursuant to and to the extent permitted on May 26, 1967 under any employee stock option plans or employee stock purchase plans of the Corporation (including Rockwell-Standard Corporation) which are then in effect (including any additional shares that may become issuable pursuant to the adjustment provisions of any such plan in respect of shares so permitted to be issued), or in case the Corporation shall issue any Common Stock pursuant to the conversion of any of its outstanding 4 1/4% Convertible Subordinated Debentures due February 15, 1991, the Corporation 14 15 shall be deemed to have received as consideration for each share of Common Stock so issued the conversion price in effect under the provisions of the Series A Stock at the time such share shall have been so issued. No account shall be taken of any options or rights to purchase any shares of Common Stock under any such plans (including any such options or rights issued after the above date), or the right to convert such debentures into shares of Common Stock, or the consideration payable for Common Stock upon the exercise of such rights or options or the conversion of such Debentures, until such shares of Common Stock are so issued. (ix) The provisions of Subsection 5.2.1 shall not be applicable in any case in which the Corporation shall (A) issue, in consideration of the acquisition by the Corporation or any subsidiary of all or substantially all of the stock of another company or all or substantially all of the assets of another company (whether by merger, acquisition of assets or otherwise), any Common Stock or convertible securities or rights or options to subscribe for or purchase Common Stock or convertible securities, or (B) issue any Common Stock pursuant to any such rights or options or upon conversion or exchange of such convertible securities. Shares of Common Stock, convertible securities, rights or options issued in any such case shall not be considered outstanding, and none of the consideration received by the Corporation for such Common Stock, or for such convertible securities, rights or options, or upon the exercise thereof, shall be taken into account, in determining the conversion price pursuant to Subsection 5.2.1. (x) The number of shares of Common Stock at any time outstanding shall include all shares of Common Stock then owned or held by or for the account of the Corporation (except for any such shares so owned or held on the date shares of Series A Stock are first issued, and any shares resulting from any reclassification or reclassifications of such shares effected while such shares were so owned or held, in each case so long as continuously owned or held by or for the account of the Corporation), and such shares (except as aforesaid) shall not, for the purpose of Subsection 5.2.1, thereafter be deemed to be again issued or sold upon their delivery. (xi) The adjustment provided for in Subsection 5.2.1 shall be made only if it results in a reduction of the current conversion price, and the Corporation shall not be required to make any reduction of the current conversion price if the amount of such reduction would be less than fifty cents ($.50), Such sum of fifty cents ($.50), or such sum as theretofore adjusted, shall be proportionately decreased upon any subdivision of the Common Stock of the Corporation, or shall be proportionately increased upon any combination of the Common Stock of the Corporation (in each case, to the nearest cent). 5.2.3. In the event of an adjustment in the purchase price per share of Common Stock provided for in any options or rights referred to in paragraph (iii) of Subsection 5.2.2 or in the consideration to be received by the Corporation upon the conversion or exchange of any convertible securities referred to in said paragraph (iii), the current conversion price shall forthwith be readjusted to such amount as would have been obtained had the adjustment in such purchase price or consideration been initially reflected upon the issuance of such options, rights or convertible securities, but such readjustment shall be made only to the extent that such options or rights which remain outstanding or unexercised and such convertible securities remain outstanding and unconverted and unexchanged, provided, however, that in no event shall any such readjustment increase the current conversion price to an amount in excess of the initial conversion price as adjusted only in accordance with the provisions of Subsection 5.2.4 below. Upon the expiration of any such options or rights or the termination of the right to convert or exchange any such convertible securities, the current conversion price shall forthwith be readjusted to such amount as would have obtained had the adjustment made upon the issuance of such options, rights or convertible securities been made upon the basis of the issuance of only the number of shares of Common Stock actually delivered upon the exercise of such options or rights or the conversion or exchange of such convertible securities and the number of shares of Common Stock issuable upon the exercise of outstanding options or rights which have not expired or upon the conversion or exchange of any outstanding convertible securities as to which the right to convert or exchange has not terminated, provided, however, that in no event shall any such readjustment increase the current 15 16 conversion price to an amount in excess of the initial conversion price as adjusted only in accordance with the provisions of Subsection 5.2.4 below. Upon any readjustment of the current conversion price pursuant to the provisions of this Subsection 5.2.3, such readjustment shall thereafter, for all purposes hereof, be deemed to have become effective at the time of the next preceding adjustment of the conversion price otherwise than pursuant to the provisions of this Subsection 5.2.3. 5.2.4. In case outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the current conversion price shall, simultaneously with the effectiveness of such subdivision, be proportionately reduced, and conversely, in case outstanding shares of Common Stock shall be combined into a smaller number of shares of Common Stock, the current conversion price shall, simultaneously with the effectiveness of such combination, be proportionately increased. 5.2.5. For the purposes of this Section 5.2, a distribution of shares of Common Stock to holders of shares of Common Stock in which the number of shares distributed is 25% or more of the number of shares of Common Stock on which the distribution is to be made shall be deemed to be a subdivision of shares of Common Stock, and a distribution of a lesser number of shares of Common Stock shall be deemed to be a stock dividend. 5.2.6. The above provisions of this Section 5.2 shall similarly apply to successive issues, sales, dividends or other distributions, subdivisions and combinations of or on shares of Common Stock. 5.2.7. In case the Common Stock of the Corporation issuable upon conversion of the shares of Series A Stock shall be changed into another kind of capital stock (otherwise than through a subdivision or combination of shares) or shall represent the right to receive some other security or property, as a result of any capital reorganization, reclassification, or merger or consolidation with another corporation in which the Corporation is the surviving corporation, or sale of all or substantially all the assets of the Corporation to another corporation otherwise than for capital stock of the other corporation, each share of Series A Stock shall (subject to further adjustments in conversion price as herein provided) thereafter entitle the holder to acquire upon conversion thereof the kind and number of shares of stock or other securities or property to which such holder would have been entitled if he had held the Common Stock issuable upon the conversion of his Series A Stock immediately prior to such capital reorganization, reclassification, merger, consolidation or sale of assets. 5.3. In case: (i) the Corporation shall declare a dividend (or any other distribution) on its Common Stock payable otherwise than in cash out of its earned surplus; or (ii) the Corporation shall authorize the granting to the holders of its Common Stock of rights to subscribe for or purchase any shares of capital stock of any class or of any other rights; or (iii) of any reclassification of the Common Stock of the Corporation (other than a subdivision or combination of its outstanding shares of Common Stock), or of any consolidation or merger to which the Company is a party and for which approval of any stockholders of the Corporation is required, or of the sale or transfer of all or substantially all of the assets of the Corporation; or (iv) of the voluntary or involuntary dissolution, liquidation or winding up of the Corporation; then the Corporation shall cause to be filed at the office of the transfer agent of the Series A Stock and shall cause to be mailed to the holders of the Series A Stock at their addresses as they shall appear upon the record of such transfer agent at least ten days prior to the record date specified in (A) below or twenty days before the date specified in (B) below, a notice stating 16 17 (A) the record date for such dividend, distribution or rights, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution or rights are to be determined, or (B) the date on which such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up. 5.4. Whenever the conversion price shall be adjusted as provided in Section 5.2, the Corporation shall forthwith file at each office designated for the conversion of shares of Series A Stock, a statement, signed by the Chairman of the Board, the President, any Vice President or the Treasurer of the Corporation, showing in reasonable detail the facts requiring such adjustment and the conversion price that will be effective after such adjustment. The Corporation shall also cause a notice setting forth any such adjustments to be sent by mail, first class, postage prepaid, to each record holder of shares of Series A Stock at his address appearing on the stock register. Where appropriate, such notice may be given in advance and may be included as part of a notice required to be mailed and published under the provisions of Section 5.3. 5.5. The Corporation shall not be required to issue fractional shares of Common Stock or scrip upon conversion of shares of Series A Stock. As to any final fraction of a share of Common Stock which the same record holder of one or more shares of Series A Stock would otherwise be entitled to upon conversion of shares of Series A Stock in the same transaction, the Corporation shall pay a cash adjustment in respect of such final fraction in an amount equal to the same fraction of the last sales price (or bid price if there were no sales) per share on the New York Stock Exchange on the business day which next precedes the date of conversion or, if such Common Stock is not listed on the New York Stock Exchange, of the market price per share (as determined in a manner prescribed by the Board of Directors of the Corporation) at the close of business on the business day which next precedes the date of conversion. 5.6. The Corporation will pay any documentary stamp taxes attributable to the initial issuance of shares of Common Stock upon conversion of any shares of Series A Stock pursuant hereto, provided, however, that the Corporation shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issue or delivery of any certificates for shares of Common Stock in a name other than that of the registered holder of shares of Series A Stock in respect of which such shares of Common Stock are issued. 5.7. The Corporation shall at all times reserve and keep available, out of its treasury stock or authorized and unissued stock, or both, solely for the purpose of effecting the conversion of the shares of Series A Stock, such number of shares of Common Stock as shall from time to time be sufficient to effect the conversion of all shares of Series A Stock from time to time outstanding. Before taking any action which would cause an adjustment reducing the conversion price below the then par value of the shares of Common Stock issuable upon conversion of the Series A Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of such Common Stock at such adjusted conversion price. 6. Voting. 6.1. Subject to the provisions of any applicable law, or of the By-laws of the Corporation as from time to time amended, with respect to the closing of the transfer books or the fixing of a record date for the determination of stockholders entitled to vote, at each meeting of stockholders of the Corpora- tion each holder of record of shares of Series A Stock shall be entitled to cast one vote for each share of 17 18 Series A Stock standing in such holder's name on the record books of the Corporation (with the same rights of cumulative voting, if any, as the Common Stock) on each matter on which the holders of record of the Common Stock of the Corporation shall be entitled to vote, voting together with the holders of record of the Common Stock and other series of Preferred Stock of the Corporation entitled to vote with the Common Stock of the Corporation, and not by classes or by series. Each such record holder of shares of Series A Stock shall be entitled to notice of any such meeting of stockholders. In addition, so long as any shares of Series A Stock are outstanding, if at the time of any annual meeting of stockholders for the election of directors a default in preferred dividends, as hereinafter defined, shall exist, the holders of shares of the Preferred Stock of the Corporation voting separately as a class without regard to series (with each share of Preferred Stock being entitled to one vote on a noncumulative basis) shall have the right to elect two members of the Board of Directors of the Corporation, and the holders of the Common Stock, the Series A Stock and any other series of Preferred Stock of the Corporation entitled to vote with the Common Stock, voting separately as another class, shall be entitled to elect the remaining members of the Board of Directors of the Corporation. Any director elected by the holders of the Preferred Stock, voting as a class as aforesaid, shall continue to serve as such director for the full term for which he shall have been elected notwithstanding that prior to the end of such term a default in preferred dividends shall cease to exist. If, prior to the end of the term of any director elected by the holders of the Preferred Stock, voting as a class as aforesaid, a vacancy in the office of such director shall occur by reason of death, resignation, removal or disability, or for any other cause, the remaining director so elected by the holders of shares of the Preferred Stock shall be entitled to nominate for election by the Board of Directors a successor director to hold office for the unexpired term of the director whose position has become vacant. If the vacancy is not filled by the election of such nominee or if there is then in office no director who has been elected by the holders of shares of the Preferred Stock, the Corporation shall, as soon as reasonably may be done, call (on at least 20 days' notice) a special meeting of the holders of shares of the Preferred Stock for the purpose of filling such vacancy or vacancies in the Board of Directors. If the Corporation fails to call such a meeting within 30 days after a written request by any three or more holders of shares of the Preferred Stock, then such three or more holders of shares of the Preferred Stock may call (on at least 20 days' notice) a special meeting of the holders of shares of the Preferred Stock for such purpose and, if the vacancy or vacancies are not theretofore filled as hereinabove provided, it or they may be filled at such meeting by the holders of shares of the Preferred Stock, voting separately as a class regardless of series. For the purposes of this Section 6, a default in preferred dividends shall be deemed to have occurred whenever the amount of unpaid cumulative dividends upon any series of Preferred Stock shall be equivalent to six full quarter-yearly dividends or more and, having so occurred, such default in preferred dividends shall be deemed to exist thereafter until, but only until, all accrued dividends on all shares of Preferred Stock then outstanding, shall have been paid to the end of the last preceding quarterly dividend period. 6.2. Without the written consent or affirmative vote of the holders of at least two-thirds of the aggregate number of shares of Preferred Stock of the Corporation at the time outstanding given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, without regard to series, the Corporation shall not amend, alter or repeal the preferences, special rights or other powers of the Preferred Stock as set forth in the Certificate of Incorporation or in any certificate providing for the authorization of Preferred Stock of any series so as to affect the Preferred Stock adversely (and the authorization or issuance of any class of stock with preference or priority over the Preferred Stock as to the right to receive either dividends or amounts distributable upon liquidation, dissolution or winding up, shall be deemed so to affect the Preferred Stock adversely). 6.3. Without the written consent or affirmative vote of the holders of at least a majority of the aggregate number of shares of Preferred Stock of the Corporation at the time outstanding given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, without regard to series, the Corporation will not increase the authorized amount of Preferred Stock. The term "Preferred Stock", for all purposes of this initial series of $4.75 Convertible Preferred Stock, Series A, shall mean and include any class of stock the holders of which shall be entitled to the receipt 18 19 of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective dividend rates or liquidation prices, equal in preference or priority with the holders of the Series A Stock. 7. Reacquired Shares. Shares of Series A Stock which have been issued and reacquired through redemption or purchase or have been converted into shares of any other class or classes of the stock of the Corporation shall, upon compliance with any applicable provision of the General Corporation Law of the State of Delaware, have the status of authorized and unissued shares of Preferred Stock and may be reissued as part of the Series A Stock or as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors. $1.35 CONVERTIBLE PREFERRED STOCK, SERIES B There is hereby created and authorized for issuance a series of Preferred Stock of the Corporation consisting of 4,131,401 shares, with the following voting powers, designation, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof: 1. Designation. The designation of said series shall be $1.35 Convertible Preferred Stock, Series B (hereinafter called Series B Stock). 2. Dividends. The holders of Series B Stock shall be entitled to cumulative dividends at the rate of $1.35 per share per annum when and as declared by the Board of Directors, payable quarterly on the first day of January, April, July, and October in each year (each such day occurring on or after July 1, 1969 being hereinafter called a dividend payment date). Dividends shall be cumulative on each share of Series B Stock from July 1, 1969 or from the dividend payment date next preceding the date of issuance of such share, whichever is later, except that dividends shall be cumulative from the date of issuance of any share issued on a dividend payment date and from the dividend payment date next following the date of issuance of any share issued between the record date for the determination of holders of Series B Stock entitled to receive a quarterly dividend and the dividend payment date for such quarterly dividend. Dividends at the above rate shall be cumulative whether or not the Corporation shall have had net profits or assets legally available for such dividends in any dividend period. Holders of Series B Stock shall not be entitled to any dividends other than full cumulative dividends in cash at the above rate, and shall be entitled to no interest on unpaid cumulative dividends. Unless the full amount of cumulative dividends on the Series B Stock up to and including the next following dividend payment date shall have been paid or declared and a sum sufficient for the payment thereof set apart, neither the Corporation nor any subsidiary of the Corporation shall at any time (a) set aside or apply any sum for the purchase or redemption of any outstanding capital stock of the Corporation of any class or series (whether by purchase or by redemption pursuant to any sinking fund provisions, optional redemption provisions, or otherwise), (b) declare any dividend (other than a dividend payable in Common Stock) or set aside or apply any sum for the payment of any dividend or other distribution, on the Common Stock or any other class of stock of the Corporation except Preferred Stock, or (c) declare or pay any dividend on the Series A Stock if, after giving effect thereto and all such dividends declared or paid on the Series B Stock, the ratio between the unpaid cumulative dividends and the annual dividend rate on the Series A Stock would not be the same as the same ratio for the Series B Stock. The Corporation shall not issue Preferred Stock of any series having dividend payment dates different from those of the Series B Stock and shall not issue any Preferred Stock, other than Series A or Series B Stock, unless full cumulative dividends on all outstanding shares of the Series A and Series B Stock up to and including the dividend payment date next following the date of such issue shall have been paid or declared and a sum sufficient for the payment thereof set apart; and neither the Corporation nor any subsidiary of the Corporation shall declare any dividend or set aside or apply any sum for the payment of dividends on any series of Preferred Stock other than Series A and Series B, if after giving effect to such dividend and to all dividends on the Series A and Series B Stock paid or declared and covered by a sum set aside for the payment thereof, the ratio between the unpaid cumulative 19 20 dividends and the annual dividend rate on the Series A and Series B Stock would be greater than the same ratio in the case of such other series of Preferred Stock. For the purposes of the foregoing provisions a corporation is a subsidiary of another corporation (the parent) if a majority of the subsidiary's outstanding stock ordinarily entitled to vote in the election of directors (excluding stock which is entitled to vote in the election of directors only upon the happening of some contingency such as failure to pay dividends) is owned by the parent and/or one or more of its subsidiaries. A corporation is also the subsidiary of another corporation if its parent is a subsidiary of such other corporation. 3. Optional Redemption. Shares of Series B Stock may be redeemed, in whole or in part, at any time after June 30, 1976, at the option of the Corporation expressed by resolution of the Board of Directors, at a redemption price in accordance with the following table, plus, in each case, an amount equal to unpaid cumulative dividends accrued to the date of redemption.
The redemption If the date of redemption is in price the Period indicated: shall be: --------------------- --------- July 1, 1976 through June 30, 1977 ................ $38.00 July 1, 1977 through June 30, 1978 ................ 37.60 July 1, 1978 through June 30, 1979 ................ 37.20 July 1, 1979 through June 30, 1980 ................ 36.80 July 1, 1980 through June 30, 1981 ................ 36.40 July 1, 1981 and thereafter ....................... 36.00
If less than all the outstanding shares of Series B Stock are to be redeemed, the shares to be redeemed shall be selected either by lot or pro rata in such manner as may be prescribed by resolution of the Board of Directors. Notice to the holders of shares of Series B Stock to be redeemed shall be given by mailing to such holders a notice of such redemption, first class, postage prepaid, not later than the thirtieth day, and not earlier than the sixtieth day, before the date fixed for redemption, at their last addresses as they shall appear upon the books of the Corporation. Any notice which is mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the stockholder receives such notice; and failure duly to give such notice by mail, or any defect in such notice, to any stockholder designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series B Stock. The notice of redemption to each stockholder whose shares of Series B Stock are to be redeemed shall specify the number of shares of Series B Stock of such stockholder to be redeemed, the date fixed for redemption and the redemption price at which shares of Series B Stock are to be redeemed, and shall specify where payment of the redemption price is to be made upon surrender of such shares, shall state the conversion price then in effect, and shall state that accrued dividends to the date fixed for redemption will be paid as specified in said notice, that from and after said date dividends thereon will cease to accrue, and that conversion rights of such shares shall cease and terminate at the close of business on the date fixed for redemption. In the case of each share of Series B Stock called for redemption as above provided, the Corporation shall be obligated (unless such share shall be converted on or prior to the redemption date) to pay to the holder thereof the redemption price plus accrued dividends, if any, to the redemption date, upon surrender of the certificate for such share at the office of any transfer agent for the Series B Stock, on or after the redemption date. Unless the Corporation shall default in the payment of the redemption price plus accrued dividends, if any, dividends on each share of Series B Stock so called for redemption shall cease to accrue from and after the redemption date. 4. Rights on Liquidation. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of shares of Series B Stock then outstanding 20 21 shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders an amount equal to $36.00 per share, plus an amount equal to unpaid cumulative dividends (and no more) before any payment shall be made to the holders of Common Stock or any other class of stock of the Corporation other than Preferred Stock. If the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay in full all amounts to which the holders of Preferred Stock of all series are entitled, the amount available for distribution to stockholders shall be shared by the holders of all series of Preferred Stock pro rata according to the amounts to which the shares of each series are entitled. For the purposes of this Section 4, a consolidation or merger of the Corporation with any other corporation, or the sale, transfer or lease of all or substantially all its assets shall not constitute or be deemed a liquidation, dissolution or winding up of the Corporation. 5. Conversion. The shares of the Series B Stock shall be convertible at the option of the respective holders thereof at the office of the transfer agent for the Series B Stock located in the Borough of Manhattan, the City and State of New York, and at such other offices or agencies of the Corporation, if any, as the Board of Directors may determine, into fully paid and nonassessable whole shares of Common Stock of the Corporation (a) at any time at an assigned value of $36.00 per share, or (b) until June 30, 1979, upon payment to the Corporation of $10.125, at an assigned value of $45.00 per share, at the conversion price, determined as hereinafter provided, in effect at the time of conversion; provided, however, such right of conversion shall cease and terminate, as to shares called for redemption, at the close of business on the date fixed for redemption, unless default shall be made in the payment of the redemption price. 5.1. The initial price per share at which shares of Common Stock shall be delivered upon conversion (the "initial conversion price") shall be $40.00. The initial conversion price and any adjusted conversion price shall be subject to adjustment from time to time in certain instances as hereinafter provided. Upon conversion the Corporation shall make no payment or adjustment on account of dividends accrued or in arrears on (a) the shares of the Series B Stock surrendered for conversion or (b) the shares of Common Stock issued on conversion of such shares of Series B Stock, provided that a holder of Series B Stock of record on a record date for the payment of a dividend thereon shall be entitled to such dividend notwithstanding his conversion of such Series B Stock before the dividend is paid. Whenever reference is made in this Section 5 to the issue or sale of shares of Common Stock the term Common Stock shall mean stock of the Corporation of any class, whether now or hereafter authorized, which by its terms has the right to participate in the distribution of either the assets or earnings of the Corporation without limit as to amount or percentage. The Common Stock initially issuable upon conversion of shares of Series B Stock shall, however, be Common Stock, $1 par value per share, of the Corporation as constituted on December 31, 1968. Before any holder of shares of Series B Stock shall be entitled to convert the same into Common Stock, he shall surrender the certificate or certificates for such shares of Series B Stock at one of the offices specified as provided in this Section 5, which certificate or certificates, if the Corporation shall so request, shall be duly endorsed to the Corporation or in blank or accompanied by proper instruments of transfer to the Corporation or in blank, and accompanied by funds in the amount of any tax or taxes payable or which may be payable in respect of any transfer involved in the issue and delivery of certificates for shares of Common Stock in a name other than that of the record holder of shares of Series B Stock in respect of which such shares of Common Stock are issued, and which are payable if conversion is made in accordance with Subparagraph (b) of Section 5 above, and shall give written notice to the Corporation at said office that he elects so to convert said shares of Series B Stock, and shall state in writing therein the name or names in which he wishes the certificate or certificates for Common Stock to be issued. 21 22 The Corporation will as soon as practicable after such deposit of certificates for shares of Series B Stock accompanied by the written notice and the statement above prescribed, issue and deliver at the office at which such certificates for shares of Series B Stock shall have been deposited to the person for whose account such shares of Series B Stock were so surrendered, or to his nominee or nominees, certificates for the number of whole shares of Common Stock to which he shall be entitled as aforesaid, together with an adjustment of any fraction of a share as hereinafter provided, if not evenly convertible. Such conversion shall be deemed to have been made as of the date of such surrender of the shares of Series B Stock to be converted; and the person or persons entitled to receive the shares of Common Stock issuable upon the conversion of such shares of Series B Stock shall be treated for all purposes as the record holder or holders of such Common Stock on such date. However, the Corporation shall not be required to convert, and no surrender of shares of Series B Stock shall be effective for that purpose, while the stock transfer books of the Corporation are closed for any purpose; but the surrender of shares of Series B Stock for conversion during any period while such books are so closed shall become effective for conversion immediately upon the reopening of such books, at the conversion price in effect at the date of such surrender notwithstanding the occurrence of the date fixed for redemption during such period. 5.2. The conversion prices, initial or adjusted, referred to herein shall be subject to adjustment from time to time as follows: 5.2.1. In case the Corporation shall at any time (a) issue or sell any shares of Common Stock without consideration, or for a consideration per share less than the conversion price, initial or adjusted, in effect immediately prior to the issuance or sale of such additional shares or (b) pay or make an extraordinary dividend or distribution on Common Stock (as defined in Subsection 5.2.2(v)), then, and thereafter successively upon each such issuance, sale, dividend or distribution, the initial or adjusted conversion price in effect immediately prior thereto (herein called the ("current conversion price") shall simultaneously with such issuance, sale, dividend or distribution be reduced to a price (calculated to the nearest cent) determined by dividing (i) an amount equal to (A) the total number of shares of Common Stock outstanding when the current conversion price became effective multiplied by the current conversion price, plus (B) the aggregate of the amounts of all consideration, if any, received by the Corporation for the issuance or sale of shares of Common Stock since the current conversion price became effective, minus (C) the aggregate amount of all extraordinary dividends or distributions on Common Stock, paid by the Corporation since the current conversion price became effective, by (ii) the total number of shares of Common Stock outstanding immediately after such issuance, sale, dividend, or other distribution. 5.2.2. Calculations pursuant to Subsection 5.2.1 shall be made in accordance with the following provisions: (i) Except to the extent provided in paragraphs (viii) and (ix) of this Subsection 5.2.2, in case of the issuance or sale of additional shares of Common Stock for cash, the consideration received by the Corporation therefor shall be deemed to be the amount of cash received by the Corporation for such shares (or, if such shares are offered by the Corporation for subscription, the subscription price, or, if such shares are sold to underwriters or dealers for public offering without a subscription offering, the initial public offering price), without deducting therefrom any compensation or discount paid or allowed to underwriters or dealers or others performing similar services or for any expenses incurred in connection therewith. (ii) Except to the extent provided in paragraphs (viii) and (ix) of this Subsection 5.2.2, in case of the issuance (otherwise than upon conversion or exchange of securities convertible in to Common Stock, hereinafter called "convertible securities") or sale of additional shares of 22 23 Common Stock for a consideration other than cash or a consideration a part of which shall be other than cash, the amount of the consideration other than cash received by the Corporation for such shares shall be deemed to be the fair value of such consideration as determined by the Board of Directors, irrespective of the accounting treatment thereof. (iii) Except to the extent provided in paragraphs (viii) and (ix) of this Subsection 5.2.2, in case at any time the Corporation shall in any manner (whether as a dividend or distribution on Common Stock, or otherwise) issue or grant any rights to subscribe for or to purchase, or any options for the purchase of, (A) Common Stock or (B) any convertible securities, or shall issue or sell convertible securities, and the price per share for which Common Stock is issuable upon the exercise of such rights or options or upon conversion or exchange of such convertible securities at the time such convertible securities first become convertible or exchangeable (determined by dividing (A) in the case of an issue or grant of any such rights or options, the total amount, if any, received or receivable by the Corporation as consideration for the issue or grant of such rights or options, plus the minimum aggregate amount of additional consideration payable to the Corporation upon the exercise of such rights or options, plus, in the case of such convertible securities, the minimum aggregate amount of additional consideration, if any, payable to the Corporation upon the conversion or exchange of such convertible securities at the time such convertible securities first become convertible or exchangeable, or (B) in the case of an issue or sale of convertible securities other than where the same are issuable upon the exercise of any such rights or options, the total amount, if any, received or receivable by the Corporation as consideration for the issue or sale of such convertible securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Corporation upon the conversion or exchange of such convertible securities at the time such convertible securities first become convertible or exchangeable, by, in either such case, (C) the total maximum number of shares of Common Stock issuable upon the exercise of such rights or options or upon the conversion or exchange of such convertible securities at the time such convertible securities first become convertible or exchangeable) shall be less than the current conversion price, then the total maximum number of shares of Common Stock issuable upon the exercise of such rights or options or upon conversion or exchange of the total maximum amount of such convertible securities at the time such convertible securities first become convertible or exchangeable shall (as of the date of issue or grant of such rights or options or, in the case of the issue or sale of convertible securities other than where the same are issuable upon the exercise of rights or options, as of the date of such issue or sale) be deemed to be issued and to be outstanding for the purpose of Subsection 5.2.1 and to have been issued for said price per share; provided that, subject to the provisions of Subsection 5.2.3 below, no further adjustment of the conversion price shall be made upon the actual issue of any such Common Stock or convertible securities or upon the conversion or exchange of any such convertible securities. (iv) In the case of the issuance of additional shares of Common stock as a dividend or as a distribution on Common Stock, the aggregate number of shares of Common Stock issued in payment of such dividend or distribution shall be deemed to have been issued on the record date for such dividend or distribution and shall be deemed to have been issued without consideration. (v) A dividend or distribution on Common Stock shall be deemed an extraordinary dividend or distribution if paid in cash otherwise than out of earned surplus or in property or securities (excluding Common Stock, convertible securities other than convertible debt 23 24 securities and rights or options to subscribe for or purchase Common Stock or such convertible securities). An extraordinary dividend or distribution shall be deemed to have been paid or made on the record date therefor and the amount thereof, if payable in property, shall be deemed to be the fair value of such property on such record date, as determined by the Board of Directors. (vi) The reclassification of securities other than Common Stock into securities including Common Stock shall be deemed to involve the issuance for a consideration other than cash of such Common Stock at the close of business on the date fixed for the determination of stockholders entitled to receive such Common Stock. (vii) In the event that there shall be no record date for the determination of stockholders entitled to any dividend or distribution declared by the Corporation, the first business day during which the stock transfer books of the Corporation shall be closed for the purpose of such determination shall be deemed to be the record date for the determination of stockholders entitled to such dividend or distribution. (viii) In case the Corporation shall issue any shares of Common Stock pursuant to any employee stock option plans, employee stock purchase plans or bonus, savings or other similar employee plans (including any additional shares that may become issuable pursuant to the adjustment provisions of any such plan in respect of shares so permitted to be issued), or in case the Corporation shall issue any Common Stock pursuant to the conversion of any a) of its outstanding 4 1/4% Convertible Subordinated Debentures due February 15, 1991 and b) any of its $4.75 Convertible Preferred Stock, Series A, the Corporation shall be deemed to have received as consideration for each share of Common Stock so issued the conversion price in effect under the provisions of the Series B Stock at the time such share shall have been so issued. No account shall be taken of any options or rights to purchase any shares of Common Stock under any such plans, or the right to convert such Debentures or Preferred Stock into shares of Common Stock, or the consideration payable for Common Stock upon the exercise of such rights or options or the conversion of such Debentures or Preferred Stock until such shares of Common Stock are so issued. (ix) The provisions of Subsection 5.2.1 shall not be applicable in any case in which the Corporation shall (A) issue, in consideration of the acquisition by the Corporation or any subsidiary of all or substantially all of the stock of another company or all or substantially all of the assets of another company (whether by merger, acquisition of assets or otherwise), any Common Stock or convertible securities or rights or options to subscribe for or purchase Common Stock or convertible securities, or (B) issue any Common Stock pursuant to any such rights or options or upon conversion or exchange of such convertible securities. Shares of Common Stock, convertible securities, rights or options issued in any such case shall not be considered outstanding, and none of the consideration received by the Corporation for such Common Stock, or for such convertible securities, rights or options, or upon the exercise thereof, shall be taken into account, in determining the conversion price pursuant to Subsection 5.2.1. (x) The number of shares of Common Stock at any time outstanding shall include all shares of Common Stock then owned or held by or for the account of the Corporation (except for any such shares so owned or held on the date shares of Series B Stock are first issued, and any shares resulting from any reclassification or reclassifications of such shares effected while such shares were so owned or held, in each case so long as continuously owned or held by or for the account of the Corporation), and such shares (except as aforesaid) shall not, for the purposes of Subsection 5.2.1, thereafter be deemed to be again issued or sold upon their delivery. (xi) The adjustment provided for in Subsection 5.2.1 shall be made only if it results in a reduction of the current conversion price, and the Corporation shall not be required to make any reduction of the current conversion price if the amount of such reduction would be less than fifty cents ($.50). Such sum of fifty cents ($.50), or such sum as theretofore adjusted, 24 25 shall be proportionately decreased upon any subdivision of the Common Stock of the Corporation, or shall be proportionately increased upon any combination of the Common Stock of the Corporation (in each case, to the nearest cent). 5.2.3. In the event of an adjustment in the purchase price per share of Common Stock provided for in any options or rights referred to in paragraph (iii) of Subsection 5.2.2 or in the consideration to be received by the Corporation upon the conversion or exchange of any convertible securities referred to in said paragraph (iii), the current conversion price shall forthwith be readjusted to such amount as would have been obtained had the adjustment in such purchase price or consideration been initially reflected upon the issuance of such options, rights or convertible securities, but such readjustment shall be made only to the extent that such options or rights which remain outstanding or unexercised and such convertible securities remain outstanding and unconverted and unexchanged, provided, however, that in no event shall any such readjustment increase the current conversion price to an amount in excess of the initial conversion price as adjusted only in accordance with the provisions of Subsection 5.2.4 below. Upon the expiration of any such options or rights or the termination of the right to convert or exchange any such convertible securities, the current conversion price shall forthwith be readjusted to such amount as would have obtained had the adjustment made upon the issuance of such options, rights or convertible securities been made upon the basis of the issuance of only the number of shares of Common Stock actually delivered upon the exercise of such options or rights or the conversion or exchange of such convertible securities and the number of shares of Common Stock issuable upon the exercise of outstanding options or rights which have not expired or upon the conversion or exchange of any outstanding convertible securities as to which the right to convert or exchange has not terminated, provided, however, that in no event shall any such readjustment increase the current conversion price to an amount in excess of the initial conversion price as adjusted only in accordance with the provisions of Subsection 5.2.4 below. Upon any readjustment of the current conversion price pursuant to the provisions of this Subsection 5.2.3, such readjustment shall thereafter, for all purposes hereof, be deemed to have become effective at the time of the next preceding adjustment of the conversion price otherwise than pursuant to the provisions of this Subsection 5.2.3. 5.2.4. In case outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the current conversion price shall, simultaneously with the effectiveness of such subdivision, be proportionately reduced, and conversely, in case outstanding shares of Common Stock shall be combined into a smaller number of shares of Common Stock, the current conversion price shall, simultaneously with the effectiveness of such combination, be proportionately increased. 5.2.5. For the purposes of this Subsection 5.2, a distribution of shares of Common Stock to holders of shares of Common Stock in which the number of shares distributed is 25% or more of the number of shares of Common Stock on which the distribution is to be made shall be deemed to be a subdivision of shares of Common Stock, and a distribution of a lesser number of shares of Common Stock shall be deemed to be a stock dividend. 5.2.6. The above provisions of this Subsection 5.2 shall similarly apply to successive issues, sales, dividends or other distributions, subdivisions and combinations of or on shares of Common Stock. 5.2.7. In case the Common Stock of the Corporation issuable upon conversion of the shares of Series B Stock shall be changed into another kind of capital stock (otherwise than through a subdivision or combination of shares) or shall represent the right to receive some other security or property, as a result of any capital reorganization, reclassification, or merger or consolidation with another corporation in which the Corporation is the surviving corporation, or sale of all or substantially all the assets of the Corporation to another corporation otherwise than for capital 25 26 stock of the other corporation, each share of Series B Stock shall (subject to further adjustments in conversion price as herein provided) thereafter entitle the holder to acquire upon conversion thereof the kind and number of shares of stock or other securities or property to which such holder would have been entitled if he had held the Common Stock issuable upon the conversion of his Series B Stock immediately prior to such capital reorganization, reclassification, merger, consolidation or sale of assets. 5.3. In case: (i) the Corporation shall declare a dividend (or any other distribution) on its Common Stock payable otherwise than in cash out of its earned surplus; or (ii) the Corporation shall authorize the granting to the holders of its Common Stock of rights to subscribe for or purchase any shares of capital stock of any class or of any other rights; or (iii) of any reclassification of the Common Stock of the Corporation (other than a subdivision or combination of its outstanding shares of Common Stock), or of any consolidation or merger to which the Corporation is a party and for which approval of any stockholders of the Corporation is required, or of the sale or transfer of all or substantially all of the assets of the Corporation; or (iv) of the voluntary or involuntary dissolution, liquidation or winding up of the Corporation then the Corporation shall cause to be filed at the office of the transfer agent of the Series B Stock and shall cause to be mailed to the holders of the Series B Stock at their addresses as they shall appear upon the record of such transfer agent at least ten days prior to the record date specified in (A) below or twenty days before the date specified in (B) below, a notice stating (A) the record date for such dividend, distribution or rights, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution or rights are to be determined, or (B) the date on which such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up. 5.4. Whenever the conversion price shall he adjusted as provided in Subsection 5.2, the Corporation shall forthwith file at each office designated for the conversion of shares of Series B Stock, a statement, signed by thc Chairman of the Board, the President, any Vice President or the Treasurer of Corporation, showing in reasonable detail the facts requiring such adjustment and the conversion price that will be effective after such adjustment. The Corporation shall also cause a notice setting forth any such adjustments to be sent by mail, first class, postage prepaid, to each record holder of shares of Series B Stock at his address appearing on the stock register. Where appropriate, such notice may be given in advance and may included as part of a notice required to he mailed and published under the provisions of Section 5.3. 5.5. The Corporation shall not be required to issue fractional shares of Common Stock or scrip upon conversion of shares of Series B Stock. As to any final fraction of a share of Common Stock which the same record holder of one or more shares of Series B Stock would otherwise be entitled to upon conversion of shares of Series B Stock in the same transaction, the Corporation shall pay a cash adjustment in respect of such final fraction in an amount equal to the same fraction of the last sales price (or bid price if there were no sales) per share on the New York Stock Exchange on the business day which next precedes the date of conversion or, if such Common Stock is not listed on the New York Stock Exchange, of the market price per share (as determined in a manner prescribed by the Board of Directors of the Corporation) at the close of business on the business day which next precedes the date of conversion. 26 27 5.6. The Corporation will pay any documentary stamp taxes attributable to the initial issuance of shares of Common Stock upon conversion of any shares of Series B Stock pursuant hereto, provided, however, that the Corporation shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issue or delivery of any certificates for shares of Common Stock in a name other than that of the registered holder of shares of Series B Stock in respect of which such shares of Common Stock are issued. 5.7. The Corporation shall at all times reserve and keep available, out of its treasury stock or authorized and unissued stock, or both, solely for the purpose of effecting the conversion of the shares of Series B Stock, such number of shares of Common Stock as shall from time to time be sufficient to effect the conversion of all shares of Series B Stock from time to time outstanding. Before taking any action which would cause an adjustment reducing the conversion price below the then par value of the shares of Common Stock issuable upon conversion of the Series B Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of such Common Stock at such adjusted conversion price. 6. Voting. 6.1. Subject to the provisions of any applicable law, or of the By-laws of the Corporation as from time to time amended, with respect to the closing of the transfer books or the fixing of a record date for the determination of stockholders entitled to vote, at each meeting of stockholders of the Corpora- tion each holder of record of shares of Series B Stock shall be entitled to cast one vote for each share of Series B Stock standing in such holder's name on the record books of the Corporation (with the same rights of cumulative voting, if any, as the Common Stock) on each matter on which the holders of record of the Common Stock of the Corporation shall be entitled to vote, voting together with the holders of record of the Common Stock and other series of Preferred Stock of the Corporation entitled to vote with the Common Stock of the Corporation, and not by classes or by series. Each such record holder of shares of Series B Stock shall be entitled to notice of any such meeting of stockholders. In addition, so long as any shares of Series B Stock are outstanding, if at the time of any annual meeting of stockholders for the election of directors a default in preferred dividends, as hereinafter defined, shall exist, the holders of shares of the Preferred Stock of the Corporation voting separately as a class without regard to series (with each share of Preferred Stock being entitled to one vote on a noncumulative basis) shall have the right to elect two members of the Board of Directors of the Corporation, and the holders of the Common Stock, the Series B Stock and any other series of Preferred Stock of the Corporation entitled to vote with the Common Stock, voting separately as another class, shall be entitled to elect the remaining members of the Board of Directors of the Corporation. Any director elected by the holders of the Preferred Stock, voting as a class as aforesaid, shall continue to serve as such director for the full term for which he shall have been elected notwithstanding that prior to the end of such term a default in preferred dividends shall cease to exist. If, prior to the end of the term of any director elected by the holders of the Preferred Stock, voting as a class as aforesaid, a vacancy in the office of such director shall occur by reason of death, resignation, removal or disability, or for any other cause, the remaining director so elected by the holders of shares of the Preferred Stock shall be entitled to nominate for election by the Board of Directors a successor director to hold office for the unexpired term of the director whose position has become vacant. If the vacancy is not filled by the election of such nominee or if there is then in office no director who has been elected by the holders of shares of the Preferred Stock, the Corporation shall, as soon as reasonably may be done, call (on at least 30 days' notice) a special meeting of the holders of shares of the Preferred Stock for the purpose of filling such vacancy or vacancies in the Board of Directors. If the Corporation fails to call such a meeting within 30 days after a written request by any three or more holders of shares of the Preferred Stock, then such three or more holders of shares of the Preferred Stock may call (on at least 30 days' notice) a special meeting of the holders of shares of the Preferred Stock for such purpose and, if the vacancy or vacancies are not theretofore filled as hereinabove provided, it or they may be filled at such 27 28 meeting by the holders of shares of the Preferred Stock, voting separately as a class regardless of series. For the purposes of this Section 6, a default in preferred dividends shall be deemed to have occurred whenever the amount of unpaid cumulative dividends upon any series of Preferred Stock shall be equivalent to six full quarter-yearly dividends or more and, having so occurred, such default in preferred dividends shall be deemed to exist thereafter until, but only until, all accrued dividends on all shares of Preferred Stock then outstanding, shall have been paid to the end of the last preceding quarterly dividend period. 6.2. Without the written consent or affirmative vote of the holders of at least two-thirds of the aggregate number of shares of Preferred Stock of the Corporation at the time outstanding given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, without regard to series, the Corporation shall not amend, alter or repeal the preferences, special rights or other powers of the Preferred Stock as set forth in the Certificate of Incorporation or in any certificate providing for the authorization of Preferred Stock of any series so as to affect the Preferred Stock adversely (and the authorization or issuance of any class of stock with preference or priority over the Preferred Stock as to the right to receive either dividends or amounts distributable upon liquidation, dissolution or winding up, shall be deemed so to affect the Preferred Stock adversely). 6.3. Without the written consent or affirmative vote of the holders of at least a majority of the aggregate number of shares of Preferred Stock of the Corporation at the time outstanding given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, without regard to series, the Corporation will not increase the authorized amount of Preferred Stock. The term "Preferred Stock", for all purposes of this series of $1.35 Convertible Preferred Stock, Series B, shall mean and include any class of stock the holders of which shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective dividend rates or liquidation prices, equal in preference or priority with the holders of the Series B Stock. 7. Reacquired Shares. Shares of Series B Stock which have been issued and reacquired through redemption or purchase or have been converted into shares of any other class or classes of the stock of the Corporation shall, upon compliance with any applicable provision of the General Corporation Law of the State of Delaware, have the status of authorized and unissued shares of Preferred Stock and may be reissued as part of the Series A or Series B Stock or as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors. FIFTH: The names and places of residence of each of the original subscribers to the capital stock of the Corporation and the number of shares subscribed for by each at twelve dollars and fifty cents ($12.50) per share are as follows:
NUMBER NAMES PLACES OF RESIDENCE OF SHARES ----- ------------------- --------- A. L. Miller ....... Wilmington, Del. 33 A. V. Lane ......... Wilmington, Del. 33 C. S. Peabbles ..... Wilmington, Del. 34
SIXTH: The Corporation is to have perpetual existence. SEVENTH: The private property of the stockholders of the Corporation shall not be subject to the payment of corporate debts to any extent whatever. EIGHTH: The number of directors of the Corporation shall be fixed by its By-laws and may be changed from time to time as provided in the By-laws. In the case of any increase in the number of 28 29 directors of the Corporation, the additional directorships created may be filled in the first instance in the same manner as a vacancy in the Board of Directors. A director need not be a stockholder. The election of directors of the Corporation need not be by ballot unless the By-laws so require. The Board of Directors may, by resolution or resolutions, passed by a majority of the whole board, designate one or more committees, each committee to consist of two or more of the directors of the Corporation, which to the extent provided in said resolution or resolutions or in the By-laws of the Corporation, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation, and may have the power to authorize the seal of the Corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be stated in the By-laws of the Corporation or as may be determined from time to time by resolution adopted by the Board of Directors. No director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. This paragraph shall not eliminate or limit the liability of a director for any act or omission occurring prior to the effective date of its adoption. No repeal or modification of this paragraph, directly or by adoption of an inconsistent provision of this Certificate of Incorporation, by the stockholders of the Corporation shall be effective with respect to any cause of action, suit, claim or other matter that, but for this paragraph, would accrue or arise prior to such repeal or modification. NINTH: In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board of Directors is expressly authorized: (a) To make, alter, amend and repeal the By-laws of the Corporation, in any manner not inconsistent with the laws of the State of Delaware or of the Certificate of Incorporation of the Corporation, subject to the power of the holders of the capital stock to alter or repeal the By-laws made by the Board of Directors; (b) To determine from time to time whether and to what extent and at what times and places and under what conditions and regulations the accounts and books of the Corporation, or any of them, shall be open to the inspection of the stockholders; and no stockholder shall have any right to inspect any account or book or document of the Corporation except as conferred by the laws of the State of Delaware unless and until authorized so to do by resolution of the Board of Directors, or of the stockholders of the Corporation; (c) Without the assent or vote of the stockholders, to authorize and issue obligations of the Corporation, secured or unsecured, to include therein such provisions as to redeemability, convertibility or otherwise, as such Board of Directors, in its discretion, may determine, and to authorize the mortgaging or pledging, as security therefor, of any property of the Corporation, real or personal, including after-acquired property; (d) To determine whether any, and if any, what part, of the annual net profits of the Corporation or of its net assets in excess of its capital shall be declared in dividends and paid to the stockholders, and to direct and determine the use and disposition of any such annual net profits or net assets in excess of capital; (e) To fix from time to time the amount of the profits of the Corporation to be reserved as working capital or for any other lawful purpose. In addition to the powers and authorities hereinbefore or by statute expressly conferred upon them, the Board of Directors may exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the laws of the State of Delaware, the Certificate of Incorporation and the By-laws of the Corporation. 29 30 TENTH: At any time and from time to time when authorized by resolution of the Board of Directors and without any action by its stockholders (except as provided in any series of the Preferred Stock), the Corporation may issue or sell any shares of its capital stock of any class, whether out of the unissued shares thereof authorized by the Certificate of Incorporation of the Corporation as originally filed or by any amendment thereof or out of shares of its stock acquired by it after the issue thereof, and whether or not the shares thereof so issued or sold shall confer upon the holders thereof the right to exchange such shares for other shares of stock of the Corporation of any class or classes. In each case the consideration to be received by the Corporation for any such shares so issued or sold shall be fixed from time to time by resolution of the Board of Directors. Each share of the capital stock of the Corporation issued or sold pursuant to the foregoing provisions of this Article Tenth and the full consideration for which in each case as so fixed by the Directors shall have been paid or delivered to the Corporation, shall be conclusively deemed to be fully paid stock and shall not be liable to any fur- ther call or assessments thereon, and the holder thereof shall not be liable for any further payments in respect thereof. The Corporation may receive in payment, in whole or in part, for any shares of its stock issued or sold by it, cash, labor done, personal property or real property or leases thereof, and in the absence of actual fraud in the transaction, the judgment of the directors of the Corporation as to the value of the labor, property, real estate or leases thereof so received, shall be conclusive. ELEVENTH: Unless otherwise determined by the Board of Directors, no holder of stock of the Corporation shall, as such holder, have any right to purchase or subscribe for any stock of any class which the Corporation may issue or sell, whether or not exchangeable for any stock of the Corporation of any class or classes and whether out of unissued shares authorized by the Certificate of Incorporation of the Corporation as originally filed or by any amendment thereof or out of shares of stock of the Corporation acquired by it after the issue thereof; nor, unless otherwise determined by the Board of Directors, shall any holder of any shares of the capital stock of the Corporation, as such holder, have any right to purchase or subscribe for any obligation which the Corporation may issue or sell that shall be convertible into, or exchangeable for, any shares of the stock of the Corporation of any class or classes, or to which shall be attached or appurtenant any warrant or warrants or other instrument or instruments that shall confer upon the holder or holders of such obligation the right to subscribe for or purchase from the Corporation any shares of its capital stock of any class or classes. TWELFTH: Any director or any officer elected or appointed by the stockholders or by the Board of Directors may be removed at any time in such manner as shall be provided in the By-laws of the Corporation. No act of this Corporation, and no contract or other transaction between this Corporation and any corporation, firm, joint venture, association or other entity or organization, shall be affected or invalidated (in the absence of fraud) by the fact that any director or officer of the Corporation is a beneficiary of such act, or a party to such contract or other transaction, or pecuniarily or otherwise interested therein, or connected with (whether as director, officer, creditor or otherwise) or pecuniarily or otherwise interested in such entity or organization. Any such director of this Corporation may be counted in determining the existence of a quorum at any meeting of the Board of Directors of this Corporation or any committee thereof which shall authorize or ratify any such act, contract or other transaction, and may vote to authorize or ratify any such act, contract or other transaction, with full force and effect. Any contract, transaction or act of the Corporation or of the directors or of any committee, which shall be ratified by a majority of a quorum of the stockholders of the Corporation at any annual meeting, or at any special meeting called for such purpose, shall, insofar as permitted by law or by the Certificate of Incorporation of the Corporation, be as valid and as binding as though ratified by every stockholder of the Corporation. 30 31 THIRTEENTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for this Corporation under the provisions of section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation. FOURTEENTH: From time to time any of the provisions of the Certificate of Incorporation may be amended, altered or repealed, and other provisions authorized by the statutes of the State of Delaware at the time in force may be added or inserted in the manner at the time prescribed by said statutes, and all rights at any time conferred upon the stockholders of the Corporation by its Certificate of Incorporation are granted subject to the provisions of this Article Fourteenth. FIFTEENTH: The stockholder vote required to approve Business Combinations (as hereinafter defined) shall be as set forth in this Article Fifteenth. 1. Higher Vote for Business Combinations. In addition to any affirmative vote required by law, this Certificate of Incorporation or the By-Laws of the Corporation, and except as otherwise expressly provided in Section 2 of this Article Fifteenth, a Business Combination shall not be consummated without the affirmative vote of the holders of at least 80% of the combined voting power of the then outstanding shares of all capital stock of the Corporation (the "Capital Stock") entitled to vote generally in the election of directors (such Capital Stock hereinafter called the "Voting Stock"), voting together as a single class. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage or separate class vote may be specified, by law or in any agreement with any national securities exchange or otherwise. 2. When Higher Vote Is Not Required. The provisions of Section 1 of this Article Fifteenth shall not be applicable to a Business Combination if the conditions specified in either of the following paragraphs A or B are met. A. Approval by Continuing Directors. The Business Combination shall have been approved by at least two-thirds of the Continuing Directors (as hereinafter defined), whether such approval is made prior to or subsequent to the date on which the Interested Stockholder (as hereinafter defined) became an Interested Stockholder (the "Determination Date"). B. Price and Procedure Requirements. Each of the seven conditions specified in the following subparagraphs (i) through (vii) shall have been met: (i) The aggregate amount of the cash and the Fair Market Value (as hereinafter defined) as of the date of the consummation of the Business Combination (the "Consummation Date") of any consideration other than cash to be received per share by holders of Common Stock in such Business Combination shall be an amount at least equal to the higher amount determined under clauses (a) and (b) below (the requirements of this paragraph B (i) shall be applicable with respect to all shares of Common Stock outstanding, whether or not the Interested Stockholder has previously acquired any shares of the Common Stock): 31 32 (a) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by or on behalf of the Interested Stockholder for any shares of Common Stock acquired beneficially by it (1) within the two-year period immediately prior to the first public announcement of the proposal of the Business Combination (the "Announcement Date") or (2) in the transaction in which it became an Interested Stockholder, whichever is higher, plus interest compounded annually from the Determination Date through the Consummation Date at the prime rate of interest of Morgan Guaranty Trust Company of New York (or other major bank headquartered in New York City selected by at least two-thirds of the Continuing Directors) from time to time in effect in New York City, less the aggregate amount of any cash dividends paid, and the Fair Market Value of any dividends paid in other than cash, per share of Common Stock from the Determination Date through the Consummation Date in an amount up to but not exceeding the amount of such interest payable per share of Common Stock; and (b) the Fair Market Value per share of Common Stock on the Announcement Date or on the Determination Date, whichever is higher. (ii) The aggregate amount of the cash and the Fair Market Value as of the Consummation Date of any consideration other than cash to be received per share by holders of shares of any class or series of outstanding Capital Stock, other than the Common Stock, in such Business Combination shall be an amount at least equal to the highest amount determined under clauses (a), (b) and (c) below (the requirements of this paragraph B(ii) shall be applicable with respect to all shares of every class or series of outstanding Capital Stock, other than the Common Stock, whether or not the Interested Stockholder has previously acquired any shares of a particular class or series of Capital Stock): (a) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by or on behalf of the Interested Stockholder for any shares of such class or series of Capital Stock acquired beneficially by it (1) within the two-year period immediately prior to the Announcement Date or (2) in the transaction in which it became an Interested Stockholder, whichever is higher, plus interest compounded annually from the Determination Date through the Consummation Date at the prime rate of interest of Morgan Guaranty Trust Company of New York (or other major bank headquartered in New York City selected by at least two-thirds of the Continuing Directors) from time to time in effect in New York City, less the aggregate amount of any cash dividends paid, and the Fair Market Value of any dividends paid in other than cash, per share of such class or series of Capital Stock from the Determination Date through the Consummation Date in an amount up to but not exceeding the amount of such interest payable per share of such class or series of Capital Stock; and (b) the Fair Market Value per share of such class or series of Capital Stock on the Announcement Date or on the Determination Date, whichever is higher; and (c) the highest preferential amount per share to which the holders of shares of such class or series of Capital Stock would be entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, regardless of whether the Business Combination to be consummated constitutes such an event. (iii) The consideration to be received by holders of a particular class or series of outstanding Capital Stock (including Common Stock) shall be in cash or in the same form as previously has been paid by or on behalf of the Interested Stockholder in its direct or indirect acquisition of beneficial ownership of shares of such class or series of Capital Stock. If the consideration so paid for shares of any class or series of Capital Stock varied as to form, the form of consideration for such class or series of Capital Stock shall be either cash or the form used to acquire beneficial ownership of the largest number of shares of such class or series of Capital Stock previously acquired by the Interested Stockholder. (iv) After such Interested Stockholder has become an Interested Stockholder and prior to the consummation of such Business Combination, such Interested Stockholder shall not have become the beneficial owner of any additional shares of Capital Stock except as part of the transaction that results in such Interested Stockholder becoming an Interested Stockholder and except in a transaction that, 32 33 after giving effect thereto, would not result in any increase in the Interested Stockholder's percentage beneficial ownership of any class or series of Capital Stock; and, except as approved by at least two-thirds of the Continuing Directors: (a) there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) payable in accordance with the terms of any outstanding Capital Stock; (b) there shall have been no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any stock split, stock dividend or subdivision of the Common Stock); and (c) there shall have been an increase in the annual rate of dividends paid on the Common Stock as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of Common Stock. (v) After such Interested Stockholder has become an Interested Stockholder, such Interested Stockholder shall not have received the benefit, directly or indirectly (except proportionately as a stockholder of the Corporation), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise. (vi) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to all stockholders of the Corporation at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). The proxy or information statement shall contain on the first page thereof, in a prominent place, any statement as to the advisability of the Business Combination that the Continuing Directors, or any of them, may choose to make and, if deemed advisable by at least two-thirds of the Continuing Directors, the opinion of an investment banking firm selected for and on behalf of the Corporation by at least two-thirds of the Continuing Directors as to the fairness of the terms of the Business Combination from a financial point of view to the holders of the outstanding shares of Capital Stock other than the Interested Stockholder and its Affiliates or Associates (as hereinafter defined). (vii) Such Interested Stockholder shall not have made any material change in the Corporation's business or equity capital structure without the approval of at least two-thirds of the Continuing Directors. Any Business Combination to which Section I of this Article Fifteenth shall not apply by reason of this Section 2 shall require only such affirmative vote as is required by law, any other provision of this Certificate of Incorporation, the By-Laws of the Corporation or any agreement with any national securities exchange. 