-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EZJcuTp570IDc6hog8vWqzq2HlOdRAskxY5CGnJcT08bW1uIzuShrGJhkBJ+PvUS jcWbsOOGBeu6TKg4FcGbrw== 0000950128-95-000220.txt : 19951222 0000950128-95-000220.hdr.sgml : 19951222 ACCESSION NUMBER: 0000950128-95-000220 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951221 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: 95603295 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 10-K 1 ================================================================================ 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, 1995. 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 and Zurich Stock Exchanges 7 5/8% Notes due February 17, 1998 New York Stock Exchange 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 7 7/8% Notes due February 15, 2005 New York Stock Exchange 6 5/8% Notes due June 1, 2005 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 on November 30, 1995 was approximately $10.5 billion. 184,655,768 shares of registrant's Common Stock, par value $1 per share, and 32,328,424 shares of registrant's Class A Common Stock, par value $1 per share, were outstanding on November 30, 1995. DOCUMENTS INCORPORATED BY REFERENCE (1) Certain information contained in the Annual Report to Shareowners of registrant for the fiscal year ended September 30, 1995 is incorporated by reference into Part I, Part II and Part IV hereof. (2) Certain information contained in the Proxy Statement for the Annual Meeting of Shareowners of registrant to be held on February 7, 1996 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 1995, 72% of the Company's total sales were made to U.S. commercial and international customers, 16% of the Company's total sales were made under United States Government defense contracts and subcontracts, and 12% of the Company's total sales were made under contracts with the National Aeronautics and Space Administration (NASA) for space activities. 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), to information under specific captions or on specific pages of the 1995 Annual Report to Shareowners of the Company (the 1995 Annual Report) or to information in the Proxy Statement for the Annual Meeting of Shareowners of the Company to be held on February 7, 1996 (the 1996 Proxy Statement), such information shall be deemed to be incorporated therein by such reference. As used herein, the terms the "Company" or "Rockwell" (and in the 1995 Annual Report, the "company") include subsidiaries and predecessors unless the context indicates otherwise. BUSINESS SEGMENTS The Company's business segments are engaged in research, development, and manufacture of diversified products as follows: Electronics: Automation--industrial automation equipment and systems. Avionics--avionics products and systems and related communications technologies primarily used in commercial and military aircraft. Semiconductor Systems--semiconductor-based subsystems including fax and data modems, global positioning system receiver engines, and gallium arsenide devices. Defense Electronics--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, advanced space-based surveillance systems, high-energy laser and other directed-energy programs, and space electric power (Space Systems); and military aircraft and modifications and military and commercial aircraft structural components (Aircraft). 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, 1995, is contained under the captions RESULTS OF OPERATIONS, Sales and Earnings by Business Segment, 1995 Compared to 1994 and 1994 Compared to 1993 in the MD&A on pages 13-16 hereof, and in Note 22 of the NOTES TO FINANCIAL STATEMENTS in the 1995 Annual Report. Information with respect to the Company's total backlog at September 30, 1995 is contained under the caption 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 in the 1995 Annual Report and under the caption GOVERNMENT CONTRACTS in the MD&A on page 18 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, 1995 were as follows:
1995 1994 1993 ------- ------- ------- (IN MILLIONS) Sales: Automation....................................... $ 3,590 $ 2,085 $ 1,716 Avionics......................................... 1,368 1,343 1,299 Semiconductor Systems............................ 760 581 423 Defense Electronics.............................. 987 998 1,213 ------- ------- ------- Total............................................ $ 6,705 $ 5,007 $ 4,651 ======= ======= ======= Operating Earnings: Automation....................................... $ 481 $ 265 $ 193 Avionics/Semiconductor Systems/Defense........... 440 432 409 ------- ------- ------- Total............................................ $ 921 $ 697 $ 602 ======= ======= =======
Automation. The acquisition of Reliance Electric Company (Reliance) in the second fiscal quarter made Automation the Company's largest business. The Company's automation products include programmable controllers, human-machine interface devices, communications networks, programming and application software, AC/DC drives and drive systems, sensing and motion control devices, machine vision, computer numeric control systems, data acquisition products and global support services; the Reliance acquisition added standard and engineered motors and mechanical power transmission equipment. 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 electronic equipment for flight control, cockpit display, navigation, voice and data communication, cockpit management, radar, global positioning and other systems for airlines, corporate aircraft, government and military applications. During fiscal 1995, Rockwell's Switching Systems business, which provides call distribution equipment to telephone companies, airlines, hotels, telemarketing bureaus and similar high call volume businesses, was moved from the Company's Semiconductor Systems business into Avionics. Semiconductor Systems. The Company's Semiconductor Systems business (formerly named Telecommunications) is the world leader in semiconductors for fax, voice and data modems for fax machines, personal computers and other uses 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. The business has now entered the market for wireless communications, supplying chipsets for cellular and cordless phones, wireless modem devices for laptop computers, and modules for Global Positioning System receivers. 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 electronic upgrades and modifications; tactical weapons; space defense sensors and electronics; navigation and guidance systems; and naval combat systems for ships and submarines. The Company also provides products for the commercial intelligent vehicle highway systems marketplace. Sales of the Company's Defense Electronics business for fiscal 1995 continued to be affected by reductions in government spending in defense programs. 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, 1995 were as follows:
1995 1994 1993 ------- ------ ------- (IN MILLIONS) Sales: Space Systems.................................... $ 1,882 $2,044 $ 2,279 Aircraft......................................... 565 583 727 ------- ------ ------- Total............................................ $ 2,447 $2,627 $ 3,006 ======= ====== ======= Operating Earnings............................... $ 361 $ 372 $ 369 ======= ====== =======
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. The Company also designs the power system for the space station, builds propulsion systems for Atlas and Delta expendable launch vehicles, and develops advanced technologies for national defense and space programs. The Company is one of NASA's largest contractors in terms of dollar volume. Sales of these businesses during fiscal 1995 declined due to continuing reductions in government spending in space programs. In November 1995, United Space Alliance, in which the Company participates 50/50 with Lockheed Martin Corporation, was selected by NASA for sole source negotiation of a contract for operation of the Space Shuttle. Aircraft. The Company's aircraft operations design, build and modify military aircraft and supply metal and composite to military and commercial aerostructures. Current activities include support and modification of the B-1B Lancer bomber, advanced technology programs, including the X-31 experimental aircraft, and aerostructures for Boeing 737, 747 and 777 aircraft. In June 1995, the Company acquired Aero Space Technologies of Australia (ASTA), which manufactures military aircraft equipment and parts for the international airliner and military aerostructure components markets. Automotive The sales and operating earnings of the businesses that comprise the Company's Automotive business segment for the three fiscal years ended September 30, 1995 were as follows:
1995 1994 1993 ------- ------- ------- (IN MILLIONS) Sales: Heavy Vehicle Systems............................ $ 1,929 $ 1,744 $ 1,455 Light Vehicle Systems............................ 1,192 900 893 ------- ------- ------- Total............................................ $ 3,121 $ 2,644 $ 2,348 ======= ====== ======= Operating Earnings............................... $ 212 $ 114 $ 135 ======= ======= =======
Heavy Vehicle Systems. Automotive's heavy vehicle systems business is a major global supplier of drivetrain components and systems for heavy- and medium-duty commercial trucks, buses, trailers and off-highway vehicles, and government heavy-duty wheeled vehicles. Major components produced include front steer axles, single and tandem rear drive axles, trailer axles, clutches, transmissions, drivelines, brakes, automatic slack adjusters, anti-lock braking systems (ABS), and air dryers for brake systems. North American factory sales of heavy-duty trucks totaled a record 244,000 units in fiscal 1995, compared with 215,000 the prior year. Sales of medium-duty trucks, used primarily for short hauls and local delivery, were 150,000 units, up from 125,000 in fiscal 1994. Trailer sales rose to a record 321,000 units, up from 255,000 in the previous year. Light Vehicle Systems. The Company's light vehicle systems business is a leading supplier of sunroof, door, access control and seat adjusting systems and of suspensions and wheels for the world's passenger car 4 5 and light truck industries. In the automotive electronics market, the Company also provides new products such as anti-squeeze windows, electronic controls and the PathMaster navigation system for automobiles. In the face of continuing customer pressure for reduced costs, the Company is emphasizing product enhancements that provide added value and concentrating its 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. To enhance its ability to support North American customers for door systems, the Company acquired the automotive window regulator business of Dura Automotive Systems, Inc. during fiscal 1995. Graphic Systems The sales and operating earnings of the Company's Graphic Systems business segment for the three fiscal years ended September 30, 1995 were as follows:
1995 1994 1993 ----- ----- ----- (IN MILLIONS) Sales................................................. $ 697 $ 655 $ 632 ===== ===== ===== Operating Earnings.................................... $ 66 $ 31 $ 15 ===== ===== =====
Graphic Systems is the world's leading supplier of newspaper printing press systems and a major supplier of commercial web presses. The Company's commercial presses are used to produce advertising inserts, catalogs, magazines and books. Performance of this business improved significantly in fiscal 1995, due primarily to internal programs that improved product costs, efficiency, and productivity. In response to a complaint filed by the Company, the U.S. Commerce Department is considering whether German and Japanese large newspaper presses are being sold in the United States at artificially low prices. 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, 1994 (the latest year for which data have been published), the Company was awarded the second largest dollar volume of NASA's prime contracts and the thirteenth 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 newspaper printing press systems. 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 GOVERNMENT CONTRACTS in the MD&A on page 18 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. In January 1995, the Company completed its acquisition of Reliance, a major manufacturer of industrial products and telecommunications equipment for $1,586 million. The purchase price was financed through $311 million of short-term borrowings, $800 million of long-term debt, and the $475 million of proceeds from the August 1995 sale of Reliance's telecommunications business. The Company also acquired several other businesses during fiscal 1995 at an aggregate cost of $121 million. GEOGRAPHIC INFORMATION The Company conducts operations in the United States and in 37 foreign countries. Selected financial information by major geographic area for the three years ended September 30, 1995 is contained in Note 22 of the NOTES TO FINANCIAL STATEMENTS in the 1995 Annual Report. 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 in the 1995 Annual Report. The Company's Science Center conducts a basic research program to support the strategies of the operating businesses. At September 30, 1995, the Company employed approximately 14,869 professional engineers and scientists and 3,616 supporting technical personnel, most of whom are engaged in a wide variety of activities on United States Government contracts and subcontracts. EMPLOYEES At September 30, 1995, the Company had 82,671 employees, of whom 20,791 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 6 7 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 ENVIRONMENTAL ISSUES in the MD&A on pages 17-18 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, "Reliance" for electric motors and mechanical power transmission products and "Goss" for printing presses. SEASONALITY None of the Company's business segments is seasonal. ITEM 2. PROPERTIES. At September 30, 1995, the Company operated 213 plants and research and development facilities throughout the United States and in Europe, Brazil, Canada, Mexico, Australia and the Far East. It also had approximately 350 sales offices, warehouses and service centers. These facilities had an aggregate floor space of approximately 48.9 million square feet. Of this floor space, approximately 76% was owned by the Company and approximately 21% was leased, with the balance being made available under facilities contracts for use in the performance of United States Government contracts. At September 30, 1995, the Company had 3.9 million square feet of floor space (including 3.5 million square feet in Company-owned facilities) that were not in use, with 67% of that total represented by 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 been well maintained, are in sound operating condition and contain all equipment and facilities 7 8 necessary to operate at present levels. A summary of floor space of these facilities at September 30, 1995 is as follows:
COMPANY- GOVERNMENT- OWNED LEASED FURNISHED LOCATION AND SEGMENTS FACILITIES FACILITIES FACILITIES TOTAL --------------------- ---------- ---------- ----------- ----- (IN MILLIONS OF SQUARE FEET) United States: Electronics....................................... 15.2 4.8 20.0 Aerospace......................................... 6.1 1.6 1.8 9.5 Automotive........................................ 4.4 0.4 4.8 Graphic Systems................................... 1.2 0.3 1.5 Europe: Electronics....................................... 0.6 1.3 1.9 Automotive........................................ 3.8 0.3 4.1 Graphic Systems................................... 0.9 0.9 South America: Electronics....................................... 0.2 0.2 Automotive........................................ 2.0 2.0 Canada and other areas: Electronics....................................... 0.5 0.7 1.2 Automotive........................................ 0.8 0.8 Graphic Systems................................... 0.1 0.1 Corporate Offices (including centralized computing and certain research and development facilities)....................................... 1.4 0.5 1.9 ---- ---- --- ---- Total..................................... 37.0 10.1 1.8 48.9 ==== ==== === ====
ITEM 3. LEGAL PROCEEDINGS. Rocky Flats Plant. On January 30, 1990, a civil action was brought in the United States District Court for the District of Colorado against 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). The action alleges the improper production, handling and disposal of radioactive and other hazardous substances, constituting, among other things, violations of various environmental, health and safety laws and regulations, and misrepresentation and concealment of the facts relating thereto. The plaintiffs, who purportedly represent two classes, sought compensatory damages of $250 million for diminution in value of real estate and other economic loss; the creation of a fund of $150 million to finance medical monitoring and surveillance services; exemplary damages of $300 million; CERCLA response costs in an undetermined amount; attorneys' fees; an injunction; and other proper relief. On February 13, 1991, the court granted certain of the motions of the defendants to dismiss the case. The plaintiffs subsequently filed a new complaint, and on November 26, 1991, the court granted in part a renewed motion to dismiss. The remaining portion of the case is pending before the court. On October 8, 1993, the court certified separate medical monitoring and property value classes. The case is currently in discovery, and trial is expected in 1996. 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 this action, and the Company has been reimbursed for all such costs incurred to date. 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. 8 9 On February 2, 1994, the court denied Rockwell's motion to dismiss the complaint for lack of subject matter jurisdiction, and discovery is proceeding. On November 14, 1995, the Department of Justice (DOJ) filed a motion seeking leave to intervene in the case on the government's behalf. In response to that action the DOE notified the Company on December 6, 1995 that it will no longer reimburse costs incurred by the Company in defense of this action. The Company believes intervention by the DOJ would be improper, and is therefore opposing both governmental actions. 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 and assert various statutory and common law claims. The relief sought includes unspecified compensatory and punitive damages for personal injuries and for economic losses, and various injunctive and other equitable relief. 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. These actions and the follow-on claims 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. 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, 1995 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, intellectual property, 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. Information with respect to a pending investigation is contained under the caption OTHER MATTERS in the MD&A on page 18 hereof. 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 1995 fiscal year. 9 10 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, 1995 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................................................................... 57 DON H. DAVIS, JR.--President and Chief Operating Officer of Rockwell since July 1995; Executive Vice President and Chief Operating Officer of Rockwell from January 1994 to July 1995; Senior Vice President and President, Automation of Rockwell from June 1993 to January 1994; President of Allen-Bradley from July 1989 to January 1994............................... 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......................... 53 KENT M. BLACK--Executive Vice President and Chief Operating Officer of Rockwell................................................................... 56 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........................................................ 57 LEE H. CRAMER--Vice President and Treasurer of Rockwell...................... 50 WILLIAM D. FLETCHER--Senior Vice President, International of Rockwell since October 1995; President, Asia-Pacific Sales Region of Allen-Bradley from March 1995 to October 1995; President of the Asia-Pacific Region of Allen-Bradley from June 1993 to March 1995; Senior Vice President, International Group and Motion Control Division of Allen-Bradley from January 1992 to June 1993; Senior Vice President, International Group of Allen-Bradley prior thereto................................................ 56 JODIE K. GLORE--Senior Vice President of Rockwell and President & Chief Operating Officer-Rockwell Automation since October 1995; President of Allen-Bradley from January 1994 to October 1995; Senior Vice President, Automation Group (formerly Industrial Computer and Communication Group) of Allen-Bradley from January 1992 to January 1994; Vice President, Sales and Marketing of Square D Company (electrical distribution and industrial control products) from October 1990 to January 1992; Vice President & General Manager, Power Equipment Business of Square D Company prior thereto.................................................................... 48 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.................................................................... 59 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.............................................................. 66 LAWRENCE J. KOMATZ--Vice President and Controller of Rockwell................ 53 ROBERT R. LIND--Vice President, Corporate Development of Rockwell since December 1994; Managing Director of Lehman Brothers (investment banking) prior thereto.............................................................. 47 RICHARD R. MAU--Senior Vice President of Rockwell since September 1995; Senior Vice President, Communications of Rockwell prior thereto............ 64 JOHN A. MCLUCKEY--Senior Vice President and President & Chief Operating Officer-Aerospace and Defense of Rockwell since September 1995; Senior Vice President and President, Defense Systems of Rockwell from June 1993 to September 1995; President, Defense Electronics of Rockwell prior thereto... 55
10 11
NAME, OFFICE AND POSITION, AND PRINCIPAL OCCUPATIONS AND EMPLOYMENT AGE ----------------------------------------------------------------------------- --- ROBERT H. MURPHY--Senior Vice President, Organization and Human Resources of Rockwell................................................................... 57 WILLIAM A. SANTE, II--General Auditor of Rockwell............................ 52 JOHN R. STOCKER--Vice President, Law of Rockwell since November 1994; Vice President and Associate General Counsel of Rockwell prior thereto.......... 54 CHARLES C. STOOPS, JR.--General Tax Counsel of Rockwell...................... 62 EARL S. WASHINGTON--Senior Vice President, Communications of Rockwell since September 1995; Vice President, Advertising and Public Relations of Rockwell from March 1994 to September 1995; Vice President, Business Development of Rockwell from June 1993 to March 1994; Vice President of Strategic Management for Rockwell's Defense Electronics businesses from June 1990 to June 1993 and Vice President of Transportation Systems of Rockwell's Defense Electronics businesses from June 1992 to June 1993...... 51
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, 1995, there were 62,551 shareowners of record of the Company's Common Stock and 47,622 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, 1995 and 1994:
1995 1994 ------------ ------------ FISCAL QUARTERS HIGH LOW HIGH LOW --------------- ---- --- ---- --- First..................................... 36 7/8 33 5/8 38 1/2 33 Second.................................... 39 7/8 35 44 1/8 35 3/8 Third..................................... 47 1/8 38 3/4 41 34 1/2 Fourth.................................... 48 43 37 7/8 33 1/2
During fiscal year 1995 the Company repurchased, through daily open-market purchases, 3.5 million shares of Common Stock. Shares repurchased under the Company's stock repurchase 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. 11 12 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, 1995:
DIVIDENDS PER FISCAL YEAR COMMON SHARE ----------- ------------- 1995.......................................................... $1.08 1994.......................................................... 1.02 1993.......................................................... 0.96 1992.......................................................... 0.92 1991.......................................................... 0.86
ITEM 6. SELECTED FINANCIAL DATA. See the information in the table captioned SELECTED FINANCIAL DATA in the 1995 Annual Report. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. OVERVIEW For Rockwell and its shareowners, 1995 was an outstanding year. The Company exceeded the financial goals in its long-term strategy to continuously enhance shareowner value. The total investment return on Rockwell stock, including stock price appreciation and cash dividends, was 41 percent when measured from September 30, 1994 to September 30, 1995. In 1992 Rockwell management established long-term financial goals of low double-digit average annual earnings per share growth and annual return on shareowners' equity in the 18 to 20 percent range. Since that time, Rockwell has posted eleven consecutive quarters of double-digit earnings per share increases. In 1995 earnings per share rose 19 percent over 1994 and for the period 1992 to 1995, earnings per share increased at an average annual rate of about 17 percent. In addition, in 1995 the Company achieved a return on shareowners' equity of 20.8 percent, the third straight year it has met or exceeded its goal. With respect to cash flow, the Company's goal is that cash provided by operating activities together with proceeds from the sale of property and businesses will be sufficient not only to fund the capital expenditure programs of its businesses, but also provide at least $400 million a year to be used for dividends, acquisitions, debt reduction, and, as appropriate, stock repurchases. With cash provided by operating activities increasing 22 percent to $1.1 billion for the year, the Company has for the fourth consecutive year met this cash flow goal. For 1996 the Company's capital expenditures are planned to increase significantly to more than $800 million to accommodate the growth profile of our leadership businesses, particularly the fast-growing Automation and Semiconductor Systems businesses. Management believes, however, that with the excellent earnings potential of the Company's businesses and aggressive asset management, the Company's cash flow goal will be achieved. The biggest event at Rockwell in 1995 was the acquisition of Reliance. The integration of Reliance with the Company's Allen-Bradley Automation business positions Rockwell to become the world leader in factory automation. Reliance was immediately accretive to Rockwell earnings, contributing eight cents per share to Rockwell's results for the three quarters following its acquisition, after deducting the financing cost of the acquisition and amortization of goodwill and other intangible assets. Financing the Reliance acquisition has raised the Company's 1995 year-end debt to total capital ratio to 39 percent, which is above the Company's goal of 25 to 35 percent. However, the Company expects to return to its goal over the next two years. Notwithstanding this increase in debt, the major rating agencies rate Rockwell long-term debt as AA/AA- and its commercial paper has the highest possible rating. 12 13 Looking ahead, Rockwell's management is committed to achieving the Company's financial goals, which will substantially enhance shareowner value and, over the long-term, help Rockwell reach its vision to be the best diversified high-technology company in the world. RESULTS OF OPERATIONS Sales and Earnings by Business Segment
YEARS ENDED SEPTEMBER 30, --------------------------------------------------- 1995 1994 1993 1992 1991 ------- ------- ------- ------- ------- (IN MILLIONS) SALES Electronics Automation............................. $ 3,590 $ 2,085 $ 1,716 $ 1,471 $ 1,387 Avionics............................... 1,368 1,343 1,299 1,420 1,470 Semiconductor Systems.................. 760 581 423 333 297 Defense Electronics.................... 987 998 1,213 1,378 1,477 ------- ------- ------- ------- ------- Total................................ 6,705 5,007 4,651 4,602 4,631 ------- ------- ------- ------- ------- Aerospace Space Systems.......................... 1,882 2,044 2,279 2,372 2,644 Aircraft............................... 565 583 727 797 891 ------- ------- ------- ------- ------- Total................................ 2,447 2,627 3,006 3,169 3,535 ------- ------- ------- ------- ------- Automotive Heavy Vehicle Systems.................. 1,929 1,744 1,455 1,373 1,363 Light Vehicle Systems.................. 1,192 900 893 896 791 ------- ------- ------- ------- ------- Total................................ 3,121 2,644 2,348 2,269 2,154 ------- ------- ------- ------- ------- Graphic Systems........................... 697 655 632 688 962 ------- ------- ------- ------- ------- Sales of ongoing businesses................. 12,970 10,933 10,637 10,728 11,282 Divested businesses......................... 11 190 203 182 645 ------- ------- ------- ------- ------- Total................................ $12,981 $11,123 $10,840 $10,910 $11,927 ======= ======= ======= ======= ======= OPERATING EARNINGS Electronics Automation............................. $ 481 $ 265 $ 193 $ 102 $ 96 Avionics/Semiconductor Systems/Defense...................... 440 432 409 387 457 ------- ------- ------- ------- ------- Total Electronics...................... 921 697 602 489 553 Aerospace................................. 361 372 369 328 409 Automotive................................ 212 114 135 107 61 Graphic Systems........................... 66 31 15 21 121 ------- ------- ------- ------- ------- Operating Earnings of ongoing businesses.... 1,560 1,214 1,121 945 1,144 Divested businesses......................... (31) 8 (13) 16 372 Restructuring of businesses................. (272) General corporate--net...................... (133) (104) (100) (75) (85) Interest expense............................ (170) (97) (104) (108) (135) Provision for income taxes.................. (484) (387) (342) (295) (423) ------- ------- ------- ------- ------- Total................................ $ 742 $ 634 $ 562 $ 483 $ 601 ======= ======= ======= ======= ======= - --------- Total earnings for 1992 exclude the one-time charge related to the change in accounting for retirement medical benefits. Divested businesses include the sales, operating earnings and gains or losses on the disposition of significant businesses and product lines (see Note 22 of the NOTES TO FINANCIAL STATEMENTS in the 1995 Annual Report). Amortization of intangible assets related to the Allen-Bradley and Reliance acquisitions reduced Automation earnings by (in millions): 1995, $49; 1994, $22; 1993, $26; 1992, $56; and 1991, $67.
