-----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, IAWgyrYYBafu0fZivN8l99kULYDY1xt+5uiGZI6kr41C5rVSki4E9JB/axJX9d2i UK949tyr3wq68/4G1xP38A== 0000950123-01-504265.txt : 20010712 0000950123-01-504265.hdr.sgml : 20010712 ACCESSION NUMBER: 0000950123-01-504265 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20010711 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20010711 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW ROCKWELL COLLINS INC CENTRAL INDEX KEY: 0001137411 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-16445 FILM NUMBER: 1678891 BUSINESS ADDRESS: STREET 1: 400 COLLINS ROAD NE CITY: CEDAR RAPIDS STATE: IA ZIP: 52498 BUSINESS PHONE: 3192951000 8-K 1 y51136e8-k.txt ROCKWELL COLLINS, INC. 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): July 11, 2001 (June 29, 2001) ROCKWELL COLLINS, INC. (Exact name of registrant as specified in its charter) Delaware 1-16445 52-2314475 (State or other jurisdiction (Commission (IRS Employer Identification No.) of incorporation) File Number) 400 Collins Road NE, Cedar Rapids, Iowa 52498 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (319) 295-1000 ================================================================================ 2 INFORMATION TO BE INCLUDED IN THE REPORT Item 5. Other Events. On June 29, 2001, Rockwell International Corporation ("Rockwell"), then the sole shareowner of Rockwell Collins, Inc. ("Registrant"), distributed all of the outstanding shares of common stock, par value $.01 per share, of Registrant, including the preferred share purchase rights associated with such common stock (collectively, "Rockwell Collins Common Stock"), to the holders of shares of common stock, par value $1 per share, of Rockwell. Registrant began operations as an independent, separately traded, publicly-held company on June 30, 2001. The Distribution was made without the payment of any consideration or the exchange of any shares by Rockwell's shareowners. In the Distribution, Rockwell shareowners received one share of Rockwell Collins Common Stock for each share of Rockwell common stock held of record as of the close of business on June 15, 2001. Ownership of Rockwell Collins Common Stock was registered in book-entry form and each Rockwell shareowner will receive a stock distribution statement indicating the number of shares of Rockwell Collins Common Stock that has been credited to the shareowner. In connection with the Distribution, on June 29, 2001 Registrant, Rockwell and Rockwell Scientific Company LLC entered into a Distribution Agreement and an Employee Matters Agreement, which are filed herewith as Exhibits 2.1 and 2.2, respectively. In addition, Registrant and Rockwell entered into a Tax Allocation Agreement, which is filed herewith as Exhibit 2.3. As previously announced by Rockwell, Rockwell received a ruling from the Internal Revenue Service that the Distribution will be tax-free to Rockwell shareowners for United States federal income tax purposes. In connection with the Distribution, Rockwell Collins Common Stock was registered pursuant to Section 12(b) of the Securities Exchange Act of 1934, as amended. "When-issued" trading in Rockwell Collins Common Stock commenced on the New York Stock Exchange on June 15, 2001 under the trading symbol "COL WI". Rockwell Collins Common Stock began trading "regular way" on the New York Stock Exchange on July 2, 2001 under the trading symbol "COL". The Distribution is more fully described in Registrant's Information Statement dated June 14, 2001 (the "Information Statement"), which constitutes part of Registrant's Registration Statement on Form 10, as amended (File No. 1-16445). The Information Statement, which was mailed to Rockwell shareowners, also contains financial statements and other information regarding Registrant and its business. (Page 2 of 5 Pages) 3 Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (c) Exhibits. 2.1 Distribution Agreement dated as of June 29, 2001 by and among Rockwell International Corporation, Rockwell Collins, Inc. and Rockwell Scientific Company LLC. 2.2 Employee Matters Agreement dated as of June 29, 2001 by and among Rockwell International Corporation, Rockwell Collins, Inc. and Rockwell Scientific Company LLC. 2.3 Tax Allocation Agreement dated as of June 29, 2001 by and between Rockwell International Corporation and Rockwell Collins, Inc. 3.1 Restated Certificate of Incorporation of Rockwell Collins, Inc., filed as Exhibit 4.1 to Registrant's Registration Statement on Form S-8 (No. 333-63100), is incorporated herein by reference. 3.2 Amended By-Laws of Rockwell Collins, Inc., filed as Exhibit 4.2 to Registrant's Registration Statement on Form S-8 (No. 333-63100), is incorporated herein by reference. 4.1 Rights Agreement dated as of June 28, 2001 by and between Rockwell Collins, Inc. and Mellon Investor Services LLC, as Rights Agent. (Page 3 of 5 Pages) 4 SIGNATURE 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 COLLINS, INC. (Registrant) By: /s/ Lawrence A. Erickson ------------------------------- Lawrence A. Erickson Senior Vice President and Chief Financial Officer Dated: July 11, 2001 (Page 4 of 5 Pages) 5 EXHIBIT INDEX
Exhibit Description Sequentially Number ----------- Numbered Page ------ ------------- 2.1 Distribution Agreement dated as of June 29, 2001 by and among Rockwell International Corporation, Rockwell Collins, Inc. and Rockwell Scientific Company LLC. 2.2 Employee Matters Agreement dated as of June 29, 2001 by and among Rockwell International Corporation, Rockwell Collins, Inc. and Rockwell Scientific Company LLC. 2.3 Tax Allocation Agreement dated as of June 29, 2001 by and between Rockwell International Corporation and Rockwell Collins, Inc. 3.1 Restated Certificate of Incorporation of Rockwell Collins, Inc., filed as Exhibit 4.1 to Registrant's Registration Statement on Form S-8 (No. 333-63100), is incorporated herein by reference. 3.2 Amended By-Laws of Rockwell Collins, Inc., filed as Exhibit 4.2 to Registrant's Registration Statement on Form S-8 (No. 333-63100), is incorporated herein by reference. 4.1 Rights Agreement dated as of June 28, 2001 by and between Rockwell Collins, Inc. and Mellon Investor Services LLC, as Rights Agent.
(Page 5 of 5 Pages) EX-2.1 2 y51136ex2-1.txt DISTRIBUTION AGREEMENT 1 Exhibit 2.1 DISTRIBUTION AGREEMENT by and among ROCKWELL INTERNATIONAL CORPORATION, ROCKWELL COLLINS, INC. and ROCKWELL SCIENTIFIC COMPANY LLC June 29, 2001 2 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS.......................................................................... 1 SECTION 1.01 General.............................................................................. 1 ARTICLE II THE DISTRIBUTION..................................................................... 35 SECTION 2.01 The Distribution..................................................................... 35 SECTION 2.02 Cooperation Prior to the Distribution................................................ 35 SECTION 2.03 Rockwell Board Action; Conditions to the Distribution................................ 36 SECTION 2.04 Waiver of Conditions................................................................. 37 SECTION 2.05 Disclosure........................................................................... 37 ARTICLE III TRANSACTIONS RELATING TO THE DISTRIBUTION............................................ 37 SECTION 3.01 Intercorporate Reorganization........................................................ 37 SECTION 3.02 Financial Instruments................................................................ 40 SECTION 3.03 Shared Agreements.................................................................... 41 SECTION 3.04 Intercompany Accounts and Arrangements............................................... 42 SECTION 3.05 Cash Management...................................................................... 44 SECTION 3.06 The Rockwell Collins Board and the Rockwell Science Center Board..................... 46 SECTION 3.07 Resignations; Transfer of Stock Held as Nominee...................................... 47 SECTION 3.08 Rockwell Collins Certificate of Incorporation and By-Laws; Rights Plan............... 48 SECTION 3.09 Insurance............................................................................ 48 SECTION 3.10 Use of Names, Trademarks, etc........................................................ 52 SECTION 3.11 Consents............................................................................. 58 SECTION 3.12 Intellectual Property................................................................ 59 SECTION 3.13 Software and Other License Agreements................................................ 66 SECTION 3.14 Charitable Entities.................................................................. 66 ARTICLE IV MUTUAL RELEASE; INDEMNIFICATION...................................................... 67 SECTION 4.01 Mutual Release....................................................................... 67 SECTION 4.02 Indemnification by Rockwell.......................................................... 67 SECTION 4.03 Indemnification by Rockwell Collins.................................................. 68 SECTION 4.04 Indemnification by Rockwell Science Center........................................... 69 SECTION 4.05 Limitations on Indemnification Obligations........................................... 69 SECTION 4.06 Procedures Relating to Indemnification............................................... 70 SECTION 4.07 Remedies Cumulative.................................................................. 72 SECTION 4.08 Survival of Indemnities.............................................................. 72 SECTION 4.09 Exclusivity of Tax Allocation Agreement and Science Center Tax Allocation Agreement.. 72
i 3
Page ---- ARTICLE V ACCESS TO INFORMATION................................................................ 73 SECTION 5.01 Access to Information................................................................ 73 SECTION 5.02 Production of Witnesses.............................................................. 75 SECTION 5.03 Retention of Records................................................................. 75 SECTION 5.04 Confidentiality...................................................................... 76 ARTICLE VI MISCELLANEOUS........................................................................ 76 SECTION 6.01 Entire Agreement; Construction....................................................... 76 SECTION 6.02 Survival of Agreements............................................................... 77 SECTION 6.03 Expenses............................................................................. 77 SECTION 6.04 Governing Law........................................................................ 78 SECTION 6.05 Notices.............................................................................. 78 SECTION 6.06 Dispute Resolution................................................................... 80 SECTION 6.07 Consent to Jurisdiction.............................................................. 80 SECTION 6.08 Amendments........................................................................... 81 SECTION 6.09 Assignment........................................................................... 81 SECTION 6.10 Captions; Currency................................................................... 81 SECTION 6.11 Severability......................................................................... 81 SECTION 6.12 Parties in Interest.................................................................. 81 SECTION 6.13 Schedules............................................................................ 81 SECTION 6.14 Termination.......................................................................... 81 SECTION 6.15 Waivers; Remedies.................................................................... 82 SECTION 6.16 Further Assurances................................................................... 82 SECTION 6.17 Counterparts......................................................................... 82 SECTION 6.18 Performance.......................................................................... 82 SECTION 6.19 Currency Calculations................................................................ 82 SECTION 6.20 Interpretation....................................................................... 82
ii 4 ANNEXES Annex A - Employee Matters Agreement Annex B - Tax Allocation Agreement SCHEDULES Schedule 1.01(a) - Rockwell Collins Amended By-Laws Schedule 1.01(b) - Rockwell Collins Restated Certificate of Incorporation Schedule 1.01(c) - Cypress Computer Servers Schedule 1.01(d) - Rockwell Automation Patents and Trademarks Schedule 1.01(e) - Rockwell Collins Securities Schedule 1.01(f) - Rockwell Automation Aircraft Schedule 1.01(g) - Former Businesses of Rockwell Automation Schedule 1.01(h) - Unrelated Former Businesses Schedule 1.01(i) - Rockwell Collins Aircraft Schedule 1.01(j) - Rockwell Collins Patents and Trademarks Schedule 1.01(k) - Rockwell Science Center Securities Schedule 1.01(l) - Former Businesses of Rockwell Collins Schedule 1.01(m) - Rockwell Collins Financial Instruments Schedule 1.01(n) - Rockwell Collins Litigation Schedule 1.01(o) - Rockwell Collins Non-U.S. Bank Accounts Schedule 1.01(p) - Rockwell Collins Subsidiaries Schedule 1.01(q) - Rockwell Collins U.S. Bank Accounts Schedule 1.01(r) - Rockwell Science Center Patents and Trademarks Schedule 1.01(s) - Rockwell Science Center Financial Instruments Schedule 1.01(t) - Rockwell Science Center Litigation Schedule 1.01(u) - Rockwell Science Center Non-U.S. Bank Accounts Schedule 1.01(v) - Rockwell Science Center Subsidiaries Schedule 1.01(w) - Rockwell Science Center U.S. Bank Accounts Schedule 1.01(x) - Rockwell Collins Credit Facilities Schedule 1.01(y) - Rockwell Science Center Credit Facilities Schedule 3.01(c) - Reorganization Transactions Schedule 3.04(a) - Continuing Intercompany Accounts Schedule 3.04(b)(ii) - Continuing Intercompany Agreements Schedule 3.06(b) - Rockwell Science Center Board Schedule 3.07 - Continuing Directors and Officers Schedule 3.14 - Rockwell Collins Charitable Commitments Schedule 4.02(b) - Certain Form 10 Sections
iii 5 DISTRIBUTION AGREEMENT DISTRIBUTION AGREEMENT (this "Agreement"), dated as of June 29, 2001, by and among (i) ROCKWELL INTERNATIONAL CORPORATION, a Delaware corporation ("Rockwell"), (ii) ROCKWELL COLLINS, INC., a Delaware corporation and, as of the date hereof, a wholly-owned subsidiary of Rockwell ("Rockwell Collins"), and (iii) ROCKWELL SCIENTIFIC COMPANY LLC, a Delaware limited liability company and, as of the date hereof, a wholly-owned subsidiary of Rockwell ("Rockwell Science Center"). WHEREAS, the Rockwell Board (as defined herein) has determined that it is appropriate and desirable to distribute all outstanding shares of Rockwell Collins Common Stock (as defined herein) on a pro rata basis to the holders of Rockwell Common Stock (as defined herein); and WHEREAS, Rockwell, Rockwell Collins and Rockwell Science Center have determined that it is appropriate and desirable to set forth the principal corporate transactions required to effect such distribution and certain other agreements that will govern certain matters relating to such distribution; NOW, THEREFORE, in consideration of the premises and of the respective agreements and covenants contained in this Agreement, the parties hereby agree as follows: ARTICLE I DEFINITIONS SECTION 1.01 General. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "ACTION" means, with respect to any Person, any actual or threatened or future action, suit, arbitration, inquiry, proceeding or investigation by or before any Governmental Entity or any claims or other legal matters that have been or may be asserted by or against, or otherwise affect, such Person. "ADMINISTRATIVE SERVICES" shall have the meaning ascribed thereto in Section 3.12(g)(i)(A). "ADMINISTRATIVE SERVICES SOFTWARE" shall have the meaning ascribed thereto in Section 3.12(g)(i)(B). 6 "AFFILIATE" means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person; provided, however, that for purposes of the Transaction Agreements, following the Time of Distribution no member of any Group shall be deemed to be an Affiliate of any member of any other Group. For purposes of the immediately preceding sentence, the term "control" (including, with correlative meanings, the terms "controlled by" and "under common control with"), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract or otherwise. "AGENCY LICENSING AGREEMENTS" means (a) the agency licensing agreement among Rockwell, Rockwell Science Center and ITL pursuant to which, among other things, ITL will act as exclusive agent for the Rockwell Automation Group in connection with the licensing of certain intellectual property to third parties in fields other than the Rockwell Automation Group's businesses and (b) the agency licensing agreement by and among Rockwell Collins, Rockwell Science Center and ITL pursuant to which, among other things, ITL will act as exclusive agent for the Rockwell Collins Group in connection with the licensing of certain intellectual property to third parties in fields other than the Rockwell Collins Group's businesses. "AGREEMENT" shall have the meaning ascribed thereto in the preamble. "ANCILLARY AGREEMENTS" means, collectively, the Employee Matters Agreement, the Tax Allocation Agreement, the Science Center Tax Allocation Agreement, the Continuing Services Agreements, the Rockwell Science Center Services Agreements, the Agency Licensing Agreements, the Transition Agreement and the Conveyance and Assumption Instruments. "ASSETS" means any and all assets, properties and rights, whether tangible or intangible, real, personal or mixed, fixed, contingent or otherwise, and wherever located (other than ownership interests in Subsidiaries), including the following: (a) real property (including land, plants, buildings and improvements) and real property interests (including leases); (b) machinery, equipment, tooling, vehicles, furniture and fixtures, leasehold improvements, repair parts, tools, plant, laboratory and office equipment and supplies, computer hardware and software, computer networking equipment, engineering and design equipment, test equipment and other tangible personal property, together with any rights or claims arising out of maintenance or service contracts relating thereto or the breach of any express or implied warranty by the manufacturers or sellers of any of such assets or any component part thereof; (c) inventories, including raw materials, work-in-process, materials, components, finished goods, parts, accessories and supplies; (d) bank accounts; 2 7 (e) cash, cash on hand, cash equivalents, funds, certificates of deposit, similar instruments and travelers checks; (f) accounts, loans and notes receivable (whether current or not current), performance and surety bonds and interests as beneficiary under letters of credit and other similar instruments and all proceeds thereof; (g) Securities; (h) swaps, collars, caps and other hedging arrangements of any kind; (i) financial, accounting, corporate, operating, design, manufacturing, test and other data and records (in each case, in whatever form or medium, including electronic media), including books, records, notes, sales and sales promotional material and data, advertising materials, credit information, cost and pricing information, customer and supplier lists, business plans, reference catalogs, payroll and personnel records and procedures, blue-prints, research and development files, data and laboratory books, sales order files, litigation files, minute books, stock ledgers, stock transfer records and other similar data and records; (j) Intellectual Property; (k) Contracts; (l) credits, prepaid expenses, deposits and retentions held by third parties; (m) claims, causes of action, choses in action, rights under express or implied warranties, guarantees and indemnities and similar rights, rights of recovery, rights of set-off, rights of subrogation and all other rights of any kind; (n) Licenses; and (o) goodwill and going concern value. "ASSIGNING PARTY" shall have the meaning ascribed thereto in Section 3.11. "AUTOMATION PRODUCTS" means (a) industrial automation products, systems and software, including controllers, electrical and electronic controls, I/O (input/output) systems, drives (including electronic drives for electric motors), sensors, power devices, packaged control products, operator interface devices, computer software and hardware products, gears, gear reducers, bearings, shaft supports, shaft hangers, shaft couplings, collars, clutches, sheaves, sprockets, pulleys, elevating and conveying machinery, power transmission machinery and components thereof, network monitoring products and motors and (b) training, installation, repair, maintenance, consulting, computer programming, designing, engineering, technical support and other services for use in the field of industrial automation. 3 8 "BNA" means Boeing North American, Inc., a Delaware corporation formerly named Rockwell International Corporation, and any successor thereto. "BOEING" means The Boeing Company, a Delaware corporation. "BOEING POST-CLOSING COVENANTS AGREEMENT" means the Post-Closing Covenants Agreement dated as of December 6, 1996 among Rockwell, Boeing, Boeing NA, Inc. and BNA, including all amendments thereto. "BOEING TRANSITION AGREEMENT" means the Transition Agreement dated as of December 6, 1996 by and among Rockwell, Boeing and BNA, including all amendments thereto. "BY-LAWS" means Rockwell Collins' amended by-laws substantially in the form attached hereto as Schedule 1.01(a). "CASH" means all cash, cash on hand, cash equivalents, funds, certificates of deposit and similar instruments held by Rockwell or any of its Subsidiaries and Affiliates (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) immediately prior to the Time of Distribution (it being understood that cash equivalents do not include intercompany cash management balances which will be eliminated as of the Time of Distribution pursuant to Section 3.04(a)). "CERTIFICATE OF INCORPORATION" means Rockwell Collins' restated certificate of incorporation substantially in the form attached hereto as Schedule 1.01(b). "CLAIMS ADMINISTRATION" means the processing of claims made under insurance policies, including the reporting of claims to the insurer, management and defense of claims, and providing for appropriate releases upon settlement of claims. "CLAIMS ADMINISTRATION CONTRACT" means the claims services agreement existing on the Distribution Date between Rockwell and Constitution State Service Company relating to the administration of self-insured general liability claims of Rockwell and its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), which agreement constitutes a Rockwell Collins Shared Agreement. "CLAIMS MADE POLICIES" shall have the meaning ascribed thereto in Section 3.09(b)(ii). "CODE" means the Internal Revenue Code of 1986, as amended, or any successor legislation. "COMMISSION" means the Securities and Exchange Commission. "CONEXANT" means Conexant Systems, Inc., a Delaware corporation, and any successor thereto. 4 9 "CONEXANT DISTRIBUTION AGREEMENT" means the Distribution Agreement dated as of December 31, 1998 by and between Rockwell and Conexant, including all amendments thereto. "CONEXANT TRANSITION AGREEMENT" means the Transition Agreement dated as of December 31, 1998 by and between Rockwell and Conexant, including all amendments thereto. "CONSENTS" means consents, approvals, waivers, clearances, exemptions, allowances, novations, authorizations, filings, registrations and notifications. "CONTINUING SERVICES AGREEMENTS" means (a) the continuing services agreement between Rockwell Collins and Rockwell entered into on or prior to the Distribution Date pursuant to which, among other things, Rockwell Collins will provide Rockwell with payroll and employee benefits administration services and (b) the continuing services agreement between Rockwell Collins and Rockwell Science Center entered into on or prior to the Distribution Date pursuant to which, among other things, Rockwell Collins will provide Rockwell Science Center with payroll and employee benefits administration services. "CONTRACTS" means all agreements, real estate and other leases, contracts, memoranda of understanding, letters of intent, sales orders, purchase orders, open bids and other commitments, including in each case, all amendments, modifications and supplements thereto and waivers and consents thereunder. "CONVEYANCE AND ASSUMPTION INSTRUMENTS" means, collectively, the various agreements, deeds, bills of sale, stock powers, certificates of title, instruments of conveyance and assignment, instruments of assumption and other instruments and documents to be entered into to effect the transfer of Assets and Subsidiaries and the assumption of Liabilities contemplated by the transactions described in Sections 3.01(b) and 3.01(c). "COSTA MESA OFFICE LEASE" means the lease agreement dated December 20, 1996 between Rockwell and 600 Anton Boulevard Associates under which office space located at 600 Anton Boulevard, Costa Mesa, California is leased to Rockwell. "CURRENT EXCESS WORKERS' COMPENSATION POLICY" means the excess workers' compensation liability insurance policy with National Union Insurance Company of Pittsburgh, Inc., a subsidiary of American International Group, as insurer, covering Rockwell and its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), the coverage under which commenced on October 1, 2000 and terminates on September 30, 2003. "CYPRESS ASSETS" means (i) Rockwell's Corporate Shared Services Center located at 5836 Corporate Avenue, Cypress, California, the lease agreement dated July 17, 1991 between Rockwell and IRP Muller Associates related thereto and all leasehold improvements, equipment and other tangible assets (including Rockwell's global employment management systems (GEMS) software, pension recordkeeping integrated solutions management (PRISM) software 5 10 and subsystems related to such software) located thereat and (ii) the computer servers set forth on Schedule 1.01(c). "DISPUTE" shall have the meaning ascribed thereto in Section 6.06. "DISTRIBUTION" means the distribution, on the basis provided for in Section 2.01, to holders of Rockwell Common Stock of the shares of Rockwell Collins Common Stock owned by Rockwell on the Distribution Date. "DISTRIBUTION AGENT" means the distribution agent selected by Rockwell to distribute Rockwell Collins Common Stock in connection with the Distribution. "DISTRIBUTION DATE" means the date determined by the Rockwell Board as the date as of which the Distribution will be effected. "DIVESTED BUSINESS EMPLOYEE" shall have the meaning ascribed thereto in the Employee Matters Agreement. "EMPLOYEE MATTERS AGREEMENT" means the Employee Matters Agreement by and among Rockwell, Rockwell Collins and Rockwell Science Center, substantially in the form attached hereto as Annex A. "EXCESS CP BORROWING AMOUNT" means the amount, if any, received by Rockwell Collins through the issuance of Rockwell Collins commercial paper on the day prior to the Distribution Date and/or on the Distribution Date in excess of an aggregate amount of $300 million, to the extent such excess amount is on deposit in the Rockwell Collins U.S. Bank Accounts (other than the Rockwell Collins Pension Trust Bank Accounts) at the Time of Distribution. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "FORM 10" means the registration statement on Form 10 filed by Rockwell Collins with the Commission to effect the registration of the Rockwell Collins Common Stock pursuant to the Exchange Act, including all amendments thereto filed by Rockwell Collins with the Commission prior to the Time of Distribution. "FORMER BUSINESS" means any corporation, partnership, entity, division, business unit, business, assets, plants, product line, operations or contract (including any assets and liabilities comprising the same) that has been sold, conveyed, assigned, transferred or otherwise disposed of or divested (in whole or in part) by any member of the Pre-Distribution Group or the operations, activities or production of which has been discontinued, abandoned, completed or otherwise terminated (in whole or in part) by any member of the Pre-Distribution Group. "FORMER ROCKWELL CORPORATE EMPLOYEE" shall have the meaning ascribed thereto in the Employee Matters Agreement. 6 11 "GOVERNMENTAL ENTITY" means any government or any court, arbitral tribunal, administrative agency or commission or other governmental or regulatory authority or agency, federal, state, local, domestic, foreign or international. "GROUP" means the Rockwell Automation Group, the Rockwell Collins Group or the Rockwell Science Center Group, as applicable. "INDEMNIFIABLE LOSSES" means any and all losses, Liabilities, claims, damages, deficiencies, obligations, fines, payments, Taxes, Liens, costs and expenses, matured or unmatured, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, known or unknown, whenever arising and whether or not resulting from Third Party Claims (including the costs and expenses of any and all Actions; all amounts paid in connection with any demands, assessments, judgments, settlements and compromises relating thereto; interest and penalties with respect thereto; out-of-pocket expenses and reasonable attorneys', accountants' and other experts' fees and expenses reasonably incurred in investigating, preparing for or defending against any such Actions or in asserting, preserving or enforcing an Indemnitee's rights hereunder; and any losses that may result from the granting of injunctive relief as a result of any such Actions). "INDEMNIFYING PARTY" shall have the meaning ascribed thereto in Section 4.05(a). "INDEMNITEE" means any of the Rockwell Automation Indemnitees, the Rockwell Collins Indemnitees or the Rockwell Science Center Indemnitees who or which is entitled to seek indemnification under this Agreement. "INDEMNITY REDUCTION AMOUNTS" shall have the meaning ascribed thereto in Section 4.05(a). "INFORMATION" means all records, books, contracts, instruments, computer data and other data and information (in each case, in whatever form or medium, including electronic media). "INFORMATION STATEMENT" means the information statement with respect to Rockwell Collins sent to the holders of Rockwell Common Stock in connection with the Distribution. "INSURANCE PROCEEDS" means monies (a) received by an insured from an insurer, (b) paid by an insurer on behalf of an insured or (c) received from any third party in the nature of insurance, contribution or indemnification in respect of any Liability. "INTELLECTUAL PROPERTY" means (a) inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents (including utility and design patents, industrial designs and utility models), patent applications, patent and invention disclosures and all other rights of inventorship, worldwide, together with all reissuances, continuations, continuations-in-part, divisions, revisions, supplementary protection certificates, extensions and re-examinations thereof; (b) trademarks, service marks, trade names, trade dress, logos, domain names, business and product names and slogans and any and every 7 12 other form of trade identity and all registrations and applications for registration thereof, worldwide; (c) copyrights in copyrightable works and all other rights of authorship, worldwide, and all applications (including the right to file applications), registrations and renewals in connection therewith; (d) mask works and semiconductor chip rights, worldwide, and all applications (including the right to file applications), registrations and renewals in connection therewith; (e) trade secrets and confidential business and technical information (including ideas, research and development, know-how, formulas, technology, compositions, manufacturing and production processes and techniques, technical data, engineering, production and other designs, drawings, engineering notebooks, industrial models, software and specifications and any other information meeting the definition of a trade secret under the Uniform Trade Secrets Act); (f) computer and electronic data processing programs and software, both source code and object code (including data and related documentation, flow charts, diagrams, descriptive texts and programs, computer print-outs, underlying tapes, computer databases and similar items), computer applications and operating programs; (g) rights to sue for and remedies against past, present and future infringements of any or all of the foregoing and rights of priority and protection of interests therein under the laws of any jurisdiction worldwide; (h) all copies and tangible embodiments of any or all of the foregoing (in whatever form or medium, including electronic media); (i) all other proprietary and intellectual property rights and interests; and (j) all other rights relating to any or all of the foregoing. "IRS" means the Internal Revenue Service. "ITL" means Innovative Technology Licensing, LLC, a Delaware limited liability company and a wholly owned subsidiary of Rockwell Science Center. "LIABILITIES" means any and all claims, debts, liabilities, commitments and obligations of whatever nature, whether fixed, contingent or absolute, matured or unmatured, liquidated or unliquidated, accrued or not accrued, known or unknown, due or to become due, whenever or however arising and whether or not the same would be required by generally accepted accounting principles to be reflected as a liability in financial statements or disclosed in the notes thereto, including all costs and expenses relating thereto and those claims, debts, liabilities, commitments and obligations: (a) based upon, arising out of or relating to any law, rule, regulation, order or consent decree of any Governmental Entity or any noncompliance therewith or breach or violation of any thereof; (b) in respect of accounts payable; (c) in respect of outstanding checks; (d) based upon, arising out of or relating to workers' compensation, automobile liability, general liability, product liability, intellectual property liability and other claims and matters (whether direct or for indemnification of any Person or otherwise, and whether insured or uninsured); 8 13 (e) based upon, arising out of or relating to Actions or any award of any arbitrator of any kind; (f) in respect of salary, bonuses, incentive payments, severance payments and other compensation payments and all Taxes and withholdings related thereto; (g) in respect of employee welfare and fringe benefits; (h) based upon, arising out of or relating to environmental matters (including all removal, remediation and cleanup costs, investigatory costs, governmental response costs, natural resources damages, property damages, personal injury damages and all other costs and damages); (i) based upon, arising out of or relating to Contracts; (j) based upon, arising out of or relating to any tort (whether based on negligence, strict liability or otherwise) or infringement; and (k) in respect of products and services, including warranty liabilities, deferred revenues, product liability claims and liabilities in respect of the return, repair or replacement of products. "LICENSES" means licenses, permits, authorizations, consents, certificates, registrations, variances, franchises and other approvals from any Governmental Entity, including those relating to environmental matters. "LIEN" means any lien, security interest, pledge, mortgage, charge, restriction, claim, retention of title agreement or other encumbrance of whatever nature. "LOS ANGELES OFFICE LEASE" means the lease agreement dated April 15, 1994 between Rockwell and Center West under which office space located at 10877 Wilshire Boulevard, Los Angeles, California is leased for the benefit of Robert Anderson. "MERITOR" means ArvinMeritor, Inc., an Indiana corporation, successor by merger to Meritor Automotive, Inc., a Delaware corporation, and any successor thereto. "MERITOR DISTRIBUTION AGREEMENT" means the Distribution Agreement dated as of September 30, 1997 by and between Rockwell and Meritor, including all amendments thereto. "MERITOR TRANSITION AGREEMENT" means the Transition Agreement dated as of September 30, 1997 by and between Rockwell and Meritor, including all amendments thereto. "METLIFE TRUST" means (a) the MetLife Demutualization Grantor Trust established by Rockwell in 2000 in connection with the demutualization of the Metropolitan Life Insurance Company and (b) all funds contained therein and rights related thereto. 9 14 "MILWAUKEE OFFICE LEASE" means the lease agreement dated March 5, 1999 between Rockwell and Firstar Bank N.A. under which office space located at 777 E. Wisconsin Avenue, Milwaukee, Wisconsin is leased to Rockwell. "NYSE" means the New York Stock Exchange, Inc. "OCCURRENCE BASIS POLICIES" shall have the meaning ascribed thereto in Section 3.09(b)(i). "ORDINARY COURSE INTERCOMPANY ARRANGEMENTS" shall have the meaning ascribed thereto in Section 3.04(b)(ii). "PERSON" means any individual, partnership, joint venture, corporation, limited liability entity, trust, unincorporated organization or other entity (including a Governmental Entity). "PITTSBURGH OFFICE LEASE" means the lease agreement dated December 28, 1989 between Rockwell and Lincoln Liberty Avenue, Ltd. under which office space located at 625 Liberty Avenue, Pittsburgh, Pennsylvania is leased to Rockwell. "POLICIES" means all insurance policies, insurance contracts and claim administration contracts of any kind of the Pre-Distribution Group which were or are in effect at any time at or prior to the Time of Distribution (other than insurance policies, insurance contracts and claim administration contracts established in contemplation of the Distribution to cover only members of the Rockwell Collins Group or members of the Rockwell Science Center Group from and after the Time of Distribution), including primary, excess and umbrella, commercial general liability, fiduciary liability, product liability, automobile, aircraft, property and casualty, business interruption, directors' and officers' liability, employment practices liability, workers' compensation, crime, errors and omissions, special accident, cargo and employee dishonesty insurance policies and captive insurance company arrangements, together with all rights, benefits and privileges thereunder. "PRE-DISTRIBUTION GROUP" means (a) each of Rockwell, the Subsidiaries of Rockwell existing immediately prior to the Time of Distribution (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) and the former Subsidiaries of Rockwell, (b) each of the predecessors of each of the foregoing (including BNA) and (c) each of the present and former Subsidiaries and other Affiliates of each of the foregoing, and their predecessors. Notwithstanding the foregoing, BNA and Persons who are Affiliates of BNA after December 6, 1996 will not constitute members of the Pre-Distribution Group after December 6, 1996. "PRESCRIPTION CENTER ASSETS" means Rockwell's prescription center located at 298 Blairs Ferry Road, N.E., Cedar Rapids, Iowa, the lease agreement dated April 1997 between Rockwell Collins and Lawrence R. Kelly and Dorothy A. Kelly related thereto and all leasehold improvements, equipment and other tangible assets located thereat. 10 15 "PRIVILEGED INFORMATION" means, with respect to any Group, Information regarding a member of such Group, or any of its operations, employees, Assets or Liabilities (whether in documents or stored in any other form or known to its employees or agents) that is or may be protected from disclosure pursuant to the attorney-client privilege, the work product doctrine or other applicable privileges, that a member of any other Group may come into possession of or obtain access to pursuant to this Agreement or otherwise. "RECIPIENT PARTY" shall have the meaning ascribed thereto in Section 3.11. "RECORD DATE" means the close of business on the date determined by the Rockwell Board as the record date for the Distribution. "RECORDED AMOUNT" means, with respect to cash in U.S. and non-U.S. bank accounts, the amount on deposit in such bank accounts, as reflected on bank account statements in respect of such bank accounts, as of the Time of Distribution. The parties acknowledge that the Recorded Amount with respect to any bank account will not have deducted therefrom the amount of outstanding checks issued on such account. "REPRESENTATIVE" means, with respect to any Person, any of such Person's directors, officers, employees, agents, consultants, advisors, accountants, attorneys and representatives. "RIGHTS" means the Rights to be issued pursuant to the Rights Plan. "RIGHTS PLAN" means the rights agreement entered into on or prior to the Distribution Date between Rockwell Collins and Mellon Investor Services LLC, as rights agent, substantially in the form filed as an exhibit to the Form 10. "ROCKWELL" shall have the meaning ascribed thereto in the preamble. "ROCKWELL AUTOMATION ASSETS" means the following: (a) all rights of any member of the Rockwell Automation Group under any Transaction Agreement to which it is or becomes a party; (b) all Assets which are expressly allocated to any member of the Rockwell Automation Group pursuant to the Employee Matters Agreement, the Tax Allocation Agreement, the Science Center Tax Allocation Agreement or the Transition Agreement; (c) all Assets (other than those described in paragraphs (b) and (d) of the definition of "Rockwell Collins Assets" and paragraphs (b) and (d) of the definition of "Rockwell Science Center Assets") which immediately prior to the Time of Distribution are owned by Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) and which are used primarily in or relate primarily to the Rockwell Automation Business, as the same shall exist as of such time; 11 16 (d) the following specifically enumerated Assets which immediately prior to the Time of Distribution are owned by Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), in each case whether or not such Assets are used primarily in or relate primarily to the Rockwell Automation Business, the Rockwell Collins Business or the Rockwell Science Center Business: (i) all (A) Rockwell Automation Retained Accounts, and (B) Cash, including all cash contained in the Rockwell Automation Retained Accounts, the Rockwell Collins U.S. Bank Accounts, the Rockwell Collins Non-U.S. Bank Accounts, the Rockwell Science Center U.S. Bank Accounts and the Rockwell Science Center Non-U.S. Bank Accounts, but not including cash described in paragraphs (d)(vi), (d)(viii), (d)(ix), (d)(xi) and (d)(xii) of the definition of "Rockwell Collins Assets" and paragraphs (d)(ii) and (d)(v) of the definition of "Rockwell Science Center Assets"; (ii) all Securities, other than Rockwell Collins Securities and Rockwell Science Center Securities; (iii) all Policies (including Shared Policies) and all rights, benefits and privileges thereunder and related thereto (including the right to receive any and all return premiums with respect thereto), other than (A) the right to assert claims under Shared Policies to the extent described in Section 3.09(b), (B) the right to assert claims under the Current Excess Workers' Compensation Policy to the extent described in Section 3.09(c) and (C) rights in respect of the Claims Administration Contract to the extent described in Section 3.09(e); (iv) other than as provided for in Section 3.10, all rights in, and to the use of, the names, trademarks, trade names, domain names and service marks "Rockwell", "Rockwell International", "Rockwell Automation", "Rockwell Collins", "Rockwell Science Center" and "Rockwell Scientific Company" and all corporate symbols and logos related thereto and all names, trademarks, trade names, domain names and service marks which include the words "Rockwell" or "Rockwell International"; (v) the Rockwell VEBA; (vi) the Rockwell Good Government Committee; (vii) the patents, patent applications, invention disclosures and registered trademarks set forth on Schedule 1.01(d); (viii) 50% of Rockwell's ownership interest in Rockwell Science Center; (ix) all interests in charitable trusts (including the Rockwell Charitable Trust and the Rockwell Canadian Charitable Trust) and assets thereof, subject to the provisions of Section 3.14; 12 17 (x) 32% of all assets of the MetLife Trust; (xi) the Rockwell Property Trust; (xii) the Rockwell Insurance Escrow Account; (xiii) the aircraft set forth on Schedule 1.01(f); (xiv) the Milwaukee Office Lease and all leasehold improvements, equipment and other assets located at or related to the office facility leased thereunder; (xv) the Costa Mesa Office Lease and all leasehold improvements, equipment and other assets located at or related to the office facility leased thereunder; (xvi) the Pittsburgh Office Lease and all leasehold improvements, equipment and other assets located at or related to the office facility leased thereunder; (xvii) all Assets based upon, arising out of or relating to the RAN Contract; (xviii) all Assets based upon, arising out of or relating to the operations of (A) the Santa Susana Field Laboratory operated by Rockwell's former Rocketdyne Division, (B) the Rocky Flats plant, Golden, Colorado and (C) the Hanford Nuclear Reservation, Hanford, Washington; (xix) all rights to receive payments for services rendered prior to the Time of Distribution under the Boeing Transition Agreement (other than pursuant to Section 2 of the Boeing Transition Agreement), the Meritor Transition Agreement and the Conexant Transition Agreement (other than pursuant to Section 2 or 9 of the Conexant Transition Agreement); (xx) all rights in U.S. Patent #4,368,098 entitled "Epitaxial Composite and Method of Making", all license agreements and royalties with respect to the licensing thereof and all rights to sue and recover for and remedies against past, present and future infringements thereof (including all rights in respect of the Action Rockwell International Corporation v. United States and SDL, Inc., Civ. No. 93-542 C, U.S. Court of Federal Claims); (xxi) all Assets relating to country club memberships of Former Rockwell Corporate Employees; (xxii) all Rockwell Science Center Shared Agreements that relate to the Rockwell Automation Business and rights, benefits and privileges thereunder and all Rockwell Collins Shared Agreements and rights, benefits and privileges 13 18 thereunder, except that, with respect to Shared Agreements relating to Unrelated Former Businesses, Rockwell Collins will have the rights described in paragraph (c)(i) of the definition of "Rockwell Collins Assets" and Rockwell Science Center will have the rights described in paragraph (c)(i) of the definition of "Rockwell Science Center Assets"; and (xxiii) all rights in respect of Unrelated Former Businesses, other than (A) rights expressly allocated to Rockwell Collins pursuant to the Transaction Agreements in respect of Unrelated Former Businesses and current and former employees thereof, which shall constitute Rockwell Collins Assets, (B) rights described in paragraphs (c)(i) and (d) of the definition of "Rockwell Collins Assets", which shall constitute Rockwell Collins Assets and (C) rights described in paragraphs (c)(i) and (d) of the definition of "Rockwell Science Center Assets", which shall constitute Rockwell Science Center Assets; (e) all other Assets which immediately prior to the Time of Distribution are owned by Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) that are not Rockwell Collins Assets or Rockwell Science Center Assets; and (f) all rights, choses in action, causes of action and claims of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) to the extent relating to any asset described in paragraphs (a) through (e) above. Anything contained herein to the contrary notwithstanding, assets described in paragraphs (b) and (d) of the definition of "Rockwell Collins Assets" and paragraphs (b) and (d) of the definition of "Rockwell Science Center Assets" will not be included in Rockwell Automation Assets. "ROCKWELL AUTOMATION BUSINESS" means: (a) the Automation business engaged in prior to the Time of Distribution by the Pre-Distribution Group of researching, developing, designing, engineering, manufacturing, building, selling, distributing, installing, modifying, repairing, servicing and supporting Automation Products (marketed under such names as Rockwell Automation, Allen-Bradley, Rockwell Software, Dodge, and Reliance Electric); (b) the Electronic Commerce business engaged in at all times prior to the Time of Distribution by the Pre-Distribution Group of researching, developing, designing, engineering, manufacturing, building, selling, distributing, installing, modifying, repairing, servicing and supporting electronic commerce products for call center systems and personalized electronic commerce applications, including automatic call distributors, computer telephony integration software, information collection, reporting, queuing and management systems, and call center systems and consulting services; 14 19 (c) Former Businesses related primarily to any of the foregoing, including Former Businesses listed on Schedule 1.01(g); and (d) activities of the Pre-Distribution Group related to the foregoing; provided, however, that, notwithstanding anything contained herein to the contrary, the Rockwell Automation Business shall not include (i) the Rockwell Science Center Business or (ii) the Unrelated Former Businesses set forth on Schedule 1.01(h). "ROCKWELL AUTOMATION EXPENSES" means: (a) the following out-of-pocket fees, costs and expenses of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), whether incurred and/or paid before, at or after the Time of Distribution: (i) all investment banking, legal and auditing fees and expenses incurred in connection with effecting the Distribution (other than (A) any such fees and expenses described in paragraphs (a) and (b) of the definition of "Rockwell Collins Expenses" or paragraph (a) of the definition of "Rockwell Science Center Expenses" and (B) any such fees and expenses incurred in connection with any dispute or modification after the Distribution Date with respect to the Transaction Agreements or the transactions contemplated thereby or any claim under Article IV); (ii) all fees and expenses of the Distribution Agent incurred in connection with effecting the Distribution; (iii) the initial listing fee payable to the NYSE for the initial listing of the Rockwell Collins Common Stock on the NYSE; and (iv) all out-of-pocket fees, costs and expenses relating to the Distribution to the extent the same relate to operations of the Rockwell Automation Business after the Time Distribution; and (b) all other out-of-pocket fees, costs and expenses of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) incurred through the Time of Distribution in connection with effecting the Distribution, the preparation, execution and delivery of the Transaction Agreements and the consummation of the Distribution which are not Rockwell Collins Expenses or Rockwell Science Center Expenses. "ROCKWELL AUTOMATION GROUP" means Rockwell and the Rockwell Subsidiaries. "ROCKWELL AUTOMATION INDEMNITEES" means each member of the Rockwell Automation Group, each of their respective Representatives and each of the heirs, executors, successors and permitted assigns of any of the foregoing. 