3. Certain Definitions. For the purposes of this Article Fifteenth: A. A "Business Combination" shall mean: (i) any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (i) any Interested Stockholder or (ii) any other corporation (whether or not itself an Interested Stockholder) which is, or after such merger or consolidation would be, an Affiliate or Associate of an Interested Stockholder; or (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder involving any assets or securities of the Corporation, any Subsidiary or any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder having an aggregate Fair Market Value of $25,000,000 or more; or (iii) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of an Interested Stockholder or any Affiliate or Associate of any Interested Stockholder; or (iv) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any 33 34 other transaction (whether or not with or into or otherwise involving an Interested Stockholder) that has the effect, directly or indirectly, of increasing the proportionate share of any class or series of Capital Stock, or any securities convertible into Capital Stock or into equity securities of any Subsidiary, that is beneficially owned by any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder; or (v) any agreement, contract, arrangement or other understanding providing for any one or more of the actions specified in clauses (i) through (iv) above. B. A "person" shall mean any individual, firm, corporation or other entity and shall include any group composed of any person and any other person with whom such person or any Affiliate or Associate of such person has any agreement, arrangement or understanding, directly or indirectly, for the purpose of acquiring, holding, voting or disposing of Capital Stock. C. "Interested Stockholder" shall mean any person (other than the Corporation or any Subsidiary and other than any profit-sharing, employee stock ownership or other employee benefit plan of the Corporation or any Subsidiary or any trustee of or fiduciary with respect to any such plan when acting in such capacity) who or which: (i) is the beneficial owner of Voting Stock having 10% or more of the votes entitled to be cast by the holders of all then outstanding shares of Voting Stock; or (ii) is an Affiliate or Associate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner of Voting Stock having 10% or more of the votes entitled to be cast by the holders of all then outstanding shares of Voting Stock; or (iii) is an assignee of or has otherwise succeeded to any shares of Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by any Interested Stockholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933. D. A person shall be a "beneficial owner" of any Capital Stock: (i) which such person or any Affiliate or Associate of such person beneficially owns, directly or indirectly; or (ii) which such person or any Affiliate or Associate of such person has, directly or indirectly, (a) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (b) the right to vote pursuant to any agreement, arrangement or understanding; or (iii) which are beneficially owned, directly or indirectly, by any other person with which such person or any Affiliate or Associate of such person has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Capital Stock. E. For the purposes of determining whether a person is an Interested Stockholder pursuant to paragraph C of this Section 3, the number of shares of Capital Stock deemed to be outstanding shall include shares deemed owned by the Interested Stockholder through application of paragraph D of this Section 3 but shall not include any other shares of Capital Stock that may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. F. "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on October 1, 1984 (the term "registrant" in such Rule 12b-2 meaning in this case the Corporation). G. "Subsidiary" means any corporation of which a majority of any class of equity security is beneficially owned by the Corporation; provided, however, that for the purposes of the definition of Interested Stockholder set forth in paragraph C of this Section 3, the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is beneficially owned by the Corporation. 34 35 H. "Continuing Director" means any member of the Board of Directors of the Corporation (the "Board") who is not an Affiliate or Associate or representative of the Interested Stockholder and was a member of the Board prior to the time that the Interested Stockholder became an Interested Stockholder, and any successor of a Continuing Director who is not an Affiliate or Associate or representative of the Interested Stockholder and is recommended or elected to succeed a Continuing Director by at least two- thirds of Continuing Directors then members of the Board. I. "Fair Market Value" means: (i) in the case of cash, the amount of such cash; (ii) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period immediately preceding the date in question on the National Association of Securities Dealers, Inc., Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined in good faith by at least two-thirds of the Continuing Directors; and (iii) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined in good faith by at least two-thirds of the Continuing Directors. J. In the event of any Business Combination in which the Corporation survives, the phrase "consideration other than cash to be received" as used in paragraphs B(i) and (ii) of Section 2 of this Article Fifteenth shall include the shares of Common Stock and/or the shares of any other class or series of Capital Stock retained by the holders of such shares. 4. Powers of Continuing Directors. Any determination as to compliance with this Article Fifteenth, including without limitation (A) whether a person is an Interested Stockholder, (B) the number of shares of Capital Stock or other securities beneficially owned by any person, (C) whether a person is an Affiliate or Associate of another, (D) whether the requirements of paragraph B of Section 2 have been met with respect to any Business Combination, and (E) whether the assets that are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Business Combination has, an aggregate Fair Market Value of $25,000,000 or more shall be made only upon action by not less than two-thirds of the Continuing Directors of the Corporation; and the good faith determination of at least two-thirds of the Continuing Directors on such matters shall be conclusive and binding for all the purposes of this Article Fifteenth. 5. No Effect on Fiduciary Obligations. Nothing contained in this Article Fifteenth shall be construed to relieve the Board of Directors or any Interested Stockholder from any fiduciary obligation imposed by law. 6. Amendment, Repeal, etc. Notwithstanding any other provisions of this Certificate of Incorporation or the By-Laws of the Corporation (and notwithstanding the fact that a lesser percentage or separate class vote may be specified by law, this Certificate of Incorporation or the By-Laws of the Corporation), the affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of Voting Stock, voting together as a single class, shall be required to amend or repeal, or adopt any provisions inconsistent with, this Article Fifteenth; provided, however, that the preceding provisions of this Section 6 shall not apply to any amendment to this Article Fifteenth, and such amendment shall require only such affirmative vote as is required by law and any other provisions of this Certificate of Incorporation or the By-Laws of the Corporation, if such amendment shall have been approved by at least two-thirds of the members of the Board who are persons who would be eligible to serve as Continuing Directors. SIXTEENTH: No action shall be taken by stockholders of the Corporation except at an annual or special meeting of stockholders of the Corporation. 35 EX-3.B.1 3 ROCKWELL 10-K 1 EXHIBIT 3-b-1 - ------------------------------------------------------ BY-LAWS of Rockwell International Corporation - ------------------------------------------------------ As Amended Effective February 1, 1995 - ------------------------------------------------------ 2 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION ARTICLE I. OFFICES SECTION 1. Registered Office in Delaware; Resident Agent. The address of the Corporation's registered office in the State of Delaware and the name and address of its resident agent in charge thereof are as filed with the Secretary of State of the State of Delaware. SECTION 2. Other Offices. The Corporation may also have an office or offices at such other place or places either within or without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation requires. ARTICLE II. MEETINGS OF STOCKHOLDERS SECTION 1. Place of Meetings. All meetings of the stockholders of the Corporation shall be held in the City of Los Angeles, State of California, or at such other place, within or without the State of Delaware, as may from time to time be designated by resolution passed by the Board of Directors. SECTION 2. Annual Meeting. An annual meeting of the stockholders for the election of directors and for the transaction of such other proper business, notice of which was given in the notice of meeting, shall be held on a date and at a time as may from time to time be designated by resolution passed by the Board of Directors. - 1 - 3 SECTION 3. Special Meetings. A special meeting of the stockholders for any purpose or purposes, unless otherwise prescribed by law, may be called at any time by the Chairman of the Board, by order of the Board of Directors or by a stockholder or stockholders holding of record at least twenty percent of the outstanding stock of the Corporation entitled to vote at such meeting. SECTION 4. Notice of Meetings. Except as otherwise provided by law, written notice of each meeting of the stockholders, whether annual or special, shall be mailed, postage prepaid, not less than ten nor more than sixty days before the date of the meeting, to each stockholder entitled to vote at such meeting, at his address as it appears on the records of the Corporation. Every such notice shall state the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Notice of any adjourned meeting of the stockholders shall not be required to be given, except when expressly required by law. SECTION 5. List of Stockholders. The Secretary shall, from information obtained from the transfer agent, prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list referred to in this section or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders. SECTION 6. Quorum. At each meeting of the stockholders, the holders of a majority of the issued and outstanding stock of the Corporation present either in person or by proxy shall constitute a quorum for the transaction of business except where otherwise provided by law for a specified action or by the Certificate of Incorporation or by these by-laws. At each meeting at which the holders of the Preferred Stock are entitled to elect a director or directors, the holders of a majority of the issued and outstanding Preferred Stock, present either in person or by proxy, shall constitute a quorum for the election of said director or directors. Except as otherwise provided by law, in the absence of a quorum, a majority in interest of the stockholders of the Corporation present in person or - 2 - 4 by proxy and entitled to vote shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until stockholders holding the requisite amount of stock shall be present or represented. At any such adjourned meeting at which a quorum may be present, any business may be transacted which might have been transacted at a meeting as originally called. The absence from any meeting of the number required by law or by the Certificate of Incorporation or by these by-laws for action upon any given matter shall not prevent action at such meeting upon any other matter or matters which may properly come before the meeting, if the number of stockholders required in respect of such other matter or matters shall be present. SECTION 7. Organization. At every meeting of the stockholders the Chairman of the Board, or, in his absence, an Executive Vice President or director designated by the Board shall act as Chairman. The Secretary, or, in his absence, an Assistant Secretary, shall act as Secretary at all meetings of the stockholders. In the absence from any such meeting of the Secretary and the Assistant Secretaries, the Chairman may appoint any person to act as Secretary of the meeting. SECTION 8. Business and Order of Business. At each meeting of the stockholders such business may be transacted as may properly be brought before such meeting, except as otherwise provided by law or in these by-laws. The order of business at all meetings of the stockholders shall be as determined by the Chairman, unless otherwise determined by a majority in interest of the stockholders present in person or by proxy at such meeting and entitled to vote thereat. SECTION 9. Voting. Except as otherwise provided by law, the Certificate of Incorporation or these by-laws, each stockholder shall at every meeting of the stockholders be entitled to one vote for each share of stock held by such stockholder. Any vote on stock may be given by the stockholder entitled thereto in person or by his proxy appointed by an instrument in writing, subscribed (or transmitted by electronic means and authenticated as provided by law) by such stockholder or by his attorney thereunto authorized, and delivered to the Secretary; provided, however, that no proxy shall be voted on after three years from its date unless the proxy provides for a longer period. Except as otherwise provided by law, the Certificate of Incorporation or these by-laws, at all meetings of the stockholders, all matters shall be decided by the vote (which need not be by ballot) of a majority in interest of the stockholders present in person or by proxy and entitled to vote thereat, a quorum being present. - 3 - 5 ARTICLE III. BOARD OF DIRECTORS SECTION 1. General Powers. The property, affairs and business of the Corporation shall be managed by or under the direction of its Board of Directors. SECTION 2. Number, Qualifications, and Term of Office. The number of directors shall be thirteen,* but the number may be increased, or may be reduced to not less than three, by amendment of these by-laws or by resolution passed by a majority of the whole Board. Directors need not be stockholders. Except as otherwise provided in these by-laws, the directors shall be elected annually, and each director shall hold office until the annual meeting held next after his election and until his successor shall have been elected and shall qualify, or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. SECTION 3. Election of Directors. At each meeting of the stockholders for the election of directors, at which a quorum is present, the directors shall be the persons receiving the greatest number of votes cast by the holders of stock entitled to vote for such directors. SECTION 4. Quorum and Manner of Acting. A majority of the members of the Board of Directors shall constitute a quorum for the transaction of business at any meeting, and the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors unless otherwise provided by law, the Certificate of Incorporation or these by-laws. In the absence of a quorum, a majority of the directors present may adjourn any meeting from time to time until a quorum shall be obtained. Notice of any adjourned meeting need not be given. The directors shall act only as a board and the individual directors shall have no power as such. SECTION 5. Place of Meetings. The Board of Directors may hold its meetings at such place or places within or without the State of Delaware as the Board may from time to time determine or as shall be specified or fixed in the respective notices or waivers of notice thereof. SECTION 6. First Meeting. Promptly after each annual election of directors, the Board of Directors shall meet for the purpose of organization, the election of officers and the transaction of other business, at the same place as that at which the annual meeting of stockholders was held or as otherwise determined *Effective immediately prior to Annual Meeting of Shareowners to be held February 1, 1995, prior to which the number of directors is fourteen. - 4 - 6 by the Board. Notice of such meeting need not be given. Such meeting may be held at any other time or place which shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors. SECTION 7. Regular Meetings. Regular meetings of the Board of Directors shall be held at such places and at such times as the Board shall from time to time determine. If any day fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting which would otherwise be held on that day shall be held at the same hour on the next succeeding business day not a legal holiday. Notice of regular meetings need not be given. SECTION 8. Special Meetings; Notice. Special meetings of the Board of Directors shall be held whenever called by the Chairman of the Board and shall be called by him or the Secretary at the written request of three directors. Notice of each such meeting stating the time and place of the meeting shall be given to each director by mail, telephone or personally. If by mail, such notice shall be given not less than five days before the meeting; and if by telephone or personally, not less than two days before the meeting. A notice mailed at least two weeks before the meeting need not state the purpose thereof except as otherwise provided in these by-laws. In all other cases the notice shall state the principal purpose or purposes of the meeting. Notice of any meeting of the Board need not be given to a director, however, if waived by him in writing before or after such meeting or if he shall be present at the meeting. SECTION 9. Organization. At each meeting of the Board of Directors, the Chairman of the Board, or, in his absence, an Executive Vice President or director designated by the Board shall act as Chairman. The Secretary, or, in his absence, an Assistant Secretary, or in the absence of both the Secretary and the Assistant Secretaries, any person appointed by the Chairman, shall act as Secretary of the meeting. SECTION 10. Order of Business. At all meetings of the Board of Directors, business shall be transacted in the order determined by the Board. SECTION 11. Resignations. Any director of the Corporation may resign at any time by giving written notice to the Chairman of the Board or to the Secretary of the Corporation. The resignation of any director shall take effect at the time specified therein, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. - 5 - 7 SECTION 12. Removal of Directors. Any director may be removed, either with or without cause, at any time, by the affirmative vote of a majority in interest of the holders of record of the stock having voting power at a special meeting of the stockholders called for the purpose; and the vacancy in the Board of Directors caused by any such removal may be filled by the stockholders at such meeting; provided, that a director elected by the holders of the Preferred Stock, voting as a class, may be so removed only by the affirmative vote of a majority in interest of the holders of record of such Preferred Stock, and the vacancy in the Board of Directors caused by such removal may be filled as provided in the Certificate of Incorporation. SECTION 13. Vacancies. Any vacancy in the Board of Directors caused by death, resignation, removal, disability, disqualification, an increase in the number of directors, or any other cause (except a vacancy in the office of a director elected by the holders of the Preferred Stock, voting as a class) may be filled by the majority vote of the remaining directors, though less than a quorum, or by the stockholders of the Corporation at the next annual meeting or any special meeting called for the purpose, and each director so elected shall hold office for a term to expire at the next annual election of directors, and until his successor shall be duly elected and qualified, or until his death or until he shall resign or shall have been removed in the manner herein provided. A vacancy in the office of a director elected by the holders of the Preferred Stock, voting as a class, may be filled as provided in the Certificate of Incorporation. In case all the directors shall die or resign or be removed or disqualified, any stockholder having voting powers may call a special meeting of the stockholders, upon notice given as herein provided for meetings of the stockholders, at which directors for the unexpired terms may be elected. SECTION 14. Compensation. Each director shall be paid such compensation, if any, as shall be fixed by the Board of Directors. SECTION 15. Indemnification of Directors and Officers. (A) The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent (except in each of the foregoing situations to the extent any agreement, arrangement or understanding of agency contains provisions that supersede or abrogate indemnification under this section) of another corporation or of any partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses - 6 - 8 (including attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (B) The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent (except in each of the foregoing situations to the extent any agreement, arrangement or understanding of agency contains provisions that supersede or abrogate indemnification under this section) of another corporation or of any partnership, joint venture, trust, employee benefit plan or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery of Delaware or such other court shall deem proper. (C) To the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (A) and (B), or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him or on his behalf in connection therewith. If any such person is not wholly successful in any such action, suit or proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters therein, the Corporation shall indemnify him against all expenses (including attorneys' fees) actually and - 7 - 9 reasonably incurred by him or on his behalf in connection with each claim, issue or matter that is successfully resolved. For purposes of this subsection and without limitation, the termination of any claim, issue or matter by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter. (D) Notwithstanding any other provision of this section, to the extent any person is a witness in, but not a party to, any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent (except in each of the foregoing situations to the extent any agreement, arrangement or understanding of agency contains provisions that supersede or abrogate indemnification under this section) of another corporation or of any partnership, joint venture, trust, employee benefit plan or other enterprise, he shall be indemnified against all expenses (including attorneys' fees) actually and reasonably incurred by him or on his behalf in connection therewith. (E) Indemnification under subsections (A) and (B) (unless ordered by a court) shall be made only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in subsections (A) and (B). Such determination shall be made (1) if a Change of Control (as hereinafter defined) shall not have occurred, (a) by the Board of Directors by a majority vote of a quorum consisting of Disinterested Directors (as hereinafter defined) or (b) if a quorum of the Board of Directors consisting of Disinterested Directors is not obtainable or, even if obtainable, a majority of such quorum so directs, by (i) Independent Counsel (as hereinafter defined) in a written opinion to the Board of Directors, a copy of which shall be delivered to the claimant, or (ii) the stockholders of the Corporation; or (2) if a Change of Control shall have occurred, by Independent Counsel selected by the claimant in a written opinion to the Board of Directors, a copy of which shall be delivered to the claimant, unless the claimant shall request that such determination be made by or at the direction of the Board of Directors, in which case it shall be made in accordance with clause (1) of this sentence. Any claimant shall be entitled to be indemnified against the expenses (including attorneys' fees) actually and reasonably incurred by him in cooperating with the person or entity making the determination of his entitlement to indemnification (irrespective of the determination as to the claimant's entitlement to indemnification) and, to the extent successful, in connection with any litigation or arbitration with respect to such claim or the enforcement thereof. - 8 - 10 (F) If a Change of Control shall not have occurred, or if a Change of Control shall have occurred and a director, officer, employee or agent requests pursuant to clause (2) of the second sentence in subsection (E) that the determination whether the claimant is entitled to indemnification be made by or at the direction of the Board of Directors, the claimant shall be conclusively presumed to have been determined pursuant to subsection (E) to be entitled to indemnification if (1)(a) within fifteen days after the next regularly scheduled meeting of the Board of Directors following receipt by the Corporation of the request therefor, the Board of Directors shall not have resolved by majority vote of a quorum consisting of Disinterested Directors to submit such determination to (i) Independent Counsel for its determination or (ii) the stockholders for their determination at the next annual meeting, or any special meeting that may be held earlier, after such receipt, and (b) within sixty days after receipt by the Corporation of the request therefor (or within ninety days after such receipt if the Board of Directors in good faith determines that additional time is required by it for the determination and, prior to expiration of such sixty-day period, notifies the claimant thereof), the Board of Directors shall not have made the determination by a majority vote of a quorum consisting of Disinterested Directors, or (2) after a resolution of the Board of Directors, timely made pursuant to clause (1)(a)(ii) above, to submit the determination to the stockholders, the stockholders meeting at which the determination is to be made shall not have been held on or before the date prescribed (or on or before a later date, not to exceed sixty days beyond the original date, to which such meeting may have been postponed or adjourned on good cause by the Board of Directors acting in good faith); provided, however, that this sentence shall not apply if the claimant has misstated or failed to state a material fact in connection with his request for indemnification. Such presumed determination that a claimant is entitled to indemnification shall be deemed to have been made (I) at the end of the sixty-day or ninety-day period (as the case may be) referred to in clause (1)(b) of the immediately preceding sentence or (II) if the Board of Directors has resolved on a timely basis to submit the determination to the stockholders, on the last date within the period prescribed by law for holding such stockholders meeting (or a postponement or adjournment thereof as permitted above). (G) Expenses (including attorneys' fees) incurred in defending a civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding to a director or officer, promptly after receipt of a request therefor stating in reasonable detail the expenses incurred, and to an employee or agent as authorized by the Board of Directors; provided that in each case the Corporation shall have received an undertaking by or on behalf of the director, officer, employee or agent to repay such amount if it shall ultimately be determined that - 9 - 11 he is not entitled to be indemnified by the Corporation as authorized in this section. (H) The Board of Directors shall establish reasonable procedures for the submission of claims for indemnification pursuant to this section, determination of the entitlement of any person thereto and review of any such determination. Such procedures shall be set forth in an appendix to these by-laws and shall be deemed for all purposes to be a part hereof. (I) For purposes of this section, (1) "Change of Control" means a change of control of the Corporation of a nature that would be required to be reported in response to Item 5(f) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Securities Exchange Act of 1934 (the "Act"), whether or not the Corporation is then subject to such reporting requirement; provided, however, that, without limitation, a Change of Control shall be deemed to have occurred if (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Corporation representing 20% or more of the combined voting power of the Corporation's then outstanding securities without the prior approval of at least two-thirds of the members of the Board of Directors in office immediately prior to such person attaining such percentage interest; (ii) the Corporation is a party to a merger, consolidation, sale of assets or other reorganization, or a proxy contest, as a consequence of which members of the Board of Directors in office immediately prior to such transaction or event constitute less than a majority of the Board of Directors immediately thereafter; or (iii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (including for this purpose any new director whose election or nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board of Directors. (2) "Disinterested Director" means a director of the Corporation who is not and was not a party to an action, suit or proceeding in respect of which indemnification is sought by a director, officer, employee or agent. (3) "Independent Counsel" means a law firm, or a member of a law firm, that (i) is experienced in matters of corporation law; (ii) neither presently is, nor in the past five years has been, retained to represent the - 10 - 12 Corporation, the director, officer, employee or agent claiming indemnification or any other party to the action, suit, or proceeding giving rise to a claim for indemnification under this section, in any matter material to the Corporation, the claimant or any such other party, and (iii) would not, under applicable standards of professional conduct then prevailing, have a conflict of interest in representing either the Corporation or such director, officer, employee or agent in an action to determine the Corporation's or such person's rights under this section. (J) The Indemnification and advancement of expenses herein provided, or granted pursuant hereto, shall not be deemed exclusive of any other rights to which any of those indemnified or eligible for advancement of expenses may be entitled under any agreement, vote of stockholders or Disinterested Directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person. Notwithstanding any amendment, alteration or repeal of this section or any of its provisions, or of any of the procedures established by the Board of Directors pursuant to subsection (H) hereof, any person who is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of any partnership, joint venture, employee benefit plan or other enterprise shall be entitled to indemnification in accordance with the provisions hereof and thereof with respect to any action taken or omitted prior to such amendment, alteration or repeal except to the extent otherwise required by law. (K) No indemnification shall be payable pursuant to this section with respect to any action against the Corporation commenced by an officer, director, employee or agent unless the Board of Directors shall have authorized the commencement thereof or unless and to the extent that this section or the procedures established pursuant to subsection (H) shall specifically provide for indemnification of expenses relating to the enforcement of rights under this section and such procedures. ARTICLE IV. COMMITTEES SECTION 1. Appointment and Powers. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more - 11 - 13 committees, each committee to consist of two or more of the directors of the Corporation, which, to the extent provided in said resolution or in these by-laws, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be stated in these by-laws or as may be determined from time to time by resolution adopted by the Board of Directors. SECTION 2. Term of Office and Vacancies. Each member of a committee shall continue in office until a director to succeed him shall have been elected and shall have qualified, or until he ceases to be a director or until he shall have resigned or shall have been removed in the manner hereinafter provided. Any vacancy in a committee shall be filled by the vote of a majority of the whole Board of Directors at any regular or special meeting thereof. SECTION 3. Alternates. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. SECTION 4. Organization. Unless otherwise provided by the Board of Directors or these by-laws, each committee shall appoint a chairman. Each committee shall keep a record of its acts and proceedings and report the same from time to time to the Board of Directors. SECTION 5. Resignations. Any regular or alternate member of a committee may resign at any time by giving written notice to the Chairman of the Board or to the Secretary of the Corporation. Such resignation shall take effect at the time of the receipt of such notice or at any later time specified therein, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 6. Removal. Any regular or alternate member of a committee may be removed with or without cause at any time by resolution passed by a majority of the whole Board of Directors at any regular or special meeting for which notice of the purpose was given. SECTION 7. Meetings. Regular meetings of each committee, of which no notice shall be necessary, shall be held on such days and at such places as the chairman of the committee shall determine or as shall be fixed by a resolution passed by a majority of all the members of such committee. Special meetings of - 12 - 14 each committee will be called by the Secretary at the request of any two members of such committee, or in such other manner as may be determined by the committee. Notice of each special meeting of a committee shall be mailed to each member thereof at least two days before the meeting or shall be telegraphed to him or given personally or by telephone at least one day before the meeting. Every such notice shall state the time and place, but need not state the purposes of the meeting. No notice of any meeting of a committee shall be required to be given to any alternate. SECTION 8. Quorum and Manner of Acting. Unless otherwise provided by resolution of the Board of Directors, a majority of a committee (including alternates when acting in lieu of regular members of such committee) shall constitute a quorum for the transaction of business and the act of a majority of those present at a meeting at which a quorum is present shall be the act of such committee. The members of each committee shall act only as a committee and the individual members shall have no power as such. SECTION 9. Compensation. Each regular or alternate member of a committee shall be paid such compensation, if any, as shall be fixed by the Board of Directors. ARTICLE V. OFFICERS SECTION 1. Officers. The officers of the Corporation shall be a Chairman and a Vice Chairman of the Board of Directors, each of whom shall be chosen from the members of the Board of Directors, one or more Executive Vice Presidents, one or more Vice Presidents (one or more of whom may be Senior Vice Presidents or otherwise as may be designated by the Board), a Secretary and a Treasurer, all of whom shall be elected by the Board of Directors. Any two or more offices may be held by the same person. The Board of Directors may also from time to time elect such other officers as it deems necessary. SECTION 2. Term of Office. Each officer shall hold office until his successor shall have been duly elected and qualified in his stead, or until his death or until he shall have resigned or shall have been removed in the manner hereinafter provided. - 13 - 15 SECTION 3. Additional Officers; Agents. The Chairman of the Board may from time to time appoint and remove such additional officers and agents as may be deemed necessary. They shall hold office for such period, have such authority, and perform such duties as in these by-laws provided or as the Chairman of the Board or an Executive Vice President may from time to time prescribe. The Board of Directors or the Chairman of the Board may from time to time authorize any officer to appoint and remove agents and employees and to prescribe their powers and duties. SECTION 4. Salaries. Unless otherwise provided by resolution passed by a majority of the whole Board, the salaries of all officers elected by the Board of Directors shall be fixed by the Board of Directors. SECTION 5. Removal. Except where otherwise expressly provided in a contract authorized by the Board of Directors, any officer may be removed, either with or without cause, by the vote of a majority of the Board at any regular or special meeting or, except in the case of an officer elected by the Board, by any superior officer upon whom the power of removal may be conferred by the Board or by these by-laws. SECTION 6. Resignations. Any officer elected by the Board of Directors may resign at any time by giving written notice to the Board or to the Chairman of the Board or to the Secretary. Any other officer may resign at any time by giving written notice to the Chairman of the Board or to an Executive Vice President. Any such resignation shall take effect at the date of receipt of such notice or at any later time specified therein, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 7. Vacancies. A vacancy in any office because of death, resignation, removal, or otherwise, shall be filled for the unexpired portion of the term in the manner provided in these by-laws for regular election or appointment to such office. SECTION 8. Chairman of the Board of Directors. The Chairman of the Board of Directors shall be chief executive officer of the Corporation and, subject to the control of the Board of Directors, shall have general and overall charge of the business and affairs of the Corporation and of its officers. He shall keep the Board of Directors appropriately informed on the business and affairs of the Corporation. He shall preside at all meetings of the stockholders and of the Board of Directors and shall enforce the observance of the rules of order for the meetings of the Board and the stockholders and the by-laws of the Corporation. - 14 - 16 In the case of his absence or disability, the person who may be designated by the Board of Directors shall perform all his duties and functions and exercise all his powers and be subject to all the restrictions as are applicable to him. SECTION 9. Executive Vice Presidents. One or more Executive Vice Presidents shall be chief operating officers of components of the Corporation designated by the Chairman of the Board and, subject to the control of the Chairman of the Board, shall direct and be responsible for the operation of the business and affairs of such designated components of the Corporation. Each Executive Vice President shall keep the Chairman of the Board and, as he or it may request, the Board of Directors, appropriately informed on the business and affairs of the designated components of the Corporation. SECTION 10. Vice Chairman of the Board of Directors. The Vice Chairman of the Board of Directors shall be senior advisor to the chief executive and chief operating officers of the Corporation and, subject to the control of the Chairman of the Board, shall perform such duties as may from time to time be assigned by the Chairman of the Board or the Executive Vice Presidents. SECTION 11. Vice Presidents. The Vice Presidents shall perform such duties as may from time to time be assigned to them or any of them by the Chairman of the Board, an Executive Vice President or the Board of Directors. SECTION 12. Secretary. The Secretary shall keep or cause to be kept in books provided for the purpose the minutes of the meetings of the stockholders, of the Board of Directors and of any committee constituted pursuant to Article IV of these by-laws. He shall be custodian of the corporate seal and see that it is affixed to all documents as required and attest the same. He shall perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him. SECTION 13. Assistant Secretaries. At the request of the Secretary, or in his absence or disability, the Assistant Secretary designated by him shall perform all the duties of the Secretary and, when so acting, shall have all the powers of, and be subject to all the restrictions upon, the Secretary. The Assistant Secretaries shall perform such other duties as from time to time may be assigned to them. SECTION 14. Treasurer. The Treasurer shall have charge of and be responsible for the receipt, disbursement and safekeeping of all funds and securities of the Corporation. He shall deposit all such funds in the name of the Corporation in such banks, trust companies or other depositories as shall - 15 - 17 be selected in accordance with the provisions of these by-laws. From time to time and whenever requested to do so, he shall render statements of the condition of the finances of the Corporation to the Board of Directors. He shall perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him. SECTION 15. Assistant Treasurers. At the request of the Treasurer, or in his absence or disability, the Assistant Treasurer designated by him shall perform all the duties of the Treasurer and, when so acting, shall have all the powers of, and be subject to all the restrictions upon, the Treasurer. The Assistant Treasurers shall perform such other duties as from time to time may be assigned to them. SECTION 16. Certain Agreements. The Board of Directors shall have power to authorize or direct the proper officers of the Corporation, on behalf of the Corporation, to enter into valid and binding agreements in respect of employment, incentive or deferred compensation, stock options, and similar or related matters, notwithstanding the fact that a person with whom the Corporation so contracts may be a member of its Board of Directors. Any such agreement may validly and lawfully bind the Corporation for a term of more than one year, in accordance with its terms, notwithstanding the fact that one of the elements of any such agreement may involve the employment by the Corporation of an officer, as such, for such term. ARTICLE VI. AUTHORIZATIONS SECTION 1. Contracts. The Board of Directors, except as in these by-laws otherwise provided, may authorize any officer, employee or agent of the Corporation to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. SECTION 2. Loans. No loan shall be contracted on behalf of the Corporation and no negotiable paper shall be issued in its name, unless authorized by the Board of Directors. SECTION 3. Checks, Drafts, Etc. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in - 16 - 18 the name of the Corporation shall be signed by such officer or officers, employee or employees, of the Corporation as shall from time to time be determined in accordance with authorization of the Board of Directors. SECTION 4. Deposits. All funds of the Corporation shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board of Directors may from time to time designate, or as may be designated by any officer or officers of the Corporation to whom such power may be delegated by the Board, and for the purpose of such deposit the officers and employees who have been authorized to do so in accordance with the determinations of the Board may endorse, assign and deliver checks, drafts, and other orders for the payment of money which are payable to the order of the Corporation. SECTION 5. Proxies. Except as otherwise provided in these by-laws or in the Certificate of Incorporation, and unless otherwise provided by resolution of the Board of Directors, the Chairman of the Board, or any other officer may from time to time appoint an attorney or attorneys or agent or agents of the Corporation, in the name and on behalf of the Corporation to cast the votes which the Corporation may be entitled to cast as a stockholder or otherwise in any other corporation any of whose stock or other securities may be held by the Corporation, at meetings of the holders of the stock or other securities of such other corporations, or to consent in writing to any action by such other corporation, and may instruct the person or persons so appointed as to the manner of casting such vote or giving such consent, and may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal, or otherwise, all such written proxies or other instruments as he may deem necessary or proper in the premises. ARTICLE VII. SHARES AND THEIR TRANSFER SECTION 1. Certificates of Stock. Certificates for shares of the stock of the Corporation shall be in such form as shall be approved by the Board of Directors. They shall be numbered in the order of their issue, by class and series, and shall be signed by the Chairman of the Board, an Executive Vice President or a Vice President, and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Corporation. If such certificate is countersigned (1) by a transfer agent other than the Corporation or its employee, or, (2) by a - 17 - 19 registrar other than the Corporation or its employee, any other signature on the certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. SECTION 2. Record Ownership. A record of the name and address of the holder of each certificate, the number of shares represented thereby and the date of issuance thereof shall be made on the Corporation's books. The Corporation shall be entitled to treat the holder of record of any share of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, except as required by law. SECTION 3. Transfer of Stock. Shares of stock shall be transferable on the books of the Corporation by the person named in the certificate for such stock in person or by his attorney or other duly constituted representative upon surrender of such certificate with an assignment endorsed thereon or attached thereto duly executed and with such guarantee of signature as the Corporation may reasonably require. SECTION 4. Lost, Destroyed and Mutilated Certificates. The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. SECTION 5. Transfer Agent and Registrar; Regulations. The Corporation shall, if and whenever the Board of Directors shall so determine, maintain one or more transfer offices or agencies, each in charge of a transfer agent designated by the Board of Directors, where the shares of the stock of the Corporation shall be directly transferable, and also one or more registry offices, each in charge of a registrar designated by the Board of Directors, where such shares of stock shall be registered, and no certificate for shares of the stock of the Corporation, in respect of which a registrar and transfer agent shall have been designated, shall be valid unless countersigned by such transfer agent and registered by such registrar. The Board of Directors may also make such - 18 - 20 additional rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates for shares of stock of the Corporation. SECTION 6. Fixing Record Date. For the purpose of determining the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed (1) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held and (2) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 7. Examination of Books by Stockholders. The Board of Directors shall, subject to the laws of the State of Delaware, have power to determine from time to time, whether and to what extent and under what conditions and regulations the accounts and books of the Corporation, or any of them, shall be open to the inspection of the stockholders; and no stockholder shall have any right to inspect any book or document of the Corporation, except as conferred by the laws of the State of Delaware, unless and until authorized so to do by resolution of the Board of Directors or of the stockholders of the Corporation. ARTICLE VIII. NOTICE SECTION 1. Manner of Giving Written Notice. Any notice in writing required by law or by these by-laws to be given to any person may be delivered personally or may be given by depositing the same in the post office or letter - 19 - 21 box in a postpaid envelope addressed to such person at such address as appears on the books of the Corporation. Notice by mail shall be deemed to be given at the time when the same shall be mailed. SECTION 2. Waiver of Notice. Whenever any notice is required to be given to any person, a waiver thereof by such person in writing or by telegraph or cable, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE IX. SEAL The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal" and "Delaware." ARTICLE X. FISCAL YEAR The fiscal year of the Corporation shall begin on the first day of October in each year. ARTICLE XI. AMENDMENTS All by-laws of the Corporation shall be subject to alteration, amendment or repeal, and new by-laws not inconsistent with any provision of the Certificate of Incorporation or any provision of law may be made, either by the affirmative vote of the holders of record of a majority of the outstanding stock of the Corporation entitled to vote in respect thereof, given at an annual meeting or at any special meeting, provided that notice of the proposed alteration, amendment or repeal or of the proposed new by-laws be included in the notice of such meeting, or by the Board of Directors at any regular or special meeting. By-laws - 20 - 22 made, altered or amended by the Board of Directors shall be subject to alteration, amendment or repeal by the stockholders or by the Board. APPENDIX PROCEDURES FOR SUBMISSION AND DETERMINATION OF CLAIMS FOR INDEMNIFICATION PURSUANT TO ARTICLE III, SECTION 15 OF THE BY-LAWS. SECTION 1. Purpose. Effective as of November 5, 1986, the Board of Directors of Rockwell International Corporation, a Delaware corporation (the "Corporation"), has adopted these Procedures for Submission and Determination of Claims for Indemnification Pursuant to Article III, Section 15 of the by-laws (the "Procedures") to implement the provisions of Article III, Section 15 of the by-laws of the Corporation (the "by-laws") in compliance with the requirement of subsection (H) thereof. SECTION 2. Definitions. For purposes of these Procedures: (A) All terms that are defined in Article III, Section 15 of the by-laws shall have the meanings ascribed to them therein when used in these Procedures unless otherwise defined herein. (B) "Expenses" include all reasonable attorneys' fees, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness in, a Proceeding; and shall also include such retainers as counsel may reasonably require in advance of undertaking the representation of an indemnitee in a Proceeding. (C) "Indemnitee" includes any person who was or is, or is threatened to be made, a witness in or a party to any Proceeding by reason of the fact that he is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent (except in each of the foregoing situations to the extent any agreement, arrangement or understanding of agency contains provisions that supersede or abrogate indemnification under Article III, Section 15 of the by-laws) of another - 21 - 23 corporation or of any partnership, joint venture, trust, employee benefit plan or other enterprise. (D) "Proceeding" includes any action, suit, arbitration, alternative dispute resolution mechanism, investigation, administrative hearing or any other proceeding, whether civil, criminal, administrative or investigative, except one initiated by an Indemnitee unless the Board of Directors shall have authorized the commencement thereof. SECTION 3. Submission and Determination of Claims. (A) To obtain indemnification or advancement of Expenses under Article III, Section 15 of the by-laws, an Indemnitee shall submit to the Secretary of the Corporation a written request therefor, including therein or therewith such documentation and information as is reasonably available to the Indemnitee and is reasonably necessary to permit a determination as to whether and what extent the Indemnitee is entitled to indemnification or advancement of Expenses, as the case may be. The Secretary shall, promptly upon receipt of a request for indemnification, advise the Board of Directors thereof in writing if a determination in accordance with Article III, Section 15(E) of the by-laws is required. (B) Upon written request by an Indemnitee for indemnification pursuant to Section 3(A) hereof, a determination with respect to the Indemnitee's entitlement thereto in the specific case, if required by the by-laws, shall be made in accordance with Article III, Section 15(E) of the by-laws, and, if it is so determined that the Indemnitee is entitled to indemnification, payment to the Indemnitee shall be made within ten days after such determination. The Indemnitee shall cooperate with the person, persons or entity making such determination, with respect to the Indemnitee's entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to the Indemnitee and reasonably necessary to such determination. (C) If entitlement to indemnification is to be made by Independent Counsel pursuant to Article III, Section 15(E) of the by-laws, the Independent Counsel shall be selected as provided in this Section 3(C). If a Change of Control shall not have occurred, the Independent Counsel shall be selected by the Board of Directors, and the Corporation shall give written notice to the Indemnitee advising him of the identity of the Independent Counsel so selected. If a Change of Control shall have occurred, the Independent Counsel shall be selected by the Indemnitee (unless the Indemnitee shall request that such selection be made by the - 22 - 24 Board of Directors, in which event the immediately preceding sentence shall apply), and the Indemnitee shall give written notice to the Corporation advising it of the identity of the Independent Counsel so selected. In either event, the Indemnitee or the Corporation, as the case may be, may, within seven days after such written notice of selection shall have been given, deliver to the Corporation or to the Indemnitee, as the case may be, a written objection to such selection. Such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of "Independent Counsel" as defined in Article III, Section 15 of the by-laws, and the objection shall set forth with particularity the factual basis of such assertion. If such written objection is made, the Independent Counsel so selected may not serve as Independent Counsel unless and until a court has determined that such objection is without merit. If, within twenty days after the next regularly scheduled Board of Directors meeting following submission by the Indemnitee of a written request for indemnification pursuant to Section 3(A) hereof, no Independent Counsel shall have been selected and not objected to, either the Corporation or the Indemnitee may petition the Court of Chancery of the State of Delaware or other court of competent jurisdiction for resolution of any objection which shall have been made by the Corporation or the Indemnitee to the other's selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Court or by such other person as the Court shall designate, and the person with respect to whom an objection is favorably resolved or the person so appointed shall act as Independent Counsel under Article III, Section 15(E) of the by-laws. The Corporation shall pay any and all reasonable fees and expenses (including without limitation any advance retainers reasonably required by counsel) of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Article III, Section 15(E) of the by-laws, and the Corporation shall pay all reasonable fees and expenses (including without limitation any advance retainers reasonably required by counsel) incident to the procedures of Article III, Section 15(E) of the by-laws and this Section 3(C), regardless of the manner in which Independent Counsel was selected or appointed. Upon the delivery of its opinion pursuant to Article III, Section 15 of the by-laws or, if earlier, the due commencement of any judicial proceeding or arbitration pursuant to Section 4(A)(3) of these Procedures, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing). (D) If a Change of Control shall have occurred, in making a determination with respect to entitlement to indemnification under the by-laws, the person, persons or entity making such determination shall presume that an Indemnitee is entitled to indemnification under the by-laws if the Indemnitee has submitted a request for indemnification in accordance with Section 3(A) hereof, and the - 23 - 25 Corporation shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. SECTION 4. Review and Enforcement of Determination. (A) In the event that (1) advancement of Expenses is not timely made pursuant to Article III, Section 15(G) of the by-laws, (2) payment of indemnification is not made pursuant to Article III, Section 15(C) or (D) of the by-laws within ten days after receipt by the Corporation of written request therefor, (3) a determination is made pursuant to Article III, Section 15(E) of the by-laws that an Indemnitee is not entitled to indemnification under the by-laws, (4) the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Article III, Section 15(E) of the by-laws and such determination shall not have been made and delivered in a written opinion within ninety days after receipt by the Corporation of the written request for indemnification, or (5) payment of indemnification is not made within ten days after a determination has been made pursuant to Article III, Section 15(E) of the by-laws that an Indemnitee is entitled to indemnification or within ten days after such determination is deemed to have been made pursuant to Article III, Section 15(F) of the by-laws, the Indemnitee shall be entitled to an adjudication in an appropriate court of the State of Delaware, or in any other court of competent jurisdiction, of his entitlement to such indemnification or advancement of Expenses. Alternatively, the Indemnitee, at his option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the rules of the American Arbitration Association. The Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within one year following the date on which the Indemnitee first has the right to commence such proceeding pursuant to this Section 4(A). The Corporation shall not oppose the Indemnitee's right to seek any such adjudication or award in arbitration. (B) In the event that a determination shall have been made pursuant to Article III, Section 15(E) of the by-laws that an Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 4 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and the Indemnitee shall not be prejudiced by reason of that adverse determination. If a Change of Control shall have occurred, the Corporation shall have the burden of proving in any judicial proceeding or arbitration commenced pursuant to this Section 4 that the Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be. - 24 - 26 (C) If a determination shall have been made or deemed to have been made pursuant to Article III, Section 15 (E) or (F) of the by-laws that an Indemnitee is entitled to indemnification, the Corporation shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 4, absent (1) a misstatement or omission of a material fact in connection with the Indemnitee's request for indemnification, or (2) a prohibition of such indemnification under applicable law. (D) The Corporation shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 4 that the procedures and presumptions of these Procedures are not valid, binding and enforceable, and shall stipulate in any such judicial proceeding or arbitration that the Corporation is bound by all the provisions of these Procedures. (E) In the event that an Indemnitee, pursuant to this Section 4, seeks to enforce his rights under, or to recover damages for breach of, Article III, Section 15 of the by-laws or these Procedures in a judicial proceeding or arbitration, the Indemnitee shall be entitled to recover from the Corporation, and shall be indemnified by the Corporation against, any and all expenses (of the types described in the definition of Expenses in Section 2 of these Procedures) actually and reasonably incurred by him in such judicial proceeding or arbitration, but only if he prevails therein. If it shall be determined in such judicial proceeding or arbitration that the Indemnitee is entitled to receive part but not all of the indemnification or advancement of Expenses sought, the expenses incurred by the Indemnitee in connection with such judicial proceeding or arbitration shall be appropriately prorated. SECTION 5. Amendments. These Procedures may be amended at any time and from time to time in the same manner as any by-law of the Corporation in accordance with Article XI of the by-laws; provided, however, that notwithstanding any amendment, alteration or repeal of these Procedures or any provision hereof, any Indemnitee shall be entitled to utilize these Procedures with respect to any claim for indemnification arising out of any action taken or omitted prior to such amendment, alteration or repeal except to the extent otherwise required by law. - 25 - EX-10.A.2 4 ROCKWELL INTERNATIONAL 10-K 1 EXHIBIT-10-a-2 ROCKWELL INTERNATIONAL CORPORATION 1981 INCENTIVE STOCK OPTION PLAN FOR KEY EMPLOYEES STOCK OPTION AGREEMENT To: We are pleased to notify you that, in accordance with a determination of the Stock Option Committee established under the 1981 Incentive Stock Option Plan for Key Employees (the "Plan"), an incentive stock option to purchase shares of common stock of the Corporation at the price of per share has this day been granted to you. A copy of the Plan is enclosed. This option has been granted, and may be exercised, upon the terms and conditions set forth below. 1. Acceptance by Employee ---------------------- Please sign the enclosed copy of this agreement at the place indicated and return it to the Secretary of the Corporation. This option will be null and void if (a) such signed copy is not received by the Secretary by March 1, 1982, unless the Corporation (in its sole discretion) elects in writing to extend such period or (b) the Plan and certain related actions are not approved by the stockholders at the Corporation's 1982 Annual Meeting of Stockholders. 2. Exercise of Option ------------------ Subject to the provisions of the Plan, this option may be exercised by you in whole or in part (or, in the event of your death, by your estate or by any person who acquires this option by bequest or inheritance or by reason of your death) from time to time during the term beginning one year from the date hereof, and ending ten years from the date hereof, provided that: (a) this stock option shall not be exercisable in whole or in part while there is outstanding, within the meaning of Section 422A of the Internal Revenue Code, any other incentive stock option which was earlier granted to you, and which earlier incentive stock option is for the purchase of capital stock of the Corporation or of a corporation which at 2 the time of granting of such incentive stock option was a parent or subsidiary of the Corporation or a predecessor of any of them, and (b) in the event of your death or termination of employment, the option may be exercised only in accordance with the provisions of the Plan applying to the exercise of an option in the event of death or termination of employment (Section 7). 3. Notice of Exercise of Stock Option and Payment --------------------------- The exercise in whole or in part of this stock option shall be effective only upon receipt by the Secretary of written notice of exercise specifying the number of shares to be purchased. The purchase price of the shares covered by the exercise may be paid entirely in cash by forwarding to the Secretary, along with a written notice of exercise in the form of Attachment 1, your check in the full amount of the purchase price. Alternatively, the purchase price may be paid in shares of the common stock of the Corporation which you already own, valued in accordance with Section 4(f) of the Plan (other than any shares acquired upon a partial exercise of this option within the preceding six months), or in a combination of cash and such shares. If you choose to use already-owned shares in connection with an exercise of this option, you should forward to the Secretary a written notice of exercise in the form of Attachment 2. The Corporation will advise you of the number of shares and any cash required to pay the purchase price in full, and the shares and any cash required in payment must be delivered to the Secretary no later than five (5) business days following the Secretary's receipt of your written notice of exercise. Certificates representing the number of shares purchased will be issued as soon thereafter as practicable. 4. Transferability --------------- This option is not transferable by you otherwise than by will or by the laws of 3 descent and distribution, and is exercisable, during your lifetime, only by you. 5. Subject to Stock Option Plan ---------------------------- This option shall be subject in all respects to all the provisions of the Plan, as it may be amended. 6. Applicable Laws and Regulations ------------------------------- This agreement and the Corporation's obligation to issue shares hereunder are subject to applicable laws and regulations. This option is an incentive stock option under the provisions of the Federal income tax laws. The federal income tax consequences under current provisions of the Internal Revenue Code applicable to exercises of incentive stock options are described in Attachment 3. Attached are the following: Attachment 1 - Option Exercise Form - Cash Only Attachment 2 - Option Exercise Form - Stock or Stock and Cash Attachment 3 - Description of Federal Income Tax Consequences ROCKWELL INTERNATIONAL CORPORATION By _______________________________ Dated: Agreed to this __________ day of _____________ , 198_ ____________________________ Employee Signature 4 ATTACHMENT 1 OPTION EXERCISE FORM- CASH ONLY ----------------------- Rockwell International Corporation 600 Grant Street Pittsburgh, PA 15219 Attention: Mr. William F. Swanson, Jr. Secretary Reference: Incentive Stock Option Exercise Gentlemen: Subject to the terms and conditions of the applicable stock option plan and agreement thereunder, I hereby exercise, to the extent hereinafter specified, the incentive stock option granted to me on ________________, 19___. This exercise covers ___________ of the shares covered by such option at the price of $_________ per share. Enclosed is a check in the amount of $____________ payable to Rockwell International Corporation, covering the price of said shares. Please have the stock registered as follows: Social Security Number: __________________________________ Name: ________________________________________________ ________________________________________________ Address: ________________________________________________ ________________________________________________ (Zip Code) Date: _____________________, 19___ Very truly yours, ___________________________ 5 ATTACHMENT 2 OPTION EXERCISE FORM- CASH ONLY ----------------------- Rockwell International Corporation 600 Grant Street Pittsburgh, PA 15219 Attention: Mr. William F. Swanson, Jr. Secretary Reference: Incentive Stock Option Exercise Gentlemen: Subject to the terms and conditions of the applicable stock option plan and agreement thereunder, I hereby exercise, to the extent hereinafter specified, the incentive stock option granted to me on ________________, 19___. This exercise covers ___________ of the shares covered by such option at the price of $_________ per share. I wish to use shares of Rockwell International common stock that I currently own in connection with my exercise of the above reference stock option. I hereby represent that none of such shares were acquired upon a partial exercise of this option within the preceding six months. I understand that you will advise me of the number of shares and any cash that I should deliver to Rockwell to pay the full purchase price of the shares covered by this exercise, and that certificates representing the number of shares purchased will be issued only after I deliver to the Corporation the number of shares required or a combination of shares and cash in full payment of the exercise price. I hereby agree to deliver to the Corporation no later than five (5) business days following the date of this exercise the number of shares required or a combination of shares and cash in full payment of the exercise price, and an executed stock transfer power covering the shares delivered. It is my understanding that following my payment of the exercise price, I will receive from the Corporation a stock certificate representing the same number of shares I delivered to the Corporation and a second stock certificate representing the additional shares due as a result of this exercise. The first certificate will be issued in the same name or names in which the shares I delivered to the Corporation were registered. Please register the shares represented by the second certificate as follows: Social Security Number: __________________________________ Name: ________________________________________________ ________________________________________________ Address: ________________________________________________ ________________________________________________ (Zip Code) Date: _____________________, 19___ Very truly yours, ___________________________ 6 STOCK POWER SEPARATE FROM CERTIFICATE ------------------------------------- FOR VALUE RECEIVED, (I) (We), _____________________________________ (insert name(s)) hereby sell, assign and transfer unto Rockwell International Corporation the ___________________ shares of the common stock of Rockwell International (insert number) Corporation standing in the name(s) of _____________________________________ on (Name(s) on certificate(s)) the books of said Rockwell International Corporation represented by Certificate(s) No(s). ________________ herewith and do hereby irrevocably constitute and appoint Mellon Bank N.A. attorney to transfer the said stock on the books of Rockwell International with full power of substitution in the premises. Dated: _________________ _____________________________ (Signature) WITNESS ______________________________ _____________________________ (Signature) 7 ATTACHMENT 3 DESCRIPTION OF FEDERAL INCOME TAX CONSEQUENCES ---------------------------------------------- The Corporation has been advised by Counsel as follows: An optionee will not realize taxable income upon the exercise of an incentive stock option, and the Corporation will not be entitled to any deduction. If the optionee does not dispose of the stock acquired within one year after its receipt (and two years after the option was granted), gain or loss realized on the subsequent disposition of the stock will be treated as long term capital gain or loss. If the stock is disposed of prior to either of those times, the optionee will realize ordinary income in an amount equal to the lesser of (i) the excess of the fair market value of the stock on the date of exercise over the option price; or (ii) if the disposition is a taxable sale or exchange, the amount of gain realized. Upon such disposition, the Corporation will be entitled to a deduction in the same amount and at the same time as the optionee realizes such ordinary income. Due to the complexity of the federal income tax laws and the differing personal circumstances of each optionee, the Corporation urges each optionee to seek assistance from his personal tax advisor. 