13 14 1995 Compared to 1994 Sales for 1995 increased 17 percent to a record $13 billion from $11.1 billion in 1994. Reliance contributed $1 billion to this increase, while strong markets, new product introductions, and increased market share led to record sales by the Company's Semiconductor Systems, Allen-Bradley Automation, and Light and Heavy Vehicle Systems businesses. Avionics and Graphic Systems sales were also up for the year, while sales by the Company's Aerospace and Defense Electronics businesses declined due to the continuing reduction in government spending in defense and space programs. In 1995 sales to U.S. commercial and international customers were up 30 percent from 1994 and now comprise 72 percent of the Company's total sales compared to 65 percent in 1994. Sales to the U.S. Department of Defense accounted for 16 percent of total sales compared to 20 percent in 1994, while sales to NASA were 12 percent compared to 15 percent a year ago. The Company's 1995 international sales increased 24 percent to $4.3 billion, the highest level in the Company's history. Net income for 1995 increased 17 percent over 1994. Seven of Rockwell's nine businesses had higher 1995 earnings, with six achieving double digit earnings growth from 1994. Operating earnings of the Company's businesses increased 28 percent over 1994. Electronics. 1995 earnings increased 32 percent primarily due to record sales and earnings performances by the Allen-Bradley Automation and Semiconductor Systems businesses and to the inclusion of Reliance's nine months operating earnings in Automation's results. The Electronics businesses accounted for 52 percent of the Company's total sales and 59 percent of total operating earnings. Automation is Rockwell's largest business with 28 percent of total sales and 31 percent of total operating earnings. Automation's 1995 earnings were up 82 percent over 1994, 45 percent due to strong worldwide markets for Allen-Bradley products and 37 percent to the inclusion of Reliance in this year's results. Excluding the newly acquired Reliance operations, Automation posted sales increases of 19 percent in the United States, 36 percent in Canada, 38 percent in Asia-Pacific, 28 percent in Europe, and 26 percent in Latin America. Semiconductor Systems earnings were 14 percent higher than 1994 due to strong customer demand for the Company's new high speed data modem products, which reached full production during this year's third quarter. In the fourth quarter, Semiconductor Systems earnings were more than three times higher than last year's fourth quarter earnings. Semiconductor Systems is the fastest growing business in Rockwell with sales up 25 percent annually during the past five years. Avionics earnings were ahead of 1994 principally due to strengthening commercial avionics markets in the second half of this year and substantial completion of development work on the Boeing 777 program. This more than offset significant investments in products to address the growing land transportation electronics market. Defense Electronics 1995 earnings were the second highest in its history although slightly below last year's record earnings due to lower sales and a favorable contract adjustment a year ago. Aerospace. Space Systems continued to generate strong returns and cash flow, although earnings were down 7 percent from a year ago due to lower volume. Aircraft's earnings were up 11 percent primarily due to the effect of unfavorable contract adjustments last year. Automotive. Earnings were up 86 percent over 1994 due to an 18 percent sales increase, improved operating performance, and lower Heavy Vehicle Systems product warranty costs. Earnings of Heavy Vehicle Systems more than doubled 1994's results, while earnings of Light Vehicle Systems were up 32 percent. Automotive's return on sales increased to 6.8 percent in 1995 compared to 4.3 percent last year. Graphic Systems. Earnings more than doubled 1994 earnings due to increased sales, particularly in the large newspaper printing press business, and continuing cost containment and productivity programs. 14 15 Corporate. 1995 earnings were reduced by higher interest expense, related to borrowings for the Reliance acquisition, higher contributions to the Company's charitable trust, and increased environmental costs related to previously disposed businesses. 1996 Outlook. Assuming continued moderate inflation and economic growth, the Company's management expects that the Company will again post double-digit earnings per share growth and achieve return on shareowners' equity in the 20 percent range. Automation and Semiconductor Systems are expected again to achieve double-digit sales and earnings increases. Automotive's earnings are expected to improve with sales increases planned by Light Vehicle Systems, and the Company also expects continued improvement in Avionics and Graphic Systems earnings. The Company expects earnings of the Aerospace and Defense Electronics businesses to approximate 1995's results. 1994 Compared to 1993 Sales in 1994 increased three percent from 1993, even though sales by the Company's Aerospace and Defense Electronics businesses declined 14 percent due to the continuing reduction in government spending in defense and space programs. All of the Company's commercial businesses achieved higher sales in 1994 compared to 1993 led by significant increases in Automation, Semiconductor Systems, and Heavy Vehicle Systems. Automation sales increased 22 percent and Semiconductor Systems sales increased 37 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. Net income for 1994 increased 13 percent over 1993 with earnings increases recorded by seven of the Company's nine business units. Electronics. 1994 earnings increased 16 percent from 1993 due to the higher sales and improved earnings performance of the Automation and Semiconductor Systems 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. Automation's higher earnings were due to strong demand for Allen-Bradley products in all of its primary markets worldwide. Automation's incoming orders in 1994 averaged $8.8 million per day, up 21 percent from 1993 and international sales surpassed 30 percent of total sales for the first time. Semiconductor Systems 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. Aerospace. 1994 earnings were slightly ahead of 1993 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. Earnings declined in 1994 as compared to 1993 as increased earnings in Heavy Vehicle Systems were more than offset by decreased earnings in Light Vehicle Systems. 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 included 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, 1994 earnings were lower due to the effect of weak international markets and investments in automotive electronics. 15 16 Graphic Systems. Earnings in 1994 more than doubled from 1993 due to improved profitability in all its product lines as a result of the business substantially lowering its cost structure and downsizing its manufacturing capacity to reflect market realities. FINANCIAL CONDITION Rockwell's financial condition continues to be a major strength, providing the liquidity and flexibility for its businesses to grow through research and new product development, capital investments, and acquisitions. In 1995 cash flow continued to be strong with cash provided by operating activities increasing 22 percent to $1.1 billion. This is after substantial investments by the Company's businesses in research and new product development. Rockwell invested a record $649 million in Company-funded research and new product development. In addition, the Company spent over $1 billion in research and development under contracts sponsored by the U.S. Government. Capital expenditures rose to a record $685 million in 1995 compared to $568 million in 1994. Substantially all of this year's capital expenditures were for facilities and equipment to support business growth initiatives as well as cost reduction and quality improvement programs. About 60 percent of the 1995 capital expenditures were in the Automation and Semiconductor Systems businesses and an additional 17 percent was spent by the Automotive businesses. The major use of cash in 1995 was the acquisition of Reliance for $1,586 million. The acquisition price was financed through the subsequent sale of Reliance's telecommunications business for $475 million and the issuance of $300 million in three-year notes, $500 million in ten-year notes and $311 million of commercial paper. During the year, the Company also acquired five other businesses and entered into two joint ventures for an aggregate investment of $121 million to support growth initiatives in Automation, Semiconductor Systems, Automotive, Aircraft, and Avionics. Other important uses of the Company's cash are the payment of dividends and stock repurchases. In 1995 dividend payments totaled a record $235 million, or 32 percent of net income. The Company also spent $137 million in stock repurchases. Since the Company initiated its stock repurchase program in 1984, it has purchased a total of 114 million shares of common stock at an average price of $23.07 per share. INCOME TAXES The Company's consolidated effective income tax rate in 1995 was 39.5% compared to 37.9% in 1994. The increase is principally due to (1) the amortization of goodwill recorded in the Reliance acquisition, which is not deductible for tax purposes, and (2) lower research and experimentation tax credits in the United States and Australia. At September 30, 1995, the Company had unrecognized tax benefits from foreign net operating loss carryforwards of approximately $65 million, including $28 million incurred by AeroSpace Technologies of Australia, which was acquired by Rockwell in 1995. Of the loss carryforwards, $35 million expire between 1996 and 2003 and the remaining $30 million do not expire. From tax strategy initiatives, the Company realized benefits from the utilization of foreign net operating loss carryforwards of $17 million in 1995 and $11 million in 1994. The Company also had foreign tax credit carryforwards of approximately $55 million at September 30, 1995, which expire through 2000. 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. The tax benefit of this disputed claim has not been recognized for financial reporting purposes. 16 17 PENSIONS At September 30, 1995, the Company's pension plans were overfunded by more than $1.1 billion based on actual benefits earned to date and by $650 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 of the NOTES TO FINANCIAL STATEMENTS in the 1995 Annual Report). The yearly amortization benefit of this initial net asset is largely related to the Company's Aerospace and Defense Electronics businesses. HEALTH CARE During the past four years, the Company has made amendments to its medical benefit plans designed to limit the growth in its future cost while still providing access to quality care for employees and retirees. 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 these 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 of the NOTES TO FINANCIAL STATEMENTS in the 1995 Annual Report). 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, including 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 its 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, including the newly acquired Reliance, has been designated as a PRP at 50 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, 1995 to be about $57 million, of which $35 million has been accrued. 17 18 Various other lawsuits, claims, and proceedings have been asserted against the Company alleging violations of federal, state and local environmental protection requirements, or seeking remediation of alleged environmental impairments, principally at previously disposed of properties. For these matters management has estimated the total reasonably possible costs the Company could incur at September 30, 1995 to be about $140 million, an increase of $65 million from last year primarily due to Reliance environmental matters. The Company has recorded environmental accruals for these matters of $110 million, of which $46 million relate to Reliance. A major portion of the $46 million accrual for Reliance's environmental obligations will be recoverable from Exxon Corporation, based on an agreement between Exxon and Reliance whereby Exxon agreed to pay substantially all costs related to certain environmental matters. Therefore, an offsetting $25 million receivable from Exxon has been recorded at September 30, 1995. In addition, the Company believes it is entitled to indemnification from Exxon with respect to one site involving approximately $18 million of cost, as to which Exxon is disputing its indemnification obligation. Based on its assessment, management believes that the Company's expenditures for environmental capital investment and remediation necessary to comply with present regulations governing environmental protection and other expenditures for the resolution of environmental claims will not have a material adverse effect on the Company's 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 audits of contract performance and cost classification and investigations of business practices 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 debarred or suspended from receiving new government contracts for a period of time. Management believes there are no claims, audits or investigations currently pending against the Company with respect to government contracts which will have a material adverse effect on either the Company's business or its financial condition. Certain of the Company's U.S. Government contracts have been terminated for convenience during the past several years. The Company has filed claims for termination costs it believes are reimbursable under the contract terms. At September 30, 1995, such outstanding termination claims aggregated approximately $110 million, net of $30 million collected through progress payments. In addition, the Company has submitted claims aggregating $547 million with respect to contractual disputes on the 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, 1995, receivables include $205 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 In July 1995 a federal grand jury in Los Angeles began an investigation of the July 1994 explosion at Rocketdyne's Santa Susana Field Laboratory in which two scientists were killed and a technician injured. The grand jury is attempting to determine whether the accident occurred during an illegal disposal of hazardous waste and whether hazardous wastes were being illegally stored. The Company is assisting the government's investigation. While there is a risk that civil or criminal fines may be imposed, and that Rocketdyne or the Company may be suspended or debarred from government contracts as a result of the incident, management believes the outcome of matters related to the Santa Susana matter will not have a material adverse effect on either the Company's business or its financial statements. 18 19 BACKLOG The Company's 1995 year-end backlog was $11.8 billion compared to last year's $10.8 billion. This year's backlog includes $6 billion of commercial orders, $1.8 billion of funded government orders and $4 billion of unfunded government orders. The increase in 1995's backlog is principally due to orders of the Semiconductor Systems business, which may reflect, in part, multiple ordering by customers due to industry capacity constraints. Commercial orders may be canceled or deferred by customers, subject in certain cases to cancellation penalties. 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. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. See STATEMENT OF CONSOLIDATED INCOME, CONSOLIDATED BALANCE SHEET, STATEMENT OF CONSOLIDATED CASH FLOWS, STATEMENT OF CONSOLIDATED SHAREOWNERS' EQUITY, NOTES TO FINANCIAL STATEMENTS, and REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS in the 1995 Annual Report. See also the table under the caption RESULTS OF OPERATIONS, Sales and Earnings by Business Segment in the MD&A on page 13 hereof. 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 1996 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 1996 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, respectively, of the 1996 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 1996 Proxy Statement. 19 20 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 incorporated herein by reference in Item 8 hereof from the 1995 Annual Report). Statement of Consolidated Income, years ended September 30, 1995, 1994 and 1993. Consolidated Balance Sheet, September 30, 1995 and 1994. Statement of Consolidated Cash Flows, years ended September 30, 1995, 1994 and 1993. Statement of Consolidated Shareowners' Equity, years ended September 30, 1995, 1994 and 1993. Notes to Financial Statements. Report of Independent Certified Public Accountants. Sales and Earnings by Business Segment, years ended September 30, 1991 through 1995. (2) Financial Statement Schedule for the years ended September 30, 1995, 1994 and 1993.
PAGE ---- Independent Auditors' Report........................................ S-1 Schedule II--Valuation and Qualifying Accounts...................... S-2
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, filed as Exhibit 3-a-1 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1994, is hereby incorporated by reference. 3-b-1 Copy of By-Laws of the Company, filed as Exhibit 3 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1995, is hereby incorporated by reference. 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 7 5/8% Notes due February 17, 1998, the 8 7/8% Notes due September 15, 1999, the 8 3/8% Notes due February 15, 2001, the 6 3/4% Notes due September 15, 2002, the 7 7/8% Notes due February 15, 2005 and the 6 5/8% Notes due June 1, 2005 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 Indenture dated as of April 1, 1993 between Reliance and Bankers Trust Company as Trustee, pursuant to which the 6.8% Notes of Reliance due April 15, 2003 have been issued, filed as Exhibit 4.7 to Registration Statement No. 33-60066, is hereby incorporated by reference.
20 21 4-a-4 First Supplemental Indenture dated April 14, 1993 to the Indenture listed as Exhibit 4-a-3 above, filed as Exhibit 4.1 to Current Report on Form 8-K of Reliance dated April 19, 1993, is hereby incorporated by reference. 4-a-5 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-6 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-7 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. 4-a-8 Form of the 7 5/8% Notes due February 17, 1998, filed as Exhibit 4-a to the Company's Current Report on Form 8-K dated February 23, 1995, is hereby incorporated by reference. 4-a-9 Form of the 6.8% Notes of Reliance due April 15, 2003, filed as Exhibit 4-8 to Registration Statement No. 33-60066, is hereby incorporated by reference. 4-a-10 Form of the 7 7/8% Notes due February 15, 2005, filed as Exhibit 4-b to the Company's Current Report on Form 8-K dated February 23, 1995, is hereby incorporated by reference. 4-a-11 Form of the 6 5/8% Notes due June 1, 2005, filed as Exhibit 4-a to the Company's Current Report on Form 8-K dated June 14, 1995, 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, filed as Exhibit 10-a-2 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1994, is hereby incorporated by reference. *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, are 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, filed as Exhibit 10-b-2 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1994, is hereby incorporated by reference. *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, filed as Exhibit 10-b-3 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1994, is hereby incorporated by reference. --------- * Management contract or compensatory plan or arrangement.
21 22 *10-b-4 Form of Stock Appreciation Rights Agreement under the Company's 1979 Stock Plan for Key Employees, as amended, filed as Exhibit 10-b-4 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1994, is hereby incorporated by reference. *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, are 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, are 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, are 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, filed as Exhibit 10-d-1 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1994, is hereby incorporated by reference. *10-d-2 Forms of Stock Option Agreements 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.
22 23 *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, are 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, are 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, filed as Exhibit 10-d-7 to the Company's Annual Report on Form 10-K for the year ended September 30, 1994, are hereby incorporated by reference. *10-e-1 Copy of the Company's 1995 Long-Term Incentives Plan, filed as Exhibit 10-e-1 to the Company's Annual Report on Form 10-K for the year ended September 30, 1994, is hereby incorporated by reference. *10-e-2 Forms of Stock Option Agreement under the Company's 1995 Long-Term Incentives Plan, filed as Exhibit 10-e-2 to the Company's Annual Report on Form 10-K for the year ended September 30, 1994, are hereby incorporated by reference. *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-f-2 Copy of resolutions of the Board of Directors of the Company, adopted December 6, 1995, amending the Company's Incentive Compensation Plan. 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 of the Board of Directors of the Company, adopted November 3, 1993, providing for the Company's Deferred Compensation Policy for Non-Employee Directors, filed as Exhibit 10-h-1 to the Company's Annual Report on Form 10-K for the year ended September 30, 1994, is hereby incorporated by reference. *10-h-2 Copy of resolutions of the Compensation Committee of the Board of Directors of the Company, adopted July 5, 1994, modifying the Company's Deferred Compensation Policy for Non-Employee Directors, filed as Exhibit 10-h-2 to the Company's Annual Report on Form 10-K for the year ended September 30, 1994, is hereby incorporated by reference. *10-i-1 Copy of the Company's Directors Stock Plan, filed as Exhibit 10-i-1 to the Company's Annual Report on Form 10-K for the year ended September 30, 1994, is hereby incorporated by reference. --------- * Management contract or compensatory plan or arrangement.
23 24 *10-i-2 Copy of resolutions of the Board of Directors of the Company, adopted December 6, 1995, modifying the Company's Directors Stock Plan subject to approval by the Company's shareowners at the 1996 Annual Meeting of Shareowners. *10-j-1 Copy of resolutions of the Board of Directors of the Company, adopted November 2, 1994, providing for the Company's Retirement Policy for Non-Employee Directors, filed as Exhibit 10-j-1 to the Company's Annual Report on Form 10-K for the year ended September 30, 1994, is hereby incorporated by reference. *10-j-2 Copy of resolutions of the Board of Directors of the Company, adopted December 6, 1995, rescinding (subject to approval of the modifications to the Directors Stock Plan by the Company's shareowners at the 1996 Annual Meeting of Shareowners) the Company's Retirement Policy for Non-Employee Directors (except to the extent applicable to Directors then age 67 and former Directors then retired). *10-k-1 Copy of the Company's Annual Incentive Compensation Plan for Senior Executive Officers, adopted by the Board of Directors of the Company on December 6, 1995 subject to approval by the Company's shareowners at the 1996 Annual Meeting of Shareowners. *10-l-1 Restricted Stock Agreement dated December 6, 1995 between the Company and Don H. Davis, Jr. *10-m-1 Copy of letter dated February 1, 1995 from the Company to Judith L. Estrin, filed as Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, is hereby incorporated by reference. 11 Computation of Earnings Per Share for the Five Years Ended September 30, 1995. 12 Computation of Ratio of Earnings to Fixed Charges and Computation of Pro Forma Ratio of Earnings to Fixed Charges for the year ended September 30, 1995. 13 Portions of the 1995 Annual Report to Shareowners of the Company. 21 List of Subsidiaries of the Company. 23 Independent Auditors' Consent. 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. 27 Financial Data Schedule for September 30, 1995 Form 10-K. 99-a-1 Copy of the Company's Savings Plan, as amended and restated as of January 1, 1995. 99-b-1 Unaudited pro forma condensed consolidated statement of income of the Company and Reliance for the year ended September 30, 1995. 99-c-1 Approval dated December 23, 1994 amending the Company's Savings Plan for Certain Represented Hourly Employees. --------- * Management contract or compensatory plan or arrangement.
(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. 24 25 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, 1995 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW ON THE 21ST DAY OF DECEMBER 1995 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 DON H. DAVIS, JR.* 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 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. 25 26 INDEPENDENT AUDITORS' REPORT ROCKWELL INTERNATIONAL CORPORATION: We have audited the consolidated financial statements of Rockwell International Corporation and subsidiaries as of September 30, 1995 and 1994, and for each of the three years in the period ended September 30, 1995, and have issued our report thereon dated October 31, 1995; such financial statements and report are included in your 1995 Annual Report to Shareowners, portions of which are incorporated herein by reference. Our audits also included the financial statement schedule of Rockwell International Corporation and subsidiaries, listed in Item 14(a)(2). This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP Pittsburgh, Pennsylvania October 31, 1995 S-1 27 SCHEDULE II ROCKWELL INTERNATIONAL CORPORATION VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
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, 1995: Allowance for doubtful accounts.... $ 78.3 $ 22.8 $ .2 $ 15.3 (c) $111.4 (25.4)(d) 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) - --------------- (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-2 28 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE - ------------ ------------------------------------------------------------------- ------- 3-a-1 Copy of Restated Certificate of Incorporation of the Company, as amended, filed as Exhibit 3-a-1 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1994, is hereby incorporated by reference. 3-b-1 Copy of By-Laws of the Company, filed as Exhibit 3 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1995, is hereby incorporated by reference. 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 7 5/8% Notes due February 17, 1998, the 8 7/8% Notes due September 15, 1999, the 8 3/8% Notes due February 15, 2001, the 6 3/4% Notes due September 15, 2002, the 7 7/8% Notes due February 15, 2005 and the 6 5/8% Notes due June 1, 2005 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 Indenture dated as of April 1, 1993 between Reliance and Bankers Trust Company as Trustee, pursuant to which the 6.8% Notes of Reliance due April 15, 2003 have been issued, filed as Exhibit 4.7 to Registration Statement No. 33-60066, is hereby incorporated by reference. *10-b-4 Form of Stock Appreciation Rights Agreement under the Company's 1979 Stock Plan for Key Employees, as amended, filed as Exhibit 10-b-4 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1994, is hereby incorporated by reference. *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, are 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, are 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, are hereby incorporated by reference. - --------- * Management contract or compensatory plan or arrangement.
29
EXHIBIT NO. DESCRIPTION PAGE - ------------ ------------------------------------------------------------------- ------- *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, filed as Exhibit 10-d-1 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1994, is hereby incorporated by reference. *10-d-2 Forms of Stock Option Agreements 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. *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, are 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, are hereby incorporated by reference. - --------- * Management contract or compensatory plan or arrangement.
30
EXHIBIT NO. DESCRIPTION PAGE - ------------ ------------------------------------------------------------------- ------- *10-d-7 Forms of Stock Option Agreement under the Company's 1988 Long-Term Incentives Plan for options granted after December 1, 1994, filed as Exhibit 10-d-7 to the Company's Annual Report on Form 10-K for the year ended September 30, 1994, are hereby incorporated by reference. *10-e-1 Copy of the Company's 1995 Long-Term Incentives Plan, filed as Exhibit 10-e-1 to the Company's Annual Report on Form 10-K for the year ended September 30, 1994, is hereby incorporated by reference. *10-e-2 Forms of Stock Option Agreement under the Company's 1995 Long-Term Incentives Plan, filed as Exhibit 10-e-2 to the Company's Annual Report on Form 10-K for the year ended September 30, 1994, are hereby incorporated by reference. *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-f-2 Copy of resolutions of the Board of Directors of the Company, adopted December 6, 1995, amending the Company's Incentive Compensation Plan. 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 of the Board of Directors of the Company, adopted November 3, 1993, providing for the Company's Deferred Compensation Policy for Non-Employee Directors, filed as Exhibit 10-h-1 to the Company's Annual Report on Form 10-K for the year ended September 30, 1994, is hereby incorporated by reference. *10-h-2 Copy of resolutions of the Compensation Committee of the Board of Directors of the Company, adopted July 5, 1994, modifying the Company's Deferred Compensation Policy for Non-Employee Directors, filed as Exhibit 10-h-2 to the Company's Annual Report on Form 10-K for the year ended September 30, 1994, is hereby incorporated by reference. *10-i-1 Copy of the Company's Directors Stock Plan, filed as Exhibit 10-i-1 to the Company's Annual Report on Form 10-K for the year ended September 30, 1994, is hereby incorporated by reference. *10-i-2 Copy of resolutions of the Board of Directors of the Company, adopted December 6, 1995, modifying the Company's Directors Stock Plan subject to approval by the Company's shareowners at the 1996 Annual Meeting of Shareowners. *10-j-1 Copy of resolutions of the Board of Directors of the Company, adopted November 2, 1994, providing for the Company's Retirement Policy for Non-Employee Directors, filed as Exhibit 10-j-1 to the Company's Annual Report on Form 10-K for the year ended September 30, 1994, is hereby incorporated by reference. - --------- * Management contract or compensatory plan or arrangement.
31
EXHIBIT NO. DESCRIPTION PAGE - ------------ ------------------------------------------------------------------- ------- *10-j-2 Copy of resolutions of the Board of Directors of the Company, adopted December 6, 1995, rescinding (subject to approval of the modifications to the Directors Stock Plan by the Company's shareowners at the 1996 Annual Meeting of Shareowners) the Company's Retirement Policy for Non-Employee Directors (except to the extent applicable to Directors then age 67 and former Directors then retired). *10-k-1 Copy of the Company's Annual Incentive Compensation Plan for Senior Executive Officers, adopted by the Board of Directors of the Company on December 6, 1995 subject to approval by the Company's shareowners at the 1996 Annual Meeting of Shareowners. *10-l-1 Restricted Stock Agreement dated December 6, 1995 between the Company and Don H. Davis, Jr. *10-m-1 Copy of letter dated February 1, 1995 from the Company to Judith L. Estrin, filed as Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, is hereby incorporated by reference. 11 Computation of Earnings Per Share for the Five Years Ended September 30, 1995. 12 Computation of Ratio of Earnings to Fixed Charges and Computation of Pro Forma Ratio of Earnings to Fixed Charges for the year ended September 30, 1995. 13 Portions of the 1995 Annual Report to Shareowners of the Company. 21 List of Subsidiaries of the Company. 23 Independent Auditors' Consent. 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. 27 Financial Data Schedule for September 30, 1995 Form 10-K. 99-a-1 Copy of the Company's Savings Plan, as amended and restated as of January 1, 1995. 99-b-1 Unaudited pro forma condensed consolidated statement of income of the Company and Reliance for the year ended September 30, 1995. 99-c-1 Approval dated December 23, 1994 amending the Company's Savings Plan for Certain Represented Hourly Employees. - --------- * Management contract or compensatory plan or arrangement.