15 20 "ROCKWELL AUTOMATION LIABILITIES" means the following: (a) all Liabilities of any member of the Rockwell Automation Group under any Transaction Agreement to which it is or becomes a party; (b) all Liabilities for which any member of the Rockwell Automation Group is expressly made responsible pursuant to the Employee Matters Agreement, the Tax Allocation Agreement, the Science Center Tax Allocation Agreement or the Transition Agreement; (c) all Liabilities (other than those described in paragraphs (b) and (d) of the definition of "Rockwell Collins Liabilities" and paragraphs (b) and (d) of the definition of "Rockwell Science Center Liabilities") of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) to the extent based upon, arising out of or relating to the Rockwell Automation Assets or the Rockwell Automation Business, including: (i) all Liabilities to the extent relating to the Rockwell Automation Business based upon, arising out of or relating to Contracts (whether or not such Contracts constitute Rockwell Automation Assets) (including any primary, secondary, contingent or other obligations, such as under guaranties or indemnities, in respect of Contracts), including Liabilities arising out of any breaches or violations and Liabilities to make payments or otherwise in connection with the termination thereof as a result of the transactions contemplated hereby or otherwise and including Liabilities in respect of Shared Agreements; provided, however, that Rockwell Automation Liabilities shall not include Liabilities in respect of Rockwell Automation Assets to the extent they constitute (i) Rockwell Collins Liabilities described in paragraph (c) of the definition of "Rockwell Collins Liabilities" because they are based upon, arise out of or relate to the Rockwell Collins Business or (ii) Rockwell Science Center Liabilities described in paragraph (c) of the definition of "Rockwell Science Center Liabilities" because they are based upon, arise out of or relate to the Rockwell Science Center Business; (d) the following specifically enumerated Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), in each case whether or not such Liabilities relate to the Rockwell Automation Business, the Rockwell Automation Assets, the Rockwell Collins Business, the Rockwell Collins Assets, the Rockwell Science Center Business or the Rockwell Science Center Assets: (i) all Liabilities in respect of the RAN Contract; (ii) all (A) Liabilities in respect of asbestos-related claims of Former Rockwell Corporate Employees and Divested Business Employees in connection 16 21 with their employment by any member of the Pre-Distribution Group and (B) Liabilities in respect of tort claims by Former Rockwell Corporate Employees and Divested Business Employees in respect of the operations of the Rocky Flats plant, Golden, Colorado (other than, in the case of both clauses (A) and (B), Liabilities described in Section 6.01(d) of the Employee Matters Agreement or paragraph (d)(iii) of the definition of "Rockwell Collins Liabilities", which shall constitute Rockwell Collins Liabilities), in each case whether asserted prior to, on or after the Distribution Date; (iii) all (A) employee indemnification Liabilities in respect of the July 1994 explosion at the Santa Susana Field Laboratory operated by Rockwell's former Rocketdyne Division (other than Liabilities described in Section 6.01(d) of the Employee Matters Agreement or paragraph (d)(iii) of the definition of "Rockwell Collins Liabilities", which shall constitute Rockwell Collins Liabilities) and (B) all other Liabilities in respect of the operations of the Santa Susana Field Laboratory operated by Rockwell's former Rocketdyne Division (other than, in the case of this clause (B) only, Liabilities described in paragraphs (d)(ii) and (iii) of the definition of "Rockwell Collins Liabilities" and Liabilities allocated to Rockwell Collins under the Employee Matters Agreement, which shall constitute Rockwell Collins Liabilities); (iv) all (A) Liabilities not described in paragraph (d)(ii)(B) of this definition in respect of the operations of the Rocky Flats plant, Golden, Colorado (including in respect of the pending Action brought against Rockwell by James Stone relating to alleged violations of the False Claims Act) and (B) Liabilities in respect of the operations of the Hanford Nuclear Reservation, Hanford, Washington (other than, in the case of both clauses (A) and (B), Liabilities described in paragraphs (d)(ii) and (iii) of the definition of "Rockwell Collins Liabilities" and Liabilities allocated to Rockwell Collins under the Employee Matters Agreement, which shall constitute Rockwell Collins Liabilities); (v) all Liabilities in respect of the Milwaukee Office Lease (other than Liabilities described in paragraphs (d)(ii) and (iii) of the definition of "Rockwell Collins Liabilities" and Liabilities allocated to Rockwell Collins under the Employee Matters Agreement, which shall constitute Rockwell Collins Liabilities); (vi) all Liabilities in respect of the Costa Mesa Office Lease (other than Liabilities described in paragraphs (d)(ii) and (iii) of the definition of "Rockwell Collins Liabilities" and Liabilities allocated to Rockwell Collins under the Employee Matters Agreement, which shall constitute Rockwell Collins Liabilities); (vii) all Liabilities in respect of the Pittsburgh Office Lease (other than Liabilities described in paragraphs (d)(ii) and (iii) of the definition of "Rockwell Collins Liabilities" and Liabilities allocated to Rockwell Collins under the 17 22 Employee Matters Agreement, which shall constitute Rockwell Collins Liabilities); (viii) all Liabilities based upon, arising out of or relating to the wind tunnel donated by Rockwell to the University of California, Los Angeles, in 1998; (ix) all Liabilities based upon, arising out of or relating to the Rockwell Debt, including all indebtedness outstanding thereunder and interest and fees payable with respect thereto; and (x) all Liabilities based upon, arising out of or relating to Unrelated Former Businesses, other than (A) Liabilities expressly allocated to Rockwell Collins pursuant to the Transaction Agreements in respect of Unrelated Former Businesses and current and former employees thereof, which shall constitute Rockwell Collins Liabilities, (B) Liabilities described in paragraphs (c)(ii) and (d) of the definition of "Rockwell Collins Liabilities", which shall constitute Rockwell Collins Liabilities, and (C) Liabilities described in paragraphs (c)(ii) and (d) of the definition of "Rockwell Science Center Liabilities", which shall constitute Rockwell Science Center Liabilities; and (e) all other Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) in respect of operations engaged in prior to the Time of Distribution that are not Rockwell Collins Liabilities or Rockwell Science Center Liabilities. Anything contained herein to the contrary notwithstanding, Liabilities described in paragraphs (b) and (d) of the definition of "Rockwell Collins Liabilities" and paragraphs (b) and (d) of the definition of "Rockwell Science Center Liabilities" will not be included in Rockwell Automation Liabilities. "ROCKWELL AUTOMATION LICENSE AGREEMENT" shall have the meaning ascribed thereto in Section 3.13. "ROCKWELL AUTOMATION RETAINED ACCOUNTS" means all bank accounts of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) immediately prior to the Time of Distribution, other than Rockwell Collins U.S. Bank Accounts, Rockwell Collins Non-U.S. Bank Accounts, Rockwell Science Center U.S. Bank Accounts and Rockwell Science Center Non-U.S. Bank Accounts. "ROCKWELL BOARD" means the Board of Directors of Rockwell or a duly authorized committee thereof. "ROCKWELL CANADIAN CHARITABLE TRUST" means the Rockwell International Canadian Trust. 18 23 "ROCKWELL CHARITABLE TRUST" means the Rockwell International Corporation Trust. "ROCKWELL CLIR FUND" means (a) the Rockwell Continued Life Insurance Reserve Fund and (b) all funds contained therein and rights related thereto. "ROCKWELL COLLINS" shall have the meaning ascribed thereto in the preamble. "ROCKWELL COLLINS ASSETS" means the following: (a) all rights of any member of the Rockwell Collins Group under any Transaction Agreement to which it is or becomes a party; (b) all Assets which are expressly allocated to any member of the Rockwell Collins Group pursuant to the Employee Matters Agreement, the Tax Allocation Agreement, the Science Center Tax Allocation Agreement or the Transition Agreement; (c) all Assets (other than those described in paragraphs (b) and (d) of the definition of "Rockwell Automation Assets" and paragraphs (b) and (d) of the definition of "Rockwell Science Center Assets") which immediately prior to the Time of Distribution are owned by Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) and which are used primarily in or relate primarily to the Rockwell Collins Business, as the same shall exist as of such time, including: (i) all rights in respect of Unrelated Former Businesses relating primarily to the operations of the Rockwell Collins Business which do not constitute a Rockwell Automation Asset (or a right related thereto) described in any of paragraphs (b) or (d)(i) - (xxi) of the definition of "Rockwell Automation Assets" or a Rockwell Science Center Asset (or a right related thereto) described in paragraphs (b) or (d) of the definition of "Rockwell Science Center Assets", including: (A) rights to receive payments for services provided under Section 9 of the Conexant Transition Agreement; (B) all rights to the extent relating primarily to the operations of the Rockwell Collins Business to receive indemnification from (x) BNA pursuant to the Boeing Post-Closing Covenants Agreement, (y) Meritor pursuant to the Meritor Distribution Agreement or (z) Conexant pursuant to the Conexant Distribution Agreement; and (C) all rights to the extent relating primarily to the operations of the Rockwell Collins Business under Section 20 of the Boeing Transition Agreement; 19 24 (d) the following specifically enumerated Assets which immediately prior to the Time of Distribution are owned by Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), in each case whether or not such Assets are used primarily in or relate primarily to the Rockwell Automation Business, the Rockwell Collins Business or the Rockwell Science Center Business: (i) 50% of Rockwell's ownership interest in Rockwell Science Center; (ii) the Cypress Assets; (iii) the Prescription Center Assets; (iv) the Los Angeles Office Lease and all leasehold improvements, equipment and other tangible assets located at the office facility leased thereunder; (v) the Washington Office Assets; (vi) the Rockwell CLIR Fund; (vii) the Rockwell Collins U.S. Bank Accounts, the Rockwell Collins Non-U.S. Bank Accounts and the Rockwell Collins Patent Escrow Account; (viii) (A) cash contained in Rockwell Collins U.S. Bank Accounts and Rockwell Collins Non-U.S. Bank Accounts (other than Rockwell Collins Pension Trust Bank Accounts) of up to an aggregate Recorded Amount equal to the Rockwell Collins Distribution Date Funding Amount; (B) all balances contained in petty cash accounts at non-U.S. locations of the Rockwell Collins Business; (C) the dollar value of travelers checks at non-U.S. locations of the Rockwell Collins Business; (D) all cash contained in the Rockwell Collins Patent Escrow Account; and (E) pension funds held by the Rockwell Group Trust as of the Time of Distribution after giving effect to the transfers contemplated by Sections 3.01(c)(ii) and (iii) of the Employee Matters Agreement (subject to Section 3.01(c) of the Employee Matters Agreement); (ix) 65% of all assets of the MetLife Trust; (x) the aircraft set forth on Schedule 1.01(i); (xi) the Rockwell Collins VEBA; (xii) the Rockwell Collins Good Government Committee; (xiii) the patents, patent applications, invention disclosures and registered trademarks set forth on Schedule 1.01(j); 20 25 (xiv) the Rockwell Collins Securities; and (xv) the Rockwell Collins Charitable Corporation; and (e) all rights, choses in action, causes of action and claims of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) to the extent relating to any asset described in paragraphs (a) through (d) above. Anything contained herein to the contrary notwithstanding, assets described in paragraphs (b) and (d) of the definition of "Rockwell Automation Assets" and paragraphs (b) and (d) of the definition of "Rockwell Science Center Assets" will not be included in Rockwell Collins Assets. "ROCKWELL COLLINS BOARD" means the Board of Directors of Rockwell Collins. "ROCKWELL COLLINS BUSINESS" means: (a) the Rockwell Collins business engaged in prior to the Time of Distribution by the Pre-Distribution Group of researching, developing, designing, engineering, manufacturing, building, selling, distributing, installing, modifying, repairing, servicing and supporting aviation electronics and airborne and mobile communications products and systems for commercial and military applications (marketed primarily under the name Rockwell Collins), including (i) flight deck electronic products and systems, including communications, navigation, display and automatic flight control systems, as well as in-flight entertainment and information management systems, and (ii) defense electronics products and systems, including communications, navigation and integrated systems, for airborne, ground and shipboard applications; (b) Former Businesses related primarily to any of the foregoing, including the Former Businesses listed on Schedule 1.01(l); and (c) activities of the Pre-Distribution Group related to the foregoing; provided, however, that, notwithstanding anything contained herein to the contrary, the Rockwell Collins Business shall not include (i) the Rockwell Science Center Business or (ii) the Unrelated Former Businesses set forth on Schedule 1.01(h). "ROCKWELL COLLINS CHANGE IN CONTROL" means any of the following events or circumstances: (a) any person (as that term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the beneficial owner (as that term is used in Section 13(d) of the Exchange Act, and the rules and regulations promulgated thereunder) of shares of Rockwell Collins entitled to cast more than 50% of the votes at the time entitled to be cast generally for the election of directors of Rockwell Collins; (b) more than 50% of the members of the Rockwell Collins Board shall not be Rockwell Collins Continuing Directors; or (c) Rockwell Collins shall be merged or consolidated with, or, in any transaction or series of transactions, substantially all of the business or assets of Rockwell Collins shall be sold to or otherwise acquired by, another corporation or entity and, as a result thereof, the shareowners of Rockwell Collins immediately prior thereto 21 26 shall not have at least 50% or more of the combined voting power of the surviving, resulting or transferee corporation or entity immediately thereafter. "ROCKWELL COLLINS CHARITABLE COMMITMENTS" means the commitments of the Rockwell Charitable Trust set forth on Schedule 3.14. "ROCKWELL COLLINS CHARITABLE CORPORATION" means the not-for-profit charitable corporation established by Rockwell Collins prior to the Time of Distribution. "ROCKWELL COLLINS COMMON STOCK" means, collectively, the Common Stock, par value $.01 per share, of Rockwell Collins and the related Rights. "ROCKWELL COLLINS CONTINUING DIRECTOR" means any member of the Rockwell Collins Board who either (i) is a member of the Rockwell Collins Board as of the Time of Distribution or (ii) is thereafter elected to the Rockwell Collins Board, or nominated for election by shareowners, by a vote of at least a majority of the directors who are Rockwell Collins Continuing Directors at the time of such vote; provided, that an individual who is so elected or nominated in connection with a merger, consolidation, acquisition or similar transaction (but excluding the Distribution) shall not be a Rockwell Collins Continuing Director unless such individual was a Rockwell Collins Continuing Director prior thereto. "ROCKWELL COLLINS CREDIT FACILITIES" means the credit facilities set forth on Schedule 1.01(x). "ROCKWELL COLLINS DISTRIBUTION DATE FUNDING AMOUNT" means the sum of (i) $20 million, plus (ii) the Excess CP Borrowing Amount (if any). "ROCKWELL COLLINS EXPENSES" means the following out-of-pocket fees, costs and expenses of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), in each case, whether incurred and/or paid before, at or after the Time of Distribution: (a) all out-of-pocket fees, costs, and expenses (including legal fees and expenses) of and related to the credit facilities established prior to the Time of Distribution for the benefit of Rockwell Collins and other members of the Rockwell Collins Group with The Chase Manhattan Bank, as agent; (b) all out-of-pocket fees, costs and expenses (including legal fees and expenses) of and related to the commercial paper program established prior to the Time of Distribution for the benefit of Rockwell Collins and other members of the Rockwell Collins Group; (c) all out-of-pocket fees, costs and expenses of the transfer agent and registrar for the Rockwell Collins Common Stock; 22 27 (d) all out-of-pocket fees, costs and expenses of executive search firms in connection with recruiting officers and directors of the Rockwell Collins Group to be in place at or after the Time of Distribution; (e) all out-of-pocket fees, costs and expenses of consultants in connection with establishing executive compensation plans for Rockwell Collins; (f) all fees and expenses required to be paid by Rockwell Collins pursuant to Section 3.01(c)(ix) of the Employee Matters Agreement; and (g) all other out-of-pocket fees, costs and expenses relating to the Distribution to the extent the same relate to operations of the Rockwell Collins Business after the Time of Distribution. "ROCKWELL COLLINS FINANCIAL INSTRUMENTS" means all credit facilities, guaranties, foreign currency forward exchange contracts, comfort letters, letters of credit and similar instruments related solely to the Rockwell Collins Business under which any member of the Rockwell Automation Group has any primary, secondary, contingent, joint, several or other Liability, including those set forth on Schedule 1.01(m). "ROCKWELL COLLINS GOOD GOVERNMENT COMMITTEE" means the Rockwell Collins Good Government Committee, a political action committee established for Rockwell Collins in contemplation of the Distribution, and all funds held thereby. "ROCKWELL COLLINS GROUP" means Rockwell Collins and the Rockwell Collins Subsidiaries. "ROCKWELL COLLINS INDEMNITEES" means each member of the Rockwell Collins Group, each of their respective Representatives and each of the heirs, executors, successors and permitted assigns of any of the foregoing. "ROCKWELL COLLINS LIABILITIES" means the following: (a) all Liabilities of any member of the Rockwell Collins Group under any Transaction Agreement to which it is or becomes a party; (b) all Liabilities for which any member of the Rockwell Collins Group is expressly made responsible pursuant to the Employee Matters Agreement, the Tax Allocation Agreement, the Science Center Tax Allocation Agreement or the Transition Agreement; (c) all Liabilities (other than those described in paragraphs (b) and (d) of the definition of "Rockwell Automation Liabilities" and paragraphs (b) and (d) of the definition of "Rockwell Science Center Liabilities") of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) to the extent based upon, arising out of or relating to the Rockwell Collins Assets or the Rockwell Collins Business, including: 23 28 (i) all Liabilities to the extent relating to the Rockwell Collins Business based upon, arising out of or relating to Contracts (whether or not such Contracts constitute Rockwell Collins Assets) (including any primary, secondary, contingent or other obligations, such as under guaranties or indemnities, in respect of Contracts), including Liabilities arising out of any breaches or violations and Liabilities to make payments or otherwise in connection with the termination thereof as a result of the transactions contemplated hereby or otherwise and including Liabilities in respect of Shared Agreements; and (ii) all Liabilities based upon, arising out of or relating to Unrelated Former Businesses to the extent relating to the operations of the Rockwell Collins Business which do not constitute a Rockwell Automation Liability described in any of paragraphs (b) or (d)(i) - (ix) of the definition of "Rockwell Automation Liabilities" or a Rockwell Science Center Liability described in paragraphs (b) or (d) of the definition of "Rockwell Science Center Liabilities", including (A) all performance and other Liabilities relating to the services required to be provided under Section 9 of the Conexant Transition Agreement; and (B) all Liabilities to the extent relating to the operations of the Rockwell Collins Business to indemnify (x) BNA and certain other Persons pursuant to the Boeing Post-Closing Covenants Agreement, (y) Meritor and certain other Persons pursuant to the Meritor Distribution Agreement or (z) Conexant and certain other Persons pursuant to the Conexant Distribution Agreement; provided, however, that Rockwell Collins Liabilities shall not include Liabilities in respect of Rockwell Collins Assets to the extent they constitute (i) Rockwell Automation Liabilities described in paragraph (c) of the definition of "Rockwell Automation Liabilities" because they are based upon, arise out of or relate to the Rockwell Automation Business or (ii) Rockwell Science Center Liabilities described in paragraph (c) of the definition of "Rockwell Science Center Liabilities" because they are based upon, arise out of or relate to the Rockwell Science Center Business; and (d) the following specifically enumerated Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), in each case whether or not such Liabilities relate to the Rockwell Automation Business, the Rockwell Automation Assets, the Rockwell Collins Business, the Rockwell Collins Assets, the Rockwell Science Center Business or the Rockwell Science Center Assets: (i) all Liabilities based upon, arising out of or relating to the Actions set forth on Schedule 1.01(n); (ii) except as provided in paragraphs (d)(ii) and (d)(iii)(A) of the definition of "Rockwell Automation Liabilities", all Liabilities based upon, arising out of or relating to the employment of Former Rockwell Corporate Employees and Divested Business Employees by any member of the Pre-Distribution Group, including all Liabilities based upon, arising out of or relating 24 29 to (A) claims of Former Rockwell Corporate Employees and Divested Business Employees in respect of their employment (or termination of employment) with any member of the Pre-Distribution Group, whether asserted prior to, on or after the Distribution Date; (B) relocation, severance, salary continuation and other amounts payable to Former Rockwell Corporate Employees and Divested Business Employees in connection with their employment (or termination of employment) with any member of the Pre-Distribution Group; (C) providing office, secretarial, telecommunications and other support services to Donald R. Beall from and after the Time of Distribution, including any monthly stipend paid to Mr. Beall for the payment of such services; (D) providing office, secretarial, telecommunications and other support services to Robert Anderson from and after the Time of Distribution, including all Liabilities in respect of the Los Angeles Office Lease (and any replacement thereof); and (E) the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended; (iii) all Liabilities based upon, arising out of or relating to workers' compensation claims of Rockwell Collins Participants (as defined in the Employee Matters Agreement), whether asserted prior to, on or after the Distribution Date; (iv) all Liabilities based upon, arising out of or relating to the Rockwell CLIR Fund; (v) all Liabilities based upon, arising out of or relating to the Cypress Assets or the operations thereof or the predecessor organizations of Rockwell's Cypress, California Corporate Shared Services Center organization or the operations thereof (it being understood that Liabilities in respect of Active Rockwell Automation Employees (as defined in the Employee Matters Agreement) engaged in payroll and benefits consolidation activities shall constitute Rockwell Automation Liabilities); (vi) all Liabilities based upon, arising out of or relating to the Prescription Center Assets or the operations thereof; (vii) all Liabilities based upon, arising out of or relating to the Washington Office Assets or the operations thereof; (viii) all Liabilities based upon, arising out of or relating to claims in respect of the demutualization of the Metropolitan Life Insurance Company; (ix) all Liabilities based upon, arising out of or relating to the Rockwell Collins VEBA; (x) all Liabilities based upon, arising out of or relating to the Rockwell Collins Good Government Committee; 25 30 (xi) all Liabilities based upon, arising out of or relating to the Rockwell Collins Credit Facilities, including all indebtedness outstanding thereunder and interest and fees payable with respect thereto; (xii) all Liabilities in respect of commitments of the Rockwell Collins Charitable Corporation to be assumed pursuant to Section 3.14; and (xiii) all Liabilities based upon, arising out of or relating to corporate office overhead claims filed by Rockwell with the U.S. Department of Defense prior to the Time of Distribution, including all Liabilities in respect of any adjustments thereto (other than any such Liabilities that would have been allocated to Rockwell Science Center in accordance with government contract cost allocation practices of Rockwell in effect immediately prior to the Time of Distribution, which shall constitute Rockwell Science Center Liabilities). Anything contained herein to the contrary notwithstanding, Liabilities described in paragraphs (b) and (d) of the definition of "Rockwell Automation Liabilities" and paragraphs (b) and (d) of the definition of "Rockwell Science Center Liabilities" will not be included in Rockwell Collins Liabilities. "ROCKWELL COLLINS MARKS" shall have the meaning ascribed thereto in Section 3.10(b)(i). "ROCKWELL COLLINS NON-U.S. BANK ACCOUNTS" means all bank accounts set forth on Schedule 1.01(o). "ROCKWELL COLLINS PATENT ESCROW ACCOUNT" means the escrow account in the name of Rockwell Collins established with the U.S. Patent Commission. "ROCKWELL COLLINS PENSION TRUST BANK ACCOUNTS" means bank accounts of the Rockwell Group Trust which contain only pension assets of the Rockwell Group Trust (which will be allocated pursuant to Section 3.01(c) of the Employee Matters Agreement). "ROCKWELL COLLINS SECURITIES" means the Securities set forth on Schedule 1.01(e). "ROCKWELL COLLINS SHARED AGREEMENTS" means all Contracts under which Rockwell or any Rockwell Subsidiary has any rights or primary, secondary, contingent, joint, several or other Liability arising out of or relating to both (i) the Rockwell Collins Business and (ii) one or more other businesses of Rockwell or any Rockwell Subsidiary (other than the Rockwell Science Center Business), which by their terms will be outstanding or in effect as of or at any time following the Time of Distribution; provided, however, that Rockwell Collins Shared Agreements shall not include any Contract for the purchase of goods or services assigned by any member of the Rockwell Automation Group to any member of the Rockwell Collins Group prior to the Time of Distribution and under which no member of the Rockwell Automation Group will make purchases after the Time of Distribution (it being understood that any such Contracts will constitute Rockwell Collins Assets). 26 31 "ROCKWELL COLLINS SUBSIDIARY" means each Person listed on Schedule 1.01(p). "ROCKWELL COLLINS U.S. BANK ACCOUNTS" means all bank accounts set forth on Schedule 1.01(q). "ROCKWELL COLLINS VEBA" means (a) the Rockwell VEBA Trust No. 4 (to be renamed the "Rockwell Collins Pre-Funded VEBA Trust") and (b) all funds contained therein and rights related thereto. "ROCKWELL COMMON STOCK" means the Common Stock, par value $1.00 per share, of Rockwell. "ROCKWELL DEBT" means all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) based upon, arising out of or relating to: (a) the 6.8% Notes of Reliance Electric Company due April 15, 2003; (b) the 6.15% Notes of Rockwell due January 15, 2008; (c) the 6.70% Debentures of Rockwell due January 15, 2028; (d) the 5.20% Debentures of Rockwell due January 15, 2098; (e) the Reliance Electric Company Athens-Clarke County Industrial Development Authority Revenue Bonds Series 1977; (f) the commercial paper borrowings of Rockwell; (g) the Amended and Restated Credit Agreement dated December 3, 1997 among Rockwell, the banks parties thereto and Morgan Guaranty Trust Company of New York, as agent, and any borrowings thereunder; and (h) all non-U.S. credit facilities of members of the Rockwell Automation Group that are not assigned to or assumed by a member of the Rockwell Collins Group or the Rockwell Science Center Group in connection with the Distribution. "ROCKWELL GOOD GOVERNMENT COMMITTEE" means the Rockwell International Corporation Good Government Committee, a political action committee (Federal Elections Commission I.D. No. C00324996), and all funds held thereby. "ROCKWELL GROUP TRUST" shall have the meaning ascribed thereto in the Employee Matters Agreement. "ROCKWELL INSURANCE ESCROW ACCOUNT" means (a) the escrow account established by Rockwell prior to the Time of Distribution with Travelers Insurance Company relating to the processing of the deductible portion of certain workers' compensation and 27 32 automobile liability losses and the self-insured retention portion of certain commercial general liability losses and (b) all funds contained therein and rights related thereto. "ROCKWELL PROPERTY TRUST" means (a) the Master Rockwell Property Exchange Trust established by Rockwell prior to the Time of Distribution to receive proceeds from the sale of certain real property and to disburse trust assets for the purpose of acquiring certain real property and (b) all funds contained therein and rights related thereto. "ROCKWELL SCIENCE CENTER" shall have the meaning ascribed thereto in the preamble. "ROCKWELL SCIENCE CENTER ASSETS" means the following: (a) all rights of any member of the Rockwell Science Center Group under any Transaction Agreement to which it is or becomes a party; (b) all Assets which are expressly allocated to any member of the Rockwell Science Center Group pursuant to the Employee Matters Agreement, the Tax Allocation Agreement, the Science Center Tax Allocation Agreement or the Transition Agreement; (c) all Assets (other than those described in paragraphs (b) and (d) of the definition of "Rockwell Automation Assets" and paragraphs (b) and (d) of the definition of "Rockwell Collins Assets") which immediately prior to the Time of Distribution are owned by Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) and which are used primarily in or relate primarily to the Rockwell Science Center Business, as the same shall exist as of such time, including: (i) all rights in respect of Unrelated Former Businesses relating primarily to the operations of the Rockwell Science Center Business and which do not constitute a Rockwell Automation Asset (or a right related thereto) described in any of paragraphs (b) or (d)(i) - (xxi) of the definition of "Rockwell Automation Assets" or a Rockwell Collins Asset (or a right related thereto) described in paragraphs (b) or (d) of the definition of "Rockwell Collins Assets", including: (A) rights to receive payments for services provided under Section 2 of the Boeing Transition Agreement and under Section 2 of the Conexant Transition Agreement; (B) all rights to the extent relating primarily to the operations of the Rockwell Science Center Business to receive indemnification from (x) BNA pursuant to the Boeing Post-Closing Covenants Agreement, (y) Meritor pursuant to the Meritor Distribution Agreement or (z) Conexant pursuant to the Conexant Distribution Agreement; and 28 33 (C) all rights to the extent relating primarily to the operations of the Rockwell Science Center Business under Section 20 of the Boeing Transition Agreement; (d) the following specifically enumerated Assets which immediately prior to the Time of Distribution are owned by Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), in each case whether or not such Assets are used primarily in or relate primarily to the Rockwell Automation Business, the Rockwell Collins Business or the Rockwell Science Center Business: (i) the Rockwell Science Center U.S. Bank Accounts, the Rockwell Science Center Non-U.S. Bank Accounts and the Rockwell Science Center Patent Escrow Account; (ii) (A) cash contained in Rockwell Science Center U.S. Bank Accounts and Rockwell Science Center Non-U.S. Bank Accounts (other than Rockwell Science Center Pension Trust Bank Accounts) of up to an aggregate Recorded Amount of $2 million; (B) all balances contained in petty cash accounts at non-U.S. locations of the Rockwell Science Center Business; (C) the dollar value of travelers checks at non-U.S. locations of the Rockwell Science Center Business; (D) all cash contained in the Rockwell Science Center Patent Escrow Account; and (E) pension funds held by the Rockwell Science Center Group Trust as of the Time of Distribution (subject to Section 3.01(c) of the Employee Matters Agreement); (iii) the Rockwell Science Center Securities; (iv) the patents, patent applications, invention disclosures and registered trademarks set forth on Schedule 1.01(r); and (v) 3% of all assets of the MetLife Trust; and (e) all rights, choses in action, causes of action and claims of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) to the extent relating to any asset described in paragraphs (a) through (d) above. Anything contained herein to the contrary notwithstanding, assets described in paragraphs (b) and (d) of the definition of "Rockwell Automation Assets" and paragraphs (b) and (d) of the definition of "Rockwell Collins Assets" will not be included in Rockwell Science Center Assets. "ROCKWELL SCIENCE CENTER BOARD" means the Board of Directors of Rockwell Science Center. 29 34 "ROCKWELL SCIENCE CENTER BUSINESS" means: (a) the business engaged in prior to the Time of Distribution by the Rockwell Science Center Group of researching, developing, designing, engineering, manufacturing, selling, licensing, servicing and supporting technologies in electronics, imaging and optics, material and computational sciences and information technologies; (b) Former Businesses related primarily to any of the foregoing; and (c) activities of the Rockwell Science Center Group related to the foregoing; provided, however, that, notwithstanding anything contained herein to the contrary, the Rockwell Science Center Business shall not include (i) the Rockwell Automation Business, (ii) the Rockwell Collins Business or (iii) the Unrelated Former Businesses set forth on Schedule 1.01(h). "ROCKWELL SCIENCE CENTER CREDIT FACILITIES" means the credit facilities set forth on Schedule 1.01(y). "ROCKWELL SCIENCE CENTER EXPENSES" means the following out-of-pocket fees, costs and expenses of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) (in each case, whether incurred and/or paid before, at or after the Time of Distribution): (a) all out-of-pocket fees, costs and expenses (including legal fees and expenses) of and related to the credit facility established prior to or after the Time of Distribution for the benefit of Rockwell Science Center and other members of the Rockwell Science Center Group with Bank of America, N.A.; and (b) all other out-of-pocket fees, costs and expenses related to the Distribution to the extent the same relate to operations of the Rockwell Science Center Business after the Time of Distribution. "ROCKWELL SCIENCE CENTER FINANCIAL INSTRUMENTS" means all credit facilities, guaranties, foreign currency forward exchange contracts, comfort letters, letters of credit and similar instruments related solely to the Rockwell Science Center Business under which any member of the Rockwell Automation Group or the Rockwell Collins Group has any primary, secondary, contingent, joint, several or other Liability, including those set forth on Schedule 1.01(s). "ROCKWELL SCIENCE CENTER GROUP" means Rockwell Science Center and the Rockwell Science Center Subsidiaries. "ROCKWELL SCIENCE CENTER GROUP TRUST" shall have the meaning ascribed thereto in the Employee Matters Agreement. 30 35 "ROCKWELL SCIENCE CENTER INDEMNITEES" means each member of the Rockwell Science Center Group, each of their respective Representatives and each of the heirs, executors, successors and permitted assigns of any of the foregoing. "ROCKWELL SCIENCE CENTER IP" shall have the meaning ascribed thereto in Section 3.12(b)(i). "ROCKWELL SCIENCE CENTER LIABILITIES" means the following: (a) all Liabilities of any member of the Rockwell Science Center Group under any Transaction Agreement to which it is or becomes a party; (b) all Liabilities for which any member of the Rockwell Science Center Group is expressly made responsible pursuant to the Employee Matters Agreement, the Tax Allocation Agreement, the Science Center Tax Allocation Agreement or the Transition Agreement; (c) all Liabilities (other than those described in paragraphs (b) and (d) of the definition of "Rockwell Automation Liabilities" and paragraphs (b) and (d) of the definition of "Rockwell Collins Liabilities") of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) to the extent based upon, arising out of or relating to the Rockwell Science Center Assets or the Rockwell Science Center Business, including: (i) all Liabilities to the extent relating to the Rockwell Science Center Business based upon, arising out of or relating to Contracts (whether or not such Contracts constitute Rockwell Science Center Assets) (including any primary, secondary, contingent or other obligations, such as under guaranties or indemnities, in respect of Contracts), including Liabilities arising out of any breaches or violations and Liabilities to make payments or otherwise in connection with the termination thereof as a result of the transactions contemplated hereby or otherwise and including Liabilities in respect of Shared Agreements; and (ii) all Liabilities based upon, arising out of or relating to Unrelated Former Businesses to the extent relating to the operations of the Rockwell Science Center Business which do not constitute a Rockwell Automation Liability described in any of paragraphs (b) or (d)(i) - (ix) of the definition of "Rockwell Automation Liabilities" or a Rockwell Collins Liability described in any of paragraphs (b) or (d) of the definition of "Rockwell Collins Liabilities", including (A) all performance and other Liabilities relating to the services required to be provided under Section 2 of the Boeing Transition Agreement and Section 2 of the Conexant Transition Agreement; and (B) all Liabilities to the extent relating to the operations of the Rockwell Science Center Business to indemnify (x) BNA and certain other Persons pursuant to the Boeing Post-Closing Covenants Agreement, (y) Meritor and certain other Persons pursuant to the Meritor 31 36 Distribution Agreement or (z) Conexant and certain other Persons pursuant to the Conexant Distribution Agreement; provided, however, that Rockwell Science Center Liabilities shall not include Liabilities in respect of Rockwell Science Center Assets to the extent they constitute (i) Rockwell Automation Liabilities described in paragraph (c) of the definition of "Rockwell Automation Liabilities" because they are based upon, arise out of or relate to the Rockwell Automation Business or (ii) Rockwell Collins Liabilities described in paragraph (c) of the definition of "Rockwell Collins Liabilities" because they are based upon, arise out of or relate to the Rockwell Collins Business; and (d) the following specifically enumerated Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), in each case whether or not such Liabilities relate to the Rockwell Automation Business, the Rockwell Automation Assets, the Rockwell Collins Business, the Rockwell Collins Assets, the Rockwell Science Center Business or the Rockwell Science Center Assets: (i) all Liabilities based upon, arising out of or relating to the Actions set forth on Schedule 1.01(t); (ii) all Liabilities based upon, arising out of or relating to the Rockwell Science Center Credit Facilities, including all indebtedness outstanding thereunder and interest and fees payable with respect thereto; and (iii) all Liabilities based upon, arising out of or relating to corporate office overhead claims filed by Rockwell with the U.S. Department of Defense prior to the Time of Distribution, including all Liabilities in respect of any adjustments thereto, which would have been allocated to Rockwell Science Center in accordance with government contract cost allocation practices of Rockwell in effect immediately prior to the Time of Distribution. Anything contained herein to the contrary notwithstanding, Liabilities described in paragraphs (b) and (d) of the definition of "Rockwell Automation Liabilities" and paragraphs (b) and (d) of the definition of "Rockwell Collins Liabilities" will not be included in Rockwell Science Center Liabilities. "ROCKWELL SCIENCE CENTER MARKS" shall have the meaning ascribed thereto in Section 3.10(c)(i). "ROCKWELL SCIENCE CENTER NON-U.S. BANK ACCOUNTS" means the bank accounts set forth on Schedule 1.01(u). "ROCKWELL SCIENCE CENTER PATENT ESCROW ACCOUNT" means the escrow account in the name of Rockwell Science Center established with the U.S. Patent Commission. 