8 ROCKWELL INTERNATIONAL CORPORATION 1981 INCENTIVE STOCK OPTION PLAN FOR KEY EMPLOYEES 1. PURPOSE The purpose of the Plan is to provide an incentive, in the form of a proprietary interest in the Corporation, to officers and other key employees who are in a position to contribute materially to the successful operation of the business of the Corporation, to increase their interest in the Corporation's welfare, and to provide a means through which the Corporation can attract and retain employees of outstanding abilities. 2. DEFINITIONS As used in the Plan, "Corporation" means Rockwell International Corporation, and those of its subsidiary corporations designated by the Board of Directors to participate in the Plan; "Board of Directors" means the Board of Directors of Rockwell International Corporation; "employee" includes officers and other key employees of the Corporation, but excludes directors who are not also employees of the Corporation; and "fair market value" means the closing price of the common stock of Rockwell International Corporation as reported in the New York Stock Exchange - Composite Transactions on the date of a determination (or on the next preceding day such stock was traded if it was not traded on the date of a determination). "Incentive stock option" means an option which is an incentive stock option as defined in Section 422A of the Internal Revenue Code. "Unused limit carryover" means, with respect to any calendar year, the aggregate for each of the three next preceding calendar years (but only after 1980) of one-half of the excess, if any, of $100,000 over the aggregate fair market value, determined as of the time an incentive stock option was granted, of the shares for which an employee was granted incentive stock options under all plans of the Corporation and any parent or subsidiary of the Corporation in any such preceding calendar year: provided, however, the amount of incentive stock options granted during any calendar year shall be treated as first using up the $100,000 limitation of Section 3 and shall then be treated as using up amounts of unused limit carryovers for incentive stock options not granted in any calendar year in the order of the calendar years in which such carryovers arose. 3. STOCK OPTION COMMITTEE (a) The Stock Option Committee (the "Committee") shall consist of three or more of those members of the Board of Directors who are not eligible to receive incentive stock options under the Plan. The members of the Committee shall be designated by the Board of Directors. A majority of the members of the Committee shall constitute a quorum. The vote of a majority of a quorum shall constitute action by the Committee. (b) The Committee shall determine the employees to whom incentive stock options may be granted and the number of shares to be subject to each option. Not more than 10% of the total number of shares available under the Plan shall be subject to option to any one employee. The aggregate fair market value (determined as of the date the option is granted) of the shares for which any employee may be granted incentive stock options in any calendar year under all plans of the Corporation and any parent or subsidiary of the Corporation shall not exceed $100,000 plus any unused limit carryover to such year. (c) As and to the extent authorized by the Board of Directors, the Committee may exercise the powers and authority vested in the Board of Directors under the Plan. 4. TERMS OF INCENTIVE STOCK OPTIONS The terms of each incentive stock option granted under the Plan shall be determined by the Board of Directors, consistent with the provisions of the Plan, including the following: (a) The purchase price of the stock subject to option shall not be less than the fair market value of the stock on the date the option is granted. (b) Each incentive stock option may be exercised in whole or in part from time to time during such period as the option shall specify, provided that no option shall be exercisable prior to one year nor after ten years from the date of the grant thereof, and provided further that incentive stock options granted in substitution for existing options under prior stock option plans of the Corporation shall be deemed 9 for the purpose of exercise only to have been granted on the date of the grant under the prior plan. (c) An incentive stock option shall not be exercisable while there is outstanding, within the meaning of Section 422A of the Internal Revenue Code, any other incentive stock option which was earlier granted to the employee, and which earlier incentive stock option is for the purchase of capital stock of Rockwell International Corporation or of a corporation which at the time of granting of such other incentive stock option was a parent or subsidiary of Rockwell International Corporation or a predecessor of any of them. (d) Each incentive stock option may provide for related stock appreciation rights. (e) Each incentive stock option may provide that the optionee shall represent at the time of each exercise of option or stock appreciation right that the shares purchased are being acquired for investment and not with a view to distribution thereof. (f) The purchase price of the shares with respect to which an incentive stock option is exercised shall be payable in full in cash or, to the extent authorized by the Board of Directors at the time such an option is granted under the Plan, (i) in shares of common stock of Rockwell International Corporation or (ii) in a combination of cash and such shares. The value of any share delivered in payment of the purchase price shall be its fair market value on the date the option is exercised. No fractional shares shall be issued. (g) An incentive stock option or stock appreciation right shall not be assignable or transferable by the employee to whom granted otherwise than by will or by the laws of descent and distribution, and shall be exercisable, during his lifetime, only by him. (h) No person shall have the rights of a stockholder wiht respect to shares subject to an option, but shall have such rights only with respect to shares acquired on exercise of an option or stock appreciation right. 5. GRANTING OF INCENTIVE STOCK OPTIONS (a) The Board of Directors may grant, from time to time, in accordance with determinations of the Committee, incentive stock options to employees to purchase shares of common stock of Rockwell International Corporation, under the Plan. The total number of shares of stock which may be purchased pursuant to incentive stock options granted under the Plan shall not exceed 2,000,000, except as provided in Paragraph 8. They may consist in whole or in part of unissued or reacquired shares, if for any reason (other than surrender of incentive stock option rights upon exercise of stock appreciation rights as provided in Paragraph 6) shares as to which an incentive stock option has been granted cease to be subject to purchase thereunder, then such shares shall again be available for option under the Plan. (b) No incentive stock option shall be granted under the Plan after December 15, 1991, but incentive stock options theretofore granted may extend beyond that date; provided, however, that stock appreciation rights may be granted after December 15, 1991 with respect to then outstanding incentive stock options. 6. STOCK APPRECIATION RIGHTS As the Board of Directors may determine, stock appreciation rights may be granted in conjunction with all or any part of any incentive stock option granted under the Plan, either at the time of the incentive stock option grant or at any time thereafter during the term of the incentive stock option. Stock appreciation rights shall entitle the optionee, upon exercise of such rights, to surrender the related incentive stock option, or any part thereof, and to receive a payment equal to the excess of the fair market value, on the date of such exercise, of the shares covered by such incentive stock option, or part thereof, over the option price of such shares. Upon exercise of a stock appreciation right and surrender of the related incentive stock option or part thereof, such incentive stock option, to the extent surrendered, shall not thereafter be exercisable. The payment contemplated by this Paragraph may be made in shares of common stock of Rockwell International Corporation valued at fair market value, on the date of exercise, or in cash or partly in cash and partly in shares of common stock, as the Board of Directors may determine. The shares of common stock covered by the incentive stock option, or part thereof, so surrendered shall not again be available for option under 2 10 the Plan. Any shares of common stock delivered as payment upon any such surrender may consist in whole or in part of unissued or reacquired shares and shall not be charged against the number of shares of common stock available for option under the Plan. 7. DEATH OR TERMINATION OF EMPLOYMENT (a) if an optionee dies his incentive stock option may be exercised only within one year from the date of death. If an optionee's employment by the Corporation is terminated for cause, his incentive stock option shall expire forthwith. If an optionee's employment by the Corporation is terminated other than by death or for cause, his incenitve stock option may be exercised only within three months from the date of termination of employment. (b) Notwithstanding any other provision hereof, an incenitve stock option may be exercised pursuant to this Paragraph 7 only to the extent the optionee was entitled to exercise the incentive stock option at the time of termination of employment or death and, in any event, may not be exercised after the expiration of ten years from the date of the grant thereof. 8. ADJUSTMENTS UPON CHANGES IN STOCK If there shall be any change in or affecting the stock subject to the Plan, or to any incentive stock option granted thereunder, through merger, consolidation, reorganization, recapitalization, stock dividend, stock split or combination, the Board of Directors may make appropriate adjustments in the aggregate number of shares subject to the Plan and the number of shares and the price per share subject to outstanding incentive stock options and may assume old incentive stock options or substitute new incentive stock options for old incentive stock options, regardless of whether the option price of any such incentive stock option is less than the then fair market value of the subject shares. 9. MISCELLANEOUS (a) For the purpose of the Plan, an employee on leave of absence will be considered as still in the employ of the Corporation unless otherwise provided in an agreement between the employee and the Corporation. (b) The Corporation shall have the right, in connection with the exercise of any stock appreciation right, to deduct from any payment to be made by the Corporation under the Plan an amount equal to the taxes required to be withheld by law with respect to such exercise or to require the employee or other person effecting such exercise to pay to it an amount sufficient to provide for any such taxes so required to be withheld. 10. FINALITY OF DETERMINATIONS The Board of Directors shall have the power to interpret the Plan. All interpretations, determinations and actions by the Board of Directors or by the Committee shall be final, conclusive and binding upon all parties. 11. AMENDMENT AND TERMINATION The Board of Directors shall have the power in its discretion, to amend, suspend or terminate the Plan or incentive stock options or stock appreciation rights granted under the Plan at any time. It shall not, however, have power to change the class of employees eligible to receive incentive stock options under the Plan, or (except as otherwise provided in the Plan) (i) increase the number of shares subject to the Plan, or (ii) reduce the option price below the fair market value of the stock on the date the incentive stock option was granted. No amendment, suspension or termination of the Plan or incentive stock options granted under the Plan shall, except with the consent of the optionee, adversely affect rights under an incentive stock option previously granted; provided, however, that any suspension or termination by the Board of Directors of a stock appreciation right previously granted shall not be deemed to affect adversely rights under an incentive stock option previously granted. 12. EFFECTIVE DATE OF PLAN The Plan has been adopted by the Board of Directors of the Corporation on December 16, 1981, subject to approval by the stockholders of the Corporation. 3 EX-10.B.2 5 ROCKWELL INTERNATIONAL 10-K 1 EXHIBIT 10-b-2 -------------- ROCKWELL INTERNATIONAL CORPORATION 1979 STOCK PLAN FOR KEY EMPLOYEES STOCK OPTION AGREEMENT To: We are pleased to notify you that, in accordance with a determination of the Compensation Committee established under the 1979 Stock Plan for Key Employees (the "Plan"), an option to purchase shares of common stock of the Corporation at the price of per share has this day been granted to you. A copy of the Plan is enclosed. This option has been granted, and may be exercised, upon the terms and conditions set forth below. 1. Acceptance by Employee ---------------------- Please sign the enclosed copy of this agreement at the place indicated and return it to the Senior Assistant Secretary of the Corporation at Room 5009, 600 Grant Street, Pittsburgh, PA 15219. If the enclosed copy is not received by the Senior Assistant Secretary within FORTY-FIVE DAYS of the date hereof, the option will terminate and be of no effect, unless the Corporation (in its sole discretion) elects in writing to extend such period. 2. Exercise of Option ------------------ Subject to the provisions of the Plan, this option may be exercised by you in whole or in part (or, in the event of your death, by your estate or by any person who acquires this option by bequest or inheritance or by reason of your death) from time to time during the term beginning one year from the date of grant, and ending ten years from the date of grant, provided that in the event of your death or termination of employment, the option may be exercised only in accordance with the following provisions as applicable: (i) if you should die, the option may be exercised only within three years from your date of death; (ii) if your employment by the Corporation is terminated for cause, the option shall expire forthwith, and (iii) if your employment with the Corporation is terminated other than by death or for cause, the option may be exercised only within three months from the date of your termination of employment, except that if your employment by the 2 Corporation terminates by reason of your retirement under a retirement plan of the Corporation or a subsidiary or affiliate of the Corporation the option may be exercised only within three years from the date of your retirement. 3. Notice of Exercise of Stock Option and Payment --------------------------- The exercise in whole or in part of this stock option shall be effective only upon receipt by the Secretary of the Corporation of written notice of exercise specifying the number of shares to be purchased. The purchase price of the shares covered by the exercise may be paid entirely in cash by forwarding to the Secretary, along with a written notice of exercise in the form of Attachment 1, your check in the full amount of the purchase price. Alternatively, the purchase price may be paid in shares of the common stock of the Corporation which you already own, valued in accordance with Section 4(e) of the Plan, or in a combination of cash and such shares. If you choose to use already-owned shares in connection with an exercise of this option, you should forward to the Secretary a written notice of exercise in the form of Attachment 2. The Corporation will advise you of the number of shares and any cash required to pay the purchase price in full, and the shares and any cash required in payment must be delivered to the Secretary no later than five (5) business days following the Secretary's receipt of your written notice of exercise. Certificates representing the number of shares purchased will be issued as soon thereafter as practicable. 4. Transferability --------------- This option is not transferable by you otherwise than by will or by the laws of descent and distribution, and is exercisable, during your lifetime, only by you. 5. Subject to Stock Option Plan ---------------------------- This option shall be subject in all respects to all the provisions of the Plan, as it may be amended. 6. Withholding ----------- The Corporation shall have the right, in connection with the exercise of the option in whole or in part, to deduct from any payment to be made by the Corporation under the Plan an amount equal to the taxes required -2- 3 to be withheld by law with respect to such exercise or to require the employee or other person effecting such exercise to pay to it an amount sufficient to provide for any such taxes so required to be withheld. 7. Applicable Laws and Regulations ------------------------------- This agreement and the Corporation's obligation to issue shares hereunder are subject to applicable laws and regulations. This option is a nonqualified stock option under the provisions of the Federal income tax laws. The federal income tax consequences under current provisions of the Internal Revenue Code applicable to exercises of nonqualified stock options are described in Attachment 3. ROCKWELL INTERNATIONAL CORPORATION By _______________________________ Senior Assistant Secretary Room 5009 600 Grant Street Pittsburgh, PA 15219 Attachment 1 - Option Exercise Form - Cash Only Attachment 2 - Option Exercise Form - Stock or Stock and Cash Attachment 3 - Description of Federal Income Tax Consequences Dated: May 2, 1984 Agreed to this _________ day of ___________________, 1984 ________________________________ Employee Signature ________________________________ Address ________________________________ ________________________________ Social Security # -3- EX-10.B.3 6 ROCKWELL INTERNATIONAL 10-K 1 EXHIBIT 10-b-3 -------------- ROCKWELL INTERNATIONAL CORPORATION 1979 STOCK OPTION PLAN FOR KEY EMPLOYEES STOCK OPTION AND STOCK APPRECIATION RIGHTS AGREEMENT To: We are pleased to notify you that, in accordance with a determination of the Stock Option Committee established under the 1979 Stock Option Plan for Key Employees (the "Plan"), an option to purchase shares of common stock of the Corporation at the price of per share has this day been granted to you together with stock appreciation rights covering of the shares subject to the option. A copy of the Plan is enclosed. This option and the related stock appreciation rights have been granted, and may be exercised, upon the terms and conditions set forth below. 1. Acceptance by Employee ---------------------- Please sign the enclosed copy of this agreement at the place indicated and return it to the Secretary of the Corporation. This option and the related stock appreciation rights will terminate and be of no effect if such copy is not received by the Secretary within THIRTY DAYS OF THE DATE HEREOF, unless the Corporation (in its sole discretion) elects in writing to extend such period. 2. Exercise of Option and Related Stock Appreciation Rights -------------------------------------------------------- Subject to the provisions of the Plan, this option and the related stock appreciation rights may be exercised by you in whole or in part (or, in the event of your death, by your estate or by any person who acquires this option by bequest or inheritance or by reason of your death) from time to time during the term beginning one year from the date hereof, and ending ten years from the date hereof, provided that: (a) in the event of your death or 2 termination of employment, the option and the related stock appreciation rights may be exercised only in accordance with the provisions of the Plan applying to the exercise of an option in the event of death or termination of employment (Section 7), and (b) the stock appreciation rights may be exercised by you only during the period beginning on the third business day following the dates of public release of the Corporation's quarterly or annual statements of sales and earnings. If stock appreciation rights are exercised in whole or in part, the related option or part thereof shall be surrendered and thereafter shall not be exercisable. 3. Notice of Exercise of Stock Option and Payment ---------------------------------------------- The exercise in whole or in part of this stock option shall be effective only upon receipt by the Secretary of written notice specifying the number of shares to be purchased, accompanied by payment to the Corporation of the full purchase price of the shares which are the subject of the exercise. Certificates representing the number of shares purchased will be issued as soon thereafter as practicable. 4. Notice of Exercise of Stock Appreciation Rights ----------------------------------------------- The exercise in whole or in part of stock appreciation rights under this agreement shall be effective only upon receipt by the Secretary of written notice specifying the number of rights being exercised, which notice shall also serve as a surrender of the related option or part thereof. As soon as practicable following the Secretary's receipt of the written notice, you will receive payment equal to the excess of the fair market value (as defined in the Plan), on the date of such exercise, of the shares covered by the related option or part thereof -2- 3 over the option price of such shares. One half of the amount of such payment shall be in cash, and one half of the amount of such payment shall consist of shares of the Corporation's common stock valued at fair market value on the date of exercise, provided however that cash shall be paid with respect to any fractional interest in a share. 5. Transferability --------------- This option and the related stock appreciation rights are not transferable by you otherwise than by will or by the laws of descent and distribution, and are exercisable, during your lifetime, only by you. 6. Subject to Stock Option Plan ---------------------------- This option and the related stock appreciation rights shall be subject in all respects to all the provisions of the Plan, as it may be amended. 7. Withholding ----------- The Corporation shall have the right, in connection with the exercise of the option or stock appreciation rights in whole or in part, to deduct from any payment to be made by the Corporation under the Plan an amount equal to the taxes required to be withheld by law with respect to such exercise or to require the employee or other person affecting such exercise to pay to it an amount sufficient to provide for any such taxes so required to be withheld. 8. Applicable Laws and Regulations ------------------------------- This agreement and the Corporation's obligation to issue shares and pay cash hereunder are subject to applicable laws and regulations. The Corporation has been advised by Counsel as follows. This option is a nonqualified stock option under the provisions of the Federal income tax laws. Upon its exercise you will receive ordinary income measured by the difference between the option price and the fair market value of the shares -3- 4 at the time of exercise. Such ordinary income is regarded for Federal income tax purposes as personal service income, subject to withholding and other employment tax considerations, and eligible for a special "50% maximum rate." In the event of a later sale of the stock, acquired through the exercise of this option, any difference between the fair market value at the time of exercise and the price at which you sell the shares, will be treated as a capital gain or loss, either short-term or long-term, depending upon the period of time you have held the shares. If the sale results in a long-term capital gain, the normally untaxed 60% portion of any such long-term capital gain may be subject to the Alternative Minimum Tax of 10 to 25%, imposed in lieu of the regular income tax under the Revenue Act of 1978. Upon the exercise of a stock appreciation right, you will receive a payment from the Corporation in cash and shares of common stock. The total amount of this payment, i.e., the amount of cash and the fair market value of the common stock received, is also regarded as personal service income, subject to withholding and other employment tax considerations, and eligible for the special "50% maximum rate." Due to the complexity of the Federal income tax laws, and the differing personal circumstances of each optionee, the Corporation urges you to seek assistance from your personal tax advisor. ROCKWELL INTERNATIONAL CORPORATION By ________________________________ Dated: Agreed to this ________ day of _________________, 198__ ___________________________ Employee Signature -4- EX-10.B.4 7 ROCKWELL INTERNATIONAL 10-K 1 EXHIBIT 10-b-4 -------------- ROCKWELL INTERNATIONAL CORPORATION 1979 STOCK OPTION PLAN FOR KEY EMPLOYEES STOCK APPRECIATION RIGHTS AGREEMENT To: On April 4, 1979, you were granted an option to purchase _____ shares of common stock of the Corporation at the price of _______ per share under the 1979 Stock Option Plan for Key Employees (the "Plan"). You thereafter executed a Stock Option Agreement respecting such option. We are pleased to notify you that, in accordance with a determination of the Stock Option Committee, stock appreciation rights covering all of the shares subject to such option have this day been granted to you. The stock appreciation rights have been granted, and may be exercised, upon the terms and conditions set forth below. 1. Acceptance by Employee ---------------------- Please sign the enclosed copy of this Stock Appreciation Rights Agreement (the "Agreement") at the place indicated and return it to the Secretary of the Corporation. This Agreement will be of no effect if such copy is not received by the Secretary WITHIN THIRTY DAYS OF THE DATE HEREOF, unless the Corporation (in its sole discretion) elects in writing to extend such period. 2. Exercise of Stock Appreciation Rights ------------------------------------- Subject to the provisions of the Plan, the stock appreciation rights may be exercised by you in whole or in part (or, in the event of your death, by your estate or by any person who acquires the related option by bequest or inheritance or by reason of your death) during the term beginning on the earlier of six months from the date hereof or the date of your death or disability, but in no event prior to April 4, 1980, and ending nine years from April 4, 1980, provided that: (a) in the event of your death or termination of employment, the stock appreciation 2 rights may be exercised only in accordance with the provisions of the Plan applying to the exercise of an option in the event of death or termination of employment (Section 7), and in no event may be exercised after the expiration of nine years from April 4, 1980, and (b) the stock appreciation rights may be exercised by you only during the periods beginning on the third business day and ending on the twelfth business day following the dates of public release of the Corporation's quarterly or annual statements of sales and earnings. If stock appreciation rights are exercised in whole or in part, the related option or part thereof shall be surrendered and thereafter shall not be exercisable. 3. Notice of Exercise of Stock Appreciation Rights --------------------------- The exercise in whole or in part of stock appreciation rights under this Agreement shall be effective only upon receipt by the Secretary of written notice specifying the number of rights being exercised, which notice shall also serve as a surrender of the related option or part thereof. As soon as practicable following the Secretary's receipt of the written notice, you will receive payment equal to the excess of the fair market value (as defined in the Plan), on the date of such exercise, of the shares covered by the related option or part thereof over the option price of such shares. One half of the amount of such payment shall be in cash, and one half of the amount of such payment shall consist of shares of the Corporation's common stock valued at fair market value on the date of exercise, provided however that cash shall be paid with respect to any fractional interest in a share. 4. Transferability --------------- The stock appreciation rights are not transferable by you otherwise than by will or by the laws of descent and distribution, and are exercisable, during your lifetime, only by you. - 2 - 3 5. Subject to Stock Option Plan ---------------------------- The stock appreciation rights shall be subject in all respects to the provisions of the Plan as it may be amended. 6. Withholding ----------- The Corporation shall have the right, in connection with the exercise of the stock appreciation rights in whole or in part, to deduct from any payment to be made by the Corporation under the Plan an amount equal to the taxes required to be withheld by law with respect to such exercise or to require the employee or other person effecting such exercise to pay to it an amount sufficient to provide for any such taxes so required to be withheld. 7. Applicable Laws and Regulations ------------------------------- This Stock Appreciation Rights Agreement and the Corporation's obligation to issue shares and pay cash hereunder are subject to applicable laws and regulations. Upon the exercise of a stock appreciation right, you will receive a payment from the Corporation in cash and shares of common stock. The Corporation has been advised by counsel that the total amount of this payment, i.e., the amount of cash and the fair market value of the common stock received, is regarded as personal service income, subject to withholding and other employment tax considerations, and eligible for the special "50% maximum rate." Due to the complexity of the Federal income tax laws, and the differing personal circumstances of each optionee, the Corporation urges you to seek assistance from your personal tax advisor. ROCKWELL INTERNATIONAL CORPORATION By ___________________________________ Dated: Agreed to this ______ day of ________________, 198_ _________________________ Employee Signature -3- EX-10.D.1 8 ROCKWELL INTERNATIONAL 10-K 1 EXHIBIT 10-d-1 ROCKWELL INTERNATIONAL CORPORATION 1988 LONG-TERM INCENTIVES PLAN (AS AMENDED EFFECTIVE NOVEMBER 30, 1994)* 1. PURPOSE The purpose of the 1988 Long-Term Incentives Plan is to foster and enhance the long-term profitability of Rockwell for the benefit of its stockholders by offering the incentives of long-term monetary rewards and proprietary interests in Rockwell to officers and other key employees of the Corporation, thus providing means by which persons of outstanding abilities can be attracted and retained in these capacities. 2. DEFINITIONS For the purpose of the Plan, the following terms shall have the meanings set forth below: (a) Board of Directors. The Board of Directors of Rockwell. (b) Committee. The Compensation Committee designated by the Board of Directors from among its members who are not eligible to receive a Grant under the Plan. (c) Corporation. Rockwell and those of its subsidiary corporations or affiliates designated by the Board of Directors to participate in the Plan. (d) Employees. Officers and other key employees of the Corporation, but not directors who are not also employees of the Corporation. (e) Fair Market Value. The closing price of the Common Stock of Rockwell as reported in the New York Stock Exchange - Composite Transactions on the date of a determination (or on the next preceding day such stock was traded if it was not traded on the date of a determination). (f) Grant. A grant made under the Plan by the Board of Directors to an Employee in the form of Performance Units, Options, Stock Appreciation Rights or Restricted Stock. (g) Option. A grant made by the Board of Directors in the form of an option to purchase Shares. (h) Participant. Any Employee to whom a Grant is made. (i) Payment Value. An amount assigned to a Performance Unit equal to the average of the Fair Market Value on each of the 45 trading days immediately preceding the end of a Performance Period, provided that in no event shall a Performance Unit have a Payment Value greater than 300% of the average of the Fair Market Value on each of the 45 trading days immediately preceding the start of a Performance Period. (j) Performance Measure. Criteria designated by the Board of Directors to serve as a measure of performance during a Performance Period. - ---------- *See notes to Section 4(a)(i) and Section 10(c) setting forth further changes that become effective upon approval of the 1995 Long-Term Incentive Plan by shareowners at the 1995 Annual Meeting on February 1, 1995. 2 (k) Performance Objectives. Levels of achievement, related to the Performance Measure, which the Board of Directors establishes as goals for a Performance Period to be used in determining whether and to what extent Performance Units therefor shall be deemed to be earned. (l) Performance Period. Any period of three or more consecutive fiscal years of Rockwell as determined by the Board of Directors. (m) Performance Unit. A unit deemed to be the equivalent of one Share. (n) Plan. This 1988 Long-Term Incentives Plan. (o) Restricted Period. The period not less than three years specified by the Board of Directors with respect to a grant of Restricted Stock during which the Shares are subject to forfeiture if the grantee does not continue as an Employee. (p) Restricted Stock. Shares subject to conditions prescribed by the Board of Directors under Section 8 of the Plan. (q) Rockwell. Rockwell International Corporation. (r) Shares. Shares of Common Stock or Class A Common Stock, or both, of Rockwell. (s) Stock Appreciation Right. A grant made by the Board of Directors to an Employee of a Right (i) in conjunction with all or any part of any Option granted under the Plan which entitles the Employee, upon exercise of such Right, to surrender such Option, or any part thereof, and to receive a payment equal to the excess of the Fair Market Value, on the date of such exercise, of the Shares covered by such Option, or part thereof, over the purchase price of such Shares pursuant to the Option (a Tandem Stock Appreciation Right) or (ii) separate and apart from any Option, which entitles the Employee, upon exercise of such Right, to receive a payment measured by the increase in the Fair Market Value of a number of Shares designated by such Right from the date of grant of such Right to the date on which the Employee exercises such Right (a Freestanding Stock Appreciation Right). 3. PLAN ADMINISTRATION (a) The Board of Directors shall determine the Employees to whom Grants are made and the number of Performance Units, Shares or Stock Appreciation Rights to be subject to each Grant. In making its determinations the Board of Directors may consider recommendations of the Chief Executive Officer of Rockwell and shall take into account such factors as the Employee's level of responsibility, performance, performance potential, level and type of compensation and potential value of Grants. (b) As and to the extent authorized by the Board of Directors, the Committee may exercise all responsibilities, powers and authority vested in the Board of Directors under the Plan. -2- 3 4. PERFORMANCE UNITS (a) Performance Period and Grants of Performance Units. (i) The Board of Directors may establish Performance Periods, for each of which it shall establish (not later than six months after the beginning of a Performance Period) a Performance Measure and Performance Objectives. No Performance Period shall end later than September 30, 1997, and no more than one Performance Period shall begin with any one fiscal year.* (ii) The Board of Directors may select and make grants of Performance Units to Employees, as it shall determine, at any time during the first fiscal year of a Performance Period. Grants will be deemed to have been made as of the first day of such fiscal year. (iii) Grants made by the Board of Directors shall be subject to the provisions of the Plan and to such other terms and conditions, not inconsistent with the Plan, as the Board of Directors may determine. (iv) The Board of Directors may at any time or from time to time, during the first half of a Performance Period, adjust (up or down) the Performance Objectives for such Period if it determines that conditions, including but not limited to changes in the economy, changes in laws or government regulations, changes in generally accepted accounting principles, or acquisitions or dispositions determined by the Board of Directors to be material, so warrant. The Board of Directors may not, however, change the Performance Measure established for any Performance Period. (b) Earned Performance Unit Determination. After the end of each Performance Period and receipt of any reports from the independent certified public accountants who audit the Corporation's accounts that the Board of Directors may deem necessary or appropriate, the Board of Directors shall determine the extent to which the Performance Objectives for such Performance Period have been achieved and the extent to which Performance Units have been earned in accordance therewith by each Participant with respect to such Performance Period. (c) Payment. After the end of each Performance Period, each Participant shall be entitled to receive, in accordance with determinations of the Board of Directors, from Rockwell an amount equal to the number of Performance Units earned by him multiplied by the Payment Value, subject to the provisions of the Plan, including the following: (i) As and on such terms as may be determined by the Board of Directors, payments may be in cash or in Shares or partly in cash and partly in Shares. Any payment which is made in cash may be made in a lump sum, in installments or on a deferred basis. Any payment which is made in Shares shall be valued at Fair Market Value on the last trading day of the week preceding the day of issuance or transfer of the Shares, or in such other manner, with - ------- *The last sentence of Section 4(a)(i) has been amended, effective upon approval of the 1995 Long-Term Incentive Plan by shareowners at the 1995 Annual Meeting on February 1, 1995, to read as follows: "No Performance Period not theretofore established shall end later than September 30, 1994, and no more than one Performance Period shall begin with any one fiscal year." -3- 4 respect to a Performance Period, as may be determined by the Board of Directors not later than six months after the beginning of such Performance Period. (ii) No grant of Performance Units or payments shall bear interest except as may be determined by the Board of Directors in respect of payments made in installments or on a deferred basis. 5. SUPPLEMENTARY PERFORMANCE PLANS (a) The Board of Directors may authorize supplementary performance plans applicable to one or more business components of the Corporation on such terms and applicable to such Employees or categories of Employees as the Board of Directors shall determine. Each such supplementary plan shall include provision for: (i) a Performance Period (ending no later than September 30, 1997) of not less than three consecutive fiscal years and (ii) establishment of a Performance Measure and Performance Objectives for the affected business component and may provide for adjustment of the Performance Objectives similar to Section 4(a)(iv) of the Plan and a Change of Control contingency similar to Section 13(f) of the Plan. (b) Payments to participating Employees shall be in accordance with determinations of the Board of Directors and may be in cash or Shares or a combination of both. Any payment which is made in Shares shall be valued at Fair Market Value on the last trading day of the week preceding the day of issuance or transfer of the Shares, or in such other manner, with respect to a Performance Period, as may be determined by the Board of Directors not later than six months after the beginning of such Performance Period. Payments shall be deemed to be payments in respect of Performance Units in a number determined by dividing the amount paid for a Performance Period by the average of the Fair Market Value on each of the 45 trading days immediately preceding the end of such Performance Period. 6. OPTIONS The Board of Directors may grant, from time to time to Employees, Options which may be incentive stock options (as defined in Section 422A of the Internal Revenue Code), nonqualified stock options, or both, to purchase Shares on terms determined by the Board of Directors, consistent with the provisions of the Plan, including the following: (a) The purchase price of the Shares subject to option shall not be less than the Fair Market Value on the date the Option is granted. (b) Each Option may be exercised in whole or in part from time to time during such period as the Option shall specify, provided that no Option shall be exercisable prior to one year (except as provided in Section 9(c) or 13(f)) nor after ten years from the date of the grant thereof. (c) Each Option may provide for related Stock Appreciation Rights. -4- 5 (d) The aggregate Fair Market Value (determined as of the date the Option is granted) of the Shares for which any Employee may be granted incentive stock options which are exercisable for the first time in any calendar year under all plans of the Corporation and any parent or subsidiary of the Corporation shall not exceed $100,000. The Board of Directors shall grant incentive stock options only to employees of Rockwell or a corporation which is a subsidiary of Rockwell within the meaning of Section 425(f) of the Internal Revenue Code. (e) The purchase price of the Shares with respect to which an Option or portion thereof is exercised shall be payable in full in cash or in Shares or in a combination of cash and Shares. The value of any Share delivered in payment of the purchase price shall be its Fair Market Value on the date the Option is exercised. (f) The aggregate number of Shares for which any Employee may be granted Options in any fiscal year of the Corporation under all plans of the Corporation and any parent or subsidiary of the Corporation shall in no event exceed 250,000. 7. STOCK APPRECIATION RIGHTS (a) The Board of Directors may grant Tandem Stock Appreciation Rights either at the time of grant of an Option or at any time thereafter during the term of an Option. A Tandem Stock Appreciation Right shall be exercisable only when and to the extent that the related Option is exercisable. (b) The Board of Directors may grant, from time to time to Employees, Freestanding Stock Appreciation Rights on terms determined by the Board of Directors, consistent with the provisions of the Plan. (c) The payment to which the grantee of a Stock Appreciation Right is entitled upon exercise thereof may be made in Shares valued at Fair Market Value, on the date of exercise, or in cash or partly in cash and partly in Shares, as the Board of Directors may determine. (d) Upon exercise of a Tandem Stock Appreciation Right and surrender of the related Option or part thereof, such Option, to the extent surrendered, shall not thereafter be exercisable, and the Shares covered by the surrendered Option shall not again be available for Grants under the Plan. (e) Upon exercise of a Freestanding Stock Appreciation Right any Shares delivered in payment thereof shall not again be available for Grants under the Plan. 8. RESTRICTED STOCK The Board of Directors may grant, from time to time to Employees, Shares of Restricted Stock on terms determined by the Board of Directors, consistent with the provisions of the Plan, including the following: -5- 6 (a) The Board of Directors shall specify a Restricted Period for each Grant of Restricted Stock, and the Shares of Restricted Stock granted shall be forfeited if the grantee does not continue as an Employee throughout the Restricted Period except as otherwise provided in Section 9(a) or 13(f). (b) Shares of Restricted Stock granted to an Employee shall have all the attributes of outstanding Shares, except that certificates for such Shares and any dividends that may be paid in cash or otherwise thereon shall be delivered to and held by Rockwell. As and to the extent that Shares of Restricted Stock are no longer subject to forfeiture, certificates therefor and any dividends related thereto held by Rockwell shall be delivered to the Employee. There shall also be paid to the Employee at such time interest on the amount of cash dividends so delivered computed at such rate and in such manner as the Board of Directors may, in its sole discretion, determine. 9. EFFECT OF DEATH OR TERMINATION OF EMPLOYMENT (a) If a Participant's employment by the Corporation terminates prior to the end of a Performance Period or Restricted Period because of death, the number of Performance Units or Shares of Restricted Stock such Participant shall be deemed to have earned shall be the number thereof determined as though such Participant's employment had not terminated multiplied by a fraction, the numerator of which is the number of months such Participant was employed during the Performance Period or Restricted Period (including the month during which employment terminated) and the denominator of which is the total number of months in the Performance Period or Restricted Period. (b) If a Participant's employment by the Corporation terminates prior to the end of a Performance Period or Restricted Period for any reason other than death, such Participant shall be deemed not to have earned any Performance Units or Shares of Restricted Stock except as and to the extent the Board of Directors, taking into account the purpose of the Plan and such other factors as in its sole discretion it deems appropriate, may determine, provided that the number of Performance Units or Shares of Restricted Stock which may be so determined by the Board of Directors to have been earned shall not exceed the number which would have been earned had the provisions of paragraph (a) above been applicable. (c) If the employment by the Corporation of a Participant who (or whose permitted transferee) holds an outstanding Grant of Options or Stock Appreciation Rights terminates by reason of the Participant's death, the Options or Stock Appreciation Rights subject to that Grant and not theretofore exercised may be exercised from and after the date of the Participant's death for a period of three years (or until the expiration date specified in the Grant if earlier) even if any of them was not exercisable at the date of death. (d) If a Participant who (or whose permitted transferee holds an outstanding Grant of Options or Stock Appreciation Rights retires under a retirement plan of the Corporation at any time after a portion thereof has become exercisable, the Options or Stock Appreciation Rights subject to that Grant and not theretofore exercised may be exercised from and after the date upon which they are first exercisable under that Grant for a period of five years from the date of retirement (or until the expiration date specified in the Grant if earlier), even if any of them was not exercisable at the date of retirement, except that any thereof (i) subject to a Grant made within eighteen months before such retirement or (ii) held by a grantee (or a permitted transferee thereof) who retires before either attaining age 62 or accumulating 85 points (or fulfilling such other criteria as may be required for an unreduced early retirement benefit) for purposes of the applicable retirement plan, may be exercised solely for a period of three years from the date of retirement (or until the expiration date specified in the Grant if earlier) or such shorter period as the Committee may determine within 60 days of a grantee's retirement. -6- 7 (e) If the employment by the Corporation of a Participant who (or whose permitted transferee) holds an outstanding Grant of Options or Stock Appreciation Rights is terminated for any reason other than death or retirement under a retirement plan of the Corporation, the Options or Stock Appreciation Rights subject to that Grant and not theretofore exercised may be exercised only within ninety days after termination of such employment (or until the expiration date specified in the Grant if earlier) and only to the extent the grantee thereof (or a permitted transferee) was entitled to exercise the Options or Stock Appreciation Rights at the time of termination of such employment, unless and except to the extent the Committee may otherwise determine; provided, however, that the Committee shall not in any event permit a longer period of exercise than would have been applicable had the provisions of paragraph (d) above been applicable. 10. UNITS AND SHARES AVAILABLE (a) The total number of Performance Units as to which payments may be made under Sections 4 and 5 of the Plan shall not exceed 7 million. There shall not, however, be any limitation on the number of Performance Units as to which Grants may be made under the Plan. (b) The total number of Shares which may be delivered in payment and upon exercise of Grants and in payments authorized under Section 5 shall not exceed 16 million, as adjusted from time to time as herein provided. Shares which may be delivered in payment or upon exercise of Grants or in payments authorized under Section 5 may consist in whole or in part of unissued or reacquired Shares; provided, however, that unless otherwise determined by the Board of Directors, Shares which may be granted as Restricted Stock shall consist only of reacquired shares. If for any reason Shares as to which an Option has been granted cease to be subject to purchase thereunder or Shares granted as Restricted Stock are forfeited to the Corporation, then such Shares shall again be available under the Plan. (c) No Option, Freestanding Stock Appreciation Right or Restricted Stock shall be granted under the Plan after September 30, 1997, but Options or Stock Appreciation Rights and Restricted Stock granted theretofore may extend beyond that date, and Tandem Stock Appreciation Rights may be granted after that date with respect to Options outstanding on that date.* 11. ADJUSTMENTS If there shall be any change in or affecting Shares on account of any merger, consolidation, reorganization, recapitalization, reclassification, stock dividend, stock split or combination, or other distribution to holders of Shares (other than a cash dividend), there shall be made or taken such amendments to the Plan and such adjustments and actions thereunder as the Board of Directors may deem appropriate under the circumstances. Such amendments, adjustments and actions may include, without limitation, changes in the number of Performance Units with respect to which payments are made, the Performance Measure and Performance Objectives for any Performance Period not complete, the number of Shares which may be issued or transferred pursuant to the Plan, the limitation set forth in the proviso to Section 2(i), the number of Shares subject to outstanding Options and Stock Appreciation Rights and the related price per share. - -------- *Section 10(c) has been amended, effective upon approval of the 1995 Long-Term Incentives Plan by shareowners at the 1995 Annual Meeting on February 1, 1995, to read as follows: "(c) No Option, Freestanding Stock Appreciation Right or Restricted Stock shall be granted under the Plan after December 31, 1994, but Options or Stock Appreciation Rights and Restricted Stock granted theretofore may extend beyond that date, and Tandem Stock Appreciation Rights may be granted after that date with respect to Options outstanding on that date." -7- 8 12. AMENDMENT AND TERMINATION The Board of Directors shall have the power in its discretion to amend, suspend or terminate the Plan or Grants thereunder at any time except that, subject to the provisions of Section 11, (a) without the consent of the person affected, no such action shall cancel or reduce a Grant theretofore made other than as provided for or contemplated in the agreement evidencing the Grant and (b) without the approval of the stockholders of Rockwell, the Board of Directors may not (i) change the class of persons eligible to receive incentive stock options, (ii) increase the number of Performance Units provided in Section 10(a), (iii) increase the number of Shares provided in Section 10(b), (iv) increase the limitation set forth in the proviso to Section 2(i), (v) reduce the Option exercise price of any Option below the Fair Market Value on the date such Option was granted or (vi) decrease the forfeiture period for any Grant below that permitted under the Plan. 13. MISCELLANEOUS (a) Except as determined by the Board of Directors, no person shall have any claim to receive a Grant or any payment under a supplementary performance plan authorized under Section 5, to receive payment in respect of a Grant or under a supplementary performance plan authorized under Section 5 in any form other than the Board of Directors shall approve or, in circumstances where Section 9 is applicable, to be deemed to have earned any Performance Units or Restricted Stock or to be entitled to exercise Options or Stock Appreciation Rights for any particular period after termination of employment. There is no obligation for uniformity of treatment of Employees under the Plan or any supplementary performance plan authorized under Section 5. No Employee shall have any right because he is a Participant or a participant under any supplementary performance plan authorized under Section 5 to continue in the employ of the Corporation for any period of time or to a continuation of any particular rate of compensation, and the Corporation expressly reserves the right to discharge or change the assignment of any Employee at any time. (b) No Option, Stock Appreciation Right, right related to Restricted Stock, right to payment in respect of Performance Units granted under the Plan or right to payment under any supplementary performance plan authorized by Section 5 may be assigned, pledged or transferred other than by will or by the laws of descent and distribution and except as provided in the Plan or as determined by the Board of Directors. Each Option, Stock Appreciation Right or right related to Restricted Stock shall be exercisable during the lifetime of the Employee to whom granted only by such Employee. Any payment in respect of Performance Units or any payment authorized under Section 5 made after the death of a Participant entitled thereto shall be paid to the legal representative of the estate or to the designated beneficiary of such Participant. (c) No person shall have the rights or privileges of a stockholder with respect to Shares subject to an Option, deliverable as a payment in respect of Performance Units, upon exercise of a Stock Appreciation Right or under a supplementary performance plan authorized by Section 5 until exercise of such Option or Stock Appreciation Right, delivery as a payment -8- 9 in respect of Performance Units or under a supplementary performance plan authorized by Section 5. (d) No fractional Shares shall be issued under the Plan. If the portion of any payment under the Plan, or under a supplementary performance plan authorized by Section 5, to be made in Shares is not equal to the value of a whole number of Shares, the person entitled thereto shall be paid an amount equal to the Fair Market Value as of the date of exercise of any fractional Share deliverable in respect of exercise of a Stock Appreciation Right and the Fair Market Value as of the date of payment of any fractional Share deliverable in respect of any other payment. (e) The Corporation, the Board of Directors, the Committee and the officers of Rockwell shall be fully protected in relying in good faith on the computations and reports made pursuant to or in connection with the Plan by the independent certified public accountants who audit the Corporation's accounts or others (who may include Employees) whose services are used by the Board of Directors or Committee in its administration of the Plan. (f) Notwithstanding any other provision of the Plan, if a Change of Control (as defined in Article III, Section 15(l)(1) of Rockwell's By-Laws) shall occur, then unless prior to the occurrence thereof, the Board of Directors shall have determined otherwise by vote of at least two-thirds of its members, (i) all Performance Periods (except those under plans established under Section 5 of the Plan that do not provide for a Change of Control contingency) not then complete shall be deemed completed forthwith, the Performance Objectives therefor shall be deemed to have been attained, and all Performance Units granted with respect thereto shall be deemed to have been fully earned; (ii) all Options and any Stock Appreciation Rights then outstanding under the Plan shall forthwith become fully exercisable whether or not otherwise then exercisable; and (iii) the restrictions on all Shares granted as Restricted Stock under the Plan shall forthwith lapse. (g) The Corporation shall have the right in connection with the delivery of any Shares in payment of a Grant or a payment authorized under Section 5 or upon exercise of an Option to require as a condition of such delivery that the recipient represent that such Shares are being acquired for investment and not with a view to the distribution thereof. (h) The Corporation shall have the right in connection with any payment in respect of Performance Units, payment authorized under Section 5, exercise of any Option or Stock Appreciation Right or termination of the Restricted Period for any Restricted Stock, to deduct from any such payment or any other payment by the Corporation, an amount equal to any taxes required by law to be withheld with respect thereto or to require the Employee or other person receiving such payment, effecting such exercise or entitled to Shares and related payments on termination of such Restricted Period, as a condition of and prior to such payment or exercise or delivery of Shares on such termination, to pay to the Corporation an amount sufficient to provide for any such taxes so required to be withheld. (i) Unless otherwise determined by the Board of Directors or provided in an agreement between any Employee and the Corporation, for purposes of the Plan an Employee on authorized leave of absence will be considered as being in the employ of the Corporation. -9- 10 (j) The Corporation shall bear all expenses and costs in connection with the operation of the Plan, including costs related to the purchase, issue or transfer of Shares, but excluding taxes imposed on any person receiving a payment or delivery of Shares under the Plan or a supplementary performance plan authorized under Section 5. 14. INTERPRETATIONS AND DETERMINATIONS The Board of Directors shall have the power from time to time to interpret the Plan, to adopt, amend and rescind rules, regulations and procedures relating to the Plan, to make, amend and rescind determinations under the Plan and to take all other actions that the Board of Directors shall deem necessary or appropriate for the implementation and administration of the Plan. All interpretations, determinations and other actions by the Board of Directors or the Committee shall be final, conclusive and binding upon all parties. 15. EFFECTIVITY Upon approval by the stockholders of Rockwell, the Plan shall become effective as of October 1, 1987. -10- EX-10.D.7 9 ROCKWELL INTERNATIONAL 10-K 1 EXHIBIT 10-d-7 1988 LONG-TERM INCENTIVES PLAN FORM OF OPTION AGREEMENT (WITHOUT ARBITRATION) NONTRANSFERRABLE OPTIONS ---------------------------------------------- December 7, 1994 To: We are pleased to notify you that the Compensation and Management Development Committee has granted to you today the following stock option(s) under the 1988 Long-Term Incentives Plan (the Plan):
Date of Grant Type of Grant Number of Shares Option Price - ------------- ------------- ---------------- ------------ 99/99/99 (NQ) 9,999,999 $$$$.9999
These stock option(s) have been granted, and may be exercised only upon the terms and conditions of this Stock Option Agreement, subject in all respects to the provisions of the Plan, as it may be amended. The attached Stock Option Terms and Conditions are incorporated in and are part of this Stock Option Agreement. Copies of the Plan and the current Prospectus covering shares issuable or transferable under the Plan are enclosed. Please confirm that you have read and agree to be bound by this Agreement by signing one copy at the place indicated and returning the signed copy to: Office of the Secretary Rockwell International Corporation 625 Liberty Avenue Pittsburgh, PA 15222-3123 Attention: Stock Option Administration These stock options will lapse and be of no effect if a copy of this Stock Option Agreement, properly signed by you, is not received by the Secretary of Rockwell on or before January 31, 1995, unless Rockwell (in its sole discretion) elects in writing to extend that date. Agreed to: Date: ______________________ ROCKWELL INTERNATIONAL CORPORATION ____________________________ By:__________________________________ Employee Signature Senior Vice President, XXXXXXXXXXXXXXXXXX General Counsel and Secretary 999-99-9999 2 1988 LONG-TERM INCENTIVES PLAN FORM OF OPTION AGREEMENT (WITH ARBITRATION) NONTRANSFERRABLE OPTIONS ---------------------------------------------- December 7, 1994 To: We are pleased to notify you that the Compensation and Management Development Committee has granted to you today the following stock option(s) under the 1988 Long-Term Incentives Plan (the Plan):
Date of Grant Type of Grant Number of Shares Option Price - ------------- ------------- ---------------- ------------ 99/99/99 (NQ) 9,999,999 $$$$.9999
These stock option(s) have been granted, and may be exercised only upon the terms and conditions of this Stock Option Agreement, subject in all respects to the provisions of the Plan, as it may be amended. The attached Stock Option Terms and Conditions are incorporated in and are part of this Stock Option Agreement. Copies of the Plan and the current Prospectus covering shares issuable or transferable under the Plan are enclosed. Please confirm that you have read and agree to be bound by this Agreement and by the enclosed Mutual Agreement to Arbitrate claims by signing one copy of each Agreement at the place indicated below and on page 2 of the Mutual Agreement to Arbitrate Claims, and returning the signed copy to: Office of the Secretary Rockwell International Corporation 625 Liberty Avenue Pittsburgh, PA 15222-3123 Attention: Stock Option Administration These stock options will lapse and be of no effect if copies of BOTH this Stock Option Agreement and the Mutual Agreement to Arbitrate Claims, each properly signed by you, is not received by the Secretary of Rockwell on or before January 31, 1995, unless Rockwell (in its sole discretion) elects in writing to extend that date. Agreed to: Date: ______________________ ROCKWELL INTERNATIONAL CORPORATION _______________________________ By:__________________________________ Employee Signature Senior Vice President, XXXXXXXXXXXXXXXXXX General Counsel and Secretary 999-99-9999 3 ROCKWELL INTERNATIONAL CORPORATION 1988 LONG-TERM INCENTIVES PLAN STOCK OPTION AGREEMENT STOCK OPTION TERMS AND CONDITIONS 1. DEFINITIONS As used in these Stock Option Terms and Conditions, the following words and phrases shall have the respective meanings ascribed to them below unless the context in which any of them is used clearly indicates a contrary meaning: (a) APPROVED OPTION EXERCISE FORM: A Cash Only Exercise Form in the form of Attachment 1 or a "Stock Swap" Exercise Form in the form of Attachment 2, any other form subsequently adopted by the Secretary of Rockwell to replace Attachment 1 or 2, or any other form accepted by the Secretary of Rockwell in his sole discretion. (b) OPTIONS: The stock option or stock options listed in the first paragraph of the letter dated December 7, 1994 to which these Stock Option Terms and Conditions are attached and which together with these Stock Option Terms and Conditions constitutes the Stock Option Agreement. (c) OPTION SHARES: The shares of Rockwell Common Stock issuable or transferable on exercise of the Options. (d) PLAN: Rockwell's 1988 Long-Term Incentives Plan, as amended and as such Plan may be further amended and in effect at the relevant time. (e) PRELIMINARY PAYMENT: Defined in Section 3(d)(i). (f) ROCKWELL: Rockwell International Corporation, a Delaware corporation. (g) SHARES: Shares of Rockwell Common Stock or Class A Common Stock. (h) STOCK OPTION AGREEMENT: These Stock Option Terms and Conditions together with the letter dated December 7, 1994 to which they are attached. 2. WHEN OPTIONS MAY BE EXERCISED The Options may be exercised, in whole or in part (but only for a whole number of shares) and at one time or from time to time, as to one-third (rounded down to an integral one hundred) of the Option Shares during the period beginning on [88NT:12/7/94] 4 December 7, 1995 and ending on December 7, 2004, as to an additional one-third (rounded down to an integral one hundred) of the Option Shares during the period beginning on December 7, 1996 and ending on December 7, 2004 and as to the balance of the Option Shares during the period beginning on December 7, 1997 and ending on December 7, 2004, and only during those periods, provided that: (a) if you die while an employee of the Corporation (as defined in the Plan), your estate, or any person who acquires the Options by bequest or inheritance, may exercise all the Options not theretofore exercised within (and only within) the period beginning on your date of death (even if you die before you have become entitled to exercise all or any part of the Options) and ending three years thereafter; and (b) if your employment by the Corporation terminates other than by death, then: (i) if your retirement or other termination date is before December 7, 1995, the Options shall lapse on your retirement or other termination and may not be exercised at any time; (ii) if your employment by the Corporation is terminated for cause, the Options shall expire forthwith upon your termination and may not be exercised thereafter; (iii) if your employment by the Corporation terminates after June 7, 1996 by reason of your retirement under a retirement plan of Rockwell, or a subsidiary or affiliate of Rockwell, at or after the earlier of age 62 or the date you have accumulated 85 points (or fulfilled such other criteria as may be required for an unreduced early retirement benefit) for purposes of the applicable retirement plan, you (or if you die after your retirement date, your estate or any person who acquires the Options by bequest or inheritance) may thereafter exercise the Options within (and only within) the period starting on the date you would otherwise have become entitled to exercise the part of the Options so exercised and ending five years after your retirement date; (iv) if your employment by the Corporation terminates after June 7, 1996 by reason of your retirement under a retirement plan of -2- [88NT:12/7/94] 5 Rockwell, or a subsidiary or affiliate of Rockwell, before the earlier of age 62 or the date you have accumulated 85 points (or fulfilled such other criteria as may be required for an unreduced early retirement benefit) for purposes of the applicable retirement plan, you (or if you die after your retirement date, your estate or any person who acquires the Options by bequest or inheritance) may thereafter exercise the Options within (and only within) the period starting on the date you would otherwise have become entitled to exercise the part of the Options so exercised and ending on the earlier of (x) the third anniversary of your retirement date or (y) such earlier date as the Compensation and Management Development Committee shall determine by action taken not later than 60 days after your retirement date; (v) if your employment by the Corporation terminates on or after December 7, 1995 but on or before June 7, 1996 by reason of your retirement under a retirement plan of Rockwell, or a subsidiary or affiliate of Rockwell, you (or if you die after your retirement date, your estate or any person who acquires the Options by bequest or inheritance) may thereafter exercise the Options within (and only within) the period starting on the date you would otherwise have become entitled to exercise the part of the Options so exercised and ending on the earlier of (x) the third anniversary of your retirement date or (y) such earlier date as the Compensation and Management Development Committee shall determine by action taken not later than 60 days after your retirement date; and (vi) if your employment by the Corporation terminates on or after December 7, 1995 for any reason not specified in subparagraph (a) or in clauses (ii), (iii), (iv) or (v) of this subparagraph (b), you (or if you die after your termination date, your estate or any person who acquires the Options by bequest or inheritance) may thereafter exercise the Options within (and only within) the period ending three months after your termination date but only to the extent they were exercisable on your termination date. -3- [88NT:12/7/94] 6 In no event shall the provisions of the foregoing subparagraphs (a) and (b) extend to a date after December 7, 2004 the period during which the Options may be exercised. 3. EXERCISE PROCEDURE (a) To exercise all or any part of the Options, you (or after your death, your estate or any person who has acquired the Options by bequest or inheritance) must deliver to the Secretary of Rockwell: (i) a notice of exercise on an Approved Option Exercise Form properly completed, dated and signed by you (or after your death, by the person entitled to exercise the Options); (ii) full payment of the exercise price for the Option Shares to be purchased on exercise of the Options o entirely in cash; or o in Shares; or o in a combination of cash and Shares; and (iii) in the case of an exercise of the Options by any person other than you seeking to exercise the Options, such documents as the Secretary of Rockwell shall require to establish to his satisfaction that the person seeking to exercise the Options is entitled to do so. (b) An exercise of the whole or any part of the Options shall be effective: (i) if you elect (or after your death, the person entitled to exercise the Options elects) to pay the exercise price for the Option Shares entirely in cash, upon (x) receipt by the Secretary of Rockwell of (I) an Approved Exercise Form, duly completed, dated and signed, (II) full payment of the exercise price for the Option Shares purchased pursuant to that Approved Exercise Form and (III) any documents required pursuant to Section 3(a)(iii), or (y) if later, the date of such Approved Exercise Form (provided you, or after your death, the person entitled to exercise the Options, or any person to whom you have transferred the Options during your lifetime as permitted by Section 4 continues to be -4- [88NT:12/7/94] 7 entitled to exercise the Options on that date); and (ii) if you elect (or after your death, the person entitled to exercise the Option elects) to pay the exercise price of the Option Shares in Shares or in a combination of Shares and cash, upon (x) receipt by the Secretary of Rockwell of (I) an Approved Exercise Form, duly completed, dated and signed, (II) the Preliminary Payment (as defined in Section 3(d)(i)) and (III) any documents required pursuant to Section 3(a)(iii), or (y) if later, the date of such Approved Exercise Form (provided you continue, or after your death, the person entitled to exercise the Options continues, to be entitled to exercise the Options on that date). (c) If you choose (or after your death, the person entitled to exercise the Options chooses) to pay the exercise price for the Option Shares to be purchased on exercise of any of the Options entirely in cash, payment must be made by o delivering to the Secretary of Rockwell a check in the full amount of the exercise price for those Option Shares; or o arranging with a stockbroker, bank or other financial institution to deliver to the Secretary of Rockwell full payment, by check or (if prior arrangements are made with the Stock Option Administration staff of the Secretary's Office) by wire transfer, of the exercise price of those Option Shares. In either event, in accordance with Section 3(e), full payment of the exercise price for the Option Shares purchased must be made within five business days after the Secretary of Rockwell has received the Approved Exercise Form, duly completed, dated and signed, or if later, within five business days after the date of such Approved Exercise Form. (d) (i) If you choose (or after your death, the person entitled to exercise the Options chooses) to use already-owned Shares to pay all or part of the exercise price for the Option Shares to be purchased on exercise of any of the Options, you (or after your death, the person entitled to exercise the Options) must deliver to the Secretary -5- [88NT:12/7/94] 8 of Rockwell one or more certificates (and executed stock powers) representing o at least the number of Shares whose value, based on the closing price of Common Stock of Rockwell on the New York Stock Exchange -- Composite Transactions on any day not more than five business days prior to (x) the date on which the Secretary of Rockwell has received the Approved Exercise Form for such exercise, or (y) if later, the date of such Approved Exercise Form, would be sufficient to pay in full the exercise price of those Option Shares; or o any lesser number of Shares you desire (or after your death, the person entitled to exercise the Options desires) to use to pay the exercise price for those Option Shares and a check in the amount of such exercise price less the value of the Shares delivered, based on the closing price of Common Stock of Rockwell on the New York Stock Exchange -- Composite Transactions on any day not more than five business days prior to (x) the date on which the Secretary of Rockwell has received the Approved Exercise Form for such exercise, or (y) if later, the date of such Approved Exercise Form. The delivery of the Shares or Shares and cash, as prescribed by this clause (i), is referred to in this Stock Option Agreement as the Preliminary Payment. (ii) The Secretary of Rockwell will advise you (or any other person who, being entitled to do so, exercises the Options) of the exact number of Shares, valued in accordance with Section 6(e) of the Plan at the closing price on the New York Stock Exchange -- Composite Transactions on the effective date of exercise under Section 3(b)(ii), and any cash required to pay in full the exercise price for the Option Shares purchased. In accordance with Section 3(e), you (or such other person) must pay, in cash, in Shares or in a combination of cash and Shares, any balance required to pay in full the exercise price of the Option Shares -6- [88NT:12/7/94] 9 purchased within five business days following the effective date of such exercise of the Options under Section 3(b)(ii). (iii) Notwithstanding any other provision of this Stock Option Agreement, the Secretary of Rockwell may limit the number, frequency or volume of successive exercises of any of the Options in which payment is made, in whole or in part, by delivery of Shares pursuant to this subparagraph (d) to prevent unreasonable pyramiding of such exercises. (e) A notice of exercise on an Approved Exercise Form, when duly completed, dated and signed by you (or any other person entitled to exercise the Options) and received by the Secretary of Rockwell, whether or not full payment of the exercise price for the Option Shares accompanies the Approved Option Exercise Form and whether the Approved Exercise Form is dated on or prior to the date of receipt by the Secretary of Rockwell or a later date, shall constitute a binding contractual obligation by you (or the other person entitled to exercise the Options) to proceed with and complete that exercise of the Options (but only so long as you continue, or the other person entitled to exercise the Options continues, to be entitled to exercise the Options on that date). By your acceptance of this Stock Option Agreement, you agree (for yourself and on behalf of any other person who becomes entitled to exercise the Options) to deliver or cause to be delivered to Rockwell any balance of the exercise price for the Option Shares to be purchased upon the exercise pursuant to the Approved Exercise Form required to pay in full the exercise price for those Option Shares, that payment being in cash, in Shares or in a combination of cash and Shares, on or before the later of the fifth business day after (i) the date on which the Secretary of Rockwell receives such duly completed, dated and signed Approved Exercise Form, or (ii) if later, the date of such Approved Exercise Form (provided you continue (or the other person entitled to exercise the Options continues) to be entitled to exercise the Options on that date), and you (for yourself and on behalf of any other person who becomes entitled to exercise the Options) authorize the Corporation forthwith to set off against salary payments or other amounts due or which may become due you (or the other person entitled to exercise the Options) any balance of the exercise price for those Option Shares remaining unpaid thereafter. (f) Certificates representing the number of Option Shares purchased will be issued as soon as practicable (i) after -7- [88NT:12/7/94] 10 Rockwell has received full payment therefor or (ii) at Rockwell's election in the sole discretion of its Secretary, after Rockwell has received (x) full payment of the exercise price of those Option Shares and (y) any reimbursement in respect of withholding taxes due pursuant to Section 5. 4. TRANSFERABILITY The Options are not transferable by you otherwise than by will or by the laws of descent and distribution. During your lifetime, only you are entitled to exercise the Options. 5. WITHHOLDING Rockwell shall have the right, in connection with the exercise of the Options in whole or in part, to deduct from any payment to be made by Rockwell under the Plan an amount equal to the taxes required to be withheld by law with respect to such exercise or to require you (or any other person entitled to exercise the Options) to pay to it an amount sufficient to provide for any such taxes so required to be withheld. By your acceptance of this Stock Option Agreement, you agree (for yourself and on behalf of any other person who becomes entitled to exercise the Options) that if Rockwell elects to require you (or such other person) to remit an amount sufficient to pay such withholding taxes, you (or such other person) must remit that amount within ten business days after the date of the statement for such amount rendered by Rockwell, failing which Rockwell shall have the same right of set-off as provided under Section 3(e) with respect to payment of the exercise price for Option Shares. 6. HEADINGS The section headings contained in these Stock Option Terms and Conditions are solely for the purpose of reference, are not part of the agreement of the parties and shall in no way affect the meaning or interpretation of this Stock Option Agreement. 7. REFERENCES All references in these Stock Option Terms and Conditions to Sections, paragraphs, subparagraphs or clauses shall be deemed to be references to Sections, paragraphs, subparagraphs and clauses of these Stock Option Terms and Conditions unless otherwise specifically provided. -8- [88NT:12/7/94] 11 8. APPLICABLE LAWS AND REGULATIONS This Stock Option Agreement and Rockwell's obligation to issue Option Shares hereunder are subject to applicable laws and regulations. Attachment 1 - Cash Only Option Exercise Form and Instructions Attachment 2 - "Stock Swap" Option Exercise Form and Instructions -9- [88NT:12/7/94] 12 ATTACHMENT 1 STOCK OPTION EXERCISE FORM - CASH ONLY ROCKWELL INTERNATIONAL CORPORATION CASH ONLY STOCK OPTION EXERCISE FORM Attached is the Stock Option Exercise Form to be used if you exercise a stock option under any of Rockwell's stock option plans for a cash payment (including a so-called "cashless" exercise in which your stockbroker, bank or other financial institution furnishes the cash payment of the exercise price). BEFORE COMPLETING THIS STOCK OPTION EXERCISE FORM, PLEASE READ CAREFULLY THE SEPARATE INSTRUCTIONS FOR THE FORM, WHICH ARE REPRODUCED IN APPENDIX I TO THE BOOKLET, FACTS ABOUT ROCKWELL INTERNATIONAL CORPORATION STOCK OPTIONS AND SARS (REVISED MARCH 1993). YOU SHOULD ALSO REFER TO THE PERTINENT PORTIONS OF THE FACTS BOOKLET, PARTICULARLY THE "HIGHLIGHTS" SECTION (ON PAGES 2-7) FOR FURTHER GUIDANCE IN COMPLETING THE FORM. If after reading the separate instructions and the pertinent sections of the FACTS booklet you have questions on the procedures to be followed in completing your exercise or on how to complete the Form, please call Stock Option Administration in the Secretary's Office in Pittsburgh (at Comnet 545-7120 or (412) 565-7120) for assistance. [88NT:12/7/94] 13 CASH ONLY STOCK OPTION EXERCISE FORM ------------------------------------ To: Rockwell International Corporation 625 Liberty Avenue Pittsburgh, Pennsylvania 15222-3123 Attention: Office of the Secretary, Stock Option Administration 1. OPTIONS EXERCISED: Subject to the terms and conditions of the 1979 Stock Plan for Key Employees, the 1981 Incentive Stock Option Plan for Key Employees, the 1988 Long-Term Incentives Plan and/or the 1995 Long-Term Incentives Plan (collectively, the Plans) of Rockwell International Corporation (Rockwell), and Agreement(s) thereunder, I hereby exercise the following stock option(s):