EX-10.F.2 2 ROCKWELL 10-K 1 EXHIBIT 10-f-2 ROCKWELL INTERNATIONAL CORPORATION RESOLUTIONS ADOPTED BY THE BOARD OF DIRECTORS ON DECEMBER 6, 1995 AMENDING THE COMPANY'S INCENTIVE COMPENSATION PLAN RESOLVED, that the amendments to the Corporation's Incentive Compensation Plan, as amended (the ICP), substantially in the form reflected in the composite copy of the ICP, as amended thereby, presented to and hereby ordered filed with the records of this meeting, be, and they hereby are, adopted, subject, however, to approval of the Senior Executive Plan by shareowners at the 1996 Annual Meeting of Shareowners. 2 ROCKWELL INTERNATIONAL CORPORATION INCENTIVE COMPENSATION PLAN 1. PURPOSES. The purposes of the Incentive Compensation Plan (the "Plan") are to provide a reward and an incentive to employees in managerial, staff or technical capacities who have contributed and, in the future, are likely to contribute to the success of the Corporation and to enhance the Corporation's ability to attract and retain outstanding employees to serve in such capacities. 2. DEFINITIONS. For the purpose of the Plan, the following terms shall have the meanings shown: (a) Rockwell. Rockwell International Corporation. (b) Corporation. Rockwell and such of its subsidiaries and affiliates as may be designated by the Board of Directors. (c) Board of Directors. The Board of Directors of Rockwell. (d) Employees. Persons in the salaried employ of the Corporation (including those on authorized leave of absence) during some part of the fiscal year for which an award is made. Unless he or she is also an employee of the Corporation, no member of the Board of Directors shall be eligible to participate in the Plan. (e) Committee. An Incentive Compensation Committee, designated by the Board of Directors, consisting of three or more members of the Board of Directors who are not eligible to participate in the Plan. (f) Applicable Net Earnings. For any fiscal year, the net income before provision for domestic and foreign taxes based on income of Rockwell and its consolidated subsidiaries, determined in accordance with generally accepted accounting principles. Amounts charged or credited to the Incentive Fund shall not be included in determining applicable net earnings. 3 (g) Incentive Fund or Fund. A Fund maintained by Rockwell to which there shall be credited for each fiscal year an amount, as determined by the Committee, which shall not exceed either the aggregate amount declared by Rockwell in such year as dividends upon its common and preferred stock or the aggregate amount calculated by adding 2% of the first $100 million of the applicable net earnings for such fiscal year, 3% of the next $50 million of such earnings, 4% of the next $25 million of such earnings, and 5% of the balance of such earnings. The Fund shall be debited with the amounts of awards made under the Plan and under the Senior Executive Plan for any fiscal year, and credited with the amount of any such award which lapses or is forfeited. The Fund shall be a single continuing fund, which may (but need not) be maintained and treated for accounting purposes as a separate fund. At any time and from time to time, the Board of Directors may direct the transfer to the general funds of Rockwell of all or any part of unawarded balances in the Fund. (h) Stock. Common stock and Class A Common Stock of Rockwell. (i) Senior Executive Plan. Rockwell's Annual Executive Compensation Plan for Senior Executive Officers. 3. DETERMINATION OF APPLICABLE NET EARNINGS AND INCENTIVE FUND. (a) After the end of each fiscal year, the independent certified public accountants who audit Rockwell's accounts shall compute the amount of the Incentive Fund at the end of such fiscal year and shall compute the applicable net earnings and the maximum amount thereof which may be credited to the Incentive Fund for such fiscal year. Such computations shall be reported to the Board of Directors and the Committee. (b) After such computations and reports have been made, the Committee shall determine the amounts, if any, of applicable net earnings to be credited to and awarded from the Incentive Fund for any fiscal year. 4. AWARDS. (a) The Chief Executive Officer of Rockwell shall submit to the Committee, before its determinations are to be made, his recommendations concerning awards. (b) The Committee, in its discretion, shall determine (i) the extent to which awards, if any, shall be made; (ii) the employees to whom any such awards shall be made; (iii) the amount of any award; and (iv) the form, terms and conditions of awards. The Committee may determine, among other things, -2- 4 whether and to what extent awards shall be paid in installments and in cash or in stock or partly in cash and partly in stock. (c) Of that portion of the Incentive Fund awarded for any fiscal year, not more than 10% shall be awarded under the Plan and the Senior Executive Plan to any one employee nor more than 50% to the ten employees receiving the highest awards. (d) The Corporation shall promptly notify each person to whom an award has been made and pay the award in accordance with the determinations of the Committee. (e) A cash award may be made with respect to an employee who has died. Any such award shall be paid to the legal representative or representatives of the estate of such employee. (f) No unpaid installment of any award shall bear interest. (g) No employee who is eligible for an award under the Senior Executive Plan for any fiscal year of the Corporation shall be eligible for an award under this Plan for that fiscal year. 5. AWARDS IN STOCK. (a) Rockwell shall make available, as required, stock to meet the needs of the Plan. The total number of shares of stock which may be awarded under the Plan shall not exceed 1,000,000, except as provided in paragraph (b) below. Such shares may consist in whole or in part of unissued or reacquired shares. Stock subject to an award which lapses or is forfeited, for any reason, shall be available for further awards under the Plan. (b) If any change shall occur in or affect stock subject to or awarded under the Plan on account of a merger, consolidation, stock dividend, split-up, reclassification, recapitalization or distribution to common shareowners (other than cash dividends), the Board of Directors may make such adjustments in the total number of shares subject to or awarded under the Plan as may be reasonably appropriate in the circumstances. (c) When an award is paid wholly or partly in stock, the Incentive Fund shall be charged for each share of stock issued by an amount equal to the closing price of the stock on the New York Stock Exchange on the last trading date before the date on which the Committee makes the award. Until issuance of the shares of stock, the employee shall not have any of the rights or privileges of a shareowner. -3- 5 6. FINALITY OF DETERMINATIONS. The Committee shall have the power to administer and interpret the Plan. All determinations, interpretations and actions of the Committee and all actions of the Board of Directors under or in connection with the Plan shall be final, conclusive and binding upon all concerned. 7. AMENDMENT OF THE PLAN. The Board of Directors shall have the power, in its sole discretion, to amend, suspend or terminate the Plan at any time, except that: (a) No such action shall adversely affect rights under an award already made, without the consent of the person affected; and (b) Without approval of the shareowners of Rockwell, the Board of Directors shall not increase the total number of shares of stock subject to the Plan (except as provided in paragraph 5(b)) or so modify the method of determining the Incentive Fund as to increase materially the maximum amount that may be credited to it. 8. MISCELLANEOUS. (a) A majority of the members of the Committee shall constitute a quorum. The Committee may act by the vote of a majority of a quorum at a meeting, or by a writing or writings signed by a majority of the members of the Committee. (b) The Corporation shall bear all expenses and costs in connection with the operation of the Plan, including costs related to the purchase or issue of shares of stock and any losses that may result if reacquired stock decreases in value before the fund is debited with the amount thereof, and no part thereof shall be charged against the Fund. (c) The Corporation, the Board of Directors, the Committee and the officers of the Corporation shall be fully protected in relying in good faith on the computations and reports made pursuant to or in connection with the Plan by the independent certified public accountants who audit Rockwell's accounts. As amended through December 6, 1995. -4- EX-10.I.2 3 ROCKWELL 10-K 1 EXHIBIT 10-i-2 ROCKWELL INTERNATIONAL CORPORATION RESOLUTIONS ADOPTED BY THE BOARD OF DIRECTORS ON DECEMBER 6, 1995 PROVIDING FOR MODIFICATION OF THE COMPANY'S DIRECTORS STOCK PLAN RESOLVED, that the amendments to the Corporation's Directors Stock Plan (the Directors Plan), substantially in the form reflected in the composite copy of the Directors Plan, as amended thereby, presented to and hereby ordered filed with the records of this meeting be, and they hereby are, adopted, subject, however, to approval by the vote of shareowners having a majority of the capital stock of the Corporation present in person or represented by proxy and entitled to vote at the 1996 Annual Meeting of Shareowners, a quorum being present. 2 DIRECTORS STOCK PLAN OF ROCKWELL INTERNATIONAL CORPORATION (LANGUAGE TO BE ADDED IS SET IN CAPITAL LETTERS. LANGUAGE TO BE DELETED IS BRACKETED.) 1. PURPOSE OF THE PLAN. The purpose of the Directors Stock Plan (the Plan) is to [provide a formal means of implementing the compensation policy adopted by the Board of Directors (the Board) of Rockwell International Corporation (Rockwell) on November 3, 1993, to] STRENGTHEN THE link [a portion] of the compensation of non-employee directors of Rockwell INTERNATIONAL CORPORATION (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]10 of the Plan, there shall be reserved for delivery under the Plan SHARES OF COMMON STOCK OF ROCKWELL (SHARES) IN THE FOLLOWING [an] aggregate AMOUNTS: [of] 75,000 S[s]hares [of Common Stock of Rockwell (Shares)]. UNDER SECTION 6; 150,000 SHARES UNDER SECTION 8; AND 75,000 SHARES UNDER SECTION 9. 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, AS AMENDED ON DECEMBER 6, 1995, shall be submitted to the shareowners of Rockwell for approval at the Annual Meeting of Shareowners to be held on February [1]7, 199[5]6, or any adjournment thereof, and, if approved by the shareowners, shall become effective on the date and at the time of such approval. THE PLAN APPROVED AT THE ANNUAL MEETING OF SHAREOWNERS HELD FEBRUARY 1, 1995 SHALL BE IN FULL FORCE AND EFFECT IF THE PLAN, AS AMENDED, IS NOT SO APPROVED. 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 right[s] to vote [those] THE Shares and to receive dividends thereon. EACH NON-EMPLOYEE DIRECTOR MAY ELECT EACH YEAR, NOT LATER THAN DECEMBER 31 OF THE YEAR PRECEDING THE YEAR IN WHICH THE ANNUAL AWARD OF SHARES IS TO BE MADE, TO RECEIVE THE ANNUAL GRANT IN THE FORM OF RESTRICTED STOCK (RESTRICTED SHARES). UPON RECEIPT OF RESTRICTED SHARES, THE RECIPIENT SHALL HAVE THE RIGHT TO VOTE THE SHARES AND TO RECEIVE DIVIDENDS THEREON, AND THE SHARES SHALL HAVE ALL THE ATTRIBUTES OF OUTSTANDING SHARES, EXCEPT THAT CERTIFICATES FOR SUCH SHARES SHALL BE DELIVERED TO AND HELD BY B-1 3 ROCKWELL UNTIL TEN DAYS AFTER THE RECIPIENT RETIRES FROM THE BOARD UNDER THE BOARD'S RETIREMENT POLICY OR IF THE RECIPIENT RESIGNS FROM THE BOARD OR CEASES TO BE A DIRECTOR BY REASON OF THE ANTITRUST LAWS, COMPLIANCE WITH ROCKWELL'S CONFLICT OF INTEREST POLICIES, DEATH, DISABILITY OR OTHER CIRCUMSTANCES THE BOARD DETERMINES NOT TO BE ADVERSE TO THE BEST INTERESTS OF ROCKWELL, WHEN CERTIFICATES SO HELD SHALL BE DELIVERED TO THE DIRECTOR AND CEASE TO BE RESTRICTED SHARES. 7. RESTRICTION ON TRANSFER OF SHARES. No Shares received by a participant under SECTION 6 OR 9 OF 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. STOCK OPTIONS. EACH NON-EMPLOYEE DIRECTOR (EXCEPT ANY NON-EMPLOYEE DIRECTOR IN OFFICE ON FEBRUARY 6, 1996 WHO HAD ATTAINED AGE 67) WHO IS ELECTED A DIRECTOR AT ANY ANNUAL MEETING OF SHAREOWNERS OF ROCKWELL SHALL RECEIVE AN OPTION TO PURCHASE 1,000 SHARES IMMEDIATELY AFTER THAT ANNUAL MEETING, PROVIDED, HOWEVER, THAT IF R.M. BRESSLER, J.D. NICHOLS AND J.F. TOOT ARE REELECTED DIRECTORS AT THE CORPORATION'S 1996 ANNUAL MEETING, OPTIONS TO PURCHASE 9,000, 9,000 AND 5,000 SHARES, RESPECTIVELY, SHALL BE GRANTED TO THEM IMMEDIATELY THEREAFTER. EACH NON- EMPLOYEE DIRECTOR WHO IS ELECTED A DIRECTOR AT ANY MEETING OF THE BOARD SHALL RECEIVE IMMEDIATELY AFTER THAT MEETING AN OPTION TO PURCHASE 1,000 SHARES IF ELECTED AFTER THE ANNUAL MEETING AND PRIOR TO MAY 1; AN OPTION TO PURCHASE 750 SHARES IF ELECTED BETWEEN MAY 1 AND JULY 31; AN OPTION TO PURCHASE 500 SHARES IF ELECTED BETWEEN AUGUST 1 AND OCTOBER 31; AND AN OPTION TO PURCHASE 250 SHARES IF ELECTED BETWEEN NOVEMBER 1 AND THE NEXT ANNUAL MEETING. THE EXERCISE PRICE FOR EACH OPTION SO GRANTED SHALL BE ONE-HUNDRED PERCENT (100%) OF THE CLOSING PRICE (THE FAIR MARKET VALUE) OF THE COMMON STOCK OF ROCKWELL ON THE DATE OF GRANT AS REPORTED IN THE NEW YORK STOCK EXCHANGE-COMPOSITE TRANSACTIONS (OR ON THE NEXT PRECEDING DAY SUCH STOCK WAS TRADED IF IT WAS NOT TRADED ON THE DATE OF GRANT). THE PURCHASE PRICE OF THE SHARES WITH RESPECT TO WHICH AN OPTION OR PORTION THEREOF IS EXERCISED SHALL BE PAYABLE IN FULL IN CASH, SHARES OF COMMON STOCK OF ROCKWELL VALUED AT THEIR FAIR MARKET VALUE ON THE DATE OF EXERCISE, OR A COMBINATION THEREOF. EACH OPTION MAY BE EXERCISED IN WHOLE OR IN PART AT ANY TIME AFTER IT BECOMES EXERCISABLE; AND EACH OPTION SHALL BECOME EXERCISABLE IN APPROXIMATELY THREE EQUAL INSTALLMENTS ON EACH OF THE FIRST, SECOND AND THIRD ANNIVERSARIES OF THE DATE THE OPTION IS GRANTED. NO OPTION SHALL BE EXERCISABLE PRIOR TO ONE YEAR NOR AFTER TEN YEARS FROM THE DATE OF THE GRANT THEREOF; PROVIDED, HOWEVER, THAT IF THE HOLDER OF AN OPTION DIES, THE OPTION MAY BE EXERCISED FROM AND AFTER THE DATE OF THE OPTIONEE'S DEATH FOR A PERIOD OF THREE YEARS (OR UNTIL THE EXPIRATION DATE SPECIFIED IN THE OPTION IF EARLIER) EVEN IF IT WAS NOT EXERCISABLE AT THE DATE OF DEATH. MOREOVER, IF AN OPTIONEE RETIRES AT AGE 72 OR PRIOR THERETO WITH AT LEAST TEN YEARS SERVICE, ALL OPTIONS THEN HELD BY SUCH OPTIONEE SHALL BE EXERCISABLE EVEN IF THEY WERE NOT EXERCISABLE AT SUCH RETIREMENT DATE; PROVIDED, HOWEVER, THAT EACH SUCH OPTION SHALL EXPIRE AT THE EARLIER OF FIVE YEARS FROM THE DATE OF THE OPTIONEE'S RETIREMENT OR THE EXPIRATION DATE SPECIFIED IN THE OPTION. IF 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 DETERMINE OTHERWISE BY VOTE OF AT LEAST TWO-THIRDS OF ITS MEMBERS, ALL OPTIONS THEN OUTSTANDING PURSUANT TO THE PLAN SHALL FORTHWITH BECOME FULLY EXERCISABLE WHETHER OR NOT THEN EXERCISABLE. OPTIONS GRANTED UNDER THE PLAN ARE NOT TRANSFERABLE OTHER THAN (i) BY WILL OR BY THE LAWS OF DESCENT AND DISTRIBUTION; OR (ii) BY GIFT TO THE GRANTEE'S SPOUSE OR NATURAL, ADOPTED OR STEP-CHILDREN OR GRANDCHILDREN (IMMEDIATE FAMILY MEMBERS) OR TO A TRUST FOR THE BENEFIT OF ONE OR MORE OF THE GRANTEE'S IMMEDIATE FAMILY MEMBERS OR TO A FAMILY CHARITABLE TRUST ESTABLISHED BY THE GRANTEE OR A MEMBER OF THE GRANTEE'S FAMILY. IF AN OPTIONEE CEASES TO BE A DIRECTOR WHILE HOLDING UNEXERCISED OPTIONS, SUCH OPTIONS ARE THEN VOID, EXCEPT IN THE CASE OF (i) DEATH, (ii) DISABILITY, (iii) RETIREMENT AFTER ATTAINING THE AGE OF 72 OR HAVING COMPLETED TEN YEARS SERVICE AS A DIRECTOR, OR (iv) RESIGNATION FROM THE BOARD FOR REASONS OF THE ANTITRUST LAWS, COMPLIANCE WITH THE CORPORATION'S CONFLICT OF INTEREST POLICIES OR B-2 4 OTHER CIRCUMSTANCES THAT THE COMMITTEE MAY DETERMINE AS SERVING THE BEST INTERESTS OF ROCKWELL. 9. SHARES IN LIEU OF CASH COMPENSATION. EACH NON-EMPLOYEE DIRECTOR MAY ELECT EACH YEAR, NOT LATER THAN DECEMBER 31 OF THE YEAR PRECEDING THE YEAR AS TO WHICH DEFERRAL OF FEES IS TO BE APPLICABLE, TO DEFER ALL OR ANY PORTION OF THE CASH RETAINER TO BE PAID FOR BOARD, COMMITTEE OR OTHER SERVICE IN THE FOLLOWING CALENDAR YEAR THROUGH THE ISSUANCE OR TRANSFER OF RESTRICTED SHARES, VALUED AT THE CLOSING PRICE ON THE NEW YORK STOCK EXCHANGE COMPOSITE TRANSACTIONS ON THE DATE WHEN EACH PAYMENT OF SUCH RETAINER AMOUNT WOULD OTHERWISE BE MADE IN CASH. SUCH RESTRICTED SHARES SHALL BE THE SAME AS AND SUBJECT TO THE SAME PROVISIONS AS ARE APPLICABLE TO THE RESTRICTED SHARES ISSUED OR DELIVERED PURSUANT TO SECTION 6 OF THE PLAN. [8]10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. If there shall be any change in or affecting Shares on account of any merger, consolidation, reorganization, recapitalization, reclassification, stock dividend, stock split or combination, or other distribution to holders of Shares (other than a cash dividend), there shall be made or taken such amendments to the Plan and such adjustments and actions thereunder as the Board may deem appropriate under the circumstances. [9]11. GOVERNMENT AND OTHER REGULATIONS. The obligations of Rockwell to deliver Shares under SECTION 6 of the Plan OR UPON EXERCISE OF OPTIONS GRANTED UNDER SECTION 8 OF THE PLAN shall be subject to (i) all applicable laws, rules and regulations and such approvals by any governmental agencies as may be required, including, without limitation, compliance with the Securities Act of 1933, as amended, and (ii) the condition that such shares shall have been duly listed on the New York Stock Exchange. [10]12. 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]10 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 the changes in the Internal Revenue Code of 1986, as amended, the Employee Retirement Income Security Act of 1974, as amended, or the regulations under either thereof. The Plan may also be terminated at any time by the Board. [11]13. 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-3 EX-10.J.2 4 ROCKWELL 10-K 1 EXHIBIT 10-j-2 ROCKWELL INTERNATIONAL CORPORATION RESOLUTIONS ADOPTED BY THE BOARD OF DIRECTORS ON DECEMBER 6, 1995 RESCINDING THE COMPANY'S RETIREMENT POLICY FOR NON-EMPLOYEE DIRECTORS RESOLVED, that effective upon approval of the Directors Plan by the shareowners as hereinabove provided, the first one of the resolutions heretofore adopted by the Board of Directors on November 2, 1994 entitled "Directors Retirement Policy" be, and it hereby is, rescinded except to the extent that it shall apply to Directors who on this date have attained at least age 67 and to former Directors who prior to this date have retired and entered into consulting agreements contemplated by that resolution. EX-10.K.1 5 ROCKWELL 10-K 1 ROCKWELL INTERNATIONAL CORPORATION ANNUAL INCENTIVE COMPENSATION PLAN FOR SENIOR EXECUTIVE OFFICERS 1. PURPOSES. The purposes of the Annual Executive Compensation Plan for Senior Executive Officers (the Plan) are to provide a reward and an incentive to the Corporation's Senior Executive Officers who have contributed and in the future are likely to contribute to the success of the Corporation, to enhance the Corporation's ability to attract and retain outstanding persons to serve as its Senior Executive Officers and to preserve for the Corporation the benefit of federal income tax deductions with respect to annual incentive compensation paid to Senior Executive Officers. 2. DEFINITIONS. (a) Applicable Net Earnings. For any fiscal year, the net income before provision for domestic and foreign taxes based on income of the Corporation, determined in accordance with generally accepted accounting principles. Amounts charged or credited to the Incentive Fund under the ICP shall not be included in determining Applicable Net Earnings. (b) Board of Directors. The Board of Directors of Rockwell. (c) Committee. The Compensation and Management Development Committee designated by the Board of Directors from among its members who are not eligible to receive an award under the Plan. (d) Corporation. Rockwell and its consolidated subsidiaries. (e) Covered Employees Performance Fund. An incentive compensation fund for each fiscal year in which the Plan is applicable from which awards may be made under the Plan, which shall be equal to 1% of the Applicable Net Earnings for that fiscal year. (f) ICP. The Corporation's Incentive Compensation Plan. (g) Rockwell. Rockwell International Corporation. (h) Senior Executive Officers. Rockwell's chief executive officer on the last day of each fiscal year and four other executive officers (as defined in Rule 3b-7 under the Securities Exchange Act of 1934, as amended) which the Committee shall designate on or before the last day of that fiscal year. No member of the Corporation's Board of Directors who is not also an employee of the Corporation shall be eligible to participate in the Plan. 3. DETERMINATION OF APPLICABLE NET EARNINGS AND COVERED EMPLOYEES PERFORMANCE FUND; ALLOCATION OF POTENTIAL AWARDS. (a) After the end of each fiscal year, the independent certified public accountants who audit the Corporation's accounts shall compute the Applicable Net Earnings and the amount of the Covered Employees Performance Fund for that fiscal year. Those computations shall be reported to the Board of Directors and the Committee. (b) There shall be allocated from the Covered Employees Performance Fund for each fiscal year potential awards to each of the Senior Executive Officers equal to the following respective percentages of the Covered Employees Performance Fund for that fiscal year: Chief Executive Officer-35%; President and Chief Operating Officer-20%; Other Senior Executive Officers-15%; 4. AWARDS. (a) After the computations, reports and allocations prescribed under Section 3(a) have been made, the Committee shall determine, in its discretion, the amounts, if any, allocated to the Senior Executive Officers pursuant to Section 3(b) to be awarded from the Covered Employees Performance Fund for that fiscal year; and the form, terms and conditions of awards, including whether and to what extent awards shall be paid in installments. (b) Without limiting the generality of Section 4(a) the Committee may, in its sole discretion, A-1 2 reduce the amount of any award made to any Senior Executive Officer from the potential award allocated to that Officer under Section 3(b), taking into account such factors as it deems relevant, including, without limitation: (i) the Applicable Net Income; (ii) other significant financial or strategic achievements during the year; (iii) its subjective assessment of each Senior Executive Officer's overall performance for the year; and (iv) information about compensation practices at other peer group companies for the purpose of evaluating competitive compensation levels so that the Committee may determine that the amount of the annual incentive award is within the targeted competitive compensation range of the Corporation's executive compensation program. The Committee shall determine the amount of any reduction in a Senior Executive Officer's award on the basis of the foregoing and other factors it deems relevant and shall not be required to establish any allocation or weighting formula with respect to the factors it considers. In no event shall any Senior Executive Officer's award under the Plan exceed the amount of the Covered Employees Performance Fund allocated to a potential award to that Senior Executive Officer. (c) The Committee shall have no obligation to disburse the full amount of the Covered Employees Performance Fund for any fiscal year. Amounts allocated but not actually awarded to a Senior Executive Officer may not be re-allocated to other Senior Executive Officers or utilized for awards in respect of other years. (d) Not more than 10% of the aggregate awards made for any fiscal year under the ICP and this Plan shall be awarded to any one person nor more than 50% to the ten persons receiving the highest awards under the ICP and this Plan. (e) The Corporation shall promptly notify each person to whom an award has been made and pay the award in accordance with the determinations of the Committee. (f) A cash award may be made with respect to a Senior Executive Officer who has died. Any such award shall be paid to the legal representative or representatives of the estate of such Officer. (g) No person who is eligible for an award under the Plan for any fiscal year of the Corporation shall be eligible for an award under the ICP or any other management incentive compensation plan of any of the Corporation's businesses for that fiscal year. 5. FINALITY OF DETERMINATIONS. The Committee shall have the power to administer and interpret the Plan. All determinations, interpretations and actions of the Committee and all actions of the Board of Directors under or in connection with the Plan shall be final, conclusive and binding upon all concerned. 6. AMENDMENT OF THE PLAN. The Board of Directors and the Committee shall each have the power, in its sole discretion, to amend, suspend or terminate the Plan at any time, except that: (a) No such action shall adversely affect rights under an award already made, without the consent of the person affected; and (b) Without approval of the shareowners of Rockwell, neither the Board of Directors nor the Committee shall (1) so modify the method of determining the Covered Employees Performance Fund as to increase materially the maximum amount that may be allocated to it or (2) after the first 90 days of any fiscal year, amend the plan in a manner that would, directly or indirectly: (i) change the method of calculating the amount allocated to the Covered Employees Performance Fund for that year; (ii) increase the maximum award payable to any Senior Executive Officer for that year; or (iii) remove the amendment restriction set forth in this sentence with respect to that year. A-2 3 7. MISCELLANEOUS. (a) The Corporation shall bear all expenses and costs in connection with the operation of the Plan. (b) The Corporation, the Board of Directors, the Committee and the officers of the Corporation shall be fully protected in relying in good faith on the computations and reports made pursuant to or in connection with the Plan by the independent certified public accountants who audit the Corporation's accounts. 8. EFFECTIVE DATE. Upon approval by the shareowners of Rockwell, the Plan shall become effective as of October 1, 1995. A-3 EX-10.L.1 6 ROCKWELL 10-K 1 EXHIBIT 10-l-1 ROCKWELL INTERNATIONAL CORPORATION RESTRICTED STOCK AGREEMENT To: D. H. Davis, Jr. In accordance with a determination of the Compensation and Management Development Committee (the Committee) of the Board of Directors of Rockwell International Corporation (Rockwell) applying the Corporation's policy, as set forth in resolutions adopted by the Committee on July 6, 1994 entitled "Compensation Deferral," as modified by resolutions adopted by the Committee today entitled "Modify Section 162(m) Policy and Approve Form of Restricted Stock" (the Section 162(m) Policy), 14,166 shares (Restricted Shares) of Common Stock of Rockwell have been granted to you as Restricted Stock in payment of the aggregate amount of $734,861.25, which is the excess over the sum of the limitation of Section 162(m)(1) of the Internal Revenue Code, as amended, and the Relocation Payments (as defined in the Section 162(m) Policy) of the base salary, incentive awards and other compensation constituting "applicable employee remuneration" for purposes of such Section 162(m) due you that has been deferred pursuant to the Section 162(m) Policy. These Restricted Shares have been granted to you today upon the following terms and conditions: 1. Earnings of Restricted Shares ----------------------------- (a) If (i) you shall continue as an employee of the Corporation until the January 1 immediately following your attainment of age 62 or such later age (not more than age 67) to which the Committee shall from time to time have requested, prior to your attainment of age 62 (or such later age as to which it shall have previously requested), that you remain in service as an employee of the Corporation; or (ii) you shall die or suffer a disability that shall continue for a continuous period of at least six months prior to your attainment of age 62 (or the later age prescribed pursuant to the preceding clause (a)(i)); or (iii) a "change of control" (as defined for purposes of Article III, Section 15(l)(1) of the Corporation's By-Laws) shall have occurred; then you shall be deemed to have fully earned all the Restricted Shares subject to this agreement. (b) If your employment by the Corporation terminates prior to the January 1 immediately following your attainment of age 62 (or the later age prescribed pursuant to clause (a)(i) of this paragraph), you shall be deemed not to have earned any of the Restricted Shares and shall have no further rights with respect thereto unless the Board of Directors or the Committee shall determine, in its sole discretion, that your earlier retirement from service with the Corporation is in the best interests of the Corporation. 2 2. Retention of Certificates for Restricted Shares ----------------------------------------------- Certificates for the Restricted Shares and any dividends or distributions thereon or in respect thereof that may be paid in additional shares of Common Stock, other securities of the Corporation or securities of another entity (Stock Dividends) shall be delivered to and held by the Corporation until you shall have earned the Restricted Shares in accordance with the provisions of paragraph 1. To facilitate implementation of the provisions of this agreement, you undertake to sign and deposit with the Corporation's Office of the Secretary a Stock Transfer Power in the form of Attachment 1 hereto with respect to the Restricted Shares and any stock Dividends thereon. 3. Dividends and Voting Rights --------------------------- Notwithstanding the retention by the Corporation of certificates for the Restricted Shares and any Stock Dividends, you shall be entitled to receive any dividends that may be paid in cash on, and to vote, the Restricted Shares and any Stock Dividends held by the Corporation in accordance with paragraph 2, unless and until such shares have been forfeited in accordance with paragraph 5. 4. Delivery of Earned Restricted Shares ------------------------------------ As promptly as practicable after you shall have been deemed to have earned the Restricted Shares in accordance with paragraph 1, the Corporation shall deliver to you (or in the event of your death, to your estate or any person who acquires your interest in the Restricted Shares by bequest or inheritance) the Restricted Shares, together with any Stock Dividends then held by the Corporation. 5. Forfeiture of Unearned Restricted Shares ---------------------------------------- Notwithstanding any other provision of this agreement, (a) if you shall make an effective election pursuant to Section 83(b) of the Internal Revenue Code, as amended, with respect to the Restricted Shares or any Stock Dividends; or (b) if at any time it shall become impossible for you to earn any of the Restricted Shares in accordance with this agreement, all the Restricted Shares, together with any Stock Dividends, then being held by the Corporation in accordance with paragraph 2 shall be forfeited, and you shall have no further rights of any kind or nature with respect thereto. Upon any such forfeiture, the Restricted Shares, together with any Stock Dividends, shall be transferred to Rockwell. 6. Transferability --------------- This grant is not transferable by you otherwise than by will or by the laws of descent and distribution, and the Restricted Shares, and any Stock Dividends shall be deliverable, during your lifetime, only to you. -2- 3 7. Withholding ----------- The Corporation shall have the right, in connection with the delivery of the Restricted Shares and any Stock Dividends subject to this agreement, (i) to deduct from any payment otherwise due by the Corporation to you or any other person receiving delivery of the Restricted Shares and any Stock Dividends an amount equal to the taxes required to be withheld by law with respect to such delivery, (ii) to require you or any other person receiving such delivery to pay to it an amount sufficient to provide for any such taxes so required to be withheld or (iii) to sell such number of the Restricted Shares and any Stock Dividends as may be necessary so that the net proceeds of such sale shall be an amount sufficient to provide for any such taxes so required to be withheld. 8. Applicable Law -------------- This agreement and the Corporation's obligation to deliver Restricted Shares and any Stock Dividends hereunder shall be governed by and construed and enforced in accordance with the laws of Delaware and the Federal law of the United States. ROCKWELL INTERNATIONAL CORPORATION By: /s/ C. H. Harff --------------------------------------- C. H. Harff Senior Vice President & Special Counsel Attachment 1 - Stock Transfer Power Dated: December 6, 1995 Agreed to this 6th day of December, 1995 /s/ D. H. Davis, Jr. - ------------------------------ D. H. Davis, Jr. Address: 4 Cherry Hills Newport Beach, CA 92660 Social Security No.: ###-##-#### -3- 4 Attachment I STOCK TRANSFER POWER SEPARATE FROM CERTIFICATE FOR VALUE RECEIVED, I, Don H. Davis, Jr., hereby sell, assign and transfer unto Rockwell International Corporation (i) the __________ shares (the Shares) of the Common Stock of Rockwell International Corporation (Rockwell) standing in my name on the books of Rockwell represented by Certificate No. ____________ herewith, granted to me on December 6, 1995, as Restricted Stock as deferred payment of certain compensation earned during the Corporation's fiscal year ended September 30, 1995, and (ii) any additional shares of Rockwell's Common Stock, other securities issued by Rockwell or securities of another entity (Stock Dividends) distributed, paid or payable on or in respect of the Shares and Stock Dividends during the period the Shares and Stock Dividends are held by Rockwell pursuant to a certain Restricted Stock Agreement dated December 6, 1995 with respect to the Shares; and I do hereby irrevocably constitute and appoint _________________________, attorney with full power of substitution in the premises to transfer the Shares on the books of Rockwell. Dated: December 6, 1995 ____________________________ (Signature) WITNESS: ____________________________ ____________________________ (Signature) EX-11 7 ROCKWELL 10-K 1 EXHIBIT 11 ROCKWELL INTERNATIONAL CORPORATION COMPUTATION OF EARNINGS PER SHARE FOR THE FIVE YEARS ENDED SEPTEMBER 30, 1995
FISCAL YEAR ENDED SEPTEMBER 30, -------------------------------------------------- 1995 1994 1993 1992 1991 ------ ------ ------ ------ ------ (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) PRIMARY EARNINGS PER SHARE: Income before change in accounting................. $742.2 $634.1 $561.9 $483.0 $600.5 Deduct dividend requirements on preferred stock.... 0.2 0.3 0.3 0.3 0.3 ------ ------ ------ ------ ------ Total primary earnings before change in accounting............................ $742.0 $633.8 $561.6 $482.7 $600.2 ====== ====== ====== ====== ====== Average number of common shares outstanding during the year......................................... 217.2 220.5 219.8 223.6 233.7 ====== ====== ====== ====== ====== Primary earnings per share before change in accounting....................................... $ 3.42 $ 2.87 $ 2.55 $ 2.16 $ 2.57 Cumulative effect of change in accounting for retirement medical benefits...................... (6.78)* ------ ------ ------ ------ ------ Net primary earnings (loss) per share.............. $ 3.42 $ 2.87 $ 2.55 $(4.62) $ 2.57 ====== ====== ====== ====== ====== FULLY DILUTED EARNINGS PER SHARE: Income before change in accounting................. $742.2 $634.1 $561.9 $483.0 $600.5 ====== ====== ====== ====== ====== Average number of common shares outstanding during the year: Common stock..................................... 217.2 220.5 219.8 223.6 233.7 Assumed issuance of stock under award plans and conversion of preferred stock and convertible debentures.................................... 3.9 4.0 4.5 2.5 3.1 ------ ------ ------ ------ ------ Total shares, assuming full dilution........ 221.1 224.5 224.3 226.1 236.8 ====== ====== ====== ====== ====== Fully diluted earnings per share before change in accounting.................................... $ 3.36 $ 2.82 $ 2.51 $ 2.14 $ 2.54 Cumulative effect of change in accounting for retirement medical benefits...................... (6.70)* ------ ------ ------ ------ ------ Net fully diluted earnings (loss) per share........ $ 3.36 $ 2.82 $ 2.51 $(4.56) $ 2.54 ====== ====== ====== ====== ====== - --------------- * 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-12 8 ROCKWELL 10-K 1 EXHIBIT 12 ROCKWELL INTERNATIONAL CORPORATION COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND COMPUTATION OF PRO FORMA RATIO OF EARNINGS TO FIXED CHARGES YEAR ENDED SEPTEMBER 30, 1995 (IN MILLIONS, EXCEPT RATIOS)
PRO FORMA PRO FORMA ROCKWELL (1) RELIANCE (2) ADJUSTMENTS COMBINED ------------- ------------- ----------- --------- EARNINGS AVAILABLE FOR FIXED CHARGES: Income before income taxes................... $ 1,226.4 $ (51.3) $49.9(3) $1,225.0 Adjustments: Undistributed (income) of affiliates...... (6.9) (6.9) Minority interest in loss of subsidiaries............................ 8.4 8.4 --------- ------- ----- -------- 1,227.9 (51.3) 49.9 1,226.5 Add fixed charges included in earnings: Interest expense........................ 169.9 6.0 21.0 196.9 Interest element of rentals............. 66.5 2.5 69.0 --------- ------- ----- -------- Total................................... 236.4 8.5 21.0 265.9 Total earnings available for fixed charges................................. $ 1,464.3 $ (42.8) $70.9 $1,492.4 ========= ======= ===== ======== FIXED CHARGES: Fixed charges included in earnings........... $ 236.4 $ 8.5 $21.0 $ 265.9 Capitalized interest......................... 10.6 10.6 --------- ------- ----- -------- Total fixed charges....................... $ 247.0 $ 8.5 $21.0 $ 276.5 ========= ======= ===== ======== RATIO OF EARNINGS TO FIXED CHARGES(4).......... 5.9 5.4 ========== ======== (1) The Rockwell information presented includes Reliance for the nine months ended September 30, 1995. (2) The Reliance information presented is for the three months ended December 31, 1994. (3) Pro forma adjustments include the following (see Exhibit 99-b-1): (A) To reflect the divestiture of Reliance's telecommunications business $ (8.2) (B) Amortize over periods ranging from seven to forty years the excess of purchase price over the estimated fair value of net tangible assets acquired (10.6) (C) Recognize interest expense on borrowings to fund acquisition (at assumed rates of 7% on short-term debt and 8.2% on long-term debt) (21.0) (D) Remove unusual expenses incurred by Reliance relating to costs associated with abandonment of a prior merger agreement and costs associated with the acquisition by Rockwell 89.7 ------- Total adjustments to income before income taxes $ 49.9 ======= (4) In computing the ratio of earnings to fixed charges, earnings are defined as income before income taxes adjusted for minority interest in income or loss of subsidiaries, undistributed earnings of affiliates and fixed charges exclusive of capitalized interest. Fixed charges consist of interest on borrowings and that portion of rentals deemed representative of the interest factor.