32 37 "ROCKWELL SCIENCE CENTER PENSION TRUST BANK ACCOUNTS" means bank accounts of the Rockwell Science Center Group Trust which contain only pension assets of the Rockwell Science Center Group Trust (which will be allocated pursuant to Section 3.01(c) of the Employee Matters Agreement). "ROCKWELL SCIENCE CENTER SECURITIES" means the Securities set forth on Schedule 1.01(k). "ROCKWELL SCIENCE CENTER SERVICES AGREEMENTS" means (a) the agreement between Rockwell Science Center and Rockwell entered into on the Distribution Date pursuant to which, among other things, Rockwell Science Center will provide Rockwell with research and development services and (b) the agreement between Rockwell Science Center and Rockwell Collins entered into on the Distribution Date pursuant to which, among other things, Rockwell Science Center will provide Rockwell Collins with research and development services. "ROCKWELL SCIENCE CENTER SHARED AGREEMENTS" means all Contracts under which Rockwell or any Rockwell Subsidiary and/or Rockwell Collins or any Rockwell Collins Subsidiary has any rights or primary, secondary, contingent, joint, several or other Liability arising out of or relating to both (i) the Rockwell Science Center Business and (ii) one or more other businesses of Rockwell or any Rockwell Subsidiary and/or one or more other businesses of Rockwell Collins or any Rockwell Collins Subsidiary, which by their terms will be outstanding or in effect as of or at any time following the Time of Distribution. "ROCKWELL SCIENCE CENTER SUBSIDIARY" means each Person listed on Schedule 1.01(v). "ROCKWELL SCIENCE CENTER U.S. BANK ACCOUNTS" means all bank accounts set forth on Schedule 1.01(w). "ROCKWELL SUBSIDIARY" means each Subsidiary of Rockwell other than Rockwell Collins, the Rockwell Collins Subsidiaries, Rockwell Science Center and the Rockwell Science Center Subsidiaries. "ROCKWELL VEBA" means (a) the Rockwell VEBA Trust No. 3 (to be renamed the "Rockwell Automation VEBA Trust") and (b) all funds contained therein and rights related thereto. "SCIENCE CENTER TAX ALLOCATION AGREEMENT" means the Tax Allocation Agreement by and between Rockwell and Rockwell Science Center entered into on the date hereof relating to, among other things, the allocation of certain tax Liabilities. "SECURITIES" means all short-term and long-term investments, banker's acceptances, shares of stock, notes, bonds, debentures, evidences of indebtedness, certificates of interest or participation in profit-sharing agreements, collateral-trust certificates, preorganization certificates or subscriptions, transferable shares, puts, calls, straddles, options, investment contracts, voting-trusts and certificates and other securities of any kind (other than ownership interests in Subsidiaries, Rockwell Science Center and joint ventures). 33 38 "SHARED AGREEMENTS" means Rockwell Collins Shared Agreements and Rockwell Science Center Shared Agreements. "SHARED POLICIES" means (a) in the case of Rockwell Collins, all Policies (other than claims administration contracts) which include Rockwell Collins, any of the Rockwell Collins Subsidiaries and/or the Rockwell Collins Business within the definition of the named insured and (b) in the case of Rockwell Science Center, all Policies (other than claims administration contracts) which include Rockwell Science Center, any of the Rockwell Science Center Subsidiaries and/or the Rockwell Science Center Business within the definition of the named insured. "STRATEGIC SOURCING AGREEMENTS" means Shared Agreements (other than those which do not relate to the Rockwell Automation Business) that are strategic sourcing or similar agreements under which members of two or more Groups purchased or had rights to purchase any products or services prior to the Time of Distribution, as such Shared Agreements exist as of the Time of Distribution. "SUBSIDIARY" means, with respect to any Person, any corporation or other organization, whether incorporated or unincorporated, of which such Person or any Subsidiaries of such Person controls or owns, directly or indirectly, more than 50% of the stock or other equity interest, or more than 50% of the voting power entitled to vote on the election of members to the board of directors or similar governing body; provided, however, that for purposes of this Agreement none of Rockwell Collins, the Rockwell Collins Subsidiaries, Rockwell Science Center or the Rockwell Science Center Subsidiaries shall be deemed to be a Rockwell Subsidiary. "TAX" shall have the meaning ascribed thereto in the Tax Allocation Agreement. "TAX ALLOCATION AGREEMENT" means the Tax Allocation Agreement by and between Rockwell and Rockwell Collins, substantially in the form attached hereto as Annex B. "TAX RULING" means a private letter ruling issued by the IRS in form and substance satisfactory to Rockwell (in its sole discretion) indicating that the Distribution will qualify as a tax-free spin-off to the shareowners of Rockwell for federal income tax purposes under Section 368(a)(1)(D) of the Code. "THIRD PARTY CLAIM" shall have the meaning ascribed thereto in Section 4.06(a). "TIME OF DISTRIBUTION" means the close of business on the Distribution Date. "TRANSACTION AGREEMENTS" means, collectively, this Agreement and each Ancillary Agreement. "TRANSITION AGREEMENT" means the transition services agreement by and among Rockwell, Rockwell Collins and Rockwell Science Center entered into on or prior to the Distribution Date and providing for various service and other relationships among Rockwell, Rockwell Collins and Rockwell Science Center following the Distribution Date. 34 39 "TRANSITION PERIOD" shall have the meaning ascribed thereto in Section 3.12(g)(i)(C). "UNRELATED FORMER BUSINESSES" means all Former Businesses not included in the Rockwell Automation Business, the Rockwell Collins Business or the Rockwell Science Center Business. Notwithstanding anything to the contrary contained herein, Unrelated Former Businesses shall include the Former Businesses set forth on Schedule 1.01(h). "WASHINGTON OFFICE ASSETS" means Rockwell's office facility located at 1300 Wilson Boulevard, Arlington, Virginia, the lease agreement dated December 31, 1997 between Rockwell and US Property Fund GmbH & Co. related thereto and all leasehold improvements, equipment and other tangible assets located thereat. ARTICLE II THE DISTRIBUTION SECTION 2.01 The Distribution. (a) Subject to Section 2.03, on or prior to the Distribution Date, Rockwell will deliver to the Distribution Agent, for the benefit of holders of record of Rockwell Common Stock as of the Record Date, a number of shares of Rockwell Collins Common Stock equal to the number of shares of Rockwell Common Stock issued and outstanding as of the Record Date (excluding treasury shares held by Rockwell), and Rockwell will instruct the Distribution Agent to make book-entry credits on the Distribution Date or as soon thereafter as practicable for each holder of record of Rockwell Common Stock as of the Record Date, or the designated transferee or transferees of such holder, for a number of shares of Rockwell Collins Common Stock equal to the number of shares of Rockwell Common Stock so held by such holder of record as of the Record Date (excluding treasury shares held by Rockwell). The Distribution will be effective as of the Time of Distribution. (b) Rockwell and Rockwell Collins will each provide to the Distribution Agent all information (including information necessary to make appropriate book-entry credits) and share certificates, in each case, as may be required in order to complete the Distribution on the basis of one share of Rockwell Collins Common Stock for each share of Rockwell Common Stock issued and outstanding as of the Record Date (excluding treasury shares held by Rockwell). SECTION 2.02 Cooperation Prior to the Distribution. Prior to the Distribution: (a) Rockwell and Rockwell Collins will prepare the Information Statement, which will set forth appropriate disclosure concerning Rockwell Collins, the Distribution and such other matters as Rockwell and Rockwell Collins may determine. Rockwell and Rockwell Collins will prepare, and Rockwell Collins will file with the Commission, the Form 10, which will include or incorporate by reference the Information Statement. Rockwell Collins will use its 35 40 reasonable best efforts to cause the Form 10 to become effective under the Exchange Act as soon as practicable following the filing thereof. Promptly after effectiveness of the Form 10 and completion of the Information Statement included therein, Rockwell will mail to the holders of Rockwell Common Stock the Information Statement. (b) Rockwell and Rockwell Collins will cooperate in preparing, filing with the Commission and causing to become effective any registration statements or amendments thereof which are required to reflect the establishment of, or amendments to, any employee benefit and other plans contemplated by the Employee Matters Agreement. (c) Rockwell and Rockwell Collins will take all such action as may be necessary or appropriate under the securities or "blue sky" laws of the states or other political subdivisions of the United States and the securities laws of any applicable foreign countries or other political subdivisions thereof in connection with the transactions contemplated by this Agreement. (d) Rockwell and Rockwell Collins will cause to be prepared, and Rockwell Collins will file and use its reasonable best efforts to have approved, an application for the listing on the NYSE of the Rockwell Collins Common Stock to be distributed in the Distribution. SECTION 2.03 Rockwell Board Action; Conditions to the Distribution. The Rockwell Board will in its discretion establish the Record Date and the Distribution Date and all appropriate procedures in connection with the Distribution, but in no event will the Distribution occur prior to such time as each of the following conditions shall have been satisfied or shall have been waived by the Rockwell Board in accordance with Section 2.04: (a) Rockwell shall have received the Tax Ruling and the Tax Ruling shall be in full force and effect and shall not have been modified or amended in any respect adversely affecting the tax consequences set forth therein; (b) the Rockwell Board shall have given final approval of the Distribution; (c) all material Consents which are required to effect the Distribution shall have been obtained and shall be in full force and effect; (d) the Form 10 shall have become effective under the Exchange Act; (e) the Certificate of Incorporation, the By-Laws and the Rights Plan each shall have been adopted and be in effect; (f) the Rockwell Collins Common Stock shall have been approved for listing upon notice of issuance on the NYSE; (g) the transactions contemplated by Section 3.01 and Section 3.02 shall have been consummated in all material respects; 36 41 (h) Rockwell, Rockwell Collins and Rockwell Science Center shall have entered into each of the Ancillary Agreements to which they are parties and each such agreement shall be in full force and effect; (i) no order, injunction or decree issued by any court of competent jurisdiction or other legal restraint or prohibition preventing consummation of the Distribution shall be in effect; (j) no suit, action or proceeding by or before any court of competent jurisdiction or other Governmental Entity shall have been commenced and be pending to restrain or challenge the Distribution, and no inquiry shall have been received that in the reasonable judgment of the Rockwell Board may lead to such a suit, action or proceeding; and (k) Rockwell Collins shall have made a pre-Distribution dividend payment to Rockwell in the amount of $300 million; provided that the satisfaction of such conditions will not create any obligation on the part of Rockwell to effect or seek to effect the Distribution or in any way limit Rockwell's right to terminate this Agreement set forth in Section 6.14 or alter the consequences of any such termination from those specified in Section 6.14. SECTION 2.04 Waiver of Conditions. Any or all of the conditions set forth in Section 2.03 may be waived, in whole or in part, in the sole discretion of the Rockwell Board. SECTION 2.05 Disclosure. If at any time after the date hereof any of the parties shall become aware of any circumstances that will or could reasonably be expected to prevent any or all of the conditions contained in Section 2.03 from being satisfied, it will promptly give to the other parties written notice of those circumstances. ARTICLE III TRANSACTIONS RELATING TO THE DISTRIBUTION SECTION 3.01 Intercorporate Reorganization. (a) Prior to the Distribution Date, Rockwell and Rockwell Collins will take all actions necessary to increase the outstanding shares of Rockwell Collins Common Stock so that, immediately prior to the Distribution, Rockwell will hold a number of shares of Rockwell Collins Common Stock equal to the number of shares of Rockwell Common Stock issued and outstanding as of the Record Date (excluding treasury shares held by Rockwell). (b) Subject to Section 3.11, prior to the Time of Distribution, Rockwell, Rockwell Collins and Rockwell Science Center will take, or cause to be taken, all actions necessary, including the actions specified in Section 3.01(c), to have: 37 42 (i) Rockwell, each Rockwell Subsidiary, Rockwell Science Center and each Rockwell Science Center Subsidiary assign and transfer, or cause to be assigned and transferred, to Rockwell Collins or a Rockwell Collins Subsidiary, as appropriate, any and all right, title and interest of Rockwell, each of the Rockwell Subsidiaries, Rockwell Science Center and each of the Rockwell Science Center Subsidiaries in the Rockwell Collins Subsidiaries; (ii) Rockwell, each Rockwell Subsidiary, Rockwell Collins and each Rockwell Collins Subsidiary assign and transfer, or cause to be assigned and transferred, to Rockwell Science Center or a Rockwell Science Center Subsidiary, as appropriate, any and all right, title and interest of Rockwell, each of the Rockwell Subsidiaries, Rockwell Collins and each of the Rockwell Collins Subsidiaries in the Rockwell Science Center Subsidiaries; (iii) Rockwell Collins, each Rockwell Collins Subsidiary, Rockwell Science Center and each Rockwell Science Center Subsidiary assign and transfer, or cause to be assigned and transferred, to Rockwell or a Rockwell Subsidiary, as appropriate, any and all right, title and interest of Rockwell Collins, each of the Rockwell Collins Subsidiaries, Rockwell Science Center and each of the Rockwell Science Center Subsidiaries in the Rockwell Subsidiaries; (iv) Rockwell, each Rockwell Subsidiary, Rockwell Science Center and each Rockwell Science Center Subsidiary assign and transfer, or cause to be assigned and transferred, to Rockwell Collins or a Rockwell Collins Subsidiary, as appropriate, any and all right, title and interest of Rockwell, each of the Rockwell Subsidiaries, Rockwell Science Center and each of the Rockwell Science Center Subsidiaries in Rockwell Collins Assets; (v) Rockwell, each Rockwell Subsidiary, Rockwell Collins and each Rockwell Collins Subsidiary assign and transfer, or cause to be assigned and transferred, to Rockwell Science Center or a Rockwell Science Center Subsidiary, as appropriate, any and all right, title and interest of Rockwell, each of the Rockwell Subsidiaries, Rockwell Collins and each of the Rockwell Collins Subsidiaries in Rockwell Science Center Assets; (vi) Rockwell Collins, each Rockwell Collins Subsidiary, Rockwell Science Center and each Rockwell Science Center Subsidiary assign and transfer, or cause to be assigned and transferred, to Rockwell or a Rockwell Subsidiary, as appropriate, any and all right, title and interest of Rockwell Collins, each of the Rockwell Collins Subsidiaries, Rockwell Science Center and each of the Rockwell Science Center Subsidiaries in Rockwell Automation Assets; (vii) Rockwell Collins or a Rockwell Collins Subsidiary, as appropriate, unconditionally assume and undertake to pay, perform and discharge, in a timely manner and in accordance with the terms thereof, all Liabilities of Rockwell, the Rockwell 38 43 Subsidiaries, Rockwell Science Center and the Rockwell Science Center Subsidiaries that are Rockwell Collins Liabilities; (viii) Rockwell Science Center or a Rockwell Science Center Subsidiary, as appropriate, unconditionally assume and undertake to pay, perform and discharge, in a timely manner and in accordance with the terms thereof, all Liabilities of Rockwell, the Rockwell Subsidiaries, Rockwell Collins and the Rockwell Collins Subsidiaries that are Rockwell Science Center Liabilities; and (ix) Rockwell or a Rockwell Subsidiary, as appropriate, unconditionally assume and undertake to pay, perform and discharge, in a timely manner and in accordance with the terms thereof, all Liabilities of Rockwell Collins, the Rockwell Collins Subsidiaries, Rockwell Science Center and the Rockwell Science Center Subsidiaries that are Rockwell Automation Liabilities. In the event that at any time or from time to time (whether prior to, at or after the Time of Distribution) any party (or any member of such party's respective Group) shall receive or otherwise possess any Asset that is allocated to any other Person pursuant to this Agreement or any Ancillary Agreement, such party will promptly transfer, or cause to be transferred, such Asset to the Person so entitled thereto. Prior to any such transfer, the Person receiving or possessing such Asset will hold such Asset in trust for the benefit of the Person entitled thereto (at the expense of the Person entitled thereto). In the event that at any time or from time to time (whether prior to, at or after the Time of Distribution) any party determines that any other party (or any member of such other party's respective Group) shall not have unconditionally assumed any Liabilities that are allocated to such other party (or a member of such other party's respective Group) pursuant to this Agreement or any Ancillary Agreement, such other party will promptly execute and deliver, or cause to be executed and delivered, all such documents and instruments and will take, or cause to be taken, all such actions as the requesting party may reasonably request to unconditionally assume, or cause to be unconditionally assumed, such Liabilities. (c) Subject to Section 3.11, Rockwell, Rockwell Collins and Rockwell Science Center will take, or cause to be taken, the actions described on Schedule 3.01(c) in connection with United States and international operations of the Rockwell Collins Business, the Rockwell Automation Business and the Rockwell Science Center Business. (d) In connection with the transfers of Subsidiaries and Assets and the assumptions of Liabilities contemplated by subsections (b) and (c) of this Section 3.01, Rockwell, Rockwell Collins and Rockwell Science Center will execute or cause to be executed by the appropriate entities the Conveyance and Assumption Instruments. The transfer of capital stock contemplated by such subsections will be effected by means of delivery of stock certificates duly endorsed or accompanied by duly executed stock powers and notation on the stock record books of the corporation or other legal entities involved and, to the extent required by applicable law, by notation on appropriate registries. 39 44 (e) Each of Rockwell (on behalf of itself and each other member of the Rockwell Automation Group), Rockwell Collins (on behalf of itself and each other member of the Rockwell Collins Group) and Rockwell Science Center (on behalf of itself and each other member of the Rockwell Science Center Group) understands and agrees that, except as expressly set forth in any Transaction Agreement, no party to any Transaction Agreement or any other agreement or document contemplated by any Transaction Agreement either has or is, in such agreement or otherwise, representing or warranting in any way as to the Assets, Subsidiaries, businesses or Liabilities retained, transferred or assumed as contemplated hereby or thereby, as to any consents or approvals required in connection with the transactions contemplated by the Transaction Agreements, as to the value or freedom from any Lien of, or any other matter concerning, any Assets, Liabilities or Subsidiaries of such party, or as to the absence of any defenses or rights of setoff or freedom from counterclaim with respect to any claim or other Assets or Subsidiaries of any party, or as to the legal sufficiency of any assignment, document or instrument delivered hereunder or thereunder to convey title to any Asset or Subsidiary or thing of value upon the execution, delivery or filing hereof or thereof. Except as may expressly be set forth in any Transaction Agreement, all Assets and Subsidiaries being transferred or retained as contemplated by any Transaction Agreement or any other agreement or document contemplated by any Transaction Agreement are being transferred, or are being retained, on an "as is", "where is" basis (and, in the case of the transfer of any real property, by means of a quitclaim or similar form deed or conveyance) and the respective transferees shall bear the economic and legal risks that any conveyance shall prove to be insufficient or that the title to any Asset or Subsidiary shall be other than good and marketable and free and clear of any Lien. (f) It is the intention of the parties that payments made by the parties to each other after the Time of Distribution pursuant to this Agreement, the Employee Matters Agreement, the Tax Allocation Agreement and the Science Center Tax Allocation Agreement are to be treated as relating back to the transactions occurring prior to the Time of Distribution pursuant to this Section 3.01 as an adjustment to the transfers of Assets, Subsidiaries and Liabilities contemplated by this Section 3.01, and Rockwell, Rockwell Collins and Rockwell Science Center will, and will cause their Subsidiaries to, take positions consistent with such intention with any Tax authority, unless with respect to any payment any party receives an opinion of counsel reasonably acceptable to Rockwell and Rockwell Collins to the effect that there is no substantial authority for such a position. SECTION 3.02 Financial Instruments. (a) Rockwell Collins will, at its expense, take or cause to be taken all actions and enter into (or cause the Rockwell Collins Subsidiaries to enter into) such agreements and arrangements as shall be necessary to effect the release of and substitution for each member of the Rockwell Automation Group, as of the Time of Distribution, from all primary, secondary, contingent, joint, several and other Liabilities in respect of Rockwell Collins Financial Instruments (it being understood that all Liabilities in respect of Rockwell Collins Financial Instruments are Rockwell Collins Liabilities). 40 45 (b) Rockwell Collins' obligations under this Section 3.02 will continue to be applicable to all Rockwell Collins Financial Instruments identified at any time by Rockwell, whether before, at or after the Time of Distribution. (c) Rockwell Science Center will, at its expense, take or cause to be taken all actions and enter into (or cause the Rockwell Science Center Subsidiaries to enter into) such agreements and arrangements as shall be necessary to effect the release of and substitution for each member of the Rockwell Automation Group and each member of the Rockwell Collins Group, effective as of the Time of Distribution, from all primary, secondary, contingent, joint, several and other Liabilities in respect of Rockwell Science Center Financial Instruments (it being understood that all Liabilities in respect of Rockwell Science Center Financial Instruments are Rockwell Science Center Liabilities). (d) Rockwell Science Center's obligations under this Section 3.02 will continue to be applicable to all Rockwell Science Center Financial Instruments identified at any time by Rockwell or Rockwell Collins, as the case may be, whether before, at or after the Time of Distribution. SECTION 3.03 Shared Agreements. (a) The parties acknowledge and understand that (i) all Rockwell Science Center Shared Agreements that relate to the Rockwell Automation Business and (ii) all Rockwell Collins Shared Agreements shall constitute Rockwell Automation Assets, except that, with respect to Shared Agreements relating to Unrelated Former Businesses, Rockwell Collins will have the rights described in paragraph (c)(i) of the definition of "Rockwell Collins Assets" and Rockwell Science Center will have the rights described in paragraph (c)(i) of the definition of "Rockwell Science Center Assets". All Rockwell Science Center Shared Agreements that do not relate to the Rockwell Automation Business will constitute (i) Rockwell Collins Assets if they relate primarily to the Rockwell Collins Business and (ii) Rockwell Science Center Assets if they relate primarily to the Rockwell Science Center Business. No member of any Group will extend or amend any Shared Agreement after the Time of Distribution unless it is the owner of the Shared Agreement. (b) The parties agree as follows with respect to Strategic Sourcing Agreements: (i) For so long as any member of the Rockwell Automation Group derives any benefit under any Strategic Sourcing Agreement following the Time of Distribution (including the ability to continue to make purchases on the terms set forth in the Strategic Sourcing Agreement) as a result of purchases by members of the Rockwell Collins Group or the Rockwell Science Center Group, as the case may be, then Rockwell Collins or Rockwell Science Center, as the case may be, will use reasonable best efforts to, and will cause the other members of the Rockwell Collins Group or the Rockwell Science Center Group, as the case may be, to use reasonable best efforts to, continue to make purchases under such Strategic Sourcing Agreement in accordance with the terms thereof. 41 46 (ii) Each party will use its reasonable best efforts to obtain, or cause to be obtained, any required consents of third parties to Strategic Sourcing Agreements to allow members of any Group to make purchases under Strategic Sourcing Agreements on the terms and conditions of such Strategic Sourcing Agreements existing as of the Time of Distribution. (iii) If Rockwell receives any rebate from a third party to a Strategic Sourcing Agreement after the Time of Distribution, Rockwell will promptly pay to each of Rockwell Collins and Rockwell Science Center its proportionate share of such rebate, if any, as reasonably determined by Rockwell (after deducting Rockwell's out-of-pocket costs and expenses incurred in connection with obtaining such rebate), based on the amount of purchases made by each Group under such Strategic Sourcing Agreement that the rebate relates to. (iv) If Rockwell is required for any reason to return after the Time of Distribution all or any portion of a rebate received from a third party to a Strategic Sourcing Agreement, then each of Rockwell Collins and Rockwell Science Center will promptly upon request of Rockwell pay to Rockwell its proportionate share of such rebate, as reasonably determined by Rockwell. SECTION 3.04 Intercompany Accounts and Arrangements. (a) Elimination of Intercompany Accounts. (i) Except as set forth in Section 3.04(a)(ii) or on Schedule 3.04(a), Rockwell Collins, on behalf of itself and each other member of the Rockwell Collins Group, Rockwell, on behalf of itself and each other member of the Rockwell Automation Group, and Rockwell Science Center, on behalf of itself and each other member of the Rockwell Science Center Group, hereby settle and eliminate, by cancellation or transfer to a member of the other Group (whether to cancel or transfer and the manner thereof will be determined by Rockwell), effective as of the Time of Distribution, all intercompany receivables, payables and other balances (including intercompany cash management balances) existing immediately prior to the Time of Distribution (a) between Rockwell Collins and/or any Rockwell Collins Subsidiary, on the one hand, and Rockwell and/or any Rockwell Subsidiary, on the other hand, (b) between Rockwell Science Center and/or any Rockwell Science Center Subsidiary, on the one hand, and Rockwell and/or any Rockwell Subsidiary, on the other hand, and (c) between Rockwell Science Center and/or any Rockwell Science Center Subsidiary, on the one hand, and Rockwell Collins and/or any Rockwell Collins Subsidiary, on the other hand. (ii) The provisions of Section 3.04(a)(i) will not apply to any intercompany receivables, payables and other balances arising under any Transaction Agreement, including those arising under Section 3.05 and those incurred in connection with the payment by any party of any expenses which are required to be paid or reimbursed by the other party pursuant to Section 6.03. 42 47 (b) Intercompany Agreements. (i) Except as set forth in Section 3.04(b)(ii), in furtherance of the releases and other provisions of Section 4.01, Rockwell Collins, on behalf of itself and each other member of the Rockwell Collins Group, Rockwell, on behalf of itself and each other member of the Rockwell Automation Group, and Rockwell Science Center, on behalf of itself and each other member of the Rockwell Science Center Group, hereby terminate any and all agreements, arrangements, commitments or understandings in existence as of the Time of Distribution, whether or not in writing (A) between or among Rockwell Collins and/or any Rockwell Collins Subsidiary, on the one hand, and Rockwell and/or any Rockwell Subsidiary, on the other hand, (B) between or among Rockwell Science Center and/or any Rockwell Science Center Subsidiary, on the one hand, and Rockwell and/or any Rockwell Subsidiary, on the other hand, and (C) between or among Rockwell Science Center and/or any Rockwell Science Center Subsidiary, on the one hand, and Rockwell Collins and/or any Rockwell Collins Subsidiary, on the other hand. No such terminated agreement, arrangement, commitment or understanding (including any provision thereof which purports to survive termination) shall be of any further force or effect after the Time of Distribution. (ii) The provisions of Section 3.04(b)(i) will not apply to any of the following agreements, arrangements, commitments or understandings (or to any of the provisions thereof): (A) the Transaction Agreements (and each other agreement, instrument or document expressly contemplated by any Transaction Agreement to be entered into by any party hereto or any of the members of their respective Groups; (B) any agreements, arrangements, commitments or understandings listed or described on Schedule 3.04(b)(ii); (C) any agreements, arrangements, commitments or understandings to which any Person other than the parties hereto and their respective Affiliates is a party; (D) any other agreements, arrangements, commitments or understandings that any of the Transaction Agreements expressly contemplates will survive the Time of Distribution; and (E) any agreements, arrangements, commitments or understandings (x) between Rockwell Collins and/or any Rockwell Collins Subsidiary, on the one hand, and Rockwell and/or any Rockwell Subsidiary, on the other hand, (y) between Rockwell Science Center and/or any Rockwell Science Center Subsidiary, on the one hand, and Rockwell and/or any Rockwell Subsidiary, on the other hand, or (z) between Rockwell Science Center and/or any Rockwell Science Center Subsidiary, on the one hand, and Rockwell Collins and/or any Rockwell Collins Subsidiary, on the other hand, in any such case for the purchase or sale of goods or services of a type which the provider thereof provides to unaffiliated third parties in the ordinary course of its business ("Ordinary Course Intercompany Arrangements"); provided, however, that in the event any such Ordinary Course Intercompany Arrangements (other than any Transaction Agreements or agreements described on Schedule 3.04(b)(ii)) do not, as of the Time of Distribution, contain commercially reasonable arm's-length terms of a type to which unaffiliated parties would reasonably agree or do not include terms which would normally appear in such arrangements between unaffiliated parties, Rockwell, Rockwell Collins and Rockwell Science Center, as the case may be, will cause such Ordinary Course Intercompany Arrangements to be amended so that they will contain terms which are, as 43 48 of the Time of Distribution, commercially reasonable arm's-length terms of a type to which unaffiliated parties would reasonably agree. SECTION 3.05 Cash Management. (a) Bank Accounts. Subject to Section 3.05(b), (i) all Rockwell Collins U.S. Bank Accounts and Rockwell Collins Non-U.S. Bank Accounts will constitute Rockwell Collins Assets, (ii) all Rockwell Science Center U.S. Bank Accounts and Rockwell Science Center Non-U.S. Bank Accounts will constitute Rockwell Science Center Assets, and (iii) all Rockwell Automation Retained Accounts will constitute Rockwell Automation Assets. (b) Cash Balances. (i) (A) In the event the aggregate Recorded Amount of cash in the Rockwell Collins U.S. Bank Accounts and the Rockwell Collins Non-U.S. Bank Accounts (other than Rockwell Collins Pension Trust Bank Accounts) (x) exceeds the Rockwell Collins Distribution Date Funding Amount, Rockwell Collins will pay to Rockwell (by wire transfer to Rockwell's bank account at Mellon Bank, N.A., Pittsburgh, Pennsylvania, Account No. 102-3474), within three business days after the Distribution Date, an amount equal to such excess or (y) is less than the Rockwell Collins Distribution Date Funding Amount, Rockwell will pay to Rockwell Collins, within three business days after the Distribution Date, an amount equal to such deficit. (B) Rockwell Collins will pay to Rockwell (by wire transfer to Rockwell's bank account at Mellon Bank, N.A., Pittsburgh, Pennsylvania, Account No. 102-3474), within three business days after the Distribution Date, (x) all balances contained immediately prior to the Time of Distribution in petty cash accounts at U.S. locations of the Rockwell Collins Business, and (y) the dollar value of travelers checks immediately prior to the Time of Distribution at U.S. locations of the Rockwell Collins Business. (ii) (A) In the event the aggregate Recorded Amount of cash in the Rockwell Science Center U.S. Bank Accounts and the Rockwell Science Center Non-U.S. Bank Accounts (other than Rockwell Science Center Pension Trust Bank Accounts) (x) exceeds $2 million, Rockwell Science Center will pay to Rockwell (by wire transfer to Rockwell's bank account at Mellon Bank, N.A., Pittsburgh, Pennsylvania, Account No. 102-3474), within three business days after the Distribution Date, an amount equal to such excess or (y) is less than $2 million, Rockwell will pay to Rockwell Science Center, within three business days after the Distribution Date, an amount equal to such deficit. (B) Rockwell Science Center will pay to Rockwell (by wire transfer to Rockwell's bank account at Mellon Bank, N.A., Pittsburgh, Pennsylvania, Account No. 102-3474), within three business days after the Distribution Date, (x) all balances contained immediately prior to the Time of Distribution in petty cash accounts at U.S. locations of the Rockwell Science Center Business, and 44 49 (y) the dollar value of travelers checks immediately prior to the Time of Distribution at U.S. locations of the Rockwell Science Center Business. (c) Rockwell Customer Payments. Each of Rockwell Collins and Rockwell Science Center will, and will cause their respective Subsidiaries and Affiliates to, forward promptly to Rockwell (for the account of Rockwell or the applicable Rockwell Subsidiary) any customer payments in respect of accounts receivable constituting Rockwell Automation Assets received by Rockwell Collins, Rockwell Science Center or any of their respective Subsidiaries or Affiliates after the Time of Distribution, whether received in lock boxes, via wire transfer or otherwise. Such amounts will be forwarded by wire transfer (to Rockwell's bank account at Mellon Bank, N.A., Pittsburgh, Pennsylvania, Account No. 102-3474) in the case of customer payments received within thirty days after the Distribution Date and by check in the case of customer payments received thereafter. (d) Rockwell Collins Customer Payments. Each of Rockwell and Rockwell Science Center will, and will cause their respective Subsidiaries and Affiliates to, forward promptly to Rockwell Collins (for the account of Rockwell Collins or the applicable Rockwell Collins Subsidiary) any customer payments in respect of accounts receivable constituting Rockwell Collins Assets received by Rockwell, Rockwell Science Center or any of their respective Subsidiaries or Affiliates after the Time of Distribution, whether received in lock boxes, via wire transfer or otherwise. Such amounts will be forwarded by wire transfer in the case of customer payments received within thirty days after the Distribution Date and by check in the case of customer payments received thereafter. (e) Rockwell Science Center Customer Payments. Each of Rockwell and Rockwell Collins will, and will cause their respective Subsidiaries and Affiliates to, forward promptly to Rockwell Science Center (for the account of Rockwell Science Center or the applicable Rockwell Science Center Subsidiary) any customer payments in respect of accounts receivable constituting Rockwell Science Center Assets received by Rockwell, Rockwell Collins or any of their respective Subsidiaries or Affiliates after the Time of Distribution, whether received in lock boxes, via wire transfer or otherwise. Such amounts will be forwarded by wire transfer in the case of customer payments received within thirty days after the Distribution Date and by check in the case of customer payments received thereafter. (f) Funding of Outstanding Checks. (i) The following subsections of this Section 3.05(f) are intended to implement the parties' agreement that (A) Rockwell Collins or a Rockwell Collins Subsidiary will be liable for payment of checks relating to the Rockwell Collins Business or the Rockwell Collins Liabilities that are outstanding immediately prior to the Time of Distribution and (B) Rockwell Science Center or a Rockwell Science Center Subsidiary will be liable for payment of checks relating to the Rockwell Science Center Business or the Rockwell Science Center Liabilities that are outstanding immediately prior to the Time of Distribution. 45 50 (ii) Rockwell Collins or a Rockwell Collins Subsidiary will fund all amounts in respect of checks that are outstanding immediately prior to the Time of Distribution and presented for payment at or after the Time of Distribution in Rockwell Collins U.S. Bank Accounts or Rockwell Collins Non-U.S. Bank Accounts. Rockwell Science Center or a Rockwell Science Center Subsidiary will fund all amounts in respect of checks that are outstanding immediately prior to the Time of Distribution and presented for payment at or after the Time of Distribution in Rockwell Science Center U.S. Bank Accounts or Rockwell Science Center Non-U.S. Bank Accounts. (iii) Rockwell or a Rockwell Subsidiary will fund all amounts in respect of checks that are outstanding immediately prior to the Time of Distribution and presented for payment at or after the Time of Distribution in Rockwell Automation Retained Accounts. Within three business days after Rockwell's request: (A) Rockwell Collins will reimburse Rockwell (by wire transfer to Rockwell's bank account at Mellon Bank, N.A., Pittsburgh, Pennsylvania, account number 102-3474), for the account of Rockwell or the applicable Rockwell Subsidiary, for all such amounts funded by Rockwell or a Rockwell Subsidiary in respect of checks relating to the Rockwell Collins Business or the Rockwell Collins Liabilities that are outstanding immediately prior to the Time of Distribution and presented for payment at or after the Time of Distribution in Rockwell Automation Retained Accounts; and (B) Rockwell Science Center will reimburse Rockwell (by wire transfer to Rockwell's bank account at Mellon Bank, N.A., Pittsburgh, Pennsylvania, account number 102-3474), for the account of Rockwell or the applicable Rockwell Subsidiary, for all such amounts funded by Rockwell or a Rockwell Subsidiary in respect of checks relating to the Rockwell Science Center Business or the Rockwell Science Center Liabilities that are outstanding immediately prior to the Time of Distribution and presented for payment at or after the Time of Distribution in Rockwell Automation Retained Accounts. (iv) No checks relating to the Rockwell Collins Business, the Rockwell Collins Liabilities, the Rockwell Science Center Business or the Rockwell Science Center Liabilities will be issued on any Rockwell Automation Retained Accounts at or after the Time of Distribution. SECTION 3.06 The Rockwell Collins Board and the Rockwell Science Center Board. (a) Prior to the Time of Distribution, Rockwell and Rockwell Collins will take all actions which may be required to elect or otherwise appoint the persons named in the Form 10 to constitute the board of directors of Rockwell Collins at the Time of Distribution. (b) Prior to the Time of Distribution, Rockwell and Rockwell Collins will take all actions which may be required to elect or otherwise appoint the persons set forth on 46 51 Schedule 3.06(b) to constitute the board of directors of Rockwell Science Center at the Time of Distribution. SECTION 3.07 Resignations; Transfer of Stock Held as Nominee. (a) Rockwell will cause all of its employees and directors and all of the employees and directors of each other member of the Rockwell Automation Group to resign, not later than the Time of Distribution, from all boards of directors or similar governing bodies of Rockwell Collins or any other member of the Rockwell Collins Group and of Rockwell Science Center or any other member of the Rockwell Science Center Group on which they serve, and from all positions as officers of Rockwell Collins or any other member of the Rockwell Collins Group and of Rockwell Science Center or any other member of the Rockwell Science Center Group in which they serve, except as otherwise specified on Schedule 3.07. Rockwell Collins will cause all of its employees and directors and all of the employees and directors of each other member of the Rockwell Collins Group to resign, not later than the Time of Distribution, from all boards of directors or similar governing bodies of Rockwell or any other member of the Rockwell Automation Group and of Rockwell Science Center or any other member of the Rockwell Science Center Group on which they serve, and from all positions as officers of Rockwell or any other member of the Rockwell Automation Group and of Rockwell Science Center or any other member of the Rockwell Science Center Group in which they serve, except as otherwise specified on Schedule 3.07. Rockwell Science Center will cause all of its employees and directors and all of the employees and directors of each other member of the Rockwell Science Center Group to resign, not later than the Time of Distribution, from all boards of directors or similar governing bodies of Rockwell or any other member of the Rockwell Automation Group and of Rockwell Collins or any other member of the Rockwell Collins Group on which they serve, and from all positions as officers of Rockwell or any other member of the Rockwell Automation Group and of Rockwell Collins or any other member of the Rockwell Collins Group in which they serve, except as otherwise specified on Schedule 3.07. (b) Rockwell will cause each of its employees, and each of the employees of the other members of the Rockwell Automation Group, who holds stock or similar evidence of ownership of any Rockwell Collins Group entity or Rockwell Science Center Group entity as nominee for such entity pursuant to the laws of the country in which such entity is located to transfer such stock or similar evidence of ownership to the Person so designated by Rockwell Collins or Rockwell Science Center, as the case may be, to be such nominee as of and after the Time of Distribution. Rockwell Collins will cause each of its employees, and each of the employees of the other members of the Rockwell Collins Group, who holds stock or similar evidence of ownership of any Rockwell Automation Group entity or Rockwell Science Center Group entity as nominee for such entity pursuant to the laws of the country in which such entity is located to transfer such stock or similar evidence of ownership to the Person so designated by Rockwell or Rockwell Science Center, as the case may be, to be such nominee as of and after the Time of Distribution. Rockwell Science Center will cause each of its employees, and each of the employees of the other members of the Rockwell Science Center Group, who holds stock or similar evidence of ownership of any Rockwell Automation Group entity or Rockwell Collins Group entity as nominee for such entity pursuant to the laws of the country in which such entity is located to transfer such stock or similar evidence of ownership to the Person so designated by 47 52 Rockwell or Rockwell Collins, as the case may be, to be such nominee as of and after the Time of Distribution. (c) Rockwell will cause each of its employees and each of the employees of the other members of the Rockwell Automation Group to revoke or withdraw their express written authority, if any, to act on behalf of any Rockwell Collins Group entity or Rockwell Science Center Group entity as an agent or representative thereof after the Time of Distribution. Rockwell Collins will cause each of its employees and each of the employees of the other members of the Rockwell Collins Group to revoke or withdraw their express written authority, if any, to act on behalf of any Rockwell Automation Group entity or Rockwell Science Center Group entity as an agent or representative thereof after the Time of Distribution. Rockwell Science Center will cause each of its employees and each of the employees of the other members of the Rockwell Science Center Group to revoke or withdraw their express written authority, if any, to act on behalf of any Rockwell Automation Group entity or