-----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, FZRuiUnGUCOtkD5EZ5anG5YRdQ7buyLyfxoU/mmfXTFIE23MtnnPDjactuLldYz5 tnIe1Hpz1ODnN36hC06F8Q== 0001024478-98-000004.txt : 19980224 0001024478-98-000004.hdr.sgml : 19980224 ACCESSION NUMBER: 0001024478-98-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980212 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROCKWELL INTERNATIONAL CORP CENTRAL INDEX KEY: 0001024478 STANDARD INDUSTRIAL CLASSIFICATION: 3670 IRS NUMBER: 251797617 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12383 FILM NUMBER: 98535304 BUSINESS ADDRESS: STREET 1: 600 ANTON BLVD STE 700 CITY: COSTA MESA STATE: CA ZIP: 92626-7147 BUSINESS PHONE: 7144244565 MAIL ADDRESS: STREET 1: 600 ANTON BLVD STE 700 CITY: COSTA MESA STATE: CA ZIP: 92626-7147 FORMER COMPANY: FORMER CONFORMED NAME: NEW ROCKWELL INTERNATIONAL CORP DATE OF NAME CHANGE: 19961009 10-Q 1 FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 1997 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended December 31, 1997 Commission file number 1-12383 Rockwell International Corporation (Exact name of registrant as specified in its charter) Delaware 25-1797617 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 600 Anton Boulevard, Suite 700, Costa Mesa, California 92626-7147 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (714) 424-4565 (Office of the Corporate Secretary) 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 200,880,282 shares of registrant's Common Stock, $1.00 par value, were outstanding on January 31, 1998 ROCKWELL INTERNATIONAL CORPORATION INDEX PART I. FINANCIAL INFORMATION: Item 1. Financial Statements: Page No. Condensed Consolidated Balance Sheet-- December 31, 1997 and September 30, 1997........... 2 Consolidated Statement of Income -- Three Months Ended December 31, 1997 and 1996...... 3 Consolidated Statement of Cash Flows-- Three Months Ended December 31, 1997 and 1996...... 4 Notes to Financial Statements...................... 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...................................... 9 Item 3. Quantitative and Qualitative Disclosures About Market Risk................................. 12 PART II. OTHER INFORMATION: Item 2. Changes in Securities and Use of Proceeds ........ 13 Item 5. Other Information................................. 13 Item 6. Exhibits and Reports on Form 8-K.................. 13 PART I. FINANCIAL INFORMATION Item 1. Financial Statements ROCKWELL INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
December 31 September 30 1997 1997 ASSETS (In millions) Current assets: Cash......................................... $ 183 $ 283 Receivables (less allowance for doubtful accounts: December 31, 1997, $67; September 30, 1997, $62)................... 1,294 1,319 Inventories.................................. 1,616 1,526 Deferred income taxes........................ 251 254 Other current assets......................... 271 302 Total current assets................. 3,615 3,684 Net property.................................... 2,246 2,245 Intangible assets............................... 1,795 1,789 Other assets.................................... 248 253 TOTAL.................. $ 7,904 $ 7,971 LIABILITIES AND SHAREOWNERS' EQUITY Current liabilities: Short-term debt.............................. $ 342 $ 66 Accounts payable............................. 757 840 Accrued compensation and benefits............ 409 436 Accrued income taxes......................... 138 96 Other current liabilities.................... 484 532 Total current liabilities............ 2,130 1,970 Long-term debt.................................. 157 156 Accrued retirement benefits..................... 778 795 Other liabilities............................... 239 239 Total liabilities........... 3,304 3,160 Shareowners' equity: Common Stock (shares issued: 216.4).......... 216 216 Additional paid-in capital................... 904 901 Retained earnings............................ 4,438 4,409 Currency translation......................... (127) (103) Common Stock in treasury, at cost (shares held: December 31, 1997, 13.9; September 30, 1997, 9.6).................. (831) (612) Total shareowners' equity... 4,600 4,811 TOTAL.................. $ 7,904 $ 7,971
See Notes to Financial Statements. ROCKWELL INTERNATIONAL CORPORATION CONSOLIDATED STATEMENT OF INCOME (Unaudited)
Three Months Ended December 31 1997 1996 (In millions) Revenues: Sales.............................................. $ 1,979 $ 1,853 Other income....................................... 25 18 Total revenues................................... 2,004 1,871 Costs and expenses: Cost of sales...................................... 1,402 1,285 Selling, general, and administrative............... 356 336 Purchased research and development................. 103 - Interest........................................... 4 4 Total costs and expenses......................... 1,865 1,625 Income from continuing operations before income taxes................................ 139 246 Provision for income taxes....................... 50 92 INCOME FROM CONTINUING OPERATIONS.................... 89 154 Income from discontinued operations.................. - 25 NET INCOME........................................... $ 89 $ 179 (In dollars) Basic earnings per share: Continuing operations........................... $ 0.43 $ 0.70 Discontinued operations......................... - 0.12 Net Income...................................... $ 0.43 $ 0.82 Diluted earnings per share: Continuing operations........................... $ 0.43 $ 0.69 Discontinued operations......................... - 0.12 Net Income...................................... $ 0.43 $ 0.81 Cash dividends per share............................. $ 0.26 $ 0.29 (In millions) Average outstanding shares: Basic........................................... 204.8 218.7 Diluted......................................... 207.8 221.8
See Notes to Financial Statements. ROCKWELL INTERNATIONAL CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
Three Months Ended December 31 1997 1996 (In millions) CONTINUING OPERATIONS: Operating Activities Income from continuing operations....................... $ 89 $ 154 Adjustments to income from continuing operations to arrive at cash provided by operating activities: Depreciation........................................ 93 95 Amortization of intangible assets................... 25 22 Deferred income taxes............................... (40) 15 Pension expense, net of contributions............... 9 13 Purchased research and development.................. 103 - Changes in assets and liabilities, excluding effects of acquisitions, divestitures and foreign currency adjustments: Receivables..................................... 37 28 Inventories..................................... (51) (14) Accounts payable................................ (83) (166) Accrued income taxes............................ 46 55 Other assets and liabilities.................... (74) (20) Cash Provided by Operating Activities........ 154 182 Investing Activities Property additions...................................... (109) (94) Acquisition of businesses, net of cash acquired......... (158) (1) Proceeds from disposition of property and businesses.... 13 557 Cash (Used for) Provided by Investing Activities................................. (254) 462 Financing Activities Increase (decrease) in short-term borrowings............ 283 (246) Payments of long-term debt.............................. - (1) Net increase (decrease) in debt......................... 283 (247) Purchase of treasury stock.............................. (239) (61) Cash dividends.......................................... (52) (63) Reissuance of common stock.............................. 8 14 Cash Used for Financing Activities........... - (357) CASH (USED FOR) PROVIDED BY CONTINUING OPERATIONS....... (100) 287 CASH USED FOR DISCONTINUED OPERATIONS.. ................ - (157) (DECREASE) INCREASE IN CASH............................. (100) 130 CASH AT BEGINNING OF PERIOD............................. 283 663 CASH AT END OF PERIOD................................... $ 183 $ 793
Income tax payments were $41 million and $25 million in the three months ended December 31, 1997 and 1996, respectively. See Notes to Financial Statements. ROCKWELL INTERNATIONAL CORPORATION NOTES TO FINANCIAL STATEMENTS (Unaudited) 1. In the opinion of management of Rockwell International Corporation (the company or Rockwell) the unaudited financial statements contain all adjustments, consisting solely of adjustments of a normal recurring nature, necessary to present fairly the financial position, results of operations, and cash flows for the periods presented. These statements should be read in conjunction with the company's Annual Report on Form 10-K for the fiscal year ended September 30, 1997. The results of operations for the three-month period ended December 31, 1997 are not necessarily indicative of the results for the full year. Certain prior year amounts have been reclassified to conform with the current presentation. It is the company's practice at the end of each interim reporting period to make an estimate of the effective tax rate expected to be applicable for the full fiscal year. The rate so determined is used in providing for income taxes on a year-to-date basis. The company adopted Statement of Financial Accounting Standards No. 128, "Earnings per Share" in the first quarter of fiscal 1998. The adoption of this standard had no effect on the company's financial statements. 2. In December 1997, the company acquired the In-Flight Entertainment (IFE) business of Hughes-Avicom International, Inc. (Hughes-Avicom), a leading supplier of airborne interactive IFE systems. The acquisition has been accounted for as a purchase as of December 31, 1997, and the company has recorded a charge of $103 million ($63 million after-tax) for purchased research and development. The remaining assets acquired and liabilities assumed have been recorded at estimated fair values determined by the company's management based on information currently available. 3. Discontinued operations include the Automotive business and the Aerospace and Defense businesses (A&D Business). On September 30, 1997, the company completed the spin-off of its Automotive business into an independent, separately traded, publicly held company by distributing all of the issued and outstanding shares of Meritor Automotive, Inc. (Meritor) to the company's shareowners on the basis of one share of Meritor Common Stock for every three shares of company common stock owned. On December 6, 1996, the company completed the merger of its former A&D Business with a subsidiary of The Boeing Company (Boeing) in a transaction valued at approximately $3.2 billion, including the assumption by Boeing of $2.3 billion of liabilities of the company, principally debt, and the issuance of $0.9 billion of Boeing stock to Rockwell shareowners in exchange for their interest in the A&D Business (the Reorganization). ROCKWELL INTERNATIONAL CORPORATION NOTES TO FINANCIAL STATEMENTS (Unaudited) The following table summarizes the results of discontinued operations (in millions). Three Months Ended December 31, 1996 Revenues: Automotive......................................... $ 767 A&D Business....................................... 