EX-13 9 ROCKWELL 10-K 1 EXHIBIT 13 REPORT 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, 1995 and 1994, and the related consolidated statements of income, shareowners' equity, and cash flows for each of the three years in the period ended September 30, 1995. 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, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 1995 in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP ------------------------ Deloitte & Touche LLP Pittsburgh, Pennsylvania October 31, 1995 2 STATEMENT OF ROCKWELL INTERNATIONAL CORPORATION CONSOLIDATED INCOME (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED SEPTEMBER 30 1995 1994 1993 ============================================================================================== Revenues Sales $12,981 $11,123 $10,840 Other income 118 82 81 -------------------------------------------------------------------------- Total revenues 13,099 11,205 10,921 - ---------------------------------------------------------------------------------------------- COSTS AND Cost of sales 9,997 8,675 8,539 EXPENSES Selling, general, and administrative 1,706 1,412 1,374 Interest 170 97 104 -------------------------------------------------------------------------- Total costs and expenses 11,873 10,184 10,017 - ---------------------------------------------------------------------------------------------- Income before income taxes 1,226 1,021 904 Provision for income taxes 484 387 342 - ---------------------------------------------------------------------------------------------- NET INCOME $ 742 $ 634 $ 562 ============================================================================================== EARNINGS PER Primary $ 3.42 $ 2.87 $ 2.55 COMMON SHARE Fully diluted $ 3.36 $ 2.82 $ 2.51 ============================================================================================== AVERAGE COMMON Primary 217.2 220.5 219.8 SHARES OUTSTANDING Fully diluted 221.1 224.5 224.3 ==============================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 3 CONSOLIDATED BALANCE SHEET ROCKWELL INTERNATIONAL CORPORATION (IN MILLIONS)
SEPTEMBER 30 1995 1994 =================================================================================================================== ASSETS CURRENT ASSETS Cash (includes time deposits and certificates of deposit: 1995, $451 million; 1994, $487 million) $ 665 $ 628 Receivables 2,510 2,267 Inventories 2,071 1,533 Other current assets 559 500 -------------------------------------------------------------------------------------------------- Total current assets 5,805 4,928 -------------------------------------------------------------------------------------------------- PROPERTY Land 159 117 Land and leasehold improvements 158 155 Buildings 1,645 1,379 Machinery and equipment 3,427 2,950 Office and data processing equipment 1,207 1,224 Construction in progress 334 335 -------------------------------------------------------------------------------------------------- Total 6,930 6,160 Less accumulated depreciation 3,904 3,777 -------------------------------------------------------------------------------------------------- Net property 3,026 2,383 -------------------------------------------------------------------------------------------------- INTANGIBLE ASSETS 2,016 777 -------------------------------------------------------------------------------------------------- OTHER ASSETS 1,658 1,773 -------------------------------------------------------------------------------------------------- TOTAL $12,505 $9,861 ================================================================================================== - ------------------------------------------------------------------------------------------------------------------- LIABILITIES AND CURRENT LIABILITIES SHAREOWNERS' Short-term debt $ 655 $ 160 EQUITY Accounts payable - trade 1,138 977 Accrued compensation and benefits 754 669 Advance payments from customers 400 295 Accrued income taxes 130 137 Other current liabilities 1,034 782 -------------------------------------------------------------------------------------------------- Total current liabilities 4,111 3,020 -------------------------------------------------------------------------------------------------- LONG-TERM DEBT 1,776 831 -------------------------------------------------------------------------------------------------- ACCRUED RETIREMENT BENEFITS 2,546 2,453 -------------------------------------------------------------------------------------------------- OTHER LIABILITIES 290 201 -------------------------------------------------------------------------------------------------- SHAREOWNERS' EQUITY Preferred stock (liquidation value - $5.4 million) 1 1 Common Stock (shares issued - 209.5 million) 210 210 Class A Common Stock (shares issued: 1995, 32.9 million; 1994, 36.9 million) 33 37 Additional paid-in capital 186 174 Retained earnings 4,158 3,762 Currency translation and pension adjustments (99) (97) Common Stock in treasury, at cost (shares held: 1995, 25.4 million; 1994, 27.8 million) (707) (731) -------------------------------------------------------------------------------------------------- Total shareowners' equity 3,782 3,356 -------------------------------------------------------------------------------------------------- TOTAL $12,505 $9,861 ===================================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 4 STATEMENT OF ROCKWELL INTERNATIONAL CORPORATION CONSOLIDATED CASH FLOWS (IN MILLIONS)
YEARS ENDED SEPTEMBER 30 1995 1994 1993 ============================================================================================== OPERATING Net income $ 742 $ 634 $ 562 ACTIVITIES Adjustments to net income to arrive at cash provided by operating activities: Depreciation 470 436 432 Amortization of intangible assets 101 58 59 Deferred income taxes 78 44 (1) Net pension income and contributions (83) (123) (121) Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and foreign currency adjustments: Receivables (74) (29) 98 Inventories (191) (89) 12 Accounts payable - trade 73 99 (4) Accrued compensation and benefits (8) (43) 32 Advance payments from customers 78 (81) (49) Income taxes (60) 68 12 Other assets and liabilities (5) (54) (102) --------------------------------------------------------------------------------- CASH PROVIDED BY OPERATING ACTIVITIES 1,121 920 930 - ---------------------------------------------------------------------------------------------- INVESTING Property additions (685) (568) (433) ACTIVITIES Acquisition of Reliance (net of cash acquired and $475 million proceeds from sale of its telecommunications business) (1,066) Other acquisitions of businesses (net of cash acquired) (121) (20) (118) Proceeds from the disposition of property and businesses 38 104 30 --------------------------------------------------------------------------------- CASH USED FOR INVESTING ACTIVITIES (1,834) (484) (521) - ---------------------------------------------------------------------------------------------- FINANCING Increase (decrease) in short-term borrowings 290 (29) (15) ACTIVITIES Payments of long-term debt (45) (232) (13) Long-term borrowings 827 22 2 --------------------------------------------------------------------------------- Net increase (decrease) in debt 1,072 (239) (26) Purchase of treasury stock (137) (155) (65) Dividends (235) (225) (211) Reissuance of common stock 50 38 63 --------------------------------------------------------------------------------- CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 750 (581) (239) - ---------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN CASH 37 (145) 170 CASH AT BEGINNING OF YEAR 628 773 603 --------------------------------------------------------------------------------- CASH AT END OF YEAR $ 665 $ 628 $ 773 ==============================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 5 STATEMENT OF CONSOLIDATED ROCKWELL INTERNATIONAL CORPORATION SHAREOWNERS' EQUITY (IN MILLIONS)
YEARS ENDED SEPTEMBER 30 1995 1994 1993 ============================================================================================== PREFERRED STOCK (No shares issued during periods) $ 1 $ 1 $ 1 - ---------------------------------------------------------------------------------------------- COMMON STOCK (No shares issued during periods) 210 210 210 - ---------------------------------------------------------------------------------------------- CLASS A Beginning balance 37 42 47 COMMON STOCK Conversions into Common Stock (4) (5) (5) --------------------------------------------------------------------------- Ending balance 33 37 42 - ---------------------------------------------------------------------------------------------- ADDITIONAL Beginning balance 174 164 145 PAID-IN CAPITAL Exercise of stock options 12 10 19 --------------------------------------------------------------------------- Ending balance 186 174 164 - ---------------------------------------------------------------------------------------------- RETAINED EARNINGS Beginning balance 3,762 3,472 3,261 Net income 742 634 562 Cash dividends: Common (per share: 1995, $1.08; 1994, $1.02; 1993, $.96) Preferred (per share: Series A - $4.75, Series B - $1.35) (235) (225) (211) Treasury stock reissuances (111) (119) (140) --------------------------------------------------------------------------- Ending balance 4,158 3,762 3,472 - ---------------------------------------------------------------------------------------------- CURRENCY Beginning balance (97) (197) (17) TRANSLATION AND Currency translation (2) 20 (114) PENSION Pension adjustment 80 (66) ADJUSTMENTS --------------------------------------------------------------------------- Ending balance (99) (97) (197) - ---------------------------------------------------------------------------------------------- TREASURY STOCK Beginning balance (731) (736) (869) Purchases (137) (155) (65) Reissuances, principally Class A Common Stock conversions 161 160 198 --------------------------------------------------------------------------- Ending balance (707) (731) (736) --------------------------------------------------------------------------- TOTAL SHAREOWNERS' EQUITY $3,782 $3,356 $ 2,956 ==============================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 6 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. 2. Acquisition of Businesses In January 1995, the company completed its acquisition of Reliance Electric Company (Reliance), a major manufacturer of industrial products and telecommunications equipment for $1,586 million. The purchase price was financed through $311 million of short-term borrowings, $800 million of long-term debt, and the $475 million of proceeds from the August 1995 sale of Reliance's telecommunications business. The company's results of operations do not include the results of Reliance's telecommunications business or the interest expense related to the short-term borrowings that were repaid with the sale proceeds. The acquisition of Reliance was accounted for as a purchase as of December 31, 1994 and the results of operations of Reliance have been included since that date. The purchase price exceeded the fair value of net assets acquired by $880 million, which is recognized as goodwill and is being amortized over 40 years. The following unaudited pro forma information has been prepared assuming Reliance had been acquired and its telecommunications business had been sold as of the beginning of the periods presented. The pro forma information is presented for information purposes only and is not necessarily indicative of what would have occurred if the acquisition had been made as of those dates. In addition, the pro forma information is not intended to be a projection of future results and does not reflect synergies expected to result from the integration of Reliance and the company's Automation business. PRO FORMA INFORMATION (UNAUDITED) (IN MILLIONS, EXCEPT PER SHARE)
YEARS ENDED SEPTEMBER 30 1995 1994 ============================================================= Sales and other income $13,428 $12,443 - ------------------------------------------------------------- Net income 742 600 - ------------------------------------------------------------- Earnings per common share: Primary 3.42 2.72 Fully diluted 3.36 2.67 =============================================================
The company also acquired several other businesses at a net cost of $121 million. The results of operations of these businesses were not material in relation to the company's consolidated results of operations. 3. Receivables Receivables are summarized as follows (in millions):
SEPTEMBER 30 1995 1994 ============================================================= Accounts and notes receivable: Commercial, less allowance for doubtful accounts (1995, $83; 1994, $68) $1,673 $1,364 United States Government 142 128 Unbilled costs and accrued profits, less related progress payments (1995, $235; 1994, $387) 695 775 - ------------------------------------------------------------- Receivables $2,510 $2,267 =============================================================
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 $205 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 1995 1994 ============================================================= Finished goods $ 520 $ 355 Long-term contracts in process 289 300 Work in process 880 620 Raw materials, parts, and supplies 553 473 - ------------------------------------------------------------- Total 2,242 1,748 Less allowance to adjust the carrying value of certain inventories (1995, $917; 1994, $557) to a LIFO basis 76 68 - ------------------------------------------------------------- Remainder 2,166 1,680 Less related progress payments 95 147 - ------------------------------------------------------------- Inventories $2,071 $1,533 =============================================================
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. 7 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. General and administrative expenses related to United States Government contracts incurred and charged to inventoried costs were $471 million, $479 million, and $520 million in 1995, 1994, and 1993, respectively. General and administrative expenses remaining in inventoried costs before consideration of progress payments were estimated at $72 million and $76 million at September 30, 1995 and 1994, 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 $244 million in 1995, $229 million in 1994, and $219 million in 1993. 6. Intangible Assets Intangible assets are summarized as follows (in millions):
SEPTEMBER 30 1995 1994 ============================================================================ Goodwill, less accumulated amortization (1995, $223; 1994, $174) $1,476 $589 Trademarks, patents, product technology, and other intangibles, less accumulated amortization (1995, $372; 1994, $349) 540 188 - ---------------------------------------------------------------------------- Intangible assets $2,016 $777 ============================================================================
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. TRADEMARKS, PATENTS, PRODUCT TECHNOLOGY, AND OTHER INTANGIBLES ARE BEING AMORTIZED ON A STRAIGHT-LINE BASIS OVER THEIR ESTIMATED USEFUL LIVES, GENERALLY RANGING FROM 5 TO 40 YEARS. The increases in goodwill and trademarks, patents, product technology, and other intangibles are primarily due to the acquisition of Reliance. Management has reviewed the realizability of goodwill and other intangible assets based on an evaluation of remaining useful lives, cash flows, and profitability projections and has determined that there is no impairment at September 30, 1995. 7. Other Assets Other assets are summarized as follows (in millions):
SEPTEMBER 30 1995 1994 ============================================================================ Prepaid pension costs (see Note 18) $1,325 $1,215 Net deferred income taxes (see Note 19) 13 300 Customer finance receivables 188 137 Investments and other assets 132 121 - ---------------------------------------------------------------------------- Other assets $1,658 $1,773 ============================================================================
The reduction in net deferred income taxes results principally from the deferred tax liabilities recorded in connection with the fair value adjustments of Reliance. 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 1995 1994 ============================================================================ Commercial paper $535 $ 40 Short-term bank borrowings, principally foreign 101 105 Current portion of long-term debt 19 15 - ---------------------------------------------------------------------------- Short-term debt $655 $160 ============================================================================
Weighted average interest rates on short-term borrowings:
1995 1994 ============================================================================ Commercial paper 5.8% 4.9% Other short-term debt (principally foreign) 4.7% 4.9% ============================================================================
The increase in short-term commercial paper borrowings is primarily due to the Reliance acquisition. At September 30, 1995, the company had $2.5 billion of unsecured credit facilities with various banks to support commercial paper borrowings. There were no significant commitment fees or compensating balance requirements under these facilities. The company reduced the credit facilities by $1.0 billion in November 1995. Short-term credit facilities available to foreign subsidiaries amounted to $521 million at September 30, 1995 and consisted of arrangements for which there are no significant commitment fees. 8 NOTES TO FINANCIAL STATEMENTS 9. Other Current Liabilities Other current liabilities are summarized as follows (in millions):
SEPTEMBER 30 1995 1994 ============================================================================ Accounts payable - other $ 312 $227 Accrued product warranties 237 217 Accrued taxes other than income taxes 85 82 Other 400 256 - ---------------------------------------------------------------------------- Other current liabilities $1,034 $782 ============================================================================
10. Long-term Debt Long-term debt consisted of the following (in millions):
SEPTEMBER 30 1995 1994 ============================================================================ 7 5/8% notes, payable in 1998 $ 300 8 7/8% notes, payable in 1999 300 $300 8 3/8% notes, payable in 2001 200 200 6 3/4% notes, payable in 2002 300 300 6.8% notes, payable in 2003 138 7 7/8% notes, payable in 2005 200 6 5/8% notes, payable in 2005 300 Other obligations, principally foreign 57 46 - ---------------------------------------------------------------------------- Total 1,795 846 Less current portion 19 15 - ---------------------------------------------------------------------------- Long-term debt $1,776 $831 ============================================================================
In 1995, the company issued the 7 5/8% notes, the 7 7/8% notes, and the 6 5/8% notes in connection with the Reliance acquisition. The 6.8% notes represent long-term debt of Reliance existing at the date of acquisition. Interest payments on short- and long-term borrowings were $154 million in 1995, $98 million in 1994, and $110 million in 1993. At September 30, 1995 aggregate maturities of long-term debt during the five years ending September 30, 2000 were as follows (in millions): 1996, $19; 1997, $18; 1998, $305; 1999, $305; and 2000, $3. 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, 1995, the carrying values of the company's financial instruments approximated 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 foreign currency commitments entered into in the ordinary course of business. These commitments are generally for terms of less than one year. The foreign currency forward exchange contracts are executed with creditworthy banks and are denominated in currencies of major industrial countries. The notional amount of outstanding foreign currency forward exchange contracts aggregated $681 million and $415 million at September 30, 1995 and 1994, respectively. The company does not anticipate any material adverse effect on its results of operations or financial 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. At September 30, 1995, 28 million shares of common stock were reserved for various employee incentive plans and conversions of preferred 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. 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 company may redeem Series A and Series B preferred stocks at $100 and $36 per share, respectively. The aggregate liquidation value of all shares of 9 preferred stock that may be issued in series from time to time cannot at any time exceed $650 million. Changes in outstanding common shares are summarized as follows (in millions):
1995 1994 1993 ======================================================= Beginning balance 218.6 221.0 220.3 Treasury stock purchases (3.5) (4.1) (2.3) Other, principally stock option exercises 1.9 1.7 3.0 - ------------------------------------------------------- Ending balance 217.0 218.6 221.0 =======================================================
Outstanding common stock at September 30, 1995 consisted of 184.1 million shares of Common Stock and 32.9 million shares of Class A Common Stock. There were also outstanding at September 30, 1995, 25,347 shares of Series A Preferred Stock and 79,716 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. The options have vesting periods which range from 1 to 3 years. Information relative to employee stock options is as follows (in thousands):
1995 1994 1993 ======================================================= Number of shares under option: Outstanding at beginning of year 10,336 9,676 9,659 Granted 1,776 2,157 2,781 Exercised (1,713) (1,401) (2,647) Expired (36) (96) (117) - ------------------------------------------------------- Outstanding at end of year 10,363 10,336 9,676 ======================================================= Exercisable at end of year 8,601 8,222 6,915 =======================================================
The ranges of exercise prices per share for options outstanding are as follows:
SEPTEMBER 30 1995 1994 1993 ======================================================= High $46.75 $41.88 $31.50 Low $16.75 $16.75 $13.13 =======================================================
Options outstanding and exercisable at September 30, 1995 included 356,981 related to Class A Common shares. Shares available for future grant or payment under various incentive plans were 16.3 million at September 30, 1995. Outstanding options expire at various dates from December 4, 1995 to July 10, 2005. None of the incentive plans presently permit options to be granted after September 30, 2005. 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 28 percent of total sales in 1995, 35 percent in 1994, and 39 percent in 1993. United States Government sales by contract type were as follows:
1995 1994 1993 ======================================================= Cost 71% 68% 65% Firm-fixed-price 25 25 27 Fixed-price-incentive 4 7 8 - ------------------------------------------------------- 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. 10 NOTES TO FINANCIAL STATEMENTS 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 $138 million, $120 million, and $118 million in 1995, 1994, and 1993, 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 $330 million as of September 30, 1995 and are payable as follows (in millions): 1996, $74; 1997, $58; 1998, $46; 1999, $37; 2000, $31; and after 2000,$84. 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 are comprised of the following (in millions):
1995 1994 1993 ======================================================= Company-initiated $ 649 $ 595 $ 587 Government-funded 1,059 1,010 1,014 - ------------------------------------------------------- Total research and development costs $1,708 $1,605 $1,601 =======================================================
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):
1995 1994 1993 ======================================================= Service cost - benefits attributed to service during the period $ 15 $ 18 $ 20 Interest accrued on accumulated retirement medical obligation 170 160 187 Amortization of plan amendments and net actuarial gains (57) (56) (29) - ------------------------------------------------------- Retirement medical expense $128 $122 $178 =======================================================
The company's retirement medical obligation consisted of the following (in millions):
SEPTEMBER 30 1995 1994 ====================================================== Accumulated retirement medical obligation: Retirees $1,833 $1,656 Employees eligible to retire 184 151 Employees not eligible to retire 277 243 - ------------------------------------------------------ Total 2,294 2,050 Unamortized amounts: Plan amendments 311 359 Net actuarial (losses) gains: Discount rate (284) (137) Health care trend rates 456 435 Demographics (228) (200) - ------------------------------------------------------ Recorded liability $2,549 $2,507 - ------------------------------------------------------ Assumptions used (June 30 measurement date): Discount rate 7.5% 8.25% Health care cost trend rates 8.5%* 8.5%* ====================================================== * Decreasing to 5.5% after 2015.