Rockwell Collins Group entity as an agent or representative thereof after the Time of Distribution. SECTION 3.08 Rockwell Collins Certificate of Incorporation and By-Laws; Rights Plan. Prior to the Time of Distribution, (a) the Rockwell Collins Board will (i) approve the Certificate of Incorporation and will cause the same to be filed with the Secretary of State of the State of Delaware and (ii) adopt the By-Laws, and (b) Rockwell, as sole shareowner of Rockwell Collins, will approve the Certificate of Incorporation. Prior to the Time of Distribution, the Rockwell Collins Board will adopt the Rights Plan and declare a dividend of the Rights so that each share of Rockwell Collins Common Stock issued and outstanding as of the Time of Distribution will initially have one Right attached thereto. SECTION 3.09 Insurance. (a) Coverage. Subject to the provisions of this Section 3.09, coverage of Rockwell Collins, the Rockwell Collins Subsidiaries, Rockwell Science Center and the Rockwell Science Center Subsidiaries under all Policies shall cease as of the Time of Distribution. From and after the Time of Distribution, Rockwell Collins, the Rockwell Collins Subsidiaries, Rockwell Science Center and the Rockwell Science Center Subsidiaries will be responsible for obtaining and maintaining all insurance coverages in their own right. All Policies will constitute Rockwell Automation Assets and will be retained by Rockwell and the Rockwell Subsidiaries, together with all rights, benefits and privileges thereunder (including the right to receive any and all return premiums with respect thereto), except that Rockwell Collins and Rockwell Science Center will have the rights in respect of Policies to the extent described in Sections 3.09(b), (c) and (e). (b) Rights Under Shared Policies. From and after the Time of Distribution, Rockwell Collins, the Rockwell Collins Subsidiaries, Rockwell Science Center and the Rockwell Science Center Subsidiaries will have no rights with respect to any Policies, except (1) as provided in Sections 3.09(c) and (e) and (2) as follows: (i) Rockwell Collins will have the right to assert claims (and Rockwell will use reasonable best efforts to assist Rockwell Collins in asserting claims) for any loss, 48 53 liability or damage with respect to Rockwell Collins Assets or Rockwell Collins Liabilities under Shared Policies with third-party insurers which are "occurrence basis" insurance policies ("Occurrence Basis Policies") arising out of insured incidents occurring from the date coverage thereunder first commenced until the Time of Distribution to the extent that the terms and conditions of any such Occurrence Basis Policies and agreements relating thereto so allow; (ii) Rockwell Collins will have the right to continue to prosecute claims with respect to Rockwell Collins Assets or Rockwell Collins Liabilities properly asserted with the insurer prior to the Time of Distribution (and Rockwell will use reasonable best efforts to assist Rockwell Collins in connection therewith) under Shared Policies with third-party insurers which are insurance policies written on a "claims made" basis ("Claims Made Policies") arising out of insured incidents occurring from the date coverage thereunder first commenced until the Time of Distribution to the extent that the terms and conditions of any such Claims Made Policies and agreements relating thereto so allow; (iii) Rockwell Science Center will have the right to assert claims (and Rockwell will use reasonable best efforts to assist Rockwell Science Center in asserting claims) for any loss, liability or damage with respect to Rockwell Science Center Assets or Rockwell Science Center Liabilities under Occurrence Basis Policies arising out of insured incidents occurring from the date coverage thereunder first commenced until the Time of Distribution to the extent that the terms and conditions of any such Occurrence Basis Policies and agreements relating thereto so allow; and (iv) Rockwell Science Center will have the right to continue to prosecute claims with respect to Rockwell Science Center Assets or Rockwell Science Center Liabilities properly asserted with the insurer prior to the Time of Distribution (and Rockwell will use reasonable best efforts to assist Rockwell Science Center in connection therewith) under Claims Made Policies arising out of insured incidents occurring from the date coverage thereunder first commenced until the Time of Distribution to the extent that the terms and conditions of any such Claims Made Policies and agreements relating thereto so allow; provided, that in the case of each of clauses (i), (ii), (iii) and (iv) above, (A) all of Rockwell's and each Rockwell Subsidiary's reasonable costs and expenses incurred in connection with the foregoing are promptly paid by Rockwell Collins or Rockwell Science Center, as the case may be, (B) Rockwell and the Rockwell Subsidiaries may, at any time, without liability or obligation to Rockwell Collins, any Rockwell Collins Subsidiary, Rockwell Science Center or any Rockwell Science Center Subsidiary (other than as set forth in Section 3.09(d)), amend, commute, terminate, buy-out, extinguish liability under or otherwise modify any Occurrence Basis Policies or Claims Made Policies (and such claims shall be subject to any such amendments, commutations, terminations, buy-outs, extinguishments and modifications), (C) such claims will be subject to (and recovery thereon will be reduced by the amount of) any applicable deductibles, retentions, self-insurance provisions or any payment or reimbursement obligations of Rockwell, any Rockwell Subsidiary or any Affiliate of Rockwell or any Rockwell 49 54 Subsidiary in respect thereof, and (D) such claims will be subject to exhaustion of existing aggregate limits. Rockwell's obligation to use reasonable best efforts to assist Rockwell Collins and Rockwell Science Center in asserting claims under Occurrence Basis Policies will include using reasonable best efforts in assisting Rockwell Collins and Rockwell Science Center to establish its right to coverage under Occurrence Basis Policies (so long as all of Rockwell's costs and expenses in connection therewith are promptly paid by Rockwell Collins or Rockwell Science Center, as the case may be). None of Rockwell or the Rockwell Subsidiaries will bear any Liability for the failure of an insurer to pay any claim under any Occurrence Basis Policy or Claims Made Policy. (c) Rights Under Current Excess Workers' Compensation Policy. Rockwell will request that the insurer under the Current Excess Workers' Compensation Policy permit members of the Rockwell Collins Group to be named as additional named insureds under the Current Excess Workers' Compensation Policy with respect to incidents occurring from the Distribution Date through September 30, 2003, provided that no member of the Rockwell Automation Group will be required to pay any consideration or grant any financial or other accommodation in connection therewith. In connection therewith, from and after the Time of Distribution Rockwell Collins will have the right to assert claims (and Rockwell will use reasonable best efforts to assist Rockwell Collins in asserting claims) for any loss, liability or damage with respect to Rockwell Collins Assets or Rockwell Collins Liabilities under the Current Excess Workers' Compensation Policy arising out of insured incidents occurring from the Time of Distribution to September 30, 2003 to the extent that the terms and conditions of the Current Excess Workers' Compensation Policy and agreements relating thereto and the insurer thereunder so allow; provided, that (i) all of Rockwell's and each Rockwell Subsidiary's reasonable costs and expenses incurred in connection with the foregoing are promptly paid by Rockwell Collins, (ii) Rockwell and the Rockwell Subsidiaries may, at any time, without liability or obligation to Rockwell Collins or any Rockwell Collins Subsidiary (other than as set forth in Section 3.09(d)), amend, commute, terminate, buy-out, extinguish liability under or otherwise modify the Current Excess Workers' Compensation Policy (and such claims shall be subject to any such amendments, commutations, terminations, buy-outs, extinguishments and modifications), (iii) such claims will be subject to (and recovery thereon will be reduced by the amount of) any applicable deductibles, retentions, self-insurance provisions or any payment or reimbursement obligations of Rockwell, any Rockwell Subsidiary or any Affiliate of Rockwell or any Rockwell Subsidiary in respect thereof, and (iv) such claims will be subject to exhaustion of existing aggregate limits. Rockwell's obligation to use reasonable best efforts to assist Rockwell Collins in asserting claims under the Current Excess Workers' Compensation Policy will include using reasonable best efforts in assisting Rockwell Collins to establish its right to coverage under the Current Excess Workers' Compensation Policy (so long as all of Rockwell's costs and expenses in connection therewith are promptly paid by Rockwell Collins). None of Rockwell or the Rockwell Subsidiaries will bear any Liability for the failure of the insurer to pay any claim under the Current Excess Workers' Compensation Policy. (d) Rockwell Actions. In the event that after the Time of Distribution Rockwell or any Rockwell Subsidiary proposes to amend, commute, terminate, buy-out, extinguish liability under or otherwise modify any Occurrence Basis Policies (including the Current Excess Workers' Compensation Policy) or Claims Made Policies under which Rockwell 50 55 Collins or Rockwell Science Center has rights to assert claims pursuant to Section 3.09(b) or Section 3.09(c) in a manner that would adversely affect any such rights of Rockwell Collins or Rockwell Science Center, (i) Rockwell will give Rockwell Collins and/or Rockwell Science Center, as the case may be, prior notice thereof and consult with Rockwell Collins and/or Rockwell Science Center, as the case may be, with respect to such action (it being understood that the decision to take any such action will be in the sole discretion of Rockwell) and (ii) Rockwell will pay to Rockwell Collins and/or Rockwell Science Center, as the case may be, its equitable share (which shall be determined by Rockwell based on the amount of premiums paid by or allocated to the Rockwell Collins Business or the Rockwell Science Center Business, as the case may be, in respect of the applicable Shared Policy) of any net proceeds actually received by Rockwell from the insurer under the applicable Shared Policy as a result of such action by Rockwell (after deducting Rockwell's reasonable costs and expenses incurred in connection with such action). (e) Claims Administration. To the extent Constitution State Service Company and the terms and conditions of the Claims Administration Contract so allow, Rockwell will permit the Rockwell Collins Group to continue to administer commercial general liability self-insured claims that relate to incidents occurring prior to the Time of Distribution under the Claims Administration Contract; provided, that (i) all of Rockwell's and each Rockwell Subsidiary's reasonable costs and expenses incurred in connection with the foregoing are promptly paid by Rockwell Collins and (ii) Rockwell and the Rockwell Subsidiaries may, at any time, without liability or obligation to Rockwell Collins or any Rockwell Collins Subsidiary, amend, modify or terminate the Claims Administration Contract. Notwithstanding the foregoing, the parties acknowledge and agree that all Liabilities in respect of claims administered for the Rockwell Collins Group under the Claims Administration Contract shall constitute Rockwell Collins Liabilities. (f) Administration. From and after the Time of Distribution: (i) Rockwell or a Rockwell Subsidiary, as appropriate, will be responsible for the Claims Administration with respect to claims of Rockwell and the Rockwell Subsidiaries under Occurrence Basis Policies (including the Current Excess Workers' Compensation Policy) and Claims Made Policies; (ii) Rockwell Collins or a Rockwell Collins Subsidiary, as appropriate, will be responsible for the Claims Administration with respect to the claims of Rockwell Collins and the Rockwell Collins Subsidiaries under Occurrence Basis Policies (including the Current Excess Workers' Compensation Policy) and Claims Made Policies that are permitted under Sections 3.09(b) and 3.09(c); and (iii) Rockwell Science Center or a Rockwell Science Center Subsidiary, as appropriate, will be responsible for the Claims Administration with respect to the claims of Rockwell Science Center and the Rockwell Science Center Subsidiaries under Occurrence Basis Policies and Claims Made Policies that are permitted under Section 3.09(b). 51 56 (g) Insurance Premiums. Rockwell will pay all premiums (retrospectively-rated or otherwise) as required under the terms and conditions of the respective Policies in respect of periods prior to the Time of Distribution and, in the case of the Current Excess Workers' Compensation Policy, in respect of periods to September 30, 2003, whereupon (i) Rockwell Collins will, upon request of Rockwell, forthwith reimburse Rockwell for that portion of such premiums paid by Rockwell as are reasonably determined by Rockwell to be attributable to the Rockwell Collins Business and (ii) Rockwell Science Center will, upon request of Rockwell, forthwith reimburse Rockwell for that portion of such premiums paid by Rockwell as are reasonably determined by Rockwell to be attributable to the Rockwell Science Center Business. (h) Agreement for Waiver of Conflict and Shared Defense. In the event that an Occurrence Basis Policy or a Claims Made Policy provides coverage for two or more of (i) Rockwell and/or a Rockwell Subsidiary, (ii) Rockwell Collins and/or a Rockwell Collins Subsidiary and (iii) Rockwell Science Center and/or a Rockwell Science Center Subsidiary relating to the same occurrence, Rockwell, Rockwell Collins and Rockwell Science Center, as applicable, agree to defend jointly and to waive any conflict of interest necessary to the conduct of that joint defense. Nothing in this Section 3.09(h) will be construed to limit or otherwise alter in any way the indemnity obligations of the parties to this Agreement, including those created by this Agreement, by operation of law or otherwise. (i) Directors' and Officers' Insurance. Rockwell will use its reasonable best efforts to cause the persons currently serving as directors and/or officers of Rockwell or any Subsidiary of Rockwell who will be, effective as of the Time of Distribution, directors and/or officers of Rockwell Collins, any Rockwell Collins Subsidiary, Rockwell Science Center or any Rockwell Science Center Subsidiary to be covered for a period of six years from the Time of Distribution with respect to claims arising from facts or events which occurred prior to the Time of Distribution by the directors' and officers' liability insurance policies maintained by Rockwell during such six-year period following the Time of Distribution for all persons who served as directors and/or officers of Rockwell or any Rockwell Subsidiary prior to the Time of Distribution with respect to claims arising from facts or events which occurred prior to the Time of Distribution. (j) Rockwell Science Center Coverage Under Rockwell Collins Aviation Insurance. Following the Time of Distribution, Rockwell Collins will provide aviation products liability insurance coverage for the benefit of the Rockwell Science Center Group with respect to products made by or on behalf of the Rockwell Science Center Group for the Rockwell Collins Group, which insurance shall provide coverage similar to that which Rockwell Collins maintains for its own account. SECTION 3.10 Use of Names, Trademarks, etc. (a) From and after the Time of Distribution, subject to Sections 3.10(b), 3.10(c) and 3.10(d), Rockwell will own all rights of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) in, and to the use of, the names "Rockwell", "Rockwell International", "Rockwell 52 57 Collins", "Rockwell Science Center" and "Rockwell Scientific Company" and all corporate symbols and logos related thereto and any name or mark which includes the words "Rockwell" or "Rockwell International" and all derivatives thereof and any other name, mark or symbol connoting "Rockwell" or which constitutes a formative thereof. From and after the Time of Distribution, except as permitted in Sections 3.10(b), 3.10(c) and 3.10(d), the Rockwell Collins Group and the Rockwell Science Center Group will not use or have any rights to the names, trademarks, trade names, domain names and service marks "Rockwell", "Rockwell International", "Rockwell Collins", "Rockwell Science Center" or "Rockwell Scientific Company" or any corporate symbol or logo related thereto or any name or mark which includes the words "Rockwell" or "Rockwell International" or any derivative thereof or any name or mark confusingly similar thereto, or any special script, type font, form, style, logo, design, device, trade dress or symbol which contains, represents or evokes the trademark, trade name or service mark "Rockwell" or "Rockwell International" or any derivative thereof or any name or mark confusingly similar thereto. From and after the Time of Distribution the Rockwell Collins Group will not hold itself out as having any affiliation with the Rockwell Automation Group. Prior to or as soon as practicable following the Time of Distribution (but in no event later than one year after the Distribution Date) (i) Rockwell Collins will change the name of any Rockwell Collins Subsidiary to eliminate therefrom the name "Rockwell" other than in the combined format "Rockwell Collins" and (ii) Rockwell Science Center will change the name of any Rockwell Science Center Subsidiary to eliminate therefrom the name "Rockwell" other than in the combined format "Rockwell Science Center", "Rockwell Scientific" or "Rockwell Scientific Company". (b) (i) Rockwell hereby grants to Rockwell Collins an exclusive, non-transferable (other than by way of sublicenses to members of the Rockwell Collins Group) license to utilize without obligation to pay royalties to Rockwell the name, trademark, trade name, domain name and service mark "Rockwell Collins" (the "Rockwell Collins Marks") in connection with businesses of the Rockwell Collins Group, other than in connection with (A) the Rockwell Automation Business (as it exists on the Distribution Date), (B) the Rockwell Science Center Business (as it exists on the Distribution Date) or (C) researching, developing, designing, engineering, manufacturing, building, selling, distributing, installing, modifying, repairing, servicing or supporting Automation Products. Unless and until the license granted under this Section 3.10(b) is terminated, Rockwell will not use, nor grant a license to any third party to use, the Rockwell Collins Marks. (ii) As a condition to the license granted by this Section 3.10(b), Rockwell Collins will use the Rockwell Collins Marks (A) in connection with goods and services having a level of quality at least as high as that established by the Rockwell Collins Business for similar goods or services made, sold or offered for sale prior to the Distribution Date and (B) in compliance with all applicable laws and regulations. (iii) Rockwell will have the right to exercise quality control over Rockwell Collins' and any permitted sublicensee's presentation or use of the Rockwell Collins Marks to that degree reasonably necessary, in the opinion of Rockwell, to maintain the validity and enforceability of the Rockwell Collins Marks and the name, trademark, trade 53 58 name or service mark "Rockwell" and to protect the goodwill associated with any of the foregoing. Rockwell Collins will, upon request by Rockwell, submit to Rockwell materials of the Rockwell Collins Group bearing the Rockwell Collins Marks as Rockwell may reasonably require to ensure Rockwell Collins' and any permitted sublicensee's compliance with the obligations set forth in this Section 3.10(b). (iv) (A) Rockwell may terminate the license granted under this Section 3.10(b) in the event of a material breach of this Section 3.10(b) by any member of the Rockwell Collins Group that has not been cured within sixty days (or ninety days, if substantial progress is being made at the end of such sixty day period) of written notice by Rockwell to Rockwell Collins. (B) The license granted under this Section 3.10(b) will terminate automatically on the 180th day after a Rockwell Collins Change in Control. (v) From and after the Time of Distribution, Rockwell Collins will have all rights of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) in, and to the use of, the name, trademark, trade name and service mark "Collins" (other than in the combined format "Rockwell Collins") and all corporate symbols and logos related thereto and all derivatives thereof. (c) (i) Rockwell hereby grants to Rockwell Science Center an exclusive, non-transferable (other than by way of sublicenses to members of the Rockwell Science Center Group) license to utilize without obligation to pay royalties to Rockwell the names, trademarks, trade names, domain names and service marks "Rockwell Science Center", "Rockwell Scientific" and "Rockwell Scientific Company" (collectively, the "Rockwell Science Center Marks") in connection with the Rockwell Science Center Business as it exists on the Distribution Date. Unless and until the license granted under this Section 3.10(c) is terminated, Rockwell will not use, nor grant a license to any third party to use, the Rockwell Science Center Marks. (ii) As a condition to the license granted by this Section 3.10(c), Rockwell Science Center will use the Rockwell Science Center Marks (A) in connection with goods and services having a level of quality at least as high as that established by the Rockwell Science Center Business for similar goods or services made, sold or offered for sale prior to the Distribution Date and (B) in compliance with all applicable laws and regulations. (iii) Rockwell will have the right to exercise quality control over Rockwell Science Center's and any permitted sublicensee's presentation or use of the Rockwell Science Center Marks to that degree reasonably necessary, in the opinion of Rockwell, to maintain the validity and enforceability of the Rockwell Science Center Marks and the name, trademark, trade name or service mark "Rockwell" and to protect the goodwill associated with any of the foregoing. Rockwell Science Center will, upon request by Rockwell, submit to Rockwell materials of the Rockwell Science Center Group bearing 54 59 the Rockwell Science Center Marks as Rockwell may reasonably require to ensure Rockwell Science Center's and any permitted sublicensee's compliance with the obligations set forth in this Section 3.10(c). (iv) (A) Rockwell may terminate the license granted under this Section 3.10(c) in the event of a material breach of this Section 3.10(c) by any member of the Rockwell Science Center Group that has not been cured within sixty days (or ninety days, if substantial progress is being made at the end of such sixty day period) of written notice by Rockwell to Rockwell Science Center. (B) The license granted under this Section 3.10(c) will terminate automatically on the earlier of (x) the 180th day after a Rockwell Collins Change in Control or (y) the 180th day after the aggregate equity ownership interest of Rockwell and Rockwell Collins in Rockwell Science Center falls below 50% or (z) the date that Rockwell and Rockwell Collins, when acting in concert, lack the ability to control management of Rockwell Science Center. (d) In addition to, and without limiting the licenses granted in Section 3.10(b) and Section 3.10(c), Rockwell hereby grants to each of Rockwell Collins and Rockwell Science Center a non-exclusive, non-transferable (other than by way of sublicenses to members of the Rockwell Collins Group or the Rockwell Science Center Group, as the case may be) license to utilize without obligation to pay royalties to Rockwell the names, trademarks or trade names "Rockwell" and "Rockwell International" and any corporate symbol or logo related thereto in connection with stationery, supplies, labels, catalogs, vehicles, signs and products of the Rockwell Collins Business or the Rockwell Science Center Business, as the case may be, described in paragraphs (i) through (v) of this Section 3.10(d), subject to the terms and conditions of this Section 3.10(d) and Section 3.10(e), in each case in the same manner and to the same extent as such names, trademarks, trade names, corporate symbols or logos were used by the Rockwell Collins Business or the Rockwell Science Center Business, as the case may be, at any time within the five year period preceding the Distribution: (i) All stationery, invoices, purchase orders and other similar documents of a transactional nature, business cards, outside forms such as packing lists, labels, and cartons, forms for internal use only and product literature constituting Rockwell Collins Assets or Rockwell Science Center Assets, as the case may be, as of the Time of Distribution may be used for a period of one year following the Distribution Date or until the supply is exhausted, whichever is the first to occur. (ii) All vehicles constituting Rockwell Collins Assets or Rockwell Science Center Assets, as the case may be, as of the Time of Distribution may continue to be used without re-marking (except as to legally required permit numbers, license numbers, etc.) for a period not to exceed (A) one year following the Distribution Date or (B) the date of disposition of the vehicle, whichever is the first to occur. (iii) Within six months following the Distribution Date, Rockwell Collins and Rockwell Science Center, as the case may be, will cause to be removed from display at 55 60 all owned and leased facilities constituting Rockwell Collins Assets or Rockwell Science Center Assets, respectively, all demountable displays which contain the names, trademarks or trade names "Rockwell" or "Rockwell International" (other than, (x) in the case of Rockwell Collins, in the combined format "Rockwell Collins" and (y) in the case of Rockwell Science Center, in the combined format "Rockwell Science Center" or "Rockwell Scientific Company") or any corporate symbol related thereto and Rockwell Collins and Rockwell Science Center each will remove, or will cause the removal of, all signs displaying any such name, trademark, trade name or corporate symbol at all such facilities (A) located in the United States, no later than six months following the Distribution Date and (B) located outside the United States, no later than one year following the Distribution Date. (iv) Products of the Rockwell Collins Business and the Rockwell Science Center Business may have applied thereto the names, trademarks or trade names "Rockwell" or "Rockwell International" or any Rockwell corporate symbol or logo related thereto for a period of six months after the Distribution. (v) Products of the Rockwell Collins Business and the Rockwell Science Center Business in finished goods inventory and work in process (to the extent the same bear the names, trademarks or trade names "Rockwell" or "Rockwell International" at the Time of Distribution or have any such trademark or trade name applied to them in accordance with paragraph (v) above) may be disposed of without re-marking. (e) (i) Apart from the rights granted under Section 3.10(b), Section 3.10(c) and Section 3.10(d), no member of the Rockwell Collins Group or the Rockwell Science Center Group shall have any right, title or interest in, or to the use of, the Rockwell Collins Marks, the Rockwell Science Center Marks or the names, trademarks or trade names "Rockwell" or "Rockwell International" or any corporate symbol or logo related thereto, either alone or in combination with any other word, name, symbol, device, trademarks, or any combination thereof. Anything contained herein to the contrary notwithstanding, except as expressly permitted by Section 3.10(b), Section 3.10(c) and Section 3.10(d), in no event will any member of the Rockwell Collins Group or any member of the Rockwell Science Center Group utilize the Rockwell Collins Marks, the Rockwell Science Center Marks, as the case may be, or the names, trademarks, trade names or domain names "Rockwell" or "Rockwell International" or any corporate symbol or logo related thereto as a component of a company or trade name. Rockwell Collins and Rockwell Science Center each will not, and will cause each other member of the Rockwell Collins Group and the Rockwell Science Center Group, as the case may be, not to, challenge or contest the validity of such names, trademarks, trade names, domain names, corporate symbols or logos, the registration thereof or the ownership thereof by the Rockwell Automation Group. Rockwell Collins and Rockwell Science Center each will not, and will cause each other member of the Rockwell Collins Group and the Rockwell Science Center Group, as the case may be, not to, apply anywhere at any time for any registration as owner or exclusive licensee of such names, trademarks, trade names, domain names, corporate symbols or logos. If, notwithstanding the foregoing, any member of the Rockwell Collins Group or the Rockwell Science 56 61 Center Group develops, adopts or acquires, directly or indirectly, any right, title or interest in, or to the use of, any such names, trademarks, trade names, domain names, corporate symbols or logos in any jurisdiction, or any goodwill incident thereto, Rockwell Collins or Rockwell Science Center, as the case may be, will, upon the request of Rockwell, and for a nominal consideration of one dollar, assign or cause to be assigned to Rockwell or any designee of Rockwell, all right, title and interest in, and to the use of, such names, trademarks, trade names, domain names, corporate symbols or logos in any and all jurisdictions, together with any goodwill incident thereto. (ii) If the laws of any country require that any mark subject to Section 3.10(b), Section 3.10(c) or Section 3.10(d) or the right of any member of the Rockwell Collins Group or the Rockwell Science Center Group to use any mark as permitted by Section 3.10(b), Section 3.10(c) or Section 3.10(d) be registered in order to fully protect the Rockwell Automation Group, then Rockwell Collins or Rockwell Science Center, as the case may be, and Rockwell will cooperate in constituting such member of the Rockwell Collins Group or the Rockwell Science Center Group, as the case may be, as a registered user (or its equivalent) in each of the countries in which such registration is necessary. Any expenses for registering such mark or constituting such member of the Rockwell Collins Group or the Rockwell Science Center Group, as the case may be, as a registered user in any country shall be borne by Rockwell Collins or Rockwell Science Center, as the case may be. Any registration of such member of the Rockwell Collins Group or the Rockwell Science Center Group, as the case may be, as a registered user of any mark hereunder shall be expunged on termination of the period of permitted use under this Agreement or upon a breach or threatened breach by any member of the Rockwell Collins Group or the Rockwell Science Center Group, as the case may be, of the terms of this Section 3.10 and Rockwell Collins or Rockwell Science Center, as the case may be, will, upon request of Rockwell, take all necessary steps to cause such registration to be so expunged upon such termination or breach or threatened breach. (iii) Rockwell will have the right to terminate the license granted in Section 3.10(b) and/or Section 3.10(d) (with respect to Rockwell Collins) in the event of a material breach of this Section 3.10(e) by any member of the Rockwell Collins Group that has not been cured within sixty days (or ninety days, if substantial progress is being made at the end of such sixty day period) after written notice by Rockwell to Rockwell Collins. Rockwell will have the right to terminate the license granted in Section 3.10(c) and/or Section 3.10(d) (with respect to Rockwell Science Center) in the event of a material breach of this Section 3.10(e) by any member of the Rockwell Science Center Group that has not been cured within sixty days (or ninety days, if substantial progress is being made at the end of such sixty day period) after written notice by Rockwell to Rockwell Science Center. (iv) Rockwell Collins hereby constitutes and appoints Rockwell the true and lawful attorney of Rockwell Collins and its Subsidiaries to act as their attorney-in-fact to execute any documents and to take all necessary steps to cause Rockwell Collins and its Subsidiaries to perform any of their obligations set forth in this Section 3.10(e), provided however, that Rockwell will provide Rockwell Collins sixty days written notice prior to 57 62 executing such documents or commencing such steps. Rockwell Science Center hereby constitutes and appoints Rockwell the true and lawful attorney of Rockwell Science Center and its Subsidiaries to act as their attorney-in-fact to execute any documents and to take all necessary steps to cause Rockwell Science Center and its Subsidiaries to perform any of their obligations set forth in this Section 3.10(e), provided however, that Rockwell will provide Rockwell Science Center sixty days written notice prior to executing such documents or commencing such steps. (f) From and after the Distribution Date, the Rockwell Automation Group will not hold itself out as having an affiliation with the Rockwell Collins Group. SECTION 3.11 Consents. Prior to and after the Distribution Date, Rockwell, Rockwell Collins and Rockwell Science Center will, and will cause their respective Subsidiaries to, use their reasonable best efforts (as requested by any other party) to obtain, or to cause to be obtained, all Consents and to resolve all impracticalities of assignments or transfers necessary for the transfer of all Assets, Subsidiaries and Liabilities contemplated to be transferred pursuant to this Article III; provided, however, that none of Rockwell, Rockwell Collins or Rockwell Science Center or their respective Subsidiaries shall be obligated to pay any consideration or offer or grant any financial accommodation in connection therewith. Anything contained herein to the contrary notwithstanding, this Agreement shall not constitute an agreement to assign any Contract, License or Asset if an assignment or attempted assignment of the same without the Consent of any other party or parties thereto or other required Consent would constitute a breach thereof or of any applicable law or in any way impair the rights of any member of the Rockwell Automation Group, the Rockwell Collins Group or the Rockwell Science Center Group, as the case may be, thereunder. If any such Consent is not obtained or if an attempted assignment would be ineffective or would impair any member of a Group's rights under any such Contract, License or Asset so that the contemplated assignee hereunder (the "Recipient Party") would not receive all such rights, then (x) the party contemplated hereunder to assign such Contract, License or Asset (the "Assigning Party") will use reasonable best efforts (it being understood that such efforts shall not include any requirement of the Assigning Party to pay any consideration or offer or grant any financial accommodation) to provide or cause to be provided to the Recipient Party, to the extent permitted by law, the benefits of any such Contract, License or Asset and the Assigning Party will promptly pay or cause to be paid to the Recipient Party when received all moneys and properties received by the Assigning Party with respect to any such Contract, License or Asset and (y) the Recipient Party will pay, perform and discharge on behalf of the Assigning Party all of the Assigning Party's Liabilities thereunder in a timely manner and in accordance with the terms thereof. In addition, the Assigning Party will take such other actions (at the Recipient Party's expense) as may reasonably be requested by the Recipient Party in order to place the Recipient Party, insofar as reasonably possible, in the same position as if such Contract, License or Asset had been transferred as contemplated hereby and so all the benefits and burdens relating thereto, including possession, use, risk of loss, potential for gain and dominion, control and command, shall inure to the Recipient Party. If and when such Consents are obtained, the transfer of the applicable Contract, License or Asset shall be effected as promptly following the Time of Distribution as shall be practicable in accordance with the terms of this Agreement. To the extent that any transfers and assumptions contemplated by this Article III shall not have been consummated on or prior to the Time of Distribution, the parties shall 58 63 cooperate to effect such transfers as promptly following the Time of Distribution as shall be practicable, it nonetheless being agreed and understood by the parties that no party shall be liable in any manner to any other party for any failure of any of the transfers contemplated by this Article III to be consummated prior to the Time of Distribution. SECTION 3.12 Intellectual Property. (a) Effective immediately after the Time of Distribution, Rockwell, on behalf of itself and the Rockwell Subsidiaries, hereby grants to Rockwell Science Center a royalty-free, world-wide, irrevocable, non-exclusive license under all Intellectual Property (excluding trademarks, trade names, domain names, service marks, trade dress or any other form of trade identity) which constitutes Rockwell Automation Assets and which immediately after the Time of Distribution is either owned by the Rockwell Automation Group or under which the Rockwell Automation Group has a right to license without the payment of royalties to a third party to make, have made, use, import, sell or otherwise dispose of products, or to practice any process in connection therewith, in the conduct of the Rockwell Science Center Business (as such business is being conducted at the Time of Distribution); said non-exclusive license being transferable only by sublicenses (to the extent permitted in the case of any restricted grant to Rockwell or a Rockwell Subsidiary, as a licensee) to members of the Rockwell Science Center Group and in connection with the sale or other disposition of all or any part of the Rockwell Science Center Business to which such Intellectual Property relates. To the extent that the Rockwell Science Center Group does not have copies of any information or materials relating to Intellectual Property licensed under this Section 3.12(a) that are essential to exercising such rights, Rockwell will, upon reasonable request, supply to the Rockwell Science Center Group copies of any such information or materials relating to such Intellectual Property. In no event shall Rockwell Science Center use the subject matter of any Intellectual Property licensed under this Section 3.12(a) in a manner that is competitive with the Rockwell Automation Business as such business is being conducted at the Time of Distribution, or any extensions or expansions thereof occurring in the ordinary course of business, except that Rockwell Science Center shall be able to continue to use the subject matter of such Intellectual Property in a manner that is competitive with the Rockwell Automation Business in any such extensions or expansions of the Rockwell Automation Business to the extent (but only to the extent) such Intellectual Property was used by Rockwell Science Center prior to such extensions or expansions of the Rockwell Automation Business. (b) (i) Effective immediately after the Time of Distribution, Rockwell Science Center, on behalf of itself and the Rockwell Science Center Subsidiaries, hereby grants to Rockwell a royalty-free, world-wide, irrevocable, non-exclusive license under all Intellectual Property (excluding trademarks, trade names, domain names, service marks, trade dress or any other form of trade identity) which constitutes Rockwell Science Center Assets and which immediately after the Time of Distribution is either owned by the Rockwell Science Center Group or under which the Rockwell Science Center Group has a right to license without the payment of royalties to a third party (collectively, "Rockwell Science Center IP") to make, have made, use, import, sell or otherwise dispose of products, or to practice any process in connection therewith, in the conduct of the Rockwell Automation Business (as such business is being conducted at the Time of 59 64 Distribution, or any extensions or expansions thereof occurring in the ordinary course of business); said non-exclusive license being transferable only (A) by sublicenses (to the extent permitted in the case of any restricted grant to Rockwell Science Center or a Rockwell Science Center Subsidiary, as a licensee) to members of the Rockwell Automation Group, (B) by sublicenses (to the extent permitted in the case of any restricted grant to Rockwell Science Center or a Rockwell Science Center Subsidiary, as a licensee) to any Person, but only in cases where the creation of Rockwell Science Center IP was funded in whole or in part by the Rockwell Automation Business prior to the Time of Distribution, and (C) in connection with the sale or other disposition of all or any part of the Rockwell Automation Business to which such Intellectual Property relates. To the extent that the Rockwell Automation Group does not have copies of any information or materials relating to Intellectual Property licensed under this Section 3.12(b) that are essential to exercising such rights, Rockwell Science Center will, upon reasonable request, supply to the Rockwell Automation Group copies of any such information or materials relating to such Intellectual Property. (ii) In addition to any other right granted to Rockwell in this Section 3.12(b), after the Time of Distribution and upon the written request of Rockwell or any member of the Rockwell Automation Group, Rockwell Science Center, on behalf of itself and the Rockwell Science Center Subsidiaries, agrees to cooperate, discuss and negotiate in good faith with Rockwell with respect to granting Rockwell or a Rockwell Subsidiary, on commercially reasonable terms, the right to grant any Person a world-wide, non-exclusive license under Rockwell Science Center IP or any part thereof, to make, have made, use, import, sell or otherwise dispose of products, or to practice any process in connection therewith, which is not permitted by Section 3.12(b)(i). (iii) Rockwell Science Center hereby covenants not to (and to cause the Rockwell Science Center Subsidiaries not to) assert any claims or rights, bring any suit, or institute any other action against the Rockwell Automation Group or any permitted or otherwise lawful transferee of products and services of the Rockwell Automation Group or any Person in privity with any member of the Rockwell Automation Group under any contract concerning the making, using or selling of products or services for the Rockwell Automation Group, based upon any infringement of any Intellectual Property (excluding trademarks, trade names, domain names, service marks, trade dress or any other form of trade identity) which constitutes Rockwell Science Center Assets and which immediately after the Time of Distribution is either owned by the Rockwell Science Center Group or under which the Rockwell Science Center Group has a right to license or grant immunity from suit without payment of royalties to a third party. This covenant not to sue shall extend in perpetuity to (i) the Rockwell Automation Group and (ii) assignees of the Rockwell Automation Group, but only in connection with the sale or other disposition of all or any part of the Rockwell Automation Business to which such Intellectual Property relates. All Intellectual Property covered by the covenant in this Section 3.12(b)(iii) shall be transferred, whether by assignment, license or otherwise, subject to this covenant and all transferees of such Intellectual Property shall take such assignment, license or other transfer subject to this covenant. 