535 Total............................................ $ 1,302 Income before income taxes: Automotive......................................... $ 44 A&D Business....................................... - Total............................................ $ 44 Net income: Automotive............................................ $ 25 A&D Business.......................................... - Total............................................... $ 25 The earnings of the A&D Business for the first two months of 1997 were entirely offset by expenses relating to the Reorganization. 4. Inventories are summarized as follows (in millions): December 31 September 30 1997 1997 Finished goods............................. $ 424 $ 414 Work in process............................ 759 702 Raw materials, parts, and supplies......... 429 404 Total.................................... 1,612 1,520 Adjustment to the carrying value of certain inventories to a LIFO basis...... 4 6 Inventories................................ $ 1,616 $ 1,526 5. Intangible assets are summarized as follows (in millions): December 31 September 30 1997 1997 Goodwill.................................. $ 1,237 $ 1,249 Trademarks, patents, product technology, and other intangibles................... 558 540 Intangible assets....................... $ 1,795 $ 1,789 ROCKWELL INTERNATIONAL CORPORATION NOTES TO FINANCIAL STATEMENTS (Unaudited) 6. Short-term debt consisted of the following (in millions): December 31 September 30 1997 1997 Commercial paper......................... $ 260 $ - Short-term foreign bank borrowings....... 80 64 Current portion of long-term debt........ 2 2 Short-term debt......................... $ 342 $ 66 At December 31, 1997, the company had $1.5 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. Short-term credit facilities available to foreign subsidiaries amounted to $315 million at December 31, 1997 and consisted of arrangements for which there are no significant commitment fees. 7. Other current liabilities are summarized as follows (in millions): December 31 September 30 1997 1997 Contract reserves and advance payments..... $ 129 $ 146 Accrued product warranty................... 119 113 Accrued taxes other than income taxes...... 46 46 Other...................................... 190 227 Other current liabilities................ $ 484 $ 532 8. Long-term debt consisted of the following (in millions): December 31 September 30 1997 1997 6.8% notes, payable in 2003............... $ 141 $ 141 Other obligations, principally foreign.... 18 17 Total................................... 159 158 Less current portion..................... 2 2 Long-term debt......................... $ 157 $ 156 In January 1998, the company issued $800 million aggregate principal amount of long-term notes and debentures in a public offering. The offering included three series of debt: $350 million principal amount of 6.15% notes due in 2008 issued at par; $250 million principal amount of 6.70% debentures due in 2028, issued at par; and $200 million principal amount of 5.20% debentures due in 2098, issued at a discount yielding approximately $150 million of proceeds. ROCKWELL INTERNATIONAL CORPORATION NOTES TO FINANCIAL STATEMENTS (Unaudited) 9. Accrued retirement benefits consisted of the following (in millions): December 31 September 30 1997 1997 Accrued retirement medical costs......... $ 682 $ 684 Accrued pension costs.................... 151 166 Total.................................. 833 850 Amount classified as current liability... 55 55 Accrued retirement benefits............ $ 778 $ 795 10. Claims have been asserted against the company for utilizing the intellectual property rights of others in certain of the company's products. The resolution of these matters may result in the negotiation of a license agreement, a settlement or the resolution of such claims through arbitration or litigation. The company accrues the estimated cost of the ultimate resolution of these matters. Management believes that the resolution of these matters will not have a material adverse effect on the company's financial statements. 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, safety and health, environmental, and employment matters. Pursuant to the Reorganization, Rockwell has agreed to indemnify Boeing for certain government contract and environmental matters related to operations of the A&D Business for periods prior to the merger. In connection with the spin-off, Meritor has agreed to indemnify the company for substantially all contingent liabilities related to the Automotive business. 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. ROCKWELL INTERNATIONAL CORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS 1998 First Quarter Compared to 1997 First Quarter The contributions to sales and earnings by business segment for the continuing operations of the company for the first quarter of fiscal 1998 and 1997 are presented below (in millions). Three Months Ended December 31 1997 1996 Sales Automation $ 1,139 $ 1,061 Avionics & Communications 426 374 Semiconductor Systems 414 418 Total $ 1,979 $ 1,853 Operating Earnings Automation $ 144 $ 131 Avionics & Communications 74 59 Semiconductor Systems 43 81 Purchased Research & Development (103) - Operating earnings 158 271 General corporate - net (15) (21) Interest expense (4) (4) Provision for income taxes (50) (92) Income from continuing operations 89 154 Income from discontinued operations - 25 Net Income $ 89 $ 179 Purchased research and development relates to the acquisition of an Avionics and Communications business. First quarter fiscal 1998 sales of approximately $2.0 billion were up seven percent from last year's first quarter due to volume increases and increased market share penetration in the Automation and Avionics & Communications businesses. The composition of sales was as follows (in millions): Three Months Ended December 31 1997 1996 U.S. Commercial $ 1,125 $ 1,059 International 717 678 U.S. Government 137 116 Total $ 1,979 $ 1,853 ROCKWELL INTERNATIONAL CORPORATION RESULTS OF OPERATIONS (CONTINUED) Income from continuing operations for the 1998 first quarter, before an acquisition-related special charge, was $152 million, or 74 cents per share, compared to $154 million, or 70 cents per share, for 1997. First quarter 1998 earnings per share were higher due to the company's stock repurchase program. The 1998 first quarter acquisition-related special charge of $63 million after-tax, or 31 cents per share, relates to the write-off of purchased research and development in connection with the December 1997 acquisition of the in-flight entertainment (IFE) business of Hughes-Avicom International, Inc. Including this charge, net income for the first quarter of 1998 was $89 million, or 43 cents per share. Net income for the first quarter of 1997, including discontinued operations, totaled $179 million, or 82 cents per share. Automation earnings increased ten percent in the first quarter of 1998 to $144 million from $131 million in 1997's first quarter. Automation's higher earnings in 1998 are primarily attributable to increased volume in the United States where sales were up nine percent over the comparable period in 1997. Automation's first quarter earnings as a percent of sales increased to 12.6 percent from 12.3 percent in last year's first quarter. Avionics & Communications achieved a 25 percent increase in operating earnings to $74 million, before an acquisition-related special charge, from $59 million in 1997's first quarter. Sales were up 14 percent to $426 million from $374 million in last year's first quarter primarily due to a sales increase of over 40 percent for the air transport business in the first quarter of 1998. Earnings, before the acquisition-related special charge, as a percent of sales increased to 17.4 percent from 15.8 percent in the first quarter of 1997. Including the special charge, Avionics & Communications incurred a first quarter operating loss of $29 million. Semiconductor Systems earnings for the first quarter of 1998 were 47 percent lower than 1997's first quarter on approximately the same sales. Semiconductor Systems achieved unit volume increases in both modem and non-modem products and reduced manufacturing costs in the first quarter of 1998; however, results were below 1997's first quarter due to lower pricing on the V.34 modem product, slower ramp-up of the new K56flex modem related to a delay in reaching a standards agreement, and continuing major investments in new non-modem product lines. Earnings as a percent of sales for the 1998 first quarter were 10.4 percent compared to 19.4 percent for the first quarter of 1997 but up from 9.2 percent in the fourth quarter of 1997. ROCKWELL INTERNATIONAL CORPORATION FINANCIAL CONDITION The major uses of cash for the first quarter of 1998 were the acquisition of the IFE business of Hughes-Avicom International, Inc., and the stock repurchase program. During the first quarter of 1998, the company completed the $1 billion stock repurchase program announced in December 1996 and is in the process of executing the additional $500 million stock repurchase program approved by the company's Board of Directors in September 1997. In February 1998 the company's Board of Directors approved an additional $500 million stock repurchase program. Through December 31, 1997, the company repurchased 18.1 million shares of its common stock for $1.1 billion relating to these programs, of which 4.7 million shares were repurchased for $239 million during the first quarter of 1998. Future stock repurchases are expected to be funded by cash generated by operating activities, commercial paper borrowings and proceeds from long-term notes and debentures. A major source of cash for the first quarter of 1997 was from the sale of the Graphic Systems business for approximately $600 million, consisting of $553 million in cash and $47 million in preferred stock. In January 1998, the company issued $800 million aggregate principal amount of long-term notes and debentures in a public offering. The proceeds of this debt offering of $750 million were used to repay approximately $380 million of outstanding short-term commercial paper borrowings, and the balance will be used for general corporate purposes, including the company's ongoing share repurchase program. 