Plan Date o NQ/ Class of Stock Number of Exercise Total Year Grant ISO Common/Class A Shares Price Purchase Price - ---- ------- --- -------------- -------- -------- -------------- $ $ - ---- ------- --- -------------- -------- -------- -------------- $ $ - ---- ------- --- -------------- -------- -------- -------------- $ $ - ---- ------- --- -------------- -------- -------- --------------
2. CONVERSION: Convert [ ] None [ ] All [ ] _____ shares of the shares of Class A Common Stock to Common Stock. 3. PAYMENT: [ ] A check payable to Rockwell International Corporation in the amount of the Total Purchase Price of the above-itemized stock option(s) is enclosed. [ ] The Total Purchase Price of the above-itemized stock option(s) will be paid by a check payable to Rockwell International Corporation or (if prior arrangements are made with the Stock Option Administration staff of the Secretary's Office) by a wire transfer of funds to Rockwell [CONTINUED ON PAGE 2] 14 Cash Only Stock Option Exercise Form Page 2 International Corporation to the account specified by the Secretary's Office (Stock Option Administration), which will be sent promptly by my stockbroker, bank or other financial institution, Representative's Name: _______________________________ Firm Name: ___________________________________________ Address: _____________________________________________ _____________________________________________ Telephone No.: _______________________________________ If full payment of the Total Purchase Price of the stock option(s) listed in ITEM 1 is not delivered within five (5) business days after the later of the date of this Form or the date of its receipt by the Secretary of Rockwell, the Corporation (as defined in the Plans) is authorized forthwith to set off the balance due against salary payments or other amounts due or which may become due me to satisfy my obligation to pay the Total Purchase Price. If any of the stock option(s) listed in Item 1 was granted as a nonqualified stock option (NQ), I understand Rockwell will issue a statement to me for reimbursement of taxes required to be withheld and remitted to taxing authorities in respect of the exercise of those stock option(s) and may withhold delivery of the certificate(s) for the shares deliverable upon this exercise until that statement has been paid in full. If full payment of that statement is not received by Rockwell within ten (10) business days after the date of that statement, the Corporation (as defined in the Plans) is authorized forthwith to set off the balance due against salary payments or other amounts due or which may become due me to satisfy any obligation to reimburse Rockwell for those withholding taxes. 4. REGISTRATION: Please register the stock as follows: Name: ________________________________________________ Social Security No.: _________________________________ Current Address: _____________________________________ _____________________________________ [CONTINUED AND TO BE SIGNED ON PAGE 3] 15 Cash Only Stock Option Exercise Form Page 3 NOTE: THE STOCK MAY BE REGISTERED ONLY IN YOUR NAME OR IN YOUR NAME JOINTLY WITH YOUR SPOUSE (OR JOINTLY WITH ANOTHER PERSON). IT MAY NOT BE REGISTERED IN THE NAME OF YOUR STOCKBROKER, BANK OR OTHER FINANCIAL INSTITUTION. 5. DELIVERY: Please deliver the stock _____ to me at the address listed in Item 4. _____ to the following person and address: Name of Stockbrokerage Firm or Other Addressee: _______________________________________________________ Address: _____________________________________________ _____________________________________________ Attention: ___________________________________________ THIS STOCK OPTION EXERCISE MAY NOT BE REVOKED OR CHANGED AFTER DELIVERY OF THIS FORM, PROPERLY COMPLETED, DATED AND SIGNED, TO THE CORPORATION WHETHER OR NOT PAYMENT ACCOMPANIES THIS FORM AND WHETHER THIS FORM IS DATED BEFORE, ON OR AFTER THE DATE OF SUCH RECEIPT. ____________________________________ (Signature) Print Name:_________________________ Dated: _____________________, 19 ___ 16 ATTACHMENT 2 STOCK OPTION EXERCISE FORM STOCK OR STOCK AND CASH ("STOCK SWAP") ROCKWELL INTERNATIONAL CORPORATION "STOCK SWAP" STOCK OPTION EXERCISE FORM Attached is the Stock Option Exercise Form to be used if you exercise a stock option under any of Rockwell's stock option plans and pay part or all of the exercise price for the Option Shares purchased by delivering shares of Rockwell Common Stock or Class A Common Stock. BEFORE COMPLETING THIS STOCK OPTION EXERCISE FORM, PLEASE READ CAREFULLY THE SEPARATE INSTRUCTIONS FOR THE FORM, WHICH ARE REPRODUCED IN APPENDIX II TO THE BOOKLET, FACTS ABOUT ROCKWELL INTERNATIONAL CORPORATION STOCK OPTIONS AND SARS (REVISED MARCH 1993). YOU SHOULD ALSO REFER TO THE PERTINENT PORTIONS OF THE FACTS BOOKLET, PARTICULARLY THE "HIGHLIGHTS" SECTION (ON PAGES 2-7) AND THE STOCK-FOR-STOCK PAYMENT METHOD ("STOCK SWAP") SECTION (ON PAGES 31-36) FOR FURTHER GUIDANCE IN COMPLETING THE FORM. If after reading the separate instructions and the pertinent sections of the FACTS booklet you have questions on the procedures to be followed in completing your exercise or on how to complete the Form, please call Stock Option Administration in the Secretary's Office in Pittsburgh (at Comnet 545-7120 or (412) 565-7120) for assistance. [88NT: 12/7/94] 17 "STOCK SWAP" STOCK OPTION EXERCISE FORM --------------------------------------- To: Rockwell International Corporation 625 Liberty Avenue Pittsburgh, Pennsylvania 15222-3123 Attention: Office of the Secretary, Stock Option Administration 1. OPTIONS EXERCISED: Subject to the terms and conditions of the 1979 Stock Plan for Key Employees, the 1981 Incentive Stock Option Plan for Key Employees, the 1988 Long-Term Incentives Plan and/or the 1995 Long-Term Incentives Plan (collectively, the Plans) of Rockwell International Corporation (Rockwell), and Agreement(s) thereunder, I hereby exercise the following stock option(s):
Plan Date o NQ/ Class of Stock Number of Exercise Total Year Grant ISO Common/Class A Shares Price Purchase Price - ---- ------- --- -------------- -------- -------- -------------- $ $ - ---- ------- --- -------------- -------- -------- -------------- $ $ - ---- ------- --- -------------- -------- -------- -------------- $ $ - ---- ------- --- -------------- -------- -------- --------------
2. CONVERSION: Convert [ ] None [ ] All [ ] _____ shares of the shares of Class A Common Stock to Common Stock. 3. PAYMENT: A. Number of shares of Rockwell Common Stock or Class A Common Stock surrendered to pay the exercise price of the option(s): ______________ shares of Common _______________ shares of Class A Common B. Amount of enclosed check, if any, payable to Rockwell International Corporation to pay estimated balance of exercise price of the option(s): $_________________________ I am using shares of Common Stock or Class A Common Stock or both of Rockwell (Shares) that I now own to pay all or part of the exercise price for the Shares to be purchased on my exercise of the above-referenced stock option(s). I enclose, or in accordance with prior arrangements I have made with you, I am arranging for delivery to you of, one or more certificates for (i) at least the number of Shares estimated, based on the closing price on the New York Stock Exchange -- Composite Transactions on a day not more than five business days prior to (x) the date of receipt of this Exercise Form by the Secretary's Office (Stock Option Administration), or (y) if later, the date of this [CONTINUED ON PAGE 2] 18 "Stock Swap" Stock Option Exercise Form Page 2 Exercise Form, to be sufficient to pay in full the Total Purchase Price of the Shares covered by this exercise, or (ii) a lesser number of Shares that I desire to apply to such Total Purchase Price and a check in the amount of such Total Purchase Price less the value of the Shares delivered, based on the closing price on the New York Stock Exchange -- Composite Transactions on a day not more than five business days prior to (x) the date of receipt of this Exercise Form by the Secretary's Office (Stock Option Administration), or (y) if later, the date of this Exercise Form, and in either case, an executed stock transfer power covering the Shares surrendered or to be surrendered. I understand that you will advise me of the exact number of Shares, valued in accordance with the Plans at the closing price on the New York Stock Exchange -- Composite Transactions on the later of (x) the date you have received (I) this Exercise Form, (II) the estimated payment in Shares or Shares and cash specified above and, (III) if I am not the optionee, any additional documents required to evidence my right to exercise these stock option(s) and (y) the date of this Exercise Form (the later of such dates, the effective date of this exercise), and any cash required to pay in full the Total Purchase Price of the Shares to be purchased upon this exercise. I further understand that certificates representing the number of Shares purchased will be issued only after I deliver to Rockwell any remaining balance of the Total Purchase Price in cash or a combination of Shares and cash and the amount sufficient to reimburse Rockwell for all withholding taxes required to be withheld and remitted to taxing authorities in respect of this exercise. I hereby agree to deliver to Rockwell no later than five (5) business days following the effective date of this exercise cash or any additional number of Shares or a combination of Shares and cash required to pay in full the Total Purchase Price of the Shares to be purchased upon this exercise, and an executed stock transfer power covering any additional Shares delivered. I hereby further agree to pay Rockwell, no later than ten (10) business days after the date of Rockwell's statement therefor, the amount sufficient to reimburse Rockwell for all withholding taxes required to be withheld and remitted to taxing authorities in respect of this exercise. If I fail to deliver any remaining balance of the Total Purchase Price of the Shares to be purchased upon this exercise and an amount sufficient to reimburse Rockwell in full for all withholding taxes required to be withheld and remitted to taxing authorities in respect of this exercise in accordance with this paragraph, the Corporation (as defined in the Plans) is authorized forthwith to set off the balance due against salary payments or other amounts due or which may become due to me to satisfy my obligation hereunder. 4. REGISTRATION: It is my understanding that following my payment in full of the Total Purchase Price and reimbursement of Rockwell for any applicable withholding taxes as provided in ITEM 3: PAYMENT, I shall receive from Rockwell one or more stock certificates representing the same [CONTINUED AND TO BE SIGNED ON PAGE 3] 19 "Stock Swap" Stock Option Exercise Form Page 3 number and kind of Shares I surrendered to Rockwell, issued in the same name or names as the Shares so surrendered. I shall also receive one or more separate stock certificates representing the additional Shares acquired as a result of this exercise, which I hereby request be registered as follows: Name: ____________________________________________________ Social Security No.: _____________________________________ Current Address: _________________________________________ _________________________________________ NOTE: THE STOCK MAY BE REGISTERED ONLY IN YOUR NAME OR IN YOUR NAME JOINTLY WITH YOUR SPOUSE (OR JOINTLY WITH ANOTHER PERSON). IT MAY NOT BE REGISTERED IN THE NAME OF YOUR STOCKBROKER, BANK OR OTHER FINANCIAL INSTITUTION. 5. DELIVERY: Please deliver the stock _____ to me at the address listed in Item 4. _____ to the following person and address: Name of Stockbrokerage Firm or Other Addressee: _______________________________________________________ Address: _____________________________________________ _____________________________________________ Attention: ___________________________________________ THIS STOCK OPTION EXERCISE MAY NOT BE REVOKED OR CHANGED AFTER DELIVERY OF THIS FORM, PROPERLY COMPLETED, DATED AND SIGNED, TO THE CORPORATION WHETHER OR NOT PAYMENT ACCOMPANIES THIS FORM AND WHETHER THIS FORM IS DATED BEFORE, ON OR AFTER THE DATE OF SUCH RECEIPT. ____________________________________ (Signature) Print Name:_________________________ Dated: _____________________, 19 ___ 20 "Stock Swap" Stock Option Exercise Form Page 4 STOCK TRANSFER POWER SEPARATE FROM CERTIFICATE FOR VALUE RECEIVED, (I) (We), ____________________________ (insert name(s)) hereby sell, assign and transfer unto Rockwell International Corporation the ________________ shares of the [Common Stock] (insert number) [Class A Common Stock] of Rockwell International Corporation standing in the name(s) of ____________________________ on the (name(s) on certificate(s)) books of said Rockwell International Corporation represented by Certificate(s) No(s). ______________ herewith and do hereby irrevocably constitute and appoint Mellon Bank, N.A., attorney to transfer the said stock on the books of Rockwell International with full power of substitution in the premises. Dated: __________________ _____________________________________________ (Signature) WITNESS: _____________________________________________ (Signature) 21 H:\WPDATA\ETM\OPTAGMT2.T&C 1988 LONG-TERM INCENTIVES PLAN FORM OF OPTION AGREEMENT (WITHOUT ARBITRATION) TRANSFERRABLE NONQUALIFIED OPTIONS ---------------------------------------------- December 7, 1994 To: We are pleased to notify you that the Compensation and Management Development Committee has granted to you today the following stock option(s) under the 1988 Long-Term Incentives Plan (the Plan):
Date of Grant Type of Grant Number of Shares Option Price - ------------- ------------- ---------------- ------------ 99/99/99 (NQ) 9,999,999 $$$$.9999
These stock option(s) have been granted, and may be exercised only upon the terms and conditions of this Stock Option Agreement, subject in all respects to the provisions of the Plan, as it may be amended. The attached Stock Option Terms and Conditions are incorporated in and are part of this Stock Option Agreement. Copies of the Plan and the current Prospectus covering shares issuable or transferable under the Plan are enclosed. Please confirm that you have read and agree to be bound by this Agreement by signing one copy at the place indicated and returning the signed copy to: Office of the Secretary Rockwell International Corporation 625 Liberty Avenue Pittsburgh, PA 15222-3123 Attention: Stock Option Administration These stock options will lapse and be of no effect if a copy of this Stock Option Agreement, properly signed by you, is not received by the Secretary of Rockwell on or before January 31, 1995, unless Rockwell (in its sole discretion) elects in writing to extend that date. Agreed to: Date: ______________________ ROCKWELL INTERNATIONAL CORPORATION ____________________________ By: _______________________________ Employee Signature Senior Vice President, General XXXXXXXXXXXXXXXXXXX Counsel and Secretary 999-99-9999 22 H:\WPDATA\ETM\OPTAGMT2.T&C ROCKWELL INTERNATIONAL CORPORATION 1988 LONG TERM INCENTIVES PLAN STOCK OPTION AGREEMENT STOCK OPTION TERMS AND CONDITIONS 1. Definitions As used in these Stock Option Terms and Conditions, the following words and phrases shall have the respective meanings ascribed to them below unless the context in which any of them is used clearly indicates a contrary meaning: (a) APPROVED OPTION EXERCISE FORM: A Cash Only Exercise Form in the form of Attachment 1 or a "Stock Swap" Exercise Form in the form of Attachment 2, any other form subsequently adopted by the Secretary of Rockwell to replace Attachment 1 or 2, or any other form accepted by the Secretary of Rockwell in his sole discretion. (b) OPTIONS: The stock option or stock options listed in the first paragraph of the letter dated December 7, 1994 to which these Stock Option Terms and Conditions are attached and which together with these Stock Option Terms and Conditions constitutes the Stock Option Agreement. (c) OPTION SHARES: The shares of Rockwell Common Stock issuable or transferable on exercise of the Options. (d) PLAN: Rockwell's 1988 Long-Term Incentives Plan, as amended and as such Plan may be further amended and in effect at the relevant time. (e) PRELIMINARY PAYMENT: Defined in Section 3(d)(i). (f) ROCKWELL: Rockwell International Corporation, a Delaware corporation. (g) SHARES: Shares of Rockwell Common Stock or Class A Common Stock. (h) STOCK OPTION AGREEMENT: These Stock Option Terms and Conditions together with the letter dated December 7, 1994 to which they are attached. 2. When Options May be Exercised ----------------------------- The Options may be exercised, in whole or in part (but only for a whole number of shares) and at one time or from time to time, as to one-third (rounded down to an integral one hundred) of the Option Shares during the period beginning on [88T:12/7/94] 23 December 7, 1995 and ending on December 7, 2004, as to an additional one-third (rounded down to an integral one hundred) of the Option Shares during the period beginning on December 7, 1996 and ending on December 7, 2004 and as to the balance of the Option Shares during the period beginning on December 7, 1997 and ending on December 7, 2004, and only during those periods, provided that: (a) if you die while an employee of the Corporation (as defined in the Plan), your estate, any person who acquires the Options by bequest or inheritance, or any person to whom you have transferred the Options during your lifetime as permitted by Section 4 may exercise all the Options not theretofore exercised within (and only within) the period beginning on your date of death (even if you die before you have become entitled to exercise all or any part of the Options) and ending three years thereafter; and (b) if your employment by the Corporation terminates other than by death, then: (i) if your retirement or other termination date is before December 7, 1995, the Options shall lapse on your retirement or other termination and may not be exercised at any time; (ii) if your employment by the Corporation is terminated for cause, the Options shall expire forthwith upon your termination and may not be exercised thereafter; (iii) if your employment by the Corporation terminates after June 7, 1996 by reason of your retirement under a retirement plan of Rockwell, or a subsidiary or affiliate of Rockwell, at or after the earlier of age 62 or the date you have accumulated 85 points (or fulfilled such other criteria as may be required for an unreduced early retirement benefit) for purposes of the applicable retirement plan, you (or if you die after your retirement date, your estate or any person who acquires the Options by bequest or inheritance) or any person to whom you have transferred the Options during your lifetime as permitted by Section 4 may thereafter exercise the Options within (and only within) the period starting on the date you would otherwise have become entitled to exercise the part of the Options so exercised and ending five years after your retirement date; -2- [88T:12/7/94] 24 (iv) if your employment by the Corporation terminates after June 7, 1996 by reason of your retirement under a retirement plan of Rockwell, or a subsidiary or affiliate of Rockwell, before the earlier of age 62 or the date you have accumulated 85 points (or fulfilled such other criteria as may be required for an unreduced early retirement benefit) for purposes of the applicable retirement plan, you (or if you die after your retirement date, your estate or any person who acquires the Options by bequest or inheritance) or any person to whom you have transferred the Options during your lifetime as permitted by Section 4 may thereafter exercise the Options within (and only within) the period starting on the date you would otherwise have become entitled to exercise the part of the Options so exercised and ending on the earlier of (x) the third anniversary of your retirement date or (y) such earlier date as the Compensation and Management Development Committee shall determine by action taken not later than 60 days after your retirement date; (v) if your employment by the Corporation terminates on or after December 7, 1995 but on or before June 7, 1996 by reason of your retirement under a retirement plan of Rockwell, or a subsidiary or affiliate of Rockwell, you (or if you die after your retirement date, your estate or any person who acquires the Options by bequest or inheritance) or any person to whom you have transferred the Options during your lifetime as permitted by Section 4 may thereafter exercise the Options within (and only within) the period starting on the date you would otherwise have become entitled to exercise the part of the Options so exercised and ending on the earlier of (x) the third anniversary of your retirement date or (y) such earlier date as the Compensation and Management Development Committee shall determine by action taken not later than 60 days after your retirement date; and (vi) if your employment by the Corporation terminates on or after December 7, 1995 for any reason not specified in subparagraph (a) or in clauses (ii), (iii), (iv) or (v) of this subparagraph (b), you (or if you die after -3- [88T:12/7/94] 25 your termination date, your estate or any person who acquires the Options by bequest or inheritance) or any person to whom you have transferred the Options during your lifetime as permitted by Section 4 may thereafter exercise the Options within (and only within) the period ending three months after your termination date but only to the extent they were exercisable on your termination date. In no event shall the provisions of the foregoing subparagraphs (a) and (b) extend to a date after December 7, 2004 the period during which the Options may be exercised. 3. Exercise Procedure (a) To exercise all or any part of the Options, you (or after your death, your estate or any person who has acquired the Options by bequest or inheritance) or any person to whom you have transferred the Options during your lifetime as permitted by Section 4 must deliver to the Secretary of Rockwell: (i) a notice of exercise on an Approved Option Exercise Form properly completed, dated and signed by you (or after your death, by the person entitled to exercise the Options) or by any person to whom you have transferred the Options during your lifetime as permitted by Section 4; (ii) full payment of the exercise price for the Option Shares to be purchased on exercise of the Options o entirely in cash; or o in Shares; or o in a combination of cash and Shares; and (iii) in the case of an exercise of the Options by any person other than you seeking to exercise the Options, such documents as the Secretary of Rockwell shall require to establish to his satisfaction that the person seeking to exercise the Options is entitled to do so. (b) An exercise of the whole or any part of the Options shall be effective: -4- [88T:12/7/94] 26 (i) if you (or after your death, the person entitled to exercise the Options) or any person to whom you have transferred the Options during your lifetime as permitted by Section 4 elects to pay the exercise price for the Option Shares entirely in cash, upon (x) receipt by the Secretary of Rockwell of (I) an Approved Exercise Form, duly completed, dated and signed, (II) full payment of the exercise price for the Option Shares purchased pursuant to that Approved Exercise Form and (III) any documents required pursuant to Section 3(a)(iii), or (y) if later, the date of such Approved Exercise Form (provided you, or after your death, the person entitled to exercise the Options, or any person to whom you have transferred the Options during your lifetime as permitted by Section 4 continues to be entitled to exercise the Options on that date); and (ii) if you (or after your death, the person entitled to exercise the Option) or any person to whom you have transferred the Options during your lifetime as permitted by Section 4 elects to pay the exercise price of the Option Shares in Shares or in a combination of Shares and cash, upon (x) receipt by the Secretary of Rockwell of (I) an Approved Exercise Form, duly completed, dated and signed, (II) the Preliminary Payment (as defined in Section 3(d)(i)) and (III) any documents required pursuant to Section 3(a)(iii), or (y) if later, the date of such Approved Exercise Form (provided you, or after your death, the person entitled to exercise the Options, or any person to whom you have transferred the Options during your lifetime as permitted by Section 4 continues to be entitled to exercise the Options on that date). (c) If you (or after your death, the person entitled to exercise the Options) or any person to whom you have transferred the Options during your lifetime as permitted by Section 4 chooses to pay the exercise price for the Option Shares to be purchased on exercise of any of the Options entirely in cash, payment must be made by o delivering to the Secretary of Rockwell a check in the full amount of the exercise price for those Option Shares; or [88T:12/7/94] -5- 27 o arranging with a stockbroker, bank or other financial institution to deliver to the Secretary of Rockwell full payment, by check or (if prior arrangements are made with the Stock Option Administration staff of the Secretary's Office) by wire transfer, of the exercise price of those Option Shares. In either event, in accordance with Section 3(e), full payment of the exercise price for the Option Shares purchased must be made within five business days after the Secretary of Rockwell has received the Approved Exercise Form, duly completed, dated and signed, or if later, within five business days after the date of such Approved Exercise Form. (d) (i) If you (or after your death, the person entitled to exercise the Options) or a person to whom you have transferred the Options during your lifetime chooses to use already-owned Shares to pay all or part of the exercise price for the Option Shares to be purchased on exercise of any of the Options, you (or the other person then entitled to exercise the Options) must deliver to the Secretary of Rockwell one or more certificates (and executed stock powers) representing o at least the number of Shares whose value, based on the closing price of Common Stock of Rockwell on the New York Stock Exchange -- Composite Transactions on any day not more than five business days prior to (x) the date on which the Secretary of Rockwell has received the Approved Exercise Form for such exercise, or (y) if later, the date of such Approved Exercise Form, would be sufficient to pay in full the exercise price of those Option Shares; or o any lesser number of Shares you desire (or the other person then entitled to exercise the Options desires) to use to pay the exercise price for those Option Shares and a check in the amount of such exercise price less the value of the Shares delivered, based on the closing price of Common Stock of Rockwell on the New York Stock Exchange -- Composite Transactions on any day not more than five business days prior to (x) the date on which the Secretary of Rockwell has [88T:12/7/94] -6- 28 received the Approved Exercise Form for such exercise, or (y) if later, the date of such Approved Exercise Form. The delivery of the Shares or Shares and cash, as prescribed by this clause (i), is referred to in this Stock Option Agreement as the Preliminary Payment. (ii) The Secretary of Rockwell will advise you (or any other person who, being entitled to do so, exercises the Options) of the exact number of Shares, valued in accordance with Section 6(e) of the Plan at the closing price on the New York Stock Exchange -- Composite Transactions on the effective date of exercise under Section 3(b)(ii), and any cash required to pay in full the exercise price for the Option Shares purchased. In accordance with Section 3(e), you (or such other person) must pay, in cash, in Shares or in a combination of cash and Shares, any balance required to pay in full the exercise price of the Option Shares purchased within five business days following the effective date of such exercise of the Options under Section 3(b)(ii). (iii) Notwithstanding any other provision of this Stock Option Agreement, the Secretary of Rockwell may limit the number, frequency or volume of successive exercises of any of the Options in which payment is made, in whole or in part, by delivery of Shares pursuant to this subparagraph (d) to prevent unreasonable pyramiding of such exercises. (e) A notice of exercise on an Approved Exercise Form, when duly completed, dated and signed by you (or any other person entitled to exercise the Options) and received by the Secretary of Rockwell, whether or not full payment of the exercise price for the Option Shares accompanies the Approved Option Exercise Form and whether the Approved Exercise Form is dated on or prior to the date of receipt by the Secretary of Rockwell or a later date, shall constitute a binding contractual obligation by you (or the other person entitled to exercise the Options) to proceed with and complete that exercise of the Options (but only so long as you continue, or the other person entitled to exercise the Options continues, to be entitled to exercise the Options on that date). By your acceptance of this Stock Option Agreement, you agree (for yourself and on behalf of any other person who becomes [88T:12/7/94] -7- 29 entitled to exercise the Options) to deliver or cause to be delivered to Rockwell any balance of the exercise price for the Option Shares to be purchased upon the exercise pursuant to the Approved Exercise Form required to pay in full the exercise price for those Option Shares, that payment being in cash, in Shares or in a combination of cash and Shares, on or before the later of the fifth business day after (i) the date on which the Secretary of Rockwell receives such duly completed, dated and signed Approved Exercise Form, or (ii) if later, the date of such Approved Exercise Form (provided you continue (or the other person entitled to exercise the Options continues) to be entitled to exercise the Options on that date), and you (for yourself and on behalf of any other person who becomes entitled to exercise the Options) authorize the Corporation forthwith to set off against salary payments or other amounts due or which may become due you (or the other person entitled to exercise the Options) any balance of the exercise price for those Option Shares remaining unpaid thereafter. (f) Certificates representing the number of Option Shares purchased will be issued as soon as practicable (i) after Rockwell has received full payment therefor or (ii) at Rockwell's election in the sole discretion of its Secretary, after Rockwell has received (x) full payment of the exercise price of those Option Shares and (y) any reimbursement in respect of withholding taxes due pursuant to Section 5. 4. Transferability --------------- You are not entitled to transfer the Options except (i) by will or by the laws of descent and distribution; or (ii) in the case of any Option not granted as an incentive stock option, by gift to any member of your immediate family or to a trust for the benefit of one or more members of your immediate family; PROVIDED, HOWEVER, that no transfer pursuant to this clause (ii) shall be effective unless you have notified the Corporation's Office of the Secretary (Attention: Stock Option Administration) in writing specifying the Option or Options transferred, the date of the gift and the name and Social Security or other Taxpayer Identification Number of the transferee. During your lifetime, only you are entitled to exercise the Options unless you have transferred any Option in accordance with this paragraph to a member of your immediate family or a trust for the benefit of one or more members of your immediate family, in which case only that transferee (or the legal representative of the estate or the heirs or legatees of that transferee) shall be entitled to exercise that Option. For purposes of this paragraph, your "immediate -8- [88T:12/7/94] 30 family" shall mean your spouse and natural, adopted or step-children and grandchildren. 5. WITHHOLDING Rockwell shall have the right, in connection with the exercise of the Options in whole or in part, to deduct from any payment to be made by Rockwell under the Plan an amount equal to the taxes required to be withheld by law with respect to such exercise or to require you (or any other person entitled to exercise the Options) to pay to it an amount sufficient to provide for any such taxes so required to be withheld. By your acceptance of this Stock Option Agreement, you agree (for yourself and on behalf of any other person who becomes entitled to exercise the Options) that if Rockwell elects to require you (or such other person) to remit an amount sufficient to pay such withholding taxes, you (or such other person) must remit that amount within ten business days after the date of the statement for such amount rendered by Rockwell, failing which Rockwell shall have the same right of set-off as provided under Section 3(e) with respect to payment of the exercise price for Option Shares. 6. HEADINGS The section headings contained in these Stock Option Terms and Conditions are solely for the purpose of reference, are not part of the agreement of the parties and shall in no way affect the meaning or interpretation of this Stock Option Agreement. 7. REFERENCES All references in these Stock Option Terms and Conditions to Sections, paragraphs, subparagraphs or clauses shall be deemed to be references to Sections, paragraphs, subparagraphs and clauses of these Stock Option Terms and Conditions unless otherwise specifically provided. 8. APPLICABLE LAWS AND REGULATIONS This Stock Option Agreement and Rockwell's obligation to issue Option Shares hereunder are subject to applicable laws and regulations. Attachment 1 - Cash Only Option Exercise Form and Instructions Attachment 2 - "Stock Swap" Option Exercise Form and Instructions -9- [88T:12/7/94] 31 ATTACHMENT 1 STOCK OPTION EXERCISE FORM - CASH ONLY ROCKWELL INTERNATIONAL CORPORATION CASH ONLY STOCK OPTION EXERCISE FORM Attached is the Stock Option Exercise Form to be used if you exercise a stock option under any of Rockwell's stock option plans for a cash payment (including a so-called "cashless" exercise in which your stockbroker, bank or other financial institution furnishes the cash payment of the exercise price). BEFORE COMPLETING THIS STOCK OPTION EXERCISE FORM, PLEASE READ CAREFULLY THE SEPARATE INSTRUCTIONS FOR THE FORM, WHICH ARE REPRODUCED IN APPENDIX I TO THE BOOKLET, FACTS ABOUT ROCKWELL INTERNATIONAL CORPORATION STOCK OPTIONS AND SARS (REVISED MARCH 1993). YOU SHOULD ALSO REFER TO THE PERTINENT PORTIONS OF THE FACTS BOOKLET, PARTICULARLY THE "HIGHLIGHTS" SECTION (ON PAGES 2-7) FOR FURTHER GUIDANCE IN COMPLETING THE FORM. If after reading the separate instructions and the pertinent sections of the FACTS booklet you have questions on the procedures to be followed in completing your exercise or on how to complete the Form, please call Stock Option Administration in the Secretary's Office in Pittsburgh (at Comnet 545-7120 or (412) 565-7120) for assistance. [88T:12/7/94] 32 CASH ONLY STOCK OPTION EXERCISE FORM ------------------------------------ To: Rockwell International Corporation 625 Liberty Avenue Pittsburgh, Pennsylvania 15222-3123 Attention: Office of the Secretary, Stock Option Administration 1. OPTIONS EXERCISED: Subject to the terms and conditions of the 1979 Stock Plan for Key Employees, the 1981 Incentive Stock Option Plan for Key Employees, the 1988 Long-Term Incentives Plan and/or the 1995 Long-Term Incentives Plan (collectively, the Plans) of Rockwell International Corporation (Rockwell), and Agreement(s) thereunder, I hereby exercise the following stock option(s):
Plan Date o NQ/ Class of Stock Number of Exercise Total Year Grant ISO Common/Class A Shares Price Purchase Price - ---- ------- --- -------------- -------- -------- -------------- $ $ - ---- ------- --- -------------- -------- -------- -------------- $ $ - ---- ------- --- -------------- -------- -------- -------------- $ $ - ---- ------- --- -------------- -------- -------- --------------
2. CONVERSION: Convert [ ] None [ ] All [ ] _____ shares of the shares of Class A Common Stock to Common Stock. 3. PAYMENT: [ ] A check payable to Rockwell International Corporation in the amount of the Total Purchase Price of the above-itemized stock option(s) is enclosed. [ ] The Total Purchase Price of the above-itemized stock option(s) will be paid by a check payable to Rockwell International Corporation or (if prior arrangements are made with the Stock Option Administration staff of the Secretary's Office) by a wire transfer of funds to Rockwell [CONTINUED ON PAGE 2] 33 Cash Only Stock Option Exercise Form Page 2 International Corporation to the account specified by the Secretary's Office (Stock Option Administration), which will be sent promptly by my stockbroker, bank or other financial institution, Representative's Name: _______________________________ Firm Name: ___________________________________________ Address: _____________________________________________ _____________________________________________ Telephone No.: _______________________________________ If full payment of the Total Purchase Price of the stock option(s) listed in ITEM 1 is not delivered within five (5) business days after the later of the date of this Form or the date of its receipt by the Secretary of Rockwell, the Corporation (as defined in the Plans) is authorized forthwith to set off the balance due against salary payments or other amounts due or which may become due me to satisfy my obligation to pay the Total Purchase Price. If any of the stock option(s) listed in Item 1 was granted as a nonqualified stock option (NQ), I understand Rockwell will issue a statement to me for reimbursement of taxes required to be withheld and remitted to taxing authorities in respect of the exercise of those stock option(s) and may withhold delivery of the certificate(s) for the shares deliverable upon this exercise until that statement has been paid in full. If full payment of that statement is not received by Rockwell within ten (10) business days after the date of that statement, the Corporation (as defined in the Plans) is authorized forthwith to set off the balance due against salary payments or other amounts due or which may become due me to satisfy any obligation to reimburse Rockwell for those withholding taxes. 4. REGISTRATION: Please register the stock as follows: Name: _________________________________________ Social Security No.: __________________________ Current Address: ______________________________ ______________________________ [CONTINUED AND TO BE SIGNED ON PAGE 3] 34 Cash Only Stock Option Exercise Form Page 3 NOTE: THE STOCK MAY BE REGISTERED ONLY IN YOUR NAME OR IN YOUR NAME JOINTLY WITH YOUR SPOUSE (OR JOINTLY WITH ANOTHER PERSON). IT MAY NOT BE REGISTERED IN THE NAME OF YOUR STOCKBROKER, BANK OR OTHER FINANCIAL INSTITUTION. 5. DELIVERY: Please deliver the stock _____ to me at the address listed in Item 4. _____ to the following person and address: Name of Stockbrokerage Firm or Other Addressee: _______________________________________________________ Address: _____________________________________________ _____________________________________________ Attention: ___________________________________________ THIS STOCK OPTION EXERCISE MAY NOT BE REVOKED OR CHANGED AFTER DELIVERY OF THIS FORM, PROPERLY COMPLETED, DATED AND SIGNED, TO THE CORPORATION WHETHER OR NOT PAYMENT ACCOMPANIES THIS FORM AND WHETHER THIS FORM IS DATED BEFORE, ON OR AFTER THE DATE OF SUCH RECEIPT. ____________________________________ (Signature) Print Name:_________________________ Dated: _____________________, 19 ___ 35 ATTACHMENT 2 STOCK OPTION EXERCISE FORM STOCK OR STOCK AND CASH ("STOCK SWAP") ROCKWELL INTERNATIONAL CORPORATION "STOCK SWAP" STOCK OPTION EXERCISE FORM Attached is the Stock Option Exercise Form to be used if you exercise a stock option under any of Rockwell's stock option plans and pay part or all of the exercise price for the Option Shares purchased by delivering shares of Rockwell Common Stock or Class A Common Stock. BEFORE COMPLETING THIS STOCK OPTION EXERCISE FORM, PLEASE READ CAREFULLY THE SEPARATE INSTRUCTIONS FOR THE FORM, WHICH ARE REPRODUCED IN APPENDIX II TO THE BOOKLET, FACTS ABOUT ROCKWELL INTERNATIONAL CORPORATION STOCK OPTIONS AND SARS (REVISED MARCH 1993). YOU SHOULD ALSO REFER TO THE PERTINENT PORTIONS OF THE FACTS BOOKLET, PARTICULARLY THE "HIGHLIGHTS" SECTION (ON PAGES 2-7) AND THE STOCK-FOR-STOCK PAYMENT METHOD ("STOCK SWAP") SECTION (ON PAGES 31-36) FOR FURTHER GUIDANCE IN COMPLETING THE FORM. If after reading the separate instructions and the pertinent sections of the FACTS booklet you have questions on the procedures to be followed in completing your exercise or on how to complete the Form, please call Stock Option Administration in the Secretary's Office in Pittsburgh (at Comnet 545-7120 or (412) 565-7120) for assistance. [88T:12/7/94] 36 "STOCK SWAP" STOCK OPTION EXERCISE FORM --------------------------------------- To: Rockwell International Corporation 625 Liberty Avenue Pittsburgh, Pennsylvania 15222-3123 Attention: Office of the Secretary, Stock Option Administration 1. OPTIONS EXERCISED: Subject to the terms and conditions of the 1979 Stock Plan for Key Employees, the 1981 Incentive Stock Option Plan for Key Employees, the 1988 Long-Term Incentives Plan and/or the 1995 Long-Term Incentives Plan (collectively, the Plans) of Rockwell International Corporation (Rockwell), and Agreement(s) thereunder, I hereby exercise the following stock option(s):
Plan Date of NQ/ Class of Stock Number of Exercise Total Year Grant ISO Common/Class A Shares Price Purchase Price - ---- ------- --- -------------- -------- -------- -------------- $ $ - ---- ------- --- -------------- -------- -------- -------------- $ $ - ---- ------- --- -------------- -------- -------- -------------- $ $ - ---- ------- --- -------------- -------- -------- --------------
2. CONVERSION: Convert [ ] None [ ] All [ ] _____ shares of the shares of Class A Common Stock to Common Stock. 3. PAYMENT: A. Number of shares of Rockwell Common Stock or Class A Common Stock surrendered to pay the exercise price of the option(s): ______________ shares of Common _______________ shares of Class A Common B. Amount of enclosed check, if any, payable to Rockwell International Corporation to pay estimated balance of exercise price of the option(s): $_________________________ I am using shares of Common Stock or Class A Common Stock or both of Rockwell (Shares) that I now own to pay all or part of the exercise price for the Shares to be purchased on my exercise of the above-referenced stock option(s). I enclose, or in accordance with prior arrangements I have made with you, I am arranging for delivery to you of, one or more certificates for (i) at least the number of Shares estimated, based on the closing price on the New York Stock Exchange -- Composite Transactions on a day not more than five business days prior to (x) the date of receipt of this Exercise Form by the Secretary's Office (Stock Option Administration), or (y) if later, the date of this [CONTINUED ON PAGE 2] 37 "Stock Swap" Stock Option Exercise Form Page 2 Exercise Form, to be sufficient to pay in full the Total Purchase Price of the Shares covered by this exercise, or (ii) a lesser number of Shares that I desire to apply to such Total Purchase Price and a check in the amount of such Total Purchase Price less the value of the Shares delivered, based on the closing price on the New York Stock Exchange -- Composite Transactions on a day not more than five business days prior to (x) the date of receipt of this Exercise Form by the Secretary's Office (Stock Option Administration), or (y) if later, the date of this Exercise Form, and in either case, an executed stock transfer power covering the Shares surrendered or to be surrendered. I understand that you will advise me of the exact number of Shares, valued in accordance with the Plans at the closing price on the New York Stock Exchange -- Composite Transactions on the later of (x) the date you have received (I) this Exercise Form, (II) the estimated payment in Shares or Shares and cash specified above and, (III) if I am not the optionee, any additional documents required to evidence my right to exercise these stock option(s) and (y) the date of this Exercise Form (the later of such dates, the effective date of this exercise), and any cash required to pay in full the Total Purchase Price of the Shares to be purchased upon this exercise. I further understand that certificates representing the number of Shares purchased will be issued only after I deliver to Rockwell any remaining balance of the Total Purchase Price in cash or a combination of Shares and cash and the amount sufficient to reimburse Rockwell for all withholding taxes required to be withheld and remitted to taxing authorities in respect of this exercise. I hereby agree to deliver to Rockwell no later than five (5) business days following the effective date of this exercise cash or any additional number of Shares or a combination of Shares and cash required to pay in full the Total Purchase Price of the Shares to be purchased upon this exercise, and an executed stock transfer power covering any additional Shares delivered. I hereby further agree to pay Rockwell, no later than ten (10) business days after the date of Rockwell's statement therefor, the amount sufficient to reimburse Rockwell for all withholding taxes required to be withheld and remitted to taxing authorities in respect of this exercise. If I fail to deliver any remaining balance of the Total Purchase Price of the Shares to be purchased upon this exercise and an amount sufficient to reimburse Rockwell in full for all withholding taxes required to be withheld and remitted to taxing authorities in respect of this exercise in accordance with this paragraph, the Corporation (as defined in the Plans) is authorized forthwith to set off the balance due against salary payments or other amounts due or which may become due to me to satisfy my obligation hereunder. 4. REGISTRATION: It is my understanding that following my payment in full of the Total Purchase Price and reimbursement of Rockwell for any applicable withholding taxes as provided in ITEM 3: PAYMENT, I shall receive from Rockwell one or more stock certificates representing the same [CONTINUED AND TO BE SIGNED ON PAGE 3] 38 "Stock Swap" Stock Option Exercise Form Page 3 number and kind of Shares I surrendered to Rockwell, issued in the same name or names as the Shares so surrendered. I shall also receive one or more separate stock certificates representing the additional Shares acquired as a result of this exercise, which I hereby request be registered as follows: Name: ____________________________________________________ Social Security No.: ______________________________________ Current Address: _________________________________________ _________________________________________ NOTE: THE STOCK MAY BE REGISTERED ONLY IN YOUR NAME OR IN YOUR NAME JOINTLY WITH YOUR SPOUSE (OR JOINTLY WITH ANOTHER PERSON). IT MAY NOT BE REGISTERED IN THE NAME OF YOUR STOCKBROKER, BANK OR OTHER FINANCIAL INSTITUTION. 5. DELIVERY: Please deliver the stock _____ to me at the address listed in Item 4. _____ to the following person and address: Name of Stockbrokerage Firm or Other Addressee: _______________________________________________________ Address: _____________________________________________ _____________________________________________ Attention: ___________________________________________ THIS STOCK OPTION EXERCISE MAY NOT BE REVOKED OR CHANGED AFTER DELIVERY OF THIS FORM, PROPERLY COMPLETED, DATED AND SIGNED, TO THE CORPORATION WHETHER OR NOT PAYMENT ACCOMPANIES THIS FORM AND WHETHER THIS FORM IS DATED BEFORE, ON OR AFTER THE DATE OF SUCH RECEIPT. ____________________________________ (Signature) Print Name:_________________________ Dated: _____________________, 19 ___ 39 "Stock Swap" Stock Option Exercise Form Page 4 STOCK TRANSFER POWER SEPARATE FROM CERTIFICATE FOR VALUE RECEIVED, (I) (We), ____________________________ (insert name(s)) hereby sell, assign and transfer unto Rockwell International Corporation the ________________ shares of the [Common Stock] (insert number) [Class A Common Stock] of Rockwell International Corporation standing in the name(s) of ____________________________ on the (name(s) on certificate(s)) books of said Rockwell International Corporation represented by Certificate(s) No(s). ______________ herewith and do hereby irrevocably constitute and appoint Mellon Bank, N.A., attorney to transfer the said stock on the books of Rockwell International with full power of substitution in the premises. Dated: __________________ _____________________________________________ (Signature) WITNESS: _____________________________________________ (Signature) EX-10.E.1 10 ROCKWELL INTERNATIONAL 10-K 1 EXHIBIT 10-e-1 ROCKWELL INTERNATIONAL CORPORATION 1995 LONG-TERM INCENTIVES PLAN 1. PURPOSE The purpose of the 1995 Long-Term Incentives Plan is to foster creation of and enhance Rockwell shareowner value by linking the compensation of officers and other key employees of the Corporation to increases in the price of Rockwell stock or by offering the incentives of long-term monetary rewards to key employees of Rockwell or its business units directly linked to their contribution to the creation of Rockwell shareowner value, thus providing means by which persons of outstanding abilities can be attracted, motivated and retained. 2. DEFINITIONS For the purpose of the Plan, the following terms shall have the meanings set forth below: (a) Board of Directors. The Board of Directors of Rockwell. (b) Committee. The Compensation and Management Development Committee designated by the Board of Directors from among its members who are not eligible to receive a Grant under the Plan or a grant under a Performance Plan. (c) Corporation. Rockwell and those of its subsidiary corporations or affiliates designated by the Committee to participate in the Plan. (d) Employees. Officers and other key employees of the Corporation, but not directors who are not also employees of the Corporation. (e) Executive Officer. An Employee who is an executive officer of Rockwell as defined in Rule 3b-7 under the Securities Exchange Act of 1934, as amended, or any successor provision. (f) Fair Market Value. The closing price of the Common Stock of Rockwell as reported in the New York Stock Exchange -- Composite Transactions on the date of a determination (or on the next preceding day such stock was traded if it was not traded on the date of a determination). (g) Grant. A grant made pursuant to the Plan by the Grant Committee to an Employee in the form of Options, Stock Appreciation Rights or Restricted Stock. (h) Grant Committee. The Committee excluding those members of the Committee who are not at the time any Grant is made "outside directors" as defined for purposes of Section 162(m) and regulations thereunder. (i) Option. An option to purchase Shares granted to an Employee by the Grant Committee pursuant to Section 5 or 8 of the Plan. (j) Participant. Any Employee to whom a Grant is made for so long as that Grant remains outstanding. (k) Performance Cycle. Any period of three or more consecutive fiscal years of Rockwell established for Rockwell or a designated business component under a Performance Plan. (l) Performance Measure. Criteria established to serve as a measure of performance of Rockwell or a designated business component during a Performance Cycle under a Performance Plan. (m) Performance Objectives. Levels of achievement, related to the Performance Measure, established as goals for a Performance Cycle to be used in determining whether and to what extent grants under a Performance Plan shall be deemed to be earned. (n) Performance Plan. A performance plan applicable to Rockwell or one or more business components of the Corporation authorized pursuant to Section 4 of the Plan. (o) Plan. This 1995 Long-Term Incentives Plan. (p) Restricted Period. The period (i) not less than three years or (ii) until achievement of performance goals specified at the time of Grant by the Grant Committee with respect to a Grant of Restricted Stock during which the Shares are subject to forfeiture if the grantee does not continue as an Employee. A-1 2 (q) Restricted Stock. Shares subject to conditions prescribed by the Committee under Section 7 of the Plan. (r) Rockwell. Rockwell International Corporation. (s) Section 162(m). Section 162(m) of the Internal Revenue Code, as amended, or any successor provision. (t) Shares. Shares of Common Stock of Rockwell. (u) Stock Appreciation Right. A Right granted to an Employee by the Grant Committee pursuant to Section 6 or 8 of the Plan (i) in conjunction with all or any part of any Option, which entitles the Employee, upon exercise of such Right, to surrender such Option, or any part thereof, and to receive a payment equal to the excess of the Fair Market Value, on the date of such exercise, of the Shares covered by such Option, or part thereof, over the purchase price of such Shares pursuant to the Option (a Tandem Stock Appreciation Right) or (ii) separate and apart from any Option, which entitles the Employee, upon exercise of such Right, to receive a payment measured by the increase in the Fair Market Value of a number of Shares designated by such Right from the date of grant of such Right to the date on which the Employee exercises such Right (a Freestanding Stock Appreciation Right). (v) Supplementary Stock Plan. A supplementary stock plan applicable to Employees subject to the tax laws of one or more countries other than the United States authorized pursuant to Section 8 of the Plan. 3. PLAN ADMINISTRATION (a) The Grant Committee shall determine the Employees to whom Grants are made, the number of Shares or Stock Appreciation Rights to be subject to each Grant and the Restricted Period for any Grant of Restricted Stock. (b) The Committee shall exercise all other responsibilities, powers and authority relating to the administration of the Plan not reserved to the Board of Directors. (c) The Board of Directors reserves the right, in its sole discretion, to exercise or authorize another committee or person to exercise some of or all the responsibilities, powers and authority vested in the Committee and the Grant Committee under the Plan. (d) In making their determinations with respect to Grants under the Plan or grants under any Performance Plan, the Grant Committee and the Committee may consider recommendations of the Chief Executive Officer of Rockwell and shall take into account such factors as the Employee's level of responsibility, performance, performance potential, level and type of compensation and potential value of Grants. 4. PERFORMANCE PLANS (a) The Committee may authorize Performance Plans applicable to Rockwell or one or more business components of the Corporation on such terms and conditions, not inconsistent with the Plan, and applicable to such Employees or categories of Employees as the Committee shall determine. In connection with its authorization of any Performance Plan, the Committee may authorize Rockwell's Chief Executive Officer to approve the definitive terms and conditions of that Performance Plan, including but not limited to the Employees or categories of Employees to which that Performance Plan shall apply and the committee or person who shall be delegated authority to administer that Performance Plan, except that authorization by the Committee shall be required for participation by any Executive Officer in any Performance Plan. Each Performance Plan shall include provision for: (i) establishment of Performance Cycles of not less than three consecutive fiscal years for each designated business component (and Rockwell if a Performance Plan applicable to it should be authorized), provided that no Performance Cycle shall begin later than September 30, 2005 and only one Performance Cycle for Rockwell or any designated business component shall begin with any one fiscal year; (ii) establishment of a Performance Measure and Performance Objectives for each Performance Cycle established for Rockwell and each designated business component; and (iii) approval by the Committee of any grants thereunder to any Executive Officer. In addition, a Performance Plan may but need not provide for (x) grants under such Performance Plan with respect to a Performance Cycle to be made at any time during the Performance Cycle, provided that any grant made after the first fiscal year of the A-2 3 Performance Cycle shall provide for a pro-rated award; (y) adjustment (up or down) of the Performance Objectives or modification of the Performance Measure (or both) for any designated business component for a Performance Cycle if the Committee (or with the Committee's approval, the committee or person delegated to administer the Performance Plan except insofar as it relates to any Executive Officer) determines that conditions, including but not limited to changes in the economy, changes in laws or government regulations, changes in generally accepted accounting principles, or acquisitions or dispositions determined by the Committee to be material, so warrant; and (z) a Change-of-Control contingency similar to Section 13(f) of the Plan. (b) Potential awards granted to participating Employees under Performance Plans shall be expressed as cash amounts (whether in currency or in units having a currency equivalent) and shall be paid in accordance with determinations of the Committee. Payments shall be in cash unless the Committee determines to make payment to one or more named participating Employees in Shares or a combination of cash and Shares. Any payment which is made in cash may be made in a lump sum, in installments or on a deferred basis. Any payment which is made in Shares shall be valued at the Fair Market Value on the last trading day of the week preceding the day of issuance or transfer of the Shares. No grant under a Performance Plan shall bear interest except as may be determined by the Committee in respect of payments made in installments or on a deferred basis. (c) If and to the extent an award under a Performance Plan for any Performance Cycle becomes payable to a participating Employee whose compensation is subject to the limitation on deductibility under Section 162(m) for the applicable year and the amount of that award when combined with all base, incentive or other compensation of such Employee for the applicable year which constitutes "applicable employee remuneration," as defined for purposes of Section 162(m), would exceed the limitation of Section 162(m)(1), the amount payable pursuant to the Performance Plan in excess of that limitation, whether payable in cash, Shares or a combination of both, may in the sole discretion of the Grant Committee be deferred until and paid on the first business day of the calendar year following the Corporation's fiscal year in which such Employee's employment by the Corporation terminates. The certificates for any Shares to which a participating Employee will become entitled in respect of a payment deferred pursuant to this paragraph and any dividends that may be paid in cash or otherwise on those Shares shall be delivered to and held by Rockwell until the end of the period for which such payment is deferred. At that time, those Shares and dividends and any cash payment deferred pursuant to this paragraph shall be delivered to the Employee, together with interest on the amount of cash dividends and any such cash payment so delivered computed at the same rate and in the same manner as interest credited from time to time under Rockwell's Deferred Compensation Plan. 5. OPTIONS The Grant Committee may grant from time to time to Employees, Options which may be incentive stock options (as defined in Section 422 of the Internal Revenue Code), nonqualified stock options, or both, to purchase Shares on terms and conditions determined by the Committee, consistent with the provisions of the Plan, including the following: (a) The purchase price of the Shares subject to any Option shall not be less than the Fair Market Value on the date the Option is granted. (b) Each Option may be exercised in whole or in part from time to time during such period as the Option shall specify; provided, however, that if the Committee does not establish a different exercise schedule at or before the date of grant of an Option, the Option shall become exercisable in three approximately equal installments on each of the first, second and third anniversaries of the date the Option is granted; and provided, further, that no Option shall be exercisable prior to one year (except as provided in Section 9(c) or 13(f)) nor after ten years from the date of the grant thereof. (c) Each Option may provide for related Stock Appreciation Rights. (d) The aggregate Fair Market Value (determined as of the date the Option is granted) of the Shares for which any Employee may be granted incentive stock options which are exercisable for the A-3 4 first time in any calendar year under all plans of the Corporation and any parent or subsidiary of the Corporation shall not exceed $100,000 (or such other amount as may be fixed as the maximum amount permitted by Section 422(d) of the Internal Revenue Code, as amended, or any successor provision). The Grant Committee shall grant incentive stock options only to employees of Rockwell or a corporation which is a subsidiary of Rockwell within the meaning of Section 425(f) of the Internal Revenue Code. (e) The purchase price of the Shares with respect to which an Option or portion thereof is exercised shall be payable in full in cash or in Shares or in a combination of cash and Shares. The value of any Share delivered in payment of the purchase price shall be its Fair Market Value on the date the Option is exercised. 