60 65 (c) Effective immediately after the Time of Distribution, Rockwell Collins, on behalf of itself and the Rockwell Collins Subsidiaries, hereby grants to Rockwell Science Center a royalty-free, world-wide, irrevocable, non-exclusive license under all Intellectual Property (excluding trademarks, trade names, domain names, service marks, trade dress or any other form of trade identity) which constitutes Rockwell Collins Assets and which immediately after the Time of Distribution is either owned by the Rockwell Collins Group or under which the Rockwell Collins Group has a right to license without the payment of royalties to a third party to make, have made, use, import, sell or otherwise dispose of products, or to practice any process in connection therewith, in the conduct of the Rockwell Science Center Business (as such business is being conducted at the Time of Distribution); said non-exclusive license being transferable only by sublicenses (to the extent permitted in the case of any restricted grant to Rockwell Collins or a Rockwell Collins Subsidiary, as a licensee) to members of the Rockwell Science Center Group and in connection with the sale or other disposition of all or any part of the Rockwell Science Center Business to which such Intellectual Property relates. To the extent that the Rockwell Science Center Group does not have copies of any information or materials relating to Intellectual Property licensed under this Section 3.12(c) that are essential to exercising such rights, Rockwell Collins will, upon reasonable request, supply to the Rockwell Science Center Group copies of any such information or materials relating to such Intellectual Property. In no event shall Rockwell Science Center use any subject matter of the Intellectual Property licensed under this Section 3.12(c) in a manner that is competitive with the Rockwell Collins Business as such business is being conducted at the Time of Distribution, or any extensions or expansions thereof occurring in the ordinary course of business, except that Rockwell Science Center shall be able to continue to use the subject matter of such Intellectual Property in a manner that is competitive with the Rockwell Collins Business in any such extensions or expansions of the Rockwell Collins Business to the extent (but only to the extent) such Intellectual Property was used by Rockwell Science Center prior to such extensions or expansions of the Rockwell Collins Businesses. (d) (i) Effective immediately after the Time of Distribution, Rockwell Science Center, on behalf of itself and the Rockwell Science Center Subsidiaries, hereby grants to Rockwell Collins a royalty-free, world-wide, irrevocable, non-exclusive license under all Rockwell Science Center IP to make, have made, use, import, sell or otherwise dispose of products, or to practice any process in connection therewith, in the conduct of the Rockwell Collins Business (as such business is being conducted at the Time of Distribution, or any extensions or expansions thereof occurring in the ordinary course of business, but excluding any extensions or expansions occurring as a result of, or at any time after, a Rockwell Collins Change in Control); said non-exclusive license being transferable only (A) by sublicenses (to the extent permitted in the case of any restricted grant to Rockwell Science Center or a Rockwell Science Center Subsidiary, as a licensee) to members of the Rockwell Collins Group, (B) by sublicenses (to the extent permitted in the case of any restricted grant to Rockwell Science Center or a Rockwell Science Center Subsidiary, as a licensee) to any Person, but only in cases where the creation of Rockwell Science Center IP was funded in whole or in part by the Rockwell Collins Business prior to the Time of Distribution, and (C) in connection with the sale or other disposition of all or any part of the Rockwell Collins Business to which such Intellectual Property relates. To the extent that the Rockwell Collins Group does not have copies of any information or 61 66 materials relating to Intellectual Property licensed under this Section 3.12(d) that are essential to exercising such rights, Rockwell Science Center will, upon reasonable request, supply to the Rockwell Collins Group copies of any such information or materials relating to such Intellectual Property. (ii) In addition to any other right granted to Rockwell Collins in this Section 3.12(d), after the Time of Distribution and upon the written request of Rockwell Collins or any Rockwell Collins Subsidiary, Rockwell Science Center, on behalf of itself and the Rockwell Science Center Subsidiaries, agrees to cooperate, discuss and negotiate in good faith with Rockwell Collins with respect to granting Rockwell Collins or a Rockwell Collins Subsidiary, on commercially reasonable terms, the right to grant any Person a world-wide, non-exclusive license under Rockwell Science Center IP or any part thereof, to make, have made, use, import, sell or otherwise dispose of products, or to practice any process in connection therewith, which is not permitted by Section 3.12(d)(i). (iii) Rockwell Science Center hereby covenants not to (and to cause the Rockwell Science Center Subsidiaries not to) assert any claims or rights, bring any suit, or institute any other action against the Rockwell Collins Group or any permitted or otherwise lawful transferee of products and services of the Rockwell Collins Group or any Person in privity with any member of the Rockwell Collins Group under any contract concerning the making, using or selling of products or services for the Rockwell Collins Group, based upon any infringement of any Intellectual Property (excluding trademarks, trade names, domain names, service marks, trade dress or any other form of trade identity) which constitutes Rockwell Science Center Assets and which immediately after the Time of Distribution is either owned by the Rockwell Science Center Group or under which the Rockwell Science Center Group has a right to license or grant immunity from suit without payment of royalties to a third party. This covenant not to sue shall extend in perpetuity to (i) the Rockwell Collins Group and (ii) assignees of the Rockwell Collins Group, but only in connection with the sale or other disposition of all or any part of the Rockwell Collins Business to which such Intellectual Property relates. All Intellectual Property covered by the covenant in this Section 3.12(d)(iii) shall be transferred, whether by assignment, license or otherwise, subject to this covenant and all transferees of such Intellectual Property shall take such assignment, license or other transfer subject to this covenant. (e) Rockwell hereby covenants not to (and to cause the Rockwell Subsidiaries not to) assert any claims or rights, bring any suit, or institute any other action against the Rockwell Collins Group or any Person in the chain of title of products and services of the Rockwell Collins Group, based upon any infringement of any Intellectual Property (excluding trademarks, trade names, domain names, service marks, trade dress or any other form of trade identity) which constitutes Rockwell Automation Assets and which immediately after the Time of Distribution is either owned by the Rockwell Automation Group or under which the Rockwell Automation Group has a right to license or grant immunity from suit without payment of royalties to a third party which might occur as a result of any manufacture, use, import, sale or other disposition by the Rockwell Collins Group of products or services after the Time of 62 67 Distribution in the conduct of the Rockwell Collins Business (as such business is being conducted at the Time of Distribution, or any extensions or expansions thereof occurring in the ordinary course of business, but excluding any extensions or expansions occurring as a result of, or at any time after, a Rockwell Collins Change in Control). This covenant not to sue shall extend in perpetuity to (i) the Rockwell Collins Group and (ii) assignees of the Rockwell Collins Group, but only in connection with the sale or other disposition of all or any part of the Rockwell Collins Business to which such Intellectual Property relates. All Intellectual Property covered by the covenant in this Section 3.12(e) shall be transferred, whether by assignment, license or otherwise, subject to this covenant and all transferees of such Intellectual Property shall take such assignment, license or other transfer subject to this covenant. (f) Rockwell Collins hereby covenants not to (and to cause the Rockwell Collins Subsidiaries not to) assert any claims or rights, bring any suit, or institute any other action against the Rockwell Automation Group or any Person in the chain of title of products and services of the Rockwell Automation Group, based upon any infringement of any Intellectual Property (excluding trademarks, trade names, domain names, service marks, trade dress or any other form of trade identity) which constitutes Rockwell Collins Assets and which immediately after the Time of Distribution is either owned by the Rockwell Collins Group or under which the Rockwell Collins Group has a right to license or grant immunity from suit without payment of royalties to a third party which might occur as a result of any manufacture, use, import, sale or other disposition by the Rockwell Automation Group of products or services after the Time of Distribution in the conduct of the Rockwell Automation Business (as such business is being conducted at the Time of Distribution, or any extensions or expansions thereof occurring in the ordinary course of business). This covenant not to sue shall extend in perpetuity to (i) the Rockwell Automation Group and (ii) assignees of the Rockwell Automation Group, but only in connection with the sale or other disposition of all or any part of the Rockwell Automation Business to which such Intellectual Property relates. All Intellectual Property covered by the covenant in this Section 3.12(f) shall be transferred, whether by assignment, license or otherwise, subject to this covenant and all transferees of such Intellectual Property shall take such assignment, license or other transfer subject to this covenant. (g) (i) For purposes of this Section 3.12(g), the following terms will have the following definitions: (A) "Administrative Services" means services pertaining to personnel, payroll, property management, benefits, human resource management, financial planning, case docketing and management, contract and subcontract management, facilities management, proposal activities and other similar services. (B) "Administrative Services Software" means software originated internally and owned by Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) prior to the Time of Distribution and relating to the provision of Administrative Services to business units of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) immediately prior to the Time of Distribution, regardless of where ownership of such software vests after the Time of 63 68 Distribution. Administrative Services Software also shall include materials and documentation supplied by one party to the other pursuant to clause (iv) of this Section 3.12(g). (C) "Transition Period" means the period from the Time of Distribution until the termination or expiration of the provision of services pursuant to each of the Transition Agreement and the Continuing Services Agreements. (ii) Anything contained herein to the contrary notwithstanding, the following licenses shall govern Administrative Services Software: (A) Effective as of the Time of Distribution, Rockwell, on behalf of itself and the Rockwell Subsidiaries, hereby grants to the Rockwell Collins Group and the Rockwell Science Center Group a royalty-free, world-wide, irrevocable non-exclusive license to use Administrative Services Software which constitutes Rockwell Automation Assets and which immediately after the Time of Distribution is either owned by the Rockwell Automation Group or under which the Rockwell Automation Group has a right to license without the payment of royalties to a third party, but only for the internal business purposes of the Rockwell Collins Group or the Rockwell Science Center Group, as the case may be, including the right to sublicense only to (x) members of the Rockwell Collins Group or the Rockwell Science Center Group, as the case may be, and (y) service providers to use the Administrative Services Software for or on behalf of the Rockwell Collins Group or the Rockwell Science Center Group, as the case may be. (B) Effective as of the Time of Distribution, Rockwell Collins, on behalf of itself and the Rockwell Collins Subsidiaries, hereby grants to the Rockwell Automation Group and the Rockwell Science Center Group a royalty-free, world-wide, irrevocable non-exclusive license to use Administrative Services Software which constitutes Rockwell Collins Assets and which immediately after the Time of Distribution is either owned by the Rockwell Collins Group or under which the Rockwell Collins Group has a right to license without the payment of royalties to a third party, but only for the internal business purposes of the Rockwell Automation Group or the Rockwell Science Center Group, as the case may be, including the right to sublicense only to (x) members of the Rockwell Automation Group or the Rockwell Science Center Group, as the case may be, and (y) service providers to use the Administrative Services Software for or on behalf of the Rockwell Automation Group or the Rockwell Science Center Group, as the case may be. (C) Effective as of the Time of Distribution, Rockwell Science Center, on behalf of itself and the Rockwell Science Center Subsidiaries, hereby grants to the Rockwell Automation Group and the Rockwell Collins Group a royalty-free, world-wide, irrevocable non-exclusive license to use Administrative Services Software which constitutes Rockwell Science Center Assets and which immediately after the Time of Distribution is either owned by the Rockwell Science Center Group or under which the Rockwell Science Center Group has a right to license without the payment of royalties to a third party, but only for the internal business purposes of the Rockwell Automation 64 69 Group or the Rockwell Collins Group, as the case may be, including the right to sublicense only to (x) members of the Rockwell Automation Group or the Rockwell Collins Group, as the case may be, and (y) service providers to use the Administrative Services Software for or on behalf of the Rockwell Automation Group or the Rockwell Collins Group, as the case may be. (D) Except as set forth in this paragraph (ii), the licenses granted pursuant to this Section 3.12(g) do not include the right to sublicense. Software originated or maintained during the Transition Period by a party and relating to the provision of Administrative Services to any other party pursuant to the Transition Agreement or the Continuing Services Agreements shall be considered Administrative Services Software subject to the above licenses, provided, that the party to be licensed has paid a mutually agreeable share of the origination and/or maintenance costs for such software and requests during the Transition Period that such software be subject to such licenses. (iii) Each party shall have the right to use, disclose, perform, display, copy, distribute and make derivatives of Administrative Services Software within the scope of the licenses granted herein. Title to Administrative Services Software and all rights therein, including all rights in patents, copyrights and trade secrets and any other intellectual property rights applicable thereto, shall remain vested in the party to which ownership is allocated pursuant to this Agreement. Notwithstanding anything to the contrary contained herein, each licensed party agrees that it will not use, copy, disclose, sell, assign or sublicense, or otherwise transfer Administrative Services Software licensed to it under this Section 3.12(g) or any derivatives thereof, except as expressly provided in this Section 3.12(g). (iv) To the extent that a licensed party does not have copies of any Administrative Services Software or materials and documentation (such as source code listings, flow charts, user guides and programmer's guides) relating to the operation and maintenance of such Administrative Services Software to which another applicable party has ownership, such owning party shall, as soon as practicable after request of the licensed party, supply to the licensed party copies of such Administrative Services Software and any related operating and maintenance materials or documentation existing as of the Time of Distribution. (v) In the event that Administrative Services Software is used by the owner in the ordinary course of its business either associated or bundled with software owned or controlled by a third party (e.g., as a suite of software), without which the Administrative Services Software would be wholly or partly inoperable or otherwise unfit for its intended purposes, the grant of the licenses under the provisions of this Section 3.12(g) shall not be construed as an implied license to use the software of such a third party or as an undertaking on the part of the owner of the Administrative Services Software to obtain a license to permit the use of such third party software. (h) (i) Rockwell makes no representations or warranties of any kind with respect to the validity, scope or enforceability of any Intellectual Property of Rockwell or the Rockwell Subsidiaries subject to this Section 3.12 and none of Rockwell or the Rockwell Subsidiaries has any obligation to file or prosecute any patent applications or maintain any 65 70 patents in force in connection therewith. Notwithstanding anything contained herein to the contrary, this Section 3.12 will not be applicable to any rights in, and to the use of, the names, trademarks, trade names and service marks "Rockwell" and "Rockwell International" and all corporate symbols and logos related thereto and all names, trademarks, trade names and service marks which include the words "Rockwell" or "Rockwell International" or any derivative thereof. (ii) Rockwell Collins makes no representations or warranties of any kind with respect to the validity, scope or enforceability of any Intellectual Property of Rockwell Collins or the Rockwell Collins Subsidiaries subject to this Section 3.12 and none of Rockwell Collins or the Rockwell Collins Subsidiaries has any obligation to file or prosecute any patent applications or maintain any patents in force in connection therewith. (iii) Rockwell Science Center makes no representations or warranties of any kind with respect to the validity, scope or enforceability of any Intellectual Property of Rockwell Science Center or the Rockwell Science Center Subsidiaries subject to this Section 3.12 and none of Rockwell Science Center or the Rockwell Science Center Subsidiaries has any obligation to file or prosecute any patent applications or maintain any patents in force in connection therewith. SECTION 3.13 Software and Other License Agreements. If after the Time of Distribution, Rockwell Collins (or any member of the Rockwell Collins Group) or Rockwell Science Center (or any member of the Rockwell Science Center Group), as the case may be, no longer has licensee rights under any software or other license agreement of Rockwell (or any member of the Rockwell Automation Group) (a "Rockwell Automation License Agreement") that, prior to the Time of Distribution, was used in the conduct of the Rockwell Collins Business or the Rockwell Science Center Business, as the case may be, (i) because such license agreement does not constitute a Rockwell Collins Asset or a Rockwell Science Center Asset, as the case may be, (ii) because the transfer of, or sublicense under such Rockwell Automation License Agreement required the consent of a third party and such consent was not obtained or (iii) for any other reason, then Rockwell Collins or Rockwell Science Center, as the case may be, shall be responsible for all costs and expenses incurred in connection with the procurement of new license agreements to replace any such Rockwell Automation License Agreements. SECTION 3.14 Charitable Entities. Prior to the Time of Distribution, Rockwell Collins shall have established the Rockwell Collins Charitable Corporation. Promptly after all required governmental approvals applicable thereto are obtained: (i) Rockwell shall cause to be transferred from the Rockwell Charitable Trust to the Rockwell Collins Charitable Corporation an aggregate amount equal to the sum of (A) the amount of the Rockwell Collins Charitable Commitments outstanding at the time of such transfer, plus (B) 40% of the remainder of (x) the assets of the Rockwell Charitable Trust at the Time of Distribution, minus (y) $5,034,000; and (ii) Rockwell shall cause to be transferred to the Rockwell Collins Charitable Corporation, and Rockwell and Rockwell Collins shall cause the Rockwell Collins 66 71 Charitable Corporation to assume, the Rockwell Collins Charitable Commitments that remain outstanding at the time of such transfer and assumption. ARTICLE IV MUTUAL RELEASE; INDEMNIFICATION SECTION 4.01 Mutual Release. Effective as of the Time of Distribution and except as otherwise specifically set forth in the Transaction Agreements, each of Rockwell, on behalf of itself and the Rockwell Subsidiaries, Rockwell Collins, on behalf of itself and the Rockwell Collins Subsidiaries, and Rockwell Science Center, on behalf of itself and the Rockwell Science Center Subsidiaries, hereby releases and forever discharges each other party and its Subsidiaries, and its and their respective officers, directors, agents, record and beneficial security holders (including trustees and beneficiaries of trusts holding such securities), advisors and Representatives (in each case, in their respective capacities as such) and their respective heirs, executors, administrators, successors and assigns, of and from all debts, demands, actions, causes of action, suits, accounts, covenants, contracts, agreements, damages, claims and Liabilities whatsoever of every name and nature, both in law and in equity, which the releasing party has or ever had or ever will have, which arise out of or relate to events, circumstances or actions taken by such other party occurring or failing to occur or any conditions existing at or prior to the Time of Distribution; provided, however, that the foregoing general release shall not apply to (i) any Liabilities or other obligations (including Liabilities with respect to payment, reimbursement, indemnification or contribution) under the Transaction Agreements or assumed, transferred, assigned, allocated or arising under any of the Transaction Agreements (including any Liability that the parties may have with respect to payment, performance, reimbursement, indemnification or contribution pursuant to any Transaction Agreement for claims brought against the parties by third Persons) and the foregoing release will not affect any party's right to enforce the Transaction Agreements in accordance with their terms, (ii) any Liability arising from or relating to any agreement, arrangement, commitment or undertaking described in Section 3.04(b)(ii) (including Ordinary Course Intercompany Arrangements), or (iii) any Liability the release of which would result in the release of any Person other than a Person released pursuant to this Section 4.01 (provided, that the parties agree not to bring suit or permit any of their Subsidiaries to bring suit against any member of any other Group with respect to any Liability to the extent such member of the other Group would be released with respect to such Liability by this Section 4.01 but for this clause (iii)). SECTION 4.02 Indemnification by Rockwell. Subject to the provisions of this Article IV, Rockwell shall indemnify, defend and hold harmless the Rockwell Collins Indemnitees and the Rockwell Science Center Indemnitees from and against, and pay or reimburse, as the case may be, the Rockwell Collins Indemnitees and the Rockwell Science Center Indemnitees for, all Indemnifiable Losses, as incurred, suffered by any Rockwell Collins Indemnitee or Rockwell Science Center Indemnitee, as the case may be, based upon, arising out of or relating to the following (except that paragraph (b) below shall not apply to Rockwell Science Center Indemnitees): 67 72 (a) the Rockwell Automation Liabilities (including the failure by Rockwell or any other member of the Rockwell Automation Group to pay, perform or otherwise discharge such Liabilities in accordance with their terms), whether such Indemnifiable Losses are based upon, arise out of or relate to events, occurrences, actions, omissions, facts, circumstances or conditions occurring, existing or asserted before, at or after the Time of Distribution; (b) any untrue statement or alleged untrue statement of a material fact contained in the sections of the Form 10 listed on Schedule 4.02(b), or any omission or alleged omission to state in such sections a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; but only in each case with respect to information relating to the Rockwell Automation Group provided by Rockwell expressly for use in the sections of the Form 10 listed on Schedule 4.02(b); (c) the breach by any member of the Rockwell Automation Group of any agreement or covenant contained in a Transaction Agreement which does not by its express terms expire at the Time of Distribution; or (d) the enforcement by the Rockwell Collins Indemnitees or the Rockwell Science Center Indemnitees, as the case may be, of their rights to be indemnified, defended and held harmless under this Section 4.02. SECTION 4.03 Indemnification by Rockwell Collins. Subject to the provisions of this Article IV, Rockwell Collins shall indemnify, defend and hold harmless the Rockwell Automation Indemnitees and the Rockwell Science Center Indemnitees from and against, and pay or reimburse, as the case may be, the Rockwell Automation Indemnitees and the Rockwell Science Center Indemnitees for, all Indemnifiable Losses, as incurred, suffered by any Rockwell Automation Indemnitee or Rockwell Science Center Indemnitee, as the case may be, based upon, arising out of or relating to the following (except that paragraphs (b) and (d) below will not apply to Rockwell Science Center Indemnitees): (a) the Rockwell Collins Liabilities (including the failure by Rockwell Collins or any other member of the Rockwell Collins Group to pay, perform or otherwise discharge Rockwell Collins Liabilities in accordance with their terms), whether such Indemnifiable Losses are based upon, arise out of or relate to events, occurrences, actions, omissions, facts, circumstances or conditions occurring, existing or asserted before, at or after the Time of Distribution; (b) any untrue statement or alleged untrue statement of a material fact contained in the Form 10, or any omission or alleged omission to state in the Form 10 a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except in each case with respect to information relating to the Rockwell Automation Group provided by Rockwell expressly for use in the sections of the Form 10 listed on Schedule 4.02(b); 68 73 (c) the breach by any member of the Rockwell Collins Group of any agreement or covenant contained in a Transaction Agreement which does not by its express terms expire at the Time of Distribution; (d) the use by members of the Rockwell Collins Group of any names, trademarks, trade names, domain names or corporate symbols or logos pursuant to Section 3.10(b) or Section 3.10(d); or (e) the enforcement by the Rockwell Automation Indemnitees or the Rockwell Science Center Indemnitees, as the case may be, of their rights to be indemnified, defended and held harmless under this Section 4.03. SECTION 4.04 Indemnification by Rockwell Science Center. Subject to the provisions of this Article IV, Rockwell Science Center shall indemnify, defend and hold harmless the Rockwell Automation Indemnitees and the Rockwell Collins Indemnitees from and against, and pay or reimburse, as the case may be, the Rockwell Automation Indemnitees and the Rockwell Collins Indemnitees for, all Indemnifiable Losses, as incurred, suffered by any Rockwell Automation Indemnitee or Rockwell Collins Indemnitee, as the case may be, based upon, arising out of or relating to the following (except that paragraph (c) below will not apply to Rockwell Collins Indemnitees): (a) the Rockwell Science Center Liabilities (including the failure by Rockwell Science Center or any other member of the Rockwell Science Center Group to pay, perform or otherwise discharge Rockwell Science Center Liabilities in accordance with their terms), whether such Indemnifiable Losses are based upon, arise out of or relate to or are otherwise in connection with events, occurrences, actions, omissions, facts, circumstances or conditions occurring, existing or asserted before, at or after the Time of Distribution; (b) the breach by any member of the Rockwell Science Center Group of any agreement or covenant contained in a Transaction Agreement which does not by its express terms expire at the Time of Distribution; (c) the use by members of the Rockwell Science Center Group of any names, trademarks, trade names, domain names or corporate symbols or logos pursuant to Section 3.10(c) or Section 3.10(d); or (d) the enforcement by the Rockwell Automation Indemnitees or the Rockwell Collins Indemnitees, as the case may be, of their rights to be indemnified, defended and held harmless under this Section 4.04. SECTION 4.05 Limitations on Indemnification Obligations. (a) The amount which any party (an "Indemnifying Party") is or may be required to pay to an Indemnitee in respect of Indemnifiable Losses or other Liability for which indemnification is provided under this Agreement shall be reduced by any amounts actually received (including Insurance Proceeds actually received) by or on behalf of such Indemnitee 69 74 (net of increased insurance premiums and charges related directly and solely to the related Indemnifiable Losses and costs and expenses (including reasonable legal fees and expenses) incurred by such Indemnitee in connection with seeking to collect and collecting such amounts) in respect of such Indemnifiable Losses or other Liability (such net amounts are referred to herein as "Indemnity Reduction Amounts"). If any Indemnitee receives any Indemnity Reduction Amounts in respect of an Indemnifiable Loss for which indemnification is provided under this Agreement after the full amount of such Indemnifiable Loss has been paid by an Indemnifying Party or after an Indemnifying Party has made a partial payment of such Indemnifiable Loss and such Indemnity Reduction Amounts exceeds the remaining unpaid balance of such Indemnifiable Loss, then the Indemnitee shall promptly remit to the Indemnifying Party an amount equal to the excess (if any) of (A) the amount theretofore paid by the Indemnifying Party in respect of such Indemnifiable Loss, less (B) the amount of the indemnity payment that would have been due if such Indemnity Reduction Amounts in respect thereof had been received before the indemnity payment was made. An insurer or other third party who would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto or, solely by virtue of the indemnification provisions hereof, have any subrogation rights with respect thereto, it being expressly understood and agreed that no insurer or any other third party shall be entitled to any benefit they would not be entitled to receive in the absence of the indemnification provisions by virtue of the indemnification provisions hereof. (b) In determining the amount of any Indemnifiable Losses, such amount shall be (i) reduced to take into account any net Tax benefit realized by the Indemnitee arising from the incurrence or payment by the Indemnitee of such Indemnifiable Losses and (ii) increased to take into account any net Tax cost incurred by the Indemnitee as a result of the receipt or accrual of payments hereunder (grossed-up for such increase), in each case determined by treating the Indemnitee as recognizing all other items of income, gain, loss, deduction or credit before recognizing any item arising from such Indemnifiable Losses. It is the intention of the parties to this Agreement that indemnity payments made pursuant to this Agreement are to be treated as relating back to the Distribution as an adjustment to capital (i.e., capital contribution or distribution), and the parties shall not take any position inconsistent with such intention before any Tax Authority (as defined in the Tax Allocation Agreement), except to the extent that a final determination (as defined in Section 1313 of the Code) with respect to the recipient party causes any such payment not to be so treated. SECTION 4.06 Procedures Relating to Indemnification. (a) If a claim or demand is made against an Indemnitee, or an Indemnitee shall otherwise learn of an assertion, by any Person who is not a party to this Agreement (or an Affiliate thereof) as to which an Indemnifying Party may be obligated to provide indemnification pursuant to this Agreement (a "Third Party Claim"), such Indemnitee will notify the Indemnifying Party in writing, and in reasonable detail, of the Third Party Claim reasonably promptly after becoming aware of such Third Party Claim; provided, however, that failure to give such notification will not affect the indemnification provided hereunder except to the extent the Indemnifying Party shall have been actually prejudiced as a result of such failure. Thereafter, the Indemnitee will deliver to the Indemnifying Party, promptly after the 70 75 Indemnitee's receipt thereof, copies of all material notices and documents (including court papers) received or transmitted by the Indemnitee relating to the Third Party Claim. (b) If a Third Party Claim is made against an Indemnitee, the Indemnifying Party will be entitled to participate in or to assume the defense thereof (in either case, at the expense of the Indemnifying Party) with counsel selected by the Indemnifying Party and reasonably satisfactory to the Indemnitee. Should the Indemnifying Party so elect to assume the defense of a Third Party Claim, the Indemnifying Party will not be liable to the Indemnitee for any legal or other expenses subsequently incurred by the Indemnitee in connection with the defense thereof; provided, that if in the Indemnitee's reasonable judgment a conflict of interest exists in respect of such claim or if the Indemnifying Party shall have assumed responsibility for such claim with any reservations or exceptions, such Indemnitee will have the right to employ separate counsel reasonably satisfactory to the Indemnifying Party to represent such Indemnitee and in that event the reasonable fees and expenses of such separate counsel (but not more than one separate counsel for all Indemnitees similarly situated) shall be paid by such Indemnifying Party. If the Indemnifying Party assumes the defense of any Third Party Claim, the Indemnitee will have the right to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the Indemnifying Party, it being understood that the Indemnifying Party will control such defense. The Indemnifying Party will be liable for the fees and expenses of counsel employed by the Indemnitee for any period during which the Indemnifying Party has failed to assume the defense thereof. If the Indemnifying Party assumes the defense of any Third Party Claim, the Indemnifying Party will promptly supply to the Indemnitee copies of all material correspondence and documents relating to or in connection with such Third Party Claim and keep the Indemnitee fully informed of all material developments relating to or in connection with such Third Party Claim (including providing to the Indemnitee on request updates and summaries as to the status thereof). If the Indemnifying Party chooses to defend a Third Party Claim, the parties hereto will cooperate in the defense thereof (such cooperation to be at the expense, including reasonable legal fees and expenses, of the Indemnifying Party), which cooperation shall include the retention in accordance with this Agreement and (upon the Indemnifying Party's request) the provision to the Indemnifying Party of records and information which are reasonably relevant to such Third Party Claim, and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. (c) No Indemnifying Party will consent to any settlement, compromise or discharge (including the consent to entry of any judgment) of any Third Party Claim without the Indemnitee's prior written consent (which consent will not be unreasonably withheld); provided, that if the Indemnifying Party assumes the defense of any Third Party Claim, the Indemnitee will agree to any settlement, compromise or discharge of such Third Party Claim which the Indemnifying Party may recommend and which by its terms obligates the Indemnifying Party to pay the full amount of Indemnifiable Losses in connection with such Third Party Claim and unconditionally and irrevocably releases the Indemnitee and its Affiliates completely from all Liability in connection with such Third Party Claim; provided, however, that the Indemnitee may refuse to agree to any such settlement, compromise or discharge (x) that provides for injunctive or other nonmonetary relief affecting the Indemnitee or any of its Affiliates or (y) that, in the reasonable opinion of the Indemnitee, would otherwise materially adversely affect the 71 76 Indemnitee or any of its Affiliates. Whether or not the Indemnifying Party shall have assumed the defense of a Third Party Claim, the Indemnitee will not (unless required by law) admit any liability with respect to, or settle, compromise or discharge, such Third Party Claim without the Indemnifying Party's prior written consent (which consent will not be unreasonably withheld). (d) Any claim on account of Indemnifiable Losses which does not involve a Third Party Claim will be asserted by reasonably prompt written notice given by the Indemnitee to the Indemnifying Party from whom such indemnification is sought. The failure by any Indemnitee so to notify the Indemnifying Party will not relieve the Indemnifying Party from any liability which it may have to such Indemnitee under this Agreement, except to the extent that the Indemnifying Party shall have been actually prejudiced by such failure. (e) In the event of payment in full by an Indemnifying Party to any Indemnitee in connection with any Third Party Claim, such Indemnifying Party will be subrogated to and shall stand in the place of such Indemnitee as to any events or circumstances in respect of which such Indemnitee may have any right or claim relating to such Third Party Claim against any claimant or plaintiff asserting such Third Party Claim or against any other Person. Such Indemnitee will cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any subrogated right or claim. SECTION 4.07 Remedies Cumulative. Subject to the provisions of Section 6.06, the remedies provided in this Article IV shall be cumulative and shall not preclude assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against any Indemnifying Party. SECTION 4.08 Survival of Indemnities. The obligations of each of Rockwell, Rockwell Collins and Rockwell Science Center under this Article IV will not terminate at any time and will survive the sale or other transfer by any party of any assets or businesses or the assignment by any party of any Liabilities with respect to any Indemnifiable Losses of the other related to such assets, businesses or Liabilities. SECTION 4.09 Exclusivity of Tax Allocation Agreement and Science Center Tax Allocation Agreement. Notwithstanding anything in this Agreement to the contrary, (a) the Tax Allocation Agreement will be the exclusive agreement between Rockwell and Rockwell Collins with respect to all Tax matters, including indemnification in respect of Tax matters and (b) the Science Center Tax Allocation Agreement will be the exclusive agreement between Rockwell and Rockwell Science Center with respect to all Tax matters, including indemnification in respect of Tax matters. 72 77 ARTICLE V ACCESS TO INFORMATION SECTION 5.01 Access to Information. (a) From and after the Time of Distribution, Rockwell will, and will cause each Rockwell Subsidiary to, afford to Rockwell Collins and its Representatives (at Rockwell Collins' expense) reasonable access and duplicating rights during normal business hours and upon reasonable advance notice to all Information within Rockwell's possession or control or in the possession or control of a Rockwell Subsidiary relating to Rockwell Collins, any Rockwell Collins Subsidiary or the Rockwell Collins Business insofar as such access is reasonably required by Rockwell Collins or any Rockwell Collins Subsidiary, subject to the provisions below regarding Privileged Information. (b) From and after the Time of Distribution, Rockwell will, and will cause each Rockwell Subsidiary to, afford to Rockwell Science Center and its Representatives (at Rockwell Science Center's expense) reasonable access and duplicating rights during normal business hours and upon reasonable advance notice to all Information within Rockwell's possession or control or in the possession or control of a Rockwell Subsidiary relating to Rockwell Science Center, any Rockwell Science Center Subsidiary or the Rockwell Science Center Business insofar as such access is reasonably required by Rockwell Science Center or any Rockwell Science Center Subsidiary, subject to the provisions below regarding Privileged Information. (c) From and after the Time of Distribution, Rockwell Collins will, and will cause each Rockwell Collins Subsidiary to, afford to Rockwell and its Representatives (at Rockwell's expense) reasonable access and duplicating rights during normal business hours and upon reasonable advance notice to all Information within Rockwell Collins' possession or control or in the possession or control of a Rockwell Collins Subsidiary relating to Rockwell, any Rockwell Subsidiary or the Rockwell Automation Business insofar as such access is reasonably required by Rockwell or any Rockwell Subsidiary, subject to the provisions below regarding Privileged Information. (d) From and after the Time of Distribution, Rockwell Collins will, and will cause each Rockwell Collins Subsidiary to, afford to Rockwell Science Center and its Representatives (at Rockwell Science Center's expense) reasonable access and duplicating rights during normal business hours and upon reasonable advance notice to all Information within Rockwell Collins' possession or control or in the possession or control of a Rockwell Collins Subsidiary relating to Rockwell Science Center, any Rockwell Science Center Subsidiary or the Rockwell Science Center Business insofar as such access is reasonably required by Rockwell Science Center or any Rockwell Science Center Subsidiary, subject to the provisions below regarding Privileged Information. 73 78 (e) From and after the Time of Distribution, Rockwell Science Center will, and will cause each Rockwell Science Center Subsidiary to, afford to Rockwell and its Representatives (at Rockwell's expense) reasonable access and duplicating rights during normal business hours and upon reasonable advance notice to all Information within Rockwell Science Center's possession or control or in the possession or control of a Rockwell Science Center Subsidiary relating to Rockwell, any Rockwell Subsidiary or the Rockwell Automation Business insofar as such access is reasonably required by Rockwell or any Rockwell Subsidiary, subject to the provisions below regarding Privileged Information. (f) From and after the Time of Distribution, Rockwell Science Center will, and will cause each Rockwell Science Center Subsidiary to, afford to Rockwell Collins and its Representatives (at Rockwell Collins' expense) reasonable access and duplicating rights during normal business hours and upon reasonable advance notice to all Information within Rockwell Science Center's possession or control or in the possession or control of a Rockwell Science Center Subsidiary relating to Rockwell Collins, any Rockwell Collins Subsidiary or the Rockwell Collins Business insofar as such access is reasonably required by Rockwell Collins or any Rockwell Collins Subsidiary, subject to the provisions below regarding Privileged Information. (g) Without limiting the foregoing, Information may be requested under this Article V for audit, accounting, claims, litigation, insurance, environmental and safety and tax purposes, as well as for purposes of fulfilling disclosure and reporting obligations and for performing this Agreement and the transactions contemplated hereby. In furtherance of the foregoing: (i) Each party acknowledges that (A) each of Rockwell, Rockwell Collins and the Rockwell Science Center (and the members of the Rockwell Automation Group, the Rockwell Collins Group and the Rockwell Science Center Group, respectively) has or may obtain Privileged Information; (B) there are a number of Actions affecting one or more of the members of the Rockwell Automation Group, the Rockwell Collins Group and the Rockwell Science Center Group; (C) the parties may have a common legal interest in Actions, in the Privileged Information, and in the preservation of the confidential status of the Privileged Information; and (D) each of Rockwell, Rockwell Collins and Rockwell Science Center intends that the transactions contemplated by the Transaction Agreements and any transfer of Privileged Information in connection therewith shall not operate as a waiver of any potentially applicable privilege. (ii) Each of Rockwell, Rockwell Collins and Rockwell Science Center agrees, on behalf of itself and each member of the Group of which it is a member, not to disclose or otherwise waive any privilege attaching to any Privileged Information relating to the business of another Group without providing prompt written notice to and obtaining the prior written consent of the applicable other party, which consent will not be unreasonably withheld. In the event of a disagreement between any member of the Rockwell Automation Group, any member of the Rockwell Collins Group and/or any member of the Rockwell Science Center Group concerning the reasonableness of 74 79 withholding such consent, no disclosure will be made prior to a final, nonappealable resolution of such disagreement. (iii) Upon any member of the Rockwell Automation Group, any member of the Rockwell Collins Group or any member of the Rockwell Science Center Group receiving any subpoena or other compulsory disclosure notice from a court, other Governmental Entity or otherwise which requests disclosure of Privileged Information, in each case relating to the business of another Group, the recipient of the notice will promptly provide to the applicable other party (following the notice provisions set forth herein) a copy of such notice, the intended response, and all materials or information relating to the other Group that might be disclosed. In the event of a disagreement as to the intended response or disclosure, unless and until the disagreement is resolved as provided in Section 5.01(g)(ii), the parties will cooperate to assert all defenses to disclosure claimed by any Group, at the cost and expense of the Group claiming such defense to disclosure, and shall not disclose any disputed documents or information until all legal defenses and claims of privilege have been finally determined. SECTION 5.02 Production of Witnesses. Subject to Section 5.01, after the Time of Distribution, each of Rockwell, Rockwell Collins and Rockwell Science Center will, and will cause each member of the Rockwell Automation Group, the Rockwell Collins Group and the Rockwell Science Center Group, respectively, to, make available to each other party and members of such other party's Group, upon written request and at the cost and expense of the party so requesting, its directors, officers, employees and agents as witnesses to the extent that any such Person may reasonably be required (giving consideration to business demands of such directors, officers, employees and agents) in connection with any Actions or other proceedings in which the requesting party may from time to time be involved, provided that the same shall not unreasonably interfere with the conduct of business by the Group of which the request is made. SECTION 5.03 Retention of Records. Except as otherwise required by law or agreed to by the parties in writing, if any Information relating to the business, assets or Liabilities of a member of a Group is retained by a member of any other Group, each of Rockwell, Rockwell Collins and Rockwell Science Center will, and will cause the members of the Group of which it is a member to, retain for the period required by the applicable Rockwell records retention policy in effect immediately prior to the Time of Distribution all such Information in such Group's possession or under its control. In addition, after the expiration of such required retention period, if any member of a Group wishes to destroy or dispose of any such Information, prior to destroying or disposing of any of such Information, (1) Rockwell, Rockwell Collins or Rockwell Science Center, on behalf of the member of its Group that is proposing to dispose of or destroy any such Information, will provide no less than 30 days' prior written notice to the applicable other party, specifying in reasonable detail the Information proposed to be destroyed or disposed of, and (2) if, prior to the scheduled date for such destruction or disposal, the recipient of such notice requests in writing that any of the Information proposed to be destroyed or disposed of be delivered to such requesting party, the party whose Group is proposing to dispose of or destroy such Information promptly will arrange for the delivery of the requested Information to a location specified by, and at the expense of, the requesting party. 