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 Matters in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations of the company's Annual Report on Form 10-K for the fiscal year ended September 30, 1997. Management believes that at December 31, 1997 there has been no material change to this information. ROCKWELL INTERNATIONAL CORPORATION Item 3. Quantitative And Qualitative Disclosures About Market Risk The company's financial instruments include cash, equity securities, short- and long-term debt, and foreign currency forward exchange contracts. At December 31, 1997, 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 enters 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 all the company's outstanding foreign currency forward exchange contracts aggregated $392 million at December 31, 1997 and $239 million at September 30, 1997. The gains and losses relating to these foreign currency forward exchange contracts are deferred and included in the measurement of the foreign currency transaction subject to the hedge. The company believes that any gain or loss incurred on foreign currency forward exchange contracts is offset by the effects of currency movements on the respective underlying hedged transactions. Based on the company's overall currency rate exposure at December 31, 1997, a 10% change in currency rates would not have had a material effect on the financial position, results of operations or cash flows of the company. PART II. OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds On October 1, 1997, the company issued 199 shares of restricted common stock to John D. Nichols, a director of the company; these shares were issued in payment for the retainer fees otherwise payable in cash and deferred by Mr. Nichols pursuant to the terms of the Directors Stock Plan. On December 31, 1997, the company issues 7,792 shares of restricted common stock to Don H. Davis, Jr. in partial payment of an incentive compensation award under the Annual Incentive Compensation Plan for Senior Executive Officers. The issuance of all these shares was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(2) thereof. Item 5. Other Information Government Contracts For information on the company's United States government contracting business, certain risks of that business and claims related thereto, see the information set forth under the caption Government Contracts in Item 1, Business, on page 3 of the company's Annual Report on Form 10-K for fiscal year ended September 30, 1997, which is incorporated herein by reference. Cautionary Statement The Quarterly Report on Form 10-Q contains statements relating to future results of the company (including certain projections and business trends) that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to changes in political and economic conditions; domestic and foreign government spending, budgetary and trade policies; demand for and market acceptance of new and existing products; successful development of advanced technologies; and competitive product and pricing pressures; as well as other risks and uncertainties, including but not limited to those detailed from time to time in the company's Securities and Exchange Commission filings. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit 3-b-1 - By-Laws of the company as in effect on the date hereof. Exhibit 3-b-2 - Copy of resolution of the Board of Directors of the company, adopted February 4, 1998, amending the By-Laws of the company effective February 4, 1998. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (Continued) (a) Exhibits: (continued) Exhibit 11 - Computation of Earnings Per Share Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges for the Three Months Ended December 31, 1997. Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K: The company filed a Current Report on Form 8-K dated October 10, 1997 in respect of the completion on September 30, 1997 of the spin-off of its Automotive business to holders of shares of common stock, par value $1 per share, of company, by means of the distribution to such holders of all outstanding shares of Common Stock, par value $1 per share (including the preferred share purchase rights associated with such Common Stock), of Meritor. Meritor began operations as an independent, separately traded, publicly-held company on October 1, 1997. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ROCKWELL INTERNATIONAL CORPORATION (Registrant) Date February 12, 1998 By W. E. Sanders W. E. Sanders Vice President and Controller (Principal Accounting Officer) Date February 12, 1998 By W. J. Calise, Jr. W. J. Calise, Jr. Senior Vice President, General Counsel and Secretary ROCKWELL INTERNATIONAL CORPORATION INDEX OF EXHIBITS TO FORM 10-Q FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1997 Page Exhibit 3-b-1 - By-Laws of the company as in effect on the 17 date hereof. Exhibit 3-b-2 - Copy of resolution of the Board of Directors 18 of the company, adopted February 4, 1998, amending the By-Laws of the company effective February 4, 1998. Exhibit 11 - Computation of Earnings Per Share for the 40 Three Months Ended December 31, 1997. Exhibit 12 - Computation of Ratio of Earnings to 41 Fixed Charges for the Three Months Ended December 31, 1997. EX-3 2 COPY OF RESOLUTION Exhibit 3-b-1 ROCKWELL INTERNATION CORPORATION ADVICE OF ACTION To: THOSE CONCERNED Date: FEBRUARY 4, 1998 Subject: BY-LAW AMENDMENTS You are hereby notified of action as follows: By: BOARD OF DIRECTORS Place of Meeting: COSTA MESA, CALIFORNIA Date of Meeting: FEBRUARY 4, 1998 RESOLVED, that the By-Laws of this Corporation be, and they hereby are amended, effective immediately, by revising Section 8 of Article V to read in its entirety as follows: "SECTION 8. Chairman of the Board of Directors. The Chairman of the Board of Directors shall be the chief executive officer of the Corporation and, subject to the control of the Board of Directors, shall have general and overall charge of the business and affairs of the Corporation and of its officers. He shall preside at all meetings of the shareowners and of the Board of Directors and shall enforce the observance of the rules of order for the meetings of the shareowners and the Board and of the by-laws of the Corporation. He shall keep the Board of Directors appropriately informed on the business and affairs of the Corporation." by deleting Section 9 of Article V and all references in the By-Laws to the office of President; and by redesignating Sections 10 through 16 of Article V as Sections 9 through 15 thereof. I, William J. Calise, Jr., Secretary of Rockwell International Corporation, hereby certify that the foregoing resolution was duly adopted by the Board of Directors at a meeting held in Costa Mesa, California on February 4, 1998, and that the same is in full force and effect. /s/ William J. Calise, Jr. Secretary EX-3 3 BY-LAWS BY-LAWS 3-b-2 OF ROCKWELL INTERNATIONAL CORPORATION (AS AMENDED EFFECTIVE FEBRUARY 4, 1998) ARTICLE I. OFFICES SECTION 1. Registered Office in Delaware; Resident Agent. The address of the Corporation's registered office in the State of Delaware and the name and address of its resident agent in charge thereof are as filed with the Secretary of State of the State of Delaware. SECTION 2. Other Offices. The Corporation may also have an office or offices at such other place or places either within or without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation requires. ARTICLE II. MEETINGS OF SHAREOWNERS SECTION 1. Place of Meetings. All meetings of the shareowners of the Corporation shall be held at such place, within or without the State of Delaware, as may from time to time be designated by resolution passed by the Board of Directors. SECTION 2. Annual Meeting. An annual meeting of the shareowners for the election of directors and for the transaction of such other proper business, notice of which was given in the notice of meeting, shall be held on a date and at a time as may from time to time be designated by resolution passed by the Board of Directors. SECTION 3. Special Meetings. A special meeting of the shareowners for any purpose or purposes shall be called only by the Board of Directors pursuant to a resolution adopted by a majority of the whole Board. SECTION 4. Notice of Meetings. Except as otherwise provided by law, written notice of each meeting of the shareowners, whether annual or special, shall be mailed, postage prepaid, not less than ten nor more than sixty days before the date of the meeting, to each shareowner entitled to vote at such meeting, at the shareowner's address as it appears on the records of the Corporation. Every such notice shall state the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Notice of any adjourned meeting of the shareowners shall not be required to be given, except when expressly required by law. SECTION 5. List of Shareowners. The Secretary shall, from information obtained from the transfer agent, prepare and make, at least ten days before every meeting of shareowners, a complete list of the shareowners entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each shareowner and the number of shares registered in the name of each shareowner. Such list shall be open to the examination of any shareowner, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any shareowner who is present. The stock ledger shall be the only evidence as to who are the shareowners entitled to examine the stock ledger, the list referred to in this section or the books of the Corporation, or to vote in person or by proxy at any meeting of shareowners. SECTION 6. Quorum. At each meeting of the shareowners, the holders of a majority of the issued and outstanding stock of the Corporation present either in person or by proxy shall constitute a quorum for the transaction of business except where otherwise provided by law or by the Certificate of Incorporation or by these by-laws for a specified action. Except as otherwise provided by law, in the absence of a quorum, a majority in interest of the shareowners of the Corporation present in person or by proxy and entitled to vote shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until shareowners holding the requisite amount of stock shall be present or represented. At any such adjourned meeting at which a quorum may be present, any business may be transacted which might have been transacted at a meeting as originally called, and only those shareowners entitled to vote at the meeting as originally called shall be entitled to vote at any adjournment or adjournments thereof. The absence from any meeting of the number of shareowners required by law or by the Certificate of Incorporation or by these by-laws for action upon any given matter shall not prevent action at such meeting upon any other matter or matters which may properly come before the meeting, if the number of shareowners required in respect of such other matter or matters shall be present. SECTION 7. Organization. At every meeting of the shareowners the Chairman of the Board, or, in his absence, a director or an officer of the Corporation designated by the Board, shall act as Chairman. The Secretary, or, in his absence, an Assistant Secretary, shall act as Secretary at all meetings of the shareowners. In the absence from any such meeting of the Secretary and the Assistant Secretaries, the Chairman may appoint any person to act as Secretary of the meeting. SECTION 8. Notice of Shareowner Business and Nominations. (A) Annual Meetings of Shareowners. (1) Nominations of persons for election to the Board of Directors of the Corporation and the proposal of business to be considered by the shareowners may be made at an annual meeting of shareowners (a) pursuant to the Corporation's notice of meeting, (b) by or at the direction of the Board of Directors or (c) by any shareowner of the Corporation who was a shareowner of record at the time of giving of notice provided for in this by-law, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this by-law. 2 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION (2) For nominations or other business to be properly brought before an annual meeting by a shareowner pursuant to clause (c) of paragraph (A) (1) of this by-law, the shareowner must have given timely notice thereof in writing to the Secretary of the Corporation and such other business must otherwise be a proper matter for shareowner action. To be timely, a shareowner's notice shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 60th day nor earlier than the close of business on the 90th day prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the shareowner to be timely must be so delivered not earlier than the close of business on the 90th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by the Corporation. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a shareowner's notice as described above. Such shareowner's notice shall set forth (a) as to each person whom the shareowner proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule 14a-11 thereunder (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (b) as to any other business that the shareowner proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such shareowner and the beneficial owner, if any, on whose behalf the proposal is made; and (c) as to the shareowner giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such shareowner, as they appear on the Corporation's books, and of such beneficial owner and (ii) the class and number of shares of the Corporation which are owned beneficially and of record by such shareowner and such beneficial owner. (3) Notwithstanding anything in the second sentence of paragraph (A)(2) of this by-law to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board of Directors at least 70 days prior to the first anniversary of the preceding year's annual meeting, a shareowner's notice required by this by-law shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation. (B) Special Meetings of Shareowners. Only such business shall be conducted at a special meeting of shareowners as shall have been brought before the meeting pursuant to the Corporation's notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting 3 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION of shareowners at which directors are to be elected pursuant to the Corporation's notice of meeting (a) by or at the direction of the Board of Directors or (b) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any shareowner of the Corporation who is a shareowner of record at the time of giving of notice provided for in this by-law, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this by-law. In the event the Corporation calls a special meeting of shareowners for the purpose of electing one or more directors to the Board of Directors, any such shareowner may nominate a person or persons (as the case may be), for election to such position(s) as specified in the Corporation's notice of meeting, if the shareowner's notice required by paragraph (A)(2) of this by-law shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the 90th day prior to such special meeting and not later than the close of business on the later of the 60th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment of a special meeting commence a new time period for the giving of a shareowner's notice as described above. (C) General. (1) Only such persons who are nominated in accordance with the procedures set forth in this by-law shall be eligible to serve as directors and only such business shall be conducted at a meeting of shareowners as shall have been brought before the meeting in accordance with the procedures set forth in this by-law. Except as otherwise provided by law, the Certificate of Incorporation or these by-laws, the Chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this by-law and, if any proposed nomination or business is not in compliance with this by-law, to declare that such defective proposal or nomination shall be disregarded. (2) For purposes of this by-law, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. (3) Notwithstanding the foregoing provisions of this by-law, a shareowner shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this by-law. Nothing in this by-law shall be deemed to affect any rights (i) of shareowners to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders of any series of Preferred Stock to elect directors under specified circumstances. SECTION 9. Business and Order of Business. At each meeting of the shareowners such business may be transacted as may properly be brought before such meeting, except as otherwise provided by law or in these by-laws. The order of business at all meetings of the shareowners shall be as determined by the 4 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION Chairman, unless otherwise determined by a majority in interest of the shareowners present in person or by proxy at such meeting and entitled to vote thereat. SECTION 10. Voting. Except as otherwise provided by law, the Certificate of Incorporation or these by-laws, each shareowner shall at every meeting of the shareowners be entitled to one vote for each share of stock held by such shareowner. Any vote on stock may be given by the shareowner entitled thereto in person or by proxy appointed by an instrument in writing, subscribed (or transmitted by electronic means and authenticated as provided by law) by such shareowner or by the shareowner's attorney thereunto authorized, and delivered to the Secretary; provided, however, that no proxy shall be voted after three years from its date unless the proxy provides for a longer period. Except as otherwise provided by law, the Certificate of Incorporation or these by-laws, at all meetings of the shareowners, all matters shall be decided by the vote (which need not be by ballot) of a majority in interest of the shareowners present in person or by proxy and entitled to vote thereat, a quorum being present. ARTICLE III. BOARD OF DIRECTORS SECTION 1. General Powers. The property, affairs and business of the Corporation shall be managed by or under the direction of its Board of Directors. SECTION 2. Number, Qualifications, and Term of Office. Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the number of directors of the Corporation shall be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the whole Board. A director need not be a shareowner. The directors, other than those who may be elected by the holders of any series of Preferred Stock or any other series or class of stock, as provided herein or in any Preferred Stock Designation, shall be divided into three classes, as nearly equal in number as possible. One class of directors shall be initially elected for a term expiring at the annual meeting of shareowners to be held in 1997, another class shall be initially elected for a term expiring at the annual meeting of shareowners to be held in 1998, and another class shall be initially elected for a term expiring at the annual meeting of shareowners to be held in 1999. Members of each class shall hold office until their successors are elected and shall have qualified. At each annual meeting of the shareowners of the Corporation, commencing with the 1997 annual meeting, the successors of the class of directors whose term expires at that meeting shall be elected by a plurality vote of all votes cast at such meeting to hold office for a term expiring at the annual meeting of shareowners held in the third year following the year of their election. SECTION 3. Election of Directors. At each meeting of the shareowners for the election of directors, at which a quorum is present, the directors shall 5 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION be the persons receiving the greatest number of votes cast by the holders of stock entitled to vote for such directors. SECTION 4. Quorum and Manner of Acting. A majority of the members of the Board of Directors shall constitute a quorum for the transaction of business at any meeting, and the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors unless otherwise provided by law, the Certificate of Incorporation or these by-laws. In the absence of a quorum, a majority of the directors present may adjourn any meeting from time to time until a quorum shall be obtained. Notice of any adjourned meeting need not be given. The directors shall act only as a board and the individual directors shall have no power as such. SECTION 5. Place of Meetings. The Board of Directors may hold its meetings at such place or places within or without the State of Delaware as the Board may from time to time determine or as shall be specified or fixed in the respective notices or waivers of notice thereof. SECTION 6. First Meeting. Promptly after each annual election of directors, the Board of Directors shall meet for the purpose of organization, the election of officers and the transaction of other business, at the same place as that at which the annual meeting of shareowners was held or as otherwise determined by the Board. Notice of such meeting need not be given. Such meeting may be held at any other time or place which shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors. SECTION 7. Regular Meetings. Regular meetings of the Board of Directors shall be held at such places and at such times as the Board shall from time to time determine. If any day fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting which would otherwise be held on that day shall be held at the same hour on the next succeeding business day not a legal holiday. Notice of regular meetings need not be given. SECTION 8. Special Meetings; Notice. Special meetings of the Board of Directors shall be held whenever called by the Chairman of the Board and shall be called by the Chairman of the Board or the Secretary at the written request of three directors. Notice of each such meeting stating the time and place of the meeting shall be given to each director by mail, telephone, other electronic transmission or personally. If by mail, such notice shall be given not less than five days before the meeting; and if by telephone, other electronic transmission or personally, not less than two days before the meeting. A notice mailed at least two weeks before the meeting need not state the purpose thereof except as otherwise provided in these by-laws. In all other cases the notice shall state the principal purpose or purposes of the meeting. Notice of any meeting of the Board need not be given to a director, however, if waived by the director in writing before or after such meeting or if the director shall be present at the meeting. SECTION 9. Organization. At each meeting of the Board of Directors, the Chairman of the Board, or, in his absence, a director or an officer of the Corporation designated by the Board, shall act as Chairman. The Secretary, or, 6 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION in the Secretary's absence, any person appointed