6. STOCK APPRECIATION RIGHTS (a) The Grant Committee may grant Tandem Stock Appreciation Rights to an Employee either at the time of grant of an Option or at any time thereafter during the term of an Option. A Tandem Stock Appreciation Right shall be exercisable only when and to the extent that the related Option is exercisable. (b) The Grant Committee may grant from time to time to Employees, Freestanding Stock Appreciation Rights on terms and conditions determined by the Committee, consistent with the provisions of the Plan. (c) The payment to which the grantee of a Stock Appreciation Right is entitled upon exercise thereof may be made in Shares valued at Fair Market Value on the date of exercise, or in cash or partly in cash and partly in Shares, as the Committee may determine. (d) Upon exercise of a Tandem Stock Appreciation Right and surrender of the related Option or part thereof, such Option, to the extent surrendered, shall not thereafter be exercisable, and the Shares covered by the surrendered Option shall not again be available for Grants pursuant to the Plan, or awards under a Performance Plan. (e) Upon exercise of a Freestanding Stock Appreciation Right, any Shares delivered in payment thereof shall not again be available for Grants pursuant to the Plan, or awards under a Performance Plan. 7. RESTRICTED STOCK The Grant Committee may grant from time to time to Employees, Shares of Restricted Stock on terms determined by the Committee, consistent with the provisions of the Plan, including the following: (a) The Grant Committee shall specify a Restricted Period and may specify performance or other criteria for each Grant of Restricted Stock, and the Shares of Restricted Stock granted shall be forfeited if the grantee does not continue as an Employee throughout the Restricted Period, or if and to the extent the specified performance or other criteria are not met during the Restricted Period, except as otherwise provided in Section 9(a), 9(b) or 13(f). (b) Shares of Restricted Stock granted to an Employee shall have all the attributes of outstanding Shares, except that certificates for such Shares and any dividends that may be paid in cash or otherwise thereon shall be delivered to and held by Rockwell. As and to the extent that Shares of Restricted Stock are no longer subject to forfeiture, certificates therefor and any dividends related thereto held by Rockwell shall be delivered to the Employee. There shall also be paid to the Employee at such time interest on the amount of cash dividends so delivered computed at the same rate and in the same manner as interest credited from time to time under Rockwell's Deferred Compensation Plan. 8. SUPPLEMENTARY STOCK PLANS (a) The Committee may authorize Supplementary Stock Plans applicable to Employees subject to the tax laws of one or more countries other than the United States and providing for the grant of Options, Stock Appreciation Rights, Restricted Stock or any combination thereof to such Employees on terms and conditions, consistent with the Plan, determined by the Committee which may differ from the terms and conditions of Grants pursuant to Sections 5, 6 and 7 of the Plan for the purpose of complying with the conditions for qualification of Options, Stock Appreciation Rights or Restricted Stock for favorable treatment under foreign tax laws. (b) Notwithstanding any other provision hereof, Options granted under any Supplementary Stock A-4 5 Plan shall include provisions that conform with Sections 5(a), (b), (c) and (e) and 6(d); Restricted Stock granted under any Supplementary Stock Plan shall include provisions that conform with Sections 7(a) and (b); and subject to Section 3(b), only the Grant Committee shall have authority to grant Options, Stock Appreciation Rights or Restricted Stock under any Supplementary Stock Plan. 9. EFFECT OF DEATH OR TERMINATION OF EMPLOYMENT (a) If a participating Employee's employment by the Corporation terminates prior to the end of a Performance Cycle under a Performance Plan or the Restricted Period applicable to any Grant of Restricted Stock because of the Employee's (i) death or (ii) retirement not less than one year after the beginning of that Performance Cycle or the date of that Grant under a retirement plan of the Corporation at or after attaining age 62 or accumulating 85 points (or fulfilling such other criteria as may be required for an unreduced early retirement benefit) for purposes of the applicable retirement plan, the amount of the award under the Performance Plan or the number of Shares of Restricted Stock such Employee shall be deemed to have earned shall be the amount or number thereof determined as though such Employee's employment had not terminated prior to the end of the Performance Cycle or Restricted Period. (b) If a participating Employee's employment by the Corporation terminates prior to the end of a Performance Cycle under a Performance Plan or the Restricted Period applicable to any Grant of Restricted Stock, for any reason other than death or retirement not less than one year after the beginning of that Performance Cycle or the date of that Grant under a retirement plan of the Corporation at or after attaining age 62 or accumulating 85 points (or fulfilling such other criteria as may be required for an unreduced early retirement benefit) under the applicable retirement plan, such Employee shall be deemed not to have earned any award under the Performance Plan or Shares of Restricted Stock except as and to the extent the Committee (or with the Committee's approval, the committee or person delegated to administer a Performance Plan except insofar as it relates to any Executive Officer), taking into account the purpose of the Plan and such other factors as in its sole discretion it deems appropriate, may determine, provided that the amount of the award or the number of Shares of Restricted Stock which may be so determined by the Committee to have been earned shall not exceed the amount or number which would have been earned had the provisions of paragraph (a) above been applicable. (c) If the employment by the Corporation of a Participant who (or whose permitted transferee) holds an outstanding Grant of Options or Stock Appreciation Rights terminates by reason of the Participant's death, the Options or Stock Appreciation Rights subject to that Grant and not theretofore exercised may be exercised from and after the date of the Participant's death for a period of three years (or until the expiration date specified in the Grant if earlier) even if any of them was not exercisable at the date of death. (d) If a Participant who (or whose permitted transferee) holds an outstanding Grant of Options or Stock Appreciation Rights retires under a retirement plan of the Corporation at any time after a portion thereof has become exercisable, the Options or Stock Appreciation Rights subject to that Grant and not theretofore exercised may be exercised from and after the date upon which they are first exercisable under that Grant for a period of five years from the date of retirement (or until the expiration date specified in the Grant if earlier), even if any of them was not exercisable at the date of retirement, except that any thereof (i) subject to a Grant made within eighteen months before such retirement or (ii) held by a grantee (or a permitted transferee thereof) who retires before either attaining age 62 or accumulating 85 points (or fulfilling such other criteria as may be required for an unreduced early retirement benefit) for purposes of the applicable retirement plan, may be exercised solely for a period of three years from the date of retirement (or until the expiration date specified in the Grant if earlier) or such shorter period as the Committee may determine within 60 days of a grantee's retirement. (e) If the employment by the Corporation of a Participant who (or whose permitted transferee) holds an outstanding Grant of Options or Stock Appreciation Rights is terminated for any reason other than death or retirement under a retirement A-5 6 plan of the Corporation, the Options or Stock Appreciation Rights subject to that Grant and not theretofore exercised may be exercised only within ninety days after termination of such employment (or until the expiration date specified in the Grant if earlier) and only to the extent the grantee thereof (or a permitted transferee) was entitled to exercise the Options or Stock Appreciation Rights at the time of termination of such employment, unless and except to the extent the Committee may otherwise determine; provided, however, that the Committee shall not in any event permit a longer period of exercise than would have been applicable had the provisions of paragraph (d) above been applicable. 10. SHARES AVAILABLE (a) The total number of Shares which may be delivered in payment and upon exercise of Grants and in payments of awards under Performance Plans shall not exceed 16 million, as adjusted from time to time as herein provided, and the total number of Shares as to which Grants may be made in any one fiscal year of the Corporation shall not exceed 1 1/2% of the total number of Shares outstanding and held in Treasury as of the date of determination. Shares which may be delivered in payment or upon exercise of Grants or in payments of awards under Performance Plans may consist in whole or in part of unissued or reacquired Shares; provided, however, that unless otherwise determined by the Committee, Shares which may be granted as Restricted Stock shall consist only of reacquired shares. Subject to Sections 6(d) and (e), if for any reason Shares as to which an Option has been granted cease to be subject to purchase thereunder or Shares granted as Restricted Stock are forfeited to the Corporation, then such Shares shall again be available under the Plan. (b) The total number of Shares subject to Options and Stock Appreciation Rights granted to any one Employee in any one fiscal year of Rockwell under all plans of Rockwell and any parent or subsidiary of Rockwell shall in no event exceed 350,000, as adjusted from time to time as herein provided. (c) No Option, Freestanding Stock Appreciation Right or Restricted Stock shall be granted under the Plan or any Supplementary Stock Plan after September 30, 2005, but Options or Stock Appreciation Rights and Restricted Stock granted theretofore may extend beyond that date, and Tandem Stock Appreciation Rights may be granted after that date with respect to Options outstanding on that date. 11. ADJUSTMENTS If there shall be any change in or affecting Shares on account of any merger, consolidation, reorganization, recapitalization, reclassification, stock dividend, stock split or combination, or other distribution to holders of Shares (other than a cash dividend), there shall be made or taken such amendments to the Plan and such adjustments and actions thereunder as the Board of Directors may deem appropriate under the circumstances. Such amendments, adjustments and actions may include, without limitation, changes in the number of Shares which may be issued or transferred, in the aggregate or to any one Employee, pursuant to the Plan, the number of Shares subject to outstanding Options and Stock Appreciation Rights and the related price per share; provided, however, that no such amendment, adjustment or action may change the limitation prescribed by Section 10(b) to a number of Shares that is a greater proportion of the total number of Shares outstanding and held in Treasury as of the effective date of that amendment, adjustment or action than the proportion of the number of Shares prescribed by Section 10(b) to the total number of Shares outstanding and held in Treasury immediately prior thereto. 12. AMENDMENT AND TERMINATION The Committee shall have the power in its discretion to amend, suspend or terminate the Plan or Grants thereunder at any time except that, subject to the provisions of Section 11, (a) without the consent of the person affected, no such action shall cancel or reduce a Grant theretofore made other than as provided for or contemplated in the agreement evidencing the Grant and (b) without the approval of the shareowners of Rockwell, the Committee may not (i) change the class of persons eligible to receive incentive stock options, (ii) increase the number of Shares provided in Section 10(a) or 10(b), (iii) reduce the Option exercise price of any Option below the Fair Market Value on the date such Option was granted or decrease the A-6 7 forfeiture period for any Grant below that permitted under the Plan. 13. MISCELLANEOUS (a) Except as determined by the Committee, no person shall have any claim to receive a Grant or any payment under a Performance Plan, to receive payment in respect of a Grant or under a Performance Plan in any form other than the Committee shall approve or, in circumstances where Section 9 is applicable, to be deemed to have earned any award under a Performance Plan or Shares of Restricted Stock or to be entitled to exercise Options or Stock Appreciation Rights for any particular period after termination of employment. There is no obligation for uniformity of treatment of Employees under the Plan or any Performance Plan. No Employee shall have any right as a Participant or a participant under any Performance Plan to continue in the employ of the Corporation for any period of time or to a continuation of any particular rate of compensation, and the Corporation expressly reserves the right to discharge or change the assignment of any Employee at any time. (b) No Option, Stock Appreciation Right or right related to Restricted Stock granted pursuant to the Plan or right to payment of an award under any Performance Plan may be assigned, pledged or transferred except (i) by will or by the laws of descent and distribution; or (ii) in the case of any Grant (other than an Option granted as an incentive stock option) or any right to payment of an award under a Performance Plan, by gift to any member of the Employee's immediate family or to a trust for the benefit of one or more members of the Employee's immediate family, if permitted in the applicable agreement governing that Grant or right to payment; or (iii) as otherwise determined by the Committee. Each Option, Stock Appreciation Right or right related to Restricted Stock shall be exercisable, and each payment of an award under a Performance Plan shall be payable, during the lifetime of the Employee to whom granted or awarded only by or to such Employee, and any payment of an award under a Performance Plan made after the death of a participating Employee entitled thereto shall be paid to the legal representative of the estate or to the designated beneficiary of such Employee, unless in any such case, the Grant or right to payment has been transferred in accordance with the provisions of the applicable agreement governing that Grant or right to payment, to a member of the Employee's immediate family or a trust for the benefit of one or more members of the Employee's immediate family, in which case it shall be exercisable or payable only by or to such transferee (or to the legal representative of the estate or to the heirs or legatees of such transferee). For purposes of this provision, an Employee's "immediate family" shall mean the Employee's spouse and natural, adopted or step-children and grandchildren. (c) No person shall have the rights or privileges of a shareowner with respect to Shares subject to an Option, deliverable as a payment, upon exercise of a Stock Appreciation Right or under a Performance Plan until exercise of such Option or Stock Appreciation Right, or delivery as a payment under the Performance Plan. (d) No fractional Shares shall be issued or transferred pursuant to the Plan. If the portion of any payment pursuant to the Plan or a Performance Plan, to be made in Shares is not equal to the value of a whole number of Shares, the person entitled thereto shall be paid an amount equal to the Fair Market Value as of the date of exercise of any fractional Share deliverable in respect of exercise of a Stock Appreciation Right and the Fair Market Value as of the date of payment of any fractional Share deliverable in respect of any payment under a Performance Plan. (e) The Corporation, the Board of Directors, the Committee, the Grant Committee and the officers of Rockwell shall be fully protected in relying in good faith on the computations and reports made pursuant to or in connection with the Plan by the independent certified public accountants who audit the Corporation's accounts or others (who may include Employees) whose services are used by the Board of Directors, Committee or Grant Committee in its administration of the Plan. (f) Notwithstanding any other provision of the Plan, if a Change of Control (as defined in Article III, Section 15(I)(1) of Rockwell's By-Laws) shall occur, then unless prior to the occurrence thereof, the Board of Directors shall have determined otherwise by vote of at least two-thirds of its members, (i) all Performance Cycles (except those under Perform- A-7 8 ance Plans that do not provide for a Change-of-Control contingency) not then complete shall be deemed completed forthwith, the Performance Objectives therefor shall be deemed to have been attained, and each participating Employee shall be deemed to have earned the maximum amount that could have been earned thereunder; (ii) all Options and any Stock Appreciation Rights then outstanding pursuant to the Plan shall forthwith become fully exercisable whether or not otherwise then exercisable; and (iii) the restrictions on all Shares granted as Restricted Stock under the Plan shall forthwith lapse. (g) The Corporation shall have the right in connection with the delivery of any Shares in payment of a Grant or a payment under a Performance Plan or upon exercise of an Option to require as a condition of such delivery that the recipient represent that such Shares are being acquired for investment and not with a view to the distribution thereof. (h) The Corporation shall have the right in connection with any payment under a Performance Plan, exercise of any Option or Stock Appreciation Right or termination of the Restricted Period for any Restricted Stock, to deduct from any such payment or any other payment by the Corporation, an amount equal to any taxes required by law to be withheld with respect thereto or to require the Employee or other person receiving such payment, effecting such exercise or entitled to Shares and related payments on termination of such Restricted Period, as a condition of and prior to such payment or exercise or delivery of Shares on such termination, to pay to the Corporation an amount sufficient to provide for any such taxes so required to be withheld. (i) Unless otherwise determined by the Committee or provided in an agreement between any Employee and the Corporation, for purposes of the Plan an Employee on authorized leave of absence will be considered as being in the employ of the Corporation. (j) The Corporation shall bear all expenses and costs in connection with the operation of the Plan, including costs related to the purchase, issue or transfer of Shares, but excluding taxes imposed on any person receiving a payment or delivery of Shares under the Plan or a Performance Plan. 14. INTERPRETATIONS AND DETERMINATIONS The Committee shall have the power from time to time to interpret the Plan, to adopt, amend and rescind rules, regulations and procedures relating to the Plan, to make, amend and rescind determinations under the Plan and to take all other actions that the Committee shall deem necessary or appropriate for the implementation and administration of the Plan. All interpretations, determinations and other actions by the Committee not revoked or modified by the Board of Directors shall be final, conclusive and binding upon all parties. 15. EFFECTIVE DATE Upon approval by the shareowners of Rockwell, the Plan shall become effective as of October 1, 1994. A-8 EX-10.E.2 11 ROCKWELL INTERNATIONAL 10-K 1 EXHIBIT 10-e-2 H:\WPDATA\ETM\OPTAGMT3.T&C 1995 LONG-TERM INCENTIVES PLAN FORM OF OPTION AGREEMENT (WITHOUT ARBITRATION AGREEMENT) NONTRANSFERABLE OPTIONS -------------------------------------------------------- December 7, 1994 To: We are pleased to notify you that the Compensation and Management Development Committee has granted to you today the following stock option(s) under the 1995 Long-Term Incentives Plan (the Plan):
Date of Grant Type of Grant Number of Shares Option Price - ------------- ------------- ---------------- ------------ 99/99/99 (NQ) 9,999,999 $$$$.9999
These stock option(s) have been granted, and may be exercised only upon the terms and conditions of this Stock Option Agreement, subject in all respects to the provisions of the Plan, as it may be amended. The attached Stock Option Terms and Conditions are incorporated in and are part of this Stock Option Agreement. A copy of the Plan is enclosed. Please confirm that you have read and agree to be bound by this Agreement by signing one copy at the place indicated and returning the signed copy to: Office of the Secretary Rockwell International Corporation 625 Liberty Avenue Pittsburgh, PA 15222-3123 Attention: Stock Option Administration These stock options will lapse and be of no effect (i) if a copy of this Stock Option Agreement, properly signed by you, is not received by the Secretary of Rockwell on or before January 31, 1995, unless Rockwell (in its sole discretion) elects in writing to extend that date; or (ii) if the shareowners do not approve the Plan at the Annual Meeting to be held February 1, 1995 or any adjournment thereof. Agreed to: Date: ______________________ ROCKWELL INTERNATIONAL CORPORATION _______________________________ By: _______________________________ Employee Signature Senior Vice President, General XXXXXXXXXXXXXXXXXXX Counsel and Secretary 999-99-9999 2 1995 LONG-TERM INCENTIVES PLAN FORM OF OPTION AGREEMENT (WITH ARBITRATION AGREEMENT) NONTRANSFERRABLE OPTIONS ---------------------------------------------- December 7, 1994 To: We are pleased to notify you that the Compensation and Management Development Committee has granted to you today the following stock option(s) under the 1995 Long-Term Incentives Plan (the Plan):
Date of Grant Type of Grant Number of Shares Option Price - ------------- ------------- ---------------- ------------ 99/99/99 (NQ) 9,999,999 $$$$.9999
These stock option(s) have been granted, and may be exercised only upon the terms and conditions of this Stock Option Agreement, subject in all respects to the provisions of the Plan, as it may be amended. The attached Stock Option Terms and Conditions are incorporated in and are part of this Stock Option Agreement. A copy of the Plan is enclosed. Please confirm that you have read and agree to be bound by this Agreement and by the enclosed Mutual Agreement to Arbitrate claims by signing one copy of each Agreement at the place indicated below and on page 2 of the Mutual Agreement to Arbitrate Claims, and returning the signed copy to: Office of the Secretary Rockwell International Corporation 625 Liberty Avenue Pittsburgh, PA 15222-3123 Attention: Stock Option Administration These stock options will lapse and be of no effect (i) if copies of BOTH this Stock Option Agreement and the Mutual Agreement to Arbitrate Claims, each properly signed by you, is not received by the Secretary of Rockwell on or before January 31, 1995, unless Rockwell (in its sole discretion) elects in writing to extend that date; or (ii) if the shareowners do not approve the Plan at the Annual Meeting to be held February 1, 1995 or any adjournment thereof. Agreed to: Date: ______________________ ROCKWELL INTERNATIONAL CORPORATION _______________________________ By:__________________________________ Employee Signature Senior Vice President, XXXXXXXXXXXXXXXXXX General Counsel and Secretary 999-99-9999 3 H:\WPDATA\ETM\OPTAGMT3.T&C ROCKWELL INTERNATIONAL CORPORATION 1995 LONG-TERM INCENTIVES PLAN STOCK OPTION AGREEMENT STOCK OPTION TERMS AND CONDITIONS 1. Definitions ----------- As used in these Stock Option Terms and Conditions, the following words and phrases shall have the respective meanings ascribed to them below unless the context in which any of them is used clearly indicates a contrary meaning: (a) APPROVED OPTION EXERCISE FORM: A Cash Only Exercise Form in the form of Attachment 1 or a "Stock Swap" Exercise Form in the form of Attachment 2, any other form subsequently adopted by the Secretary of Rockwell to replace Attachment 1 or 2, or any other form accepted by the Secretary of Rockwell in his sole discretion. (b) OPTIONS: The stock option or stock options listed in the first paragraph of the letter dated December 7, 1994 to which these Stock Option Terms and Conditions are attached and which together with these Stock Option Terms and Conditions constitutes the Stock Option Agreement. (c) OPTION SHARES: The shares of Rockwell Common Stock issuable or transferable on exercise of the Options. (d) PLAN: Rockwell's 1995 Long-Term Incentives Plan, as amended and as such Plan may be further amended and in effect at the relevant time. (e) PRELIMINARY PAYMENT: Defined in Section 3(d)(i). (f) ROCKWELL: Rockwell International Corporation, a Delaware corporation. (g) SHARES: Shares of Rockwell Common Stock or Class A Common Stock. (h) STOCK OPTION AGREEMENT: These Stock Option Terms and Conditions together with the letter dated December 7, 1994 to which they are attached. 2. When Options May be Exercised ----------------------------- The Options may be exercised, in whole or in part (but only for a whole number of shares) and at one time or from time to time, as to one-third (rounded down to an integral one hundred) of the Option Shares during the period beginning on [95NT:12/7/94] 4 December 7, 1995 and ending on December 7, 2004, as to an additional one-third (rounded down to an integral one hundred) of the Option Shares during the period beginning on December 7, 1996 and ending on December 7, 2004 and as to the balance of the Option Shares during the period beginning on December 7, 1997 and ending on December 7, 2004, and only during those periods, provided that: (a) if you die while an employee of the Corporation (as defined in the Plan), your estate, or any person who acquires the Options by bequest or inheritance, may exercise all the Options not theretofore exercised within (and only within) the period beginning on your date of death (even if you die before you have become entitled to exercise all or any part of the Options) and ending three years thereafter; and (b) if your employment by the Corporation terminates other than by death, then: (i) if your retirement or other termination date is before December 7, 1995, the Options shall lapse on your retirement or other termination and may not be exercised at any time; (ii) if your employment by the Corporation is terminated for cause, the Options shall expire forthwith upon your termination and may not be exercised thereafter; (iii) if your employment by the Corporation terminates after June 7, 1996 by reason of your retirement under a retirement plan of Rockwell, or a subsidiary or affiliate of Rockwell, at or after the earlier of age 62 or the date you have accumulated 85 points (or fulfilled such other criteria as may be required for an unreduced early retirement benefit) for purposes of the applicable retirement plan, you (or if you die after your retirement date, your estate or any person who acquires the Options by bequest or inheritance) may thereafter exercise the Options within (and only within) the period starting on the date you would otherwise have become entitled to exercise the part of the Options so exercised and ending five years after your retirement date; (iv) if your employment by the Corporation terminates after June 7, 1996 by reason of your retirement under a retirement plan of -2- [95NT:12/7/94] 5 Rockwell, or a subsidiary or affiliate of Rockwell, before the earlier of age 62 or the date you have accumulated 85 points (or fulfilled such other criteria as may be required for an unreduced early retirement benefit) for purposes of the applicable retirement plan, you (or if you die after your retirement date, your estate or any person who acquires the Options by bequest or inheritance) may thereafter exercise the Options within (and only within) the period starting on the date you would otherwise have become entitled to exercise the part of the Options so exercised and ending on the earlier of (x) the third anniversary of your retirement date or (y) such earlier date as the Compensation and Management Development Committee shall determine by action taken not later than 60 days after your retirement date; (v) if your employment by the Corporation terminates on or after December 7, 1995 but on or before June 7, 1996 by reason of your retirement under a retirement plan of Rockwell, or a subsidiary or affiliate of Rockwell, you (or if you die after your retirement date, your estate or any person who acquires the Options by bequest or inheritance) may thereafter exercise the Options within (and only within) the period starting on the date you would otherwise have become entitled to exercise the part of the Options so exercised and ending on the earlier of (x) the third anniversary of your retirement date or (y) such earlier date as the Compensation and Management Development Committee shall determine by action taken not later than 60 days after your retirement date; and (vi) if your employment by the Corporation terminates on or after December 7, 1995 for any reason not specified in subparagraph (a) or in clauses (ii), (iii), (iv) or (v) of this subparagraph (b), you (or if you die after your termination date, your estate or any person who acquires the Options by bequest or inheritance) may thereafter exercise the Options within (and only within) the period ending three months after your termination date but only to the extent they were exercisable on your termination date. -3- [95NT:12/7/94] 6 In no event shall the provisions of the foregoing subparagraphs (a) and (b) extend to a date after December 7, 2004 the period during which the Options may be exercised. 3. Exercise Procedure ------------------ (a) To exercise all or any part of the Options, you (or after your death, your estate or any person who has acquired the Options by bequest or inheritance) must deliver to the Secretary of Rockwell: (i) a notice of exercise on an Approved Option Exercise Form properly completed, dated and signed by you (or after your death, by the person entitled to exercise the Options); (ii) full payment of the exercise price for the Option Shares to be purchased on exercise of the Options o entirely in cash; or o in Shares; or o in a combination of cash and Shares; and (iii) in the case of an exercise of the Options by any person other than you seeking to exercise the Options, such documents as the Secretary of Rockwell shall require to establish to his satisfaction that the person seeking to exercise the Options is entitled to do so. (b) An exercise of the whole or any part of the Options shall be effective: (i) if you elect (or after your death, the person entitled to exercise the Options elects) to pay the exercise price for the Option Shares entirely in cash, upon (x) receipt by the Secretary of Rockwell of (I) an Approved Exercise Form, duly completed, dated and signed, (II) full payment of the exercise price for the Option Shares purchased pursuant to that Approved Exercise Form and (III) any documents required pursuant to Section 3(a)(iii), or (y) if later, the date of such Approved Exercise Form (provided you, or after your death, the person entitled to exercise the Options, or any person to whom you have transferred the Options during your lifetime as permitted by Section 4 continues to be -4- [95NT:12/7/94] 7 entitled to exercise the Options on that date); and (ii) if you elect (or after your death, the person entitled to exercise the Option elects) to pay the exercise price of the Option Shares in Shares or in a combination of Shares and cash, upon (x) receipt by the Secretary of Rockwell of (I) an Approved Exercise Form, duly completed, dated and signed, (II) the Preliminary Payment (as defined in Section 3(d)(i)) and (III) any documents required pursuant to Section 3(a)(iii), or (y) if later, the date of such Approved Exercise Form (provided you continue, or after your death, the person entitled to exercise the Options continues, to be entitled to exercise the Options on that date). (c) If you choose (or after your death, the person entitled to exercise the Options chooses) to pay the exercise price for the Option Shares to be purchased on exercise of any of the Options entirely in cash, payment must be made by o delivering to the Secretary of Rockwell a check in the full amount of the exercise price for those Option Shares; or o arranging with a stockbroker, bank or other financial institution to deliver to the Secretary of Rockwell full payment, by check or (if prior arrangements are made with the Stock Option Administration staff of the Secretary's Office) by wire transfer, of the exercise price of those Option Shares. In either event, in accordance with Section 3(e), full payment of the exercise price for the Option Shares purchased must be made within five business days after the Secretary of Rockwell has received the Approved Exercise Form, duly completed, dated and signed, or if later, within five business days after the date of such Approved Exercise Form. (d) (i) If you choose (or after your death, the person entitled to exercise the Options chooses) to use already-owned Shares to pay all or part of the exercise price for the Option Shares to be purchased on exercise of any of the Options, you (or after your death, the person entitled to exercise the Options) must deliver to the Secretary -5- [95NT:12/7/94] 8 of Rockwell one or more certificates (and executed stock powers) representing o at least the number of Shares whose value, based on the closing price of Common Stock of Rockwell on the New York Stock Exchange -- Composite Transactions on any day not more than five business days prior to (x) the date on which the Secretary of Rockwell has received the Approved Exercise Form for such exercise, or (y) if later, the date of such Approved Exercise Form, would be sufficient to pay in full the exercise price of those Option Shares; or o any lesser number of Shares you desire (or after your death, the person entitled to exercise the Options desires) to use to pay the exercise price for those Option Shares and a check in the amount of such exercise price less the value of the Shares delivered, based on the closing price of Common Stock of Rockwell on the New York Stock Exchange -- Composite Transactions on any day not more than five business days prior to (x) the date on which the Secretary of Rockwell has received the Approved Exercise Form for such exercise, or (y) if later, the date of such Approved Exercise Form. The delivery of the Shares or Shares and cash, as prescribed by this clause (i), is referred to in this Stock Option Agreement as the Preliminary Payment. (ii) The Secretary of Rockwell will advise you (or any other person who, being entitled to do so, exercises the Options) of the exact number of Shares, valued in accordance with Section 6(e) of the Plan at the closing price on the New York Stock Exchange -- Composite Transactions on the effective date of exercise under Section 3(b)(ii), and any cash required to pay in full the exercise price for the Option Shares purchased. In accordance with Section 3(e), you (or such other person) must pay, in cash, in Shares or in a combination of cash and Shares, any balance required to pay in full the exercise price of the Option Shares -6- [95NT:12/7/94] 9 purchased within five business days following the effective date of such exercise of the Options under Section 3(b)(ii). (iii) Notwithstanding any other provision of this Stock Option Agreement, the Secretary of Rockwell may limit the number, frequency or volume of successive exercises of any of the Options in which payment is made, in whole or in part, by delivery of Shares pursuant to this subparagraph (d) to prevent unreasonable pyramiding of such exercises. (e) A notice of exercise on an Approved Exercise Form, when duly completed, dated and signed by you (or any other person entitled to exercise the Options) and received by the Secretary of Rockwell, whether or not full payment of the exercise price for the Option Shares accompanies the Approved Option Exercise Form and whether the Approved Exercise Form is dated on or prior to the date of receipt by the Secretary of Rockwell or a later date, shall constitute a binding contractual obligation by you (or the other person entitled to exercise the Options) to proceed with and complete that exercise of the Options (but only so long as you continue, or the other person entitled to exercise the Options continues, to be entitled to exercise the Options on that date). By your acceptance of this Stock Option Agreement, you agree (for yourself and on behalf of any other person who becomes entitled to exercise the Options) to deliver or cause to be delivered to Rockwell any balance of the exercise price for the Option Shares to be purchased upon the exercise pursuant to the Approved Exercise Form required to pay in full the exercise price for those Option Shares, that payment being in cash, in Shares or in a combination of cash and Shares, on or before the later of the fifth business day after (i) the date on which the Secretary of Rockwell receives such duly completed, dated and signed Approved Exercise Form, or (ii) if later, the date of such Approved Exercise Form (provided you continue (or the other person entitled to exercise the Options continues) to be entitled to exercise the Options on that date), and you (for yourself and on behalf of any other person who becomes entitled to exercise the Options) authorize the Corporation forthwith to set off against salary payments or other amounts due or which may become due you (or the other person entitled to exercise the Options) any balance of the exercise price for those Option Shares remaining unpaid thereafter. (f) Certificates representing the number of Option Shares purchased will be issued as soon as practicable (i) after -7- [95NT:12/7/94] 10 Rockwell has received full payment therefor or (ii) at Rockwell's election in the sole discretion of its Secretary, after Rockwell has received (x) full payment of the exercise price of those Option Shares and (y) any reimbursement in respect of withholding taxes due pursuant to Section 5. 4. Transferability --------------- The Options are not transferable by you otherwise than by will or by the laws of descent and distribution. During your lifetime, only you are entitled to exercise the Options. 5. Withholding ----------- Rockwell shall have the right, in connection with the exercise of the Options in whole or in part, to deduct from any payment to be made by Rockwell under the Plan an amount equal to the taxes required to be withheld by law with respect to such exercise or to require you (or any other person entitled to exercise the Options) to pay to it an amount sufficient to provide for any such taxes so required to be withheld. By your acceptance of this Stock Option Agreement, you agree (for yourself and on behalf of any other person who becomes entitled to exercise the Options) that if Rockwell elects to require you (or such other person) to remit an amount sufficient to pay such withholding taxes, you (or such other person) must remit that amount within ten business days after the date of the statement for such amount rendered by Rockwell, failing which Rockwell shall have the same right of set-off as provided under Section 3(e) with respect to payment of the exercise price for Option Shares. 6. Headings -------- The section headings contained in these Stock Option Terms and Conditions are solely for the purpose of reference, are not part of the agreement of the parties and shall in no way affect the meaning or interpretation of this Stock Option Agreement. 7. References ---------- All references in these Stock Option Terms and Conditions to Sections, paragraphs, subparagraphs or clauses shall be deemed to be references to Sections, paragraphs, subparagraphs and clauses of these Stock Option Terms and Conditions unless otherwise specifically provided. -8- [95NT:12/7/94] 11 8. Applicable Laws and Regulations ------------------------------- This Stock Option Agreement and Rockwell's obligation to issue Option Shares hereunder are subject to applicable laws and regulations. Attachment 1 - Cash Only Option Exercise Form and Instructions Attachment 2 - "Stock Swap" Option Exercise Form and Instructions -9- [95NT:12/7/94] 12 ATTACHMENT 1 STOCK OPTION EXERCISE FORM - CASH ONLY ROCKWELL INTERNATIONAL CORPORATION CASH ONLY STOCK OPTION EXERCISE FORM Attached is the Stock Option Exercise Form to be used if you exercise a stock option under any of Rockwell's stock option plans for a cash payment (including a so-called "cashless" exercise in which your stockbroker, bank or other financial institution furnishes the cash payment of the exercise price). BEFORE COMPLETING THIS STOCK OPTION EXERCISE FORM, PLEASE READ CAREFULLY THE SEPARATE INSTRUCTIONS FOR THE FORM, WHICH ARE REPRODUCED IN APPENDIX I TO THE BOOKLET, FACTS ABOUT ROCKWELL INTERNATIONAL CORPORATION STOCK OPTIONS AND SARS (REVISED MARCH 1993). YOU SHOULD ALSO REFER TO THE PERTINENT PORTIONS OF THE FACTS BOOKLET, PARTICULARLY THE "HIGHLIGHTS" SECTION (ON PAGES 2-7) FOR FURTHER GUIDANCE IN COMPLETING THE FORM. If after reading the separate instructions and the pertinent sections of the FACTS booklet you have questions on the procedures to be followed in completing your exercise or on how to complete the Form, please call Stock Option Administration in the Secretary's Office in Pittsburgh (at Comnet 545-7120 or (412) 565-7120) for assistance. [95NT:12/7/94] 13 CASH ONLY STOCK OPTION EXERCISE FORM ------------------------------------ To: Rockwell International Corporation 625 Liberty Avenue Pittsburgh, Pennsylvania 15222-3123 Attention: Office of the Secretary, Stock Option Administration 1. OPTIONS EXERCISED: Subject to the terms and conditions of the 1979 Stock Plan for Key Employees, the 1981 Incentive Stock Option Plan for Key Employees, the 1988 Long-Term Incentives Plan and/or the 1995 Long-Term Incentives Plan (collectively, the Plans) of Rockwell International Corporation (Rockwell), and Agreement(s) thereunder, I hereby exercise the following stock option(s):
Plan Date of NQ/ Class of Stock Number of Exercise Total Year Grant ISO Common/Class A Shares Price Purchase Price - ---- ------- --- -------------- --------- -------- -------------- $ $ - ---- ------- --- -------------- --------- -------- -------------- $ $ - ---- ------- --- -------------- --------- -------- -------------- $ $ - ---- ------- --- -------------- --------- -------- --------------
2. CONVERSION: Convert [ ] None [ ] All [ ] _____ shares ---------- of the shares of Class A Common Stock to Common Stock. 3. PAYMENT: ------- [ ] A check payable to Rockwell International Corporation in the amount of the Total Purchase Price of the above-itemized stock option(s) is enclosed. [ ] The Total Purchase Price of the above-itemized stock option(s) will be paid by a check payable to Rockwell International Corporation or (if prior arrangements are made with the Stock Option Administration staff of the Secretary's Office) by a wire transfer of funds to Rockwell [CONTINUED ON PAGE 2] 14 Cash Only Stock Option Exercise Form Page 2 International Corporation to the account specified by the Secretary's Office (Stock Option Administration), which will be sent promptly by my stockbroker, bank or other financial institution, Representative's Name: _______________________________ Firm Name: ___________________________________________ Address: _____________________________________________ _____________________________________________ Telephone No.: _______________________________________ If full payment of the Total Purchase Price of the stock option(s) listed in Item 1 is not delivered within five (5) business days after the later of the date of this Form or the date of its receipt by the Secretary of Rockwell, the Corporation (as defined in the Plans) is authorized forthwith to set off the balance due against salary payments or other amounts due or which may become due me to satisfy my obligation to pay the Total Purchase Price. If any of the stock option(s) listed in Item 1 was granted as a nonqualified stock option (NQ), I understand Rockwell will issue a statement to me for reimbursement of taxes required to be withheld and remitted to taxing authorities in respect of the exercise of those stock option(s) and may withhold delivery of the certificate(s) for the shares deliverable upon this exercise until that statement has been paid in full. If full payment of that statement is not received by Rockwell within ten (10) business days after the date of that statement, the Corporation (as defined in the Plans) is authorized forthwith to set off the balance due against salary payments or other amounts due or which may become due me to satisfy any obligation to reimburse Rockwell for those withholding taxes. 4. REGISTRATION: Please register the stock as follows: Name: ________________________________________________ Social Security No.: _________________________________ Current Address: _____________________________________ _____________________________________ [CONTINUED AND TO BE SIGNED ON PAGE 3] 15 Cash Only Stock Option Exercise Form Page 3 NOTE: THE STOCK MAY BE REGISTERED ONLY IN YOUR NAME OR IN YOUR NAME JOINTLY WITH YOUR SPOUSE (OR JOINTLY WITH ANOTHER PERSON). IT MAY NOT BE REGISTERED IN THE NAME OF YOUR STOCKBROKER, BANK OR OTHER FINANCIAL INSTITUTION. 5. DELIVERY: Please deliver the stock _____ to me at the address listed in Item 4. _____ to the following person and address: Name of Stockbrokerage Firm or Other Addressee: _______________________________________________________ Address: _____________________________________________ _____________________________________________ Attention: ___________________________________________ THIS STOCK OPTION EXERCISE MAY NOT BE REVOKED OR CHANGED AFTER DELIVERY OF THIS FORM, PROPERLY COMPLETED, DATED AND SIGNED, TO THE CORPORATION WHETHER OR NOT PAYMENT ACCOMPANIES THIS FORM AND WHETHER THIS FORM IS DATED BEFORE, ON OR AFTER THE DATE OF SUCH RECEIPT. ____________________________________ (Signature) Print Name:_________________________ Dated: _____________________, 19 ___ 16 ATTACHMENT 2 STOCK OPTION EXERCISE FORM STOCK OR STOCK AND CASH ("STOCK SWAP") ROCKWELL INTERNATIONAL CORPORATION "STOCK SWAP" STOCK OPTION EXERCISE FORM Attached is the Stock Option Exercise Form to be used if you exercise a stock option under any of Rockwell's stock option plans and pay part or all of the exercise price for the Option Shares purchased by delivering shares of Rockwell Common Stock or Class A Common Stock. BEFORE COMPLETING THIS STOCK OPTION EXERCISE FORM, PLEASE READ CAREFULLY THE SEPARATE INSTRUCTIONS FOR THE FORM, WHICH ARE REPRODUCED IN APPENDIX II TO THE BOOKLET, FACTS ABOUT ROCKWELL INTERNATIONAL CORPORATION STOCK OPTIONS AND SARS (REVISED MARCH 1993). YOU SHOULD ALSO REFER TO THE PERTINENT PORTIONS OF THE FACTS BOOKLET, PARTICULARLY THE "HIGHLIGHTS" SECTION (ON PAGES 2-7) AND THE STOCK-FOR-STOCK PAYMENT METHOD ("STOCK SWAP") SECTION (ON PAGES 31-36) FOR FURTHER GUIDANCE IN COMPLETING THE FORM. If after reading the separate instructions and the pertinent sections of the FACTS booklet you have questions on the procedures to be followed in completing your exercise or on how to complete the Form, please call Stock Option Administration in the Secretary's Office in Pittsburgh (at Comnet 545-7120 or (412) 565-7120) for assistance. [95NT: 12/7/94] 17 "STOCK SWAP" STOCK OPTION EXERCISE FORM --------------------------------------- To: Rockwell International Corporation 625 Liberty Avenue Pittsburgh, Pennsylvania 15222-3123 Attention: Office of the Secretary, Stock Option Administration 1. OPTIONS EXERCISED: Subject to the terms and conditions of the 1979 Stock Plan for Key Employees, the 1981 Incentive Stock Option Plan for Key Employees, the 1988 Long-Term Incentives Plan and/or the 1995 Long-Term Incentives Plan (collectively, the Plans) of Rockwell International Corporation (Rockwell), and Agreement(s) thereunder, I hereby exercise the following stock option(s):
Plan Date of NQ/ Class of Stock Number of Exercise Total Year Grant ISO Common/Class A Shares Price Purchase Price - ---- ------- --- -------------- -------- -------- -------------- $ $ - ---- ------- --- -------------- -------- -------- -------------- $ $ - ---- ------- --- -------------- -------- -------- -------------- $ $ - ---- ------- --- -------------- -------- -------- --------------
2. CONVERSION: Convert [ ] None [ ] All [ ] _____ shares of the shares of Class A Common Stock to Common Stock. 3. PAYMENT: A. Number of shares of Rockwell Common Stock or Class A Common Stock surrendered to pay the exercise price of the option(s): ______________ shares of Common _______________ shares of Class A Common B. Amount of enclosed check, if any, payable to Rockwell International Corporation to pay estimated balance of exercise price of the option(s): $_________________________ I am using shares of Common Stock or Class A Common Stock or both of Rockwell (Shares) that I now own to pay all or part of the exercise price for the Shares to be purchased on my exercise of the above-referenced stock option(s). I enclose, or in accordance with prior arrangements I have made with you, I am arranging for delivery to you of, one or more certificates for (i) at least the number of Shares estimated, based on the closing price on the New York Stock Exchange -- Composite Transactions on a day not more than five business days prior to (x) the date of receipt of this Exercise Form by the Secretary's Office (Stock Option Administration), or (y) if later, the date of this [CONTINUED ON PAGE 2] 18 "Stock Swap" Stock Option Exercise Form Page 2 Exercise Form, to be sufficient to pay in full the Total Purchase Price of the Shares covered by this exercise, or (ii) a lesser number of Shares that I desire to apply to such Total Purchase Price and a check in the amount of such Total Purchase Price less the value of the Shares delivered, based on the closing price on the New York Stock Exchange -- Composite Transactions on a day not more than five business days prior to (x) the date of receipt of this Exercise Form by the Secretary's Office (Stock Option Administration), or (y) if later, the date of this Exercise Form, and in either case, an executed stock transfer power covering the Shares surrendered or to be surrendered. I understand that you will advise me of the exact number of Shares, valued in accordance with the Plans at the closing price on the New York Stock Exchange -- Composite Transactions on the later of (x) the date you have received (I) this Exercise Form, (II) the estimated payment in Shares or Shares and cash specified above and, (III) if I am not the optionee, any additional documents required to evidence my right to exercise these stock option(s) and (y) the date of this Exercise Form (the later of such dates, the effective date of this exercise), and any cash required to pay in full the Total Purchase Price of the Shares to be purchased upon this exercise. I further understand that certificates representing the number of Shares purchased will be issued only after I deliver to Rockwell any remaining balance of the Total Purchase Price in cash or a combination of Shares and cash and the amount sufficient to reimburse Rockwell for all withholding taxes required to be withheld and remitted to taxing authorities in respect of this exercise. I hereby agree to deliver to Rockwell no later than five (5) business days following the effective date of this exercise cash or any additional number of Shares or a combination of Shares and cash required to pay in full the Total Purchase Price of the Shares to be purchased upon this exercise, and an executed stock transfer power covering any additional Shares delivered. I hereby further agree to pay Rockwell, no later than ten (10) business days after the date of Rockwell's statement therefor, the amount sufficient to reimburse Rockwell for all withholding taxes required to be withheld and remitted to taxing authorities in respect of this exercise. If I fail to deliver any remaining balance of the Total Purchase Price of the Shares to be purchased upon this exercise and an amount sufficient to reimburse Rockwell in full for all withholding taxes required to be withheld and remitted to taxing authorities in respect of this exercise in accordance with this paragraph, the Corporation (as defined in the Plans) is authorized forthwith to set off the balance due against salary payments or other amounts due or which may become due to me to satisfy my obligation hereunder. 4. REGISTRATION: It is my understanding that following my payment in full of the Total Purchase Price and reimbursement of Rockwell for any applicable withholding taxes as provided in ITEM 3: PAYMENT, I shall receive from Rockwell one or more stock certificates representing the same [CONTINUED AND TO BE SIGNED ON PAGE 3] 19 "Stock Swap" Stock Option Exercise Form Page 3 number and kind of Shares I surrendered to Rockwell, issued in the same name or names as the Shares so surrendered. I shall also receive one or more separate stock certificates representing the additional Shares acquired as a result of this exercise, which I hereby request be registered as follows: Name: __________________________________________________ Social Security No.: ___________________________________ Current Address: _______________________________________ _______________________________________ NOTE: THE STOCK MAY BE REGISTERED ONLY IN YOUR NAME OR IN YOUR NAME JOINTLY WITH YOUR SPOUSE (OR JOINTLY WITH ANOTHER PERSON). IT MAY NOT BE REGISTERED IN THE NAME OF YOUR STOCKBROKER, BANK OR OTHER FINANCIAL INSTITUTION. 5. DELIVERY: Please deliver the stock _____ to me at the address listed in Item 4. _____ to the following person and address: Name of Stockbrokerage Firm or Other Addressee: _______________________________________________ Address: _____________________________________ _____________________________________ Attention: ___________________________________ THIS STOCK OPTION EXERCISE MAY NOT BE REVOKED OR CHANGED AFTER DELIVERY OF THIS FORM, PROPERLY COMPLETED, DATED AND SIGNED, TO THE CORPORATION WHETHER OR NOT PAYMENT ACCOMPANIES THIS FORM AND WHETHER THIS FORM IS DATED BEFORE, ON OR AFTER THE DATE OF SUCH RECEIPT. ____________________________________ (Signature) Print Name:_________________________ Dated: _____________________, 19 ___ 20 "Stock Swap" Stock Option Exercise Form Page 4 STOCK TRANSFER POWER SEPARATE FROM CERTIFICATE FOR VALUE RECEIVED, (I) (We), ____________________________ (insert name(s)) hereby sell, assign and transfer unto Rockwell International Corporation the ________________ shares of the [Common Stock] (insert number) [Class A Common Stock] of Rockwell International Corporation standing in the name(s) of ____________________________ on the (name(s) on certificate(s) books of said Rockwell International Corporation represented by Certificate(s) No(s). ______________ herewith and do hereby irrevocably constitute and appoint Mellon Bank, N.A., attorney to transfer the said stock on the books of Rockwell International with full power of substitution in the premises. Dated: __________________ _____________________________________________ (Signature) WITNESS: _____________________________________________ (Signature) EX-10.H.1 12 ROCKWELL INTERNATIONAL 10-K 1 EXHIBIT 10-h-1 ROCKWELL INTERNATIONAL CORPORATION Resolutions adopted by The Board of Directors on November 3, 1993 providing for Deferred Compensation Policy for Non-Employee Directors -------------------------------------- RESOLVED, that any Director of the Corporation who wishes to defer all or any part of the retainer fees paid in cash which such Director will be entitled to receive from the Corporation beginning January 1 of the following year, may do so by delivering a written statement to the Secretary of the Corporation to that effect, specifying the percentage of such future fees paid in cash to be deferred and the time when, or period during which, such deferred fees shall be paid to him or, in the event of his death, to his estate or beneficiary; that any such Director may terminate such deferral at any time with respect to future fees by delivering a written notice to that effect to the Secretary of the Corporation, provided, however, such termination shall not affect fees already deferred or be effective except as to fees commencing on or after the January 1 next following the date of receipt by the Secretary of the Corporation of such Director's written notice of termination; that this Board of Directors may terminate any such deferral at any time and may change the period of payment of any deferred amounts or cause any deferred amounts to be paid in a lump sum regardless of a Director's instructions with respect thereto; that there shall be credited to the total amount deferred by each Director at the end of each calendar quarter an additional amount equal to the amount then deferred multiplied by one-fourth the prime rate quoted by Mellon Bank, N.A. on the last day of such quarter, such additional amounts to be paid at the same times and in the same proportion as the payments of the fees so deferred; and that no deferred fees or additional amounts credited thereon may be assigned or otherwise transferred; and further RESOLVED, that the officers of this Corporation be, and each of them hereby is, authorized and empowered 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 they may deem necessary or appropriate to carry out the purpose and intent of the immediately foregoing resolution; and further RESOLVED, that the resolutions heretofore adopted by the Board of Directors on November 12, 1980 entitled "Directors Deferred Compensation" be, and they hereby are, superseded by the two immediately foregoing resolutions, provided, however, that any deferral election made by a Director and still effective under those superseded resolutions shall continue in effect under the two immediately foregoing resolutions until terminated in accordance therewith by that Director or the Corporation. EX-10.H.2 13 ROCKWELL INTERNATIONAL 10-K 1 EXHIBIT 10-h-2 ROCKWELL INTERNATIONAL CORPORATION Resolutions Adopted by the Compensation Committee of The Board of Directors on July 5, 1994 Modifying Deferred Compensation Policy for Non- Employee Directors ---------------------------------- RESOLVED, that, effective July 1, 1994, there shall be credited to the total amount deferred pursuant to resolutions adopted by the Board of Directors on November 12, 1980 and November 3, 1993 entitled "Directors Deferred Compensation" and "Directors' Compensation", respectively, by each Director in respect of retainer and meeting attendance fees paid in cash and remaining owing to such Director at the end of each calendar quarter an additional amount equal to the amount then deferred and owing multiplied by one-fourth of the annual rate for quarterly compounding that is 120% of the "applicable Federal long-term rate" determined by the Secretary of the Treasury pursuant to Section 1274(d) of the Internal Revenue Code, as amended, or any successor provision, for the last month in such calendar quarter, such additional amount to be paid at the same time and in the same proportion as the payments of the fees so deferred; and further RESOLVED, that the penultimate clause of the sixth resolution under the heading "Directors' Compensation" heretofore adopted by the Board of Directors on November 3, 1993 be and it hereby is superseded by the preceding resolution. EX-10.I.1 14 ROCKWELL INTERNATIONAL 10-K 1 EXHIBIT 10-i-1 DIRECTORS STOCK PLAN OF ROCKWELL INTERNATIONAL CORPORATION 1. PURPOSE OF THE PLAN The purpose of the Directors Stock Plan (the Plan) is to link a portion of the compensation of non-employee directors of Rockwell directly with the interests of the shareowners. 2. PARTICIPANTS Participants in the Plan shall consist of directors of Rockwell who are not employees of Rockwell or any of its subsidiaries (Non-Employee Director). The term "subsidiary" as used in the Plan means a corporation more than 50% of the voting stock of which, or an unincorporated business entity more than 50% of the equity interest in which, shall at the time be owned directly or indirectly by Rockwell. 3. SHARES RESERVED UNDER THE PLAN Subject to the provisions of Section 8 of the Plan, there shall be reserved for delivery under the Plan an aggregate of 75,000 shares of Common Stock of Rockwell (Shares). Shares to be delivered under the Plan may be authorized and unissued Shares, Shares held in treasury or any combination thereof. 4. ADMINISTRATION OF THE PLAN The Plan shall be administered by the Compensation and Management Development Committee of the Board of Directors of Rockwell (the Committee). The Committee shall have authority to interpret the Plan, and to prescribe, amend and rescind rules and regulations relating to the administration of the Plan, and all such interpretations, rules and regulations shall be conclusive and binding on all persons. 5. EFFECTIVE DATE OF THE PLAN The Plan shall be submitted to the shareowners of Rockwell for approval at the Annual Meeting of Shareowners to be held on February 1, 1995, or any adjournment thereof, and, if approved by the shareowners, shall become effective on the date and at the time of such approval. 6. AWARD OF SHARES Each Non-Employee Director who is elected a director at any Annual Meeting of Shareowners of Rockwell shall receive an award of 400 Shares effective immediately after that Annual Meeting. Each Non-Employee Director who is elected a director at any meeting of the Board shall receive effective immediately after that meeting an award of 400 Shares if elected after the annual meeting and prior to May 1; an award of 300 Shares if elected between May 1 and July 31; an award of 200 Shares if elected between August 1 and October 31; and an award of 100 Shares if elected between November 1 and the next annual meeting. A participant shall not be required to make any payment for any Shares delivered under the Plan. Upon the delivery of Shares under the Plan, the recipient shall have the entire beneficial ownership interest in, and all rights and privileges of a shareowner as to those Shares, including the rights to vote those Shares and to receive dividends thereon. 7. RESTRICTION ON TRANSFER OF SHARES No Shares received by a participant under the Plan may be sold, assigned, transferred, pledged or otherwise encumbered or disposed of for a period of six months after receipt of those Shares, except in the case of the participant's death or disability during that six-month period. 8. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION If there shall be any change in or affecting Shares on account of any merger, consolidation, reorganization, recapitalization, reclassification, stock dividend, stock split or combination, or other distribution to holders of Shares (other than a cash dividend), there shall be made or taken such amendments to the Plan and such adjustments and actions thereunder as the Board may deem appropriate under the circumstances. B-1 2 9. GOVERNMENT AND OTHER REGULATIONS The obligations of Rockwell to deliver Shares under the Plan shall be subject to (i) all applicable laws, rules and regulations and such approvals by any governmental agencies as may be required, including, without limitation, compliance with the Securities Act of 1933, as amended, and (ii) the condition that such shares shall have been duly listed on the New York Stock Exchange. 10. AMENDMENT AND TERMINATION OF THE PLAN The Plan may be amended by the Board in any respect, provided that, without shareowner approval, no amendment shall (i) materially increase the maximum number of shares of Common Stock available for delivery under the Plan (other than adjustments pursuant to Section 8 hereof), (ii) materially increase the benefits accruing to participants under the Plan, or (iii) materially modify the requirements as to eligibility for participation in the Plan, and provided, further, that Section 6 of the Plan may not be amended more than once every six months except to comport with changes in the Internal Revenue Code of 1986, as amended, the Employee Retirement Income Securities Act, as amended, or the regulations under either thereof. The Plan may also be terminated at any time by the Board. 11. MISCELLANEOUS (a) Nothing contained in this Plan shall be deemed to confer upon any person any right to continue as a director of or to be associated in any other way with Rockwell. (b) To the extent that Federal laws do not otherwise control, the Plan and all determinations made and actions taken pursuant hereto shall be governed by the law of the State of Delaware. B-2 EX-10.J.1 15 ROCKWELL INTERNATIONAL 10-K 1 EXHIBIT 10-j-1 ROCKWELL INTERNATIONAL CORPORATION RESOLUTIONS ADOPTED BY THE BOARD OF DIRECTORS ON NOVEMBER 2, 1994 PROVIDING FOR RETIREMENT POLICY FOR NON-EMPLOYEE DIRECTORS RESOLVED, that it is the policy of the Corporation, and the officers of the Corporation be, and each of them hereby is, authorized for and on behalf of the Corporation, to enter into a consulting agreement with each Director upon his retirement from Board service, at an annual fee equal to the cash retainer fee for Board service in effect from time to time and providing for his continued availability for advice and consultation after retirement, provided that such Director had at least five years of Board service and had not been an employee of the Corporation during any part of the ten years immediately prior to his retirement from Board service; and provided, further, that the term of each agreement would be for the lesser of life or ten years if the Director's retirement is at age 72, and for the least of life, ten years or the number of years of Board service if the Director's retirement from Board service occurs before he attains age 72; and further RESOLVED, that the resolution heretofore adopted by the Board of Directors on February 11, 1987 entitled "Retired Directors" be, and it hereby is, superseded by the foregoing resolution. EX-11 16 ROCKWELL INTERNATIONAL 10-K 1 EXHIBIT 11 ROCKWELL INTERNATIONAL CORPORATION COMPUTATION OF EARNINGS PER SHARE FOR THE FIVE YEARS ENDED SEPTEMBER 30, 1994
YEARS ENDED SEPTEMBER 30 -------------------------------------------------- 1994 1993 1992 1991 1990 ------ ------ ------ ------ ------ (IN MILLIONS EXCEPT PER SHARE AMOUNTS) PRIMARY EARNINGS PER SHARE: Income before change in accounting................. $634.1 $561.9 $483.0 $600.5 $624.3 Deduct dividend requirements on preferred stock.... 0.3 0.3 0.3 0.3 0.4 ------ ------ ------ ------ ------ Total primary earnings before change in accounting............................ $633.8 $561.6 $482.7 $600.2 $623.9 ====== ====== ====== ====== ====== Average number of common shares outstanding during the year......................................... 220.5 219.8 223.6 233.7 244.1 ====== ====== ====== ====== ====== Primary earnings per share before change in accounting....................................... $ 2.87 $ 2.55 $ 2.16 $ 2.57 $ 2.56 Cumulative effect of change in accounting for retirement medical benefits...................... (6.78)* ------ ------ ------ ------ ------ Net primary earnings per share..................... $ 2.87 $ 2.55 $(4.62) $ 2.57 $ 2.56 ====== ====== ====== ====== ====== FULLY DILUTED EARNINGS PER SHARE: Income before change in accounting................. $634.1 $561.9 $483.0 $600.5 $624.3 Average number of common shares outstanding during the year: Common stock..................................... 220.5 219.8 223.6 233.7 244.1 Assumed issuance of stock under award plans and conversion of preferred stock and convertible debentures.................................... 4.0 4.5 2.5 3.1 3.1 ------ ------ ------ ------ ------ Total shares, assuming full dilution........ 224.5 224.3 226.1 236.8 247.2 ====== ====== ====== ====== ====== Fully diluted earnings per share before change in accounting.................................... $ 2.82 $ 2.51 $ 2.14 $ 2.54 $ 2.53 Cumulative effect of change in accounting for retirement medical benefits...................... (6.70)* ------ ------ ------ ------ ------ Net fully diluted earnings per share............... $ 2.82 $ 2.51 $(4.56) $ 2.54 $ 2.53 ====== ====== ====== ====== ====== - --------------- * The per share amounts pertaining to the cumulative effect of change in accounting in 1992 were computed using average outstanding shares for the second quarter, which approximate full year 1992 average outstanding shares.
EX-21 17 ROCKWELL INTERNATIONAL 10-K 1 EXHIBIT 21 ROCKWELL INTERNATIONAL CORPORATION LIST OF SUBSIDIARIES OF THE COMPANY AS OF NOVEMBER 30, 1994
PERCENTAGE OF VOTING SECURITIES OWNED BY ------------------------- NAME AND JURISDICTION REGISTRANT SUBSIDIARY - ----------------------------------------------------------------------- ---------- ---------- Allen-Bradley Company, Inc. (Wisconsin)................................ 100% Rockwell-Collins International, Inc. (Texas)........................... 100% Rockwell Graphic Systems, Inc. (Delaware).............................. 100% Rockwell International Finance Corporation (Delaware).................. 100% Rockwell Body and Chassis Systems--France, a societe anonyme (France).......................................................... 100% Rockwell Participacoes Ltda. (Brazil)................................ 100% Rockwell International GmbH (Germany)................................ 100% Rockwell International of Canada Ltd. (Canada)....................... 100% Rockwell Limited (Delaware).......................................... 100% Sprecher + Schuh A.G. (Switzerland).................................. 100%
Listed above are certain consolidated subsidiaries included in the consolidated financial statements of the Company. Unlisted subsidiaries, considered in the aggregate, do not constitute a significant subsidiary. EX-23 18 ROCKWELL INTERNATIONAL 10-K 1 EXHIBIT 23 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We consent to the incorporation by reference in Registration Statement No. 33-49699 on Form S-3 and Registration Statement Nos. 2-99494 (as amended through Post-Effective Amendment No. 4 thereto), 33-27122 and 33-32662, all on Form S-8, of our reports dated November 1, 1994 (except as to Note 2 to Financial Statements as to which the date is November 21, 1994) appearing in the Annual Report on Form 10-K of Rockwell International Corporation for the year ended September 30, 1994. DELOITTE & TOUCHE LLP Pittsburgh, Pennsylvania December 21, 1994 EX-24 19 ROCKWELL INTERNATIONAL 10-K 1 EXHIBIT 24 POWER OF ATTORNEY I, the undersigned Director and/or Officer of Rockwell International Corporation, a Delaware corporation (the Company), hereby constitute CHARLES H. HARFF, WILLIAM J. CALISE, JR. and EDWARD T. MOEN, II, 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, 1994; (2) Registration Statements and any and all amendments thereto (including supplements and post-effective amendments) for the purpose of registering under the Securities Act of 1933, as amended, (a) additional debt securities of the Company in an aggregate principal amount of up to $200,000,000; (b) additional securities to be sold pursuant to (i) the Company's Savings Plan, as amended; and (ii) the Company's Savings Plan for Certain Represented Hourly Employees, as amended; and (c) securities to be sold pursuant to (i) the Company's 1995 Long-Term Incentives Plan; and (ii) the Company's Directors Stock Plan; and (3) any and all amendments (including supplements and and post-effective amendments) to (a) the Registration Statment on Form S-3 (Registration Statement No. 33-49699) registering additional debt securities of the Company in an aggregate principal amount of up to $300,000,000; (b) the Registration Statement on Form S-8 (Registration Statement No. 33-27122) registering securities to be sold under the Company's 1988 Long-Term Incentives Plan, 1981 Incentive Stock Option Plan for Key Employees, as amended, and 1979 Stock Plan for Key Employees, as amended; (c) the Registration Statement on Form S-8 (Registration Statement No. 33-32662) registering securities to be sold pursuant to the Company's Savings Plan, as amended; and (d) the Registration Statement on Form S-8 (Registration Statement No. 2-99494) registering securities to be sold pursuant to the Company's Savings Plan for Certain Represented Hourly Employees, as amended.
Signature Title Date --------- ----- ---- DONALD R. BEALL Chairman of the Board and December 7, 1994 - ---------------------------- Chief Executive Officer (Donald R. Beall) (principal executive officer) and Director LEW ALLEN, JR. Director December 7, 1994 - ---------------------------- (Lew Allen, Jr.) Director December 7, 1994 - ---------------------------- (Richard M. Bressler) JOHN J. CREEDON Director December 7, 1994 - ---------------------------- (John J. Creedon) ROBIN CHANDLER DUKE Director December 7, 1994 - ---------------------------- (Robin Chandler Duke)
2 JUDITH L. ESTRIN Director December 7, 1994 - ------------------------------ (Judith L. Estrin) WILLIAM H. GRAY, III Director December 7, 1994 - ------------------------------ (William H. Gray, III) JAMES CLAYBURN LA FORCE, JR. Director December 7, 1994 - ------------------------------ (James Clayburn La Force, Jr. WILLIAM T. McCORMICK, JR. Director December 7, 1994 - ------------------------------ (William T. McCormick, Jr.) JOHN D. NICHOLS Director December 7, 1994 - ------------------------------ (John D. Nichols) BRUCE M. ROCKWELL Director December 7, 1994 - ------------------------------ (Bruce M. Rockwell) ROSS D. SIRAGUSA, JR. Director December 7, 1994 - ------------------------------ (Ross D. Siragusa, Jr.) WILLIAM S. SNEATH Director December 7, 1994 - ------------------------------ (William S. Sneath) JOSEPH F. TOOT, JR. Director December 7, 1994 - ------------------------------ (Joseph F. Toot, Jr.) W. M. BARNES Senior Vice President, December 7, 1994 - ------------------------------ Finance & Planning and (W. M. Barnes) Chief Financial Officer (principal financial officer) LAWRENCE J. KOMATZ Vice President and December 7, 1994 - ------------------------------ Controller (principal (Lawrence J. Komatz) accounting officer)
2 3 POWER OF ATTORNEY I, the undersigned Director and/or Officer of Rockwell International Corporation, a Delaware corporation (the Company), hereby constitute CHARLES H. HARFF, WILLIAM J. CALISE, JR. and EDWARD T. MOEN, II, 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, 1994; (2) Registration Statements and any and all amendments thereto (including supplements and post-effective amendments) for the purpose of registering under the Securities Act of 1933, as amended, (a) additional debt securities of the Company in an aggregate principal amount of up to $200,000,000; (b) additional securities to be sold pursuant to (i) the Company's Savings Plan, as amended; and (ii) the Company's Savings Plan for Certain Represented Hourly Employees, as amended; and (c) securities to be sold pursuant to (i) the Company's 1995 Long-Term Incentives Plan; and (ii) the Company's Directors Stock Plan; and (3) any and all amendments (including supplements and and post-effective amendments) to (a) the Registration Statment on Form S-3 (Registration Statement No. 33-49699) registering additional debt securities of the Company in an aggregate principal amount of up to $300,000,000; (b) the Registration Statement on Form S-8 (Registration Statement No. 33-27122) registering securities to be sold under the Company's 1988 Long-Term Incentives Plan, 1981 Incentive Stock Option Plan for Key Employees, as amended, and 1979 Stock Plan for Key Employees, as amended; (c) the Registration Statement on Form S-8 (Registration Statement No. 33-32662) registering securities to be sold pursuant to the Company's Savings Plan, as amended; and (d) the Registration Statement on Form S-8 (Registration Statement No. 2-99494) registering securities to be sold pursuant to the Company's Savings Plan for Certain Represented Hourly Employees, as amended.