75 80 SECTION 5.04 Confidentiality. Subject to Section 5.01, which shall govern Privileged Information, from and after the Time of Distribution, each of Rockwell, Rockwell Collins and Rockwell Science Center shall hold, and shall use reasonable efforts to cause members of its Group and its and their Representatives to hold, in strict confidence all Information concerning each other party's Group in its possession or control or furnished to it by such other party's Group pursuant to the Transaction Agreements or the transactions contemplated thereby and will not release or disclose such Information to any other Person, except members of its Group and its and their Representatives, who will be bound by the provisions of this Section 5.04; provided, however, that any member of the Rockwell Automation Group, the Rockwell Collins Group or the Rockwell Science Center Group may disclose such Information to the extent that (a) disclosure is compelled by judicial or administrative process or, in the opinion of such Person's counsel, by other requirements of law (in which case the party required to make such disclosure will notify the other party as soon as practicable of such obligation or requirement and cooperate with the other party to limit the Information required to be disclosed and to obtain a protective order or other appropriate remedy with respect to the Information ultimately disclosed) or (b) such Person can show that such Information was (i) available to such Person on a nonconfidential basis (other than from a member of another party's Group) prior to its disclosure by such Person, (ii) in the public domain through no fault of such Person, or (iii) lawfully acquired by such Person from another source after the time that it was furnished to such Person by another party's Group, and not acquired from such source subject to any confidentiality obligation on the part of such source known to the acquiror, or on the part of the acquiror. Each party acknowledges that it will be liable for any breach of this Section 5.04 by its Representatives to whom such Information is disclosed by such party. Notwithstanding the foregoing, each of Rockwell, Rockwell Collins and Rockwell Science Center will be deemed to have satisfied its obligations under this Section 5.04 with respect to any Information (other than Privileged Information) if it exercises the same care with regard to such Information as it takes to preserve confidentiality for its own similar Information. ARTICLE VI MISCELLANEOUS SECTION 6.01 Entire Agreement; Construction. This Agreement and the Ancillary Agreements, including any annexes, schedules and exhibits hereto or thereto, and other agreements and documents referred to herein and therein, will together constitute the entire agreement between the parties with respect to the subject matter hereof and thereof and will supersede all prior negotiations, agreements and understandings of the parties of any nature, whether oral or written, with respect to such subject matter. Notwithstanding any other provisions in the Transaction Agreements to the contrary, (i) in the event and to the extent that there is a conflict between the provisions of this Agreement and the provisions of the Employee Matters Agreement, the Tax Allocation Agreement or the Science Center Tax Allocation Agreement, the provisions of the Employee Matters Agreement, the Tax Allocation Agreement or the Science Center Tax Allocation Agreement, as appropriate, will control and (ii) in the event and to the extent that there is a conflict between the provisions of this Agreement and the 76 81 provisions of any Conveyance and Assumption Instruments, the provisions of this Agreement will control. SECTION 6.02 Survival of Agreements. Except as otherwise contemplated by the Transaction Agreements, all covenants and agreements of the parties contained in the Transaction Agreements will remain in full force and effect and survive the Time of Distribution. SECTION 6.03 Expenses. (a) Except as otherwise set forth in any Transaction Agreement, (i) all Rockwell Automation Expenses will be charged to and paid by Rockwell, (ii) all Rockwell Collins Expenses will be charged to and paid by Rockwell Collins and (iii) all Rockwell Science Center Expenses will be charged to and paid by Rockwell Science Center. (b) Within ten days after the Distribution Date, Rockwell Collins will reimburse Rockwell (by wire transfer to Rockwell's bank account at Mellon Bank, N.A., Pittsburgh, Pennsylvania, account number 102-3474) for all amounts in respect of Rockwell Collins Expenses paid by Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) before or at the Time of Distribution and notified in writing by Rockwell to Rockwell Collins within five days after the Distribution Date. Promptly after Rockwell's request therefor, Rockwell Collins will reimburse Rockwell (by wire transfer to the same bank account referred to in the preceding sentence) for all Rockwell Collins Expenses paid by Rockwell or any of its Subsidiaries before, at or after the Time of Distribution (other than as previously reimbursed by Rockwell Collins pursuant to the preceding sentence). Rockwell will, at the request of Rockwell Collins, provide Rockwell Collins with appropriate documentation to support Rockwell Collins Expenses required to be reimbursed to Rockwell pursuant to this Section 6.03(b). (c) Within ten days after the Distribution Date, Rockwell Science Center will reimburse Rockwell (by wire transfer to Rockwell's bank account at Mellon Bank, N.A., Pittsburgh, Pennsylvania, Account No. 102-3474) for all amounts in respect of Rockwell Science Center Expenses paid by Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) before or at the Time of Distribution and notified in writing by Rockwell to Rockwell Science Center within five days after the Distribution Date. Promptly after Rockwell's request therefor, Rockwell Science Center will reimburse Rockwell (by wire transfer to the same bank account referred to in the preceding sentence) for all Rockwell Science Center Expenses paid by Rockwell or any of its Subsidiaries before, at or after the Time of Distribution (other than as previously reimbursed by Rockwell Science Center pursuant to the preceding sentence). Rockwell will, at the request of Rockwell Science Center, provide Rockwell Science Center with appropriate documentation to support Rockwell Science Center Expenses required to be reimbursed to Rockwell pursuant to this Section 6.03(c). (d) Except as otherwise set forth in any Transaction Agreement, all out-of-pocket costs and expenses incurred following the Time of Distribution in connection with implementation of the transactions contemplated by the Transaction Agreements will be charged 77 82 to and paid by the party for whose benefit the expenses are incurred, with any out-of-pocket expenses which cannot be allocated on such basis to be split equally between Rockwell and Rockwell Collins. SECTION 6.04 Governing Law. This Agreement will be governed by and construed in accordance with the internal laws of the State of New York applicable to contracts made and to be performed entirely within such State, without regard to the conflicts of law principles of such State. SECTION 6.05 Notices. All notices, requests, claims, demands and other communications required or permitted to be given hereunder will be in writing and will be delivered by hand or telecopied, e-mailed or sent, postage prepaid, by registered, certified or express mail or reputable overnight courier service and will be deemed given when so delivered by hand or telecopied, when e-mail confirmation is received if delivered by e-mail, or three business days after being so mailed (one business day in the case of express mail or overnight courier service). All such notices, requests, claims, demands and other communications will be addressed as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice: (a) If to Rockwell: Rockwell International Corporation Firstar Center 777 East Wisconsin Avenue Milwaukee, Wisconsin 53202 Attention: Mr. Michael A. Bless Senior Vice President, Finance and Planning and Chief Financial Officer Telecopy: (414) 212-5552 E-mail: mabless@corp.rockwell.com with a copy to: Rockwell International Corporation Firstar Center 777 East Wisconsin Avenue Milwaukee, Wisconsin 53202 Attention: William J. Calise, Jr., Esq. Senior Vice President, General Counsel and Secretary Telecopy: (414) 212-5357 E-mail: wjcalise@corp.rockwell.com 78 83 (b) If to Rockwell Collins: Rockwell Collins, Inc. 400 Rockwell Collins Road NE Cedar Rapids, Iowa 52498 Attention: Lawrence A. Erickson Senior Vice President and Chief Financial Officer Telecopy: (319) 295-3400 E-mail: laericks@rockwellcollins.com with a copy to: Rockwell Collins, Inc. 400 Rockwell Collins Road NE Cedar Rapids, Iowa 52498 Attention: Senior Vice President, General Counsel and Secretary Telecopy: (319) 295-3599 (c) If to Rockwell Science Center: Rockwell Scientific Company LLC 1049 Camino Dos Rios Thousand Oaks, California 91360 Attention: Derek T. Cheung President and Chief Executive Officer Telecopy: (805) 373-4775 E-Mail: dcheung@rwsc.com with a copy to: Rockwell Scientific Company LLC 1049 Camino Dos Rios Thousand Oaks, California 91360 Attention: Wayne A. Davey Vice President and Chief Financial Officer Telecopy: (805) 373-4775 E-Mail: wdavey@rwsc.com 79 84 and with a copy to Rockwell (in the case of any notice given by a member of the Rockwell Collins Group) or Rockwell Collins (in the case of any notice given by any member of the Rockwell Automation Group). SECTION 6.06 Dispute Resolution. In the event that any dispute, claim or controversy (collectively, a "dispute") arises out of or relates to this Agreement, the Employee Matters Agreement, the Tax Allocation Agreement or the Science Center Tax Allocation Agreement, any provision of this Agreement, the Employee Matters Agreement, the Tax Allocation Agreement or the Science Center Tax Allocation Agreement or the breach, performance, enforcement or validity or invalidity of any thereof, the Chief Financial Officers of the parties affected thereby will attempt a good faith resolution of such dispute within 30 days after any party notifies any other party in writing of such dispute. If the dispute is not resolved by such designees within 30 days of receipt of such notification, or within such other time as they may agree, such dispute will be referred for resolution to the Chief Executive Officers of the parties affected thereby. Should they be unable to resolve such dispute within 30 days following such referral to them, or within such other time as they may agree, the parties affected thereby will then attempt in good faith to resolve such dispute by mediation in accordance with the then-existing CPR Mediation Procedure promulgated by the CPR Institute for Dispute Resolution, New York City. If such mediation is unsuccessful within 60 days after commencement thereof, any party to the dispute may pursue any other remedies available to it. SECTION 6.07 Consent to Jurisdiction. Each of Rockwell, Rockwell Collins and Rockwell Science Center irrevocably submits to the exclusive jurisdiction of (i) the Court of Chancery in and for the State of Delaware and the Superior Court in and for the State of Delaware and (ii) the United States District Court for the District of Delaware, for the purposes of any suit, action or other proceeding arising out of this Agreement, the Employee Matters Agreement, the Tax Allocation Agreement or the Science Center Tax Allocation Agreement or any transaction contemplated thereby or the breach, performance, enforcement or validity or invalidity of any thereof (and agrees not to commence any action, suit or proceeding relating thereto except in such courts). Each of Rockwell, Rockwell Collins and Rockwell Science Center further agrees that service of any process, summons, notice or document hand delivered or sent by U.S. registered mail to such party's respective address set forth in Section 6.05 will be effective service of process for any action, suit or proceeding in Delaware with respect to any matters to which it has submitted to jurisdiction as set forth in the immediately preceding sentence. Each of Rockwell, Rockwell Collins and Rockwell Science Center irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement, the Employee Matters Agreement, the Tax Allocation Agreement or the Science Center Tax Allocation Agreement or the transactions contemplated thereby or the breach, performance, enforcement or validity or invalidity of any thereof in (i) the Court of Chancery in and for the State of Delaware and the Superior Court in and for the State of Delaware or (ii) the United States District Court for the District of Delaware, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. Notwithstanding the foregoing, each party agrees that a final judgment in any action, suit or proceeding so brought shall be conclusive and may be enforced by suit on the judgment in any jurisdiction or in any other manner provided in law or in equity. 80 85 SECTION 6.08 Amendments. This Agreement cannot be amended, modified or supplemented except by a written agreement executed by each party affected thereby. SECTION 6.09 Assignment. No party to this Agreement will convey, assign or otherwise transfer any of its rights or obligations under this Agreement without the prior written consent of the other parties affected thereby in their sole and absolute discretion, except that, other than as expressly provided herein, any party may (without obtaining any consent) assign any of its rights hereunder to a successor to all or any part of its business. Any such conveyance, assignment or transfer requiring the prior written consent of the other parties which is made without such consent will be void ab initio. No assignment of this Agreement will relieve the assigning party of its obligations hereunder. SECTION 6.10 Captions; Currency. The article, section and paragraph captions herein and the table of contents hereto are for convenience of reference only, do not constitute part of this Agreement and will not be deemed to limit or otherwise affect any of the provisions hereof. Unless otherwise specified, all references herein to numbered articles or sections are to articles and sections of this Agreement and all references herein to annexes or schedules are to annexes and schedules to this Agreement. Unless otherwise specified, all references contained in this Agreement, in any annex or schedule referred to herein or in any instrument or document delivered pursuant hereto to dollars or "$" shall mean United States Dollars. SECTION 6.11 Severability. If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances other than those as to which it has been held invalid or unenforceable, will remain in full force and effect and will in no way be affected, impaired or invalidated thereby. If the economic or legal substance of the transactions contemplated hereby is affected in any manner adverse to any party as a result thereof, the parties affected thereby will negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the parties. SECTION 6.12 Parties in Interest. This Agreement is binding upon and is for the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement is not made for the benefit of any Person not a party hereto, and no Person other than the parties hereto or their respective successors and permitted assigns will acquire or have any benefit, right, remedy or claim under or by reason of this Agreement, except that the provisions of Sections 4.02, 4.03 and 4.04 hereof shall inure to the benefit of the Persons referred to therein. SECTION 6.13 Schedules. All annexes and schedules attached hereto are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Capitalized terms used in the schedules hereto but not otherwise defined therein will have the respective meanings assigned to such terms in this Agreement. SECTION 6.14 Termination. This Agreement may be terminated and the Distribution abandoned at any time prior to the Time of Distribution by and in the sole discretion of the Rockwell Board without the approval of Rockwell Collins, Rockwell Science Center, or 81 86 Rockwell's shareowners. In the event of such termination, no party will have any liability of any kind to any other party on account of such termination. SECTION 6.15 Waivers; Remedies. The conditions to Rockwell's obligation to consummate the Distribution are for the sole benefit of Rockwell and may be waived in writing by Rockwell in whole or in part in Rockwell's sole discretion. No failure or delay on the part of Rockwell, Rockwell Collins or Rockwell Science Center in exercising any right, power or privilege hereunder will operate as a waiver thereof, nor will any waiver on the part of Rockwell, Rockwell Collins or Rockwell Science Center of any right, power or privilege hereunder operate as a waiver of any other right, power or privilege hereunder, nor will any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. Subject to the provisions of Section 6.06, the rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies which the parties may otherwise have at law or in equity. SECTION 6.16 Further Assurances. From time to time after the Distribution, as and when requested by any party hereto, each other party shall execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken, all such actions as the requesting party may reasonably request to consummate the transactions contemplated by the Transaction Agreements. SECTION 6.17 Counterparts. This Agreement may be executed in separate counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts will together constitute the same agreement. SECTION 6.18 Performance. Each party will cause to be performed and hereby guarantees the performance of all actions, agreements and obligations set forth herein to be performed by any Subsidiary or Affiliate of such party. SECTION 6.19 Currency Calculations. Following the Distribution Date, for purposes of calculating the United States Dollar equivalent of any amount payable under any Transaction Agreement which is denominated in a currency other than United States Dollars, the New York foreign exchange selling rate applicable to such currency will be used, as published in the Wall Street Journal, New York Edition, for the second business day preceding the earlier of the date such payment is due or the date such payment is made (it being understood that this Section 6.19 shall not apply to the conversion of foreign currency balances made as of the Distribution Date in accordance with standard Rockwell accounting practices and procedures). SECTION 6.20 Interpretation. Any reference herein to any federal, state, local, or foreign law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. For the purposes of this Agreement, (a) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires, (b) the terms "hereof", "herein", and "herewith" and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement and (c) the word "including" and words of similar import when used in this Agreement shall mean "including, without limitation". 82 87 IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officers of the parties as of the date first hereinabove written. ROCKWELL INTERNATIONAL CORPORATION By: /s/ William J. Calise, Jr. ------------------------------------------ Name: William J. Calise, Jr. Title: Senior Vice President, General Counsel and Secretary ROCKWELL COLLINS, INC. By: /s/ Lawrence A. Erickson ------------------------------------------ Name: Lawrence A. Erickson Title: Senior Vice President and Chief Financial Officer ROCKWELL SCIENTIFIC COMPANY LLC By: /s/ Wayne A. Davey ------------------------------------------ Name: Wayne A. Davey Title: Vice President and Chief Financial Officer 83 EX-2.2 3 y51136ex2-2.txt EMPLOYEE MATTERS AGREEMENT 1 Exhibit 2.2 ================================================================================ EMPLOYEE MATTERS AGREEMENT by and among ROCKWELL INTERNATIONAL CORPORATION, ROCKWELL COLLINS, INC. and ROCKWELL SCIENTIFIC COMPANY LLC -------------------------- June 29, 2001 -------------------------- ================================================================================ 2 TABLE OF CONTENTS -----------------
Page ---- ARTICLE I DEFINITIONS...................................................................1 Section 1.01 General.......................................................................1 ARTICLE II EMPLOYEES....................................................................10 Section 2.01 Employees....................................................................10 Section 2.02 Employee Benefits Generally..................................................11 Section 2.03 Collective Bargaining Agreements.............................................12 ARTICLE III PENSION PLANS................................................................12 Section 3.01 U.S. Pension Plan............................................................12 Section 3.02 Stand-Alone Pension Plan.....................................................25 Section 3.03 U.S. Non-Qualified Pension Plan..............................................26 Section 3.04 Rockwell Collins (U.K.) Limited Pension Scheme...............................28 Section 3.05 Rockwell U.K. Pension Scheme.................................................31 Section 3.06 Canadian Pension Plan........................................................34 ARTICLE IV SAVINGS PLANS................................................................35 Section 4.01 U.S. Salaried Savings Plan...................................................35 Section 4.02 U.S. Hourly Represented Savings Plan.........................................36 Section 4.03 U.S. Hourly Non-Represented Savings Plan.....................................37 Section 4.04 Non-Qualified Savings Plans..................................................38 Section 4.05 Canadian Savings Plans.......................................................39 ARTICLE V STOCK PLANS..................................................................42 Section 5.01 Stock Plans..................................................................42 ARTICLE VI OTHER EMPLOYEE PLANS AND MATTERS.............................................43 Section 6.01 Welfare Plans................................................................43 Section 6.02 Incentive Compensation Plans.................................................47 Section 6.03 Deferred Compensation Plan...................................................48 Section 6.04 Severance Pay................................................................49 Section 6.05 Employment, Consulting and Other Employee Related Agreements.................51 Section 6.06 Other Liabilities............................................................51 Section 6.07 Funding of Master Rabbi Trusts...............................................52 ARTICLE VII MISCELLANEOUS................................................................53 Section 7.01 Indemnification..............................................................53 Section 7.02 Cooperation..................................................................53
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Section 7.03 Sharing of Information.......................................................53 Section 7.04 Entire Agreement; Construction...............................................53 Section 7.05 Survival of Agreements.......................................................54 Section 7.06 Governing Law................................................................54 Section 7.07 Notices......................................................................54 Section 7.08 Amendments...................................................................54 Section 7.09 Assignment...................................................................54 Section 7.10 Captions; Currency...........................................................55 Section 7.11 Severability.................................................................55 Section 7.12 Parties in Interest..........................................................55 Section 7.13 Schedules....................................................................56 Section 7.14 Termination..................................................................56 Section 7.15 Waivers; Remedies............................................................56 Section 7.16 Counterparts.................................................................56 Section 7.17 Performance..................................................................56 Section 7.18 Interpretation...............................................................56 SCHEDULES Schedule 1.01 - Certain Definitions Schedule 1.02 - Certain Rockwell Split Optionees Schedule 2.01(a) - Certain Rockwell Automation Employees Schedule 2.01(b) - Certain Rockwell Collins Employees Schedule 2.01(c) - Certain Rockwell Science Center Employees Schedule 2.01(d) - Certain Former Rockwell Corporate Employees Schedule 3.04(b)(i) - U.K. Actuary's Schedule Schedule 5.01(a) - Rockwell Option Adjustment - Rockwell Automation Optionees Schedule 5.01(b) - Rockwell Option Adjustment - Rockwell Collins Optionees Schedule 5.01(c)(i) - Rockwell Split Options - Rockwell Options Schedule 5.01(c)(ii) - Rockwell Split Options - Rockwell Collins Options
ii 4 EMPLOYEE MATTERS AGREEMENT EMPLOYEE MATTERS AGREEMENT (this "Agreement") dated as of June 29, 2001 by and among (i) ROCKWELL INTERNATIONAL CORPORATION, a Delaware corporation ("Rockwell"), (ii) ROCKWELL COLLINS, INC., a Delaware corporation and, as of the date hereof, a wholly-owned subsidiary of Rockwell ("Rockwell Collins"), and (iii) ROCKWELL SCIENTIFIC COMPANY LLC, a Delaware limited liability company and, as of the date hereof, a wholly-owned subsidiary of Rockwell ("Rockwell Science Center"). WHEREAS, the Rockwell Board has determined that it is appropriate and desirable to distribute all outstanding shares of Rockwell Collins Common Stock on a pro rata basis to the holders of Rockwell Common Stock (the "Distribution"); and WHEREAS, Rockwell, Rockwell Collins and Rockwell Science Center are entering into a Distribution Agreement dated as of the date hereof (the "Distribution Agreement") which, among other things, sets forth the principal corporate transactions required to effect the Distribution and certain other agreements that will govern certain matters relating to the Distribution; and WHEREAS, in connection with the Distribution, Rockwell, Rockwell Collins and Rockwell Science Center have determined that it is appropriate and desirable to provide for the allocation of certain assets and liabilities and certain other matters relating to employees, employee benefit plans and compensation arrangements; NOW, THEREFORE, in consideration of the premises and of the respective agreements and covenants contained in this Agreement, the parties hereby agree as follows: ARTICLE I DEFINITIONS Section 1.01 General. Capitalized terms used in this Agreement but not defined herein (other than the names of employee benefit plans) will have the meanings ascribed to such terms in the Distribution Agreement. As used in this Agreement (or in any Schedule to this Agreement), the terms defined in Schedule 1.01 will have the meanings set forth in such Schedule 1.01, the terms defined in Section 3.01(e) will have the meanings set forth in such Section 3.01(e) and the following terms will have the following meanings (in each case, such meanings to be equally applicable to both the singular and plural forms of the terms defined): 5 "ACTIVE ROCKWELL AUTOMATION EMPLOYEE" means any individual who, immediately after the Time of Distribution, will be employed by a member of the Rockwell Automation Group pursuant to Section 2.01(a) (other than any such individual who was an employee of the corporate office of Rockwell prior to the Distribution and who has not accepted permanent employment with a member of the Rockwell Automation Group as of the Time of Distribution). "ACTIVE ROCKWELL COLLINS CANADIAN EMPLOYEE" means any Active Rockwell Collins Employee who was employed by a Canadian subsidiary of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) immediately prior to the Time of Distribution. "ACTIVE ROCKWELL COLLINS EMPLOYEE" means any individual who, immediately after the Time of Distribution, will be (a) employed by a member of the Rockwell Collins Group pursuant to Section 2.01(b) or (b) a Holdover Employee. "ACTIVE ROCKWELL SCIENCE CENTER EMPLOYEE" means any individual who, immediately after the Time of Distribution, will be employed by a member of the Rockwell Science Center Group pursuant to Section 2.01(c). "AGREEMENT" will have the meaning ascribed thereto in the preamble. "CANADIAN HOLDOVER TERM" means the Holdover Term (as defined in the Transition Agreement) during which an Affiliate of Rockwell will continue to employ Active Rockwell Collins Canadian Employees pursuant to Section 12 of the Transition Agreement. "DISCRETIONARY PRACTICE" will have the meaning ascribed thereto in Section 3.04(a)(v). "DISTRIBUTION" will have the meaning ascribed thereto in the recitals. "DISTRIBUTION AGREEMENT" will have the meaning ascribed thereto in the recitals. "DIVESTED BUSINESS EMPLOYEE" means any Pre-Distribution Group Employee who is not, immediately after the Time of Distribution, an Active Rockwell Automation Employee, a Former Rockwell Automation Employee, an Active Rockwell Collins Employee, a Former Rockwell Collins Employee, an Active Rockwell Science Center Employee, a Former Rockwell Science Center Employee or a Former Rockwell Corporate Employee, and whose most recent active employment with Rockwell or any other member of the Pre-Distribution Group (during a time that such member of the Pre-Distribution 2 6 Group was an affiliate of Rockwell or its predecessors) was with an Unrelated Former Business, whether or not such individual remains employed by such Unrelated Former Business as of the Time of Distribution. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor legislation. "FORMER ROCKWELL AUTOMATION EMPLOYEE" means any Pre-Distribution Group Employee who is not, immediately after the Time of Distribution, an Active Rockwell Automation Employee, an Active Rockwell Collins Employee or an Active Rockwell Science Center Employee, and whose most recent active employment with Rockwell or any other member of the Pre-Distribution Group (during a time that such member of the Pre-Distribution Group was an affiliate of Rockwell or its predecessors) was with the Rockwell Automation Business. "FORMER ROCKWELL COLLINS EMPLOYEE" means any Pre-Distribution Group Employee who is not, immediately after the Time of Distribution, an Active Rockwell Collins Employee, an Active Rockwell Automation Employee or an Active Rockwell Science Center Employee, and whose most recent active employment with Rockwell or any other member of the Pre-Distribution Group (during a time that such member of the Pre-Distribution Group was an affiliate of Rockwell or its predecessors) was with the Rockwell Collins Business. "FORMER ROCKWELL CORPORATE EMPLOYEE" means any Pre-Distribution Group Employee who is not, immediately after the Time of Distribution, an Active Rockwell Automation Employee, a Former Rockwell Automation Employee, an Active Rockwell Collins Employee, a Former Rockwell Collins Employee, an Active Rockwell Science Center Employee or a Former Rockwell Science Center Employee, and whose most recent active employment with Rockwell or any other member of the Pre-Distribution Group (during a time that such member of the Pre-Distribution Group was an affiliate of Rockwell or its predecessors) was with the corporate office of Rockwell or its predecessors (including Rockwell's and its predecessor's corporate offices located in Pittsburgh, Pennsylvania, El Segundo, California, Seal Beach, California, Costa Mesa, California or Milwaukee, Wisconsin). Any individual who was an employee of the corporate office of Rockwell prior to the Distribution who is employed by a member of the Rockwell Automation Group as of or immediately after the Time of Distribution will nevertheless be considered a Former Rockwell Corporate Employee if such individual has not accepted permanent employment with a member of the Rockwell Automation Group as of the Time of Distribution. Notwithstanding anything to the contrary contained herein, those individuals 3 7 identified on the attached Schedule 2.01(d) will be considered Former Rockwell Corporate Employees. "FORMER ROCKWELL SCIENCE CENTER EMPLOYEE" means any Pre-Distribution Group Employee who is not, immediately after the Time of Distribution, an Active Rockwell Science Center Employee, an Active Rockwell Automation Employee or an Active Rockwell Collins Employee, and whose most recent active employment with Rockwell or any other member of the Pre-Distribution Group (during a time that such member of the Pre-Distribution Group was an affiliate of Rockwell or its predecessors) was with the Rockwell Science Center Business. "GUARANTEED MINIMUM PENSION" has the meaning given to it in section 8(2) of the U.K. Pension Schemes Act 1993. "HOLDOVER EMPLOYEES" will have the meaning ascribed thereto in the Transition Agreement. "INCENTIVE COMPENSATION PLAN" means the Rockwell International Corporation Incentive Compensation Plan. "LTIP" will have the meaning ascribed thereto in Section 6.02(a). "PBGC" means the Pension Benefit Guaranty Corporation. "PRE-DISTRIBUTION GROUP EMPLOYEE" means any individual who was, at any time prior to the Time of Distribution, employed by Rockwell or any other member of the Pre-Distribution Group (during a time that such member of the Pre-Distribution Group was an affiliate of Rockwell or its predecessors). "REC (U.K.)" means Rockwell Electronic Commerce Limited. "RIL (U.K.)" means Rockwell International Limited. "RIL/REC (U.K.) EMPLOYEES" means those active employees of Rockwell International Limited or Rockwell Electronic Commerce Limited who are active members of the Rockwell Collins (U.K.) Scheme as of the Time of Distribution. "ROCKWELL" will have the meaning ascribed thereto in the preamble. "ROCKWELL AUTOMATION DEFERRED COMPENSATION PLAN" will have the meaning ascribed thereto in Section 6.03(a)(i). 4 8 "ROCKWELL AUTOMATION MASTER RABBI TRUST" means the master rabbi trust related to the Rockwell Automation Deferred Compensation Plan, the Rockwell Automation Non-Qualified Pension Plan and the Rockwell Automation Non-Qualified Savings Plan. "ROCKWELL AUTOMATION NON-QUALIFIED PENSION PLAN" will have the meaning ascribed thereto in Section 3.03(a)(i). "ROCKWELL AUTOMATION NON-QUALIFIED SAVINGS PLAN" will have the meaning ascribed thereto in Section 4.04(a)(i). "ROCKWELL AUTOMATION OPTIONEE" means any Person who immediately after the Time of Distribution is an Active Rockwell Automation Employee, other than (a) those who were employees of the corporate office of Rockwell prior to the Time of Distribution and become employees of the Rockwell Automation Business (or remain employees of the Rockwell corporate office) in connection with the Distribution and (b) those who are set forth on Schedule 1.02. "ROCKWELL AUTOMATION PARTICIPANT" means any individual who, immediately after the Time of Distribution, is (a) an Active Rockwell Automation Employee, (b) a Former Rockwell Automation Employee or (c) a beneficiary of either of the foregoing. "ROCKWELL CANADIAN DEFERRED PROFIT SHARING PLAN" means the Rockwell Automation Canada Inc. Employees' Savings Plan. 5 9 "ROCKWELL CANADIAN EMPLOYEES PROFIT SHARING PLAN" means the Employees Profit Sharing Plan of Rockwell Automation Canada Inc. "ROCKWELL CANADIAN PENSION PLAN" means the pension plan for employees of Rockwell Automation of Canada Inc. "ROCKWELL CANADIAN SAVINGS PLAN" means the Rockwell Automation Canada Inc. Employees' Retirement Savings Plan. "ROCKWELL CIF" will have the meaning ascribed thereto in Section 3.05(b)(ii). "ROCKWELL COLLINS" will have the meaning ascribed thereto in the preamble. "ROCKWELL COLLINS CANADIAN DEFERRED PROFIT SHARING PLAN" will have the meaning ascribed thereto in Section 4.05(b)(i). "ROCKWELL COLLINS CANADIAN EMPLOYEES PROFIT SHARING PLAN" will have the meaning ascribed thereto in Section 4.05(c)(i). "ROCKWELL COLLINS CANADIAN PENSION PLAN" will have the meaning ascribed thereto in Section 3.06(a). "ROCKWELL COLLINS CANADIAN SAVINGS PLAN" will have the meaning ascribed thereto in Section 4.05(a)(i). "ROCKWELL COLLINS HOURLY NON-REPRESENTED SAVINGS PLAN" will have the meaning ascribed thereto in Section 4.03(a). "ROCKWELL COLLINS HOURLY REPRESENTED SAVINGS PLAN" will have the meaning ascribed thereto in Section 4.02(a). "ROCKWELL COLLINS OPTION" means an option to purchase from Rockwell Collins shares of Rockwell Collins Common Stock provided to a holder of a Rockwell Option pursuant to Section 5.01. "ROCKWELL COLLINS OPTIONEE" means any Person who immediately after the Time of Distribution is an Active Rockwell Collins Employee, other than (a) those who were employees of the corporate office of Rockwell prior to the Time of Distribution and become employees of the Rockwell Collins Business in connection with the Distribution and (b) those who are set forth on Schedule 1.02. "ROCKWELL COLLINS PARTICIPANT" means any individual who, immediately after the Time of Distribution, is (a) an Active Rockwell Collins Employee, (b) a Former Rockwell Collins Employee, (c) a Divested Business Employee, (d) a Former Rockwell Corporate Employee or (e) a beneficiary of any of the foregoing. "ROCKWELL COLLINS SALARIED SAVINGS PLAN" will have the meaning ascribed thereto in Section 4.01(a). "ROCKWELL COLLINS (U.K.)" means Rockwell Collins (U.K.) Limited. "ROCKWELL COLLINS (U.K.) EMPLOYEES" means those active employees of Rockwell Collins (U.K.) who are active members of the Rockwell U.K. Plan at the Time of Distribution. "ROCKWELL COLLINS (U.K.) SCHEME" means the Rockwell Collins (U.K.) Limited Pension Scheme. 6 10 "ROCKWELL COLLINS (U.K.) SCHEME DEBT CERTIFICATE" will have the meaning ascribed thereto in Section 3.04(c)(i). "ROCKWELL COLLINS (U.K.) SCHEME DEFICIENCY DEBT" means any liability of RIL (U.K.) or REC (U.K.) under section 75 of the U.K. Pensions Act 1995 referable to the cessation of its participation in the Rockwell Collins (U.K.) Scheme under the terms of this Agreement. "ROCKWELL COLLINS (U.K.) SCHEME PAYMENT DATE" means (a) the latest of (i) September 21, 2001 and (ii) seven days after the Inland Revenue has given its approval to the transfer contemplated in Section 3.04(b)(ii) or (b) such other date as Rockwell and Rockwell Collins shall agree to in writing. "ROCKWELL COLLINS (U.K.) SCHEME TRANSFER PAYMENT" means the amount in respect of the Transferring RIL/REC (U.K.) Employees calculated in accordance with Section 3.04(b)(i). "ROCKWELL COLLINS WELFARE PARTICIPANTS" means all individuals who were covered under Rockwell Welfare Plans prior to the Time of Distribution (other than Rockwell Automation Participants and Rockwell Science Center Participants), including all Rockwell Collins Participants. "ROCKWELL COLLINS WELFARE PLANS" will have the meaning ascribed thereto in Section 6.01(a). "ROCKWELL DEFERRED COMPENSATION PLAN" means the Rockwell International Corporation Deferred Compensation Plan, the name of which has been or will be changed to the "Rockwell Collins Deferred Compensation Plan" pursuant to Section 6.03(a)(ii). "ROCKWELL GROUP TRUST" means the group trust related to the Rockwell Pension Plan, the name of which has been or will be changed to the "Rockwell Collins Master Trust" pursuant to Section 3.01(a)(ii). "ROCKWELL HOURLY NON-REPRESENTED SAVINGS PLAN" means the Rockwell International Corporation Non-Represented Hourly Retirement Savings Plan. "ROCKWELL HOURLY REPRESENTED SAVINGS PLAN" means the Rockwell International Corporation Retirement Savings Plan for Certain Employees. "ROCKWELL MASTER RABBI TRUST" means the master rabbi trust related to the Rockwell Deferred Compensation Plan, the Rockwell Non-Qualified Pension Plan and the Rockwell Non-Qualified Savings Plan, the name of which has been or will be changed to the "Rockwell Collins Master Rabbi Trust - Deferred 7 11 Compensation, Non-Qualified Savings and Non-Qualified Pension Plans" pursuant to Section 3.03(a)(ii). "ROCKWELL NON-QUALIFIED PENSION PLAN" means the Rockwell International Corporation Non-Qualified Retirement Plan, the name of which has been or will be changed to the "Rockwell Collins Non-Qualified Pension Plan" pursuant to Section 3.03(a)(ii). "ROCKWELL NON-QUALIFIED SAVINGS PLAN" means the Rockwell International Corporation Non-Qualified Retirement Savings Plan, the name of which has been or will be changed to the "Rockwell Collins Non-Qualified Savings Plan" pursuant to Section 4.04(a)(ii). "ROCKWELL OPTION" means an option to purchase from Rockwell shares of Rockwell Common Stock granted pursuant to one of the Rockwell Stock Plans. "ROCKWELL PENSION PLAN" means the Rockwell Retirement Plan, the name of which has been or will be changed to the "Rockwell Collins Retirement Plan" pursuant to Section 3.01(a)(ii). "ROCKWELL SALARIED SAVINGS PLAN" means the Rockwell International Corporation Salaried Retirement Savings Plan. "ROCKWELL SCIENCE CENTER" will have the meaning ascribed thereto in the preamble. "ROCKWELL SCIENCE CENTER DEFERRED COMPENSATION PLAN" will have the meaning ascribed thereto in Section 6.03(a)(i). "ROCKWELL SCIENCE CENTER MASTER RABBI TRUST" means the master rabbi trust related to the Rockwell Science Center Deferred Compensation Plan, the Rockwell Science Center Non-Qualified Pension Plan and the Rockwell Science Center Non-Qualified Savings Plan. "ROCKWELL SCIENCE CENTER NON-QUALIFIED PENSION PLAN" will have the meaning ascribed thereto in Section 3.03(a)(i). "ROCKWELL SCIENCE CENTER NON-QUALIFIED SAVINGS PLAN" will have the meaning ascribed thereto in Section 4.04(a)(i). "ROCKWELL SCIENCE CENTER PARTICIPANT" means any individual who, immediately after the Time of Distribution, is (a) an Active Rockwell Science Center Employee, (b) a Former Rockwell Science Center Employee or (c) a beneficiary of either of the foregoing. 8 12 "ROCKWELL SCIENCE CENTER SALARIED SAVINGS PLAN" will have the meaning ascribed thereto in Section 4.01(a). "ROCKWELL SCIENCE CENTER WELFARE PLANS" will have the meaning ascribed thereto in Section 6.01(a). "ROCKWELL SPLIT OPTION" means any Rockwell Option outstanding as of the Time of Distribution held by a Rockwell Split Optionee. "ROCKWELL SPLIT OPTIONEE" means any individual who holds Rockwell Options at the Time of Distribution who is not a Rockwell Automation Optionee or a Rockwell Collins Optionee (and shall include those individuals set forth on Schedule 1.02). "ROCKWELL STOCK PLANS" means, collectively, the Rockwell 2000 Long-Term Incentives Plan, the Rockwell 1995 Long-Term Incentives Plan, the Rockwell 1988 Long-Term Incentives Plan and the Rockwell Directors Stock Plan. "ROCKWELL U.K. PLAN" means the Rockwell U.K. Pension Scheme (formerly known as the Rockwell U.K. Executive Pension Plan). "ROCKWELL U.K. PLAN DEBT CERTIFICATE" will have the meaning ascribed thereto in Section 3.05(c)(i). "ROCKWELL U.K. PLAN DEFICIENCY DEBT" means any liability of Rockwell Collins (U.K.) under section 75 of the U.K. Pensions Act 1995 referable to the cessation of its participation in the Rockwell U.K. Plan under the terms of this Agreement. "ROCKWELL U.K. PLAN PAYMENT DATE" means (a) the latest of (i) September 21, 2001 and (ii) seven days after the Inland Revenue has given its approval to the transfer contemplated in Section 3.05(b)(ii) or (b) such other date as Rockwell and Rockwell Collins shall agree to in writing. "ROCKWELL U.K. PLAN TRANSFER PAYMENT" means the amount in respect of Transferring Rockwell Collins (U.K.) Employees calculated in accordance with Section 3.05(b)(i). "ROCKWELL WELFARE PLANS" means the Welfare Plans and other employee welfare benefit and fringe benefit arrangements maintained by Rockwell and its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) prior to the Time of Distribution. 9 13 "STAND-ALONE PENSION PLAN" will have the meaning ascribed thereto in Section 3.02. "TRANSFERRING RIL/REC (U.K.) EMPLOYEES" means those RIL/REC (U.K.) Employees who request a transfer of assets in accordance with invitations provided pursuant to Section 3.04(a)(iii). "TRANSFERRING ROCKWELL COLLINS (U.K.) EMPLOYEES" means those Rockwell Collins (U.K.) Employees who request a transfer of assets in accordance with invitations provided pursuant to Section 3.05(a)(iii). "U.K. ACTUARY" means Towers Perrin. "WELFARE PLAN" means any employee welfare benefit plan as defined in Section 3(1) of ERISA, including medical, vision, dental and other health plans, retiree health plans, life insurance plans, retiree life insurance plans, accidental death and dismemberment plans, long-term disability plans and severance pay plans. ARTICLE II EMPLOYEES Section 2.01 Employees. (a) Each individual employed by Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) immediately prior to the Distribution and (x) who is engaged primarily in the Rockwell Automation Business or (y) who Rockwell consents to becoming an Active Rockwell Automation Employee, it being understood that Rockwell has granted such consent in respect of individuals identified on the attached Schedule 2.01(a) (including, in the case of both clauses (x) and (y), those who are actively employed or on lay-off, leave, short-term or long-term disability or other permitted absence from employment) will be employed by a member of the Rockwell Automation Group immediately after the Time of Distribution and will be an Active Rockwell Automation Employee. Notwithstanding the foregoing, the parties acknowledge and agree that any such individual employed by a member of the Rockwell Automation Group immediately after the Time of Distribution who is not identified on Schedule 2.01(a), who was an employee of the corporate office of Rockwell prior to the Distribution and who has not accepted permanent employment with a member of the Rockwell Automation Group as of the Time of Distribution will be considered a Former Rockwell Corporate Employee (and not an Active Rockwell Automation Employee). 