by the Chairman, shall act as Secretary of the meeting. SECTION 10. Order of Business. At all meetings of the Board of Directors, business shall be transacted in the order determined by the Board. SECTION 11. Resignations. Any director of the Corporation may resign at any time by giving written notice to the Chairman of the Board or the Secretary of the Corporation. The resignation of any director shall take effect at the time specified therein, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 12. Compensation. Each director shall be paid such compensation, if any, as shall be fixed by the Board of Directors. SECTION 13. Indemnification of Directors and Officers. (A) The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that such person is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent (except in each of the foregoing situations to the extent any agreement, arrangement or understanding of agency contains provisions that supersede or abrogate indemnification under this section) of another corporation or of any partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful. (B) The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent (except in each of the foregoing situations to the extent any agreement, arrangement or understanding of agency contains provisions that supersede or abrogate indemnification under this section) of another corporation or of any partnership, joint venture, trust, employee benefit plan or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in 7 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery of Delaware or such other court shall deem proper. (C) To the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (A) and (B), or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by or on behalf of such person in connection therewith. If any such person is not wholly successful in any such action, suit or proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters therein, the Corporation shall indemnify such person against all expenses (including attorneys' fees) actually and reasonably incurred by or on behalf of such person in connection with each claim, issue or matter that is successfully resolved. For purposes of this subsection and without limitation, the termination of any claim, issue or matter by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter. (D) Notwithstanding any other provision of this section, to the extent any person is a witness in, but not a party to, any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent (except in each of the foregoing situations to the extent any agreement, arrangement or understanding of agency contains provisions that supersede or abrogate indemnification under this section) of another corporation or of any partnership, joint venture, trust, employee benefit plan or other enterprise, such person shall be indemnified against all expenses (including attorneys' fees) actually and reasonably incurred by or on behalf of such person in connection therewith. (E) Indemnification under subsections (A) and (B) (unless ordered by a court) shall be made only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because such person has met the applicable standard of conduct set forth in subsections (A) and (B). Such determination shall be made (1) if a Change of Control (as hereinafter defined) shall not have occurred, (a) by the Board of Directors by a majority vote of the Disinterested Directors (as hereinafter defined), even though less than a quorum or (b) if there are no Disinterested Directors or, even if there are Disinterested Directors, a majority of such Disinterested Directors so directs, by (i) Independent Counsel (as hereinafter defined) in a written opinion to the Board of Directors, a copy of which shall be delivered to the claimant, or (ii) the shareowners of the Corporation; or (2) if a Change of Control shall have 8 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION occurred, by Independent Counsel selected by the claimant in a written opinion to the Board of Directors, a copy of which shall be delivered to the claimant, unless the claimant shall request that such determination be made by or at the direction of the Board of Directors, in which case it shall be made in accordance with clause (1) of this sentence. Any claimant shall be entitled to be indemnified against the expenses (including attorneys' fees) actually and reasonably incurred by such claimant in cooperating with the person or entity making the determination of entitlement to indemnification (irrespective of the determination as to the claimant's entitlement to indemnification) and, to the extent successful, in connection with any litigation or arbitration with respect to such claim or the enforcement thereof. (F) If a Change of Control shall not have occurred, or if a Change of Control shall have occurred and a director, officer, employee or agent requests pursuant to clause (2) of the second sentence in subsection (E) that the determination whether the claimant is entitled to indemnification be made by or at the direction of the Board of Directors, the claimant shall be conclusively presumed to have been determined pursuant to subsection (E) to be entitled to indemnification if (1)(a) within fifteen days after the next regularly scheduled meeting of the Board of Directors following receipt by the Corporation of the request therefor, the Board of Directors shall not have resolved by majority vote of the Disinterested Directors to submit such determination to (i) Independent Counsel for its determination or (ii) the shareowners for their determination at the next annual meeting, or any special meeting that may be held earlier, after such receipt, and (b) within sixty days after receipt by the Corporation of the request therefor (or within ninety days after such receipt if the Board of Directors in good faith determines that additional time is required by it for the determination and, prior to expiration of such sixty-day period, notifies the claimant thereof), the Board of Directors shall not have made the determination by a majority vote of the Disinterested Directors, or (2) after a resolution of the Board of Directors, timely made pursuant to clause (1)(a)(ii) above, to submit the determination to the shareowners, the shareowners meeting at which the determination is to be made shall not have been held on or before the date prescribed (or on or before a later date, not to exceed sixty days beyond the original date, to which such meeting may have been postponed or adjourned on good cause by the Board of Directors acting in good faith); provided, however, that this sentence shall not apply if the claimant has misstated or failed to state a material fact in connection with his or her request for indemnification. Such presumed determination that a claimant is entitled to indemnification shall be deemed to have been made (I) at the end of the sixty-day or ninety-day period (as the case may be) referred to in clause (1)(b) of the immediately preceding sentence or (II) if the Board of Directors has resolved on a timely basis to submit the determination to the shareowners, on the last date within the period prescribed by law for holding such shareowners meeting (or a postponement or adjournment thereof as permitted above). (G) Expenses (including attorneys' fees) incurred in defending a civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding to a director or officer, promptly after receipt of a request therefor stating in reasonable detail the expenses incurred, and to an employee or agent as authorized by the Board of Directors; provided that in each case the 9 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION Corporation shall have received an undertaking by or on behalf of the director, officer, employee or agent to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation as authorized in this section. (H) The Board of Directors shall establish reasonable procedures for the submission of claims for indemnification pursuant to this section, determination of the entitlement of any person thereto and review of any such determination. Such procedures shall be set forth in an appendix to these by-laws and shall be deemed for all purposes to be a part hereof. (I) For purposes of this section, (1) "Change of Control" means a change of control of the Corporation at any time after the distribution of the shares of capital stock of the Corporation to the holders of capital stock of Rockwell International Corporation of a nature that would be required to be reported in a proxy statement pursuant to Section 14(a) of the Exchange Act or in a Form 8-K pursuant to Section 13 of the Exchange Act (or in any similar form or schedule under either of those provisions or any successor provision), whether or not the Corporation is then subject to such reporting requirement; provided, however, that, without limitation, a Change of Control shall be deemed to have occurred if (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 20% or more of the combined voting power of the Corporation's then outstanding securities without the prior approval of at least two-thirds of the members of the Board of Directors in office immediately prior to such person attaining such percentage interest; (ii) the Corporation is a party to a merger, consolidation, sale of assets or other reorganization, or a proxy contest, as a consequence of which members of the Board of Directors in office immediately prior to such transaction or event constitute less than a majority of the Board of Directors immediately thereafter; or (iii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (including for this purpose any new director whose election or nomination for election by the Corporation's shareowners was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board of Directors. (2) "Disinterested Director" means a director of the Corporation who is not and was not a party to an action, suit or proceeding in respect of which indemnification is sought by a director, officer, employee or agent. (3) "Independent Counsel" means a law firm, or a member of a law firm, that (i) is experienced in matters of corporation law; (ii) neither presently is, nor in the past five years has been, retained to represent the Corporation, the director, officer, employee or agent claiming indemnification or any other party to the action, suit, or proceeding giving rise to a claim for indemnification under this section, in any matter material to the Corporation, the claimant or any such other party; and (iii) would not, under applicable standards of professional conduct then prevailing, have a conflict of interest 10 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION in representing either the Corporation or such director, officer, employee or agent in an action to determine the Corporation's or such person's rights under this section. (J) The Indemnification and advancement of expenses herein provided, or granted pursuant hereto, shall not be deemed exclusive of any other rights to which any of those indemnified or eligible for advancement of expenses may be entitled under any agreement, vote of shareowners or Disinterested Directors or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person. Notwithstanding any amendment, alteration or repeal of this section or any of its provisions, or of any of the procedures established by the Board of Directors pursuant to subsection (H) hereof, any person who is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of any partnership, joint venture, employee benefit plan or other enterprise shall be entitled to indemnification in accordance with the provisions hereof and thereof with respect to any action taken or omitted prior to such amendment, alteration or repeal except to the extent otherwise required by law. (K) No indemnification shall be payable pursuant to this section with respect to any action against the Corporation commenced by an officer, director, employee or agent unless the Board of Directors shall have authorized the commencement thereof or unless and to the extent that this section or the procedures established pursuant to subsection (H) shall specifically provide for indemnification of expenses relating to the enforcement of rights under this section and such procedures. ARTICLE IV. COMMITTEES SECTION 1. Appointment and Powers. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of two or more directors of the Corporation, which, to the extent provided in said resolution or in these by-laws and not inconsistent with Section 141 of the Delaware General Corporation Law, as amended, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. SECTION 2. Term of Office and Vacancies. Each member of a committee shall continue in office until a director to succeed him or her shall have been elected and shall have qualified, or until he or she ceases to be a director or until he or she shall have resigned or shall have been removed in the manner 11 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION hereinafter provided. Any vacancy in a committee shall be filled by the vote of a majority of the whole Board of Directors at any regular or special meeting thereof. SECTION 3. Alternates. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. SECTION 4. Organization. Unless otherwise provided by the Board of Directors, each committee shall appoint a chairman. Each committee shall keep a record of its acts and proceedings and report the same from time to time to the Board of Directors. SECTION 5. Resignations. Any regular or alternate member of a committee may resign at any time by giving written notice to the Chairman of the Board or the Secretary of the Corporation. Such resignation shall take effect at the time of the receipt of such notice or at any later time specified therein, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 6. Removal. Any regular or alternate member of a committee may be removed with or without cause at any time by resolution passed by a majority of the whole Board of Directors at any regular or special meeting. SECTION 7. Meetings. Regular meetings of each committee, of which no notice shall be necessary, shall be held on such days and at such places as the chairman of the committee shall determine or as shall be fixed by a resolution passed by a majority of all the members of such committee. Special meetings of each committee will be called by the Secretary at the request of any two members of such committee, or in such other manner as may be determined by the committee. Notice of each special meeting of a committee shall be mailed to each member thereof at least two days before the meeting or shall be given personally or by telephone or other electronic transmission at least one day before the meeting. Every such notice shall state the time and place, but need not state the purposes of the meeting. No notice of any meeting of a committee shall be required to be given to any alternate. SECTION 8. Quorum and Manner of Acting. Unless otherwise provided by resolution of the Board of Directors, a majority of a committee (including alternates when acting in lieu of regular members of such committee) shall constitute a quorum for the transaction of business and the act of a majority of those present at a meeting at which a quorum is present shall be the act of such committee. The members of each committee shall act only as a committee and the individual members shall have no power as such. SECTION 9. Compensation. Each regular or alternate member of a committee shall be paid such compensation, if any, as shall be fixed by the Board of Directors. 12 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION ARTICLE V. OFFICERS SECTION 1. Officers. The officers of the Corporation shall be a Chairman of the Board of Directors, who shall be chosen from the members of the Board of Directors, one or more Vice Presidents (one or more of whom may be Executive Vice Presidents, Senior Vice Presidents or otherwise as may be designated by the Board), a Secretary and a Treasurer, all of whom shall be elected by the Board of Directors. Any two or more offices may be held by the same person. The Board of Directors may also from time to time elect such other officers as it deems necessary. SECTION 2. Term of Office. Each officer shall hold office until his or her successor shall have been duly elected and qualified in his or her stead, or until his or her death or until he or she shall have resigned or shall have been removed in the manner hereinafter provided. SECTION 3. Additional Officers; Agents. The Chairman of the Board may from time to time appoint and remove such additional officers and agents as may be deemed necessary. Such persons shall hold office for such period, have such authority, and perform such duties as in these by-laws provided or as the Chairman of the Board may from time to time prescribe. The Board of Directors or the Chairman of the Board may from time to time authorize any officer to appoint and remove agents and employees and to prescribe their powers and duties. SECTION 4. Salaries. Unless otherwise provided by resolution passed by a majority of the whole Board, the salaries of all officers elected by the Board of Directors shall be fixed by the Board of Directors. SECTION 5. Removal. Except where otherwise expressly provided in a contract authorized by the Board of Directors, any officer may be removed, either with or without cause, by the vote of a majority of the Board at any regular or special meeting or, except in the case of an officer elected by the Board, by any superior officer upon whom the power of removal may be conferred by the Board or by these by-laws. SECTION 6. Resignations. Any officer elected by the Board of Directors may resign at any time by giving written notice to the Chairman of the Board or the Secretary. Any other officer may resign at any time by giving written notice to the Chairman of the Board. Any such resignation shall take effect at the date of receipt of such notice or at any later time specified therein, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 7. Vacancies. A vacancy in any office because of death, resignation, removal, or otherwise, shall be filled for the unexpired portion of the term in the manner provided in these by-laws for regular election or appointment to such office. 13 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION SECTION 8. Chairman of the Board of Directors. The Chairman of the Board of Directors shall be the chief executive officer of the Corporation and, subject to the control of the Board of Directors, shall have general and overall charge of the business and affairs of the Corporation and of its officers. He shall preside at all meetings of the shareowners and of the Board of Directors and shall enforce the observance of the rules of order for the meetings of the shareowners and the Board and of the by-laws of the Corporation. He shall keep the Board of Directors appropriately informed on the business and affairs of the Corporation. SECTION 9. Executive Vice Presidents. One or more Executive Vice Presidents shall, subject to the control of the Chairman of the Board, have lead accountability for components or functions of the Corporation as and to the extent designated by the Chairman of the Board. Each Executive Vice President shall keep the Chairman of the Board appropriately informed on the business and affairs of the designated components or functions of the Corporation. SECTION 10. Vice Presidents. The Vice Presidents shall perform such duties as may from time to time be assigned to them or any of them by the Chairman of the Board. SECTION 11. Secretary. The Secretary shall keep or cause to be kept in books provided for the purpose the minutes of the meetings of the shareowners, of the Board of Directors and of any committee constituted pursuant to Article IV of these by-laws. The Secretary shall be custodian of the corporate seal and see that it is affixed to all documents as required and attest the same. The Secretary shall perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him or her. SECTION 12. Assistant Secretaries. At the request of the Secretary, or in his or her absence or disability, the Assistant Secretary designated by him or her shall perform all the duties of the Secretary and, when so acting, shall have all the powers of, and be subject to all the restrictions upon, the Secretary. The Assistant Secretaries shall perform such other duties as from time to time may be assigned to them. SECTION 13. Treasurer. The Treasurer shall have charge of and be responsible for the receipt, disbursement and safekeeping of all funds and securities of the Corporation. The Treasurer shall deposit all such funds in the name of the Corporation in such banks, trust companies or other depositories as shall be selected in accordance with the provisions of these by-laws. From time to time and whenever requested to do so, the Treasurer shall render statements of the condition of the finances of the Corporation to the Board of Directors. The Treasurer shall perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him or her. SECTION 14. Assistant Treasurers. At the request of the Treasurer, or in his or her absence or disability, the Assistant Treasurer designated by him or her shall perform all the duties of the Treasurer and, when so acting, shall have all the powers of, and be subject to all the restrictions upon, the Treasurer. The Assistant Treasurers shall perform such other duties as from time to time may be assigned to them. 14 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION SECTION 15. Certain Agreements. The Board of Directors shall have power to authorize or direct the proper officers of the Corporation, on behalf of the Corporation, to enter into valid and binding agreements in respect of employment, incentive or deferred compensation, stock options, and similar or related matters, notwithstanding the fact that a person with whom the Corporation so contracts may be a member of its Board of Directors. Any such agreement may validly and lawfully bind the Corporation for a term of more than one year, in accordance with its terms, notwithstanding the fact that one of the elements of any such agreement may involve the employment by the Corporation of an officer, as such, for such term. ARTICLE VI. AUTHORIZATIONS SECTION 1. Contracts. The Board of Directors, except as in these by-laws otherwise provided, may authorize any officer, employee or agent of the Corporation to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. SECTION 2. Loans. No loan shall be contracted on behalf of the Corporation and no negotiable paper shall be issued in its name, unless authorized by the Board of Directors. SECTION 3. Checks, Drafts, Etc. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or officers, employee or employees, of the Corporation as shall from time to time be determined in accordance with authorization of the Board of Directors. SECTION 4. Deposits. All funds of the Corporation shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board of Directors may from time to time designate, or as may be designated by any officer or officers of the Corporation to whom such power may be delegated by the Board, and for the purpose of such deposit the officers and employees who have been authorized to do so in accordance with the determinations of the Board may endorse, assign and deliver checks, drafts, and other orders for the payment of money which are payable to the order of the Corporation. SECTION 5. Proxies. Except as otherwise provided in these by-laws or in the Certificate of Incorporation, and unless otherwise provided by resolution of the Board of Directors, the Chairman of the Board, the President or any other officer may from time to time appoint an attorney or attorneys or agent or agents of the Corporation, in the name and on behalf of the Corporation to cast the votes which the Corporation may be entitled to cast as a shareowner or otherwise in any other corporation any of whose stock or other securities may be held by the Corporation, at meetings of the holders of the stock or other securities of such other corporations, or to consent in writing to any action by such other corporation, and may instruct the person or persons so appointed as 15 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION to the manner of casting such vote or giving such consent, and may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal, or otherwise, all such written proxies or other instruments as he may deem necessary or proper in the premises. ARTICLE VII. SHARES AND THEIR TRANSFER SECTION 1. Certificates of Stock. Certificates for shares of the stock of the Corporation shall be in such form as shall be approved by the Board of Directors. They shall be numbered in the order of their issue, by class and series, and shall be signed by the Chairman of the Board or a Vice President, and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Corporation. If such certificate is countersigned (1) by a transfer agent other than the Corporation or its employee, or (2) by a registrar other than the Corporation or its employee, any other signature on the certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent, or registrar at the date of issue. SECTION 2. Record Ownership. A record of the name and address of the holder of each certificate, the number of shares represented thereby and the date of issuance thereof shall be made on the Corporation's books. The Corporation shall be entitled to treat the holder of record of any share of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, except as required by law. SECTION 3. Transfer of Stock. Shares of stock shall be transferable on the books of the Corporation by the person named in the certificate for such stock in person or by such person's attorney or other duly constituted representative upon surrender of such certificate with an assignment endorsed thereon or attached thereto duly executed and with such guarantee of signature as the Corporation may reasonably require. SECTION 4. Lost, Destroyed and Mutilated Certificates. The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such person's legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. SECTION 5. Transfer Agent and Registrar; Regulations. The Corporation shall, if and whenever the Board of Directors shall so determine, maintain one or more transfer offices or agencies, each in charge of a transfer agent 16 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION designated by the Board of Directors, where the shares of the stock of the Corporation shall be directly transferable, and also one or more registry offices, each in charge of a registrar designated by the Board of Directors, where such shares of stock shall be registered, and no certificate for shares of the stock of the Corporation, in respect of which a registrar and transfer agent shall have been designated, shall be valid unless countersigned by such transfer agent and registered by such registrar. The Board of Directors may also make such additional rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates for shares of stock of the Corporation. SECTION 6. Fixing Record Date. For the purpose of determining the shareowners entitled to notice of or to vote at any meeting of shareowners or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed (1) the record date for determining shareowners entitled to notice of or to vote at a meeting of shareowners shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held and (2) the record date for determining shareowners for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of shareowners of record entitled to notice of or to vote at a meeting of shareowners shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 7. Examination of Books by Shareowners. The Board of Directors shall, subject to the laws of the State of Delaware, have power to determine from time to time, whether and to what extent and under what conditions and regulations the accounts and books of the Corporation, or any of them, shall be open to the inspection of the shareowners; and no shareowner shall have any right to inspect any book or document of the Corporation, except as conferred by the laws of the State of Delaware, unless and until authorized so to do by resolution of the Board of Directors or of the shareowners of the Corporation. ARTICLE VIII. NOTICE SECTION 1. Manner of Giving Written Notice. Any notice in writing required by law or by these by-laws to be given to any person may be delivered personally, may be transmitted by electronic means or may be given by depositing the same in the post office or letter box in a postpaid envelope addressed to such person at such address as appears on the books of the Corporation. Notice by mail shall be deemed to be given at the time when the same shall be mailed, and notice by other means shall be deemed given when actually delivered (and in the case of notice transmitted by electronic means, when authenticated if and as required by law). 17 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION SECTION 2. Waiver of Notice. Whenever any notice is required to be given to any person, a waiver thereof by such person in writing or transmitted by electronic means (and authenticated if and as required by law), whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE IX. SEAL The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal" and "Delaware". ARTICLE X. FISCAL YEAR The fiscal year of the Corporation shall begin on the first day of October in each year. 18 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION APPENDIX PROCEDURES FOR SUBMISSION AND DETERMINATION OF CLAIMS FOR INDEMNIFICATION PURSUANT TO ARTICLE III, SECTION 13 OF THE BY-LAWS. SECTION 1. Purpose. The Procedures for Submission and Determination of Claims for Indemnification Pursuant to Article III, Section 13 of the by-laws (the "Procedures") are to implement the provisions of Article III, Section 13 of the by-laws of the Corporation (the "by-laws") in compliance with the requirement of subsection (H) thereof. SECTION 2. Definitions. For purposes of these Procedures: (A) All terms that are defined in Article III, Section 13 of the by-laws shall have the meanings ascribed to them therein when used in these Procedures unless otherwise defined herein. (B) "Expenses" include all reasonable attorneys' fees, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness in, a Proceeding; and shall also include such retainers as counsel may reasonably require in advance of undertaking the representation of an indemnitee in a Proceeding. (C) "Indemnitee" includes any person who was or is, or is threatened to be made, a witness in or a party to any Proceeding by reason of the fact that such person is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent (except in each of the foregoing situations to the extent any agreement, arrangement or understanding of agency contains provisions that supersede or abrogate indemnification under Article III, Section 13 of the by-laws) of another corporation or of any partnership, joint venture, trust, employee benefit plan or other enterprise. (D) "Proceeding" includes any action, suit, arbitration, alternative dispute resolution mechanism, investigation, administrative hearing or any other proceeding, whether civil, criminal, administrative or investigative, except one initiated by an Indemnitee unless the Board of Directors shall have authorized the commencement thereof. SECTION 3. Submission and Determination of Claims. (A) To obtain indemnification or advancement of Expenses under Article III, Section 13 of the by-laws, an Indemnitee shall submit to the Secretary of the Corporation a written request therefor, including therein or therewith such documentation and information as is reasonably available to the Indemnitee and is reasonably necessary to permit a determination as to whether and what extent 19 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION the Indemnitee is entitled to indemnification or advancement of Expenses, as the case may be. The Secretary shall, promptly upon receipt of a request for indemnification, advise the Board of Directors thereof in writing if a determination in accordance with Article III, Section 13(E) of the by-laws is required. (B) Upon written request by an Indemnitee for indemnification pursuant to Section 3(A) hereof a determination with respect to the Indemnitee's entitlement thereto in the specific case, if required by the by-laws, shall be made in accordance with Article III, Section 13(E) of the by-laws, and, if it is so determined that the Indemnitee is entitled to indemnification, payment to the Indemnitee shall be made within ten days after such determination. The Indemnitee shall cooperate with the person, persons or entity making such determination, with respect to the Indemnitee's entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to the Indemnitee and reasonably necessary to such determination. (C) If entitlement to indemnification is to be made by Independent Counsel pursuant to Article III, Section 13(E) of the by-laws, the Independent Counsel shall be selected as provided in this Section 3(C). If a Change of Control shall not have occurred, the Independent Counsel shall be selected by the Board of Directors, and the Corporation shall give written notice to the Indemnitee advising the Indemnitee of the identity