Signature Title Date --------- ----- ---- Chairman of the Board and December 7, 1994 - ---------------------------- Chief Executive Officer (Donald R. Beall) (principal executive officer) and Director Director December 7, 1994 - ---------------------------- (Lew Allen, Jr.) RICHARD M. BRESSLER Director December 18, 1994 - ---------------------------- (Richard M. Bressler) Director December 7, 1994 - ---------------------------- (John J. Creedon) Director December 7, 1994 - ---------------------------- (Robin Chandler Duke)
EX-27 20 ROCKWELL FINANCIAL DATA SCHEDULE TO 10-K
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SEPTEMBER 30, 1994 CONSOLIDATED BALANCE SHEET, STATEMENT OF CONSOLIDATED INCOME FOR THE YEAR ENDED SEPTEMBER 30, 1994 AND NOTES TO FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 12-MOS SEP-30-1994 SEP-30-1994 628 0 2,267 68 1,533 4,928 6,160 3,777 9,861 3,020 831 246 0 1 3,109 9,861 11,123 11,205 8,675 10,087 0 0 97 1,021 387 634 0 0 0 634 2.87 2.82
EX-99.A.1 21 ROCKWELL INTERNATIONAL 10-K 1 EXHIBIT 99-a-1 PN004 EIN 95-105-4708 Effective Date 10/1/94 ROCKWELL INTERNATIONAL CORPORATION SAVINGS PLAN (Amended and Restated as of September 30, 1994) 2 APPENDIX A RETIREMENT PLANS GOVERNING CREDITING OF CONTINUOUS EMPLOYMENT . . . 85 APPENDIX B PROCEDURES FOR DISTRIBUTIONS TO PARTICIPANTS AGE 70-1/2 . . . . . . 86 APPENDIX C PROCEDURES, TERMS AND CONDITIONS OF LOANS . . . . . . . . . . . . . 87
3 ROCKWELL INTERNATIONAL CORPORATION SAVINGS PLAN AS AMENDED THROUGH SEPTEMBER 30, 1994 PREAMBLE The Plan and Effective Date. - --------------------------- The Plan hereinafter described constitutes a savings plan for certain employees on the salary and weekly payrolls of the Company. The Effective Date of the Plan is March 1, 1966. The Plan as restated herein is effective September 30, 1994. The provisions of the Plan as in effect from time to time prior to September 30, 1994, apply to the related periods prior to such date for all purposes, except as specifically provided in the Plan. 4 ARTICLE I DEFINITIONS 1.010 "ACCOUNTS" means the Participant's Company Contributions Account, Compensation Deferral Account, Compensation Deduction Account, Supplemental Deferral Account and Supplemental Deduction Account, as applicable. 1.020 "ADMINISTRATIVE COMMITTEE" means the committee appointed by the Plan Committee and assigned power and authority under Sections 2.030 and 6.030. 1.030 "AFFILIATED COMPANY" means Rockwell International Corporation and: (a) any corporation incorporated under the laws of one of the United States of America of which Rockwell International Corporation, a Delaware corporation, owns, directly or indirectly, eighty percent (80%) or more of the combined voting power of all classes of stock or eighty percent (80%) or more of the total value of the shares of all classes of stock (all within the meaning of section 1563 of the Code.); (b) any partnership or other business entity organized under such laws, of which Rockwell International Corporation owns, directly or indirectly, eighty percent (80%) or more of the voting power or eighty percent (80%) or more of the total value (all within the meaning of section 414(c) of the Code); and (c) any other company deemed to be an Affiliated Company by the Board of Directors of Rockwell International Corporation. 1.040 "BASE COMPENSATION" means the Participant's compensation not in excess of One Hundred Thousand Dollars ($150,000), or such larger sum as may be established pursuant to section 401(a)(17) of the Code, in any calendar year, as payable, including any amount which would be paid to the Participant absent an election under Section 2.020(a), or an election to make elective employer contributions pursuant to a qualified cash or deferred arrangement under a cafeteria plan meeting the requirements of section 125 of the Code, but excluding compensation for overtime, extended workweek compensation, night work or other premium pay, bonuses, any form of extra, contingent or supplementary compensation (including, but not limited to, lump sum payments for unused vacation) or compensation on the hourly payroll. 1.050 "BENEFICIARY" means the one or more persons or trusts designated by a Participant pursuant to Article IX of the Plan; provided, however, that notwithstanding the foregoing and any provision to the contrary in Article IX, effective August 23, 1984, in the case of a Participant who has been married for a one (1) year period within the meaning of section 417(d) of the Code who dies prior to complete distribution of his Accounts pursuant to Article V or VI of the Plan, the Beneficiary shall be deemed to be the Participant's spouse regardless of any contrary designation, unless the Participant has filed with the Plan Administrator a written designation of a -2- 5 person or persons other than such spouse as a Beneficiary or Beneficiaries with respect to all or any part of the Participant's Accounts and such written designation is accompanied by the consent of the Participant's spouse or it is established to the satisfaction of the Plan Administrator that such consent cannot be obtained because there is no spouse or the spouse cannot be located or because of other circumstances permitted under section 417(a)(2) of the Code. Such consent shall be in writing on a form furnished to the Participant by the Plan Administrator and shall acknowledge the effect of such consent. The spouse's signature must be witnessed by a notary public not an Employee of the Company. Such consent shall apply only to the signatory spouse. In the event the Participant has a new spouse to whom he has been married for a one (1) year period within the meaning of section 417(d) of the Code, the written designation shall be void, and such new spouse shall be deemed to be the Participant's Beneficiary until such time as the Participant makes a written designation of a person or persons other than such spouse in accordance with the provisions of this Section 1.050. 1.060 "BOARD OF DIRECTORS" means the Board of Directors of Rockwell International Corporation; provided that any action of the Board of Directors contemplated by Section 1.030, 1.080, 1.018, 2.020, 3.020 or 5.030 may be taken by the Board of Directors or by any officer or officers of Rockwell International Corporation authorized by the Board of Directors to take such action. 1.070 "CLASS A STOCK" means the Class A Common Stock of Rockwell International Corporation. 1.075 "CODE" means the Internal Revenue Code of 1986, as it may be amended from time to time. References to sections of the Code are to such sections as of January 1, 1987, and shall include any subsequent modifications or successor sections thereto. 1.080 "COMMON STOCK" means the common stock of Rockwell International Corporation other than the Class A Stock. 1.090 "COMPANY" means Rockwell International Corporation and any other entity to which the Board of Directors has extended the benefits of this Plan. 1.100 "COMPANY CONTRIBUTIONS" under Article III, including forfeitures treated as Company Contributions under that Article. 1.110 "COMPANY CONTRIBUTIONS ACCOUNT" means the Account, with respect to a Participant, that is comprised of Company Contributions, adjusted by gains or losses related to the investment of such contributions. 1.120 "COMPENSATION DEDUCTION CONTRIBUTIONS" means the amounts contributed by Participants to the Plan through payroll deductions pursuant to Section 2.020(a)(ii). -3- 6 1.130 "COMPENSATION DEDUCTION ACCOUNT" means the Account with respect to a Participant that is comprised of Compensation Deduction Contributions adjusted by gains or losses related to the investment of such contributions. 1.140 "COMPENSATION DEFERRAL CONTRIBUTIONS" means the amounts contributed to the Plan on behalf of Participants on and after April 1, 1984, pursuant to Participants' elections under Section 2.020(a)(i). 1.150 "COMPENSATION DEFERRAL ACCOUNT" means the account with respect to a Participant that is comprised of Compensation Deferral Contributions adjusted by gains or losses related to the investment of such contributions. 1.155 "CONTINUOUS EMPLOYMENT" means a Participant's "Vesting Service" under the retirement plan listed in Appendix A hereto in which he participates at the time his Continuous Employment for purposes of this Plan is determined. If at the time of such determination he is not a participant in any of the retirement plans listed in Appendix A his Continuous Employment shall mean the Vesting Service he would have had under the Rockwell International Corporation Retirement Income Plan for Certain Salaried Employees had he been a participant in said plan from his original date of hire as an Employee. 1.160 "DIVERSIFIED FUND" means the fund established by the Trustee pursuant to Section 10.020(a)(i). 1.170 "DIVESTED COMPONENT" means a component of the Company or of an Affiliated Company which ceases to be a component of the Company or of an Affiliated Company, by reason of its divestiture, or any action taken incident thereto. 1.180 "EFFECTIVE DATE" means March 1, 1966. 1.190 "ELIGIBLE EMPLOYEE" means any Employee (including any officer) employed on a salary or weekly payroll of an Affiliated Company, or on the salary or weekly payroll of a division, plant, office or location of an Affiliated Company, to which the benefits of the Plan have been extended by the Board of Directors. Eligible Employee shall not include any director of the Company not otherwise so employed, nor any person not otherwise so employed who is compensated by special fees or pursuant to a special contract or arrangement, or on a commission basis, nor any person covered by a collective bargaining agreement which does not provide for participation in the Plan. 1.195 "ELIGIBLE RETIREMENT PLAN" means: (a) an individual retirement account described in section 408(a) of the Code, (b) an individual retirement annuity described in section 408(b) of the Code, (c) an annuity plan described in section 403(a) of the Code, or (d) a qualified plan (which is a defined contribution plan) described in section 401(a) of the Code; -4- 7 which accepts an individual's eligible rollover distributions; provided, however, that in the case of an eligible rollover distribution to a Participant's surviving Spouse, only an individual retirement account or individual retirement annuity described in (a) and (b) above shall be deemed to be an Eligible Retirement Plan. 1.200 "EMPLOYEE" means any person who is employed by the Company or by an Affiliated Company, including an Eligible Employee. Employee shall to the extent permitted by section 406 of the Code, be deemed to include any United States citizen regularly employed by a foreign subsidiary or affiliate of the Company. 1.210 "ERISA" means the Employee Retirement Income Security Act of 1974, as it may be amended from time to time. 1.220 "FIXED INCOME FUND" means the fund established by the Trustee pursuant to Section 10.020(a)(ii). 1.230 "GUARANTEED RETURN FUND" means the fund established by the Trustee pursuant to Section 10.020(a)(iii). 1.240 "INVESTMENT MANAGER" means the one or more investment managers within the meaning of ERISA section 3(38) appointed pursuant to Section 10.020(b)(i). 1.250 "INVESTMENT MANAGER ACCOUNT" means the one or more investment manager accounts established pursuant to Section 10.020(b)(i) of the Plan. 1.260 "LAYOFF" means an involuntary severance of employment, other than a discharge for cause. 1.270 "MATERNITY OR PATERNITY LEAVE" means any period of absence by reason of the pregnancy of the Participant, the birth of a child of the Participant, the placement of a child with the Participant in connection with the adoption of such child by the Participant, or the caring for such child for a period beginning immediately following such birth or placement; provided that the Participant shall have complied with the Company's request to furnish the Plan Administrator such timely information as may be reasonably required to establish that the absence is for such reason and the number of days for which there was such an absence. 1.280 "NAMED FIDUCIARY" means the Plan Committee, the Plan Administrator, the Administrative Committee, the Trustee(s) and Investment Manager(s). 1.290 "PARTICIPANT" means a person who has elected to participate in the Plan in accordance with Article II; provided, however, that such term shall include a person who no longer has an effective election under Article II only so long as he retains, under the provisions of the Plan, a nonforfeited interest in an Account under the Plan. -5- 8 1.300 "PLAN" means the Rockwell International Corporation Savings Plan as it may be amended from time to time. 1.310 "PLAN ADMINISTRATOR" means the person so designated by name or corporate office by the Board of Directors. 1.320 "PLAN COMMITTEE" means the Rockwell International Corporation Employee Benefit Plan Committee. 1.330 "PLAN YEAR" means each twelve-month period ending on the last day of September. 1.340 "RETIRE" OR "RETIREMENT" means retirement of a Participant pursuant to a retirement plan of the Company or any Affiliated Company. 1.350 "STOCK FUND A" means the fund established by the Trustee pursuant to Section 10.020(a)(iv). 1.360 "STOCK FUND B" means the fund established by the Trustee pursuant to Section 10.020(a)(v). 1.364 "SUPPLEMENTAL DEDUCTION CONTRIBUTIONS" means the amounts contributed by Participants to the Plan through payroll deductions pursuant to Section 2.020(b)(ii). 1.365 "SUPPLEMENTAL DEDUCTION ACCOUNT" means the Account with respect to a Participant, comprised of Supplemental Deduction Contributions and adjusted by gains or losses related to the investment of such contributions, established pursuant to the provisions of Section 4.010. 1.366 "SUPPLEMENTAL DEFERRAL CONTRIBUTIONS" means the amounts contributed by Participants to the Plan on behalf of Participants pursuant to Participants' elections under Section 2.020(b)(i). 1.367 "SUPPLEMENTAL DEFERRAL ACCOUNT" means the Account with respect to a Participant, comprised of Supplemental Deferral Contributions and adjusted by gains or losses related to the investment of such contributions, established pursuant to the provisions of Section 4.010. 1.368 "TRANSFER CONTRIBUTIONS" means the amounts described in Section 2.020(c) which are transferred to a Participant's Account in the manner provided in said Section 2.020(c). 1.370 "TRUST AGREEMENT" means the trust agreement established pursuant to Section 10.010 of this Plan. 1.380 "TRUST FUND" means the fund, including the earnings thereon, held by the Trustee into which all contributions of the Participant and the Company are deposited pursuant to the Plan. The Trust Fund shall be divided into a Diversified Fund, Fixed Income Fund, Guaranteed Return Fund, Stock Fund A, and Stock Fund B. -6- 9 1.390 "TRUSTEE" means the trustee or trustees of the trust to be established pursuant to Article X of the Plan. 1.400 "UNIT" means the unit of measurement of a Participant's interest in the Trust Fund. "Common Unit" means a Unit of the Stock Fund A or the Stock Fund B attributable to Common Stock. "Class A Unit" means a Unit of the Stock Fund A or the Stock Fund B attributable to Class A Stock. Where appropriate, "Units" includes Common Units and Class A Units. 1.410 "VALUATION DATE" means the last day of each month or such other days as the Plan Committee may determine. -7- 10 ARTICLE II PARTICIPATION 2.010 EFFECTIVE DATES. (a) An election by an Eligible Employee to contribute to the Plan which was in effect on April 1, 1984, or which has subsequently become effective under Section 2.010(b)(i), shall remain in effect except as provided in Section 2.010(c). (b) With respect to contributions to be made under the Plan on and after October 1, 1987, except as provided in Section 2.010(c), (i) an Eligible Employee who has first become an Employee prior to October 1, 1987, may elect to participate in the Plan if he has completed at least twenty-six (26) weeks of employment with an Affiliated Company. (ii) an Eligible Employee who has first become an Employee on or after October 1, 1987, may elect to participate in the Plan if he has completed at least fifty-two (52) weeks of employment with an Affiliated Company. (iii) an election to participate shall be made on fifteen (15) days notice to the Company and shall become effective on the first payroll payment date following the expiration of such fifteen (15) day notice period. (c) No contributions shall be made by, or with respect to, any Participant after any of the following events until such Participant again makes an election that is effective under subsection (b): (i) The Participant ceases to be an Employee; (ii) The Participant receives a distribution under Section 5.020, 5.030, 5.040, or 6.010. (iii) The Participant voluntarily elects to have contributions suspended under Section 8.010. (d) No contributions shall be made by, or with respect to, any Participant during any period of suspension of contributions described in Section 8.010 or Section 8.020. (e) Any Employee who receives a distribution from the Plan under Section 6.010 may not have contributions resumed during the twenty-six (26) week period beginning on the date of such distribution. 2.020 CONTRIBUTION ELECTION OR AUTHORIZATION. (a) An Eligible Employee who has notified the Company of his election to become a Participant shall also: -8- 11 (i) elect to defer receipt of an amount equal to 1%, 2%, 3%, 4%, 5%, 6%, 7% or 8% of Base Compensation, which amount shall be contributed as a Compensation Deferral Contribution to the Participant's Compensation Deferral Account; or (ii) authorize to be deducted from his Base Compensation, as paid, an amount equal to 1%, 2%, 3%, 4%, 5%, 6%, 7% or 8% of his Base Compensation, which amount shall be contributed as a Compensation Deduction Contribution to the Participant's Compensation Deduction Account. (b) Commencing on April 1, 1993, in addition to the elections and authorizations described in (a) above, the Participant may: (i) if he has elected to defer receipt of 8% of his Base Compensation pursuant to subsection (a)(i) of this Section, elect to defer receipt of an amount equal to an additional 1%, 2% or 3% of his Base Compensation as a Supplemental Deferral Contribution to a Supplemental Deferral Account; or (ii) if he has authorized deduction of 8% of his Base Compensation pursuant to subsection (a)(ii) of this Section, authorize the further deduction of an amount equal to an additional 1%, 2% or 3% of his Base Compensation as a Supplemental Deduction Contribution to a Supplemental Deduction Account. Notwithstanding the foregoing provisions of this subsection (b), a Participant who is a Highly Compensated Eligible Employee as defined in Section 2.030(b)(i), may authorize only a further deferral or deduction of 1% or 2% of his Base Compensation as a Supplemental Deferral or Supplemental Deduction Contribution to a Supplemental Deferral or Supplemental Deduction Account, as appropriate. (c) (i) With the consent of the Plan Administrator, which consent (1) shall be given only in connection with the termination of a qualified individual account plan and related trust of a business organization the stock, assets or business of which has been acquired by the Company, and the extension of the Plan to such business organization pursuant to Section 1.190, and (2) when given, shall extend to all participants in said individual account plan, an Eligible Employee may, in accordance with and subject to applicable provisions of the Code, cause to be -9- 12 transferred to the Plan and Trust Fund any portion of the balance credited to him in such individual account plan and related trust if any portion of such balance would have been payable to him as a rollover amount under section 402(a)(5) of the Code but for such transfer. Such balance shall be transferred to the Plan entirely in cash and shall constitute a Transfer Contribution. Transfer Contributions shall not constitute Deferral or Deduction Contributions under this Section 2.020, and no Company Contributions will be made under Article III with respect to Transfer Contributions. (ii) Transfer Contributions shall be credited to the Eligible Employee's Account as follows: (1) that portion of such balance attributable to employer contributions made pursuant to deferral elections under section 401(k) of the Code, which contributions remain subject to the provisions of said section 401(k) following transfer to the Plan, shall be credited to the Eligible Employee's Compensation Deferral Account and shall be designated as such in a manner determined by the Plan Administrator in order to ensure compliance with the requirements of said section 401(k); (2) that portion of such balance attributable to employer contributions made pursuant to deferral elections under section 401(k) of the Code, which contributions have been distributed under circumstances so as to be no longer subject to the provisions of said section 401(k) following transfer to the Plan, shall be credited to the Eligible Employee's Compensation Deduction Account, but the Eligible Employee's tax basis under the Code in such contributions shall be the same as his tax basis under the individual account plan from which such contributions are transferred or distributed; (3) that portion of such balance attributable to employer contributions other than those described in paragraph (2) above shall be credited to the Eligible Employee's Compensation Deduction Account, but the Eligible Employee's tax basis under the Code in such contributions shall be the same as his tax basis under the individual account plan from which such contributions are transferred or distributed; and (4) that portion of such balance attributable to employee contributions made on an after-tax basis, shall be credited to the Eligible Employee's Compensation Deduction Account. -10- 13 (d) In addition to the elections and authorization set forth in (a), (b) and (c), the Participant shall elect, as provided in Section 2.060, whether the amount of any such Compensation Deferral Contributions, Compensation Deduction Contributions or Transfer Contributions shall be contributed under one of the following investment options: (i) entirely to the Diversified Fund; (ii) entirely to the Fixed Income Fund; (iii) entirely to the Stock Fund B; (iv) entirely to the Guaranteed Return Fund; (v) one-half to the Diversified Fund and one-half to the Fixed Income Fund; (vi) one-half to the Diversified Fund and one-half to Stock Fund B; (vii) one-half to the Diversified Fund and one-half to the Guaranteed Return Fund; (viii) one-half to the Fixed Income Fund and one-half to the Stock Fund B; (ix) one-half to the Fixed Income Fund and one-half to the Guaranteed Return Fund; or (x) one-half to the Stock Fund B and one-half to the Guaranteed Return Fund; provided, however, that the amount of any Supplemental Deferral Contributions of the Participant shall be contributed under the same investment option as are the Participant's Compensation Deferral Contributions and that any Supplemental Deduction Contributions of the Participant shall be contributed under the same investment option as are the Participant's Compensation Deduction Contributions. (e) The Board of Directors, in extending the benefits of the Plan to a component of an Affiliated Company may place such limitations as the Company deems appropriate on the amount of Compensation Deferral Contributions, Supplemental Deferral Contributions, Compensation Deduction Contributions, and/or Supplemental Deduction Contributions which may be made with respect to or by a Participant employed by such component. Compensation Deduction Contributions and Supplemental Deduction Contributions under this Section shall be made only by payroll deductions unless, under exceptional circumstances, another method of contributions is approved by the Plan Committee. 2.030 LIMITATIONS ON COMPENSATION DEFERRAL, SUPPLEMENTAL DEFERRAL, COMPENSATION DEDUCTION AND SUPPLEMENTAL DEDUCTION CONTRIBUTIONS. (a) Commencing January 1, 1993, with the respect to any Participant, the aggregate amount in any calendar year of: (i) Compensation Deferral and Supplemental Deferral Contributions to the Plan, (ii) all elective deferrals under any other cash or deferred arrangement as defined in section 402(g) of the Code which are maintained by an Affiliated Company, and (iii) all elective employer contributions to any simplified employee pension as defined in and pursuant to sections 408(k)(1) and (6), respectively, of the Code which are maintained by an Affiliated Company, -11- 14 may not exceed Seven Thousand Dollars ($7,000.00) or such larger sum as may be established pursuant to section 402(g)(5) of the Code. (b) For purposes of this Section 2.030: (i) the term "Highly Compensated Eligible Employees" means those Eligible Employees who are "highly compensated employees" within the meaning of section 414(q) of the Code. The Plan Administrator may determine those Employees who are "highly compensated employees" for purposes of this Section 2.030 in any manner permitted by said section 414(q). (ii) the term "Average Deferral Percentage" for each group of Eligible Employees with deferral elections under Sections 2.020(a)(i) and (b)(i) shall be the average of the percentages, calculated separately for each Eligible Employee in such group, of each such Eligible Employee's compensation (as such term is defined in section 414(s) of the Code) that he has elected to defer pursuant to Sections 2.020(a)(i) and (b)(i) for the Plan Year. Eligible Employees who do not elect to make Compensation Deferral Contributions and are thus precluded from making Supplemental Deferral Contributions shall be included at zero percent (0%) in the Average Deferral Percentage of each group. (iii) the term "Average Contribution Percentage" for each group of Eligible Employees with contribution elections under Sections 2.020(a)(ii) and (b)(ii), shall in each case be the average of the percentages, calculated separately for each Eligible Employee in such group, which the sum of: (1) the amounts each such Eligible Employee has elected to contribute pursuant to Sections 2.020(a)(ii) and (b)(ii) for the Plan Year, and (2) the amounts of Company Contributions payable to his Company Contributions Account in respect of his elections under Section 2.020(a), bears to his compensation (as such term is defined in section 414(s) of the Code) for that Plan Year. Eligible Employees who do not elect to make either Compensation Deferral or Compensation Deduction Contributions and are thus precluded from making either Supplemental Deferral or Supplemental Deduction Contributions shall be included at zero percent (0%) in the Average Contribution Percentage of each group. To the extent and in any manner permitted under proposed or final regulations promulgated pursuant to section 401(m) of the Code, the -12- 15 Administrative Committee may include elective deferrals and qualified nonelective contributions as defined in sections 401(m)(4)(B) and (C) of the Code in the determination of the Average Contribution Percentage. (iv) the term "Limitation Deferral Percentage" shall mean the maximum deferral percentage in each Plan Year for the group of Highly Compensated Eligible Employees and shall be that percentage amount which does not exceed the greater of: (1) the Average Deferral Percentage for all Eligible Employees other than Highly Compensated Eligible Employees multiplied by one and twenty-five hundredths (1.25); or (2) the lesser of (A) an amount which does not exceed the Average Deferral Percentage for all Eligible Employees other than Highly Compensated Eligible Employees by more than two (2) percentage points, or (B) the Average Deferral Percentage for all Eligible Employees other than Highly Compensated Eligible Employees multiplied by two (2). If any Highly Compensated Eligible Employee is a participant in any other cash or deferred arrangement within the meaning of section 401(k) of the Code established or maintained by an Affiliated Company, for the purpose of determining the Limitation Deferral Percentage with respect to such Highly Compensated Eligible Employee such other cash or deferred arrangement shall be deemed to be a part of this Plan. (v) the term "Limitation Contribution Percentage" shall mean the maximum contribution percentage in each Plan Year for the group of Highly Compensated Eligible Employees and shall be that percentage amount which does not exceed the greater of: (1) the Average Contribution Percentage for all Eligible Employees other than Highly Compensated Eligible Employees multiplied by one and twenty-five hundredths (1.25); or (2) the lesser of -13- 16 (A) an amount which does not exceed the Average Contribution Percentage for all Eligible Employees other than Highly Compensated Eligible Employees by more than two (2) percentage points, or (B) the Average Contribution Percentage for all Eligible Employees other than Highly Compensated Eligible Employees multiplied by two (2). If any Highly Compensated Eligible Employee is a participant in any other plan established or maintained by an Affiliated Company pursuant to which elective deferrals pursuant to a cash or deferred arrangement or matching contributions, both as defined in section 401(m)(4) of the Code, or employee contributions, are made, for the purpose of determining the Limitation Contribution Percentage with respect to such Highly Compensated Eligible Employee such other plan shall be deemed to be a part of this Plan. (c) Prior to the beginning of, and periodically during, each Plan Year the Administrative Committee shall test deferral elections under Sections 2.020(a)(i) and (b)(i) in order to determine whether the Average Deferral Percentage for Highly Compensated Eligible Employees exceeds the Limitation Deferral Percentage, and shall also test contribution elections under Sections 2.020(a)(ii) and (b)(ii) in order to determine whether the Average Contribution Percentage for Highly Compensated Eligible Employees exceeds the Limitation Contribution Percentage. (d) In the event that the Administrative Committee should determine that Compensation and Supplemental Deferral Contributions made for any Plan Year on behalf of the Highly Compensated Eligible Employees would (if not reduced) cause the Average Deferral Percentage of such Employees to exceed the Limitation Deferral Percentage, the Administrative Committee shall report such determination to the Plan Administrator, who shall refer such determination to the Plan Committee. In such event, the Plan Committee shall reduce the Supplemental Deferral Contributions, if any, and then the Compensation Deferral Contributions elected by the Highly Compensated Eligible Employees so that the Limitation Deferral Percentage is not exceeded for any Plan Year. Such reduction shall be effective as of the first payroll payment date in the month following such determination and shall be made as set forth in subsection (d)(i) below, and if necessary, subsection (d)(ii): (i) Highly Compensated Eligible Employees electing Supplemental Deferral Contributions -14- 17 (1) in an amount equal to 2% of Base Compensation under Section 2.020(b)(i) shall have their elections reduced by 1%; (2) in an amount equal to 1% (including any Highly Compensated Employees whose elections were reduced under subsection (i)(1)) shall have their elections reduced by 1% to 0%; (ii) Highly Compensated Eligible Employees electing Compensation Deferral Contributions (1) in an amount equal to 8% of Base Compensation under Section 2.020(a)(i) shall have their elections reduced by 1%; (2) in an amount equal to 7% of Base Compensation (including any Highly Compensated Employees whose elections were reduced under subsection (ii)(1)) shall have their elections reduced by 1%. This process shall continue until the Average Deferral Percentage for the Highly Compensated Eligible Employees does not exceed the Limitation Percentage. (e) In the event that the Administrative Committee should determine that Compensation and Supplemental Deduction Contributions made for any Plan Year by the Highly Compensated Eligible Employees would (if not reduced) cause the Average Contribution Percentage of such Employees to exceed the Limitation Contribution Percentage, the Administrative Committee shall report such determination to the Plan Administrator, who shall refer such determination to the Plan Committee. In such event, the Plan Committee shall reduce the Supplemental Deduction Contributions, if any, and then the Compensation Deduction Contributions elected by the Highly Compensated Eligible Employees so that the Limitation Contribution Percentage is not exceeded for any Plan Year. Such reduction shall be effective as of the first payroll payment date in the month following such determination and shall be made as set forth in subsection (e)(i) below, and if necessary, subsection (e)(ii): (i) Highly Compensated Eligible Employees electing Supplemental Deduction Contributions (1) in an amount equal to 2% of Base Compensation under Section 2.020(b)(ii) shall have their elections reduced by 1%; (2) in an amount equal to 1% (including any Highly Compensated Employees whose elections were reduced under subsection (i)(1)) shall have their elections reduced by 1% to 0%; -15- 18 (ii) Highly Compensated Eligible Employees electing Compensation Deduction Contributions (1) in an amount equal to 8% of Base Compensation under Section 2.020(a)(ii) shall have their elections reduced by l%; (2) in an amount equal to 7% of Base Compensation (including any Highly Compensated Employees whose elections were reduced under subsection (ii)(1)) shall have their elections reduced by 1%. This process shall continue until the Average Contribution Percentage for the Highly Compensated Eligible Employees does not exceed the Limitation Percentage. (f) The reduced election of a Participant under Section 2.030(d)(i) or (ii) or (e)(i) or (ii), as applicable, shall be substituted for the actual election of the Participant under Section 2.020(a) or (b), as appropriate, and shall represent the percentage of Base Compensation that shall be paid into the Plan on his behalf as Compensation Deferral, Supplemental Deferral, Compensation Deduction or Supplemental Deduction Contributions, as the case may be. (g) To the extent permitted under subsection (e), the amount representing the additional amount of Base Compensation that would have been contributed as Supplemental Deferral or Compensation Deferral Contributions on behalf of the Participant absent the limitations set forth in this Section 2.030 shall be contributed to the Plan by the Participant as Supplemental Deduction or Compensation Deduction Contributions, as appropriate. (h) Reductions in Supplemental Deferral, Compensation Deferral, Supplemental Deduction and Compensation Deduction Contributions made under subsections (d) and/or (e) shall remain in effect for the remainder of the Plan Year unless the Administrative Committee determines that changed circumstances permit an increase in any or all such Contributions. If the Administrative Committee makes such a determination, the Plan Committee shall determine the amount by which such Contributions shall be increased for the balance of the Plan Year. (i) To the extent permitted by proposed or final regulations promulgated pursuant to Code section 401(k) or such other standards as may be established from time to time by the Secretary of the Treasury or his delegate, and by subsection (e), the Plan Committee may during or following a Plan Year cause Supplemental Deferral and Compensation Deferral Contributions made on behalf of Highly Compensated Eligible -16- 19 Employees to be recharacterized as Supplemental Deduction or Compensation Deduction Contributions, as appropriate, as and to the extent necessary so that the Average Deferral Percentage for the Highly Compensated Eligible Employees for any Plan Year does not exceed the Limitation Deferral Percentage. Any such recharacterizations will be done in a uniform and non-discriminatory manner. (j) If it shall be determined as a result of tests of contribution elections pursuant to subsection (c) that there shall be "excess aggregate contributions" (as defined in and determined pursuant to section 401(m)(6) of the Code) in any Plan Year, such excess aggregate contributions and all income allocable thereto shall be distributed, or, if forfeitable, forfeited, in the manner and within the time required by the said section 401(m)(6). (k) The Plan shall comply with the limitation on multiple use of the alternative limitation as described in Treasury Regulation 1.401(m)-(2)(b). (l) If multiple use of the alternative limitation does occur, it will be corrected by requiring reduction in actual contribution ratios of Highly Compensated Eligible Employees who are eligible to participate in both arrangements, in accordance with subsections (d) through (j) of this Section 2.030. 2.040 CHANGES IN RATE OF COMPENSATION DEDUCTION, SUPPLEMENTAL DEDUCTION, COMPENSATION DEFERRAL AND SUPPLEMENTAL DEFERRAL CONTRIBUTIONS. Upon fifteen (15) days' notice a Participant may from time to time change his rate of Compensation Deduction Contribution, Supplemental Deduction Contribution, Compensation Deferral Contribution or Supplemental Deferral Contribution. Such change shall be effective on the first payroll payment date following the expiration of the fifteen (15) days' notice period. 2.050 CHANGES BETWEEN COMPENSATION AND SUPPLEMENTAL DEDUCTION AND COMPENSATION AND SUPPLEMENTAL DEFERRAL CONTRIBUTIONS. (a) Upon fifteen (15) days' notice a Participant who has an authorization in effect under Section 2.020(a)(ii) to make Compensation Deduction Contributions may revoke such authorization and at the same time elect under Section 2.020(a)(i) to commence Compensation Deferral Contributions. Such revocation and election shall also constitute a similar revocation and election with respect to any Supplemental Deduction Contributions previously authorized by the Participant. Such revocation and election shall be effective on the first payroll payment date following the expiration of the fifteen (15) days' notice period. -17- 20 (b) A Participant who has an election in effect under Section 2.020(a)(i) to have Compensation Deferral Contributions made on his behalf may revoke such election and at the same time authorize Compensation Deduction Contributions to commence under Section 2.020(a)(ii) effective with the first payroll payment date: (1) in April of any year by giving the Company notice of such revocation and authorization during the month of February of that year, and (2) in October of any year by giving the Company notice of such revocation and authorization during the month of August of that year. Such revocation and election shall also constitute a similar revocation and election with respect to any Supplemental Deferral Contributions previously authorized by the Participant. 2.060 CHANGES IN INVESTMENT ELECTIONS. A Participant may make an election pursuant to Section 2.020(c) above or change such election effective with the first payroll payment date in April of any year by giving the Company notice thereof during the month of February of that year, and effective with the first payroll payment date in October of any year by giving the Company notice thereof during the month of August of that year. 2.070 CHANGE IN INVESTMENTS. (a) A Participant may elect once in any calendar year, by giving the Company notice of such election, to have the total value of all Units resulting from Compensation and Supplemental Deferral, Compensation and Supplemental Deduction, and/or Transfer Contributions made to his Account or Accounts prior to the effective date of such election: (i) in the Diversified Fund converted to Units in the Fixed Income Fund; or (ii) in the Fixed Income Fund converted to Units in the Diversified Fund. (b) In addition to the annual elections available under subsection (a), (i) a Participant who has not attained age fifty-five (55) may elect once in any calendar year, by giving the Company notice of such election, to have ten percent (10%) of the total value of all Units in the Stock Fund B resulting from Compensation and Supplemental Deferral, Compensation and Supplemental Deduction, and/or Transfer Contributions made to his Account or Accounts prior to the effective date of such election, or 100% of such total value if such total value is $25.00 or less, converted to Units in the Fixed Income Fund; (ii) a Participant who has attained age fifty-five (55), but not age sixty-five (65), may elect once in any calendar -18- 21 year, by giving the Company notice of such election, to have fifty percent (50%) of the total value of all Units in the Stock Fund B resulting from Compensation and Supplemental Deferral, Compensation and Supplemental Deduction, and/or Transfer Contributions made to his Account or Accounts prior to the effective date of such election, or 100% of such total value if such total value is $25.00 or less, converted to Units in the Fixed Income Fund; provided, that if the Participant has made a prior election under subsection (i) above in the calendar year in which he attained age fifty-five (55), he may not make an election under this subsection (ii) during that same calendar year; and (iii) a Participant, upon attainment of age sixty-five (65), shall have an election, which may be exercised by him only once during all periods of his participation in the Plan thereafter, to have: (1) the total value of all Units in Stock Fund A resulting from Company Contributions made to his Company Contributions Account prior to the effective date of such election, or (2) the total value of all Units in the Stock Fund A resulting from Company Contributions to his Company Contributions Account and all Units in the Stock Fund B resulting from Compensation and Supplemental Deferral, Compensation and Supplemental Deduction, and/or Transfer Contributions made to his Account or Accounts, prior to the effective date of such election, converted to Units in the Fixed Income Fund. (c) The effective date of an election under this Section 2.070 shall be, and the value of all Units elected to be converted pursuant thereto will be determined as of, the first Valuation Date following the date on which such election shall have been received by the Company. Such conversion shall be effected by the conversion of such Units into cash and the transfer of such cash to the designated fund, and such transfer shall be effected by the Trustee on or before the Valuation Date in the second month succeeding the month in which the election was received. (d) All elections are irrevocable. The exercise of an election under subsection (a) or (b) shall not affect the right to exercise any other election provided by the Plan. (e) Upon making an election under subsection (a) or (b)(i), (ii) or (iii)(2), the Participant shall also either confirm or -19- 22 change his election under Section 2.020(d) with respect to future Compensation and Supplemental Deferral or Compensation and Supplemental Deduction Contributions, effective as of the effective date of the election to convert. (f) All Company Contributions made to a Participant's Company Contributions Account after the effective date of an election under subsection (b)(iii)(1) shall be invested in the Fixed Income Fund. (g) A Participant with Units in the Guaranteed Return Fund may elect, by providing written notice on a form provided by the Company, at least thirty (30) days prior to the Valuation Date upon which any contract under the Guaranteed Return Fund, or any interest guarantee period under any such contract, expires, to convert his interest under such contract, whether held under a Compensation or Supplemental Deferral Account or a Compensation or Supplemental Deduction Account, solely to Units in the Diversified Fund or solely to Units in the Fixed Income Fund. Such conversion shall be based on the value of Units in such respective funds as of the date of such expiration or the Valuation Date immediately preceding the transfer of funds, whichever is later. The transfer of funds pursuant to this subsection (g) shall be made by the Trustee within a reasonable period after such expiration or receipt of the funds. An election under this subsection (g) shall be irrevocable. A Participant making an election under this subsection (g) shall also indicate his election under Section 2.020(c) regarding investment of contributions made subsequent to the conversion described in this subsection (g). The interest under a Guaranteed Return Fund contract of a Participant who does not make an election under this subsection (g) shall continue to be invested in the Guaranteed Return Fund. 2.080 INSUFFICIENT EARNINGS. Compensation Deduction and Supplemental Deduction Contributions shall be made only if the Participant has earnings available therefor after all withholdings and deductions required by law or the Company have been made. 2.090 DEPOSITS IN TRUST FUND. Contributions made hereunder shall be deposited in the Trust Fund and credited to the Participant's Compensation Deferral Account, Supplemental Deferral Account, Compensation Deduction Account or Supplemental Deduction Account, as appropriate, as soon as practicable. -20- 23 ARTICLE III COMPANY CONTRIBUTIONS 3.010 MATCHING AMOUNTS. (a) The Company shall contribute to the Trust Fund an amount equal to fifty percent (50%) of the contributions by Participants until March 1, 1969. During the period commencing on March 1, 1969, and ending on March 31, 1984 the Company shall contribute to the Trust Fund an amount equal to seventy-five percent (75%) of the contributions of the Participants. Commencing on April 1, 1984, the Company shall contribute to the Trust Fund as Company Contributions an amount equal to seventy-five percent (75%) of Compensation Deferral Contributions and Compensation Deduction Contributions. No Company Contributions shall be made with respect to Supplemental Deduction, Supplemental Deferral or Transfer Contributions. Except as provided in Section 3.020, contributions by the Company under this Section shall be in cash and shall be deposited in the Trust Fund and credited to the Company Contributions Account of the affected Participants as soon as practicable. (b) Adjustments may be made by the Company at any time because of errors in calculating previous Company or Participant's contributions or because of data not known at the time of the previous calculation but such adjustments need not be made retroactively. 3.020 CONTRIBUTIONS IN STOCK. Except as provided in Section 2.070(e), contributions by the Company pursuant to Section 3.010 may, at the option of the Board of Directors, be in the form of shares of Common Stock, which may be unissued or reacquired, unissued shares of Class A Stock or any combination of Common Stock, Class A Stock or cash. Notwithstanding the foregoing, if the form of contributions to be made in any month shall be changed from the form of the contributions made during the immediately preceding month, the Company shall notify the Plan Administrator of such change no later than fifteen (15) days prior to the end of such immediately preceding month. If the Board of Directors elects to make the Company's contributions wholly or partially in Common Stock or Class A Stock, such stock shall be valued at the closing price of Common Stock as reflected on the New York Stock Exchange--Composite Transactions listing on the last trading day preceding the date on which the contribution is made. 3.030 FORFEITURES. The amount of Company contributions required by this Article shall be reduced by the amount of any forfeitures provided for elsewhere in the Plan, as provided in Article VII. -21- 24 ARTICLE IV MAINTENANCE AND VALUATION OF ACCOUNTS 4.010 PARTICIPANT'S ACCOUNTS. A separate account representing each Participant's interest in the Diversified Fund, the Fixed Income Fund, each contract under the Guaranteed Return Fund, the Stock Fund A and the Stock Fund B under the Participant's Company Contributions Account, Compensation Deferral Account and Compensation Deduction Account, as applicable, shall be maintained by the Trustee (or by such other person or persons as the Plan Committee shall designate). In addition to the above separate accounts, commencing on April 1, 1993, separate Supplemental Deduction and Supplemental Deferral Accounts shall be established and maintained by the Trustee (or by such other person or persons as the Plan Committee shall designate) to represent all amounts (if any), adjusted for gains or losses thereon, which have been contributed by or on behalf of a Participant as Supplemental Deduction Contributions and Supplemental Deferral Contributions. Such separate accounts shall contain sufficient information to permit, with respect to the Diversified Fund, the Fixed Income Fund, each contract under the Guaranteed Return Fund, the Stock Fund A and the Stock Fund B, a determination of the dollar balance of such Participant's Accounts at any time, in accordance with the Unit valuation procedures described in Section 4.020 through 4.040 of this Article. Such separate accounts shall also contain sufficient information to permit, with respect to the Stock Fund A and the Stock Fund B, a determination of the number of Common Units and Class A Units, respectively, in such Participant's account. The accounts shall contain sufficient information to permit such other determinations as may be required to carry out the provisions of the Plan. 4.020 CREDITING OF UNITS TO ACCOUNTS. (a) The interest of each Participant in the Diversified Fund, the Fixed Income Fund, each contract under the Guaranteed Return Fund, the Stock Fund A and the Stock Fund B, including that part of the Diversified Fund or the Fixed Income Fund resulting from Company Contributions, shall be represented by Units allocated to his Accounts. The value of each Unit shall be One Dollar ($l.00) for the contributions deposited on behalf of each Participant prior to the first Valuation Date following the Effective Date of the Plan in the case of the Diversified Fund, the first Valuation Date following March 1, 1969, in the case of the Stock Fund A; the first Valuation Date following March 1, 1971, in the case of the Fixed Income Fund; the first Valuation Date following the effective date of each contract under the Guaranteed Return Fund; and the first Valuation Date following October 1, 1988, in the case of the Stock Fund B. (b) Effective as of February 23, 1987, the Plan Administrator shall cause to be determined the number of Units allocated to each Participant's account in the Stock Fund A on such date. Effective as of the date distribution shall be made to the Trustee of Class A Stock in payment of the stock dividend to holders of Common Stock of record on February 23, 1987, all existing Units of the Stock Fund A shall be reclassified as -22- 25 Common Units, and there shall be allocated to each Participant's account in the Stock Fund A the number of new Class A Units equal to the number of Common Units previously determined to have been allocated to such account as of February 23, 1987. Such Class A Units shall be valued in the manner provided in Section 4.030 except that, for the purposes of Articles V and VI, they shall be initially valued as if such dividend of Class A Stock had been distributed and allocated to each Participant's account in the Stock Fund A on the Valuation Date described in the applicable Section of Article V or VI. (c) Effective as of October 1, 1988, the Plan Administrator shall cause to be determined the number of shares of Common Stock and the number of shares of Class A Stock allocated to each Participant's account in the Stock Fund B on such date and the closing price of Common Stock as reflected on the New York Stock Exchange--Composite Transactions listing on September 30, 1988. The dollar value of the shares of Common Stock and Class A Stock allocated to each Participant's Account shall be converted into Common Units and Class A Units, respectively. (d) Each contribution on behalf of a Participant to the Diversified Fund or payment made to a Participant from the Diversified Fund prior to the first Valuation Date following the Effective Date of the Plan, each contribution on behalf of a Participant to the Stock Fund A or payment made to a Participant from the Stock Fund A prior to the first Valuation Date following March 1, 1969; each contribution on behalf of a Participant to the Fixed Income Fund or payment made to a Participant from the Fixed Income Fund prior to the first Valuation Date following March 1, 1971; each contribution on behalf of a Participant with respect to a contract under the Guaranteed Return Fund or payment made to a Participant under a Guaranteed Return Fund contract prior to the first Valuation Date following the effective date of such contract; and each contribution on behalf of a Participant to the Stock Fund B or payment made to a Participant from the Stock Fund B following October 1, 1988, shall result in a credit or charge to the account representing his interest in the fund or contract under his Company Contributions Account, Compensation Deferral Account, Supplemental Deferral Account, Compensation Deduction Account and Supplemental Deduction Account, as applicable, equal to the number of Units contributed or paid as the case may be. Effective May 1, 1987, dividends on Common Stock and Class A Stock held in the Stock Fund A, and effective November 1, 1988, dividends on Common Stock and Class A Stock held in the Stock Fund B, shall result in the crediting of Common Units as provided in Section 4.030. 4.030 UNIT VALUATIONS. Except as otherwise provided in Section 4.020, as of the Valuation Date next following the first deposit into -23- 26 the fund concerned (or under the contract concerned, in the case of the Guaranteed Return Fund) and as of each succeeding Valuation Date, an amount equal to the fair market value of all property in such fund (other than dividends received that are attributable to whole shares of Common Stock or Class A Stock that were or are to be transferred to Participants subsequent to the record date for such dividend) or under such contract, in the case of the Guaranteed Return Fund, shall be determined by the Trustee in such manner and on such basis as it shall deem appropriate, except that Class A Stock shall be deemed to have the same value per share as Common Stock. Such amount shall be divided by the total number of Units credited to all the Participants in the fund or under the contract concerned on the particular Valuation Date, thereby establishing a new Unit value. With respect to each fund, each contribution or other payment thereto or payment therefrom (and in the case of the Stock Fund A each dividend paid after May 1, 1987, and in the case of the Stock Fund B each dividend paid after November 1, 1988, on Common Stock and Class A Stock held in such fund) after such Valuation Date and prior to or on the next Valuation Date shall be converted to Units (in the cases of the Stock Fund A and the Stock Fund B, to Common Units and/or Class A Units to the extent appropriate) by dividing such new Unit value into the amount of such contribution or payment, and the individual account of each affected Participant representing his interest in the fund or contract under his Company Contributions Account, Compensation Deferral Account, Supplemental Deferral Account, Compensation Deduction Account and Supplemental Deduction Account, as applicable, shall be credited or charged, as the case may be, with the portion of the number of Units so computed properly attributable to such Participant. The value of each contract under the Guaranteed Return Fund shall be equal to the principal amount held in such Fund plus accrued interest. 4.040 BALANCE OF PARTICIPANT'S ACCOUNTS. As of any specified date, the dollar balance of the individual account or accounts of each Participant representing the interest of each Participant in each fund or contract under his Company Contributions Account, Compensation Deferral Account, Supplemental Deferral Account, Compensation Deduction Account and Supplemental Deduction Account, as applicable, shall be determined by multiplying the number of Units in his current balance by the Unit value as of the last preceding Valuation Date in accordance with the foregoing and adding to the resulting dollar balance the amount of contributions made with respect to such account since the last valuation date for which Units have not yet been credited. Only those contributions actually received by the Trustee will be considered in making valuations and determining account balances. 4.050 STATEMENTS OF PARTICIPANTS. After the end of each calendar year or more frequently as the Plan Administrator shall determine, the Plan Administrator (or if the Plan Administrator shall so determine, the Trustee) shall forward by mail to each Participant a statement, in such form as the Plan Administrator shall determine, setting forth pertinent information relative to each Participant's Accounts. Such statement shall, for all purposes, be deemed to have been accepted as correct unless the Plan Administrator (or the Trustee, as the case may be) is notified to the contrary by mail within sixty (60) days of the mailing thereof to the Participant. -24- 27 ARTICLE V BENEFITS PAYABLE UPON TERMINATING EMPLOYMENT 5.010 VESTING. (a) Each Participant shall at all times be fully vested in his Compensation Deferral Account, Supplemental Deferral Account, Compensation Deduction Account and Supplemental Deduction Account, as applicable. Each Participant who is an Employee and: (i) who at any time on or after October 1, 1988, has at least five (5) years of Continuous Employment shall be fully vested in his Company Contributions Account. For the purposes of the preceding sentence, any Participant who has forfeited Units in his Company Contributions Account under Articles V or VI prior to October 1, 1988, or prior to completing five (5) years of Continuous Employment (which Units shall have been applied to reduce Company Contributions pursuant to Article VII), shall not have a vested right to such forfeited Units until such forfeited Units shall have been restored pursuant to the applicable provisions of Sections 5.040(b), 6.010(b), 6.020(d) or 6.030(g). (ii) who has less than five (5) years of Continuous Employment as of October 1, 1988, shall be fully vested in the Units in his Company Contributions Account resulting from Company Contributions made for all months prior to October, 1988, but, except as otherwise provided in the Plan, shall not become vested in any Units in his Company Contributions Account resulting from Company Contributions for any month after September, 1988, until he shall have accumulated five (5) years of Continuous Employment. (iii) For the purposes of paragraphs (i) and (ii), an Employee who (A) terminates employment with all Affiliated Companies at any time after October 1, 1985, (B) does not receive a distribution under Article V and retains a vested interest in his Company Contributions Account, and (C) is subsequently reemployed by an Affiliated Company at any time following his termination of employment shall be credited with his period of Continuous Employment with all Affiliated Companies prior to such termination of employment, but only for the purpose of determining whether he has a vested right under -25- 28 Section 5.010(a)(i) to that portion of his Company Contributions Account attributable to Company Contributions made during his period of reemployment. (b) No Units in a Participant's Company Contributions Account shall vest subsequent to the Participant's termination of employment (described in Section 5.040), except as provided in Section 5.040(b) (dealing with reemployment). (c) If a Participant who is an Employee attains age sixty-five (65), all of the Units in his Accounts which are attributable to Company Contributions shall be fully vested. 5.020 RETIREMENT, DEATH, LAYOFF, ETC. (a) (i) Subject to Section 5.050 and, in the case of Retirement, to the provisions of subsection (b), upon a Participant's (1) Retirement, (2) death, (3) Layoff, (4) termination of employment because of inability to meet Company medical standards, (5) termination of employment in order to enter the Armed Forces of the United States or to accept employment with the Government of the United States, (6) disability which has continued for a period of at least six (6) months, the Participant shall become fully vested in all Units in his Company Contributions Account, and as soon as practicable after (but in no event later than sixty (60) days after the end of the Plan Year in which such event shall have occurred) he (or his Beneficiary in the case of his death) shall receive all amounts described in paragraph (ii) of this subsection (a). (ii) The amounts that the Participant (or his Beneficiary in the case of death) shall receive under paragraph (i) shall be as follows: (1) With respect to the Diversified Fund, the Fixed Income Fund, and Guaranteed Return Fund, the Participant shall receive the full dollar balance of his Account or Accounts in such funds. Such balance shall be determined in the manner provided by Section 4.040, by reference to the Units in such Participant's Account or Accounts -26- 29 (A) on the date of such Retirement, Layoff or termination, or, (B) in the case of the Participant's death or disability, on the date all documentation determined by the Plan Administrator to be necessary to effect distribution from the Plan shall have been received by the Plan Administrator, and the value of each Unit on the Valuation Date coinciding with or immediately preceding such date. (2) With respect to the Stock Fund A and the Stock Fund B, the dollar balance or balances in such Participant's account or accounts in such funds as of the Valuation Date coinciding with or immediately preceding (A) such Retirement, Layoff, or termination, or (B) in the case of the Participant's death or disability, the date all documentation determined by the Plan Administrator to be necessary to effect distribution from the Plan shall have been received by the Plan Administrator, (such balance or balances to be determined in the manner provided by Section 4.040 separately by reference to the Common Units and any Class A Units in the Participant's Account on such Valuation Date and the respective Unit values on such Valuation Date) shall be applied to Common Stock to the extent attributable to Common Units and Class A Stock to the extent attributable to Class A Units. The Participant shall receive shares of Common Stock equal in number to the maximum number of whole shares of Common Stock which could be purchased at the closing price of Common Stock as reflected on the New York Stock Exchange -- Composite Transactions listing on such Valuation Date (or, in the event such Valuation Date falls on a date on which for any reason there are no trades of such stock reflected on such listing, the last trading day preceding such Valuation Date) with the portion of such dollar balance attributable to the Common Units in his Account, and shares of Class A Stock equal in number to the maximum number of whole shares of Common Stock which could be purchased at such closing price with the portion, if any, of such dollar balance attributable to -27- 30 Class A Units, in his Account. The Participant shall be paid in cash the dollar amounts remaining in his account or accounts in the Stock Fund A and the Stock Fund B after reduction of each such account by the value, based on such closing price, of the whole shares previously described. In addition, the Participant shall be paid in cash the amount of any cash dividends received since such Valuation Date attributable to the number of whole shares of Common Stock and Class A Stock distributed to him as described in this paragraph (ii) and the dollar value of any contributions to the Stock Fund A and Stock Fund B in respect of such Participant between such Valuation Date and the date of such Retirement, death, Layoff or termination. (b) A Participant who, upon Retirement, would otherwise receive a distribution pursuant to subsection (a) above, notwithstanding any prior consent to such distribution which he may have given pursuant to Section 5.050, may make an irrevocable election at any time during the thirty (30) day period ending on the day immediately prior to the effective date of his Retirement to remain in the Plan without any further contributions until January 1 of the calendar year following the effective date of his Retirement. As soon as practicable after such January 1, a Participant who has made such an irrevocable election shall receive all amounts provided in subsection (a) above, valued as of the Valuation Date immediately prior to such January 1. (c) Notwithstanding the provisions of Sections 5.020(a) and (b), if an Employee attains age 70-1/2 on or after January 1, 1988, distribution of the amounts described in paragraph (a)(ii) of this Section 5.020 to such Employee shall be made not later than April 1 of the calendar year following the calendar year in which the Employee shall have attained age 70-1/2. If such a Participant shall so request in writing, the Plan Administrator shall cause all or a portion of the amounts and shares of Common and Class A Stock with respect to which the Participant would be taxable under section 402 of the Code (other than amounts and/or shares required to be distributed at that time pursuant to the provisions of section 401(a)(9)(A) of the Code) to be transferred from the Trustee directly to the custodian of an Eligible Retirement Plan specified by the Participant. Such request shall be made by such date as the Plan Administrator shall determine, but in no event later than the said April 1 date. Prior to effecting such transfer the Plan Administrator shall require evidence reasonably satisfactory to him that the entity to which such transfer is to be made is in fact an Eligible Retirement Plan and that such Eligible Retirement Plan may receive the distribution in the forms required under this Section. -28- 31 5.030 EMPLOYEES OF DIVESTED COMPONENTS. (a) Subject to the provisions of Section 5.050, any Participant who is employed by a Divested Component immediately prior to its divestiture and who does not continue employment with the Divested Component and whose employment is terminated in the course of such divestiture shall have his Accounts distributed to him by the Trustee in the manner provided in Section 5.020. (b) Any Participant who immediately prior to its divestiture is employed by a Divested Component or by an Affiliated Company in any component, subsidiary or affiliate other than the Divested Component and who continues employment with the Divested Component or, with the Company's consent and in connection with such divestiture, accepts employment with the Divested Component after its divestiture shall become fully vested in all Units in his Company Contributions Account. Subject to the provisions of Section 5.050, the Accounts of such Participant shall be distributable in the manner provided in Section 5.020; or, to the extent authorized by the Plan Administrator and subject to the provisions of Section 13.030, all or a portion of such Accounts shall be transferred by the Trustee in accordance with the provisions of section 401(a) of the Code to the trustee or other funding agent of any appropriate plan established or otherwise maintained by the acquiror of said Divested Component in such a manner as to ensure that no portion of the Accounts of any Participant transferred hereunder shall be subject to forfeiture, but that in all other respects such Accounts shall be subject to the provisions of the successor plan. 5.040 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. (a) If the Participant's employment is terminated after October 1, 1988, for any reason other than those set forth in Sections 5.020, 5.030, or 8.020(a)(v), subject to the provisions of Section 5.050 the Participant shall receive the following as soon as practicable: (i) With respect to the Diversified Fund, the Fixed Income Fund and the Guaranteed Return Fund, the Participant shall receive the full dollar balance of his Account or Accounts in such funds. Such balance shall be determined, in the manner provided in Section 4.040, by reference to the Units in such Participant's Account or Accounts on the date of such termination and the value of each Unit on the Valuation Date coinciding with or immediately preceding such date. (ii) With respect to the Stock Fund B the dollar balance or balances in such Participant's account or accounts in such Fund, and with respect to the Stock Fund A the -29- 32 vested portion of the dollar balance or balances in such Participant's account or accounts in such Fund, both as of the Valuation Date immediately preceding such termination (such balance or balances to be determined in the manner provided by Section 4.040 separately by reference to the Common Units and any Class A Units in such Participant's Account on such Valuation Date and the value of each such Unit on such Valuation Date) shall each be applied to Common Stock to the extent attributable to Common Units and Class A Stock to the extent attributable to Class A Units. With respect to each such fund, the Participant shall receive shares of Common Stock equal in number to the maximum number of whole shares of Common Stock which could be purchased at the closing price of Common Stock as reflected on the New York Stock Exchange -- Composite Transactions listing on such Valuation Date (or, in the event such Valuation Date falls on a date on which for any reason there are no trades of such stock reflected on such listing, the last trading day preceding such Valuation Date) with such dollar balance (in the case of the Stock Fund A, the vested portion of such dollar balance) attributable to the Common Units in his account in such fund, and shares of Class A Stock equal in number to the maximum number of whole shares of Common Stock which could be purchased at such closing price with the portion, if any, of such dollar balance (in the case of the Stock Fund A, the vested portion, if any, of such dollar balance) attributable to Class A Units in his account in such fund. The Participant shall be paid in cash the dollar amount remaining in his account in the Stock Fund B and in the vested portion of his account in the Stock Fund A after reduction by the value, based on such closing price, of the whole shares previously described. In addition, the Participant shall be paid in cash the amount of any cash dividends received since such Valuation Date attributable to the number of whole shares of Common Stock and Class A Stock distributed to him as described in this paragraph (ii). (b) If a Participant receives a distribution pursuant to subsection (a) or becomes eligible to receive a distribution under subsection (a) but fails to provide written consent to such distribution as required by Section 5.050, the non-vested portions of the Participant's Company Contributions Account shall be forfeited at the time such distribution is made or, but for the Participant's failure to provide such written consent, would have been made as determined by the Plan Administrator. In either case, if the Participant is reemployed as an Employee prior to the end of five (5) years after the date on which his termination of employment shall have occurred, there shall be restored to the Participant's -30- 33 Company Contributions Account a dollar amount equal to the non-vested portion of the dollar balance of his Company Contributions Account in Stock Fund A as of the Valuation Date last preceding his termination of employment (determined, in the manner set forth in Section 4.040, by reference to the Units in such Account and the value of each such Unit on such Valuation Date); provided, however, that if the Participant shall have received a distribution under subsection (a), such amount shall be restored only if the Participant shall have made a cash repayment to the Plan following such reemployment as an Employee and on or prior to the end of the sixtieth (60th) month after the date on which he shall have been reemployed as an Employee. The amount of such repayment shall equal the sum of all the amounts distributed to such Participant pursuant to subsection (a) from his Company Contributions Account, his Compensation Deduction Account and his Compensation Deferral Account and as a result of all other, prior distributions and withdrawals with respect to which he would be permitted to make a repayment under Article VI, shall be credited to his Compensation Deduction Account and shall be allocated to the funds and any accounts under the Guaranteed Return Fund in such Account in the same proportion that the total of his Compensation Deduction and Compensation Deferral Accounts were allocated immediately prior to the distribution, except that any amounts allocated to the Guaranteed Return Fund shall be allocated to the contract under such Fund to which contributions under the Plan are then being made. Such amount shall not be increased to reflect interest. The non-vested portion of the Participant's Company Contributions Account restored pursuant to this subsection (b) shall vest as provided in Section 5.010. For the purposes of this subsection (b), in the case of an Employee who is absent from work by reason of a Maternity or Paternity Leave, the five (5) year period following termination of employment described above shall not be deemed to have commenced until the earlier of the date on which he terminates employment by reason of his retirement, death, voluntary quit or discharge or the second annual anniversary date of the commencement of his Maternity or Paternity Leave. (c) Notwithstanding the provisions of Section 5.040(b), if an Employee terminated employment with all Affiliated Companies on or after October 1, 1985, and was reemployed by an Affiliated Company prior to October 1, 1986, any Units of his Company Contributions Account forfeited under Section 5.040 of the Plan as then in effect shall be restored in the manner provided in Section 5.040(b) regardless of whether the Employee shall have made the cash repayment required by said Section. 