The unamortized amounts for plan amendments will be recognized over the next 3 to 12 years and, accordingly, reduce retirement medical expense. Net actuarial losses and 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, 1995 by approximately $175 million and would change retirement medical expense by approximately $15 million. 11 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. Net pension income consisted of the following (in millions):
1995 1994 1993 ======================================================= Service cost-benefits earned during the year $(124) $(128) $(112) Interest accrued on pro- jected benefit obligation (597) (557) (553) Assumed return on plan assets 704 669 638 Initial net asset amortization 137 137 137 Prior service cost amortization (32) (25) (35) Net actuarial loss amortization (25) (70) (19) - ------------------------------------------------------- Net pension income $ 63 $ 26 $ 56 =======================================================
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 equity securities, United States Government obligations, and other fixed income investments whose values are subject to fluctuations of the securities market. The actual return on plan assets was $1,391 million, $128 million, and $935 million in 1995, 1994, and 1993, 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. The following table reconciles the funded status of the company's overfunded pension plans to amounts included in the accompanying balance sheet (in millions):
1995 1994 ======================================================= Accumulated benefit obligation, principally vested $7,474 $6,721 Effects of projected compensation increases 529 460 - ------------------------------------------------------- Projected benefit obligation 8,003 7,181 Fair value of plan assets 8,653 7,795 - ------------------------------------------------------- Plan assets in excess of projected benefit obligation 650 614 Items not yet recognized in the balance sheet: Net actuarial (gains) losses: Asset return (213) 474 Discount rate 983 385 Demographics 345 304 Prior service cost 80 96 Remaining initial net asset (520) (658) - ------------------------------------------------------- Prepaid pension costs at September 30 (see Note 7) $1,325 $1,215 - ------------------------------------------------------- Assumptions used (June 30 measurement date): Discount rate 7.5% 8.25% 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 $86 million, $88 million, and $89 million for 1995, 1994, and 1993, respectively. 12 NOTES TO FINANCIAL STATEMENTS 19. Income Taxes The components of the provision for income taxes are as follows (in millions):
1995 1994 1993 ======================================================= Current: United States $260 $219 $240 Foreign 86 76 54 State and local 60 48 49 - ------------------------------------------------------- Total current 406 343 343 - ------------------------------------------------------- Deferred: United States 54 46 (18) Foreign 13 (7) 13 State and local 11 5 4 - ------------------------------------------------------- Total deferred 78 44 (1) - ------------------------------------------------------- Provision for income taxes $484 $387 $342 =======================================================
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 1995 1994 ======================================================= Accrued compensation and benefits $155 $146 Accrued product warranties 92 85 Other - net 56 58 - ------------------------------------------------------- Current deferred income taxes $303 $289 =======================================================
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 1995 1994 ======================================================= Accrued retirement medical costs $ 914 $ 901 Pension costs (471) (470) Property (244) (159) Intangible assets (116) 39 Loss carryforwards 74 44 Foreign tax credit carryforwards 57 53 Other - net (77) (16) - ------------------------------------------------------- Subtotal 137 392 - ------------------------------------------------------- Valuation allowance (124) (92) - ------------------------------------------------------- Long-term deferred income taxes (see Note 7) $ 13 $ 300 =======================================================
Management believes it is more likely than not that current and long-term tax assets will be realized through the reduction of future taxable income. Significant factors considered by management in its determination of the probability of the realization of the deferred tax assets included: (a) the historical operating results of the company ($2.5 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. 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 period for net operating losses expires between 1996 and 2003, except for $30 million which do not expire. The carryforward period for foreign tax credits expires between 1996 and 2000. The consolidated effective tax rate was different from the United States statutory rate for the reasons set forth below:
1995 1994 1993 ======================================================= Statutory tax rate 35.0% 35.0% 35.0% State and local income taxes 3.7 3.4 3.9 Foreign income taxes 2.5 2.0 3.1 Non-deductible goodwill 1.4 0.5 0.6 Utilization of foreign loss carryforwards (1.4) (1.1) (1.3) Tax credits (1.3) (1.9) (1.9) Deferred income tax rate changes (1.9) Other (0.4) - 0.3 - ------------------------------------------------------- Effective tax rate 39.5% 37.9% 37.8% =======================================================
The income tax provisions were calculated based upon the following components of income before income taxes (in millions):
1995 1994 1993 ======================================================= United States income $ 948 $ 811 $742 Foreign income 278 210 162 - ------------------------------------------------------- Total $1,226 $1,021 $904 =======================================================
No provision has been made for United States, state, or additional foreign income taxes related to approximately $700 million of undistributed earnings of foreign subsidiaries which have been or are intended to be permanently reinvested. Income tax payments were $448 million in 1995, $299 million in 1994, and $340 million in 1993. 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 1995. 13 20. 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. 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: AUTOMATION - industrial automation equipment and systems. OTHER ELECTRONICS BUSINESSES - avionics products and systems and related communications technologies primarily used in commercial and military aircraft (Avionics); semiconductor-based subsystems including fax and data modems, global positioning system receiver engines, and gallium arsenide devices (Semiconductor Systems); and defense electronics systems and products for precision guidance and control, for tactical weapons, and for command, control, communications, and intelligence (Defense Electronics). AEROSPACE - manned and unmanned space systems, rocket engines, advanced space-based surveillance systems, high-energy laser and other directed-energy programs, and space electric power (Space Systems); and military aircraft and modifications and military and commercial aircraft structural components (Aircraft). 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. Divested businesses include the sales, operating results, and gains or losses on the disposition of significant businesses and product lines. Divested businesses include the Semiconductor Systems Local Area Networking product line in 1995, the Automotive Plastics business in 1994, the Flame Safeguard Controls product line in 1992, and the Network Transmission Systems business and Steel Castings product line in 1991. Sales and operating earnings by business segment are included in the table on page 29. The following tables provide additional segment information for 1995, 1994, and 1993 (in millions). ASSET INFORMATION BY SEGMENT
PROVISION FOR DEPRECIATION IDENTIFIABLE ASSETS AND AMORTIZATION CAPITAL EXPENDITURES ------------------------- ------------------------- ------------------------ Business Segment 1995 1994 1993 1995 1994 1993 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------ Electronics: Automation $ 4,277 $1,817 $1,699 $192 $121 $116 $237 $120 $ 96 Avionics/Semiconductor Systems/Defense 2,339 1,990 1,822 143 123 120 256 222 124 - ------------------------------------------------------------------------------------------------------------ Total Electronics 6,616 3,807 3,521 335 244 236 493 342 220 Aerospace 2,142 2,042 1,975 79 82 85 44 66 81 Automotive 1,473 1,372 1,236 97 93 92 119 102 100 Graphic Systems 917 898 937 30 30 31 12 12 13 - ------------------------------------------------------------------------------------------------------------ Business segment totals 11,148 8,119 7,669 541 449 444 668 522 414 Corporate 1,350 1,712 1,893 25 36 36 16 36 12 Divested businesses 7 30 133 5 9 11 1 10 7 - ------------------------------------------------------------------------------------------------------------ Total $12,505 $9,861 $9,695 $571 $494 $491 $685 $568 $433 ============================================================================================================
AUTOMATION ASSETS FOR 1995 INCLUDE $1,234 MILLION OF INTANGIBLE ASSETS AND GOODWILL RELATED TO THE ACQUISTION OF RELIANCE. AUTOMATION PROVISION FOR DEPRECIATION AND AMORTIZATION FOR 1995 INCLUDES $27 MILLION RELATED TO THE AMORTIZATION OF RELIANCE INTANGIBLE ASSETS AND GOODWILL. CORPORATE INDENTIFIABLE ASSETS INCLUDE CASH AND NET DEFERRED INCOME TAX ASSETS. 14 NOTES TO FINANCIAL STATEMENTS 22. Business Segment Information (continued) SALES, EARNINGS AND ASSETS BY GEOGRAPHIC AREA
IDENTIFIABLE ASSETS --------------------------------------------------- SALES EARNINGS SEGMENTS CORPORATE ------------------------- ------------------------ ------------------------- ----------------------- Geographic Area 1995 1994 1993 1995 1994 1993 1995 1994 1993 1995 1994 1993 - ----------------------------------------------------------------------------------------------------------------------------- United States $10,266 $ 8,728 $ 8,620 $1,286 $1,004 $ 939 $ 8,734 $6,220 $5,999 $ 698 $1,078 $1,325 Canada 593 455 369 70 84 54 245 210 175 419 380 322 Europe 2,059 1,649 1,499 154 92 66 1,395 1,213 1,194 149 154 127 Asia-Pacific 518 455 467 22 9 24 520 294 243 73 96 103 Latin America 428 352 285 28 25 38 261 212 191 11 4 16 Eliminations (894) (706) (603) - ----------------------------------------------------------------------------------------------------------------------------- Total $12,970 $10,933 $10,637 $1,560 $1,214 $1,121 $11,155 $8,149 $7,802 $1,350 $1,712 $1,893 =============================================================================================================================
SALES AND EARNINGS EXCLUDE DIVESTED BUSINESSES. UNITED STATES SALES INCLUDE EXPORT SALES TO CUSTOMERS AND INTERNATIONAL SUBSIDIARIES OF $1,635 MILLION IN 1995, $1,280 MILLION IN 1994 AND $1,171 MILLION IN 1993. 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
1995 1994 1993 ===================================================== Aerospace $2,247 $2,439 $2,734 Electronics 1,308 1,329 1,414 Other business segments 78 143 117 - ----------------------------------------------------- Total $3,633 $3,911 $4,265 =====================================================
Included in sales to the United States Government are the following major programs (in millions):
1995 1994 1993 ===================================================== Space Shuttle $1,145 $1,295 $1,380 Space Station 325 329 372 B-1B 230 268 269 - ----------------------------------------------------- Total $1,700 $1,892 $2,021 =====================================================
23. Quarterly Financial Information (Unaudited) (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
1995 FISCAL QUARTERS 1994 FISCAL QUARTERS ------------------------------------------------ ----------------------------------------------- FIRST SECOND THIRD FOURTH 1995 First Second Third Fourth 1994 - ------------------------------------------------------------------------------------------------------------------------------ Sales $2,623 $3,361 $3,452 $3,545 $12,981 $2,601 $2,762 $2,872 $2,888 $11,123 Cost of sales 2,031 2,572 2,661 2,733 9,997 2,028 2,158 2,218 2,271 8,675 Net income 165 191 197 189 742 149 155 165 165 634 Per share: Primary .76 .88 .90 .88 3.42 .68 .70 .74 .75 2.87 Fully diluted .74 .87 .88 .87 3.36 .66 .69 .73 .74 2.82 ==============================================================================================================================
15 SELECTED FINANCIAL DATA ROCKWELL INTERNATIONAL CORPORATION (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
1995 1994 1993 1992 1991 ===================================================================================================================== SUMMARY OF OPERATIONS Sales of ongoing businesses $12,970 $10,933 $10,637 $10,728 $11,282 Cost of sales 9,997 8,675 8,539 8,810 9,189 Selling, general, and administrative expenses 1,706 1,412 1,374 1,332 1,371 Operating earnings of ongoing businesses 1,560 1,214 1,121 945 1,144 Net income 742 634 562 483* 601 Earnings per common share: Primary 3.42 2.87 2.55 2.16* 2.57 Fully diluted 3.36 2.82 2.51 2.14* 2.54 Cash dividends 235 225 211 206 202 Per common share 1.08 1.02 .96 .92 .86 Average common shares outstanding (in millions) 217 221 220 224 234 - --------------------------------------------------------------------------------------------------------------------- FINANCIAL POSITION AT SEPTEMBER 30 Current assets $ 5,805 $ 4,928 $ 4,946 $ 4,839 $ 4,823 Current liabilities 4,111 3,020 2,946 3,112 3,322 Working capital 1,694 1,908 2,000 1,727 1,501 Ratio of current assets to current liabilities 1.41 1.63 1.68 1.55 1.45 Property--net 3,026 2,383 2,326 2,375 2,461 Total assets 12,505 9,861 9,695 9,731 9,376 Long-term debt 1,776 831 1,028 1,035 740 Ratio of total debt to shareowners' equity .64 .30 .40 .43 .24 Shareowners' equity 3,782 3,356 2,956 2,778 4,224 Per common share 17.40 15.32 13.35 12.58 18.48 - --------------------------------------------------------------------------------------------------------------------- OTHER STATISTICAL DATA Backlog at September 30 $11,756 $10,751 $13,135 $14,564 $16,468 Payrolls and fringe benefits 4,417 4,189 4,285 4,470 4,786 Depreciation expense 470 436 432 454 498 Capital expenditures 685 568 433 386 484 Number of employees at September 30 82,671 71,891 77,028 78,685 87,004 ===================================================================================================================== *EXCLUDES THE ONE-TIME CHARGE RELATED TO THE CHANGE IN ACCOUNTING FOR RETIREMENT MEDICAL BENEFITS. INCLUDING THE EFFECT OF THIS ACCOUNTING CHANGE THE COMPANY HAD A NET LOSS FOR 1992 OF $1,036 MILLION, OR $4.62 PER SHARE.
EX-21 10 ROCKWELL 10-K 1 EXHIBIT 21 ROCKWELL INTERNATIONAL CORPORATION LIST OF SUBSIDIARIES OF THE COMPANY AS OF NOVEMBER 30, 1995
PERCENTAGE OF VOTING SECURITIES OWNED BY ------------------------- NAME AND JURISDICTION REGISTRANT SUBSIDIARY --------------------- ---------- ---------- Allen-Bradley Company, Inc. (Wisconsin)................................ 100% Reliance Electric Company (Delaware)................................... 100% Rockwell-Collins International, Inc. (Texas)........................... 100% Rockwell Graphic Systems, Inc. (Delaware).............................. 100% Rockwell International Finance Corporation (Delaware).................. 100% Rockwell Light Vehicle 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 11 ROCKWELL 10-K 1 EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 33-61723 on Form S-3 and Registration Statement Nos. 2-99494 (as amended through Post-Effective Amendment No. 4 thereto), 33-27122, 33-32662, 33-62917, 33-63777 and 33-64497, all on Form S-8, of our reports dated October 31, 1995 appearing in and incorporated by reference in the Annual Report on Form 10-K of Rockwell International Corporation for the year ended September 30, 1995 and to the reference to us under the heading "Experts" in the Prospectuses, which are part of the Registration Statements. DELOITTE & TOUCHE LLP Pittsburgh, Pennsylvania December 21, 1995 EX-24 12 ROCKWELL 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 WILLIAM J. CALISE, JR., EDWARD T. MOEN, II and PETER R. KOLYER, 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, 1995; (2) Registration Statements and any and all amendents thereto (including supplements and post-effective amendments) for the purpose of registering under the Securities Act of 1933, as amended, (a) additional securities to be sold pursuant to (i) the Company's Savings Plan, as amended; (ii) the Company's Savings Plan for Certain Represented Hourly Employees, as amended; (iii) the Company's Retirement Savings Plan for Certain Employees; and (iv) the Reliance Electric Company (Reliance) Savings and Investment Plan, as amended; and (b) securities to be sold pursuant to (i) the Allen-Bradley Company Savings and Investment Plan for Salaried Employees, as amended; (ii) the Allen-Bradley Company Savings and Investment Plan for Non-Represented Hourly Employees, as amended; (iii) the Allen-Bradley Company Savings and Investment Plan for Represented Hourly Employees, as amended; and (v) the Company's Directors Stock Plan, as amended; and (3) any and all amendments (including supplements and post-effective amendments to (a) the Registration Statement on Form S-3 (Registration Statement No. 33-61723) 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. 33-63777) registering securities to be sold under the Company's 1995 Long-Term Incentives Plan; (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; (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; (e) the Registration Statement on Form S-8 (Registration Statement No. 33-64497) registering securities to be sold pursuant to the Company's Retirement Savings Plan for Certain Employees; and (f) the Registration Statement on Form S-8 (Registration Statement No. 33-62917) registering securities to be sold pursuant to the Reliance Savings and Investment Plan, as amended.
Signature Title Date --------- ----- ---- /s/ DONALD R. BEALL Chairman of the Board and December 6, 1995 - ---------------------------------- Chief Executive Officer (Donald R. Beall) (principal executive officer) and Director /s/ DON H. DAVIS, JR. Director December 6, 1995 - ---------------------------------- (Don H. Davis, Jr.) /s/ LEW ALLEN, JR. Director December 6, 1995 - ---------------------------------- (Lew Allen, Jr.)
2 /s/ RICHARD M. BRESSLER Director December 6, 1995 - ---------------------------------- (Richard M. Bressler) /s/ JOHN J. CREEDON Director December 6, 1995 - ---------------------------------- (John J. Creedon) /s/ ROBIN CHANDLER DUKE Director December 6, 1995 - ---------------------------------- (Robin Chandler Duke) /s/ JUDITH L. ESTRIN Director December 6, 1995 - ---------------------------------- (Judith L. Estrin) /s/ WILLIAM H. GRAY, III Director December 6, 1995 - ---------------------------------- (William H. Gray, III) /s/ JAMES CLAYBURN LA FORCE, JR. Director December 6, 1995 - ---------------------------------- (James Clayburn La Force, Jr.) /s/ WILLIAM T. MCCORMICK, JR. Director December 6, 1995 - ---------------------------------- (William T. McCormick, Jr.) /s/ JOHN D. NICHOLS Director December 6, 1995 - ---------------------------------- (John D. Nichols) /s/ BRUCE M. ROCKWELL Director December 6, 1995 - ---------------------------------- (Bruce M. Rockwell) /s/ WILLIAM S. SNEATH Director December 6, 1995 - ---------------------------------- (William S. Sneath) /s/ JOSEPH F. TOOT, JR. Director December 6, 1995 - ---------------------------------- (Joseph F. Toot, Jr.) /s/ W. M. BARNES Senior Vice President, December 6, 1995 - ---------------------------------- Finance & Planning and (W. M. Barnes) Chief Financial Officer (principal financial officer) /s/ LAWRENCE J. KOMATZ Vice President and Controller December 6, 1995 - ---------------------------------- (principal financial officer) (Lawrence J. Komatz)
EX-27 13 ROCKWELL FINANCIAL DATA SCHEDULE TO 10-K
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SEPTEMBER 30, 1995 CONSOLIDATED BALANCE SHEET, STATEMENT OF CONSOLIDATED INCOME FOR THE YEAR ENDED SEPTEMBER 30, 1995 AND NOTES TO FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 12-MOS SEP-30-1995 SEP-30-1995 665 0 2,510 83 2,071 5,805 6,930 3,904 12,505 4,111 1,776 243 0 1 3,538 12,505 12,981 13,099 9,997 11,703 0 0 170 1,226 484 742 0 0 0 742 3.42 3.36
EX-99.A.1 14 ROCKWELL 10-K 1 PN004 Exhibit 99-a-1 EIN 95-105-4708 Effective Date 1/1/95 ROCKWELL INTERNATIONAL CORPORATION SAVINGS PLAN (Amended and Restated as of January 1, 1995) 2 ROCKWELL INTERNATIONAL CORPORATION SAVINGS PLAN TABLE OF CONTENTS PREAMBLE............................................................................. 1 ARTICLE I DEFINITIONS ............................................................... 2 1.010 "Accounts" ............................................................... 2 1.020 "Administrative Committee" ............................................... 2 1.030 "Affiliated Company" ..................................................... 2 1.035 "Average Contribution Percentage" ........................................ 2 1.040 "Average Deferral Percentage" ............................................ 2 1.045 "Base Compensation" ...................................................... 3 1.050 "Beneficiary" ............................................................ 3 1.055 "Board of Directors" ..................................................... 3 1.060 "Class A Stock" .......................................................... 3 1.070 "Class A Unit" ........................................................... 3 1.075 "Code" ................................................................... 3 1.080 "Common Stock" ........................................................... 3 1.085 "Common Unit" ............................................................ 4 1.090 "Company" ................................................................ 4 1.100 "Company Contributions" .................................................. 4 1.110 "Company Contributions Account" .......................................... 4 1.120 "Compensation Deduction Account" ......................................... 4 1.130 "Compensation Deduction Contributions" ................................... 4 1.140 "Compensation Deferral Account" .......................................... 4 1.150 "Compensation Deferral Contributions" .................................... 4 1.155 "Continuous Employment" .................................................. 4 1.160 "Deduction Contributions" ................................................ 4 1.163 "Deduction Limitation Percentage" ........................................ 4 1.165 "Deferral Contributions" ................................................. 5 1.168 "Deferral Limitation Percentage" ......................................... 5 1.170 "Diversified Fund" ....................................................... 5 1.175 "Divested Component" ..................................................... 6 1.180 "Effective Date" ......................................................... 6 1.190 "Eligible Employee" ...................................................... 6 1.195 "Eligible Retirement Plan" ............................................... 6 1.200 "Employee" ............................................................... 6 1.210 "ERISA" .................................................................. 6 1.220 "Fixed Income Fund" ...................................................... 6 1.230 "Guaranteed Return Fund" ................................................. 6 1.232 "Highly Compensated Participants" ........................................ 7 1.235 "Intermediate Term Bond Fund" ............................................ 7
-i- 3 1.240 "Investment Funds" ....................................................... 7 1.245 "Investment Manager" ..................................................... 7 1.250 "Investment Manager Account" ............................................. 7 1.260 "Layoff" ................................................................. 7 1.270 "Maternity or Paternity Leave" ........................................... 7 1.280 "Named Fiduciary" ........................................................ 7 1.290 "Participant" ............................................................ 7 1.300 "Plan" ................................................................... 7 1.310 "Plan Administrator" ..................................................... 7 1.320 "Plan Committee" ......................................................... 7 1.330 "Plan Year" .............................................................. 8 1.340 "Retiree"................................................................. 8 1.345 "Retirement" ............................................................. 8 1.350 "Stock Fund A" ........................................................... 8 1.360 "Stock Fund B" ........................................................... 8 1.370 "Supplemental Deduction Account" ......................................... 8 1.380 "Supplemental Deduction Contributions" ................................... 8 1.390 "Supplemental Deferral Account" .......................................... 8 1.400 "Supplemental Deferral Contributions" .................................... 8 1.405 "Tender Offer" ........................................................... 8 1.410 "Transfer Contributions" ................................................. 8 1.420 "Trust Agreement" ........................................................ 8 1.430 "Trust Fund" ............................................................. 9 1.440 "Trustee" ................................................................ 9 1.450 "Unit" ................................................................... 9 1.460 "Valuation Date" ......................................................... 9 ARTICLE II PARTICIPATION ............................................................ 10 2.010 Effective Dates .......................................................... 10 2.020 Contribution Election or Authorization ................................... 10 2.025 Transfer Contributions ................................................... 12 2.030 Limitations on Employee Contributions .................................... 13 2.040 Changes in Rate of Employee Contributions ................................ 16 2.050 Changes Between Deduction and Deferral Contributions ..................... 16 2.060 Changes in Investment Elections .......................................... 16 2.070 Transfer of Investments .................................................. 16 ARTICLE III COMPANY CONTRIBUTIONS ................................................... 19 3.010 Matching Amounts ......................................................... 19 3.020 Application of Forfeitures ............................................... 19 ARTICLE IV MAINTENANCE AND VALUATION OF ACCOUNTS .................................... 20 4.010 Participant's Accounts ................................................... 20 4.020 Crediting of Units to Accounts ........................................... 20 4.030 Unit Valuations .......................................................... 21
-ii- 4 4.040 Balance of Participant's Accounts......................................... 21 4.050 Statements of Participants ............................................... 22 ARTICLE V BENEFITS PAYABLE UPON TERMINATING EMPLOYMENT .............................. 23 5.010 Vesting .................................................................. 23 5.020 Retirement, Death, Layoff, Etc ........................................... 24 5.025 Form of Distributions to Participants .................................... 26 5.030 Employees of Divested Components ......................................... 27 5.040 Termination of Employment for Other Reasons .............................. 27 5.050 Participant's Consent to Distribution of Benefits ........................ 29 5.055 Transfer of Distribution Directly to Eligible Retirement Plan ............ 30 5.060 Valuation Dates For Domestic Relations Orders ............................ 30 ARTICLE VI IN-SERVICE WITHDRAWALS, TRANSFERS AND LOANS .............................. 31 6.010 Withdrawals from Accounts by Participants under Age 59-1/2 ............... 31 6.020 Withdrawal from Accounts by Participants Over Age 59-1/2 ................. 32 6.030 Forfeitures and Limitation on Withdrawals ................................ 33 6.040 Allocation of Withdrawals Among Investment and Stock Funds ............... 34 6.050 Hardship Withdrawals from Deferral Accounts .............................. 35 6.060 Transfers to Certain Affiliated Company Plans ............................ 37 6.070 Loans .................................................................... 37 6.080 Transfer of Distribution or Withdrawal to Eligible Retirement Plan ....... 38 ARTICLE VII [RESERVED] .............................................................. 38 ARTICLE VIII SUSPENSION OF SAVINGS AND CONTRIBUTIONS ................................ 39 8.010 Voluntary Suspension ..................................................... 39 8.020 Involuntary Suspension ................................................... 39 8.030 General Provisions Applicable to Suspensions ............................. 39 ARTICLE IX DESIGNATION OF AND PAYMENT TO A BENEFICIARY .............................. 40 9.010 Designation of a Beneficiary ............................................. 40 9.020 Payment to a Beneficiary ................................................. 40 ARTICLE X TRUST AGREEMENT ........................................................... 41 10.010 Establishment of Trust Fund .............................................. 41 10.020 Investments .............................................................. 41 10.030 Duty of Trustee as to Stock in Stock Fund A and Stock Fund B ............. 43 10.040 Form of Trust Agreement .................................................. 44 10.050 Rights in the Trust Fund ................................................. 45 10.060 Taxes, Fees and Expenses of the Trustee .................................. 45 ARTICLE XI ADMINISTRATION ........................................................... 46 11.010 General Administration ................................................... 46 11.020 Plan Committee ........................................................... 46
-iii- 5 11.030 Plan Committee Records ................................................... 46 11.040 Funding Policy ........................................................... 46 11.050 Allocation and Delegation of Duties Under Plan ........................... 46 11.060 Plan Committee Powers .................................................... 46 11.070 Plan Administrator ....................................................... 47 11.080 Reliance Upon Documents and Opinions ..................................... 47 11.090 Requirement of Proof ..................................................... 48 11.100 Limitation on Liability .................................................. 48 11.110 Indemnification .......................................................... 48 11.120 Multiple Fiduciary Capacity .............................................. 48 11.130 Mailing and Lapse of Payments ............................................ 48 11.140 Non-Alienation............................................................ 49 11.150 Addresses ................................................................ 49 11.160 Notices and Communications ............................................... 49 11.170 Company Rights ........................................................... 50 11.180 Payments on Behalf of Incompetent Participants or Beneficiaries .......... 50 ARTICLE XII PARTICIPANT'S CLAIMS .................................................... 51 12.010 Requirement to File Claim ................................................ 51 12.020 Appeal of Denied Claim ................................................... 51 ARTICLE XIII AMENDMENT, MERGERS, TERMINATION, ETC. .................................. 52 13.010 Amendment ................................................................ 52 13.020 Transfer of Assets and Liabilities ....................................... 52 13.030 Merger Restriction ....................................................... 52 13.040 Suspension of Contributions .............................................. 52 13.050 Discontinuance of Contributions .......................................... 53 13.060 Termination .............................................................. 53 ARTICLE XIV STATUTORY LIMITATIONS ................................................... 54 14.010 Annual Limits of Participants' Account Increases ......................... 54 14.020 Limits as to Combined Plans .............................................. 54 14.030 Combining Similar Plans .................................................. 55 14.040 Adjustment to Deferral Contributions ..................................... 55 ARTICLE XV MISCELLANEOUS ............................................................ 56 15.010 Benefits Payable only from Trust Fund .................................... 56 15.020 Requirement for Release .................................................. 56 15.030 Transfers of Stock ....................................................... 56 15.040 Qualification of the Plan ................................................ 56 15.050 Interpretation ........................................................... 56 ARTICLE XVI TENDER OFFERS: PLAN ADMINISTRATION ...................................... 57 16.010 Applicability ............................................................ 57 16.020 Additional Definitions ................................................... 57
-iv- 6 16.030 Establishment and Investment of Sub Fund A and Sub Fund B ................ 57 16.040 Maintenance and Valuation of Sub Fund A and Sub Fund B ................... 58 16.050 Benefits Payable from Sub Funds at Termination of Employment ............. 60 16.060 Distributions from the Plan under Section 6.010 .......................... 61 16.070 Withdrawals from Deduction Accounts under Section 6.030 .................. 62 16.080 Withdrawals from Deferral Accounts under Section 6.030 ................... 63 ARTICLE XVII TOP HEAVY PROVISIONS ................................................... 64 17.010 Definitions .............................................................. 64 17.020 Application of this Article .............................................. 65 17.030 Adjustment of Limitation on Annual Benefit ............................... 66 APPENDIX A Retirement Plans Governing Crediting of Continuous Employment .......... A-1 APPENDIX B Procedures, Terms and Conditions of Loans ............................... B-1