10 14 (b) Each individual employed by Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) immediately prior to the Distribution and (x) who is engaged primarily in the Rockwell Collins Business or (y) who Rockwell consents to becoming an Active Rockwell Collins Employee, it being understood that Rockwell has granted such consent in respect of individuals identified on the attached Schedule 2.01(b) (including, in the case of both clauses (x) and (y), those who are actively employed or on lay-off, leave, short-term or long-term disability or other permitted absence from employment) will be employed by a member of the Rockwell Collins Group immediately after the Time of Distribution and will be an Active Rockwell Collins Employee, except that Holdover Employees will continue to be employed by Affiliates of Rockwell for a transitional period after the Distribution Date pursuant to Section 12 of the Transition Agreement. Rockwell and Rockwell Collins acknowledge and agree that Holdover Employees will nevertheless be considered Active Rockwell Collins Employees hereunder from and after the Time of Distribution. (c) Each individual employed by Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) immediately prior to the Distribution and (x) who is engaged primarily in the Rockwell Science Center Business or (y) who Rockwell consents to becoming an Active Rockwell Science Center Employee, it being understood that Rockwell has granted such consent in respect of individuals identified on the attached Schedule 2.01(c) (including, in the case of both clauses (x) and (y), those who are actively employed or on lay-off, leave, short-term or long-term disability or other permitted absence from employment) will be employed by a member of the Rockwell Science Center Group immediately after the Time of Distribution and will be an Active Rockwell Science Center Employee. (d) Nothing contained in this Section 2.01 is intended to confer upon any employee of the Rockwell Automation Group, the Rockwell Collins Group or the Rockwell Science Center Group any right to continued employment after the Distribution Date. Section 2.02 Employee Benefits Generally. Until at least January 1, 2003, (a) the Rockwell Collins Group will provide to Rockwell Collins Participants employee benefits that are substantially comparable in the aggregate to the employee benefits provided to Rockwell Collins Participants by Rockwell and its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) immediately prior to the Time of Distribution and (b) the Rockwell Science Center will provide to Rockwell Science Center Participants employee benefits that are substantially comparable in the aggregate to the employee benefits provided to Rockwell Science Center Participants by Rockwell and its Subsidiaries (including members of the Rockwell Science Center Group) immediately prior to the 11 15 Time of Distribution. Notwithstanding the foregoing, the parties acknowledge and agree that the failure of the Rockwell Collins Group to provide a defined benefit pension plan to its employees in Canada will not be deemed to violate the terms of this Section 2.02. Section 2.03 Collective Bargaining Agreements. (a) Effective as of the Time of Distribution, Rockwell will, or will cause one or more Rockwell Subsidiaries to, unconditionally assume or retain (as applicable) all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) (including Liabilities relating to wages, hours or other terms and conditions of employment) relating to Rockwell Automation Participants under each of the collective bargaining agreements of the Pre-Distribution Group relating to the Rockwell Automation Business and collateral agreements related thereto. (b) Effective as of the Time of Distribution, Rockwell Collins will, or will cause one or more Rockwell Collins Subsidiaries to, unconditionally assume or retain (as applicable) all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) (including Liabilities relating to wages, hours or other terms and conditions of employment) relating to Rockwell Collins Participants under each of the collective bargaining agreements of the Pre-Distribution Group relating to the Rockwell Collins Business or any Unrelated Former Business and collateral agreements related thereto. ARTICLE III PENSION PLANS Section 3.01 U.S. Pension Plan. (a) Establishment and Sponsorship of Pension Plans and Trusts. (i) Prior to the Time of Distribution, Rockwell will have established (A) a new defined benefit pension plan which will be qualified under Section 401(a) of the Code (the "Rockwell Automation Pension Plan"), the purpose of which will be to provide benefits to eligible Rockwell Automation Participants, and a group trust related thereto which will be exempt from taxation under Section 501(a) of the Code (the "Rockwell Automation Group Trust") and (B) a new defined benefit pension plan which will be qualified under Section 401(a) of the Code (the "Rockwell Science Center Pension Plan"), the purpose of which will be to provide benefits to eligible Rockwell Science Center Participants, and a group trust related thereto which will be exempt from taxation under Section 501(a) of the Code (the "Rockwell Science Center Group Trust"). The Rockwell Automation Pension Plan and the Rockwell Science Center Pension Plan 12 16 each will credit each participant thereunder for purposes of eligibility to participate, vesting, benefit accruals and all other plan purposes with all service which had been credited to such participant for such purposes under the Rockwell Pension Plan immediately prior to the Time of Distribution (excluding any such service which was not counted under the Rockwell Pension Plan by operation of its "break in service" rules). (ii) Effective as of the Time of Distribution, Rockwell Collins hereby assumes sponsorship of the Rockwell Pension Plan and the Rockwell Group Trust, and (if not already completed) will promptly change the name of the Rockwell Pension Plan to the "Rockwell Collins Retirement Plan" and change the name of the Rockwell Group Trust to the "Rockwell Collins Master Trust". Effective as of the Time of Distribution, Rockwell hereby retains sponsorship of the Rockwell Automation Pension Plan and the Rockwell Automation Group Trust. Effective as of the Time of Distribution, Rockwell Science Center hereby assumes sponsorship of the Rockwell Science Center Pension Plan and the Rockwell Science Center Group Trust. (b) Assumption of Pension Plan Liabilities. (i) Effective as of the Time of Distribution, Rockwell hereby assumes, and agrees to fully perform, pay and discharge, and agrees to cause the Rockwell Automation Pension Plan and the Rockwell Automation Group Trust to assume, and to fully perform, pay and discharge, all accrued benefit and other Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), the Rockwell Pension Plan and the Rockwell Group Trust under and relating to the Rockwell Pension Plan and the Rockwell Group Trust with respect to Rockwell Automation Participants who were covered under the Rockwell Pension Plan prior to the Time of Distribution. The Liabilities assumed by Rockwell, the Rockwell Automation Pension Plan and the Rockwell Automation Group Trust pursuant to the preceding sentence will be considered to have been transferred from the Rockwell Pension Plan and the Rockwell Group Trust to the Rockwell Automation Pension Plan and the Rockwell Automation Group Trust on the Distribution Date. (ii) Effective as of the Time of Distribution, Rockwell Science Center hereby assumes, and agrees to fully perform, pay and discharge, and agrees to cause the Rockwell Science Center Pension Plan and the Rockwell Science Center Group Trust to assume, and to fully perform, pay and discharge, all accrued benefit and other Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), the Rockwell Pension Plan and the Rockwell Group Trust under and relating to the Rockwell Pension Plan and the Rockwell Group Trust with respect to Rockwell Science Center Participants who were covered under the Rockwell Pension Plan prior to the Time of Distribution. The Liabilities assumed by Rockwell Science Center, the Rockwell Science Center Pension Plan and the Rockwell Science Center Group Trust pursuant to the preceding sentence will be 13 17 considered to have been transferred from the Rockwell Pension Plan and the Rockwell Group Trust to the Rockwell Science Center Pension Plan and the Rockwell Science Center Group Trust on the Distribution Date. (iii) Effective as of the Time of Distribution, Rockwell Collins hereby assumes or retains, as applicable, and agrees to fully perform, pay and discharge, and agrees to cause the Rockwell Pension Plan and the Rockwell Group Trust to retain, and to fully perform, pay and discharge, all accrued benefit and other Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), the Rockwell Pension Plan and the Rockwell Group Trust under and relating to the Rockwell Pension Plan and the Rockwell Group Trust with respect to all participants who were covered under the Rockwell Pension Plan prior to the Time of Distribution (other than Rockwell Automation Participants and Rockwell Science Center Participants), including all Rockwell Collins Participants. (c) Transfers of Pension Plan Assets. (i) At least 30 days prior to the Time of Distribution, Rockwell will have filed with the IRS a proper notice on IRS Forms 5310-A regarding (A) the transfer of assets and liabilities from the Rockwell Pension Plan and the Rockwell Group Trust to the Rockwell Automation Pension Plan and the Rockwell Automation Group Trust and (B) the transfer of assets and liabilities from the Rockwell Pension Plan and the Rockwell Group Trust to the Rockwell Science Center Pension Plan and the Rockwell Science Center Group Trust. (ii) Prior to the Time of Distribution, the PBGC and IRS waiting periods applicable to the transfers of assets and liabilities from the Rockwell Pension Plan and the Rockwell Group Trust to the Rockwell Automation Pension Plan and the Rockwell Automation Group Trust contemplated by this Section 3.01 will have expired or terminated. On or prior to the Distribution Date, assets (the form of which have been agreed upon by Rockwell and Rockwell Collins) having a value equal to an amount determined by Rockwell will have been transferred from the Rockwell Group Trust to the Rockwell Automation Group Trust. (iii) Prior to the Time of Distribution, the PBGC and IRS waiting periods applicable to the transfers of assets and liabilities from the Rockwell Pension Plan and the Rockwell Group Trust to the Rockwell Science Center Pension Plan and the Rockwell Science Center Group Trust contemplated by this Section 3.01 will have expired or terminated. On or prior to the Distribution Date, assets (the form of which have been agreed upon by Rockwell, Rockwell Collins and Rockwell Science Center) having a value equal to an amount determined by Rockwell will have been transferred from the Rockwell Group Trust to the Rockwell Science Center Group Trust. 14 18 (iv) For purposes of determining the Allocated Rockwell Automation Pension Asset Amount and the Allocated Rockwell Science Center Pension Asset Amount the Actual Aggregate Pension Asset Amount will be allocated among (x) the Rockwell Pension Plan and the Rockwell Group Trust, (y) the Rockwell Automation Pension Plan and the Rockwell Automation Group Trust and (z) the Rockwell Science Center Pension Plan and the Rockwell Science Center Group Trust as follows: (A) If the Actual Aggregate Pension Asset Amount is less than the aggregate Distribution Date ABO for all of the Pension Plans (taken together), then the Actual Aggregate Pension Asset Amount will be allocated among (x) the Rockwell Pension Plan and the Rockwell Group Trust, (y) the Rockwell Automation Pension Plan and the Rockwell Automation Group Trust and (z) the Rockwell Science Center Pension Plan and the Rockwell Science Center Group Trust in accordance with Section 4044 of ERISA and the regulations thereunder, using a discount rate of 7.5% and actuarial assumptions (other than such discount rate) specified in the January 2001 Pension Plan Actuarial Valuation; or (B) If the Actual Aggregate Pension Asset Amount is equal to or greater than the aggregate Distribution Date ABO for all of the Pension Plans (taken together), then the Actual Aggregate Pension Asset Amount will be allocated among (x) the Rockwell Pension Plan and the Rockwell Group Trust, (y) the Rockwell Automation Pension Plan and the Rockwell Automation Group Trust and (z) the Rockwell Science Center Pension Plan and the Rockwell Science Center Group Trust, in accordance with the following priorities: (1) First, each Pension Plan (and the related Trust) will have allocated to it that portion of the Actual Aggregate Pension Asset Amount equal to (I) in the case of the Rockwell Automation Pension Plan, the Distribution Date ABO for Rockwell Automation Participants, (II) in the case of the Rockwell Science Center Pension Plan, the Distribution Date ABO for Rockwell Science Center Participants, and (III) in the case of the Rockwell Pension Plan, the Distribution Date ABO for all participants covered under the Rockwell Pension Plan (other than Rockwell Automation Participants and Rockwell Science Center Participants), including Rockwell Collins Participants; (2) Second, the Rockwell Science Center Pension Plan (and the Rockwell Science Center Group Trust) will have allocated to it that portion, if any, of any Step 2 Excess Amount 15 19 that is required to be allocated to it in order to comply with Government Cost Accounting Standard (CAS) 413-50(c)(5)(ii) (as may be reflected in any applicable agreement with the U.S. government); (3) Third, if either of the Rockwell Pension Plan or the Rockwell Automation Pension Plan has a Step 3 ERISA 4044 Funded Percentage of less than 100%, then whichever of the Rockwell Pension Plan and the Rockwell Automation Pension Plan has the lower Step 3 ERISA 4044 Funded Percentage (and the related Trust) will have allocated to it any Step 3 Excess Amount until the ERISA 4044 Funded Percentage of such Pension Plan is equal (after giving effect to the allocation under this Section 3.01(c)(iv)(B)(3)) to the lesser of (I) the ERISA 4044 Funded Percentage of whichever of the Rockwell Pension Plan and the Rockwell Automation Pension Plan had the higher Step 3 ERISA 4044 Funded Percentage or (II) 100%; (4) Fourth, if the ERISA 4044 Funded Percentage of each of the Rockwell Pension Plan and the Rockwell Automation Pension Plan (after giving effect to the allocation under Section 3.01(c)(iv)(B)(3)) is less than 100%, then the Rockwell Pension Plan and the Rockwell Automation Pension Plan each will have allocated to it, on a pro rata basis (based on the ratio of each such Pension Plan's Step 4 ERISA 4044 Shortfall Amount to the aggregate Step 4 ERISA 4044 Shortfall Amount of such two Pension Plans), any Step 4 Excess Amount until the ERISA 4044 Funded Percentage of each such Pension Plan is equal to 100% (after giving effect to the allocation under this Section 3.01(c)(iv)(B)(4)); (5) Fifth, the Rockwell Pension Plan (and the Rockwell Group Trust) will have allocated to it that portion, if any, of any Step 5 Excess Amount that is required to be allocated to it in order to comply with Government Cost Accounting Standard (CAS) 413-50(c)(5)(ii) (as may be reflected in any applicable agreement with the U.S. government); (6) Sixth, the Pension Plan with the lowest Step 6 ABO Funded Percentage (and the related Trust) will have allocated to it any Step 6 Excess Amount until the ABO Funded Percentage of such Pension Plan is equal (after giving effect to the allocation under this Section 3.01(c)(iv)(B)(6)) to the ABO 16 20 Funded Percentage of the Pension Plan with the next lowest Step 6 ABO Funded Percentage; (7) Seventh, the two Pension Plans with the lowest Step 7 ABO Funded Percentage each will have allocated to it, on a pro rata basis (based on the ratio of each such Pension Plan's ABO Percentage to the aggregate ABO Percentage of such two Pension Plans), any Step 7 Excess Amount until the ABO Funded Percentage of each such Pension Plan is equal (after giving effect to the allocation under this Section 3.01(c)(iv)(B)(7)) to the ABO Funded Percentage of the Pension Plan with the highest Step 7 ABO Funded Percentage; and (8) Eighth, each Pension Plan will have allocated to it such Pension Plan's pro rata share (based on such Pension Plan's ABO Percentage) of any Step 8 Excess Amount. (v) Within 150 days following the Distribution Date, Rockwell and Rockwell Collins will cause the Actuary to prepare and deliver to Rockwell, Rockwell Collins and Rockwell Science Center an actuarial valuation (the "Post-Distribution Actuarial Valuation") which will: (A) certify the Distribution Date ABO for Rockwell Automation Participants, the Distribution Date ABO for Rockwell Science Center Participants and the Distribution Date ABO for all other participants in the Rockwell Pension Plan, including Rockwell Collins Participants; (B) certify the ABO Percentage for the Rockwell Automation Pension Plan, the ABO Percentage for the Rockwell Science Center Pension Plan and the ABO Percentage for the Rockwell Pension Plan; (C) set forth the Actual Aggregate Pension Asset Amount, the Actual Rockwell Automation Pension Asset Amount and the Actual Rockwell Science Center Pension Asset Amount; (D) certify the portion of the Actual Aggregate Pension Asset Amount required to be allocated to the Rockwell Pension Plan, the Allocated Rockwell Automation Pension Asset Amount and the Allocated Rockwell Science Center Pension Asset Amount and the calculation of each thereof in accordance with Section 3.01(c)(iv); 17 21 (E) certify the portion of the Actual Aggregate Pension Asset Amount required to be allocated to each of the Rockwell Pension Plan, the Rockwell Automation Pension Plan and the Rockwell Science Center Pension Plan under CAS 413-50(c)(5)(ii); and (F) certify the portion of the Actual Aggregate Pension Asset Amount required to be allocated to each of the Rockwell Pension Plan, the Rockwell Automation Pension Plan and the Rockwell Science Center Pension Plan under Section 4044 of ERISA and the regulations thereunder (using the actuarial assumptions set forth therein, including the interest rate specified by the PBGC for pension plans terminating at the Time of Distribution). The date on which the Actuary delivers the Post-Distribution Actuarial Valuation to Rockwell, Rockwell Collins and Rockwell Science Center is referred to herein as the "Delivery Date". (vi) Either Rockwell or Rockwell Collins may dispute any of the calculations referred to in clauses (iii)(A)-(F) above certified or set forth in the Post-Distribution Actuarial Valuation by delivering written notice thereof (a "Dispute Notice") to the Actuary and the other parties to this Agreement on or before the 30th day following the Delivery Date (the "Dispute Notice Deadline Date"). If Rockwell or Rockwell Collins delivers a Dispute Notice as provided for above, then, following delivery of a Dispute Notice, Rockwell, Rockwell Collins and the Actuary will work together in good faith and on a reasonable basis to resolve any matters specified in the Dispute Notice, and Rockwell and Rockwell Collins will use their reasonable best efforts to cause the Actuary to deliver to Rockwell, Rockwell Collins and Rockwell Science Center a restated Post-Distribution Actuarial Valuation reflecting any required adjustments agreed to by Rockwell and Rockwell Collins resulting from the resolution of such matters within 60 days following delivery of a Dispute Notice. (vii) (A) If the Allocated Rockwell Automation Pension Asset Amount set forth in the Final Post-Distribution Actuarial Valuation is greater than the Actual Rockwell Automation Pension Asset Amount set forth in the Final Post-Distribution Actuarial Valuation, then assets having a fair market value equal to the excess thereof will be transferred from the Rockwell Pension Plan and the Rockwell Group Trust to the Rockwell Automation Pension Plan and the Rockwell Automation Group Trust on the Transfer Date. If the Actual Rockwell Automation Pension Asset Amount set forth in the Final Post-Distribution Actuarial Valuation is greater than the Allocated Rockwell Automation Pension Asset Amount set forth in the Final Post-Distribution Actuarial Valuation, then assets having a fair market value equal to the excess thereof will be transferred from the Rockwell Automation Pension Plan and the 18 22 Rockwell Automation Group Trust to the Rockwell Pension Plan and the Rockwell Group Trust on the Transfer Date. (B) If the Allocated Rockwell Science Center Pension Asset Amount set forth in the Final Post-Distribution Actuarial Valuation is greater than the Actual Rockwell Science Center Pension Asset Amount set forth in the Final Post-Distribution Actuarial Valuation, then assets having a fair market value equal to the excess thereof will be transferred from the Rockwell Pension Plan and the Rockwell Group Trust to the Rockwell Science Center Pension Plan and the Rockwell Science Center Group Trust on the Transfer Date. If the Actual Rockwell Science Center Pension Asset Amount set forth in the Final Post-Distribution Actuarial Valuation is greater than the Allocated Rockwell Science Center Pension Asset Amount set forth in the Final Post-Distribution Actuarial Valuation, then assets having a fair market value equal to the excess thereof will be transferred from the Rockwell Science Center Pension Plan and the Rockwell Science Center Group Trust to the Rockwell Pension Plan and the Rockwell Group Trust on the Transfer Date. (C) Any amount to be transferred pursuant to this Section 3.01(c)(vii) will bear interest from the Time of Distribution to the date of payment (calculated based on actual days elapsed in a 365-day year) at a rate of 9% per annum and assets having a fair market value equal to such interest amount will be transferred on the date of payment by the applicable Pension Plans and Trusts required to make any transfer pursuant to this Section 3.01(c)(vii). (D) The assets to be transferred from the Rockwell Group Trust, from the Rockwell Automation Group Trust and/or from the Rockwell Science Center Group Trust pursuant to this Section 3.01(c)(vii) will consist solely of cash and marketable securities. (viii) In the event that, after the allocation and transfer of assets among the Pension Plans (and the related Trusts) in accordance with Section 3.01(c)(vii), any Pension Plan (and the related Trust) does not hold on the Transfer Date an amount of assets required to be held by such Pension Plan in order to comply with both (A) CAS 413-50(c)(5) (as may be reflected in any applicable agreement with the U.S. government) and (B) Section 414(l) of the Code and the regulations thereunder (using the actuarial assumptions set forth therein, including the interest rate specified by the PBGC for pension plans terminating at the Time of Distribution), the sponsor of such Pension Plan will be responsible for (A) making (and agrees to make promptly, but in no event later than January 31, 2002) any contribution of assets required to be made to such Pension Plan in order for such Pension Plan to so comply with both CAS 413-50(c)(5) (as 19 23 reflected in any applicable agreement with the U.S. government) and Section 414(l) of the Code and the regulations thereunder (using the actuarial assumptions set forth therein, including the interest rate specified by the PBGC for pension plans terminating at the Time of Distribution) and (B) all Liabilities in connection therewith. Any amount required to be contributed to a Pension Plan pursuant to this Section 3.01(c)(viii) will bear interest from the Time of Distribution to the date of contribution (calculated based on actual days elapsed in a 365-day year) at a rate of 9% per annum and assets having a fair market value equal to such interest amount will also be contributed to such Pension Plan on the date of contribution by the sponsor of such Pension Plan. (ix) All costs and expenses of the Actuary in connection with the matters contemplated by this Section 3.01 will be shared equally by Rockwell and Rockwell Collins. (d) Compliance with Applicable Laws. The parties acknowledge that the transfers of assets and liabilities from the Rockwell Pension Plan and the Rockwell Group Trust to the Rockwell Automation Pension Plan and Rockwell Automation Group Trust and to the Rockwell Science Center Pension Plan and the Rockwell Science Center Group Trust contemplated hereby will comply with Section 414(l) of the Code and the Treasury Regulations thereunder. (e) Definitions. For purposes of this Section 3.01, the following terms will have the respective meanings set forth below: "ABO FUNDED PERCENTAGE" means, with respect to each Pension Plan, a fraction, (A) the numerator of which is the fair market value of the applicable assets allocated to such Pension Plan pursuant to Section 3.01(c)(iv), and (B) the denominator of which is (x) in the case of the Rockwell Automation Pension Plan, the Distribution Date ABO for Rockwell Automation Participants, (y) in the case of the Rockwell Science Center Pension Plan, the Distribution Date ABO for Rockwell Science Center Participants, and (z) in the case of the Rockwell Pension Plan, the Distribution Date ABO for all participants covered under the Rockwell Pension Plan (other than Rockwell Automation Participants and Rockwell Science Center Participants), including Rockwell Collins Participants. "ABO PERCENTAGE" means, with respect to each Pension Plan, a fraction, (A) the numerator of which is (x) in the case of the Rockwell Automation Pension Plan, the Distribution Date ABO for Rockwell Automation Participants, (y) in the case of the Rockwell Science Center Pension Plan, the Distribution Date ABO for Rockwell Science Center Participants, and (z) in the case of the Rockwell Pension Plan, the Distribution Date ABO for all participants covered under the Rockwell Pension Plan (other than Rockwell Automation 20 24 Participants and Rockwell Science Center Participants), including Rockwell Collins Participants, and (B) the denominator of which is the Distribution Date ABO for all participants covered under all the Pension Plans (including Rockwell Automation Participants, Rockwell Science Center Participants and Rockwell Collins Participants). "ACTUAL AGGREGATE PENSION ASSET AMOUNT" means the fair market value of the aggregate assets of the Rockwell Pension Plan and the Rockwell Group Trust, the Rockwell Automation Pension Plan and the Rockwell Automation Group Trust and the Rockwell Science Center Pension Plan and the Rockwell Science Center Group Trust as of the Time of Distribution. "ACTUAL ROCKWELL AUTOMATION PENSION ASSET AMOUNT" means the fair market value of the assets of the Rockwell Automation Pension Plan and the Rockwell Automation Group Trust as of the Time of Distribution. "ACTUAL ROCKWELL SCIENCE CENTER PENSION ASSET AMOUNT" means the fair market value of the assets of the Rockwell Science Center Pension Plan and the Rockwell Science Center Group Trust as of the Time of Distribution. "ACTUARY" means Watson Wyatt Worldwide. "ALLOCATED ROCKWELL AUTOMATION PENSION ASSET AMOUNT" means the portion of the Actual Aggregate Pension Asset Amount allocated to the Rockwell Automation Pension Plan and the Rockwell Automation Group Trust under Section 3.01(c)(iv). "ALLOCATED ROCKWELL SCIENCE CENTER PENSION ASSET AMOUNT" means the portion of the Actual Aggregate Pension Asset Amount allocated to the Rockwell Science Center Pension Plan and the Rockwell Science Center Group Trust under Section 3.01(c)(iv). "DELIVERY DATE" has the meaning ascribed thereto in Section 3.01(c)(v). "DISPUTE NOTICE" has the meaning ascribed thereto in Section 3.01(c)(vi). "DISPUTE NOTICE DEADLINE DATE" has the meaning ascribed thereto in Section 3.01(c)(vi). "DISTRIBUTION DATE ABO" means, with respect to any group of participants covered under the Rockwell Pension Plan, the Rockwell Automation Pension Plan and/or the Rockwell Science Center Pension Plan immediately prior 21 25 to the Time of Distribution (including Rockwell Automation Participants, Rockwell Science Center Participants and Rockwell Collins Participants), the aggregate accumulated benefit obligation for such participants under the Rockwell Pension Plan, the Rockwell Automation Pension Plan and the Rockwell Science Center Pension Plan as of the Time of Distribution, as determined in accordance with FAS 87 utilizing a discount rate of 7.5% and actuarial assumptions (other than such discount rate) specified in the January 2001 Pension Plan Actuarial Valuation. The determination of the Distribution Date ABO will be based on an actuarial valuation using participant data as of January 1, 2001, with the results of such valuation adjusted to the Time of Distribution using standard actuarial techniques. Other than reflecting any changes in the assignment of participants among the Pension Plans from January 1, 2001 through the Distribution Date, no changes occurring after January 1, 2001 will be taken into account in determining the Distribution Date ABO. "ERISA 4044 FUNDED PERCENTAGE" means, with respect to each Pension Plan, a fraction, (A) the numerator of which is the fair market value of the applicable assets allocated to such Pension Plan pursuant to Section 3.01(c)(iv), and (B) the denominator of which is the portion of the Actual Aggregate Pension Asset Amount required to be allocated to such Pension Plan under Section 4044 of ERISA and the regulations thereunder (using the actuarial assumptions set forth therein, including the interest rate specified by the PBGC for pension plans terminating at the Time of Distribution). "FAS 87" means Statement of Financial Accounting Standards No. 87. "FINAL POST-DISTRIBUTION ACTUARIAL VALUATION" is defined as follows: (A) if a Dispute Notice is not delivered by Rockwell or Rockwell Collins on or prior to the Dispute Notice Deadline Date, then the Final Post-Distribution Actuarial Valuation means the Post-Distribution Actuarial Valuation delivered by the Actuary to Rockwell, Rockwell Collins and Rockwell Science Center on the Delivery Date; or (B) if a Dispute Notice is delivered by Rockwell or Rockwell Collins on or prior to the Dispute Notice Deadline Date, then the Final Post-Distribution Actuarial Valuation means the Post-Distribution Actuarial Valuation agreed to (and restated by the Actuary, if necessary) by Rockwell and Rockwell Collins pursuant to Section 3.01(c)(vi). 22 26 "JANUARY 2001 PENSION PLAN ACTUARIAL VALUATION" means the actuarial valuation for the Rockwell Pension Plan prepared by the Actuary dated May 31, 2001. "PENSION PLAN" means the Rockwell Pension Plan, the Rockwell Automation Pension Plan and the Rockwell Science Center Pension Plan. "POST-DISTRIBUTION ACTUARIAL VALUATION" has the meaning ascribed thereto in Section 3.01(c)(v). "ROCKWELL AUTOMATION GROUP TRUST" has the meaning ascribed thereto in Section 3.01(a)(i). "ROCKWELL AUTOMATION PENSION PLAN" has the meaning ascribed thereto in Section 3.01(a)(i). "ROCKWELL GROUP TRUST" has the meaning ascribed thereto in Section 1.01. "ROCKWELL PENSION PLAN" has the meaning ascribed thereto in Section 1.01. "ROCKWELL SCIENCE CENTER GROUP TRUST" has the meaning ascribed thereto in Section 3.01(a)(i). "ROCKWELL SCIENCE CENTER PENSION PLAN" has the meaning ascribed thereto in Section 3.01(a)(i). "STEP 2 EXCESS AMOUNT" means that amount, if any, by which the Actual Aggregate Pension Asset Amount exceeds the aggregate portions of the Actual Aggregate Pension Asset Amount required to be allocated to all the Pension Plans (and their related Trusts) under Section 3.01(c)(iv)(B)(1). "STEP 3 ERISA 4044 FUNDED PERCENTAGE" means, with respect to each Pension Plan, a fraction, (A) the numerator of which is the fair market value of the assets allocated to such Pension Plan (and the related Trust) under Sections 3.01(c)(iv)(B)(1) and (2), and (B) the denominator of which is the portion of the Actual Aggregate Pension Asset Amount required to be allocated to such Pension Plan under Section 4044 of ERISA and the regulations thereunder (using the actuarial assumptions set forth therein, including the interest rate specified by the PBGC for pension plans terminating at the Time of Distribution). 23 27 "STEP 3 EXCESS AMOUNT" means the amount, if any, by which the Actual Aggregate Pension Asset Amount exceeds the aggregate portions of the Actual Aggregate Pension Assets Amount required to be allocated to all the Pension Plans (and their related Trusts) under Sections 3.01(c)(iv)(B) (1) and (2). "STEP 4 ERISA 4044 SHORTFALL AMOUNT" means, with respect to each Plan, the remainder of (A) the portion of the Actual Aggregate Pension Asset Amount required to be allocated to such Pension Plan under Section 4044 of ERISA and the regulations thereunder (using the actuarial assumptions set forth therein, including the interest rate specified by the PBGC for pension plans terminating at the Time of Distribution), less (B) the fair market value of the assets allocated to such Pension Plan (and the related Trust) under Sections 3.01(c)(iv)(B)(1), (2) and (3). "STEP 4 EXCESS AMOUNT" means the amount, if any, by which the Actual Aggregate Pension Asset Amount exceeds the aggregate portions of the Actual Aggregate Pension Asset Amount required to be allocated to all the Pension Plans (and their related Trusts) under Sections 3.01(c)(iv)(B)(1), (2) and (3). "STEP 5 EXCESS AMOUNT" means the amount, if any, by which the Actual Aggregate Pension Asset Amount exceeds the aggregate portions of the Actual Aggregate Pension Asset Amount required to be allocated to all the Pension Plans (and their related Trusts) under Sections 3.01(c)(iv)(B)(1), (2), (3) and (4). "STEP 6 ABO FUNDED PERCENTAGE" means, with respect to each Pension Plan, a fraction, (A) the numerator of which is the fair market value of the assets allocated to such Pension Plan (and the related Trust) under Sections 3.01(c)(iv)(B)(1), (2), (3), (4) and (5), and (B) the denominator of which is (x) in the case of the Rockwell Automation Pension Plan, the Distribution Date ABO for Rockwell Automation Participants, (y) in the case of the Rockwell Science Center Pension Plan, the Distribution Date ABO for Rockwell Science Center Participants, and (z) in the case of the Rockwell Pension Plan, the Distribution Date ABO for all participants covered under the Rockwell Pension Plan (other than Rockwell Automation Participants and Rockwell Science Center Participants), including Rockwell Collins Participants. "STEP 6 EXCESS AMOUNT" means the amount, if any, by which the Actual Aggregate Pension Asset Amount exceeds the aggregate portions of the Actual Aggregate Pension Asset Amount required to be allocated to all the Pension Plans (and their related Trusts) under Sections 3.01(c)(iv)(B)(1), (2), (3), (4) and (5). 24 28 "STEP 7 ABO FUNDED PERCENTAGE" means, with respect to each Pension Plan, a fraction, (A) the numerator of which is the fair market value of the assets allocated to such Pension Plan (and the related Trust) under Sections 3.01(c)(iv)(B)(1), (2), (3), (4), (5) and (6), and (B) the denominator of which is (x) in the case of the Rockwell Automation Pension Plan, the Distribution Date ABO for Rockwell Automation Participants, (y) in the case of the Rockwell Science Center Pension Plan, the Distribution Date ABO for Rockwell Science Center Participants, and (z) in the case of the Rockwell Pension Plan, the Distribution Date ABO for all participants covered under the Rockwell Pension Plan (other than Rockwell Automation Participants and Rockwell Science Center Participants), including Rockwell Collins Participants. "STEP 7 EXCESS AMOUNT" means the amount, if any, by which the Actual Aggregate Pension Asset Amount exceeds the aggregate portions of the Actual Aggregate Pension Asset Amount required to be allocated to all the Pension Plans (and their related Trusts) under Sections 3.01(c)(iv)(B)(1), (2), (3), (4), (5) and (6). "STEP 8 EXCESS AMOUNT" means the amount, if any, by which the Actual Aggregate Pension Asset Amount exceeds the aggregate portions of the Actual Aggregate Pension Asset Amount required to be allocated to all the Pension Plans (and their related Trusts) under Sections 3.01(c)(iv)(B)(1), (2), (3), (4), (5), (6) and (7). "TRANSFER DATE" means: (A) if a Dispute Notice is not delivered by Rockwell or Rockwell Collins on or prior to the Dispute Notice Deadline Date, the third business day after the Dispute Notice Deadline Date; or (B) if a Dispute Notice is delivered by Rockwell or Rockwell Collins on or prior to the Dispute Notice Deadline Date, the third business day following (i) the date that Rockwell and Rockwell Collins agree in writing that the Post-Distribution Actuarial Valuation delivered on the Delivery Date is final or (ii) the date the Actuary delivers to Rockwell, Rockwell Collins and Rockwell Science Center a restated Post-Distribution Actuarial Valuation properly reflecting any required adjustments agreed to by Rockwell and Rockwell Collins. "TRUST" means the Rockwell Group Trust, the Rockwell Automation Group Trust or the Rockwell Science Center Group Trust. Section 3.02 Stand-Alone Pension Plan. Effective as of the Time of Distribution, Rockwell Collins will or will cause one or more Rockwell Collins 25 29 Subsidiaries to assume and adopt or retain, as applicable, sponsorship of the Kaiser Aerospace Retirement Plan, as amended through the Time of Distribution (the "Stand-Alone Pension Plan"), the trust related thereto and all assets and Liabilities related thereto. Effective as of the Time of Distribution, Rockwell Collins hereby assumes or retains, as applicable, and agrees to fully perform, pay and discharge, and agrees to cause the Stand-Alone Pension Plan and the trust related thereto to assume or retain, and to fully perform, pay and discharge, all accrued benefit and other Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), the Stand-Alone Pension Plan and the trust related thereto under and relating to the Stand-Alone Pension Plan and the trust related thereto with respect to all participants who were covered under the Stand-Alone Pension Plan prior to the Time of Distribution. Section 3.03 U.S. Non-Qualified Pension Plan. (a) Establishment and Sponsorship of Non-Qualified Pension Plans and Rabbi Trusts. (i) Prior to the Time of Distribution, Rockwell will have established (A) a new non-qualified supplemental pension plan (the "Rockwell Automation Non-Qualified Pension Plan"), the purpose of which will be to provide benefits to Rockwell Automation Participants, and the Rockwell Automation Master Rabbi Trust, (B) a new non-qualified supplemental pension plan (the "Rockwell Science Center Non-Qualified Pension Plan"), the purpose of which will be to provide benefits to Rockwell Science Center Participants, and the Rockwell Science Center Master Rabbi Trust and (C) the Rockwell Master Rabbi Trust. The Rockwell Automation Non-Qualified Pension Plan and the Rockwell Science Center Non-Qualified Pension Plan each will be substantially similar in all material respects to the Rockwell Non-Qualified Pension Plan, and will provide a benefit formula which will be substantially similar in all material respects to the benefit formula that the Rockwell Non-Qualified Pension Plan provided immediately prior to the Time of Distribution. The Rockwell Automation Non-Qualified Pension Plan and the Rockwell Science Center Non-Qualified Pension Plan each will credit each participant thereunder for purposes of eligibility to participate, vesting, benefit accruals and all other plan purposes with all service which had been credited to such participant for such purposes under the Rockwell Non-Qualified Pension Plan immediately prior to the Time of Distribution. (ii) Effective as of the Time of Distribution, Rockwell Collins hereby assumes sponsorship of the Rockwell Non-Qualified Pension Plan and the Rockwell Master Rabbi Trust (and hereby assumes all Liabilities under the Rockwell Master Rabbi Trust) and (if not already completed) will promptly change the name of the Rockwell Non-Qualified Pension Plan to the "Rockwell Collins Non-Qualified Pension Plan" and change the name of the Rockwell Master Rabbi Trust to the "Rockwell Collins Master 26 30 Rabbi Trust - Deferred Compensation, Non-Qualified Savings and Non-Qualified Pension Plans". Effective as of the Time of Distribution, Rockwell hereby retains sponsorship of the Rockwell Automation Non-Qualified Pension Plan and the Rockwell Automation Master Rabbi Trust (and hereby retains all Liabilities under the Rockwell Automation Master Rabbi Trust). Effective as of the Time of Distribution, Rockwell Science Center hereby assumes sponsorship of the Rockwell Science Center Non-Qualified Pension Plan and the Rockwell Science Center Master Rabbi Trust (and hereby assumes all Liabilities under the Rockwell Science Center Master Rabbi Trust). (b) Assumption of Non-Qualified Pension Plan Liabilities. (i) Effective as of the Time of Distribution, Rockwell hereby assumes, and agrees to fully perform, pay and discharge, and agrees to cause the Rockwell Automation Non-Qualified Pension Plan to assume, and to fully perform, pay and discharge, all accrued benefit and other Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) and of the Rockwell Non-Qualified Pension Plan under and relating to the Rockwell Non-Qualified Pension Plan with respect to Rockwell Automation Participants who were covered under the Rockwell Non-Qualified Pension Plan prior to the Time of Distribution. (ii) Effective as of the Time of Distribution, Rockwell Science Center hereby assumes, and agrees to fully perform, pay and discharge, and agrees to cause the Rockwell Science Center Non-Qualified Pension Plan to assume, and to fully perform, pay and discharge, all accrued benefit and other Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) and of the Rockwell Non-Qualified Pension Plan under and relating to the Rockwell Non-Qualified Pension Plan with respect to Rockwell Science Center Participants who were covered under the Rockwell Non-Qualified Pension Plan prior to the Time of Distribution. (iii) Effective as of the Time of Distribution, Rockwell Collins hereby assumes, and agrees to fully perform, pay and discharge, and agrees to cause the Rockwell Non-Qualified Pension Plan to retain, and to fully perform, pay and discharge, all accrued benefit and other Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) and of the Rockwell Non-Qualified Pension Plan under and relating to the Rockwell Non-Qualified Pension Plan with respect to all participants who were covered under the Rockwell Non-Qualified Pension Plan prior to the Time of Distribution (other than Rockwell Automation Participants and Rockwell Science Center Participants), including all Rockwell Collins Participants. 27 31 Section 3.04 Rockwell Collins (U.K.) Limited Pension Scheme. (a) RIL/REC (U.K.) Employees. (i) Effective as of the Time of Distribution, Rockwell and Rockwell Collins shall cause RIL (U.K.) and REC (U.K.) to cease to participate in the Rockwell Collins (U.K.) Scheme in respect of the RIL/REC (U.K.) Employees. As soon as reasonably possible after the Time of Distribution, Rockwell and Rockwell Collins shall cause an appropriate deed of disadherence to be executed by RIL (U.K.), REC (U.K.), Rockwell Collins (U.K.) (as the "Principal Employer" of the Rockwell Collins (U.K.) Scheme) (as that term is defined in the governing documentation of the Rockwell Collins (U.K.) Scheme)) and the trustees of the Rockwell Collins (U.K.) Scheme confirming such cessation of participation. (ii) Effective as of the Time of Distribution, Rockwell Collins shall cause Rockwell Collins (U.K.) to remain as the Rockwell Collins (U.K.) Scheme's Principal Employer. (iii) Prior to the Time of Distribution, Rockwell shall cause each RIL/REC (U.K.) Employee to be invited to become an active member of the Rockwell U.K. Plan with effect from the Time of Distribution. The invitations shall be in writing and shall include: (A) an offer to join the Rockwell U.K. Plan for future service on terms which are materially identical (as to the form of benefit provision including death benefit provision) to the terms of benefit provision in respect of each RIL/REC (U.K.) Employee under the Rockwell Collins (U.K.) Scheme at the Time of Distribution; (B) the option for each RIL/REC (U.K.) Employee to request by July 31, 2001 a transfer of assets in respect of his or her past service rights under the Rockwell Collins (U.K.) Scheme to the Rockwell U.K. Plan; (C) a statement that if the RIL/REC (U.K.) Employee does not request such a transfer of assets from the Rockwell Collins (U.K.) Scheme to the Rockwell U.K. Plan, his or her deferred benefits earned in respect of pensionable service in the Rockwell Collins (U.K.) Scheme will remain within the Rockwell Collins (U.K.) Scheme and will be calculated on the basis of his or her Pensionable Service to, and his or her Final Pensionable Earnings at, the Time of Distribution. For the purposes of this Section 3.04(a)(iii)(C), the terms "Pensionable Service" and "Final Pensionable Earnings" shall be defined in accordance with the trust deed and rules of the Rockwell Collins (U.K.) Scheme dated May 9, 2001; and 28 32 (D) a statement that if the RIL/REC (U.K.) Employee does request such a transfer of assets from the Rockwell Collins (U.K.) Scheme to the Rockwell U.K. Plan, he or she will be provided with benefits under the Rockwell U.K. Plan which are materially identical to those provided in respect of such RIL/REC (U.K.) Employee in the Rockwell Collins (U.K.) Scheme, and that the periods of pensionable service pre- and post- the Time of Distribution shall be treated as continuous. (iv) As soon as practicable following the Time of Distribution, Rockwell shall cause the governing documentation of the Rockwell U.K. Plan to be amended to reflect the provisions of Sections 3.04(a)(iii)(A) and (D) above. (v) Rockwell and Rockwell Collins acknowledge that there is currently a discretionary practice in the Rockwell Collins (U.K.) Scheme of increasing annually all pensions in payment which were accrued in respect of pensionable service prior to April 6, 1997 (the "Discretionary Practice"). Under the Discretionary Practice, such element of pension is increased annually in April by the lesser of 5% and the increase in the Retail Prices Index over the previous calendar year (with the statutory increase to the Guaranteed Minimum Pension being offset against this increase). For as long as the Discretionary Practice is continued, Rockwell Collins shall cause Rockwell Collins (U.K.) to continue to provide for the Discretionary Practice in respect of members of the Rockwell Collins (U.K.) Scheme who are former employees of RIL (U.K.) or REC (U.K.) and will meet any funding requirements for these purposes in accordance with the provisions of Rule 12.25 (Special benefits) of the trust deed and rules of the Rockwell Collins (U.K.) Scheme dated May 9, 2001. (b) Transfer Payment in Respect of RIL/REC (U.K.) Employees. (i) On or prior to September 14, 2001, Rockwell Collins shall cause the U.K. Actuary to complete and deliver to Rockwell and Rockwell Collins the calculation of the Rockwell Collins (U.K.) Scheme Transfer Payment in respect of the Transferring RIL/REC (U.K.) Employees in accordance with the U.K. Actuary's Schedule set forth in Schedule 3.04(b)(i). (ii) On the Rockwell Collins (U.K.) Scheme Payment Date, Rockwell Collins shall cause the Rockwell Collins (U.K.) Scheme to transfer to the Rockwell U.K. Plan a representative spread of assets held under the trusts of the Rockwell Collins (U.K.) Scheme the mid-market value of which on the business day preceding the Rockwell Collins (U.K.) Scheme Payment Date is equal to the Rockwell Collins (U.K.) Scheme Transfer Payment, unless Rockwell and Rockwell Collins shall agree in writing that the Rockwell Collins (U.K.) Scheme Transfer Payment shall be transferred in some other manner. 