5.050 PARTICIPANT'S CONSENT TO DISTRIBUTION OF BENEFITS. Notwithstanding any other provisions of the Plan, if the aggregate value of the vested portions of a Participant's Accounts is in excess of Three Thousand -31- 34 Five Hundred Dollars ($3,500) and the Participant shall not have attained age sixty-five (65) at the time distribution of benefits under the Plan would otherwise be made, no distribution of benefits under the Plan shall be made unless the Plan Administrator shall first have obtained the Participant's written consent thereto. In the event such written consent shall not have been so obtained by the time such distribution would otherwise have been made, the vested portion of the Participant's Accounts, determined as of his termination of employment and valued as provided in Sections 5.020(a)(2) or 5.040(a), as applicable, shall be retained by the Plan and shall be maintained and valued in accordance with Article IV. Distribution of the Participant's Accounts pursuant to Article V (subject, however, to the provisions of Section 5.020(b)) shall be made following the date on which the Participant's written consent to such distribution is obtained by the Plan Administrator or, if earlier, the date on which the Participant attains age sixty-five (65) or dies, in the same manner as if the Participant had terminated employment on such date; provided, however, that if the Participant is reemployed as an Employee prior to the date on which such written consent shall have been received by the Plan Administrator such Participant shall not have any further right to receive a distribution of benefits under this Section 5.050 as a result of his prior termination of employment. Until such distribution is made, the provisions of Sections 2.070, 5.010(b) and 5.040(b) and Articles IX, XII and XVII shall be applicable to such Participant. Under no circumstances other than those set forth in Section 5.020(b) shall such Participant have any right to withdraw any portion of the balance of his Accounts under Article VI prior to the date distribution of the balance of his Accounts shall be made under Section 5.020 or 5.040 and this Section 5.050. 5.055 TRANSFER OF DISTRIBUTION DIRECTLY TO ELIGIBLE RETIREMENT PLAN. If a Participant, a Participant's spouse entitled to distribution pursuant to Article IX in the case of a Participant's death, or former spouse entitled to distribution pursuant to Section 11.150(b) shall so request in writing, the Plan Administrator shall cause all or a portion of the amounts and shares of Common and Class A Stock with respect to which the Participant would be taxable under section 402 of the Code to be transferred from the Trustee directly to the custodian of an Eligible Retirement Plan specified by the Participant. Such request shall be made, in the case of a Participant, at the time his consent to such distribution shall be given to the Plan Administrator pursuant to Section 5.050, or at such later date as the Plan Administrator shall permit, or, in the case of the Participant's spouse or former spouse, at such time as the Plan Administrator shall determine. Prior to effecting such transfer the Plan Administrator shall require evidence reasonably satisfactory to him that the entity to which such transfer is to be made is in fact an Eligible Retirement Plan and that such Eligible Retirement Plan may receive the distribution in the forms required under this Article V. 5.060 RESUMPTION OF PARTICIPATION. An Employee who has received a distribution under this Article shall be eligible to resume participation in the Plan only as provided in Section 2.010. 5.070 VALUATION DATES FOR WITHDRAWALS AND DISTRIBUTIONS PURSUANT TO DOMESTIC RELATIONS ORDERS. Notwithstanding any other provision of this Article V or Article VI, in the event that the Plan Administrator shall -32- 35 determine that a distribution of a Participant's Account pursuant to this Article V or Article VI or a withdrawal from a Participant's Account pursuant to Article VI has been delayed as a result of a pending or threatened domestic relations order, the Valuation Date immediately preceding the date on which such withdrawal or distribution is approved by the Plan Administrator pursuant to such order shall be substituted for the Valuation Date which would otherwise be applicable to such withdrawal or distribution pursuant to this Article V or Article VI. -33- 36 ARTICLE VI DISTRIBUTIONS AND WITHDRAWALS WHILE EMPLOYED; LOANS 6.010 DISTRIBUTION OF COMPENSATION DEDUCTION ACCOUNT AND SUPPLEMENTAL DEDUCTION ACCOUNT AND PARTIAL DISTRIBUTION OF COMPANY CONTRIBUTIONS ACCOUNTS. (a) Subject to such restrictions as the Plan Committee may establish pursuant to Section 6.040, an Employee who has a Compensation Deduction Account under the Plan may elect to receive a distribution of his entire Compensation Deduction Account together with the vested portion of his Company Contributions Account relating to his Compensation Deduction Account, and his entire Supplemental Deduction Account. As soon as practicable after the Company's receipt of such an election, there shall be paid or transferred to such Employee cash and stock determined in the same manner as under Section 5.040(a) except that the date of receipt of the election shall be used for such determination in lieu of the date of termination, and except that the Employee's Compensation Deferral Account, the related portion of his Company Contribution Account, if any, and the Employee's Supplemental Deferral Account shall not be distributable under this Section 6.010(a). The non-vested portion of the Employee's Company Contributions Account relating to his Compensation Deduction Account, if any, shall be forfeited at the time of such distribution. (b) An Employee who has received a distribution from the Plan as provided in subsection (a) and thereby suffered a forfeiture may elect to restore his interest in the Plan by making a cash repayment to the Plan in the amount described in subsection (c). Any repayment under this Section 6.010 must be made while an Employee and within sixty (60) months after such distribution; provided, that no such repayment may be made prior to the expiration of twelve (12) months following the date of such distribution unless the Participant terminates employment within the twelve (12) month period following such distribution, in which case repayment may be made at any time following the date written notice of termination is given to him by an Affiliated Company or by him to an Affiliated Company and prior to his date of termination; and provided further, that if the Employee terminates employment on or after October 1, 1985, for any reason no such repayment may be made after such termination unless he shall have been reemployed as an Employee prior to the end of five (5) years after the date on which such distribution shall have been made. (c) The amount of the repayment described in subsection (b) shall equal the sum of (i) the amount distributed to such Employee from his Company Contributions Account plus (ii) the total amounts distributed to the Employee from his Compensation Deduction Account as a result of his election under subsection (a) and as a result of all prior withdrawals with -34- 37 respect to which he would be permitted to make a repayment under Section 6.020(d). For purposes of this subsection (c), the amount distributed to an Employee means the sum of the cash distributed to such Employee plus the dollar value of the Common Stock and any Class A Stock distributed to such Employee, determined at the closing price for Common Stock as reflected on the New York Stock Exchange -- Composite Transactions listing on the Valuation Date applicable to the distribution or withdrawal (or if such Valuation Date falls on a date on which, for any reason, there are no trades of such stock reflected on such listing, the last trading day preceding such Valuation Date). Such amount shall not be increased to reflect interest. (d) As soon as practicable after an Employee makes a repayment described in subsection (b), there shall be credited to the Employee's Company Contributions Account a dollar amount equal to the balance that was in such Account at the time of the distribution plus the dollar amount of all balances forfeited as a result of withdrawals under Section 6.020(a) made prior to such distribution as to which repayment is required under Section 6.020(d). At the same time, the Employee's Compensation Deduction Account shall be credited with a dollar amount equal to the amount repaid by the Participant to such Account. This amount shall be allocated to the funds and any accounts under the Guaranteed Return Fund in the manner that the Employee's Compensation Deduction Account was allocated prior to the distribution, except that any amounts allocated to the Guaranteed Return Fund shall be allocated to the contract under such Fund to which contributions are then currently being made. The amount credited under this subsection (d) shall vest as provided in Section 5.010. For purposes of this Section 6.010, the balance of the Participant's Company Contributions Account shall be determined, in the manner provided in Section 4.040, by reference to the Units in such Account on the date of the Participant's distribution (or, where applicable, withdrawal) and the value of each Unit on the Valuation Date preceding such date. (e) An Employee who has received a distribution under this Section 6.010 shall be eligible to have contributions resumed under the Plan only as provided in Section 2.010. 6.020 WITHDRAWALS FROM EMPLOYEE'S COMPENSATION DEDUCTION ACCOUNT AND SUPPLEMENTAL DEDUCTION ACCOUNT. (a) Subject to such restrictions as the Plan Committee may establish pursuant to Section 6.040, an Employee may from time to time elect to withdraw some or all of his Compensation Deduction Account and some or all of his Supplemental Deduction Account; but in no event may the Employee's total withdrawals from either Account under this Section 6.020 exceed the total amount actually contributed by him to such Account. -35- 38 (b) A withdrawal under this Section 6.020 shall be taken first from the Employee's Supplemental Deduction Account, if any. Thereafter, if at the time of such withdrawal the Employee is not fully vested in that portion of his Company Contributions Account which is attributable to Compensation Deduction Contributions: (i) Such withdrawal shall be taken first from that portion, if any, of the Employee's Compensation Deduction Account resulting from Compensation Deduction Contributions made for periods prior to October 1, 1988. (ii) When that portion, if any, of the Employee's Compensation Deduction Account resulting from Compensation Deduction Contributions made for periods prior to October 1, 1988, has been exhausted, such withdrawal shall then be taken from the portion of such Account resulting from Compensation Deduction Contributions made for periods commencing on or after October 1, 1988. If, immediately prior to such withdrawal, the dollar balance of the portion of the Employee's Company Contributions Account attributable to Company Contributions made for periods prior to October 1, 1988, shall be less than fifty percent (50%) of the total dollar balance of his Company Contributions Account, such withdrawal shall result in a forfeiture of those Units of his Company Contributions Account which are attributable to the Compensation Deduction Contributions withdrawn; and for this purpose the amount of any such withdrawal which shall be allocated to Compensation Deduction Contributions shall be determined in accordance with the provisions of section 72(e) of the Code. For the purposes of paragraph (ii) of this subsection (b), the Units of his Company Contributions Account which are attributable to the Compensation Deduction Contributions withdrawn shall be determined by multiplying the dollar amount of that portion of the Employee's withdrawal described in paragraph (ii) by a fraction, the numerator of which is the total dollar value of that portion of the Employee's Company Contributions Account which is attributable to Compensation Deduction Contributions made for periods commencing on or after October 1, 1988, and the denominator of which is the total dollar value of that portion of the Employee's Compensation Deduction Account which is attributable to Compensation Deduction Contributions made for periods commencing on or after October 1, 1988 (both such dollar values to be determined as of the last Valuation Date preceding the date of withdrawal), and dividing the result by the Unit value of the Common Units in the Employee's Company Contributions Account (determined as of the last Valuation Date preceding the date of withdrawal). If the resulting number of Common Units exceeds the number of -36- 39 Common Units in that portion of the Employee's Company Contributions Account which is attributable to Compensation Deduction Contributions made for periods commencing on or after October 1, 1988, all Common Units in such portion of such Account shall be forfeited, the aggregate value of such Common Units shall be deducted from the total dollar value of Units to be forfeited, and the remaining balance shall be divided by the Unit value of the Class A Units in his Company Contributions Account (determined as of the Valuation Date next preceding the date of withdrawal) to determine the number of Class A Units to be forfeited. (c) (i) Subject to the provisions of subsection (b), an Employee may elect to have any withdrawal pursuant to subsection (a) taken from his account in the Diversified Fund, his account in the Fixed Income Fund, his account or accounts under the Guaranteed Return Fund, or his account in the Stock Fund B, or to have a specified portion or portions taken from his account or accounts in the Diversified Fund, the Fixed Income Fund, the Guaranteed Return Fund, and/or the Stock Fund B. In the absence of such election, such withdrawal shall be made from his accounts in such funds in the following order: first, from his account, if any, in the Fixed Income Fund; next, from his account, if any, in the Diversified Fund; next, from his account or accounts, if any, in the Guaranteed Return Fund, and finally, from his account, if any, in the Stock Fund B, first from his Common Units and then, when his Common Units have been exhausted, from his Class A Units in such Fund. Notwithstanding the foregoing provisions of this paragraph (i), and subject only to the provisions of subsection (b), any withdrawal from his account or accounts in the Guaranteed Return Fund shall be taken in reverse sequence by first exhausting his accounts in the most recent contracts under such Fund. (ii) As soon as practicable after a withdrawal election is made, there shall be paid or transferred to the Employee cash and stock determined in the same manner as under Section 5.040(a) above (except that the date of withdrawal shall be used for such determination in lieu of the date of termination, and except that the withdrawal election shall apply only to the Employee's Compensation and Supplemental Deduction Accounts). (d) No repayment may be made by any Employee except under the following circumstances. An Employee who has made one or more withdrawals from the Plan which, as provided in subsection (b), resulted in forfeitures of all or part of his Company Contributions Account may elect to restore the interest he had in the Plan preceding such withdrawals by making a cash -37- 40 repayment to the Plan. The amount of the repayment shall equal the amount distributed to the Employee due to such withdrawals by the Employee (as such amount is defined in Section 6.010(c), but using for such determination the date of the withdrawal or withdrawals in lieu of the date of distribution). However, repayment shall be limited by the following conditions: (i) No repayment may be made nor interest restored with respect to a withdrawal less than twelve (12) months after the withdrawal (unless the Employee terminates employment within such twelve (12) month period in which case repayment may be made at any time following the date written notice of termination is given to him by an Affiliated Company or by him to an Affiliated Company and prior to his date of termination) nor more than sixty (60) months after the withdrawal. (ii) No repayment may be made nor interest restored with respect to a withdrawal if the Employee has terminated employment for any reason on or after October 1, 1985, and subsequent to the withdrawal, unless he has been reemployed as an Employee prior to the end of five (5) years after the date on which such withdrawal shall have been made. (iii) An Employee may only make a repayment with respect to a withdrawal if such withdrawal resulted in forfeiture of some portion of his Company Contributions Account. (iv) Any Employee making repayment under this Section 6.020 with respect to any withdrawal must repay the total amounts distributed with respect to all prior withdrawals for which the Employee is permitted to make repayment under this subsection (d). As soon as practicable after an Employee makes a repayment described in this subsection (d), there shall be credited to the Employee's Company Contributions Account a dollar amount equal to the dollar balances that were forfeited as a result of the withdrawals in respect of which such repayment is made. At the same time, the Employee's Compensation Deduction Account shall be credited with a dollar amount equal to the amount repaid by the Employee to such Account. The amounts credited under the preceding sentences shall be used to purchase Units at the Unit value established on the last preceding Valuation Date prior to such repayment. The dollar amount recredited shall be allocated to the funds and any accounts under the Guaranteed Return Fund in the manner that the Employee's Compensation Deduction Account was allocated prior to the Employee's withdrawal or withdrawals, except that any amounts allocated to the Guaranteed Return Fund shall be allocated to the contract under such Fund to which contributions are then currently being made. The amount credited under this subsection (d) shall vest as provided in Section 5.010. -38- 41 (e) Withdrawals shall be in a minimum amount of $100 with respect to the Diversified Fund, the Fixed Income Fund or Guaranteed Return Fund, and in the number of whole shares of Common Stock or Class A Stock with a dollar value in a minimum amount of $100 based on the closing price of Common Stock reflected on the New York Stock Exchange -- Composite Transactions listing on the immediately preceding Valuation Date (or, in the event such Valuation Date falls on a date on which, for any reason, there are no trades of such stock reflected on such listing, the last trading day preceding such Valuation Date) with respect to the Stock Fund B. An Employee may not make a request for partial withdrawal within twenty-six (26) weeks of any prior request for partial withdrawal; provided, however, that this limitation upon the ability of an Employee to make a partial withdrawal within twenty-six (26) weeks of any prior request for a partial withdrawal shall be waived by the Plan Administrator for the six-month period immediately following any due declaration by the President of the United States under applicable federal law that a particular occurrence or situation constitutes a national disaster condition, if such partial withdrawal is requested for a reason associated with financial need of the Employee resulting from the effects of the said condition. Payment of partial withdrawal requests shall be made to the Employee as soon as practicable. 6.030 WITHDRAWALS FROM EMPLOYEE'S COMPENSATION DEFERRAL AND SUPPLEMENTAL DEFERRAL ACCOUNTS. (a) Subject to such restrictions as the Plan Committee may establish pursuant to Section 6.040, an Employee may withdraw all or a portion of the balance of his Compensation Deferral Account or Supplemental Deferral Account if he has attained age fifty-nine and one-half (59-1/2). (b) Subject to such restrictions as the Plan Committee may establish pursuant to Section 6.040, an Employee who has not attained age fifty-nine and one-half (59-1/2) may request approval of the Administrative Committee to withdraw some or all of the Units of his Compensation Deferral Account attributable solely to his Compensation Deferral Contributions and/or Transfer Contributions, excluding those Units thereof which are attributable to earnings under the individual account plan from which such Transfer Contributions were transferred or distributed, and some or all of the Units of his Supplemental Deferral Account attributable solely to his Supplemental Deferral Contributions. (c) In no event, however, may any Units attributable to income allocated to his Compensation Deferral Account or his Supplemental Deferral Account be withdrawn pursuant to subsections (b) and (d) of this Section 6.030; nor may a withdrawal of any Units from his Compensation Deferral Account be made until all Units which may be withdrawn under this Section 6.030 from his Supplemental Deferral Account shall have been withdrawn. -39- 42 (d) The Trustee shall, upon the direction of the Administrative Committee, distribute all or a portion of the Compensation Deferral Account and/or Supplemental Deferral Account of an Employee requesting a withdrawal under subsection (b) prior to the time such Account is distributable in accordance with Article V hereof; provided, however, that any such withdrawal shall be made only if, and the amount of such withdrawal shall be limited to the extent that, the Employee demonstrates that the withdrawal is required as a result of a hardship and to pay any federal, state or local income taxes and penalties reasonably anticipated to result from such withdrawal. For the purposes of this subsection (d) the term "hardship" shall mean an immediate and heavy financial need of the Employee for which the amount required is not reasonably available to the Employee from other sources and which arises for one of the following reasons: (i) the purchase (excluding mortgage payments) or construction of a principal residence for the Employee, or to prevent eviction from, or foreclosure on the mortgage on, the Employee's principal residence; (ii) the incurring of obligations for (1) tuition and related educational fees for post-secondary education for the Employee, his spouse or one or more of his children or other dependents (as defined in section 152 of the Code) to be incurred during the twelve (12) month period immediately following the date of his request for distribution; or (2) expenses not covered by insurance which either have been previously incurred by the Employee for, or are necessary in order for the Employee to obtain, medical care (as described in section 213(d) of the Code) for himself, his spouse or one or more his dependents (as defined in section 152 of the Code); or (iii) any other reason permitted under section 401(k)(2)(B)(i)(IV) of the Code and approved by the Administrative Committee. Any determination of the existence of hardship, the reasonable availability to the Employee of funds from other sources and the amount to be withdrawn on account of such hardship shall be made by the Administrative Committee on the basis of all relevant facts and circumstances and in accordance with the foregoing rules, as applied in a uniform and nondiscriminatory manner. In making such determination, the Administrative Committee may, if it is reasonable to do so in the light of all relevant and known facts and circumstances, rely on the Employee's representation that the hardship cannot be relieved -40- 43 (1) through reimbursement or compensation by insurance or otherwise; (2) by reasonable liquidation of the Employee's assets, to the extent that such liquidation would not itself cause an immediate and heavy financial need; (3) by suspension of Compensation Deferral or Compensation Deduction Contributions; or (4) by other distributions (other than hardship distributions) or loans (which meet the requirements of section 72(p) of the Code) from the Plan and any other plan maintained by an Affiliated Company or by any former employer or by borrowing from commercial sources at reasonable commercial rates. (e) If at the time of a withdrawal under this Section 6.030 the Employee is not fully vested in that portion of his Company Contributions Account which is attributable to Compensation Deferral Contributions: (i) Such withdrawal shall be taken first from that portion, if any, of the Employee's Compensation Deferral Account resulting from Compensation Deferral Contributions made for periods prior to October 1, 1988. (ii) When that portion, if any, of the Employee's Compensation Deferral Account resulting from Compensation Deferral Contributions made for periods prior to October 1, 1988, has been exhausted, such withdrawal shall then be taken from the portion of such Account resulting from Compensation Deferral Contributions made for periods commencing on or after October 1, 1988. If, immediately prior to such withdrawal, the dollar balance of the portion of the Employee's Company Contributions Account attributable to Company Contributions made for periods prior to October 1, 1988, shall be less than fifty percent (50%) of the total dollar balance of his Company Contributions Account, such withdrawal shall result in a forfeiture of those Units of his Company Contributions Account which are attributable to the Compensation Deferral Contributions withdrawn. For the purposes of paragraph (ii) of this subsection (e), the Units of his Company Contributions Account which are attributable to the Compensation Deferral Contributions withdrawn shall be determined by multiplying that portion of the Employee's withdrawal described in paragraph (ii) by a fraction, the numerator of which is the total dollar value of that portion of the Employee's Company Contributions Account which is attributable to Compensation Deferral Contributions -41- 44 made for periods commencing on or after October 1, 1988, and the denominator of which is the total dollar value of that portion of the Employee's Compensation Deferral Account which is attributable to Compensation Deferral Contributions made for periods commencing on or after October 1, 1988 (both such dollar values to be determined as of the last Valuation Date preceding the date of withdrawal), and dividing the result by the Unit value of the Common Units in the Employee's Company Contributions Account (determined as of the last Valuation Date preceding the date of withdrawal). If the resulting number of Common Units exceeds the number of Common Units in that portion of the Employee's Company Contributions Account which is attributable to Compensation Deferral Contributions made for periods commencing on or after October 1, 1988, all Common Units in such portion of such Account shall be forfeited, the aggregate value of such Common Units shall be deducted from the total dollar value of Units to be forfeited and the remaining balance shall be divided by the Unit value of the Class A Units in his Company Contributions Account (determined as of the Valuation Date next preceding the date of withdrawal) to determine the number of Class A Units to be forfeited. (f) (i) Subject to the provisions of subsection (e), an Employee may elect to have any withdrawal pursuant to subsections (a) or (b) taken from his account in the Diversified Fund, his account in the Fixed Income Fund, his account or accounts under the Guaranteed Return Fund, or his account in the Stock Fund B, or to have a specified portion or portions taken from his account or accounts in the Diversified Fund, the Fixed Income Fund, the Guaranteed Return Fund, and/or the Stock Fund B. In the absence of such election, such withdrawal shall be made from his accounts in such funds in the following order: first, from his account, if any, in the Fixed Income Fund; next, from his account, if any, in the Diversified Fund; next, from his account or accounts, if any, in the Guaranteed Return Fund, and finally, from his account, if any, in the Stock Fund B, first from his Common Units and then, when his Common Units have been exhausted, from his Class A Units in such Fund. Notwithstanding the foregoing provisions of this paragraph (i), and subject only to the provisions of subsection (e), any withdrawal from his account or accounts in the Guaranteed Return Fund shall be taken in reverse sequence by first exhausting his accounts in the most recent contracts under such Fund. (ii) As soon as practicable after a withdrawal election is made, there shall be paid or transferred to the Employee cash and stock determined in the same manner as under Section 5.040(a) (except that the date of withdrawal shall be used for such determination in lieu of the date -42- 45 of termination, Units withdrawn from Stock Fund B shall be paid in an amount of cash determined as provided in Section 5.040(a)(i), and the withdrawal election shall apply only to the Employee's Compensation Deferral and Supplemental Deferral Accounts). (g) No repayment may be made by any Employee except under the following circumstances. An Employee who has made one or more withdrawals from the Plan which, as provided in subsection (e), resulted in forfeitures of all or part of his Company Contributions Account may elect to restore the interest he had in the Plan preceding such withdrawals by making a cash repayment to the Plan. The amount of the repayment shall equal the amount distributed to the Employee due to such withdrawals under this Section 6.030 by the Employee. The amount of the repayment shall be credited to a compensation Deduction Account of the Employee. However, repayment shall be limited by the following conditions: (i) No repayment may be made nor interest restored with respect to a withdrawal less than twelve (12) months after the withdrawal (unless the Employee terminates employment within such twelve (12) month period in which case repayment may be made at any time following the date written notice of termination is given to him by an Affiliated Company or by him to an Affiliated Company and prior to his date of termination) nor more than sixty (60) months after the withdrawal. (ii) No repayment may be made nor interest restored with respect to a withdrawal if the Employee has terminated employment for any reason on or after October 1, 1985, and subsequent to the withdrawal, unless he has been reemployed as an Employee prior to the end of five (5) years after the date on which such withdrawal shall have been made. (iii) An Employee may only make a repayment with respect to a withdrawal if such withdrawal resulted in forfeiture of some portion of his Company Contributions Account. (iv) Any Employee making repayment under this Section 6.030 with respect to any withdrawal must repay the total amounts distributed with respect to all prior withdrawals for which the Employee is permitted to make repayment under this subsection (g). As soon as practicable after an Employee makes a repayment described in this subsection (g), there shall be credited to the Employee's Company Contributions Account a dollar amount equal to the dollar balances that were forfeited as a result of the withdrawals in respect of which such repayment is made. At -43- 46 the same time, the Employee's Compensation Deduction Account shall be credited with a dollar amount equal to the amount repaid by the Employee to such Account. The amounts credited under the preceding sentences shall be used to purchase Units at the Unit value established on the last preceding Valuation Date prior to such repayment. The dollar amount recredited shall be allocated to the Funds and any accounts under the Guaranteed Return Fund in the manner that the Employee's Compensation Deferral Account was allocated prior to the Employee's withdrawal or withdrawals, except that any amounts allocated to the Guaranteed Return Fund shall be allocated to the contract under such Fund to which contributions are then currently being made. The amount credited under this subsection (g) shall vest as provided in Section 5.010. (h) Withdrawals shall be in a minimum amount of $100 with respect to the Diversified Fund, the Fixed Income Fund or Guaranteed Return Fund, and in the number of whole shares of Common Stock or Class A Stock with a dollar value in a minimum amount of $100 based on the closing price of Common Stock reflected on the New York Stock Exchange -- Composite Transactions listing on the immediately preceding Valuation Date (or, in the event such Valuation Date falls on a date on which, for any reason, there are no trades of such stock reflected on such listing, the last trading day preceding such Valuation Date) with respect to the Stock Fund B. An Employee may not make a request for partial withdrawal within twenty-six (26) weeks of any prior request for partial withdrawal; provided, however, that this limitation upon the ability of an Employee to make a partial withdrawal (including hardship withdrawals pursuant to the provisions of subsection (d) of this Section) within twenty-six (26) weeks of any prior request for a partial withdrawal shall be waived by the Plan Administrator for the six-month period immediately following any due declaration by the President of the United States under applicable federal law that a particular occurrence or situation constitutes a national disaster condition, if such partial withdrawal is requested for a reason associated with financial need of the Employee resulting from the effects of the said condition. Payment of partial withdrawal requests shall be made to the Employee as soon as practicable. 6.035 TRANSFER OF DISTRIBUTION OR WITHDRAWAL DIRECTLY TO ELIGIBLE RETIREMENT PLAN. If a Participant entitled to a distribution or withdrawal under this Article VI, shall so request in writing at the time his election to receive such distribution or withdrawal is made or at such later date as the Plan Administrator may permit, the Plan Administrator shall cause all or a portion of the amounts and shares of Common and Class A Stock with respect to which the Participant would be taxable under section 402 of the Code to be transferred from the Trustee directly to the custodian of an Eligible Retirement Plan specified by the Participant. Prior to effecting such transfer the Plan Administrator shall require evidence reasonably satisfactory -44- 47 to him that the entity to which such transfer is to be made is in fact an Eligible Retirement Plan and that such Eligible Retirement Plan may receive the distribution in the forms required under this Article VI. 6.040 LOANS. Effective October 1, 1990, or such later date as the Plan Committee may determine, the Plan Committee, if so recommended by the Plan Administrator, may establish procedures pursuant to which any Employee or other party in interest (as the term "party in interest" is defined in ERISA section 3(14)) may apply for and receive from the Plan loans in accordance with such terms and conditions as the Plan Committee may prescribe consistent with the provisions of the Plan and applicable provisions of the Code and ERISA. Such procedures, terms and conditions shall require, in addition to such other procedures, terms and conditions as may be established by the Plan Committee, that no Employee or other party in interest shall be permitted to obtain a loan from the Plan of less than One Thousand Dollars ($1,000) or in an amount exceeding the least of (a), (b), (c) or (d): (a) the aggregate of the balances in his Compensation Deferral, Supplemental Deferral, Compensation Deduction and Supplemental Deduction Accounts; (b) an amount which, when combined with all outstanding loans to such Employee from all other plans of all Affiliated Companies, equals Fifty Thousand Dollars ($50,000), reduced by the excess, if any, of (i) his highest outstanding and unpaid balances of all prior loans to such Employee or other party in interest from the Plan and such other plans during the twelve (12) month period immediately preceding the date on which such loan is made, over (ii) the outstanding balance of any loan to the Employee or other party in interest from the Plan or such other plans on the date on which the loan is made; (c) one-half (1/2) of the aggregate of the balances of his Accounts; or (d) such amount, not exceeding the amounts described in (a) through (c) above, as the Plan Committee shall determine. In addition to the above and to such other procedures, terms and conditions as may be established by the Plan Committee, no such Employee or other party in interest shall be permitted to have more than a single loan from the Plan and all other "qualified employer plans" (as such term is defined in Code section 72(p)(4)) of the Company outstanding at any one time. Such procedures, upon establishment, and in the form approved, by the Plan Committee, shall be attached hereto as Appendix C. Prior to implementation of such procedures the Plan Administrator shall -45- 48 cause an announcement thereof to be disseminated to all eligible Employees and other parties in interest. Until the Plan Committee shall have established such procedures, no Employee or other party in interest shall have any right to obtain a loan from the Plan. Once available to eligible Employees and other parties in interest, however, all such loans shall be made available to all eligible Employees and other parties in interest on a reasonably equivalent and non-discriminatory basis. -46- 49 ARTICLE VII APPLICATION OF FORFEITED UNITS Units which have been forfeited in accordance with the provisions of Sections 5.040, 6.010, 6.020 or 6.030 or under any other provision of this Plan, shall be applied to reduce subsequent Company Contributions required under the Plan, or, if the Plan should be terminated, any amount not previously so applied shall be credited ratably to the accounts of all Participants in proportion to the amounts of Company Contributions credited to their respective accounts during the most recent Plan Year. -47- 50 ARTICLE VIII SUSPENSION OF SAVINGS AND CONTRIBUTIONS 8.010 VOLUNTARY SUSPENSION. (a) A Participant may at any time, upon fifteen (15) days' notice elect to have contributions suspended until further notice. Suspension shall become effective not later than the first payroll payment date following the expiration of the fifteen (15) days' notice period. (b) Subject to Section 2.010 and Section 2.020, a Participant who has elected to have contributions suspended, may elect to have contributions resumed upon fifteen (15) days' written notice to the Company, effective the first payroll payment date following the expiration of the fifteen (15) days' notice period. 8.020 INVOLUNTARY SUSPENSION. (a) A Participant's Compensation Deferral and Supplemental Deferral Contributions or Compensation Deduction and Supplemental Deduction Contributions for purposes of the Plan shall be suspended whenever: (i) No payment of Base Compensation is made by the Company to the Participant or, in the case of a Compensation Deduction and Supplemental Deduction Contribution, the amount payable after all applicable withholdings and deductions required by law or the Company is less than the full Compensation Deduction or Supplemental Deduction Contribution for the purposes of the Plan. (ii) Payroll deduction for Compensation Deduction and Supplemental Deduction Contributions under the Plan would be contrary to law. (iii) The Participant, although an Employee, is not an Eligible Employee. (iv) The Participant is transferred to a component of the Company to which the benefits of the Plan have not been extended. (v) The Participant's employment is terminated in order to accept employment with any subsidiary or affiliate of the Company to which the benefits of the Plan have not been extended. (b) Unless a Participant who has incurred a suspension under this Section 8.020 gives at least fifteen (15) days' contrary written notice to the Company, such Participant's previously elected Compensation Deferral and Supplemental Deferral Contributions or previously authorized Compensation Deduction -48- 51 and Supplemental Deduction Contributions shall resume automatically effective the first payroll date following the date when the cause of suspension is terminated. 8.030 GENERAL PROVISIONS APPLICABLE TO SUSPENSIONS. (a) Suspensions of a Participant's Compensation Deferral and Supplemental Deferral Contributions or Compensation Deduction and Supplemental Deduction Contributions, whether voluntary or involuntary, shall not affect his benefit and withdrawal rights, which shall be determined in accordance with the provisions of Article V and VI of the Plan. (b) During the period of a Participant's suspension, the Company's contributions on his behalf shall be similarly suspended, but the Trustee shall continue to adjust the Participant's Accounts as of each Valuation Date during such period in accordance with the provisions of Article IV of the Plan. (c) A Participant may not make up suspended Compensation Deferral and Supplemental Deferral Contributions or Compensation Deduction and Supplemental Deduction Contributions. -49- 52 ARTICLE IX DESIGNATION OF AND PAYMENT TO A BENEFICIARY 9.010 DESIGNATION OF A BENEFICIARY. Subject to the provisions of Section 1.050, (a) if a Participant dies, payment of the benefits provided under this Plan shall be made to such person or persons as he has designated as his Beneficiary to receive such benefits in the event of his death. (b) a Participant may change his designation of Beneficiary at any time by filing with the Plan Administrator (or such other person as is designated by the Plan Administrator) a request for such change. Such change shall become effective only upon receipt of the request by the Plan Administrator (or such other person as is designated by the Plan Administrator) but upon such receipt the change shall relate back to and take effect as of the date the Participant signed such request; provided, however, that neither the Company, the Trustee, the Plan Committee, the Plan Administrator, any other named or unnamed fiduciary, nor the Trust Fund shall be liable by reason of any payment made to the Beneficiary theretofore designated before receipt of such request. (c) if no designation is effective pursuant to this Article or if the Plan Administrator or Trustee shall have any doubt as to the right of any Beneficiary or if the Beneficiary shall predecease the Participant, the amount of such benefits may be paid to the estate of the Participant, in which event neither the Company, the Trustee, the Plan Committee, the Plan Administrator, any other named or unnamed fiduciary, nor the Trust Fund shall be liable to anyone with respect to such payment. 9.020 PAYMENT TO A BENEFICIARY. Upon receipt by the Plan Administrator (or another person designated by him) of evidence satisfactory to such person of the death of a Participant and of the identity and existence at the time of such death of the Beneficiary, the Plan Administrator shall direct the Trustee to pay the Participant's Accounts to such Beneficiary. -50- 53 ARTICLE X TRUST AGREEMENT 10.010 ESTABLISHMENT OF TRUST FUND. The property resulting from contributions made on behalf of all Participants, including contributions made by the Company, shall be held as a Trust Fund by a corporate Trustee or Trustees selected by the Plan Committee pursuant to a Trust Agreement entered into between such Trustee and the Plan Committee. References in the Plan to Trustee shall be deemed to be applicable with equal force to co-Trustees or successor Trustees who may be so designated. 10.020 INVESTMENTS. (a) The Trustee shall establish: (i) A Diversified Fund consisting of all contributions made by Participants under the Plan prior to March 1, 1971, all contributions made by or on behalf of Participants under the Plan and designated as contributions to the Diversified Fund, and all contributions made by the Company to match contributions deducted from the Participant's compensation prior to March 1, 1969, all property purchased therewith and the proceeds and income of such contributions and property, and (ii) A Fixed Income Fund consisting of all contributions made by or on behalf of Participants under the Plan subsequent to March 1, 1971, and designated as contributions to the Fixed Income Fund, or resulting from elections pursuant to Section 2.070(b), all property purchased therewith and proceeds and income of such contributions and property, and (iii) A Guaranteed Return Fund consisting of the Trust Fund's interest in a contract or contracts between the Trustee and one or more insurance companies, approved by the Plan Committee, whereby such one or more insurance companies agree to: (1) guarantee the principal, a defined rate or rates of earnings or interest on principal amounts for a specified period of time held pursuant to such contract or contracts, (2) accrue such guaranteed interest or earnings monthly, and (3) repay to the Trustee such principal amount with accrued earnings or interest thereon in accordance with the provisions of the Plan and in accordance with the provisions of the contract or contracts, and (iv) A Stock Fund A consisting of all cash, Common Stock and Class A Stock contributed by the Company to match contributions made by or on behalf of Participants on or after March 1, 1969, and the proceeds and income therefrom, and -51- 54 (v) A Stock Fund B consisting of all contributions made by or on behalf of Participants under the Plan and designated as contributions to the Stock Fund B, all Common Stock purchased therewith and proceeds and income therefrom. The Trustee shall keep records so as to segregate with respect to each Participant, benefits derived from contributions by such Participant and benefits derived from contributions by the Company on his behalf and with respect to each Participant's account in the Stock Fund A, the portions thereof attributable to Common Units and Class A Units, respectively. (b) The Trust Agreement will provide that: (i) The Plan Committee from time to time may direct the segregation of all or a portion of the Diversified Fund and the Fixed Income Fund (except that part of the Diversified Fund which the Trustee is authorized under the terms of subparagraph (ii) below to invest in any special investment fund maintained by the Trustee) in an Investment Manager Account (or Accounts), and if it does so, shall also appoint an Investment Manager (or Investment Managers), with respect to the portion of the Diversified Fund or Fixed Income Fund so segregated. Any Investment Manager appointed pursuant to this subparagraph (i) shall have full discretion (subject to the criteria set forth in the first sentence of subparagraph (ii) or (iii) below, as applicable), to direct the Trustee with respect to the acquisition, retention, management and disposition of the assets from time to time comprising the Investment Manager Account of such Investment Manager; and (ii) The Trustee shall invest and reinvest the principal and income of that portion of the Diversified Fund which has not been segregated in an Investment Manager Account (or Accounts), without direction and without distinction between principal and income, in every kind of property (real, personal or mixed), and every kind of investment (specifically including, but not by way of limitation, corporate obligations of every kind and stocks preferred or common) which a prudent man, acting in a like capacity and familiar with such matters would use in the conduct of a similar enterprise, but the Trustee shall not invest such principal and income in any security issued by the Company. Notwithstanding the foregoing, up to 10% of the contributions made after March 1, 1969 to the Diversified Fund, including for this purpose contributions segregated in an Investment Manager Account (or Accounts), may be invested by the Trustee in any special investment fund maintained by the Trustee designated to offer unusual possibilities for growth and capital investment. The -52- 55 Trustee shall have the sole responsibility with respect to selecting, making and retaining investments except for the portion of the Diversified Fund segregated in an Investment Manager Account (or Accounts); and (iii) The Trustee and any Investment Manager shall invest and reinvest the principal and income of the Fixed Income Fund without direction and without distinction between principal and income of said Fixed Income Fund, only in the following kinds of instruments of debt with maturity of not more than three years: treasury bills, treasury notes, treasury bonds, federal agency obligations, other instruments of federal, state and local government debt, bankers acceptances and bank certificates of deposit, and cash equivalents, including short-term fixed income commingled and collective investment funds of banks, but the Trustee shall not invest such principal and income in any instrument of debt issued by the Company or any subsidiary or affiliate thereof.) The Trustee shall have the sole responsibility with respect to selecting, making and retaining investments except for that portion of the Fixed Income Fund segregated in an Investment Manager Account (or Accounts); and (iv) The Trustee shall pay all cash in the Guaranteed Return Fund to the one or more insurance companies described in paragraph (iii) of subsection 10.020(a) subject to the terms of the contract, or contracts described in such paragraph. (v) The Trustee shall use all cash in the Stock Fund A and the Stock Fund B only to purchase Common Stock. Purchases may be made from or through any source (other than the Company) including a Participant. Any Class A Stock received by the Trustee as a Company contribution or as a stock dividend or other distribution on shares of Common Stock or Class A Stock in the Stock Fund A or the Stock Fund B shall be retained as such except to the extent necessary to make cash payments from such fund as provided in the Plan. Rights, options, or warrants offered to purchase Common Stock or Class A Stock shall be exercised by the Trustee in his discretion but only to the extent that there is cash available in the Stock Fund A and the Stock Fund B for investment. To the extent they are not exercised, the same shall be sold on the open market. Rights, options, or warrants to purchase securities of Rockwell International Corporation or its subsidiaries or affiliates other than Common Stock or Class A Stock shall be sold by the Trustee on the open market. -53- 56 (c) In making all investments pursuant to this Plan, the Trustee and the Investment Manager shall: (A) not be bound by any law or any court doctrine of any state or jurisdiction limiting trust investments except as otherwise provided by ERISA; (B) give consideration to the cash requirements of the Plan; (C) not cause the Plan to engage in any transaction constituting a prohibited transaction within the meaning of ERISA sections 406 through 408 or Code section 4975. 10.030 DUTY OF TRUSTEE AS TO COMMON STOCK AND CLASS A STOCK IN THE STOCK FUND A AND THE STOCK FUND B. (a) Except as otherwise provided in this Section 10.030, the Trust Agreement shall provide that the duty with respect to the voting, retention, and tendering of Common Stock and Class A Stock held in the Stock Fund A or the Stock Fund B shall be solely that of the Trustee, to be exercised solely in the Trustee's discretion. (b) The Trust Agreement shall provide that, with respect to any matter as to which a vote of the outstanding shares of Common Stock or Class A Stock is solicited by proxies, consents or authorizations: (i) Each Participant shall be entitled to direct the Trustee, and the Trustee shall solicit the direction in writing of each Participant, as to the manner in which voting rights of shares of Common Stock or Class A Stock held in the Stock Fund A or the Stock Fund B which either represent the vested or non-vested interest of such Participant in the Stock Fund A as of the record date fixed for determining the holders of Common Stock or Class A Stock entitled to vote on such matter or have been credited as of such record date to the Stock Fund B account of such Participant are to be exercised with respect to such matter, and the Trustee shall exercise the voting rights of such shares with respect to such matter in accordance with the last-dated timely written direction, if any, of such Participant. In connection with the solicitation of written directions from Participants, the Company will cause to be furnished to each Participant and the Trustee notice of each occasion for the exercise of such voting rights, an appropriate form on which such written direction may be given, and a statement containing the information that the Company distributes to stockholders generally regarding the exercise of such voting rights; and (ii) The duty with respect to the exercise of voting rights of shares of Common Stock or Class A Stock held in the Stock Fund A or the Stock Fund B as to which no timely direction in writing has been received pursuant to paragraph (i) of this subsection (b) shall be solely that of the Trustee, to be exercised solely in the Trustee's discretion. -54- 57 (c) The Trust Agreement shall provide that, in the event of any Tender Offer (as defined in Section 17.010): (i) Each Participant shall be entitled to direct the Trustee, and the Trustee shall solicit the direction in writing of each Participant, as to the tendering or depositing of any shares of Common Stock or Class A Stock held, and any shares of Common Stock issuable on conversion of Class A Stock held, in the Stock Fund A or the Stock Fund B which either represent the vested or non-vested interest of such Participant in the Stock Fund A as of the Tender Date (as defined herein) with respect to such Participant or have been credited as of such Tender Date to the account or accounts in the Stock Fund B of such Participant, and, except as limited by paragraph (iii) hereof, the Trustee shall tender or deposit such shares pursuant to any such Tender Offer in accordance with the last dated timely written direction, if any, of such Participant; (ii) Except as limited by Paragraph (iii) hereof, the duty with respect to the retention, tendering or depositing of shares of Common Stock or Class A Stock held, and any shares of Common Stock issuable on conversion of Class A Stock held, in the Stock Fund A or the Stock Fund B as to which no timely direction in writing has been received pursuant to paragraph (i) hereof shall be solely that of the Trustee to be exercised solely in the Trustee's discretion; and (iii) Shares of Common Stock or Class A Stock held, and any shares of Common Stock issuable on conversion of Class A Stock held, in the Stock Fund A or the Stock Fund B shall not be tendered or deposited by the Trustee pursuant to any such Tender Offer until the earlier of (A) immediately preceding the scheduled expiration of the Tender Offer pursuant to which such shares are to be tendered or deposited or (B) immediately preceding the expiration of the period during which such shares of Common Stock (including shares of Common Stock issuable on conversion of Class A Stock) or Class A Stock will be taken up and paid for on a pro rata basis pursuant to such Tender Offer or (C) the expiration of 30 days from the date of the Trustee's solicitation of Participants' written direction pursuant to paragraph (i) hereof; and (iv) The duty with respect to the withdrawing of, or other exercise of any right to withdraw, shares of Common Stock held, and any shares of Common Stock issuable on conversion of Class A Stock held, in the Stock Fund A or the Stock Fund B which have been tendered or deposited pursuant to any such Tender Offer shall be solely that of -55- 58 the Trustee, provided that the Trustee may solicit the direction in writing of each Participant with respect to whom any such shares of Common Stock (including shares of Common Stock issued on conversion of Class A Stock) or Class A Stock have been tendered or deposited pursuant to any such Tender Offer as to the withdrawing of, or other exercise of any right to withdraw, such shares of Common Stock (including shares of Common Stock issued on conversion of Class A Stock) or Class A Stock, and if such solicitation is made, the Trustee shall act in accordance with the last dated timely written direction, if any, of each such Participant. As used in this subsection (c) with respect to a Participant, the term 'Tender Date' means the date on which the Trustee tenders or deposits any shares of the Common Stock (including shares of Common Stock issued on conversion of Class A Stock) or Class A Stock either representing the vested or non-vested interest of such Participant in the Stock Fund A or credited to the account or accounts in the Stock Fund B of such Participant in accordance with this subsection (c). 10.040 FORM OF TRUST AGREEMENT. The Trust Agreement shall be in such form and contain such provisions as the Plan Committee may deem appropriate (consistent with the provisions of Section 10.020, Section 10.030 and Section 17.030), including, but not limited to, provisions with respect to the powers and authority of the Trustee, the authority of the Plan Committee to amend the Trust Agreement and to terminate the trust, and a provision that at no time shall any part of the Trust Fund revert to or be recoverable by the Company (within the taxable year or thereafter) or be used for or diverted to purposes other than for the exclusive benefit of Participants or their Beneficiaries. The Trust Agreement shall be deemed to form a part of this Plan, and all rights and benefits that may accrue to any person under this Plan shall be subject to all the terms and provisions of the Trust Agreement. The Trust Agreement may authorize the Trustee to invest all or part of the assets held by him in a collective trust for investment purposes. The Trustee may deposit amounts held in any of the funds comprising the Trust Fund in an interest bearing account or accounts including short-term fixed income commingled and collective investment funds in a bank or similar financial institution including without limitation the commercial banking department of the Trustee on a temporary basis pending either: (1) investment of such amounts or (2) distribution of funds to Plan Participants. 10.050 RIGHTS IN THE TRUST FUND. Nothing in the Plan or in the Trust Agreement shall be deemed to confer any legal or equitable right or interest in the Trust Fund in favor of any Participant, Beneficiary or other person, except to the extent expressly provided in the Plan. 10.060 TRUST FUND VALUES. Neither the Company, the Board of Directors, the Plan Committee, the Plan Administrator, the Trustee, nor any Investment Manager or investment advisor warrants or represents in any way that the value of Participants' Accounts shall increase or not decrease, each Participant assuming this risk as to his own Accounts. -56- 59 10.070 TAXES, FEES AND EXPENSES OF THE TRUSTEE. Effective as of October 1, 1993: (a) The reasonable fees and expenses of the Trustee (including the reasonable expenses of the Trustee's counsel), any Investment Manager and any investment advisor shall be paid from the Trust Fund and shall constitute a charge on the Trust Fund until so paid; provided, however, that in no event shall the Trust Fund nor the Company (unless the Company is specifically so directed by resolution of the Company's Board of Directors) pay any such Trustee, Investment Manager or investment advisors fees or expenses: (1) for preparation or prosecution of any action against the Company, the Plan, any member of the Plan Committee or the Plan Administrator, or (2) for the defense or settlement of, or the satisfaction of a judgment related to, any proceeding arising either out of any alleged misfeasance or nonfeasance in any person's performance of duties with respect to the Plan or out of any alleged wrongful act against the Plan. Neither the Plan Administrator nor the members of the Plan Committee shall be compensated from the Plan but may be compensated by the Company for services rendered on behalf of the Plan. (b) Brokerage fees, commissions, stock transfer taxes and other charges and expenses incurred in connection with transactions relating to the acquisition or disposition of property for or of the Trust Fund, or distributions therefrom, shall be paid from the Trust Fund. Taxes, if any, payable by the Trustee on the assets at any time held in the Trust Fund or on the income thereof shall be paid from the Trust Fund. -57- 60 ARTICLE XI ADMINISTRATION 11.010 GENERAL ADMINISTRATION. Authority to control and manage the operation and administration of the Plan shall be vested in the Plan Committee except to the extent that: (1) the Plan Administrator or the Administrative Committee is allocated any such authority under the Plan; or (2) any Trustee appointed pursuant to Section 10.020 and any Investment Manager appointed pursuant to Section 10.020(b)(i) may, pursuant to Article X, be granted exclusive authority and discretion to manage and control all or any portion of the assets of the Plan. The Plan Committee, the Plan Administrator, the Administrative Committee, the Trustee(s) and the Investment Manager(s) shall constitute the Named Fiduciaries of the Plan for purposes of ERISA. 11.020 PLAN COMMITTEE. The Board of Directors shall, from time to time, determine the size of the Plan Committee and appoint its individual members. The Plan Committee shall act, with or without a meeting, in a manner consistent with the rules and regulations adopted pursuant to Section 11.060(d). 11.030 PLAN COMMITTEE RECORDS. The Plan Committee shall keep such records and data as it shall deem appropriate and it shall from time to time file with the Board of Directors such reports as the latter may request. It shall be a function of the Plan Committee to keep records of the assets of the Trust Fund, based upon reports furnished by the Trustee, and the evaluations placed thereon by the Committee shall be final and conclusive. The records of the Plan shall be kept on the basis of a Plan Year beginning October 1. 11.040 FUNDING POLICY. The Plan Committee shall be responsible for determining a funding policy of the Plan consistent with the objectives for the Diversified Fund, Fixed Income Fund, Guaranteed Return Fund and the Stock Fund A and the Stock Fund B and shall from time to time advise the Trustee and the Investment Manager of such policy. 11.050 ALLOCATION AND DELEGATION OF DUTIES UNDER PLAN. The Plan Committee, the Plan Administrator and the Administrative Committee shall each have the following powers and authorities: (a) To designate agents to carry out responsibilities relating to the Plan, other than fiduciary responsibilities. (b) To employ such legal, consultant, medical, accounting, clerical and other assistance as it may deem appropriate in carrying out the provisions of this Plan including one or more persons to render advice with regard to any responsibility any Named Fiduciary or any other fiduciary may have under the Plan. -58- 61 11.060 PLAN COMMITTEE POWERS. In addition to any powers and authority conferred on the Plan Committee elsewhere in the Plan or by law, the Plan Committee shall have the following powers and authority: (a) To allocate fiduciary responsibilities (other than trustee responsibilities) to one or more members of the Plan Committee or to the Plan Administrator and to designate one or more persons (other than the Trustee, or the Investment Manager) to carry out fiduciary responsibilities (other than trustee responsibilities). The term "trustee responsibilities" as used herein shall mean responsibilities provided in the Trust Agreement to manage or control the assets of the Plan. (b) To appoint one or more Investment Managers within the meaning of ERISA section 3(38), as provided in section 10.020(b)(i) and to appoint one or more investment advisors who need not be Investment Managers as defined in ERISA and who shall not have authority to manage, acquire, or dispose of any asset of the Plan. (c) To determine the manner in which the assets of this Plan, or any part thereof, shall be disbursed by the Trustee, but, except as limited by the Trust Agreement in accordance with Section 10.030, the duty with respect to the making and retention of investments shall be solely that of the Trustee, or of the one or more Investment Managers which may be appointed pursuant to subsection (b) above. (d) To establish rules and regulations from time to time for the conduct of the Plan Committee's business and for the administration and effectuation of its responsibilities under the Plan. 11.070 PLAN ADMINISTRATOR. In addition to any powers and authority conferred on the Plan Administrator elsewhere in the Plan or by law, the Plan Administrator shall have the following powers and authority: (a) To administer, interpret, construe and apply this Plan and to decide all questions which may arise or which may be raised by any Employee, Participant, Beneficiary, or other person whatsoever, and the actions or decisions of the Plan Administrator in regard thereto, or in regard to anything or matter otherwise within his discretion, shall be conclusive and binding on all Employees, Participants, Beneficiaries, and other persons whatsoever. (b) To designate one or more persons (other than the Trustee or the Investment Manager) to carry out fiduciary responsibilities (other than trustee responsibilities). The term "trustee responsibilities" as used herein shall mean responsibilities provided in the Trust Agreement to manage or control the assets of the Plan. -59- 62 (c) To establish rules and regulations from time to time for the administration and effectuation of his responsibilities under the Plan including but not limited to, adoption of forms under Section 11.170. (d) The Plan Administrator shall have such other responsibility as is designated by ERISA as the responsibility of the administrator of the Plan and shall have such other power and authority as is necessary to fulfill his responsibilities under ERISA or under the Plan. 11.080 RELIANCE UPON DOCUMENTS AND OPINIONS. The members of the Plan Committee and the Administrative Committee, the Plan Administrator, the Board of Directors and the Company shall be entitled to rely upon any tables, valuations, computations, estimates, certificates and reports furnished by any consultant or firm or corporation which employs one or more consultants, upon any opinions furnished by legal counsel, upon any computation, estimates, and reports furnished by any consultants or consulting firms, and upon any reports furnished by the Trustee, and the members of the Plan Committee, the Plan Administrator, the Board of Directors and the Company shall be fully protected and shall not be liable in any manner whatsoever except as otherwise specifically provided by law for anything done or action taken or suffered in reliance upon any such consultant or firm or corporation which employs one or more consultants, Trustee, or counsel, and any and all such things done or such actions taken or suffered by the Plan Committee, the Plan Administrator, the Board of Directors and the Company shall be conclusive and binding on all Employees, Participants, Beneficiaries, and other persons whatsoever except as otherwise specifically provided by law. The Plan Committee and the Plan Administrator may, but are not required to, rely upon all records of the Company with respect to any matter or thing whatsoever, and to the extent they rely thereon, such records shall be conclusive with respect to all Employees, Participants, and Beneficiaries, except as otherwise provided by law. For purposes of this Section, "consultant" shall include, but shall not be limited to, any Investment Manager and investment advisor. 11.090 REQUIREMENT OF PROOF. The Plan Committee, the Plan Administrator, the Administrative Committee, the Board of Directors or the Company may require satisfactory proof of any matter under this Plan from or with respect to any Employee, Participant, or Beneficiary, and no such person shall acquire any rights or be entitled to receive any benefits under this Plan until such proof shall be furnished as so required. 11.100 LIMITATION ON LIABILITY. (a) Except as provided in Part 4 of Title 1 of ERISA, no person shall be subject to any liability with respect to his duties under the Plan, unless he acts fraudulently or in bad faith. (b) No person shall be liable for any breach of fiduciary responsibility resulting from the act or omission of any other fiduciary or any person to whom fiduciary responsibilities have been allocated or delegated, except as provided in ERISA -60- 63 section 405(a) and 405(c)(2)(A) or (B). No action or responsibility shall be deemed to be a fiduciary action or responsibility except to the extent required by ERISA. 11.110 INDEMNIFICATION. To the extent permitted by law, the Company shall indemnify the Board of Directors, the Plan Administrator, each member of the Plan Committee, each member of the Administrative Committee and any other employee of the Company with duties under the Plan against expenses (including any amount paid in settlement) reasonably incurred by him in connection with any claims against him by reason of his conduct in the performance of his duties under the Plan. Except in relation to matters as to which he has been guilty of willful misconduct in the performance of such duties, the foregoing right of indemnification shall be in addition to any other right to which any such Plan Committee member, Plan Administrator, Administrative Committee member, or other person may be entitled as a matter of law or otherwise. 11.120 MULTIPLE FIDUCIARY CAPACITY. Any person or group of persons may serve in more than one fiduciary capacity with respect to the Plan. 11.130 EXPENSES. Effective October 1, 1993, and subject to any limitations set forth in Section 10.070 of this Plan, all costs and expenses reasonably incurred by the Plan Committee, the Administrative Committee and the Plan Administrator in the administration of the Plan, including the reasonable fees of and expenses incurred by any third party administrator retained by the Plan Committee or the Plan Administrator to perform ministerial functions associated with administration of the Plan, shall be paid from the Trust Fund and shall constitute a charge on the Trust Fund until so paid. 11.140 MAILING AND LAPSE OF PAYMENTS. All payments under the Plan shall be delivered in person or mailed to the last address of the Participant (or, in the case of the death of the Participant, to that of any other person entitled to such payments under the terms of the Plan) furnished pursuant to Section 11.160 below. If the Plan Administrator cannot, by making a reasonably diligent attempt by mail, locate either the Participant or his Beneficiary, as the case may be, for a period of seven years, such Participant or Beneficiary shall be presumed dead. If payment cannot be made alternately to the estate of either and no surviving spouse, child, grandchild, parent, brother or sister of the Participant or his Beneficiary are known to the Plan Administrator or the Trustee or, if known, cannot with reasonable diligence be located, the amount payable shall be treated as a forfeiture and shall be a credit against (and to that extent reduce) future Company contributions. 