-v- 7 ROCKWELL INTERNATIONAL CORPORATION SAVINGS PLAN (amended and restated as of January 1, 1995) 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 January 1, 1995. The provisions of the Plan as in effect from time to time prior to January 1, 1995, apply to the related periods prior to such date for all purposes, except as specifically provided in the Plan. 8 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 6.040. 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. 1.035 "AVERAGE CONTRIBUTION PERCENTAGE" for each group of Participants 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 Participant in such group, which percentage, for any Plan Year, is equal to the sum of (a) and (b), divided by (c): (a) the amount the Participant has elected to contribute pursuant to Sections 2.020(a)(ii) and (b)(ii); (b) the amount of Company Contributions payable to the Participant's Company Contributions Account in respect of his elections under Section 2.020(a); (c) the Participant's compensation (as such term is defined in section 414(s) of the Code) for that Plan Year. 1.040 "AVERAGE DEFERRAL PERCENTAGE" for each group of Participants with deferral elections under Sections 2.020(a)(i) and (b)(i) shall be the average of the percentages, calculated separately for each Participant in such group, of the compensation (as such term is defined in section 414(s) of the Code) that the Participant has elected to defer for the Plan Year pursuant to Sections 2.020(a)(i) and (b)(i). - 2 - Sav. Pln. '95 9 1.045 "BASE COMPENSATION" means the Participant's compensation, not in excess of One Hundred and Fifty 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, including lump sum merit awards scheduled to be paid after September 30, 1995, 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. Base Compensation shall not include 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, in the case of a Participant who has been married for a one (1) year period and 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 person or persons other than such spouse as Beneficiary or Beneficiaries. Such written designation must be accompanied by a written 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 written consent (which must be witnessed by a notary public who is not an Employee) shall be on a form furnished to the Participant by the Plan Administrator and shall acknowledge the effect of such consent. In the event the Participant has a new spouse to whom he has been married for a one (1) year period, the designation of the prior spouse shall be void and the new spouse shall be deemed to be the Participant's Beneficiary, unless the Participant makes a written designation of a person or persons other than the new spouse. 1.055 "BOARD OF DIRECTORS" means the Board of Directors of Rockwell International Corporation; provided, however, that any action hereunder of the Board of Directors under Section 1.030, 1.090, 1.190, 2.020 and 3.020 may be taken by any officer or officers of Rockwell International Corporation authorized by the Board of Directors. 1.060 "CLASS A STOCK" means the Class A Common Stock of Rockwell International Corporation. 1.070 "CLASS A UNIT" means a Unit of Stock Fund A or Stock Fund B attributable to Class A Stock. 1.075 "CODE" means the Internal Revenue Code of 1986, as it may be amended from time to time. 1.080 "COMMON STOCK" means the common stock, other than the Class A Stock, of Rockwell International Corporation. - 3 - Sav. Pln. '95 10 1.085 "COMMON UNIT" means a Unit of Stock Fund A or Stock Fund B attributable to Common Stock. 1.090 "COMPANY" means Rockwell International Corporation and any other entity to which the Board of Directors has extended this Plan. 1.100 "COMPANY CONTRIBUTIONS" means the contributions made by the Company to the Trust Fund pursuant to the terms of Article III, including forfeitures treated as Company Contributions under that Article. 1.110 "COMPANY CONTRIBUTIONS ACCOUNT" means the Account with respect to a Participant which is comprised of Company Contributions, adjusted by gains or losses related thereto. 1.120 "COMPENSATION DEDUCTION ACCOUNT" means the Account with respect to a Participant which is comprised of Compensation Deduction Contributions, adjusted by gains or losses related thereto. 1.130 "COMPENSATION DEDUCTION CONTRIBUTIONS" means the amounts contributed by Participants to the Plan through payroll deductions pursuant to Section 2.020(a)(ii). 1.140 "COMPENSATION DEFERRAL ACCOUNT" means the Account with respect to a Participant which is comprised of Compensation Deferral Contributions, adjusted by gains or losses related thereto. 1.150 "COMPENSATION DEFERRAL CONTRIBUTIONS" means the amounts contributed to the Plan on behalf of Participants pursuant to Participants' elections under Section 2.020(a)(i). 1.155 "CONTINUOUS EMPLOYMENT" means a Participant's "Vesting Service" under any of the sub-Plans of the Rockwell Retirement Plan for Eligible Employees (the "Rockwell Retirement Plan") listed in Appendix A in which he participates at the time his Continuous Employment for purposes of this Plan is determined. If at the time of such determination the Participant is not a participant in any of the listed sub-Plans to the Rockwell Retirement Plan, the Participant's Continuous Employment will equal the Vesting Service he would have had under the sub-Plan known as the Rockwell International Corporation Retirement Income Plan for Certain Salaried Employees (sub-Plan No. 003), if he had been a participant in that sub-Plan from his original date of hire as an Employee. 1.160 "DEDUCTION CONTRIBUTIONS" means, as applicable, Compensation Deduction Contributions and/or Supplemental Deduction Contributions. 1.163 "DEDUCTION LIMITATION PERCENTAGE" means the maximum contribution percentage in each Plan Year for the group of Highly Compensated Participants and shall be that percentage amount which does not exceed the greater of: - 4 - Sav. Pln. '95 11 (a) the Average Contribution Percentage for all Participants other than Highly Compensated Participants multiplied by one and twenty-five hundredths (1.25); or (b) the lesser of (i) an amount which does not exceed the Average Contribution Percentage for all Participants other than Highly Compensated Participants by more than two (2) percentage points, or (ii) the Average Contribution Percentage for all Participants other than Highly Compensated Participants multiplied by two (2). If a Highly Compensated Participant is a participant in any other plan established or maintained by an Affiliated Company pursuant to which elective deferrals under a cash or deferred arrangement or matching contributions, both as defined in section 401(m)(4) of the Code, or employee contributions, are made, such other plan shall be deemed to be a part of this Plan for the purpose of determining the Deduction Limitation Percentage with respect to that Participant. 1.165 "DEFERRAL CONTRIBUTIONS" means, as applicable, Compensation Deferral Contributions and/or Supplemental Deferral Contributions. 1.168 "DEFERRAL LIMITATION PERCENTAGE" means the maximum deferral percentage in each Plan Year for the group of Highly Compensated Participants and shall be that percentage amount which does not exceed the greater of: (a) the Average Deferral Percentage for all Participants other than Highly Compensated Participants multiplied by one and twenty- five hundredths (1.25); or (b) the lesser of (i) an amount which does not exceed the Average Deferral Percentage for all Participants other than Highly Compensated Participants by more than two (2) percentage points, or (ii) the Average Deferral Percentage for all Participants other than Highly Compensated Participants multiplied by two (2). If any Highly Compensated Participant 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 Deferral Limitation Percentage with respect to such Highly Compensated Participant such other cash or deferred arrangement shall be deemed to be a part of this Plan. - 5 - Sav. Pln. '95 12 1.170 "DIVERSIFIED FUND" means the fund established by the Trustee pursuant to Section 10.020(a)(i). 1.175 "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 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, 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). - 6 - Sav. Pln. '95 13 1.230 "GUARANTEED RETURN FUND" means the fund established by the Trustee pursuant to Section 10.020(a)(iv). 1.232 "HIGHLY COMPENSATED PARTICIPANTS" means those Participants 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 1.232 in any manner permitted by said section 414(q). 1.235 "INTERMEDIATE TERM BOND FUND" means the fund established by the Trustee pursuant to Section 10.020(a)(iii). 1.240 "INVESTMENT FUNDS" means the Diversified Fund, the Fixed Income Fund, the Guaranteed Return Fund, the Intermediate Term Bond Fund and Stock Fund B. 1.245 "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, however, 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 any 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 a vested interest in an Account under the Plan. 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 from time to time so designated by name or corporate office by the Board of Directors. - 7 - Sav. Pln. '95 14 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 "RETIREE" means a Participant who has entered Retirement status pursuant to a retirement plan of the Company or any Affiliated Company, excluding, for purposes of the election available to such a Retiree under Section 2.050(b)(iii), any former Employee who terminated employment with the Company or Affiliated Company as a deferred vested Participant and who later attained Retirement age under the retirement plan. 1.345 "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)(v). 1.360 "STOCK FUND B" means the fund established by the Trustee pursuant to Section 10.020(a)(vi). 1.370 "SUPPLEMENTAL DEDUCTION ACCOUNT" means the Account with respect to a Participant which is comprised of Supplemental Deduction Contributions, as adjusted by gains or losses related thereto. 1.380 "SUPPLEMENTAL DEDUCTION CONTRIBUTIONS" means the amounts contributed by Participants to the Plan through payroll deductions pursuant to Section 2.020(b)(ii). 1.390 "SUPPLEMENTAL DEFERRAL ACCOUNT" means the Account with respect to a Participant which is comprised of Supplemental Deferral Contributions, as adjusted by gains or losses related thereto. 1.400 "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). 1.405 "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. 1.410 "TRANSFER CONTRIBUTIONS" means the amounts described in Section 2.025 which are transferred to a Participant's Account pursuant to the terms of the said Section. 1.420 "TRUST AGREEMENT" means the trust agreement established pursuant to Section 10.010 of this Plan. - 8 - Sav. Pln. '95 15 1.430 "TRUST FUND" means the fund, including the earnings thereon, held by the Trustee for all contributions made by Participants and the Company pursuant to the Plan. The Trust Fund shall be divided into a Diversified Fund, Fixed Income Fund, Guaranteed Return Fund, Intermediate Term Bond Fund, Stock Fund A and Stock Fund B. 1.440 "TRUSTEE" means the trustee or trustees of the trust described in Article X of this Plan. 1.450 "UNIT" means the unit of measurement of a Participant's interest in the Trust Fund. Where appropriate, "Units" includes Common Units and Class A Units. 1.460 "VALUATION DATE" means the last business day of each month or such other business day as the Plan Committee may determine. - 9 - Sav. Pln. '95 16 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 with at least fifteen (15) days notice to the Company and shall become effective on the first payroll payment date following the expiration of the 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 or 5.040; or (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. 2.020 CONTRIBUTION ELECTION OR AUTHORIZATION. (a) An Eligible Employee who has notified the Company of his election to become a Participant shall also: (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 - 10 - Sav. Pln. '95 17 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) 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 (provided, however, that if the Participant is a Highly Compensated Participant, such deferral shall be limited to an additional 1% or 2% of his Base Compensation); 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 (provided, however, that if the Participant is a Highly Compensated Participant, such deduction shall be limited to an additional 1% or 2% of his Base Compensation). (c) In addition to the elections and authorizations set forth in (a) and (b), the Participant shall elect, as provided in Section 2.060, in which Investment Funds his Compensation Deferral Contributions (including Supplemental Deferral Contributions), Compensation Deduction Contributions (including Supplemental Deduction Contributions) or Transfer Contributions are to be invested. Such investments shall be elected by the Participant among the Investment Funds in increments of five percent (5%), with the total of the elected percentage increments equalling one hundred percent (100%). (d) The Board of Directors, in extending the benefits of the Plan to a component of an Affiliated Company may place such limitations as it 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 - 11 - Sav. Pln. '95 18 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. 2.025 TRANSFER CONTRIBUTIONS. Transfers to this Plan of a Participant's interest in another individual account plan shall be permitted in the situations and pursuant to the requirements set forth below: (a) A Participant who is presently an Eligible Employee but who formerly, though an Employee, was not an Eligible Employee may elect (by providing the Plan Administrator with notice thereof) to have the entire amount credited to the said Participant's account in any qualified individual account plan of Allen-Bradley Company or in the Reliance Electric Company Savings and Investment Plan transferred to this Plan; provided, however, that such a transfer shall not be permitted unless and until the Plan Administrator has determined that the amount to be transferred from the said qualified individual account plan is not subject (or is no longer subject) to any provisions or limitations attributable to it under the said qualified individual account plan which are inconsistent with the provisions of this Plan. (b) With the prior consent of the Plan Administrator, which consent may be given only in connection with the Company's acquisition of the stock or assets of another business organization and the extension of this Plan to that business organization, the account balances of persons who were participants in an individual account plan which was sponsored by the acquired organization, but who have become Eligible Employees, may be transferred to this Plan. Such transferred account balances (which shall be entirely in cash or, if the said balances consist in whole or in part of participant loans from the transferring plan, in cash and in kind), shall constitute Transfer Contributions and shall not constitute Deferral or Deduction Contributions under Section 2.020. (c) Transfer Contributions shall be credited to the Participant's Account as follows: (i) that portion of such balance attributable to employer contributions made pursuant to deferral elections under section 401(k) of the Code shall be credited to the Participant's Compensation Deferral Account; (ii) that portion of such balance attributable to employer contributions other than those described in paragraph (i) above shall be credited to the Participant's Compensation Deferral Account, but the Participant'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 - 12 - Sav. Pln. '95 19 (iii) that portion of such balance attributable to employee contributions made on an after-tax basis, shall be credited to the Participant's Compensation Deduction Account. (d) No Company Contributions will be made under Article III with respect to the Transfer Contributions described in this Section 2.025. 2.030 LIMITATIONS ON EMPLOYEE CONTRIBUTIONS. (a) The aggregate amount, with respect to a Participant, 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, 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, may not exceed Seven Thousand Dollars ($7,000) or such larger sum as may be established pursuant to section 402(g)(5) of the Code. (b) Prior to the beginning of, and periodically during, each Plan Year the Administrative Committee shall test: (i) deferral elections under Sections 2.020(a)(i) and (b)(i), in order to determine whether the Average Deferral Percentage for Highly Compensated Participants exceeds the Deferral Limitation Percentage; and (ii) deduction elections under Sections 2.020(a)(ii) and (b)(ii), as well as Company Contributions under Section 3.010, in order to determine whether the Average Contribution Percentage for Highly Compensated Participants exceeds the Deduction Limitation Percentage. (c) If the Administrative Committee determines that Compensation and Supplemental Deferral Contributions made for any Plan Year on behalf of the Highly Compensated Participants would (if not reduced) cause the Average Deferral Percentage of such Employees to exceed the Deferral Limitation Percentage, it shall report such determination, through the Plan Administrator, to the Plan Committee. In such event, the Plan Committee shall first reduce any - 13 - Sav. Pln. '95 20 Supplemental Deferral Contributions and then Compensation Deferral Contributions elected by the Highly Compensated Participants, so that the Deferral Limitation Percentage is not exceeded for the 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 below: (i) First, Highly Compensated Participants electing Supplemental Deferral Contributions in an amount equal to 2% of Base Compensation shall have their elections reduced to 1% of Base Compensation. If, following the said reductions, the Deferral Limitation Percentage is still exceeded, Highly Compensated Participants electing Supplemental Deferral Contributions in an amount equal to 1% of Base Compensation (including any Highly Compensated Participants whose elections were reduced under the terms of the preceding sentence) shall have their elections reduced to 0%. (ii) Second, if, following the reductions described in paragraph (i), the Deferral Limitation Percentage is still exceeded, Highly Compensated Participants electing Compensation Deferral Contributions in an amount equal to 8% of Base Compensation shall have their elections reduced to 7%. If, following the reductions described in the preceding sentence, the Deferral Limitation Percentage is still exceeded, Highly Compensated Participants electing Compensation Deferral Contributions in an amount equal to 7% of Base Compensation (including any Highly Compensated Participants whose elections were reduced under the terms of the preceding sentence) shall have their elections reduced to 6%. The process set forth in this paragraph (ii) shall continue until the Average Deferral Percentage for the Highly Compensated Participants does not exceed the Deferral Limitation Percentage. (iii) To the extent permitted under subsection (d) below, the amount representing the additional amount of Base Compensation which would have been contributed as Supplemental Deferral or Compensation Deferral Contributions on behalf of the Participant shall be contributed by the Participant to the Plan, as appropriate, as Supplemental Deduction or Compensation Deduction Contributions. In addition, to the extent permitted by regulation, the Plan Committee may during or following a Plan Year cause Supplemental Deferral and Compensation Deferral Contributions made on behalf of Highly Compensated Participants to be recharacterized (on a uniform and non-discriminatory basis) as Supplemental Deduction or Compensation Deduction Contributions to the extent necessary to prevent the Average Deferral Percentage for the said - 14 - Sav. Pln. '95 21 Participants for any Plan Year from exceeding the Deferral Limitation Percentage. (d) If the Administrative Committee determines that Compensation and Supplemental Deduction Contributions made for any Plan Year by the Highly Compensated Participants would (if not reduced) cause the Average Contribution Percentage of such Employees to exceed the Deduction Limitation Percentage, the Administrative Committee shall report such determination, through the Plan Administrator, to the Plan Committee. In such event, the Plan Committee shall first reduce any Supplemental Deduction Contributions and then the Compensation Deduction Contributions elected by the Highly Compensated Participants, so that the Deduction Limitation Percentage is not exceeded for the 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 below: (i) First, Highly Compensated Participants electing Supplemental Deduction Contributions in an amount equal to 2% of Base Compensation shall have their elections reduced to 1%. If, following the said reductions, the Deduction Limitation Percentage is still exceeded, Highly Compensated Participants electing Supplemental Deduction Contributions in an amount equal to 1% of Base Compensation (including any Highly Compensated Participants whose elections were reduced under the terms of the preceding sentence) shall have their elections reduced to 0%. (ii) Second, if, following the reductions described in paragraph (i), the Deduction Limitation Percentage is still exceeded, Highly Compensated Participants electing Compensation Deduction Contributions in an amount equal to 8% of Base Compensation shall have their elections reduced to 7%. If, following the reductions described in the preceding sentence, the Deduction Limitation Percentage is still exceeded, Highly Compensated Participants electing Compensation Deduction Contributions in an amount equal to 7% of Base Compensation (including any Highly Compensated Participants whose elections were reduced under the terms of the preceding sentence) shall have their elections reduced to 6%. The process set forth in this paragraph (ii) shall continue until the Average Contribution Percentage for the Highly Compensated Participants does not exceed the Deduction Limitation Percentage. (e) Reductions in Supplemental Deferral, Compensation Deferral, Supplemental Deduction and Compensation Deduction Contributions made under subsections (c) and/or (d) 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 - 15 - Sav. Pln. '95 22 determine the amount by which such Contributions shall be increased for the balance of the Plan Year. (f) 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). (g) The Plan shall comply with the limitation on multiple use of the alternative limitation as described in section 1.401(m)-(2)(b) of the Treasury Regulations under Code section 401(m). 2.040 CHANGES IN RATE OF EMPLOYEE CONTRIBUTIONS. A Participant may from time to time change the rate of his Compensation Deduction Contribution, Supplemental Deduction Contribution, Compensation Deferral Contribution or Supplemental Deferral Contribution. Such change shall be effective as soon as is reasonably possible after his election, but, in general, no later than the first payroll payment date following the expiration of fifteen (15) days subsequent to his election. 2.050 CHANGES BETWEEN DEDUCTION AND DEFERRAL CONTRIBUTIONS. (a) A Participant who has an authorization in effect to make Compensation or Supplemental Deduction Contributions may revoke such authorization and at the same time elect to commence Compensation or Supplemental Deferral Contributions. Such revocation and election shall be effective as soon as is reasonably possible after his election, but, in general, no later than the first payroll payment date following the expiration of fifteen (15) days subsequent to his election. (b) A Participant who has elected to have Compensation or Supplemental Deferral Contributions made on his behalf may revoke such election and at the same time authorize Compensation or Supplemental Deduction Contributions to commence effective with the first payroll payment date in April or October of any year by giving the Company prior notice thereof. 2.060 CHANGES IN INVESTMENT ELECTIONS. A Participant may make an Investment Fund election or change any previous Investment Fund election he has made under Section 2.020(d) regarding his Deferral Contributions and Deduction Contributions. Such election or change of election may be made by the Participant once per calendar year quarter and shall be effective as of the last business day of the month in which the election or change of election is made. - 16 - Sav. Pln. '95 23 2.070 TRANSFER OF INVESTMENTS. (a) A Participant may elect once in each calendar year quarter, by giving the Company notice of such election, to have the whole or portions of the value of Units in one or more of the Investment Funds (other than Stock Fund B and the Guaranteed Return Fund), which Units are attributable to his Deferral, Deduction and Transfer Contributions under Section 2.020, transferred into, and then converted to Units of, one or more of the other Investment Funds (including Stock Fund B, but excluding the Guaranteed Return Fund). The Unit transfers and conversions described in the preceding sentence shall be effected on the first day of the calendar month immediately succeeding the month in which elected by the Participant and shall be in increments of 5% of the value of the Participant's Units in the transferring Fund(s). (b) In addition to the elections available under subsection (a), the following elections shall be available to eligible Participants: (i) A Participant who has not attained age fifty-five (55) may elect once in each calendar year, by giving the Company notice of such election, to have ten percent (10%) of the total value of all Units (or 100% of such total value, if $25.00 or less) in Stock Fund B, which are attributable to the Participant's Deferral, Deduction and/or Transfer Contributions, transferred, in increments of five percent (5%), into any one or more of the Investment Funds, other than the Guaranteed Return Fund. (ii) A Participant who has attained age fifty-five (55), but not age sixty-five (65), may elect once in each calendar year, by giving the Company notice of such election, to have fifty percent (50%) of the total value of all Units (or 100% of such total value, if $25.00 or less) in Stock Fund B, which are attributable to the Participant's Deferral, Deduction and/or Transfer Contributions, transferred, in increments of five percent (5%), into any one or more of the Investment Funds, other than the Guaranteed Return Fund; provided, however, that the Participant may not make an election under this paragraph (ii) during the same calendar year in which an election has been made under paragraph (i). (iii) A Participant who is still an Employee and has attained age sixty-five (65) or a Retiree who has elected deferred distribution pursuant to Section 5.020(b) may elect once each calendar year quarter to have the total value or a portion (in 5% increments) of the total value of all Units in Stock Funds A and B, which are attributable, respectively, to (1) Company Contributions and (2) Deferral, Deduction and/or Transfer Contributions transferred, in increments of five percent (5%), into any one or more of the Investment Funds, other than the Guaranteed Return Fund. If, as a result of an election made pursuant to this paragraph (iii), one hundred - 17 - Sav. Pln. '95 24 percent (100%) of the Participant's interest in Stock Fund A has been transferred to other Investment Funds, all subsequent Company Contributions, if any, made to the Participant's Company Contributions Account after the effective date of the said election shall be made in cash and shall be invested in the same manner as are the investments described in Section 2.020(d). If less than one hundred percent (100%) of the Participant's interest in Stock Fund A has been so transferred, such Company Contributions shall continue to be made in the manner described in Section 3.010(b). (c) The effective date of an election under this Section 2.070 shall be, and the value of all Units elected to be converted hereunder shall be determined as of, the first Valuation Date following the date on which such election is 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. 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 under this Section shall be irrevocable and shall not affect the Participant's 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 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) A Participant with Units in the Guaranteed Return Fund may elect 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 transfer and convert all or a portion of his interest under such contract to Units in the Diversified Fund, Stock Fund B, the Intermediate Term Bond Fund and/or the Fixed Income Fund or to reinvest all or a portion of his interest in the Guaranteed Return Fund contract currently offered at that time. Such conversion or reinvestment shall be effected in increments of 5%, but totalling 100% of his interest and shall be based upon the value of Units in the respective Funds as of the later of the date of such expiration or the Valuation Date immediately preceding the transfer of funds. The interest under a Guaranteed Return Fund contract of a Participant who does not make an election under this subsection (f) shall be invested in the Guaranteed Return Fund contract currently offered at that time. - 18 - Sav. Pln. '95 25 ARTICLE III COMPANY CONTRIBUTIONS 3.010 MATCHING AMOUNTS. (a) The Company shall contribute to the Trust Fund 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. (b) Except as provided in Section 2.070(b)(iii), contributions by the Company may, at the option of the Board of Directors, be in the form of Common Stock, cash or any combination thereof. The Company's Common Stock shall be valued at the closing price reflected on the New York Stock Exchange--Composite Transactions listing on the Valuation Date immediately preceding the date on which the contribution is made. (c) The Company shall notify the Plan Administrator no later than fifteen (15) days in advance, if the form of contributions to be made for any month will be changed from that of the immediately preceding month. 3.020 APPLICATION OF FORFEITURES. Amounts which have been forfeited in accordance with the provisions of Article V and VI of this Plan shall be applied to reduce subsequent Company Contributions required hereunder. 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. - 19 - Sav. Pln. '95 26 ARTICLE IV MAINTENANCE AND VALUATION OF ACCOUNTS 4.010 PARTICIPANT'S ACCOUNTS. Separate Compensation Deferral, Supplemental Deferral, Compensation Deduction and Supplemental Deduction 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 Compensation, Transfer and Supplemental Deduction Contributions and Compensation and Supplemental Deferral Contributions. In addition, the Trustee (or by such other person or persons as the Plan Committee shall designate) shall establish and maintain a Company Contributions Account to represent the value of Company Contributions, as adjusted for gains or losses. Such separate Accounts shall contain sufficient information to permit 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. Such separate Accounts shall also contain sufficient information to permit, with respect to Stock Fund A and Stock Fund B, a determination of the number of Common Units and Class A Units, respectively, in such Participant's Account. 4.020 CREDITING OF UNITS TO ACCOUNTS. (a) The interest of each Participant in the Investment Funds and in Stock Fund A (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 ($1.00) for the contributions deposited on behalf of each Participant prior to the first Valuation Date following the effective date of the particular Investment Fund. (b) Each contribution on behalf of a Participant to, or payment made to a Participant from, an Investment Fund or Stock Fund A shall result in a credit or charge to the Account representing his interest in the said Fund or contract under his Company Contributions Account, Compensation Deferral Account, Supplemental Deferral Account, Compensation Deduction Account and Supplemental Deduction Account, as applicable, and shall be equal to the number of Units contributed or paid as the case may be. (c) (i) 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 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 Stock Fund A shall be reclassified as Common Units, and there shall be allocated to each Participant's Account in 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 - 20 - Sav. Pln. '95 27 such dividend of Class A Stock had been distributed and allocated to each Participant's Account in Stock Fund A on the Valuation Date described in the applicable Section of Article V or VI. (ii) 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 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. (iii) Dividends on Common Stock held in Stock Fund A and Stock Fund B shall result in an appropriate increase in the Unit values of the said Funds. (iv) Dividends on Class A Stock held in Stock Fund A and Stock Fund B shall not result in an increase in Unit values of the said Funds, but shall result rather in the value of such dividends being applied to an appropriate increase in the number of Units held in the said Funds. 