of the Independent Counsel so selected. If a Change of Control shall have occurred, the Independent Counsel shall be selected by the Indemnitee (unless the Indemnitee shall request that such selection be made by the Board of Directors, in which event the immediately preceding sentence shall apply), and the Indemnitee shall give written notice to the Corporation advising it of the identity of the Independent Counsel so selected. In either event, the Indemnitee or the Corporation, as the case may be, may, within seven days after such written notice of selection shall have been given, deliver to the Corporation or to the Indemnitee, as the case may be, a written objection to such selection. Such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of "Independent Counsel" as defined in Article III, Section 13 of the by-laws, and the objection shall set forth with particularity the factual basis of such assertion. If such written objection is made, the Independent Counsel so selected may not serve as Independent Counsel unless and until a court has determined that such objection is without merit. If, within twenty days after the next regularly scheduled Board of Directors meeting following submission by the Indemnitee of a written request for indemnification pursuant to Section 3(A) hereof, no Independent Counsel shall have been selected and not objected to, either the Corporation or the Indemnitee may petition the Court of Chancery of the State of Delaware or other court of competent jurisdiction for resolution of any objection which shall have been made by the Corporation or the Indemnitee to the other's selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Court or by such other person as the Court shall designate, and the person with respect to whom an objection is favorably resolved or the person so appointed shall act as Independent Counsel under Article III, Section 13(E) of the by-laws. The Corporation shall pay any and all reasonable fees and expenses (including without limitation any advance retainers reasonably required by counsel) of 20 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Article III, Section 13(E) of the by-laws, and the Corporation shall pay all reasonable fees and expenses (including without limitation any advance retainers reasonably required by counsel) incident to the procedures of Article III, Section 13(E) of the by-laws and this Section 3(C), regardless of the manner in which Independent Counsel was selected or appointed. Upon the delivery of its opinion pursuant to Article III, Section 13 of the by-laws or, if earlier, the due commencement of any judicial proceeding or arbitration pursuant to Section 4(A)(3) of these Procedures, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing). (D) If a Change of Control shall have occurred, in making a determination with respect to entitlement to indemnification under the by-laws, the person, persons or entity making such determination shall presume that an Indemnitee is entitled to indemnification under the by-laws if the Indemnitee has submitted a request for indemnification in accordance with Section 3(A) hereof, and the Corporation shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. SECTION 4. Review and Enforcement of Determination. (A) In the event that (1) advancement of Expenses is not timely made pursuant to Article III, Section 13(G) of the by-laws, (2) payment of indemnification is not made pursuant to Article III, Section 13(C) or (D) of the by-laws within ten days after receipt by the Corporation of written request therefor, (3) a determination is made pursuant to Article III, Section 13(E) of the by-laws that an Indemnitee is not entitled to indemnification under the by-laws, (4) the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Article III, Section 13(E) of the by-laws and such determination shall not have been made and delivered in a written opinion within ninety days after receipt by the Corporation of the written request for indemnification, or (5) payment of indemnification is not made within ten days after a determination has been made pursuant to Article III, Section 13(E) of the by-laws that an Indemnitee is entitled to indemnification or within ten days after such determination is deemed to have been made pursuant to Article III, Section 13(F) of the by-laws, the Indemnitee shall be entitled to an adjudication in an appropriate court of the State of Delaware, or in any other court of competent jurisdiction, of the Indemnitee's entitlement to such indemnification or advancement of Expenses. Alternatively, the Indemnitee, at his or her option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the rules of the American Arbitration Association. The Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within one year following the date on which the Indemnitee first has the right to commence such proceeding pursuant to this Section 4(A). The Corporation shall not oppose the Indemnitee's right to seek any such adjudication or award in arbitration. (B) In the event that a determination shall have been made pursuant to Article III, Section 13(E) of the by-laws that an Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 4 shall be conducted in all respects as a de novo trial, or 21 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION arbitration, on the merits and the Indemnitee shall not be prejudiced by reason of that adverse determination. If a Change of Control shall have occurred, the Corporation shall have the burden of proving in any judicial proceeding or arbitration commenced pursuant to this Section 4 that the Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be. (C) If a determination shall have been made or deemed to have been made pursuant to Article III, Section 13(E) or (F) of the by-laws that an Indemnitee is entitled to indemnification, the Corporation shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 4, absent (1) a misstatement or omission of a material fact in connection with the Indemnitee's request for indemnification, or (2) a prohibition of such indemnification under applicable law. (D) The Corporation shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 4 that the procedures and presumptions of these Procedures are not valid, binding and enforceable, and shall stipulate in any such judicial proceeding or arbitration that the Corporation is bound by all the provisions of these Procedures. (E) In the event that an Indemnitee, pursuant to this Section 4, seeks to enforce the Indemnitee's rights under, or to recover damages for breach of, Article III, Section 13 of the by-laws or these Procedures in a judicial proceeding or arbitration, the Indemnitee shall be entitled to recover from the Corporation, and shall be indemnified by the Corporation against, any and all expenses (of the types described in the definition of Expenses in Section 2 of these Procedures) actually and reasonably incurred in such judicial proceeding or arbitration, but only if the Indemnitee prevails therein. If it shall be determined in such judicial proceeding or arbitration that the Indemnitee is entitled to receive part but not all of the indemnification or advancement of Expenses sought, the expenses incurred by the Indemnitee in connection with such judicial proceeding or arbitration shall be appropriately prorated. SECTION 5. Amendments. These Procedures may be amended at any time and from time to time in the same manner as any by-law of the Corporation in accordance with the Certificate of Incorporation; provided, however, that notwithstanding any amendment, alteration or repeal of these Procedures or any provision hereof, any Indemnitee shall be entitled to utilize these Procedures with respect to any claim for indemnification arising out of any action taken or omitted prior to such amendment, alteration or repeal except to the extent otherwise required by law. 22 BY-LAWS OF ROCKWELL INTERNATIONAL CORPORATION EX-11 4 COMPUTATAION OF EARNINGS PER SHARE EXHIBIT 11 ROCKWELL INTERNATIONAL CORPORATION COMPUTATION OF EARNINGS PER SHARE Three Months Ended December 31 1997 1996 (In millions, except per share amounts) Basic earnings per share: Income from continuing operations................... $ 89 $ 154 Income from discontinued operations................. - $ 25 Net income.......................................... $ 89 $ 179 Average number of common shares outstanding during the period................................. 204.8 218.7 Basic earnings per share: Continuing operations............................. $ 0.43 $ 0.70 Discontinued operations........................... - 0.12 Net income........................................ $ 0.43 $ 0.82 Diluted earnings per share: Income from continuing operations................... $ 89 $ 154 Income from discontinued operations................. - 25 Net income.......................................... $ 89 $ 179 Average number of common shares outstanding during the period assuming full dilution: Common stock................................... 204.8 218.7 Assumed issuance of stock under award plans.... 3.0 3.1 Total diluted shares.............................. 207.8 221.8 Diluted earnings per share: Continuing operations............................. $ 0.43 $ 0.69 Discontinued operations........................... - 0.12 Net income........................................ $ 0.43 $ 0.81 EX-12 5 COMPUTATION OF RATION OF EARNINGS TO FIXED ASSETS Exhibit 12 ROCKWELL INTERNATIONAL CORPORATION COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES THREE MONTHS ENDED DECEMBER 31, 1997 (In millions, except ratio) EARNINGS AVAILABLE FOR FIXED CHARGES: Income from continuing operations before income taxes............ $ 139 Less undistributed income of affiliates........................ (2) 137 Add fixed charges included in earnings: Interest expense.............................................. 4 Interest element of rentals................................... 14 18 Total earnings available for fixed charges....................... $ 155 FIXED CHARGES: Fixed charges included in earnings............................... $ 18 Capitalized interest............................................. 3 Total fixed charges........................................... $ 21 RATIO OF EARNINGS TO FIXED CHARGES (1).............................. 7.4 (1) In computing the ratio of earnings to fixed charges, earnings are defined as income from continuing operations before income taxes, adjusted for minority interest in income or loss of subsidiaries, undistributed earnings of affiliates, and fixed charges exclusive of capitalized interest. Fixed charges consist of interest on borrowings and that portion of rentals deemed representative of the interest factor. EX-27 6 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER 31, 1997 CONSOLIDATED BALANCE SHEET, CONSOLIDATED INCOME STATEMENT FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND NOTES TO THE FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 3-MOS SEP-30-1997 DEC-31-1997 183 0 1294 67 1616 3615 2246 0 7904 2130 157 0 0 216 4384 7904 1979 2004 1402 1865 0 0 4 139 50 89 0 0 0 89 0.43 0.43
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