11.150 NON-ALIENATION. (a) Except as provided in subsection (b), no right or benefit provided for in the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge the same shall be void. Except as may otherwise be required or permitted by the Internal Revenue Service, no such right or -61- 64 benefit shall be in any manner liable for or subject to the debts, contracts, liabilities, engagements or torts of any person entitled to such right or benefit, or shall be subject to garnishment, attachment, execution or levy of any kind. If any Participant or Beneficiary shall become bankrupt or shall attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge such right or benefit, or if the right or benefit to which such person may be entitled should be held by any court to be subject to garnishment, attachment, execution or levy of any kind, then in the discretion of the Plan Administrator such right or benefit shall cease and determine and the same shall be held or applied, in whole or in part, to or for the benefit of such Participant or Beneficiary or his spouse, children or other dependents, or any of them, in such manner and in such proportion as the Plan Administrator shall deem proper. Any payment of any such right or benefit so made or applied shall be conclusively deemed to have been made for the benefit of such Participant or Beneficiary as the case may be. (b) (1) The non-alienation rule of subsection (a) shall apply to the creation, assignment, or recognition of a right to any benefit payable with respect to a Participant pursuant to a domestic relations order, (as defined in section 414(p)(1)(B) of the Code) except that subsection (a) shall not apply if the Plan Administrator determines that such order is a qualified domestic relations order under section 414(p) of the Code. (2) Upon receipt of a domestic relations order, the Plan Administrator shall promptly notify the Participant and any other alternative payee of the receipt of such order and the Plan's procedures for determining the qualified status of domestic relations orders. (3) Within a reasonable period after the receipt of a domestic relations order, the Plan Administrator shall determine the qualified status of such order, and thereafter notify the Participant and each alternate payee of such determination. During any period in which the issue of whether a domestic relations order is a qualified domestic relations order is being determined by the Plan Administrator, the Plan Administrator shall segregate in a separate account in the Plan or in an escrow account the amounts which would have been payable to the alternate payee during such period if the order had been determined to be a qualified domestic relations order. (4) If within 18 months after issuance of the order, the order is determined to be a qualified domestic relations order, the Plan Administrator shall pay the segregated -62- 65 amounts (plus interest thereon, if any) to the person or persons entitled thereto. If within 18 months (A) it is determined that the order is not a qualified domestic relations order, or (B) the issue as to whether such order is a qualified domestic relations order is not resolved, the Plan Administrator shall pay the segregated amounts (plus interest thereon, if any) to the person or persons who would have been entitled to such amounts if there had been no order. Any determination that an order is a qualified domestic relations order which is made after the close of the 18 month period shall be applied prospectively only from the date of such determination. (5) In the case of a domestic relations order entered before January 1, 1985, the Plan Administrator (A) shall treat such order as a qualified domestic relations order if the Plan is paying benefits pursuant to such order on such date, and (B) may treat any other such order entered before such date as a qualified domestic relations order even if such order does not meet the requirements set forth in section 414(p) of the Code. 11.160 ADDRESSES. Each Participant shall be responsible for furnishing the Plan Administrator with his current address and the correct current name and address of his Beneficiary. 11.170 NOTICES AND COMMUNICATIONS. (a) All applications, notices, designations, elections, and other communications from Participants shall be in writing, on forms prescribed by the Plan Administrator and shall be mailed or delivered to such office as may be designated by the Plan Administrator, and shall be deemed to have been given to the Company when received by such office. (b) Each notice, report, remittance, statement and other communication directed to a Participant or Beneficiary shall be in writing and may be delivered in person or by mail, in which latter event it shall be deemed to have been delivered and received by him when so deposited in the United States Mail with postage prepaid addressed to the Participant or Beneficiary at his last address of record with the office designated by the Plan Administrator. 11.180 COMPANY RIGHTS. The Company's rights to discipline or discharge Employees or to exercise its rights as to incidents and tenure of employment shall not be affected in any manner by reason of the existence of the Trust Agreement or the Plan, or any action taken under them. 11.190 PAYMENTS ON BEHALF OF INCOMPETENT PARTICIPANTS OR BENEFICIARIES. In the event that the Plan Administrator or his designee shall find that any Participant or Beneficiary to whom a benefit is payable under -63- 66 the terms of this Plan is unable to care for his affairs because of illness or accident, is otherwise mentally or physically incompetent, or unable to give a valid receipt, the Plan Administrator may cause the payment becoming due to such Participant or Beneficiary to be paid to another person for his benefit without responsibility on the part of the Plan Administrator, the Plan Committee, the Administrative Committee, the Company, or the Trustee, to follow the application of such payment. Any such payment shall be a payment for the account of the Participant or Beneficiary and shall operate as a complete discharge of all liability therefor under this Plan of the Trustee, the Company, the Plan Administrator, the Administrative Committee, and the Plan Committee. 11.200 WITHHOLDING OF TAXES. Any payment out of the Trust Fund may be subject to withholding for taxes as required by law. -64- 67 ARTICLE XII PARTICIPANT'S CLAIMS 12.010 REQUIREMENT TO FILE CLAIM. (a) A Participant wishing a distribution from the Plan under Section 6.010, or to make a withdrawal from the Plan under Section 6.020 or Section 6.030, must file a written claim with the person designated by the Plan Administrator. A claimant who fails to reduce a claim to writing shall be deemed not to have made such claim. (b) Except as otherwise provided by the Plan Administrator, a claimant will not be required to file a claim to be entitled to a distribution under this Plan for any reason other than those identified in subsection (a). However, a person who fails to receive a benefit to which he claims to be entitled under this Plan may file a claim in the manner described in subsection (a). (c) The person designated by the Plan Administrator shall approve or deny in writing within thirty (30) days any claim which has been filed with it. 12.020 APPEAL OF DENIED CLAIM. (a) A Participant whose claim has been denied as set forth in Section 12.010(c) may appeal the denial to the Plan Administrator by filing a written appeal within sixty (60) days of the date of the denial. (b) The Participant or his representative shall, for the purpose of preparation of such appeal, have the right to inspect any document relied upon by the person designated by the Plan Administrator in denying the claim. (c) The Plan Administrator or his delegate shall make a final, full and fair review of any such decision which is appealed to him. A decision which is not appealed within the time herein provided shall be final and conclusive as to any matter which was presented to the person making such decision. -65- 68 ARTICLE XIII MODIFICATION, SUSPENSION, MERGER AND TERMINATION 13.010 AMENDMENT. The Board of Directors may, at any time and from time to time, amend this Plan in whole or in part. However, except as provided in Section 16.030 below, no amendment shall be made the effect of which would be: (a) To cause any contributions paid to the Trustee to be used for or diverted to purposes other than providing benefits to the Participants and their Beneficiaries, and defraying reasonable expenses of administering the Plan, prior to satisfaction of all liabilities with respect to Participants and their Beneficiaries; (b) To have any retroactive effect so as to deprive any Participant or Beneficiary of any benefit to which he would be entitled under this Plan if his employment were terminated immediately before such amendment; or (c) To increase the responsibilities or liabilities of any Trustee or Investment Manager without its written consent. 13.020 TRANSFER OF ASSETS AND LIABILITIES. The Plan Committee at any time may in its sole discretion without the consent of the Participant or his representative cause the Trustee to segregate part of the assets of the Trust Fund into one or more separate trust funds and designate a group of Participants whose benefits shall be provided solely from each such segregated fund. The Board of Directors may, in its sole discretion without the consent of any Participant or his representative, establish a separate plan to cover any such group of Participants. The initial terms and conditions of any such plan shall be identical to the extent such terms and conditions affect the rights of Participants under the Plan. Amendment to the Plan shall not be necessary to carry out the provisions of this Section 13.020. Any such transfer of assets and liabilities to another plan shall be expressly conditioned on the qualification of such plan and trust under section 401(a) and section 501(a) of the Code. 13.030 MERGER RESTRICTION. Notwithstanding any other provision in this Plan, the Plan shall not in whole or in part merge or consolidate with, or transfer its assets or liabilities to any other plan unless each affected Participant in this Plan would (if the Plan then terminated) receive a benefit immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation, or transfer (if the Plan had then terminated). 13.040 SUSPENSION OF CONTRIBUTIONS. The Company may, without amendment of the Plan and without the consent of any Participant or representative of any Participant, suspend contributions to the Plan as to all or certain Participants by action of the Board of Directors. In any event, the Company will suspend contributions at any time when the amount of any contribution by it would be in excess of the earnings, including retained -66- 69 earnings, of the Company. Upon a suspension, the Plan Committee may, in its sole discretion permit the Trust Fund to continue to be held by the Trustee, or may segregate one or more parts of the Trust Fund, as provided in Section 13.020. 13.050 DISCONTINUANCE OF CONTRIBUTIONS. The Company may, by action of the Board of Directors, without amendment of the Plan and without the consent of any Participant or representative of any Participant, discontinue such contributions to the Plan as to all or certain Participants. Upon such discontinuance the Plan Committee may in its sole discretion segregate one or more parts of the Trust Fund, as provided in Section 13.020. 13.060 TERMINATION. The Plan Committee may terminate or partially terminate the Plan at any time. Upon such termination or partial termination of the Plan, or upon a complete discontinuance of contributions pursuant to Section 13.050 the Accounts of each affected Participant shall become nonforfeitable, and for this purpose the Company shall contribute to the Company Contributions Accounts of all Employees who: (a) have forfeited Units in such Accounts under Articles V and VI within five (5) years prior to such termination, and, (b) but for such forfeitures, would have been vested in such forfeited Units under Section 5.010 on the date of termination of the Plan, amounts sufficient to restore such forfeitures in the same manner as such forfeitures could have been restored by such persons under applicable provisions of said Articles V and VI. In the event of termination or partial termination the Plan Committee may, without the consent of any Participant or other person, (i) permit the Trustee to retain all or part of the Trust Fund or (ii) distribute all or part of the Trust Fund to the Participants or their spouses or Beneficiaries. -67- 70 ARTICLE XIV STATUTORY LIMITATIONS 14.010 ANNUAL LIMITS OF PARTICIPANTS' ACCOUNT INCREASES. (a) This Article XIV is intended to conform the Plan to the requirements of section 415 of the Code, and the regulations issued thereunder; and shall be administered and interpreted in accordance with such requirements and regulations; and notwithstanding any provision of this Plan to the contrary, no amount shall be credited to any Participant's Account which is in excess of the limitation imposed by said section 415, as from time to time amended or replaced. (b) The amount allocated in each calendar year to any Participant under the combination of defined contribution plans of all Affiliated Companies cannot exceed the lesser of $30,000.00 (or such larger amount as may be established under section 415(d)(1)(B) of the Code to reflect an increase in the cost of living) or 25% of the Participant's total compensation. For purposes of this limitation, the amount allocated shall be deemed to be comprised of: (i) Company Contributions, Compensation Deferral Contributions and Supplemental Deferral Contributions with respect to the Participant; and (ii) forfeitures; and (iii) for all calendar years ending on or prior to December 31, 1986, the lesser of: (1) one half of the Participant's Compensation Deduction Contributions; or (2) the Participant's Compensation Deduction Contributions in excess of 6% of his total compensation from the Company or an Affiliated Company; and (iv) for each calendar year commencing on or after January 1, 1987, the Participant's Compensation Deduction Contributions; and (v) for each calendar year commencing on or after January 1, 1993, the Participant's Compensation Deduction and Supplemental Deduction Contributions. 14.020 LIMITS AS TO COMBINED PLANS. In the case of a Participant who also is a participant in a defined benefit pension plan which is or was maintained by the Company or an Affiliated Company and to which section 415 of the Code applies, the limitation set forth herein shall be further adjusted in compliance with section 415(e) of the Code. In making such adjustment, the maximum benefit allowable shall be paid hereunder before applying the limitations on the defined benefit plan. -68- 71 14.030 COMBINING SIMILAR PLANS. For purposes of this Article, all defined contribution plans which are required to be aggregated under section 414(b) of the Code shall be so aggregated and the limitation set forth herein shall be applied to the total amounts allocated under all such plans. 14.040 ADJUSTMENT TO COMPENSATION DEFERRAL AND SUPPLEMENTAL DEFERRAL CONTRIBUTIONS. To the extent the Compensation Deferral and Supplemental Deferral Contributions elected by a Participant under Sections 2.020(a)(ii) and (b)(ii) would, if made, cause the total amount allocated to a Participant in any calendar year to exceed the limitations set forth in this Article, such amount shall be paid as compensation to the Participant and shall be contributed to the Plan by the Participant as Compensation Deduction and Supplemental Deduction Contributions to the full extent permitted under this Article and Section 2.030. -69- 72 ARTICLE XV MISCELLANEOUS 15.010 BENEFITS PAYABLE ONLY FROM TRUST FUND. All benefits payable hereunder shall be provided solely from the trust, and the Company assumes no responsibility for the acts of the Trustee, except as provided in the Trust Agreement. 15.020 REQUIREMENT FOR RELEASE. Any payment to any Participant or his Beneficiary in accordance with the provisions of this Plan shall, to the extent thereof, be in full satisfaction of all claims against the Trustee and the Company, and the Trustee may require such Participant or Beneficiary, as a condition precedent to such payment to execute a receipt and release to such effect. If in the opinion of the Plan Administrator any present, former or future spouse of a Participant shall by reason of the law of any jurisdiction appear to have paid interest in the benefits that might, but for any election made by such Participant pursuant to the Plan, be or become payable to such Participant or his Beneficiary, the Plan Administrator may, as a condition precedent to the making of such an election or revocation of such an election or as a condition of the continued effectiveness of any such election or revocation of such election, require such written release or releases, or such other proof in lieu thereof, as in his discretion he shall determine to be necessary, desirable or appropriate either to protect the rights of any such present, former or future spouse or to prevent or avoid any conflict or multiplicity of claims with respect to the payment of any benefits under this Plan. 15.030 TRANSFERS OF STOCK. Transfers of Common Stock and Class A Stock from the Trustee pursuant to Article V or VI shall be made as soon as practicable, but neither the Company, any Named Fiduciary nor the Trustee shall have any responsibility for any decrease in the value of such stock between the Valuation Date used for determination of the number of shares to which the Participant is entitled and the date of transfer by the transfer agent, nor, except as provided in Articles V and VI, shall the Participant receive any dividends, rights, options or warrants on such stock other than those payable to stockholders of record as of a date on or after the date of transfer. 15.040 INTERPRETATION. The masculine gender shall include the feminine and the singular shall include the plural unless the context clearly indicates otherwise. -70- 73 ARTICLE XVI APPROVAL OF THE COMMISSIONER OF INTERNAL REVENUE 16.010 QUALIFICATION OF THE PLAN. The Company intends to preserve the qualification with and approval by the Internal Revenue Service of the Plan as a plan, Company Contributions to which are deductible by the Company for federal income tax purposes. Should any amendment to the Plan cause the Plan as amended to fail so to qualify and obtain such approval, then in such event, the amendment to the Plan shall be deemed revoked and, as soon as practicable thereafter, the Plan shall be amended to the extent necessary to preserve such qualification and approval. The dollar value of each Participant's Account resulting from Company Contributions, if any, made by the Company solely by virtue of such amendment shall be returned to the Company. The Participants shall have no interest in the amounts so returnable to the Company. 16.020 CONTINUATION OF THE PLAN. Continuation of the Plan is contingent upon and subject to retaining such approval of the Commissioner of Internal Revenue as the Company may find necessary to establish the continued deductibility for income tax purposes of the Company Contributions under the Plan. 16.030 MODIFICATION OF THE PLAN. Any modification or amendment of the Plan or the Trust Agreement may be made retroactively by the Company, if necessary or appropriate, to qualify or maintain the Plan as a plan and trust, meeting the requirements of applicable sections of the Code and of other federal and state laws, as now in effect or hereafter amended or enacted. -71- 74 ARTICLE XVII PLAN ADMINISTRATION IN THE EVENT OF THIRD-PARTY TENDER OFFERS 17.010 APPLICABILITY. The provisions of this Article XVII shall take effect only as of the date of the first tender or deposit by the Trustee of any share of Common Stock (including any share of Common Stock issued on conversion of Class A Stock) or Class A Stock pursuant to any Tender Offer (as herein defined) in accordance with the Trust Agreement as provided in Section 10.030(c) and shall remain in effect thereafter unless and until (a) each share of Common Stock (including any share of Common Stock issued on conversion of Class A Stock) and Class A Stock held in the Stock Fund A or the Stock Fund B which has been tendered or deposited in accordance with the Trust Agreement as provided in Section 10.030(c) pursuant to such Tender Offer or any subsequent Tender Offer commenced while the provisions of this Article XVII are in effect has been effectively withdrawn by or otherwise returned to the Trustee and (b) the certificate representing each share is in the possession of the Trustee. As used in this Article XVII, the term "Tender Offer" means any tender offer for, or request or invitation for tenders of, the Common Stock and/or Class A Stock subject to section 14(d)(1) of the Securities Exchange Act of 1934, as amended, or any regulation thereunder, except for any such tender offer or request or invitation for tenders made by the Company or any Affiliated Company. 17.020 ADDITIONAL DEFINITIONS. While the provisions of this Article XVII are in effect: (a) The term "Sub Fund A" shall mean the fund established by the Trustee pursuant to Section 17.030(a)(i). (b) The term "Sub Fund B" shall mean the fund established by the Trustee pursuant to Section 17.030(a)(ii). (c) In lieu of the definition set forth in Section 1.110, the term "Company Contributions Account" shall mean the account, with respect to a Participant, that is comprised of or attributable to Company Contributions, adjusted by gains or losses related to the investment of such contributions. (d) In lieu of the definition set forth in Section 1.130, the term "Compensation Deduction Account" shall mean the account, with respect to a Participant, that is comprised of or attributable to contributions made by the Participant under Article II, adjusted by gains or losses related to the investment of such contributions, and shall also include the term "Supplemental Deduction Account" as defined in Section 1.365. (e) In lieu of the definition set forth in Section 1.150, the term "Compensation Deferral Account" means the account, with respect to a Participant, that is comprised of or attributable to contributions made on behalf of or with respect to the Participant under Article II, including, but not limited to, Transfer Contributions as defined in Section 1.368, adjusted by gains or losses related to the investment of such contributions, and shall also include the term "Supplemental Deferral Account" as defined in Section 1.367. -72- 75 (f) In lieu of the definition set forth in Section 1.380, the term "Trust Fund" shall mean the fund, including the earnings thereon, held by the Trustee into which all contributions of or attributable to the Participant and the Company are deposited pursuant to the Plan. The Trust Fund shall be divided into a Diversified Fund, Fixed Income Fund, Guaranteed Return Fund, Stock Fund A, Stock Fund B, Sub Fund A and Sub Fund B. 17.030 ESTABLISHMENT AND INVESTMENT OF THE SUB FUND A AND THE SUB FUND B. While the provisions of this Article XVII are in effect: (a) The Trustee shall establish: (i) A Sub Fund A consisting of any cash, securities or other consideration received by the Trustee as payment for shares of Common Stock (including any shares of Common Stock issued on conversion of Class A Stock) or Class A Stock previously held in the Stock Fund A which were tendered or deposited in accordance with the Trust Agreement as provided in Section 10.030(c), all property purchased therewith and the proceeds and income therefrom; and (ii) A Sub Fund B consisting of any cash, securities or other consideration received by the Trustee as payment for shares of Common Stock (including any shares of Common Stock issued on conversion of Class A Stock) or Class A Stock previously held in the Stock Fund B which were tendered or deposited in accordance with the Trust Agreement as provided in Section 10.030(c), all property purchased therewith and the proceeds and income therefrom. (b) The Trustee shall use all cash in the Sub Fund A and the Sub Fund B only to purchase the kinds of instruments of debt with maturity of not more than three years in which the Trustee and any Investment Manager may invest and reinvest the principal and income of the Fixed Income Fund pursuant to Section 10.020(b)(iii) and shall so invest and reinvest the principal thereof and income thereon. Dividends, income and other distributions received on, and proceeds from the sale or other disposition of, any securities or other consideration held by the Trustee for Participants in the Sub Fund A or the Sub Fund B pursuant to a tender or deposit of shares of Common Stock (including any shares of Common Stock issued on conversion of Class A Stock) or Class A Stock in accordance with the Trust Agreement as provided in Section 10.030(c) shall be similarly invested and reinvested. (c) The funding policy of the Plan determined by the Plan Committee pursuant to Section 11.040 shall be consistent with the objectives for the Sub Fund A and the Sub Fund B. -73- 76 17.040 MAINTENANCE AND VALUATION OF SUB FUND A AND SUB FUND B; CORRESPONDING REDUCTIONS OF STOCK FUND A AND STOCK FUND B. While the provisions of this Article XVII are in effect: (a) A separate account representing each Participant's interest in the Sub Fund A and the Sub Fund B under the Participant's Company Contributions Account, Compensation Deferral Account and Compensation Deduction Account, as applicable, shall be maintained. Such separate accounts shall contain sufficient information to permit with respect to the Sub Fund A and the Sub Fund B a determination of the dollar balance of such Participant's Accounts at any time in accordance with the Unit valuation described in subsections (b), (c) and (d) hereof. Such separate accounts shall contain sufficient information to permit such other determinations as may be required to carry out the provisions of this Plan. (b) The interest of each Participant in the Sub Fund A and the Sub Fund B shall be represented by Units allocated to his Accounts. The initial value of each Unit to be allocated to his Accounts in respect of amounts held by the Trustee in the Sub Fund A or the Sub Fund B shall be One Dollar ($1.00), and Units shall be credited to each Participant on such basis for amounts received by the Trustee on his behalf prior to the first Valuation Date following the first receipt by the Trustee of cash, securities or other consideration for shares of Common Stock (including any shares of Common Stock issued on conversion of Class A Stock) or Class A Stock previously representing his interest in the Stock Fund A which were tendered or deposited in accordance with the Trust Agreement as provided in Section 10.030(c) in the case of Sub Fund A, and the first Valuation Date following the first receipt by the Trustee of cash, securities or other consideration for shares of Common Stock (including any shares of Common Stock issued on conversion of Class A Stock) or Class A Stock previously held in his account or accounts in the Stock Fund B which were tendered or deposited in accordance with the Trust Agreement as provided in Section 10.030(c) in the case of the Sub Fund B. Each receipt on behalf of a Participant of cash, securities or other consideration for shares of Common Stock (including any shares of Common Stock issued on conversion of Class A Stock) or Class A Stock previously representing his interest in the Stock Fund A which were tendered or deposited in accordance with the Trust Agreement as provided in Section 10.030(c) or each payment to a Participant from the Sub Fund A, and each receipt on behalf of a Participant by the Trustee of cash, securities or other consideration for shares of Common Stock (including any shares of Common Stock issued on conversion of Class A Stock) or Class A Stock previously held in his account or accounts in the Stock Fund B which were tendered or deposited in accordance with the Trust Agreement as provided in Section 10.030(a) or each payment to a Participant from the -74- 77 Sub Fund B, shall result in a credit or charge to the affected Account of the Participant equal to the number of Units received or paid as the case may be. (c) As of the Valuation Date immediately following the first deposit into the Sub Fund A or the Sub Fund B, as the case may be, and as of each succeeding Valuation Date, an amount equal to the fair market value of all property in each such fund shall be determined by the Trustee in such manner and on such basis as it shall deem appropriate. Such amount shall be divided by the total number of Units credited to all Participants in each such fund, thereby establishing a new Unit Value. With respect to each such fund, each receipt therein or payment therefrom after such Valuation Date shall be converted to Units by dividing such new Unit value into the amount of such receipt or payment and the affected Account of the Participant shall be credited or charged, as the case may be, with the portion of the number of Units so computed properly attributable to such Participant. (d) As of any specified date, the dollar balance of the individual account or accounts of each Participant in the Sub Fund A and the Sub Fund B shall be determined in the same manner as under Section 4.040 (but using for such determination amounts received by the Trustee in respect of the Sub Fund A and the Sub Fund B in lieu of contributions). (e) The Participant's account in the Stock Fund A shall be reduced as of each date on which the Trustee receives cash, securities or other consideration for shares of Common Stock (including any shares of Common Stock issued on conversion of Class A Stock) or Class A Stock previously representing some or all of his interest in the Stock Fund A which were tendered or deposited in accordance with the Trust Agreement as provided in Section 10.030(c) by the number of Units which bears the same relation to the number of Units credited to such account immediately prior to the tender or deposit of such shares as the portion of his interest in the Stock Fund A in respect of which such shares were tendered bore to his entire interest in the Stock Fund A immediately prior to the tender or deposit of such shares. (f) The Participant's account or accounts in the Stock Fund B shall be reduced as of each date on which the Trustee receives cash, securities or other consideration for shares of Common Stock (including any shares of Common Stock issued on conversion of Class A Stock) or Class A Stock previously held in such account or accounts which were tendered and deposited in accordance with the Trust Agreement as provided in Section 10.030(c) by the number of such shares which were so tendered or deposited. -75- 78 17.050 BENEFITS PAYABLE FROM THE SUB FUND A AND THE SUB FUND B UPON TERMINATING EMPLOYMENT. While the provisions of this Article XVII are in effect: (a) For purposes of Section 5.010, each Unit representing a Participant's interest in the Sub Fund A that results from the crediting to the Participant's account in Sub Fund A of cash, securities or other consideration received by the Trustee pursuant to the tender or deposit in accordance with the Trust Agreement as provided in Section 10.030(c) of shares of Common Stock (including any shares of Common Stock issued on conversion of Class A Stock) or Class A Stock previously representing his interest in the Stock Fund A shall be deemed attributable to Company Contributions made on the Participant's behalf which resulted in the credit to his account in the Stock Fund A of a Unit in respect of such interest. (b) For purposes of Section 5.020(a): (1) The full dollar balance of the Participant's accounts in the Sub Fund A and the Sub Fund B shall be deemed to be described in paragraph (2) thereof, and such balance shall be deemed to be an amount that the Participant (or his Beneficiary in the case of death) shall receive under paragraph (1) thereof. Such balance shall be determined, in the manner provided by Section 17.040(d), by reference to the Units in each such account on the date of the Participant's termination of employment for any reason set forth in Section 5.020(a), and the value of each Unit on the Valuation Date coinciding with or immediately preceding such date. (2) The amounts set forth in subparagraphs (ii) and (iii) of paragraph (2) of Section 5.020(a) shall be amounts that the Participant (or his Beneficiary in the case of death, shall receive under paragraph (1) thereof; provided, however, that no share of Common Stock (including any share of Common Stock issued on conversion of Class A Stock) or Class A Stock representing a Participant's interest in the Stock Fund A or held in such Participant's account or accounts in the Stock Fund B which, as of the date of such Participant's termination of employment for any reason set forth in Section 5.020(a), has been tendered or deposited in accordance with the Trust Agreement as provided in Section 10.030(c) shall be transferred to such Participant (or his Beneficiary in the case of death) pursuant to paragraph (1) of Section 5.020(a) unless and until such share has been effectively withdrawn by or otherwise returned to the Trustee and the certificate representing such share is in the possession of the Trustee; and provided, further, however, that there shall be paid or transferred to such Participant (or his -76- 79 Beneficiary in the case of death) any and all cash, securities or other consideration received by the Trustee for whole shares of Common Stock (including any shares of Common Stock issued on conversion of Class A Stock) or Class A Stock previously representing such Participant's interest in the Stock Fund A or held in such Participant's account or accounts in the Stock Fund B as of the Valuation Date immediately preceding the date of such termination and which were tendered or deposited in accordance with the Trust Agreement as provided in Section 10.030(c) as soon as practicable after the receipt of such cash, securities or other consideration by the Trustee. (c) If the Participant's employment is terminated for any reason other than those reasons set forth in Sections 5.020, 5.030, or 8.020(a)(v), the Participant shall receive as soon as practicable: (1) The vested portion of the dollar balance of his account in the Sub Fund A and the full dollar balance of his account or accounts in the Sub Fund B. Such balances shall be determined, in the manner provided in Section 17.040(d), by reference to the Units in each such account on the date of such termination and the value of each Unit on the Valuation Date coinciding with or immediately preceding such date. (2) The amounts set forth in subsections (i) through (iii) of Section 5.040(a); provided, however, that no share of Common Stock (including any share of Common Stock issued on conversion of Class A Stock) or Class A Stock representing such Participant's vested interest in the Stock Fund A or held in such Participant's account or accounts in the Stock Fund B which, as of the date of such termination, has been tendered or deposited in accordance with the Trust Agreement as provided in Section 10.030(c) shall be transferred to such Participant after the date of such termination unless and until such share has been effectively withdrawn by or otherwise returned to the Trustee and the certificate representing such share is in the possession of the Trustee; and provided further, however, that there shall be paid or transferred to such Participant any and all cash, securities or other consideration received by the Trustee for whole shares of Common Stock (including any shares of Common Stock issued on conversion of Class A Stock) or Class A Stock previously representing such Participant's vested interest in the Stock Fund A or held in such Participant's account or accounts in the Stock Fund B as of the Valuation Date immediately preceding the date of such termination and which were tendered or deposited in accordance with the Trust Agreement as -77- 80 provided in Section 10.030(c) as soon as practicable after the receipt of such cash, securities or other consideration by the Trustee. 17.060 DISTRIBUTIONS FROM THE PLAN UNDER SECTION 6.010. While the provisions of this Article XVII are in effect: (a) The amount paid or transferred to a Participant who elects a distribution in accordance with Section 6.010 shall be determined in the same manner as under Section 17.050(c) (except that the date of receipt of the election shall be used for such determination in lieu of the date of termination and except that the Participant's Compensation Deferral Account and the related portion of his Company Contribution Account, if any, shall not be distributable). (b) As soon as practicable after an Employee makes a repayment described in Section 6.010(b), there shall be credited to the Employee's Company Contributions Account a dollar amount as set forth in the first sentence of Section 6.010(d). To the extent that the dollar amount to be credited to his Company Contributions Account relates to shares of Common Stock (including any shares of Common Stock issued on conversion of Class A Stock) or Class A Stock previously representing his interest in the Stock Fund A for which the Trustee received cash, securities or other consideration pursuant to the tender or deposit thereof in accordance with the Trust Agreement as provided in Section 10.030(c), such dollar amount shall be allocated to the Sub Fund A. At the same time, the Employee's Compensation Deduction Account shall be credited with a dollar amount, and such amount shall be allocated to the funds and any accounts under the Guaranteed Return Fund, as set forth in the second and third sentences of Section 6.010(d); provided, however, that, if the Participant makes a repayment in respect of shares of Common Stock (including any shares of Common Stock issued on conversion of Class A Stock) or Class A Stock previously held in his Compensation Deduction Account in the Stock Fund B for which the Trustee received cash, securities or other consideration pursuant to the tender or deposit thereof in accordance with the Trust Agreement as provided in Section 10.030(c), a dollar amount equal to the amount of such repayment shall be allocated to the Participant's Compensation Deduction Account in the Sub Fund B. The amounts credited under this subsection (b) shall vest, and, for purposes of this subsection (b), the balance of the Participant's Company Contributions Account shall be determined, as set forth in the penultimate and last sentences of Section 6.010(d). 17.070 WITHDRAWALS FROM A PARTICIPANT'S COMPENSATION DEDUCTION ACCOUNT UNDER SECTION 6.020. While the provisions of this Article XVII are in effect: (a) For purposes of Section 6.020(c), a Participant may elect to have any withdrawal from his Compensation Deduction Account -78- 81 taken from any of the funds as set forth in Section 6.020(c) or from his Compensation Deduction Account in the Sub Fund B, or to have a specified portion taken from any of such funds as set forth in Section 6.020(c) or a specified portion taken from any two or more of such funds. In the absence of such election, such withdrawal shall be made from his accounts in such funds in the following order: first, from his account, if any, in the Fixed Income Fund; next, from his account, if any, in the Diversified Fund; next, from his account or accounts, if any, in the Guaranteed Return Fund; and finally, from his account, if any, in the Sub Fund B, first from his Units attributable to Common Stock and then, if such Units have been fully withdrawn, from his Units attributable in Class A Stock in such Fund. Notwithstanding the foregoing provisions of this subsection (a), and subject only to the provisions of Section 6.020(b), any withdrawal from his account or accounts in the Guaranteed Return Fund shall be taken in reverse sequence by first exhausting his accounts in the most recent contracts under such Fund. The amount paid or transferred to a Participant who has made a withdrawal election in accordance with Section 6.020 shall be determined in the same manner as under Section 17.050(c) (except that the date of withdrawal shall be used for such determination in lieu of the date of termination, and except that the withdrawal election shall apply only to the Participant's Compensation Deduction Account). (b) For purposes of subsection (d) of Section 6.020, as soon as practicable after a Participant makes a repayment described in such subsection, there shall be credited to the Participant's Company Contributions Account a dollar amount as set forth in the first sentence of such subsection immediately following paragraph (iv) thereof. To the extent that the dollar amount to be credited to his Company Contributions Account relates to shares of Common Stock (including any shares of Common Stock issued on conversion of Class A Stock) or Class A Stock previously representing his interest in the Stock Fund A for which the Trustee received cash, securities or other consideration pursuant to the tender or deposit thereof in accordance with the Trust Agreement as provided in Section 10.030(c), such dollar amount shall be allocated to the Sub Fund A. At the same time, the Participant's Compensation Deduction Account shall be credited with a dollar amount equal to the amount repaid by the Participant to such Account, and such amount shall be used to purchase Units and shall be allocated to the funds and any accounts under the Guaranteed Return Fund, as set forth in the third and fourth sentences of such subsection (d) following paragraph (iv) thereof; provided, however, that, if the Participant makes a repayment in respect of shares of Common Stock or Class A Stock previously held in his Compensation Deduction Account in the Stock Fund B as to which a withdrawal election was made and for which the Trustee -79- 82 received cash, securities or other consideration pursuant to the tender or deposit thereof in accordance with the Trust Agreement as provided in Section 10.030(c), a dollar amount equal to the amount of such repayment shall be allocated to the Participant's Compensation Deduction Account in the Sub Fund B. The amounts credited under this subsection (b) shall vest as set forth in the last sentence of Section 6.020(d). (c) Partial withdrawals pursuant to Section 6.020(f) shall be in a minimum amount of $100 with respect to the Sub Fund B. 17.080 WITHDRAWALS FROM A PARTICIPANT'S COMPENSATION DEFERRAL ACCOUNT UNDER SECTION 6.030. While the provisions of this Article XVII are in effect: (a) For purposes of Section 6.030(f), a Participant may elect to have any withdrawal of the portion of his Compensation Deferral Account taken from any of the funds as set forth in Section 6.030(f) or from his Compensation Deferral Account in the Sub Fund B, or to have a specified portion taken from any of such funds as set forth in Section 6.030(f) and a specified portion taken from any two or more of such funds. In the absence of such election, such withdrawal shall be made from his accounts in such funds in the following order: first, from his account, if any, in the Fixed Income Fund; next, from his account, if any, in the Diversified Fund; next, from his account or accounts, if any, in the Guaranteed Return Fund; and finally, from his account, if any, in the Sub Fund B, first from his Units attributable to Common Stock and then, if such Units have been fully withdrawn, from his Units attributable in Class A Stock in such Fund. Notwithstanding the foregoing provisions of this subsection (a), and subject only to the provisions of Section 6.030(e), any withdrawal from his account or accounts in the Guaranteed Return Fund shall be taken in reverse sequence by first exhausting his accounts in the most recent contracts under such Fund. The amount paid or transferred to a Participant who has made a withdrawal election in accordance with Section 6.030 shall be determined in the same manner as under Section 17.050(c) (except that the date of withdrawal shall be used for such determination in lieu of the date of termination, and except that the withdrawal election shall apply only to the Participant's Compensation Deferral Account). (b) For purposes of subsection (g) of Section 6.030, as soon as practicable after a Participant makes a repayment described in such subsection, there shall be credited to the Participant's Company Contributions Account a dollar amount as set forth in the first sentence of such subsection immediately following paragraph (iv) thereof. To the extent that the dollar amount to be credited to his Company Contributions Account relates to shares of Common Stock (including any shares of Common Stock issued on conversion of Class A Stock) or Class A Stock -80- 83 previously representing his interest in the Stock Fund A for which the Trustee received cash, securities or other consideration pursuant to the tender or deposit thereof in accordance with the Trust Agreement as provided in Section 10.030(c), such dollar amount shall be allocated to the Sub Fund A. At the same time, the Participant's Compensation Deduction Account shall be credited with a dollar amount equal to the amount repaid by the Participant to such Account, and such amount shall be used to purchase Units and shall be allocated to the funds and any accounts under the Guaranteed Return Fund, as set forth in the third and fourth sentences of such subsection (g) following paragraph (iv) thereof; provided, however, that, if the Participant makes a repayment in respect of shares of Common Stock (including any shares of Common Stock issued on conversion of Class A Stock) or Class A Stock previously held in his Compensation Deferral Account in the Stock Fund B as to which a withdrawal election was made and for which the Trustee received cash, securities or other consideration pursuant to the tender or deposit thereof in accordance with the Trust Agreement as provided in Section 10.030(c), a dollar amount equal to the amount of such repayment shall be allocated to the Participant's Compensation Deduction Account in the Sub Fund B. The amounts credited under this subsection (b) shall vest as set forth in the last sentence of the last paragraph of Section 6.030(g). (c) Partial withdrawals pursuant to Section 6.030(h) shall be in a minimum amount of $100 with respect to the Sub Fund B. -81- 84 ARTICLE XVIII TOP HEAVY PROVISIONS The purpose of this Article XVIII is to conform the Plan to the requirements of section 416 of the Code and any regulations issued thereunder, and this Article XVIII shall be interpreted in accordance with such requirements and regulations. 18.010 DEFINITIONS. For purposes of this Article, the following special definitions shall apply: (a) "TOP HEAVY PLAN" shall mean a qualified retirement plan, including this Plan if applicable, which is included in, or which constitutes, an Aggregation Group under which, as of the Determination Date, the sum of the present values of accrued benefits for all Key Employees under all defined benefit plans in the Aggregation Group and the aggregate of all accounts of Key Employees under all defined contribution plans in the Aggregation Group exceeds sixty percent (60%) of the sum of the present values of accrued benefits under all such defined benefit plans and of all accounts under all such defined contribution plans for all participants under such plans. (b) "KEY EMPLOYEE" shall mean each Employee or former Employee who has, at any time during the five (5) year period ending on the Determination Date, performed services for an Affiliated Company and who is, at any time during the plan year ending on the Determination Date, or was, during any one of the four plan years preceding the plan year ending on the Determination Date, any one or more of the following. (1) An officer of the Company having annual compensation greater than fifty percent (50%) of the amount in effect under Code section 415(b)(1)(A) for any plan year; (2) One of the ten (10) persons having annual compensation from all Affiliated Companies greater than the limitation in effect under Code section 415(c)(1)(A) and owning (or considered as owning within the meaning of Code section 318, as modified by Code section 416(i)(B)(iii)), the largest interests in the Company; (3) Any person owning (or considered as owning within the meaning of Code section 318, as modified by Code section 416(i)(B)(iii)), more than five percent (5%) of the outstanding stock of the Company (or stock having more than five percent (5%) of the total combined voting power of all stock of the Company) (a "5 Percent Owner"); or (4) Any person who has annual compensation of more than one hundred fifty thousand dollars ($150,000) and would be described in subsection (3) above, if "one percent (1%)" was substituted for "five percent (5%)". -82- 85 For purposes of determining whether a person is an officer in subsection (1) above, in no event will more than fifty (50) Employees or, if less than fifty (50) Employees, the greater of three (3) Employees or ten percent (10%) of all Employees, be considered Key Employees solely by reason of officer status. In addition, persons who are merely nominal officers will not be treated as officers solely by reason of their titles. (c) "DETERMINATION DATE" shall mean the last day of the immediately preceding plan year or, in the case of the first plan year of any plan, the last day of such plan year. (d) "EMPLOYEE" shall mean not only an Employee as defined in Article I, but shall also include any beneficiary of such Employee. (e) "AGGREGATION GROUP" shall mean a group of plans (including this Plan) maintained by one or more Affiliated Companies in which a Key Employee is a participant or which is combined with this Plan in order to meet the coverage and nondiscrimination requirements of Code sections 410 and 401(a)(4). The Aggregation Group shall also include those plans other than this Plan which need not be aggregated with this Plan to meet Code Requirements, but which are selected by the Company to be part of a selective Aggregation Group which shall include this Plan if the Aggregation Group would continue to meet the requirements of Code sections 401(a)(4) and 410 with such plans being taken into account. (f) "NON-KEY EMPLOYEE" shall mean any employee who is not a Key Employee. Non-Key Employee shall also mean an employee who is a former Key Employee. 18.020 APPLICATION OF THIS ARTICLE. In the event that this Plan is or becomes a Top Heavy Plan, the following special provisions shall become applicable to this Plan and shall supersede the comparable provisions contained elsewhere in this Plan. (a) MINIMUM CONTRIBUTION. The Plan, where aggregated with each other defined contribution plan in the Aggregation Group in which a Key Employee is a participant, shall provide a minimum allocation to the account of each Participant who is not a Key Employee for each plan year to which these rules apply equal to the lesser of: (1) four percent (4%) of such Participant's compensation (subject to the provisions of Section 18.030), or (2) the highest percentage of contribution made for the plan year to a Participant who is a Key Employee for such plan year. -83- 86 (b) VESTING. A Participant's nonforfeitable right to his Company Contributions Account shall be not less than the amount determined pursuant to the following schedule: Years of Service Vested Interest -------------------------- --------------- Less than two 0% Two but less than three 20% Three but less than four 40% Four but less than five 60% Five but less than six 80% Six or more 100% If the Plan ceases to be a Top Heavy Plan the vesting schedule set forth in Section 5.010(a) shall again become applicable; provided that a Participant's nonforfeitable right to his Company Contributions Account shall not be less than his nonforfeitable right to the balance of his Company Contributions Account immediately before the Plan ceased to be a Top Heavy Plan; and provided further that any Participant who at the time the Plan ceased to be a Top Heavy Plan had been an Employee on the last day of at least five (5) plan years following his becoming an Employee shall be permitted irrevocably to elect to remain under the vesting schedule set forth in this subsection (b) in lieu of the vesting schedule set forth in Section 5.010(a). (c) MAXIMUM COMPENSATION. For any plan year in which the Plan is a Top Heavy Plan, only the first two hundred thousand dollars ($200,000) of each Participant's annual compensation will be taken into account for purposes of determining benefits under the Plan, provided that such dollar amount shall be automatically adjusted as prescribed by the Secretary of the Treasury. 18.030 ADJUSTMENT OF LIMITATION ON ANNUAL BENEFIT. If for any plan year the Plan becomes "super top heavy" (i.e., by substituting "90%" for "60%" in Section 18.010(a)), the percentage described in Section 18.020(a)(1) shall be changed to three percent (3%), and Section 14.020 shall be applied in accordance with the requirements of Code section 416(h)(1) (i.e., by substituting "90%" for "60%" in Section 18.010(a)). -84- 87 APPENDIX A RETIREMENT PLANS GOVERNING CREDITING OF CONTINUOUS EMPLOYMENT 1. Rockwell International Corporation Retirement Income Plan for Certain Salaried Employees. 2. Rockwell International Corporation Retirement Income Plan For Salaried Employees in Certain Units of the General Industries Operations. 3. Rockwell International Corporation Retirement Income Plan for Certain Salaried Employees of the General Industries Operations. 4. Rockwell International Corporation Salaried Employees' Retirement Plan - Electronics Operations. 5. Rockwell International Corporation Retirement Plan for Eligible Employees on the Salary and Weekly Payrolls of Electronics Operations, North American Aircraft Operations and North American Space Operations. 6. Maine Electronics Inc. Salary Payroll Retirement Plan. 7. Rockwell Telecommunications, Inc. (formerly Wescom) Retirement Plan for Exempt Salaried Employees. 8. Retirement Plan for Hourly-Rated Employees of the Sulphur Springs, Texas Plant. 9. Asheville Employees Retirement Savings Plan, Truck Axle Division. -85- 88 APPENDIX B PROCEDURES FOR DISTRIBUTIONS TO PARTICIPANTS AGE 70-1/2 Pursuant to the general powers of administration conferred on the Plan Administrator by Section 11.070 of the Plan, the Plan Administrator hereby adopts the following procedures which shall govern the manner in which distributions required under Section 5.020(c) to Participants who have become age 70-1/2 on or after January 1, 1988, shall be made: 1. Commencing no later than January 31, 1990, each such Participant shall receive a complete distribution of his or her Account in the Plan in accordance with Section 5.020 of the Plan valued as of December 31, 1989. No later than January 31 of each year thereafter, each Participant who, as of December 31 of that year has attained age 70-1/2 will also receive a complete distribution of his or her Account in the Plan valued as of the immediately preceding December 31. 2. Applicable waivers for federal and state income tax purposes must be completed and returned to the Company's Administrative Services Center by no later than ten (10) days prior to January 31 of each year in order to prevent federal and, if applicable, state income taxes from being withheld from distributions. 3. Distributions pursuant to Paragraph 1 shall not affect any existing elections by such Participants to continue making contributions to the Plan nor the Company's obligation to continue to make matching Company Contributions pursuant to Article III of the Plan, all of which shall be invested in accordance with the provisions of Article II. Compensation Deduction, Compensation Deferral and Company Contributions made to the Plan during each calendar year by such Participants, together with earnings thereon, will be distributed the following year in accordance with Paragraph 1. Approved and adopted 12/5 , 1990: ----------------- -- /S/ L. A. FELIX, JR. - --------------------------------- L. A. Felix, Jr. Plan Administrator -86- 89 APPENDIX C PROCEDURES, TERMS AND CONDITIONS OF LOANS Pursuant to Section 6.040 of the Plan and the recommendation of the Plan Administrator, the Employee Benefit Plan Committee of Rockwell International Corporation hereby adopts the following procedures, terms and conditions for the granting and administration of loans from the Plan: ELIGIBILITY FOR LOAN: To be eligible to obtain a loan from the Plan, an Employee must have an Account balance with the Plan and be employed on an active payroll of an Affiliated Company at the time he applies for a loan. A "party in interest" (as defined in ERISA section 3(14)) who has an Account balance with the Plan, but who is not an Employee, shall be eligible to obtain a loan only if he can provide an agreement by his current employer to deduct and remit to Savings Plan Loan Administration the required loan repayments. However, following a default on another loan from the Plan or any other Company sponsored savings plan, an Employee or other party in interest may not obtain a loan from the Plan prior to the expiration of the greater of: (a) one (1) year, or (b) a period of time equal to the original term of the defaulted loan. NUMBER OF LOANS PERMITTED FROM PLAN AT ANY ONE TIME; MINIMUM AMOUNT OF LOAN: Only a single loan is permitted to be outstanding from all Company sponsored savings plans at any one time. Any Employee or other party in interest who has an outstanding loan with the Plan will be required to repay the loan in full before applying for another loan. Each loan must be in the minimum amount of $1,000. MAXIMUM AMOUNT OF LOAN: The amount which any Employee or other party in interest shall be permitted to borrow from the Plan shall be based on the aggregate of the value of his Account determined in accordance with Section 4.030 of the Plan and may not exceed the lesser of an amount which, when combined with all outstanding loans to such Employee or other party in interest from all other plans of all Affiliated Companies, equals Fifty Thousand Dollars ($50,000), reduced by the highest outstanding and unpaid balances during the twelve (12) month period immediately preceding the date on which such loan is made of all prior loans to such Employee or other party in interest from the Plan and such other plans; or one-half (1/2) the aggregate of the balances of his Account. The maximum amount of any loan will be further limited to an amount which, at the applicable rate of interest, will result in periodic repayments of installments not in excess of net earnings in any applicable pay period, after all statutory withholdings, deductions for employee benefits and pre-tax contributions to the Plan, but before other deductions for credit union, savings bond and other savings and charitable deductions, of the Employee or other party in interest for the week in which the loan repayment is to be deducted. LOAN APPLICATIONS: Initial loan application forms will consist of an application form and a repayment worksheet, both in form approved by the Plan Administrator, and may be obtained from any Benefits Representative or Payroll -87- 90 Department. The loan application form must be completed and signed by the Employee or other party in interest and returned to the applicable Benefits Representative or Payroll Department, which will review the forms to determine eligibility and, if approved, forward them to Savings Plan Loan Administration, Administrative Services Center, Rockwell International Corporation, 7391 Lincoln Way, Garden Grove, California 92641 for processing. If the loan is approved by the Savings Plan Loan Administrator, a promissory note, payroll deduction authorization and Truth In Lending statement, together with a letter notifying the applicant of the approval of the loan, all in form approved by the Plan Administrator, will be prepared and forwarded to the applicant for execution. These forms must be executed by the applicant and returned to Savings Plan Loan Administration within thirty (30) days after the date of the letter approving the loan or the application will be deemed withdrawn. SOURCE OF LOAN FUNDS: Each loan will be funded by withdrawing the required amounts from the Plan account(s) of the Employee or other party in interest specified in his loan application form. Each such account will be credited with a receivable equal to the amount withdrawn, the aggregate of which receivables will be evidenced by the promissory note of the Employee or other party in interest for the amount of the loan. To the extent a loan is made against a Participant's Stock Fund B account, the Participant will receive cash in lieu of shares of Common and/or Class A Stock. The Trustee shall not be permitted to sell shares of Common or Class A Stock in order to provide the cash with which to finance loan applications, but shall utilize funds received from Participants and the Company for credit to Stock Funds A or B for such purpose and shall process such applications on a first-come first-service basis. If at any time the Trustee shall not have sufficient cash on hand to finance all outstanding loan applications, the Trustee shall defer processing of each application for which sufficient cash is not available until sufficient cash becomes available to enable the Trustee to process such loans on a first-come first-service basis. DETERMINATION OF INTEREST RATE TO BE CHARGED FOR LOANS: The interest rate to be charged for loans will be the rate determined by the Plan Administrator as equivalent to the rate of interest charged by First Interstate Bank for secured loans comparable to loans from the Plan at the time the loan from the Plan is approved. The Plan Administrator has determined that First Interstate's prime rate of interest plus 1% represents an appropriate rate of interest under this standard. TERM OF LOAN: Loans will be permitted for terms of 12, 24, 36, 48 or 60 months for loans other than those for the purpose of purchasing a primary residence. Loans for the purpose of purchasing a primary residence will be permitted for a term of 120 months. REPAYMENTS: Loan repayments by Employees will be deducted from the Employee's paycheck each pay period. If a paycheck is insufficient to cover the full amount of the loan repayment, no deduction will be made, and the repayment will be deducted from the Employee's next paycheck. Loan repayment schedules for parties in interest who are not Employees will be developed on an individual basis, but parallelling as closely as possible the loan repayment schedules for Employees. -88- 91 PREPAYMENTS: Subject to the limitations described in this paragraph, a Participant may prepay at any time the full unpaid balance of his loan. Partial prepayments in excess of scheduled payroll deductions will not be accepted. No prepayments will be accepted within twelve (12) months after the date of the loan unless the borrower is an Employee and terminates employment within such twelve (12) month period, in which case prepayment is permitted within the periods specified in Section 6.020(d)(i). MISSED PAYMENTS: If any payment is not made, interest will continue to accrue on such missed payment and subsequent payments will be applied first to accrued and unpaid interest and then to principal. A notice will be mailed to the last known address of the Participant on each occasion of a missed payment, or, in the case of payments made more frequently than monthly, the number of payments equivalent to a monthly payment, have been missed. These notices will continue until three (3) consecutive monthly payments, or, in the case of payments made more frequently than monthly, a number of payments equivalent thereto, have been missed. The notice will state the amount of the missed payment(s), that the missed payment(s) will be deducted from his next paycheck(s), that if three (3) consecutive monthly payments, or, in the case of payments made more frequently than monthly, a number of payments equivalent thereto, are missed the loan will be considered in default, and that, upon default, the unpaid balance of the loan and all accrued and unpaid interest will be considered as taxable income. TERMINATION OF EMPLOYMENT: If an Employee or other party in interest terminates employment so that payroll deductions may no longer be made to effect loan repayments, such person may continue to make loan repayments by personal check to Savings Plan Loan Administration, Rockwell International Corporation, Administrative Services Center, Department LA 21089S, Pasadena, California 91185. In the event that three (3) consecutive monthly payments (or a number of payments equivalent thereto) are missed, the loan will be considered in default. DEFAULT: A loan will be considered in default after three (3) consecutive monthly payments (or a number of payments equivalent thereto) have been missed during the term of the loan or when a Participant effectively revokes a payroll deduction authorization. When a loan is in default, all accrued and unpaid interest will be capitalized, and a taxable distribution for the purposes of Code section 72(p) only will be deemed to have occurred, and a notice will be sent to the Participant advising him of the default and the tax implications thereof. If an event permitting distribution of the Account of the Participant has occurred (whether or not distribution of the Account will actually be made concurrently therewith or has been deferred pursuant to applicable provisions of the Plan, the unpaid balance of the loan, including capitalized interest, will be charged off against such person's Account. If no distributable event has occurred, the unpaid balance of the loan, including capitalized interest, will be retained in the Account and will continue to bear interest until such time as distribution is permitted under Code section 401(k), at which time the unpaid balance of the loan, including all accrued and unpaid interest, will be charged off, and the Participant's promissory note will be marked "Charged in Full Against Account" and returned to the Participant. A W2-P reflecting the Participant's taxable income (in the year of default, the unpaid balance of the loan plus capitalized interest -89- 92 and interest accrued and unpaid thereafter; in each subsequent year, interest accrued and unpaid on the loan) will be issued to the Participant as soon as practicable after the end of each calendar year during any part of which a defaulted loan is retained in a Participant's Account. FORFEITURE OF NON-VESTED COMPANY MATCHING CONTRIBUTIONS ON DEFAULTED LOANS: In the event that, at the time a defaulted loan is charged against the Participant's Account, the loan consisted of non-matured Compensation Deferral or Compensation Deduction Contributions, that portion of the Participant's Company Contributions Account attributable to such non-matured Contributions will, to the extent such forfeiture is permitted under Article V or VI, be forfeited. PROCEDURE UPON PAYMENT IN FULL OR CHARGE-OFF OF LOAN: Upon receipt of the final, scheduled repayment paying the loan in full, the Participant's promissory note will be marked "Paid In Full" and returned to the Participant. If, as a result of missed payments, the loan has not been paid in full at such time, the Participant will be billed for the remaining balance. If payment of the remaining balance and all accrued and unpaid interest is not received within three (3) months thereafter, the loan will be considered to be in default. Approved, OCTOBER 1, , 1990: ------------------------- -- THE EMPLOYEE BENEFIT PLAN COMMITTEE OF ROCKWELL INTERNATIONAL CORPORATION By /S/ R. A. DEPALMA ---------------------------------------- R. A. dePalma, Chairman, duly authorized -90- EX-99.B.1 22 ROCKWELL INTERNATIONAL 10-K 1 EXHIBIT 99-b-1 APPROVAL OF THE MEMORANDUM OF PROPOSED AMENDMENTS TO THE ROCKWELL INTERNATIONAL CORPORATION SAVINGS PLAN FOR CERTAIN REPRESENTED HOURLY EMPLOYEES I, Robert H. Murphy, Senior Vice President, Organization & Human Resources, Rockwell International Corporation, pursuant to authority of the Board of Directors of Rockwell International Corporation by resolution dated November 1, 1989, for and on behalf of said Corporation, do hereby approve the adoption by Rockwell International Corporation, effective as of February 1, 1994, the Memorandum of Proposed Amendments to the Rockwell International Corporation Savings Plan for Certain Represented Hourly Employees ("the Plan") in the form attached hereto which provides for increased availability of Plan assets, through Plan withdrawals, hardship distributions and loans, in situations in which a national disaster or emergency has been declared under applicable federal law by the President of the United States, which disaster has placed one or more Plan Participants in particular need of access to such Plan assets by means of such withdrawal, hardship distribution or loan if such withdrawal, hardship distribution or loan is requested for a reason associated with financial need of the Participant resulting from the effects of the said condition. Dated this 25th day of February, 1994. /s/ Robert H. Murphy --------------------------------------- Robert H. Murphy, Senior Vice President Organization & Human Resources 2 MEMORANDUM OF PROPOSED AMENDMENTS TO THE ROCKWELL INTERNATIONAL CORPORATION SAVINGS PLAN FOR CERTAIN REPRESENTED HOURLY EMPLOYEES ------------------------------ Amend the Rockwell International Corporation Savings Plan for Certain Represented Hourly Employees (the "Plan"), effective February 1, 1994, in order to provide for increased availability of Plan assets, through Plan withdrawals, hardship distributions and loans, in situations in which a national disaster or emergency has been declared under applicable federal law by the President of the United States, which disaster has placed one or more Plan Participants in particular need of access to such Plan assets by means of such withdrawal, hardship distribution or loan if such withdrawal, hardship distribution or loan is requested for a reason associated with financial need of the Participant resulting from the effects of the said condition. 1. Amend subparagraph (C) of subsection (d)(i) of Section 5.010 of the Plan in its entirety to read as follows: "(C) any other reason permitted under section 401(k)(2)(B)(i)(IV) of the Code and approved by the Administrative Committee." 2. Amend subsection (f) of Section 5.010 of the Plan in its entirety to read as follows: "(f) Withdrawals shall be in a minimum amount of $100 with respect to the Equity Fund, the Money Market Fund, the Rockwell Stock Fund or Guaranteed Investment Fund. A Participant may not make a request for withdrawal within twenty-six (26) weeks of any prior request for withdrawal; provided, however, that this limitation upon the ability of a Participant to make a withdrawal (including hardship withdrawals pursuant to the provision of subsection (d) of this Section) within twenty-six (26) weeks of any prior request for a withdrawal shall be waived by the Plan Administrator for the six-month period immediately following any due declaration by the President of the United States under applicable federal law that a particular occurrence or situation constitutes a national disaster condition, if such withdrawal is requested for a reason associated with financial need of the Participant resulting from the effects of the said condition. Payment of withdrawal requests shall be made to the Participant as soon as practicable." -1- 3 3. Amend Section 5.020 of the Plan in its entirety to read as follows: "5.020 Loans. As soon as practicable after January 1, 1990, the Plan Administrator shall establish written procedures pursuant to which any Employee or other "party in interest" (as defined in ERISA Section 3(14)) may apply for and receive from the Plan loans in accordance with such terms and conditions as the Plan Administrator may prescribe in writing consistent with the provisions of the Plan and applicable provisions of the Code and ERISA. Such procedures, terms and conditions shall require, in addition to such other written procedures, terms and conditions as may be established by the Plan Administrator not inconsistent herewith, that (a) the amount which any Employee or other party in interest shall be permitted to borrow from the Plan shall be based on the aggregate of the value of his Account determined in accordance with Section 3.030; (b) no Employee or other party in interest shall be permitted to obtain a loan from the Plan of less than One Thousand Dollars ($1,000) or in an amount exceeding the least of (i), (ii), or (iii): (i) an amount which, when combined with all outstanding loans to such Employee or other party in interest from all other plans of all Affiliated Companies, equals Fifty Thousand Dollars ($50,000), reduced by the excess, if any, of the highest outstanding and unpaid balances of all prior loans to such Employee or other party in interest from the Plan and such other plans during the twelve (12) month period immediately preceding the date on which such loan is made, over the outstanding balance of any loan to the Employee or other party in interest from the Plan or such other plans on the date on which the loan is made; (ii) one-half (1/2) the aggregate of the balances of his Account; or (iii) such amount, not exceeding the amounts described in (i) and (ii) above, as the Plan Administrator shall determine. In addition to the above and to such other procedures, terms and conditions as may be established by the Plan Committee, no such Employee or other party in interest shall be permitted to have more than a single loan from the Plan and all other "qualified employer plans" (as such term is defined in section 72(p)(4) of the Code) of the Company outstanding at any one time. -2- 4 At such time as the Plan Administrator shall have established such written procedures, terms and conditions the Plan Administrator shall cause (1) an announcement thereof to be disseminated to all eligible Employees and other parties in interest, and (2) a copy of such written procedures, terms and conditions to be attached to and made a part of this Plan as Appendix C. Until the Plan Administrator shall have established such procedures, terms and conditions no Employee or other party in interest shall have any right to obtain a loan from the Plan. Once available to eligible Employees, however, all such loans shall be made available to all eligible Employees and other parties in interest on a reasonably equivalent and non-discriminatory basis." -3- -----END PRIVACY-ENHANCED MESSAGE-----