4.030 UNIT VALUATIONS. Except as otherwise provided in Section 4.020, as of each Valuation Date, an amount equal to the fair market value of all property in the Funds (other than dividends received which are attributable to whole shares of Common Stock or Class A Stock which were or are to be transferred to Participants subsequent to the record date for such dividend) or under a 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; provided, however, 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 after such Valuation Date and prior to or on the next Valuation Date shall be converted to Units (in the cases of Stock Fund A and 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 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 Accounts of each Participant representing the interest of each Participant in each Fund or contract under his Company Contributions Account, Compensation Deferral Account, - 21 - Sav. Pln. '95 28 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. - 22 - Sav. Pln. '95 29 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. Each Participant who is an Employee and 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 shall not have a vested right to such forfeited Units until such Units shall have been restored pursuant to the provisions of Section 5.040 or 6.030. Any Participant who had 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 attributable to Company Contributions for months subsequent to that date until he has accumulated five (5) years of Continuous Employment. (b) For the purposes of the preceding subsection, an Employee who: (i) terminates employment with all Affiliated Companies at any time after October 1, 1985, (ii) does not receive a distribution under Article V and retains a vested interest in his Company Contributions Account, and (iii) 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 Section 5.010(a)(i) to that portion of his Company Contributions Account attributable to Company Contributions made during his period of reemployment. (c) No Units in a Participant's Company Contributions Account shall vest subsequent to the Participant's termination of employment, except as provided in Section 5.040(b). (d) 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. - 23 - Sav. Pln. '95 30 5.020 RETIREMENT, DEATH, LAYOFF, ETC. (a) Upon a Participant's: (i) Retirement, (ii) death, (iii) Layoff, (iv) termination of employment because of inability to meet Company medical standards, (v) 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, (vi) disability which has continued for a period of at least six (6) months, all of the Units in the Participant's Company Contributions Account shall become fully vested and nonforfeitable. (b) Subject to the provisions of Section 5.050: (i) As soon as is practicable after the occurrence of an event described subsection (a), but not later than sixty (60) days after the end of the Plan Year in which the event shall have occurred, a Participant or Beneficiary, in the case of death, shall receive all amounts described in paragraph (ii). In the case, however, of Retirement, a Participant who would otherwise receive a distribution pursuant to the preceding sentence may nevertheless elect at any time prior to the effective date of the Retirement to remain in the Plan without any further contributions and may elect to defer the Retirement distribution to a later date, which date shall not be later than April 1 of the calendar year following the calendar year in which the Participant attains age seventy and one-half (70-1/2). Distributions to such Participants shall be made pursuant to the terms of Section 5.025 of this Article. (ii) The amounts which a Participant or Beneficiary (in the case of the Participant's death) shall receive under paragraph (ii) shall be as follows: (1) With respect to Investment Funds other than Stock Fund A and Stock Fund B, the Participant shall receive the full dollar balance of his Accounts in such Funds. Such balance shall be determined - 24 - Sav. Pln. '95 31 in the manner provided by Section 4.040, by reference to the value of Units in such Participant's Accounts on the Valuation Date coinciding with or immediately preceding: (A) the date of the Participant's Retirement, Layoff or termination; or (B) in the case of the Participant's death or disability, the date all documentation necessary to effect distribution from the Plan is received by the Plan Administrator. (2) With respect to Stock Fund A and Stock Fund B, the dollar balances in such Participant 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 necessary to effect distribution from the Plan shall have been received by the Plan Administrator, (such 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 Class A Units, in his Account. The Participant shall be paid in cash the dollar amounts remaining in his Accounts in Stock Fund A and Stock Fund B after reduction of each such Account by the value, based on such closing price, of the whole - 25 - Sav. Pln. '95 32 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 subparagraph (2) and the dollar value of any contributions to 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. (c) Notwithstanding the provisions of subsections (a) and (b), if a Participant attains age seventy and one-half (70-1/2) while still an Employee, distribution to the Participant of the amounts described in subsection (b)(ii) of this Section 5.020 shall be made or commence to be made pursuant to the provisions of Section 5.025 not later than April 1 of the calendar year following the calendar year in which the Participant attains age seventy and one-half (70-1/2). 5.025 FORM OF DISTRIBUTIONS TO PARTICIPANTS. (a) Any Participant who is eligible for and wishes to receive a Retirement distribution under Section 5.020(b) shall make an election concerning the form of distribution and shall provide such election to the Plan Administrator prior to Retirement. (i) The form of distributions elected hereunder shall be with reference to the amounts described in subsection (a)(iii) of Section 5.020 and shall be either: (1) a lump sum payment, or (2) ten (10) or fewer annual installment payments, such installment payments to be equal to the value of the Participant's Accounts as of the Valuation Date immediately preceding distribution, divided by the number of installments remaining at the time of each payment. The initial installment payment shall be made as soon as is practicable after the effective date of the Participant's election, with subsequent payments during the elected installment payment period to be made as of the annual anniversary date of the said initial installment payment. (ii) Notwithstanding the above, in the event that no election concerning the form of Retirement distribution has been received by the Plan Administrator from a Retiree by the end of the calendar year in which the Retiree has attained age seventy and one-half (70-1/2), the said Retirement distribution shall be in the form of lump sum payment. - 26 - Sav. Pln. '95 33 (iii) If a Retiree who had previously elected and commenced receipt of installment payments pursuant to paragraph (i)(2) returns to employment with the Company or an Affiliated Company (other than as a member of the Company's flexible work force), such installment payments shall be suspended until the Retiree's subsequent Retirement, at which time he shall be permitted again to make the election described therein, subject to the provisions of this Section 5.025. (b) A Participant who is still an Employee and has attained age seventy and one-half (70-1/2) and is, therefore, required to commence distribution pursuant to the terms of Section 5.020(c), shall receive or commence to receive the value of his Accounts no later than April 1 of the calendar year following the calendar year in which the Participant has attained the said age. Distributions under this subsection (b) shall be over the period of the Participant's life expectancy (pursuant to the terms of Section 401(a)(9) of the Code). Upon the Participant's subsequent Retirement, the Participant shall be entitled to make the election provided for in the preceding subsection (a) with respect to the balance of the Participant's account at that time. (c) A Participant who had previously elected the form of distribution described in subsection (a)(ii) or who had commenced receiving payments from his Accounts over his life expectancy under subsection (b) shall be permitted to revoke such election at a later date, in the case of the distribution under subsection (a)(i), and, in either case, accelerate receipt of the distribution by electing distribution of the remaining Account balances in a lump sum payment. 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 shall have his Accounts distributed to him by the Trustee in the manner provided in Sections 5.020 and 5.025. (b) Any Participant who immediately prior to its divestiture is employed by a Divested Component and who continues employment with the Divested Component, shall become fully vested in all of the 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 Sections 5.020 and 5.025 or transferred by the Trustee to the trustee or other funding agent of any appropriate plan established or otherwise maintained by the acquiror of the 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. - 27 - Sav. Pln. '95 34 5.040 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. (a) Subject to the provisions of Section 5.050, if a Participant's employment is terminated for any reason other than those set forth in Sections 5.020, 5.030 and 8.020(a), the Participant shall receive the following as soon as practicable: (i) With respect to the Investment Funds (other than Stock Fund B), the full dollar balance of his 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 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 Stock Fund B the dollar balance or balances in such Participant's Accounts in such Fund, and with respect to Stock Fund A the vested portion of the dollar balance or balances in such Participant's 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 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 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 Stock Fund B and in the vested portion of his Account in 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). - 28 - Sav. Pln. '95 35 (b) If a Participant with less than five (5) years of Continuous Employment receives a distribution pursuant to subsection (a), the non-vested portion of the Participant's Company Contributions Account shall be forfeited at the time such distribution is made. 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 and if the Participant shall make a cash repayment to the Plan of the amounts which were distributed from his Compensation Deduction and Compensation Deferral Accounts on or prior to the end of the sixtieth (60th) month after the date of his reemployment, there shall be restored to the Participant's Company Contributions Account a dollar amount equal to the previously forfeited non-vested portion of the dollar balance of his Company Contributions Account in Stock Fund A (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). The amount of such repayment (which such amount shall not reflect interest) shall be credited to his Compensation Deduction Account and shall be allocated to the Investment Funds (including any contract accounts under the Guaranteed Return Fund) in the same proportion that the Participant's Deduction and Deferral Contributions under the Plan are then currently being made to the Investment Funds. 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. (c) If a Participant with less than five (5) years of Continuous Employment becomes eligible to receive a distribution under subsection (a) but fails to provide 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 conclusion of the five (5) year period following the date on which his termination of employment shall have occurred, unless the Participant shall be reemployed as an Employee prior to the conclusion of the said five (5) year period. (d) For the purposes of this Section, 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 in subsections (b) and (c) 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. (e) 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 the said Section. - 29 - Sav. Pln. '95 36 5.050 PARTICIPANT'S CONSENT TO DISTRIBUTION OF BENEFITS. Notwithstanding any other provisions of the Plan, if the aggregate value of the vested portion of a Participant's Accounts is in excess of Three Thousand Five Hundred Dollars ($3,500) and the Participant has not attained age seventy and one-half (70-1/2) 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 is not so obtained, the vested portion of the Participant's Accounts 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 this Section 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 seventy and one-half (70-1/2) or dies, in the same manner as if the Participant had terminated employment on such date. If the Participant is reemployed as an Employee prior to the date on which such written consent is received by the Plan Administrator, the Participant shall not have any further right to receive a distribution of benefits as a result of his prior termination of employment. Under no circumstances shall a Participant have any right to withdraw any portion of the balance of his Accounts under Article VI prior to the date of distribution of benefits. 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 a former spouse entitled to distribution pursuant to Section 11.140 shall so request in writing, the Plan Administrator shall cause all or a portion of the amounts (including 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 VALUATION DATES FOR DOMESTIC RELATIONS ORDERS. Notwithstanding any other provision of this Article V or of Article VI, in the event that the Plan Administrator shall determine that a distribution or a withdrawal of a Participant's Account pursuant to this Article V or 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. - 30 - Sav. Pln. '95 37 ARTICLE VI IN-SERVICE WITHDRAWALS, TRANSFERS AND LOANS 6.010 WITHDRAWALS FROM ACCOUNTS BY PARTICIPANTS UNDER AGE 59-1/2. (a) Subject to Sections 6.040 and 6.050, a Participant who has not yet attained age fifty-nine and one-half (59-1/2) may elect while still employed to withdraw certain amounts from his Accounts. As soon as practicable after the Company's receipt of such an election, there shall be paid or transferred to such Participant cash and, if applicable, stock from his Accounts in the following order: (i) first, from that portion of his Compensation Deduction Account, which is attributable to Compensation Deduction Contributions made prior to January 1, 1987; (ii) second, from his Supplemental Deduction Account; (iii) third, from that portion of his Compensation Deduction Account, which is attributable to Compensation Deduction Contributions made after December 31, 1986; (iv) fourth, from that portion (if vested) of his Company Contributions Account, which is attributable to Compensation Deduction Contributions; (v) fifth, from his Supplemental Deferral Account; and (vi) sixth, from his Compensation Deferral Account. (b) Withdrawals pursuant to paragraph (iii) of subsection (a) shall be subject to the suspension provisions of Section 8.020(d) and to the forfeiture provisions and withdrawal limitations of Section 6.030. (c) A Participant shall be permitted to withdraw from his Supplemental and Compensation Deferral Accounts, as described in paragraphs (v) and (vi) of subsection (a), only upon providing adequate evidence of a hardship, as provided in Section 6.050 and such a hardship withdrawal shall be governed by the provisions of that Section. (d) The portion of the Employee's Company Contributions Account which is attributable to Compensation Deferral Contributions shall not be available for withdrawal prior to the Employee's attainment of age fifty-nine and one-half (59-1/2). (e) In determining withdrawal amounts, the value of available Units in the Participant's Accounts shall be determined as of the Valuation Date coinciding with or immediately preceding the date of the election. - 31 - Sav. Pln. '95 38 6.020 WITHDRAWAL FROM ACCOUNTS BY PARTICIPANTS OVER AGE 59-1/2. (a) A Participant who has attained age fifty-nine and one-half (59-1/2) while still employed by the Company may elect to withdraw any or all vested amounts from his Accounts. A Participant making such an election shall receive the amount of cash or, if applicable, stock to be withdrawn from his Accounts in the following order: (i) first, from that portion of his Compensation Deduction Account, which is attributable to Compensation Deduction Contributions made prior to January 1, 1987; (ii) second, from his Supplemental Deduction Account; (iii) third, from that portion of his Compensation Deduction Account, which is attributable to Compensation Deduction Contributions made after December 31, 1986; (iv) fourth, from his Supplemental Deferral Account; (v) fifth, from his Compensation Deferral Account; (vi) sixth, from that portion (if vested) of his Company Contributions Account, which is attributable to Compensation Deduction Contributions; and (vii) seventh, from that portion (if vested) of his Company Contributions Account, which is attributable to Compensation Deferral Contributions. (b) Withdrawals under paragraph (iii) of subsection (a) shall be subject to the forfeiture provisions of Section 6.030, if the Units in the Employee's Company Contributions Account are not fully vested pursuant to the provisions of Section 5.010. (c) Withdrawals pursuant to this Section 6.020 shall not be subject to the suspension provisions of Section 8.020(d) or to the withdrawal limitations of Section 6.030(d). (d) In determining the distribution amounts, the value of available Units in the Participant's Accounts shall be determined as of the Valuation Date coinciding with or immediately preceding the date of the election. - 32 - Sav. Pln. '95 39 6.030 FORFEITURES AND LIMITATION ON WITHDRAWALS. (a) When applicable, any non-vested portion of a Participant's Company Contributions Account associated with a withdrawal from his Compensation Deduction Account shall be forfeited at the time of such withdrawal. (i) The forfeitable Units, if any, of a Participant's Company Contributions Account which are attributable to Compensation Deduction Contributions shall be determined by multiplying the dollar balance of the Participant's Company Contributions Account by a fraction, the numerator of which is equal to the dollar value of the Compensation Deduction Contributions which were withdrawn by the Participant and the denominator of which is the total dollar value of the Participant's Compensation Deduction Account (both such dollar values to be determined as of the last Valuation Date preceding the date of withdrawal). (ii) An Employee who has suffered a forfeiture described in this subsection (a) may elect to restore his interest in the Plan by making a cash repayment to the Plan in the amount and in the manner described in subsections (b) and (c). (b) In order to restore a forfeiture described in subsection (a), a repayment of the amount withdrawn by the Employee from his Compensation Deduction Account must be made within sixty (60) months after such withdrawal. For purposes of this subsection (b), 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. (c) 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 the dollar amount of any amounts forfeited as a result of the withdrawals. The amount repaid under this subsection (c) shall be credited to the Employee's Compensation Deduction Account or, if applicable, his Compensation Deferral Account and shall be allocated to the Investment Funds (including any contract accounts under the Guaranteed Return Fund) in the same proportion that the Participant's Deduction and Deferral Contributions under the Plan are then currently being made to the Investment Funds. The previously forfeited amount which is credited under this subsection shall subsequently vest as provided in Section 5.010. - 33 - Sav. Pln. '95 40 (d) Withdrawals shall be in a minimum amount of $100. An Employee who has not yet attained age fifty-nine and one-half (59-1/2) may not make a request for a partial withdrawal within twenty-six (26) weeks of any prior request for a partial withdrawal; provided, however, that this limitation upon the ability of such Employee to make a partial withdrawal (including hardship withdrawals pursuant to the provisions of Section 6.050) 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. 6.040 ALLOCATION OF WITHDRAWALS AMONG INVESTMENT AND STOCK FUNDS. (a) Withdrawals pursuant to Sections 6.010 and 6.020 shall be taken from the Employee's Accounts in the Investment Funds in a pro rata fashion, based upon the relative size of the said Accounts. Any withdrawal from an Employee's Accounts in the Guaranteed Return Fund shall be taken in reverse sequence by withdrawing amounts from the Fund's Account's in the contracts on a last-in first-out basis. (b) Notwithstanding the above subsection (a), an Employee may elect to have any such withdrawal taken: (i) first from the Employee's Account in Stock Fund B, with any additional withdrawal amount to be taken on a pro rata basis from the Employee's Accounts in the remaining Investment Funds; or (ii) first on a pro rata basis from the Investment Funds other than Stock Fund B, with any additional withdrawal amount to then be taken from the Employee's Account in Stock Fund B. (c) In the course of any withdrawal from Stock Fund B pursuant to the pro rata withdrawal provisions of subsection (a) or the alternative withdrawal methods of subsection (b), such withdrawal from Stock Fund B shall be carried out first from Common Units and then, when the Common Units have been exhausted, from Class A Units in that Fund. - 34 - Sav. Pln. '95 41 6.050 HARDSHIP WITHDRAWALS FROM DEFERRAL ACCOUNTS. Subject to any restrictions the Plan Committee may establish pursuant to Section 6.070: (a) 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 and his Supplemental Deferral Account, if the Employee demonstrates that the withdrawal is required as a result of a hardship and for payment of any federal, state or local income taxes and penalties reasonably anticipated to result from such withdrawal. (i) For the purposes of this subsection (a) 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: (1) 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; (2) the incurring of obligations for (A) tuition, related educational fees and room and board expenses 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 (B) 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 of his dependents (as defined in section 152 of the Code); (3) any other reason which is permitted under section 401(k)(2)(B)(i)(IV) of the Code and is approved by the Administrative Committee. (ii) 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 - 35 - Sav. Pln. '95 42 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: (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. (b) Withdrawals pursuant to subsection (a) shall not result in the forfeiture of a Participant's interest in his Company Contributions Account. (c) Withdrawals pursuant to subsection (a) shall be taken from the Participant's Investment Fund Accounts, as elected by the Participant, either: (i) first from his Account in Stock Fund B, with any additional withdrawal amount to be taken on a pro rata basis from the Employee's Accounts in the remaining Investment Funds; or (ii) first on a pro rata basis from the Investment Funds other than Stock Fund B, with any additional withdrawal amount to then be taken from his Account in Stock Fund B. Any withdrawal from the Participant's Accounts in the Guaranteed Return Fund shall be taken in reverse sequence by withdrawing amounts from the Fund's Account's in the contracts on a last-in first-out basis. (d) Withdrawals (including those from Stock Fund B) shall be in cash and for a minimum amount of $100. 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 (a) of this Section) within twenty-six (26) weeks of any prior request for a partial withdrawal shall be waived by the Plan - 36 - Sav. Pln. '95 43 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. 6.060 TRANSFERS TO CERTAIN AFFILIATED COMPANY PLANS. A Participant who though remaining an Employee is no longer an Eligible Employee may, if the said Participant's continuing employment with the Company is in a salaried position with the Allen-Bradley Company or the Reliance Electric Company, elect (by providing the Plan Administrator with notice thereof) to have the entire amount credited to the said Participant's account in this Plan transferred to any qualified individual account plan of Allen-Bradley Company or the Reliance Electric Company Savings and Investment Plan, as the case may be; provided, however, that such transferred amount shall consist of and be limited to: (a) cash, in the case of amounts attributle to the Participant's interest in Investment Funds other than Stock Fund B; (b) Common Stock (which shall include Common Stock issued on conversion of Class A Stock) in the case of amounts attributable to the Participant's interest, if any, in Stock Fund B and in Stock Fund A; and (c) in the case of a Participant to whom a loan has been made pursuant to Section 6.070, the Participant's loan. 6.070 LOANS. The Plan Committee shall establish, and may from time to time modify, procedures pursuant to which any Employee or other "party in interest" (as defined in ERISA section 3(14)) may apply for and receive a loan from the Plan in an amount not exceeding the least of (a), (b), (c) or (d): (a) the aggregate of the balances in the borrower's Compensation Deferral, Supplemental Deferral, Compensation Deduction and Supplemental Deduction Accounts; (b) an amount which, when combined with all outstanding loans to the borrower from all other plans of all Affiliated Companies, equals Fifty Thousand Dollars ($50,000), reduced by the excess, if any, of (i) the highest outstanding and unpaid balances of all prior loans to the borrower 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 borrower 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 fully vested and nonforfeitable interests in the balances of the borrower's Accounts; or (d) such amount, not exceeding the amounts described in (a) through (c) above, as the Plan Committee shall determine. - 37 - Sav. Pln. '95 44 In addition to the above limitation, no such Employee or other party in interest shall be permitted to have more than a single loan outstanding from this Plan and all other plans sponsored by the Company and Affiliated Companies at any one time. All such loans shall be made available to all eligible Employees and other parties in interest on a reasonably equivalent and non-discriminatory basis and shall be governed by the provisions of Appendix B, as such Appendix is from time to time constituted, pursuant to determination of the Plan Administrator. 6.080 TRANSFER OF DISTRIBUTION OR WITHDRAWAL TO ELIGIBLE RETIREMENT PLAN. If a Participant entitled to a distribution under Article V or an in-service 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 (including 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 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. ARTICLE VII [RESERVED] - 38 - Sav. Pln. '95 45 ARTICLE VIII SUSPENSION OF SAVINGS AND CONTRIBUTIONS 8.010 VOLUNTARY SUSPENSION. (a) A Participant may at any time 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 period thereafter. (b) Subject to Section 2.010, a Participant who has elected to have contributions suspended, may elect to have contributions resumed, effective no later than the first payroll payment date following the expiration of the fifteen (15) days period thereafter. 8.020 INVOLUNTARY SUSPENSION. A Participant's Compensation and Supplemental Deferral Contributions and/or Compensation and Supplemental Deduction Contributions shall be involuntarily suspended whenever: (a) no payment of Base Compensation is made by the Company to the Participant or, in the case of a Deduction Contribution, the amount payable after all applicable withholdings and deductions required by law or the Company is less than the applicable Deduction Contribution; (b) payroll deduction for Compensation Deduction Contributions under the Plan would be contrary to law; (c) the Participant is not an Eligible Employee of an Affiliated Company or of a component of the Company to which the benefits of the Plan have been extended; or (d) the Participant receives a distribution under Section 6.010(a)(iv) of Company Contributions Account Units which are attributable to his Compensation Deduction Contributions; provided, however, that the previously suspended Contributions shall automatically resume following the completion of the twenty-six (26) week period beginning on the date of such distribution. 8.030 GENERAL PROVISIONS APPLICABLE TO SUSPENSIONS. Suspensions of a Participant's Deferral or Deduction Contributions, whether voluntary or involuntary, shall not affect his benefit and withdrawal rights under Articles V and VI of the Plan, but Company contributions on his behalf shall be similarly suspended. A Participant may not make up suspended Deferral or Deduction Contributions. - 39 - Sav. Pln. '95 46 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 for any payment made to the Beneficiary 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. - 40 - Sav. Pln. '95 47 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 in 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, which shall be invested in stocks, convertible bonds and other corporate securities (other than securities issued by the Company), as well as in cash equivalents and other miscellaneous securities; (ii) a Fixed Income Fund, which shall be invested in debt instruments (other than debt instruments issued by the Company) with maturity dates of three years or less, which such instruments shall include treasury bills, treasury notes, treasury bonds, federal agency obligations, other instruments of government debt, bankers' acceptances and bank certificates of deposit; (iii) an Intermediate Term Bond Fund, which shall be invested in debt instruments with a combined average maturity of five years or less, which such instruments shall include treasury bills, treasury notes, treasury bonds, federal agency obligations and other instruments of government debt; (iv) a Guaranteed Return Fund consisting of the Trust Fund's interest in contracts issued by one or more insurance companies, which contracts: (1) guarantee the principal and interest thereon for a specified period of time, and (2) accrue such guaranteed interest on a monthly basis; (v) Stock Fund A, which shall consist of all cash, the Company's Common Stock and Class A Stock, and the proceeds and income therefrom, attributable to Company Contributions; (vi) Stock Fund B, which shall consist of all cash, the Company's Common Stock, Class A Stock and the proceeds and income on such cash and - 41 - Sav. Pln. '95 48 Stock attributable to contributions made by or on behalf of Participants under the Plan and designated as contributions to Stock Fund B. (b) The Trust Agreement will provide the following: (i) The Plan Committee may from time to time direct the segregation of all or a portion of the Investment Funds, other than the Guaranteed Return Fund and Stock Fund B and shall appoint Investment Managers with respect to the portions of the Investment Funds so segregated. Any Investment Manager so appointed shall have full discretion to direct the Trustee with respect to the acquisition, retention, management and disposition of the assets from time to time comprising the Investment Manager's Account. (ii) The Trustee shall pay all cash in the Guaranteed Return Fund to the one or more insurance companies described in paragraph (iv) of Section 10.020(a), subject to the terms of the contracts described in such paragraph. (iii) The Trustee shall use all cash in Stock Fund A and Stock Fund B only to purchase Common Stock. 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 Stock Fund A or 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 Stock Fund A and 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. (iv) In making all investments pursuant to this Plan, the Trustee and the Investment Manager shall: (1) not be bound by any law or any court doctrine of any state or jurisdiction limiting trust investments, except as otherwise provided by ERISA; (2) give consideration to the cash requirements of the Plan; (3) not cause the Plan to engage in any transaction constituting a prohibited transaction under section 406 of ERISA. - 42 - Sav. Pln. '95 49 10.030 DUTY OF TRUSTEE AS TO STOCK IN STOCK FUND A AND STOCK FUND B. (a) Except as otherwise provided in this Section 10.030, the duty with respect to the voting, retention, and tendering of Common Stock and Class A Stock held in Stock Fund A or Stock Fund B shall be solely that of the Trustee, to be exercised solely in the Trustee's discretion. (b) With respect to any matter as to which a vote of the outstanding shares of Common Stock or Class A Stock is solicited: (i) the Trustee shall solicit the direction in writing of each Participant, as to the manner in which voting rights of the Participant's vested and non-vested shares of Common Stock or Class A Stock held in or credited to Stock Fund A or Stock Fund B as of the record date fixed for determining the holders of Common Stock or Class A Stock entitled to vote on such matter 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; and (ii) the Trustee, in its sole discretion, shall exercise voting rights of shares of Common Stock or Class A Stock held in Stock Fund A or Stock Fund B as to which no timely direction has been received pursuant to paragraph (i). (c) In the event of any Tender Offer (as defined in Section 1.405): (i) the Trustee shall solicit the direction in writing of each Participant, as to the tendering or depositing of any vested or non-vested shares of Common Stock or Class A Stock held, any shares of Common Stock issuable on conversion of Class A Stock held, in Stock Fund A or Stock Fund B as of the Tender Date with respect to such Participant or have been credited as of such Tender Date to the Accounts in Stock Fund B of such Participant, and, except as limited by subsection (d) 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) the Trustee shall, in its sole discretion, shall have the duty, except as limited by subsection (d) hereof, with respect to the retention, tendering or depositing of shares of Common Stock or Class A Stock held, and any - 43 - Sav. Pln. '95 50 shares of Common Stock issuable on conversion of Class A Stock held, in Stock Fund A or Stock Fund B as to which no timely direction in writing has been received pursuant to paragraph (i); (d) Shares of Common Stock or Class A Stock held, and any shares of Common Stock issuable on conversion of Class A Stock held, in Stock Fund A or Stock Fund B shall not be tendered or deposited by the Trustee pursuant to any such Tender Offer until the earlier of: (i) immediately preceding the scheduled expiration of the Tender Offer pursuant to which such shares are to be tendered or deposited, or (ii) 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 (iii) the expiration of 30 days from the date of the Trustee's solicitation of Participants' written direction pursuant to subsection (c)(i). (e) 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 Stock Fund A or Stock Fund B which have been tendered or deposited pursuant to any such Tender Offer shall be solely that of 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 herein, 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 Stock Fund A or credited to the Accounts in Stock Fund B of such Participant. 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 16.030) The Trust Agreement shall be deemed to form a part of this Plan, and all rights and benefits that may accrue to any - 44 - Sav. Pln. '95 51 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 and deposit amounts held in any of the funds comprising the Trust Fund in an interest bearing account in a bank or similar financial institution (including without limitation the commercial banking department of the Trustee) on a temporary basis pending either: (a) investment of such amounts or (b) 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 TAXES, FEES AND EXPENSES OF THE TRUSTEE. (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: (i) for preparation or prosecution of any action against the Company, the Plan, any member of the Plan Committee or the Plan Administrator, or (ii) 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. There shall be included in the reasonable expenses payable from the Trust Fund any direct internal costs (which may include reimbursement of compensation of Company Employees) associated with Plan operations and administration, the payment of which shall be in conformity with the requirements of Title I of ERISA. 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. - 45 - Sav. Pln. '95 52 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: (a) the Plan Administrator or the Administrative Committee is allocated any such authority under the Plan; (b) any Trustee or Investment Manager hereunder 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; (c) the Plan Committee, the Plan Administrator, the Administrative Committee, the Trustee(s) and the Investment Manager(s) shall constitute ERISA Named Fiduciaries of the Plan. 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. 11.040 FUNDING POLICY. The Plan Committee shall be responsible for determining a funding policy of the Plan consistent with the objectives for the Investment Funds 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; and (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. 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: - 46 - Sav. Pln. '95 53 (a) to allocate fiduciary responsibilities, other than trustee responsibilities (responsibilities under the Trust Agreement to manage or control the Plan assets) 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 Investment Manager) to carry out such fiduciary responsibilities; (b) to appoint one or more Investment Managers or investment advisors (who need not be Investment Managers and who shall not have authority to manage, acquire, or dispose of Plan assets). (c) to determine the manner in which the assets of this Plan, or any part thereof, shall be disbursed by the Trustee, except as relates to the making and retention of investments; and (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, 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); (c) to establish rules and regulations from time to time for the administration and effectuation of his responsibilities under the Plan. 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 consultants or consulting firms, opinions furnished by legal counsel and reports furnished by the Trustee. The members of the Plan Committee, the - 47 - Sav. Pln. '95 54 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, Trustee or counsel. 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. 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 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 (except for his willful misconduct) in the performance of his duties under the Plan. 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 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 11.150 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 - 48 - Sav. Pln. '95 55 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 retained by the Trustee until the amount can be distributed pursuant to the provisions of this Plan or of applicable law. 11.140 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 (including garnishment, attachment, execution or levy of any kind or charge) and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge the same shall be void. (b) The non-alienation rule of subsection (a) shall not apply to the creation, assignment, or recognition of a right to any benefit payable with respect to a Participant pursuant to: (i) a levy for federal income tax issued against the Participant by the Internal Revenue Service; or (ii) a domestic relations order, which the Plan Administrator determines is a qualified domestic relations order under section 414(p) of the Code and which requires that the order's alternate payee (as defined in the said Code section) will be paid in a lump sum as soon as is practicable following the order's issuance. 11.150 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. 11.160 NOTICES AND COMMUNICATIONS. (a) All communications from Participants shall be in the manner from time to time prescribed by the Plan Administrator and shall be addressed or communicated (including telephonic communications) to such entity or Company office as may be designated by the Plan Administrator, and shall be deemed to have been given to the Company when received by such entity or Company office. (b) Each 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. - 49 - Sav. Pln. '95 56 11.170 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. 11.180 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 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. - 50 - Sav. Pln. '95 57 ARTICLE XII PARTICIPANT'S CLAIMS 12.010 REQUIREMENT TO FILE CLAIM. A Participant wishing a distribution or withdrawal from the Plan must present a claim, in such manner and pursuant to such procedure established by the Plan Administrator, with the person or entity designated by the Plan Administrator. A claimant who fails to comply with the manner and procedure designated by the Plan Administrator shall be deemed not to have made such claim. The person or entity designated by the Plan Administrator shall approve or deny in writing within thirty (30) days any claim which has been so presented. 12.020 APPEAL OF DENIED CLAIM. (a) A Participant whose claim has been denied as set forth in Section 12.010 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 (including computerized records) relied upon by the Plan Administrator's representative 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. 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. - 51 - Sav. Pln. '95 58 ARTICLE XIII AMENDMENT, MERGERS, TERMINATION, ETC. 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 15.040 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 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. - 52 - Sav. Pln. '95 59 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 the 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. - 53 - Sav. Pln. '95 60 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 (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 - 54 - Sav. Pln. '95 61 such adjustment, the maximum benefit allowable shall be paid hereunder before applying the limitations on the defined benefit plan. 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 DEFERRAL CONTRIBUTIONS. To the extent the Compensation Deferral and Supplemental Deferral Contributions elected by a Participant under Sections 2.020(a)(i) and (b)(i) 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. - 55 - Sav. Pln. '95 62 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 a Participant's present, future or former spouse or 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. 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 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. 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. 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 and the Trust 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. 15.050 INTERPRETATION. The masculine gender shall include the feminine and the singular shall include the plural unless the context clearly indicates otherwise. - 56 - Sav. Pln. '95 63 ARTICLE XVI TENDER OFFERS: PLAN ADMINISTRATION 16.010 APPLICABILITY. The provisions of this Article XVI 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, 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 Stock Fund A or Stock Fund B which has been tendered or deposited in accordance with the Trust Agreement, pursuant to such Tender Offer or any subsequent Tender Offer commenced while the provisions of this Article XVI 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 XVI, 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. 16.020 ADDITIONAL DEFINITIONS. While the provisions of this Article XVI are in effect: (a) the term "Sub Fund A" shall mean the fund established by the Trustee pursuant to Section 16.030(a)(i); and (b) the term "Sub Fund B" shall mean the fund established by the Trustee pursuant to Section 16.030(a)(ii). 16.030 ESTABLISHMENT AND INVESTMENT OF SUB FUND A AND SUB FUND B. While the provisions of this Article XVI 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 Stock Fund A which were tendered or deposited in accordance with the Trust Agreement, 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 Stock Fund B which were tendered or deposited in accordance with the Trust Agreement, all property purchased therewith and the proceeds and income therefrom. - 57 - Sav. Pln. '95 64 (b) The Trustee shall use all cash in Sub Fund A and 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 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 Sub Fund A or 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, 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 Sub Fund A and Sub Fund B. 16.040 MAINTENANCE AND VALUATION OF SUB FUND A AND SUB FUND B. While the provisions of this Article XVI are in effect: (a) A separate Account representing each Participant's interest in Sub Fund A and Sub Fund B under the Participant's Company Contributions Account, Compensation Deferral Account, Compensation Deduction, Supplemental Deferral Account or Supplemental Deduction Account, as applicable, shall be maintained. Such separate Accounts shall contain sufficient information to permit with respect to Sub Fund A and 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 Sub Fund A and 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 Sub Fund A or 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 Stock Fund A which were tendered or deposited in accordance with the Trust Agreement, 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 Accounts in Stock Fund B which were tendered or deposited in accordance with the Trust Agreement, in the case of Sub Fund B. Each receipt on behalf of a Participant of cash, securities or other - 58 - Sav. Pln. '95 65 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 Stock Fund A which were tendered or deposited in accordance with the Trust Agreement, or each payment to a Participant from 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 Accounts in Stock Fund B which were tendered or deposited in accordance with the Trust Agreement, or each payment to a Participant from 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 Sub Fund A or 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 Sub 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 Sub Fund, thereby establishing a new Unit Value. With respect to each such Sub 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 Accounts of each Participant in Sub Fund A and 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 Sub Fund A and Sub Fund B in lieu of contributions). (e) The Participant's Account in 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 Stock Fund A which were tendered or deposited in accordance with the Trust Agreement, 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 Stock Fund A in respect of which such shares were tendered bore to his entire interest in Stock Fund A immediately prior to the tender or deposit of such shares. (f) The Participant's Accounts in 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 - 59 - Sav. Pln. '95 66 Class A Stock) or Class A Stock previously held in such Accounts which were tendered and deposited in accordance with the Trust Agreement, by the number of such shares which were so tendered or deposited. 16.050 BENEFITS PAYABLE FROM SUB FUNDS AT TERMINATION OF EMPLOYMENT. While the provisions of this Article XVI are in effect: (a) For purposes of Section 5.010, each Unit representing a Participant's interest in 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, 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 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 Stock Fund A of a Unit in respect of such interest. (b) For purposes of Section 5.020(a): (i) The full dollar balance of the Participant's accounts in Sub Fund A and Sub Fund B shall be deemed to be described in paragraph (iii) 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 (i) thereof. Such balance shall be determined, in the manner provided by Section 16.040(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. (ii) The amounts set forth in subparagraphs (1) and (2) of paragraph (iii) of Section 5.020(a) shall be amounts that the Participant (or his Beneficiary in the case of death, shall receive under paragraph (i) 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 Stock Fund A or held in such Participant's Accounts in 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, shall be transferred to such Participant (or his Beneficiary in the case of death) pursuant to paragraph (i) 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, - 60 - Sav. Pln. '95 67 further, however, that there shall be paid or transferred to such Participant (or his 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 Stock Fund A or held in such Participant's Accounts in 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 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 or 5.030, the Participant shall receive as soon as practicable: (i) The vested portion of the dollar balance of his account in Sub Fund A and the full dollar balance of his Accounts in Sub Fund B. Such balances shall be determined, in the manner provided in Section 16.040(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. (ii) The amounts set forth in paragraphs (i) through (iv) 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 Stock Fund A or held in such Participant's Accounts in Stock Fund B which, as of the date of such termination, has been tendered or deposited in accordance with the Trust Agreement, 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 Stock Fund A or held in such Participant's Accounts in 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 soon as practicable after the receipt of such cash, securities or other consideration by the Trustee. - 61 - Sav. Pln. '95 68 16.060 DISTRIBUTIONS FROM THE PLAN UNDER SECTION 6.010. While the provisions of this Article XVI 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 16.050(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 Contributions Account, if any, shall not be distributable). (b) As soon as practicable after an Employee makes a repayment described in Section 6.030, there shall be credited to the Employee's Company Contributions Account a dollar amount as set forth in Section 6.030(c)). 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 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, such dollar amount shall be allocated to 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 Section 6.030(c); 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 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, a dollar amount equal to the amount of such repayment shall be allocated to the Participant's Compensation Deduction Account in 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 6.030(d). 16.070 WITHDRAWALS FROM DEDUCTION ACCOUNTS UNDER SECTION 6.030. While the provisions of this Article XVI are in effect: (a) For purposes of Section 6.030(c), withdrawals pursuant to this subsection (a) shall be taken from the Employee's Accounts in the Investment Funds in a pro rata fashion, based upon the relative size of the said Accounts. Any withdrawal from his 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. An Employee may, however, elect to have any such withdrawal taken first from his Account in 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), with any additional withdrawal amount to be taken from his Accounts in the remaining Investment Funds. - 62 - Sav. Pln. '95 69 (b) For purposes of subsection (c) 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 previously representing his interest in 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, such dollar amount shall be allocated to 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 therein; 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 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, a dollar amount equal to the amount of such repayment shall be allocated to the Participant's Compensation Deduction Account in Sub Fund B. The amounts credited under this subsection (b) shall vest as set forth in the last sentence of Section 6.030(c). (c) Partial withdrawals pursuant to Section 6.030(d) shall be in a minimum amount of $100 with respect to Sub Fund B. 16.080 WITHDRAWALS FROM DEFERRAL ACCOUNTS UNDER SECTION 6.030. While the provisions of this Article XVI are in effect, For purposes of Section 6.030, withdrawals, in minimum amounts of $100 shall be taken from the Employee's Accounts in the Investment Funds in a pro rata fashion, based upon the relative size of the said Accounts. Any withdrawal from his 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. An Employee may, however, elect to have any such withdrawal taken first from his Account in 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), with any additional withdrawal amount to be taken from his Accounts in the remaining Investment Funds. - 63 - Sav. Pln. '95 70 ARTICLE XVII TOP HEAVY PROVISIONS 17.010 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: (i) 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; (ii) 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; (iii) 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 (iv) 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%)". For purposes of determining whether a person is an officer in paragraph (i) above, in no event will more than fifty (50) Employees or, if less than fifty (50) - 64 - Sav. Pln. '95 71 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. 17.020 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: (i) four percent (4%) of such Participant's compensation (subject to the provisions of Section 17.030), or (ii) the highest percentage of contribution made for the plan year to a Participant who is a Key Employee for such plan year. - 65 - Sav. Pln. '95 72 (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 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 three (3) 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. 17.030 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 17.010(a)), the percentage described in Section 18.020(a)(i) 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 17.010(a)). - 66 - Sav. Pln. '95 73 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. A-1 Sav. Pln. '95 74 APPENDIX B PROCEDURES, TERMS AND CONDITIONS OF LOANS ELIGIBILITY FOR LOANS. The individuals eligible to obtain loans from the Plan ("Borrowers") are limited to: (1) Employees, and (2) non-Employees who are "parties in interest" (as defined in section 3(14) of ERISA) who have Plan Account balances. An Employee who wishes to obtain a loan must be employed on an active payroll of an Affiliated Company at the time of the loan application. A party in interest who is not an Employee will be eligible to obtain a loan only if an agreement can be provided by the party's current employer to deduct and remit the required loan repayments to the Savings Plan. LIMITATION ON NUMBER AND MINIMUM AMOUNT OF LOANS. Only one (1) loan to a Borrower is permitted to be outstanding from all Company sponsored savings plans at any one time. Any Borrower who has an outstanding loan from the Plan will be required to repay that loan in full before applying for another loan. Each loan which is approved must be for a minimum of $1,000. MAXIMUM AMOUNT OF LOAN. The amount which a Borrower will be permitted to borrow from the Plan is based on the aggregate value of the Borrower's Accounts, determined in accordance with Section 4.030 of the Plan, and may not exceed the least of the amounts described in subsections (a), (b) and (c) of Section 6.070 of the Plan. The maximum amount of any loan will be further limited to ensure that, after applying the appropriate interest rate and taking into account all applicable deductions, the resulting periodic repayments will not exceed the Borrower's net earnings. The deductions referred to in the preceding sentence include statutory withholdings, deductions for employee benefits and all pre-tax contributions to the Plan, but exclude credit union, savings bond, charitable contribution and other similar deductions. LOAN APPLICATIONS. Loan applications by prospective Borrowers will be made via telephone to the Plan Administrator or such third party administrator as may be designated by the Plan Administrator (either of whom is hereafter referred to as the "Loan Administrator"). The Loan Administrator will then review the telephonic application and determine eligibility for the loan. If the loan is approved, the Loan Administrator will prepare and forward to the Borrower a letter notifying the Borrower of the approval, together with a Truth in Lending Statement and a check for the loan amount, all in form approved by the Plan Administrator. The Borrower's endorsement of the loan check will be considered to be the Borrower's agreement to the terms of the loan. Failure by the Borrower to endorse the check within thirty (30) days after the date of the check will be deemed to be a withdrawal by the Borrower of the loan application. B-1 Sav. Pln. '95 75 SOURCE OF LOAN FUNDS. Each loan will be funded by withdrawing the required amounts from the Plan Account(s) of the Borrower in the following order: First -- from the Borrower's Supplemental Deferral Account; Second -- from the Borrower's Compensation Deferral Account; Third -- from the Borrower's Supplemental Deduction Account; and Fourth -- from the Borrower's Compensation Deduction Account.
Subject to the provisions of the following paragraph, the loan amount will be funded by the Borrower's Investment Funds in the applicable Accounts, in a pro rata fashion, based upon the relative size of the balance of each such Fund in the Accounts. Alternatively, a Borrower may elect to have the loan funded first from the Borrower's interest in Stock Fund B, with any additional funding to be on a pro rata basis from the remaining Investment Funds. Any pro rata loan funding from the Borrower's interest in the Guaranteed Return Fund will be taken in reverse sequence by accessing the Fund's contracts on a last-in first-out basis. Any loan funding from the Borrower's interest in Stock Fund B will be carried out first from the Borrower's Common Units and then, when the Common Units have been exhausted, from Class A Units in that Fund. To the extent a loan is made against the Borrower's Stock Fund B Account, the Borrower will receive cash in lieu of shares of Common and/or Class A Stock. The Trustee will not be permitted to sell shares of Common or Class A Stock in order to provide the cash with which to finance loan applications. If, at any time, the Trustee does not have sufficient cash on hand to finance all outstanding loan applications, processing of each application for which sufficient cash is not available will be deferred until sufficient cash becomes available to process such loans on a first-come, first-serve basis. DETERMINATION OF LOAN INTEREST RATE. The interest rate to be charged for loans will be one percent (1%) over the prime rate, which is defined for this Appendix as the base rate on corporate loans posted by at least seventy-five percent (75%) of the largest thirty (30) U.S. banks, as such rate is identified in the edition of The Wall Street Journal published on the last business day of the month prior to the approval of a loan. TERM OF LOANS. 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, which will be permitted for a term of 120 months. B-2 Sav. Pln. '95 76 REPAYMENTS. Loan repayments by Employees will be deducted from the Employee's pay check each pay period. If a pay check 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 pay check. Loan repayment schedules for Borrowers who are not Employees will be developed on an individual basis, but will parallel as closely as possible the loan repayment schedules for Employees. PREPAYMENTS. The full unpaid balance of a loan may be prepaid at any time by a Borrower. 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. 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 on the missed payment and then to principal. A notice will be mailed to the last known address of the Borrower stating that if three (3) consecutive months of payments are missed, the loan will be considered to be in default. TERMINATION OF EMPLOYMENT. If a Borrower who is an Employee terminates employment or is on an unpaid leave of absence, or if a Borrower who is not an Employee is no longer able to repay a loan through payroll deductions, the Borrower may continue to make loan repayments by personal check. Such repayments to the Plan will be made through the Loan Administrator at an address to be provided to the Borrower by the Loan Administrator. DEFAULT. A loan will be considered to be in default after three (3) consecutive months of payments have been missed during the term of the loan or when a Borrower revokes a payroll deduction authorization. In the event of such a default, a distribution of the loan amount, including both unpaid principal and accrued but unpaid interest, will be deemed to have occurred (as described in section 1.401(k)-1(d)(6)(ii) of the Treasury Regulations) and an information return reflecting the tax consequences, if any, to the Borrower will be issued. Upon the occurrence of an event permitting actual distribution of the Borrower's Account pursuant to the provisions of Code section 401(k) (whether distribution of the Borrower's entire Plan Account will actually be made or will be deferred pursuant to applicable provisions of the Plan), the unpaid balance of a defaulted loan will be charged off against the Borrower's Account. If no distribution event has occurred, which would otherwise permit payment to the Borrower under Code section 401(k), the unpaid balance of the loan will be retained in the Account until such time as payment would be permitted under that Code section, at which time the unpaid balance of the loan, including any accrued and unpaid interest, will be charged off against the Borrower's Account. B-3 Sav. Pln. '95 EX-99.B.1 15 ROCKWELL 10-K 1 EXHIBIT 99-B-1 ROCKWELL INTERNATIONAL CORPORATION UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME The following unaudited pro forma condensed consolidated statement of income has been prepared by Rockwell's management. This statement reflects Rockwell's acquisition of Reliance and combines the historical consolidated income statements of Rockwell and Reliance for the twelve months ended September 30, 1995, using the purchase method of accounting. The unaudited pro forma condensed consolidated statement of income has been prepared assuming the acquisition of Reliance had occurred at the beginning of Rockwell's fiscal year ended September 30, 1995. This pro forma statement should be read in conjunction with the historical consolidated financial statements and related notes of Rockwell and Reliance. The pro forma statement includes estimates and assumptions which Rockwell management believes are reasonable. Pro forma adjustments reflecting anticipated cost savings and other synergies resulting from the integration of Reliance and Rockwell's Automation business are, under most circumstances, not permitted. As a result, the pro forma results are not intended to be a projection of future results and are not necessarily indicative of the results which would have occurred if the business combination had been in effect throughout the period presented. The unaudited pro forma condensed consolidated statement of income has been prepared using the following facts and assumptions: - Rockwell acquires all the common stock of Reliance for a total cash payment of $1,586 million. Simultaneously with the acquisition of Reliance, Rockwell sells the telecommunications business of Reliance for $475 million to fund a portion of the acquisition price. - Rockwell borrows $1,111 million to finance the remaining portion of the $1,586 million acquisition price. - In accordance with generally accepted accounting principles, the purchase price of Reliance was allocated to the assets and liabilities of Reliance based upon their respective fair values. Such allocations were based upon appraisals, evaluations, estimations and other studies, some of which are still in process. For purposes of the accompanying pro forma statement, the pro forma adjustments have been reflected on an estimated basis using information currently available. Accordingly, the allocation of the purchase price to the acquired assets and assumed liabilities of Reliance is subject to revision as a result of the final determination of fair values. 2 EXHIBIT 99-B-1 ROCKWELL INTERNATIONAL CORPORATION UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME YEAR ENDED SEPTEMBER 30, 1995 (In millions, except per share amounts)
PRO FORMA -------------------------- BUSINESS ADJUSTMENTS SOLD BY INCREASE PRO FORMA ROCKWELL (1) RELIANCE (2) ROCKWELL (3) (DECREASE) COMBINED ------------ ------------ ------------ ----------- --------- Sales and other income........ $ 13,099 $449 $ (120) $13,428 Costs and expenses: Cost of sales............... 9,997 337 (89) 10,245 Selling, general and administrative........... 1,706 68 (19) 1,755 Other expense, net.......... 89 (3) $ 11 (4) 7 (90)(5) Interest.................... 170 6 21 (6) 197 -------- ---- ------ --- -------- Total costs and expenses............... 11,873 500 (111) (58) 12,204 ------- ---- ------ ---- -------- Income before income taxes.... 1,226 (51) (9) 58 1,224 Provision for income taxes.... (484) 5 (3)(7) (482) -------- ---- ------ ---- -------- Net income.................... $ 742 $(51) $ (4) $ 55 $ 742 ======= = ==== ======= ==== ======== Earnings per common share (8): Primary..................... $ 3.42 $ 3.42 ======== ======= Fully diluted............... $ 3.36 $ 3.36 ======== ======= Average common shares outstanding: Primary..................... 217.2 217.2 ======== ======= Fully diluted............... 221.1 221.1 ======== ======= (1) The Rockwell information presented includes Reliance for the nine months ended September 30, 1995. (2) The Reliance information presented is for the three months ended December 31, 1994. (3) To reflect the divestiture of Reliance's telecommunications business. (4) Amortize over periods ranging from seven to forty years the excess of purchase price over the estimated fair value of net tangible assets acquired. (5) Remove unusual expenses incurred by Reliance relating to costs associated with abandonment of a prior merger agreement and costs associated with the acquisition by Rockwell. (6) Recognize interest expense on borrowings to fund acquisition (at assumed rates of 7% on short-term debt and 8.2% on long-term debt). (7) Increase in the provision for income taxes primarily associated with the removal of unusual expenses noted in 5 above and reduced by the effect of additional interest expense. (8) Pro forma primary and fully-diluted earnings per share are computed on the same basis as historical amounts.
-2- EX-99.C.1 16 ROCKWELL 10-K 1 EXHIBIT 99-c-1 APPROVAL OF AMENDMENTS TO CERTAIN ROCKWELL INTERNATIONAL CORPORATION SAVINGS PLANS ---------------------------------------- I, Robert H. Murphy, Senior Vice President, Organization & Human Resources, Rockwell International Corporation (the "Corporation"), pursuant to authority of the Board of Directors of the Corporation by resolution dated November 1, 1989, for and on behalf of the Corporation, do hereby approve the following action: Effective January 1, 1994, amend the Plans identified hereinafter by adding language, where appropriate and similar in substance to the following, to reflect the $150,000.00 compensation maximum required by the Omnibus Budget Reconciliation Act of 1993: "Notwithstanding the provisions of this Plan to the contrary, only compensation described in section 401(a)(17) of the Code, as that section shall be from time to time set forth, may be considered in the determination of benefits hereunder." 023 25-1200273 ROCKWELL GRAPHIC SYSTEMS, INC. FIELD SERVICE HOURLY EMPLOYEES SAVINGS PLAN 085 95-1054708 HOURLY PAYROLL EMPLOYEES LAYOFF BENEFIT & SECURITY PROGRAM-UAW 086 95-1054708 HOURLY PAYROLL EMPLOYEES LAYOFF BENEFIT & SECURITY PROGRAM-NON-UAW 106 95-1054708 YORK EMPLOYEES RETIREMENT SAVINGS PLAN - TRUCK AXLE DIVISION; YORK, SOUTH CAROLINA 107 95-1054708 ASHEVILLE EMPLOYEES RETIREMENT SAVINGS PLAN - TRUCK AXLE DIVISION; ASHEVILLE, NORTH CAROLINA 116 95-1054708 ROCKWELL INTERNATIONAL CORPORATION SAVINGS PLAN FOR CERTAIN REPRESENTED HOURLY EMPLOYEES 127 95-1054708 ALLENTOWN EMPLOYEES RETIREMENT SAVINGS PLAN - OFF-HIGHWAY PRODUCTS AND DRIVELINE DIVISION; ALLENTOWN, PENNSYLVANIA 131 95-1054708 ROCKWELL SAVINGS PLAN FOR CERTAIN ELIGIBLE EMPLOYEES (FORMERLY KNOWN AS AIR TRANSPORT PLAN) 128 25-1200273 ROCKWELL GRAPHIC SYSTEMS, INC. READING HOURLY EMPLOYEES RETIREMENT SAVINGS PLAN 129 25-1200273 ROCKWELL GRAPHIC SYSTEMS, INC. CEDAR RAPIDS HOURLY EMPLOYEES SAVINGS PLAN 014 25-1200273 GRAPHIC SYSTEMS DEFINED CONTRIBUTION TARGET BENEFIT RETIREMENT PLAN FOR HOURLY-RATED EMPLOYEES OF THE CEDAR RAPIDS, IOWA PLANT Dated this 23rd day of December, 1994. /s/ ROBERT H. MURPHY -------------------------------------- Robert H. Murphy, Senior Vice President Organization & Human Resources -----END PRIVACY-ENHANCED MESSAGE-----