29 33 (iii) To the extent that the Rockwell Collins (U.K.) Scheme does not pay the Rockwell Collins (U.K.) Scheme Transfer Payment in accordance with Section 3.04(b)(ii) on the Rockwell Collins (U.K.) Scheme Payment Date for any reason, Rockwell Collins shall cause Rockwell Collins (U.K.) to pay RIL (U.K.) within 14 days after the Rockwell Collins (U.K.) Scheme Payment Date the amount of the difference, less the rate of corporation tax applicable to Rockwell Collins (U.K.) in the United Kingdom. (iv) Rockwell shall cause the Rockwell U.K. Plan to accept liability for each Transferring RIL/REC (U.K.) Employee's accrued rights to a Guaranteed Minimum Pension, and rights under Section 9(2B) of the U.K. Pension Schemes Act 1993. (v) Rockwell Collins shall cause (subject to the consent of the trustees of the Rockwell Collins (U.K.) Scheme) the assets representing Transferring RIL/REC (U.K.) Employees' voluntary contributions to be transferred to the Rockwell U.K. Plan. Rockwell shall cause the proportion of the amount so transferred which is attributable to each Transferring RIL/REC (U.K.) Employee to be credited to the relevant employee's additional voluntary contribution account in the Rockwell U.K. Plan and the Rockwell U.K. Plan to provide benefits for the employees concerned equal in value to the assets transferred. (c) Rockwell Collins (U.K.) Scheme Deficiency Debt. (i) As soon as practicable following the Time of Distribution, Rockwell Collins shall cause Rockwell Collins (U.K.) to instruct the U.K. Actuary to carry out an actuarial valuation of the Rockwell Collins (U.K.) Scheme as of the Time of Distribution and to provide a certificate certified by the U.K. Actuary (the "Rockwell Collins (U.K.) Scheme Debt Certificate") setting out any Rockwell Collins (U.K.) Scheme Deficiency Debt calculated as of the Time of Distribution. (ii) Rockwell shall cause RIL (U.K.) and REC (U.K.) to satisfy any Rockwell Collins (U.K.) Scheme Deficiency Debt within 20 business days after receipt of the Rockwell Collins (U.K.) Scheme Debt Certificate. (iii) In the event that, following the actuarial valuation described in Section 3.04(c)(i), no Rockwell Collins (U.K.) Scheme Deficiency Debt is identified and no Rockwell Collins (U.K.) Scheme Debt Certificate is required, Rockwell Collins shall use all reasonable endeavours to procure that the trustees of the Rockwell Collins (U.K.) Scheme shall resolve that no debt would be treated as becoming due from RIL (U.K.) or REC (U.K.) under section 75 of the U.K. Pensions Act 1995. 30 34 Section 3.05 Rockwell U.K. Pension Scheme (a) Rockwell Collins (U.K.) Employees. (i) Effective as of the Time of Distribution, Rockwell and Rockwell Collins shall cause Rockwell Collins (U.K.) to cease to participate in the Rockwell U.K. Plan in respect of Rockwell Collins (U.K.) Employees. As soon as reasonably possible after the Time of Distribution, Rockwell and Rockwell Collins shall cause an appropriate deed of disadherence to be executed by RIL (U.K.) (as the "Principal Employer" of the Rockwell U.K. Plan (as that term is defined in the governing documentation of the Rockwell U.K. Plan)), Rockwell Collins (U.K.) and the trustees of the Rockwell U.K. Plan confirming such cessation of participation. (ii) Effective as of the Time of Distribution, Rockwell shall cause RIL (U.K.) to remain as the Rockwell U.K. Plan's Principal Employer. (iii) Prior to the Time of Distribution, Rockwell Collins shall cause each Rockwell Collins (U.K.) Employee to be invited to become an active member of the Rockwell Collins (U.K.) Scheme with effect from the Time of Distribution. The invitations shall be in writing and shall include: (A) an offer to join the Rockwell Collins (U.K.) Scheme for future service on terms which are materially identical (as to the form of benefit provision including death benefit provision) to the terms of benefit provision in respect of each Rockwell Collins (U.K.) Employee under the Rockwell U.K. Plan at the Time of Distribution; (B) the option for each Rockwell Collins (U.K.) Employee to request by July 31, 2001 a transfer of assets in respect of his or her past service rights under the Rockwell U.K. Plan to the Rockwell Collins (U.K.) Scheme; (C) a statement that if the Rockwell Collins (U.K.) Employee does not request such a transfer of assets from the Rockwell U.K. Plan to the Rockwell Collins (U.K.) Scheme, his or her deferred benefits earned in respect of pensionable service in the Rockwell U.K. Plan will remain within the Rockwell U.K. Plan and will be calculated on the basis of his or her Pensionable Service to, and his or her Final Pensionable Earnings at, the Time of Distribution. For the purposes of this Section 3.05(a)(iii)(C), "Pensionable Service" and "Final Pensionable Earnings" shall be defined in accordance with the governing documentation of the Rockwell U.K. Plan; and 31 35 (D) a statement that if the Rockwell Collins (U.K.) Employee does request such a transfer of assets from the Rockwell U.K. Plan to the Rockwell Collins (U.K.) Scheme, he or she will be provided with benefits under the Rockwell Collins (U.K.) Scheme which are materially identical to those provided in respect of such Rockwell Collins (U.K.) Employee in the Rockwell U.K. Plan, and that the periods of pensionable service pre- and post-the Time of Distribution shall be treated as continuous. (iv) As soon as practicable following the Time of Distribution, Rockwell Collins shall cause appropriate resolutions to be passed in relation to the Rockwell Collins (U.K.) Scheme to reflect the provisions of Sections 3.05(a)(iii)(A) and (D) above. (b) Transfer payment in respect of the Rockwell Collins (U.K.) Employees. (i) On or prior to September 14, 2001, Rockwell shall cause the U.K. Actuary to complete and deliver to Rockwell and Rockwell Collins the calculation of the Rockwell U.K. Plan Transfer Payment in respect of the Transferring Rockwell Collins (U.K.) Employees in accordance with the U.K. Actuary's Schedule set forth in Schedule 3.04(b)(i). (ii) On the Rockwell U.K. Plan Payment Date, Rockwell shall cause the Rockwell U.K. Plan to transfer to the Rockwell Collins (U.K.) Scheme a representative spread of assets held under the Rockwell International Common Investment Fund (the "Rockwell CIF") the mid-market value of which on the business day preceding the Rockwell U.K. Plan Payment Date is equal to the Rockwell U.K. Plan Transfer Payment, unless Rockwell and Rockwell Collins shall agree in writing that the Rockwell U.K. Plan Transfer Payment shall be transferred in some other manner. (iii) To the extent that the Rockwell U.K. Plan does not pay the Rockwell U.K. Plan Transfer Payment in accordance with Section 3.05(b)(ii) on the Rockwell U.K. Plan Payment Date for any reason, Rockwell shall cause RIL (U.K.) to pay Rockwell Collins (U.K.) within 14 days after the Rockwell U.K. Plan Payment Date the amount of the difference, less the rate of corporation tax applicable to RIL (U.K.) in the United Kingdom. (iv) Rockwell Collins shall cause the Rockwell Collins (U.K.) Scheme to accept liability for each Transferring Rockwell Collins (U.K.) Employee's accrued rights to a Guaranteed Minimum Pension, and rights under Section 9(2B) of the U.K. Pension Schemes Act 1993. (v) Rockwell shall cause (subject to the consent of the trustees of the Rockwell U.K. Plan) the assets representing Transferring Rockwell Collins (U.K.) 32 36 Employees' voluntary contributions to be transferred to the Rockwell Collins (U.K.) Scheme. Rockwell Collins shall cause the proportion of the amount so transferred which is attributable to each Transferring Rockwell Collins (U.K.) Employee to be credited to the relevant employee's additional voluntary contribution account in the Rockwell Collins (U.K.) Scheme and the Rockwell Collins (U.K.) Scheme to provide benefits for the employees concerned equal in value to the assets transferred. (c) Rockwell U.K. Plan Deficiency Debt (i) As soon as practicable following the Time of Distribution, Rockwell shall cause RIL (U.K.) to instruct the U.K. Actuary to carry out an actuarial valuation of the Rockwell U.K. Plan as of the Time of Distribution and to provide a certificate certified by the U.K. Actuary (the "Rockwell U.K. Plan Debt Certificate") setting out any Rockwell U.K. Plan Deficiency Debt calculated as of the Time of Distribution. (ii) Rockwell Collins shall cause Rockwell Collins (U.K.) to satisfy any Rockwell U.K. Plan Deficiency Debt within 20 business days after receipt of the Rockwell U.K. Plan Debt Certificate. (iii) In the event that following the actuarial valuation described in Section 3.05(c)(i), no Rockwell U.K. Plan Deficiency Debt is identified and no Debt Certificate is required, Rockwell shall use all reasonable endeavours to procure that the trustees of the Rockwell U.K. Plan shall resolve that no debt would be treated as becoming due from Rockwell Collins (U.K.) under section 75 of the U.K. Pensions Act 1995. (d) The Rockwell International Common Investment Fund. (i) Rockwell Collins and Rockwell shall cause the cessation of participation of the Rockwell Collins (U.K.) Scheme in the Rockwell CIF with effect from the Time of Distribution. (ii) Within two weeks after the Time of Distribution, Rockwell Collins and Rockwell shall cause the trustee of the Rockwell CIF to ascertain the relevant portion of the Rockwell CIF which is equal in value to the interest of the Rockwell Collins (U.K.) Scheme in accordance with the provisions of the Rockwell CIF Deed dated March 2, 1995. Rockwell Collins and Rockwell shall cause the trustee of the Rockwell CIF to transfer the amount so ascertained to the trustees of the Rockwell Collins (U.K.) Scheme or as the trustees of the Rockwell Collins (U.K.) Scheme may direct within one month after the Time of Distribution. Such transfer may be made in cash or in such other form (or partly in one form and partly in the other) as shall be agreed between Rockwell Collins, Rockwell and the trustee of the Rockwell CIF. 33 37 Section 3.06 Canadian Pension Plan. (a) Establishment and Sponsorship of Rockwell Collins Canadian Pension Plan. As of the end of the Canadian Holdover Term, a member of the Rockwell Collins Group will have established, and will cover the Active Rockwell Collins Canadian Employees who participated in the Rockwell Canadian Pension Plan under, a defined contribution registered pension plan (the "Rockwell Collins Canadian Pension Plan"). The Rockwell Collins Canadian Pension Plan will credit each participating Active Rockwell Collins Canadian Employee for purposes of eligibility, vesting and locking-in with all membership and service which had been credited to such employee for such purposes under the Rockwell Canadian Pension Plan immediately prior to the end of the Canadian Holdover Term. The Rockwell Collins Canadian Pension Plan will not require participant contributions. After the end of the Canadian Holdover Term, each Active Rockwell Collins Canadian Employee who participated in the Rockwell Canadian Pension Plan prior to the end of the Canadian Holdover Term will be permitted to transfer his or her commuted value in the Rockwell Canadian Pension Plan (as determined pursuant to the terms of the Rockwell Canadian Pension Plan) from the Rockwell Canadian Pension Plan to the Rockwell Collins Canadian Pension Plan, the Rockwell Collins Canadian Savings Plan or any other vehicle as may be provided by law, in accordance with the terms of the respective plans and applicable law. (b) Retention of Rockwell Canadian Pension Plan Liabilities. Effective as of the end of the Canadian Holdover Term, Rockwell hereby retains and agrees to fully perform, pay and discharge, and agrees to cause the Rockwell Canadian Pension Plan and any trust related thereto to retain, and to fully perform, pay and discharge, all accrued benefit and other Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group), the Rockwell Canadian Pension Plan and any trust related thereto under the Rockwell Canadian Pension Plan accrued through the end of the Canadian Holdover Term with respect to Active Rockwell Collins Canadian Employees who were covered under the Rockwell Canadian Pension Plan prior to the end of the Canadian Holdover Term, except to the extent any Active Rockwell Collins Canadian Employee elects to transfer his or her commuted value from the Rockwell Canadian Pension Plan as permitted pursuant to Section 3.06(a), the terms of the Rockwell Canadian Pension Plan or applicable law. None of Rockwell Collins, the Rockwell Collins Subsidiaries, Affiliates of any of the foregoing or the Rockwell Collins Canadian Pension Plan will have or acquire any interest in or right to any of the assets of the Rockwell Canadian Pension Plan, and Rockwell will retain full power and authority with respect to the amendment and termination of the Rockwell Canadian Pension Plan and the investment and disposition of assets held in the Rockwell Canadian Pension Plan to the extent permitted by law. 34 38 ARTICLE IV SAVINGS PLANS Section 4.01 U.S. Salaried Savings Plan. (a) As of the Time of Distribution, Rockwell Collins will have established, and will cover the Active Rockwell Collins Employees who participated in the Rockwell Salaried Savings Plan prior to the Time of Distribution under, a defined contribution plan (the "Rockwell Collins Salaried Savings Plan"), which will be qualified under Sections 401(a) and 401(k) of the Code, and will have established a related trust which will be exempt from taxation under Section 501(a) of the Code. As of the Time of Distribution, Rockwell Science Center will have established, and will cover the Active Rockwell Science Center Employees who participated in the Rockwell Salaried Savings Plan prior to the Time of Distribution under, a defined contribution plan (the "Rockwell Science Center Salaried Savings Plan"), which will be qualified under Sections 401(a) and 401(k) of the Code, and will have established a related trust which will be exempt from taxation under Section 501(a) of the Code. Each of the Rockwell Collins Salaried Savings Plan and the Rockwell Science Center Salaried Savings Plan will credit each participating Active Rockwell Collins Employee or Active Rockwell Science Center Employee, as the case may be, for purposes of vesting and eligibility with all service which had been credited to such employee for such purposes under the Rockwell Salaried Savings Plan immediately prior to the Time of Distribution (excluding any such service which was not counted under the Rockwell Salaried Savings Plan by operation of its "break in service" rules). (b) After the Time of Distribution, each Active Rockwell Collins Employee who participated in the Rockwell Salaried Savings Plan prior to the Time of Distribution will be permitted to transfer his or her account balances from the Rockwell Salaried Savings Plan to the Rockwell Collins Salaried Savings Plan in accordance with the terms of the respective plans and applicable law. After the Time of Distribution, each Active Rockwell Science Center Employee who participated in the Rockwell Salaried Savings Plan prior to the Time of Distribution will be permitted to transfer his or her account balances from the Rockwell Salaried Savings Plan to the Rockwell Science Center Salaried Savings Plan in accordance with the terms of the respective plans and applicable law. (c) Effective as of the Time of Distribution, each Active Rockwell Collins Employee and each Active Rockwell Science Center Employee who participated in the Rockwell Salaried Savings Plan immediately prior to the Time of Distribution will become fully vested in his or her account balances under the Rockwell Salaried Savings Plan. Effective as of the Time of Distribution, each Active Rockwell Collins Employee and each Active Rockwell Science Center Employee will cease to be eligible to 35 39 contribute to, or receive contributions in respect of, his or her Rockwell Salaried Savings Plan accounts. None of Rockwell Collins, the Rockwell Collins Subsidiaries, Rockwell Science Center, the Rockwell Science Center Subsidiaries, Affiliates of any of the foregoing, the Rockwell Collins Salaried Savings Plan or the trust thereunder or the Rockwell Science Center Salaried Savings Plan or the trust thereunder will have or acquire any interest in or right to any of the assets of the Rockwell Salaried Savings Plan, and Rockwell will retain full power and authority with respect to the amendment and termination of the Rockwell Salaried Savings Plan and the investment and disposition of assets held in the Rockwell Salaried Savings Plan to the extent permitted by law. Section 4.02 U.S. Hourly Represented Savings Plan. (a) As of the Time of Distribution, Rockwell Collins will have established, and will cover the Active Rockwell Collins Employees who participated in the Rockwell Hourly Represented Savings Plan prior to the Time of Distribution under, a defined contribution plan (the "Rockwell Collins Hourly Represented Savings Plan"), which will be qualified under Sections 401(a) and 401(k) of the Code, and will have established a related trust which will be exempt from taxation under Section 501(a) of the Code. The Rockwell Collins Hourly Represented Savings Plan will credit each participating Active Rockwell Collins Employee for purposes of vesting and eligibility with all service which had been credited to such employee for such purposes under the Rockwell Hourly Represented Savings Plan immediately prior to the Time of Distribution (excluding any such service which was not counted under the Rockwell Hourly Represented Savings Plan by operation of its "break in service" rules). (b) After the Time of Distribution, each Active Rockwell Collins Employee who participated in the Rockwell Hourly Represented Savings Plan prior to the Time of Distribution will be permitted to transfer his or her account balances from the Rockwell Hourly Represented Savings Plan to the Rockwell Collins Hourly Represented Savings Plan in accordance with the terms of the respective plans and applicable law. (c) Effective as of the Time of Distribution, each Active Rockwell Collins Employee who participated in the Rockwell Hourly Represented Savings Plan immediately prior to the Time of Distribution will become fully vested in his or her account balances under the Rockwell Hourly Represented Savings Plan. Effective as of the Time of Distribution, each Active Rockwell Collins Employee will cease to be eligible to contribute to, or receive contributions in respect of, his or her Rockwell Hourly Represented Savings Plan accounts. None of Rockwell Collins, the Rockwell Collins Subsidiaries, Affiliates of any of the foregoing or the Rockwell Collins Hourly Represented Savings Plan or the trust thereunder will have or acquire any interest in or right to any of the assets of the Rockwell Hourly Represented Savings Plan, and Rockwell will retain full power and authority with respect to the amendment and termination of the Rockwell Hourly Represented Savings Plan and the investment and 36 40 disposition of assets held in the Rockwell Hourly Represented Savings Plan to the extent permitted by law. Section 4.03 U.S. Hourly Non-Represented Savings Plan. (a) As of the Time of Distribution, Rockwell Collins will have established, and will cover the Active Rockwell Collins Employees who participated in the Rockwell Hourly Non-Represented Savings Plan prior to the Time of Distribution under, a defined contribution plan (the "Rockwell Collins Hourly Non-Represented Savings Plan"), which will be qualified under Sections 401(a) and 401(k) of the Code, and will have established a related trust which will be exempt from taxation under Section 501(a) of the Code. The Rockwell Collins Hourly Non-Represented Savings Plan will credit each participating Active Rockwell Collins Employee for purposes of vesting and eligibility with all service which had been credited to such employee for such purposes under the Rockwell Hourly Non-Represented Savings Plan immediately prior to the Time of Distribution (excluding any such service which was not counted under the Rockwell Hourly Non-Represented Savings Plan by operation of its "break in service" rules). (b) After the Time of Distribution, each Active Rockwell Collins Employee who participated in the Rockwell Hourly Non-Represented Savings Plan prior to the Time of Distribution will be permitted to transfer his or her account balances from the Rockwell Hourly Non-Represented Savings Plan to the Rockwell Collins Hourly Non-Represented Savings Plan in accordance with the terms of the respective plans and applicable law. (c) Effective as of the Time of Distribution, each Active Rockwell Collins Employee who participated in the Rockwell Hourly Non-Represented Savings Plan immediately prior to the Time of Distribution will become fully vested in his or her account balances under the Rockwell Hourly Non-Represented Savings Plan. Effective as of the Time of Distribution, each Active Rockwell Collins Employee will cease to be eligible to contribute to, or receive contributions in respect of, his or her Rockwell Hourly Non-Represented Savings Plan accounts. None of Rockwell Collins, the Rockwell Collins Subsidiaries, Affiliates of any of the foregoing or the Rockwell Collins Hourly Non-Represented Savings Plan or the trust thereunder will have or acquire any interest in or right to any of the assets of the Rockwell Hourly Non-Represented Savings Plan, and Rockwell will retain full power and authority with respect to the amendment and termination of the Rockwell Hourly Non-Represented Savings Plan and the investment and disposition of assets held in the Rockwell Hourly Non-Represented Savings Plan to the extent permitted by law. 37 41 Section 4.04 Non-Qualified Savings Plans. (a) Establishment and Sponsorship of Non-Qualified Savings Plans. (i) Prior to the Time of Distribution, Rockwell will have established (A) a new non-qualified supplemental savings plan (the "Rockwell Automation Non-Qualified Savings Plan"), the purpose of which will be to provide benefits to Rockwell Automation Participants and (B) a new non-qualified supplemental savings plan (the "Rockwell Science Center Non-Qualified Savings Plan"), the purpose of which will be to provide benefits to Rockwell Science Center Participants. The Rockwell Automation Non-Qualified Savings Plan and the Rockwell Science Center Non-Qualified Savings Plan each will be substantially similar in all material respects to the Rockwell Non-Qualified Savings Plan and will provide a benefit formula which will be substantially similar in all material respects to the benefit formula that the Rockwell Non-Qualified Savings Plan provided immediately prior to the Time of Distribution. The Rockwell Automation Non-Qualified Savings Plan and the Rockwell Science Center Non-Qualified Savings Plan each will credit each participant thereunder for purposes of eligibility to participate, vesting, benefit accruals and all other plan purposes with all service which had been credited to such participant for such purposes under the Rockwell Non-Qualified Savings Plan immediately prior to the Time of Distribution. (ii) Effective as of the Time of Distribution, Rockwell Collins hereby assumes sponsorship of the Rockwell Non-Qualified Savings Plan, and (if not already completed) will promptly change the name of the Rockwell Non-Qualified Savings Plan to the "Rockwell Collins Non-Qualified Savings Plan". Effective as of the Time of Distribution, Rockwell hereby retains sponsorship of the Rockwell Automation Non-Qualified Savings Plan. Effective as of the Time of Distribution, Rockwell Science Center hereby assumes sponsorship of the Rockwell Science Center Non-Qualified Savings Plan. (b) Assumption of Non-Qualified Savings Plan Liabilities. (i) Effective as of the Time of Distribution, Rockwell hereby assumes, and agrees to fully perform, pay and discharge, and agrees to cause the Rockwell Automation Non-Qualified Pension Plan to assume, and to fully perform, pay and discharge, all accrued benefit and other Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) and of the Rockwell Non-Qualified Savings Plan under and relating to the Rockwell Non-Qualified Savings Plan with respect to Rockwell Automation Participants who were covered under the Rockwell Non-Qualified Savings Plan prior to the Time of Distribution. (ii) Effective as of the Time of Distribution, Rockwell Science Center hereby assumes, and agrees to fully perform, pay and discharge, and agrees to cause the 38 42 Rockwell Science Center Non-Qualified Savings Plan to assume, and to fully perform, pay and discharge, all accrued benefit and other Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) and of the Rockwell Non-Qualified Savings Plan under and relating to the Rockwell Non-Qualified Savings Plan with respect to Rockwell Science Center Participants who were covered under the Rockwell Non-Qualified Savings Plan prior to the Time of Distribution. (iii) Effective as of the Time of Distribution, Rockwell Collins hereby assumes, and agrees to fully perform, pay and discharge, and agrees to cause the Rockwell Non-Qualified Savings Plan to retain, and to fully perform, pay and discharge, all accrued benefit and other Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) and of the Rockwell Non-Qualified Savings Plan under and relating to the Rockwell Non-Qualified Savings Plan with respect to all participants who were covered under the Rockwell Non-Qualified Savings Plan prior to the Time of Distribution (other than Rockwell Automation Participants and Rockwell Science Center Participants), including all Rockwell Collins Participants. Section 4.05 Canadian Savings Plans. (a) Rockwell Collins Canadian Savings Plan. (i) As of the end of the Canadian Holdover Term, a member of the Rockwell Collins Group will have established, and will cover the Active Rockwell Collins Canadian Employees who participated in the Rockwell Canadian Savings Plan prior to the end of the Canadian Holdover Term under, a group registered retirement savings plan (the "Rockwell Collins Canadian Savings Plan"). The terms of the Rockwell Collins Canadian Savings Plan will be substantially similar to the terms of the Rockwell Canadian Savings Plan. The Rockwell Collins Canadian Savings Plan will credit each participating Active Rockwell Collins Canadian Employee for purpose of eligibility with all service which had been credited to such employee for such purpose under the Rockwell Canadian Savings Plan immediately prior to the end of the Canadian Holdover Term. (ii) After the end of the Canadian Holdover Term, each Active Rockwell Collins Canadian Employee who participated in the Rockwell Canadian Savings Plan will be permitted to transfer his or her account balances from the Rockwell Canadian Savings Plan to the Rockwell Collins Canadian Savings Plan, the Rockwell Collins Canadian Pension Plan or any other vehicle as may be provided by law, in accordance with the terms of the respective plans and applicable law. (iii) Effective as of the end of the Canadian Holdover Term, each Active Rockwell Collins Canadian Employee will cease to be eligible to contribute to his 39 43 or her Rockwell Canadian Savings Plan accounts. None of Rockwell Collins, the Rockwell Collins Subsidiaries, Affiliates of any of the foregoing or the Rockwell Collins Canadian Savings Plan will have or acquire any interest in or right to any of the assets of the Rockwell Canadian Savings Plan, and Rockwell will retain full power and authority with respect to the amendment and termination of the Rockwell Canadian Savings Plan and the investment and disposition of assets held in the Rockwell Canadian Savings Plan to the extent permitted by law. (b) Rockwell Collins Canadian Deferred Profit Sharing Plan. (i) As of the end of the Canadian Holdover Term, a member of the Rockwell Collins Group will have established, and will cover the Active Rockwell Collins Canadian Employees who participated in the Rockwell Canadian Deferred Profit Sharing Plan prior to the end of the Canadian Holdover Term under, a deferred profit sharing plan (the "Rockwell Collins Canadian Deferred Profit Sharing Plan"). The terms of the Rockwell Collins Canadian Deferred Profit Sharing Plan will be substantially similar to the terms of the Rockwell Canadian Deferred Profit Sharing Plan. The Rockwell Collins Canadian Deferred Profit Sharing Plan will credit each participating Active Rockwell Collins Canadian Employee for purposes of vesting and eligibility with all service which had been credited to such employee for such purposes under the Rockwell Canadian Deferred Profit Sharing Plan immediately prior to the end of the Canadian Holdover Term. Prior to or as soon as possible after the end of the Canadian Holdover Term, Rockwell will cause the Rockwell Canadian Deferred Profit Sharing Plan to be amended to provide for the immediate vesting as of the end of the Canadian Holdover Term of all account balances of the Active Rockwell Collins Canadian Employees under the Rockwell Canadian Deferred Profit Sharing Plan. (ii) After the end of the Canadian Holdover Term, each Active Rockwell Collins Canadian Employee who participated in the Rockwell Canadian Deferred Profit Sharing Plan will be permitted to transfer his or her account balances from the Rockwell Canadian Deferred Profit Sharing Plan to the Rockwell Collins Canadian Deferred Profit Sharing Plan, the Rockwell Collins Canadian Pension Plan or any other vehicle as may be provided by law, in accordance with the terms of the respective plans and applicable law. After the end of the Canadian Holdover Term, within the time required by law or the terms of the Rockwell Canadian Deferred Profit Sharing Plan, each Active Rockwell Collins Canadian Employee who participated in the Rockwell Canadian Deferred Profit Sharing Plan will be paid such individual's account balances in the Rockwell Canadian Deferred Profit Sharing Plan in a lump sum (in accordance with the terms of the Rockwell Canadian Deferred Profit Sharing Plan and applicable law) unless he or she transfers his or her account balances from the Rockwell Canadian Deferred Profit Sharing Plan to the Rockwell Collins Canadian Deferred Profit Sharing Plan, the Rockwell Collins Canadian Pension Plan or any other vehicle as may 40 44 be provided by law, in accordance with the terms of the respective plans and applicable law. (iii) Effective as of the end of the Canadian Holdover Term, each Active Rockwell Collins Canadian Employee will cease to be eligible to receive contributions in respect of his or her Rockwell Canadian Deferred Profit Sharing Plan accounts. None of Rockwell Collins, the Rockwell Collins Subsidiaries, Affiliates of any of the foregoing or the Rockwell Collins Canadian Deferred Profit Sharing Plan will have or acquire any interest in or right to any of the assets of the Rockwell Canadian Deferred Profit Sharing Plan, and Rockwell will retain full power and authority with respect to the amendment and termination of the Rockwell Canadian Deferred Profit Sharing Plan and the investment and disposition of assets held in the Rockwell Canadian Deferred Profit Sharing Plan to the extent permitted by law. (c) Rockwell Collins Canadian Employees Profit Sharing Plan. (i) As of the end of the Canadian Holdover Term, a member of the Rockwell Collins Group will have established, and will cover the Active Rockwell Collins Canadian Employees who participated in the Rockwell Canadian Employees Profit Sharing Plan prior to the end of the Canadian Holdover Term under, an employees profit sharing plan (the "Rockwell Collins Canadian Employees Profit Sharing Plan"). The terms of the Rockwell Collins Canadian Employees Profit Sharing Plan will be substantially similar to the terms of the Rockwell Canadian Employees Profit Sharing Plan. The Rockwell Collins Canadian Employees Profit Sharing Plan will credit each participating Active Rockwell Collins Canadian Employee for purposes of vesting and eligibility with all service which had been credited to such employee for such purposes under the Rockwell Canadian Employees Profit Sharing Plan immediately prior to the end of the Canadian Holdover Term. Prior to or as soon as possible after the end of the Canadian Holdover Term, Rockwell will cause the Rockwell Canadian Employees Profit Sharing Plan to be amended to provide for the immediate vesting as of the end of the Canadian Holdover Term of all account balances of the Active Rockwell Collins Canadian Employees under the Rockwell Canadian Employees Profit Sharing Plan. (ii) After the end of the Canadian Holdover Term, within the time required by law or the terms of the Rockwell Canadian Employees Profit Sharing Plan, each Active Rockwell Collins Canadian Employee who participated in the Rockwell Canadian Employees Profit Sharing Plan will be paid such individual's account balances in a lump sum in accordance with the terms of the Rockwell Canadian Employees Profit Sharing Plan and applicable law. (iii) Effective as of the end of the Canadian Holdover Term, each Active Rockwell Collins Canadian Employee will cease to be eligible to contribute to, or receive contributions in respect of, his of her Rockwell Canadian Employees Profit 41 45 Sharing Plan accounts. None of Rockwell Collins, the Rockwell Collins Subsidiaries, Affiliates of any of the foregoing or the Rockwell Collins Canadian Employees Profit Sharing Plan will have or acquire any interest in or right to any of the assets of the Rockwell Canadian Employees Profit Sharing Plan, and Rockwell will retain full power and authority with respect to the amendment and termination of the Rockwell Canadian Employees Profit Sharing Plan and the investment and disposition of assets held in the Rockwell Canadian Employees Profit Sharing Plan to the extent permitted by law. ARTICLE V STOCK PLANS Section 5.01 Stock Plans. (a) Rockwell will take all action necessary or appropriate so that each Rockwell Option held by a Rockwell Automation Optionee that is outstanding as of the Time of Distribution is adjusted pursuant to the equitable adjustment provisions of the applicable Rockwell Stock Plan under which such Rockwell Option was granted. The number of shares of Rockwell Common Stock subject to such option and the per-share exercise price of such option will be determined as set forth on Schedule 5.01(a). Such adjusted Rockwell Option will otherwise have the same terms and conditions as those in effect prior to the adjustment. (b) Rockwell and Rockwell Collins will take all action necessary or appropriate so that each Rockwell Option held by a Rockwell Collins Optionee that is outstanding as of the Time of Distribution will be and become a Rockwell Collins Option pursuant to the equitable adjustment provisions of the applicable Rockwell Stock Plan under which such Rockwell Option was granted. The number of shares of Rockwell Collins Common Stock subject to the Rockwell Collins Option and the per-share exercise price of such Rockwell Collins Option will be determined as set forth on Schedule 5.01(b). Such Rockwell Collins Option will otherwise have substantially the same terms and conditions as the corresponding Rockwell Option being replaced, except that references to Rockwell will be changed to refer to Rockwell Collins and references to any of the Rockwell Stock Plans will be changed to refer to Rockwell Collins' applicable stock option plan. (c) Rockwell and Rockwell Collins will take all action necessary or appropriate so that each Rockwell Split Option will be adjusted pursuant to the equitable adjustment and other provisions of the applicable Rockwell Stock Plan under which such Rockwell Split Option was granted. The number of shares of Rockwell Common Stock subject to such Rockwell Split Option and the per-share exercise price of such Rockwell Split Option will be determined as set forth on Schedule 5.01(c)(i). Such adjusted Rockwell Split Option will otherwise have the same terms and conditions as those in 42 46 effect immediately prior to the adjustment. In addition, each Rockwell Split Optionee holding a Rockwell Split Option as of the Time of Distribution will receive a Rockwell Collins Option pursuant to the equitable adjustment and other provisions of the applicable Rockwell Stock Plan under which such Rockwell Split Option was granted. The number of shares of Rockwell Collins Common Stock subject to such Rockwell Collins Option and the per-share exercise price of such Rockwell Collins Option will be determined as set forth on Schedule 5.01(c)(ii). Such Rockwell Collins Option will otherwise have substantially the same terms and conditions as the corresponding Rockwell Split Option being adjusted, except that references to Rockwell will be changed to refer to Rockwell Collins and references to any of the Rockwell Stock Plans will be changed to refer to Rockwell Collins' applicable stock option plan. ARTICLE VI OTHER EMPLOYEE PLANS AND MATTERS Section 6.01 Welfare Plans. (a) As of the Time of Distribution, Rockwell Collins and the Rockwell Collins Subsidiaries will have established or assumed, and will cover all Rockwell Collins Welfare Participants under, Welfare Plans and other employee welfare benefit and fringe benefit arrangements (collectively, "Rockwell Collins Welfare Plans") that are comparable in the aggregate to the Rockwell Welfare Plans that covered Rockwell Collins Welfare Participants immediately prior to the Time of Distribution. As of the Time of Distribution, Rockwell Science Center and the Rockwell Science Center Subsidiaries will have established or assumed, and will cover Rockwell Science Center Participants under, Welfare Plans and other employee welfare benefit and fringe benefit arrangements (collectively, "Rockwell Science Center Welfare Plans") that are comparable in the aggregate to the Rockwell Welfare Plans that covered Rockwell Science Center Participants immediately prior to the Time of Distribution. (b) (i) The Rockwell Collins Welfare Plans will provide for the immediate participation of those Rockwell Collins Welfare Participants who participated in the corresponding Rockwell Welfare Plans immediately prior to the Time of Distribution. Each of the Rockwell Collins Welfare Plans will credit each Rockwell Collins Welfare Participant for all Rockwell Collins Welfare Plan purposes with all service and any other item which had been credited to or otherwise accumulated for the benefit of such participant under the corresponding Rockwell Welfare Benefit Plans immediately prior to the Time of Distribution, including service credited toward any waiting periods and amounts credited toward any medical or health insurance deductible or co-payment. Without limiting the generality of the foregoing, each Rockwell Collins Welfare Plan, to the extent applicable: (A) will recognize all amounts applied to 43 47 deductibles, co-payments, out-of-pocket maximums and lifetime maximum benefits with respect to Rockwell Collins Welfare Participants under the corresponding Rockwell Welfare Plan for the plan year that includes the Time of Distribution and for prior periods (if applicable); (B) will recognize all service credited to waiting periods with respect to Rockwell Collins Welfare Participants under the corresponding Rockwell Welfare Plan; (C) will not impose any limitations on coverage of pre-existing conditions of Rockwell Collins Welfare Participants, except to the extent such limitations applied to such participants under the corresponding Rockwell Welfare Plan immediately before such Rockwell Collins Welfare Plan became effective; and (D) will not impose any other conditions (such as proof of good health, evidence of insurability or a requirement of a physical examination) upon the participation by Rockwell Collins Welfare Participants who were participating in the corresponding Rockwell Welfare Plan immediately before such Rockwell Collins Welfare Plan became effective. (ii) The Rockwell Science Center Welfare Plans will provide for the immediate participation of those Rockwell Science Center Participants who participated in the corresponding Rockwell Welfare Plans immediately prior to the Time of Distribution. Each of the Rockwell Science Center Welfare Plans will credit each Rockwell Science Center Participant for all Rockwell Science Center Welfare Plan purposes with all service and any other item which had been credited to or otherwise accumulated for the benefit of such participant under the corresponding Rockwell Welfare Benefit Plans immediately prior to the Time of Distribution, including service credited toward any waiting periods and amounts credited toward any medical or health insurance deductible or co-payment. Without limiting the generality of the foregoing, each Rockwell Science Center Welfare Plan, to the extent applicable: (A) will recognize all amounts applied to deductibles, co-payments, out-of-pocket maximums and lifetime maximum benefits with respect to Rockwell Science Center Participants under the corresponding Rockwell Welfare Plan for the plan year that includes the Time of Distribution and for prior periods (if applicable); (B) will recognize all service credited to waiting periods with respect to Rockwell Science Center Participants under the corresponding Rockwell Welfare Plan; (C) will not impose any limitations on coverage of pre-existing conditions of Rockwell Science Center Participants, except to the extent such limitations applied to such participants under the corresponding Rockwell Welfare Plan immediately before such Rockwell Science Center Welfare Plan became effective; and (D) will not impose any other conditions (such as proof of good health, evidence of insurability or a requirement of a physical examination) upon the participation by Rockwell Science Center Participants who were participating in the corresponding Rockwell Welfare Plan immediately before such Rockwell Science Center Welfare Plan became effective. (c) (i) As of the Time of Distribution, Rockwell Collins and the Rockwell Collins Subsidiaries will credit each Active Rockwell Collins Employee with the unused vacation days and personal and sickness days accrued immediately prior to 44 48 the Distribution in accordance with the vacation and personnel policies and labor agreements of Rockwell and its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) applicable to such employee in effect immediately prior to the Time of Distribution. (ii) As of the Time of Distribution, Rockwell Science Center and the Rockwell Science Center Subsidiaries will credit each Active Rockwell Science Center Employee with the unused vacation days and personal and sickness days accrued immediately prior to the Distribution in accordance with the vacation and personnel policies of Rockwell and its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) applicable to such employee in effect immediately prior to the Time of Distribution. (d) (i) From and after the Time of Distribution, except as specifically set forth in this Agreement, Rockwell Collins and the Rockwell Collins Subsidiaries hereby assume or retain, as the case may be, and will be solely responsible for and will fully perform, pay and discharge, all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) in respect of Rockwell Collins Welfare Participants (and claims by or relating to Rockwell Collins Welfare Participants) with respect to employee welfare and fringe benefits (including medical, dental, life, travel, accident, short- and long-term disability, hospitalization, workers' compensation and other insurance benefits), whether under the Rockwell Welfare Plans, the Rockwell Collins Welfare Plans or otherwise, whether incurred, or arising in connection with incidents occurring, before, at or after the Time of Distribution and whether any claim is made with respect thereto before, at or after the Time of Distribution. Without limiting the generality of the foregoing, from and after the Time of Distribution, Rockwell Collins and the Rockwell Collins Subsidiaries (or where appropriate, the Rockwell Collins Welfare Plans) hereby assume, and will be solely responsible for and will fully perform, pay and discharge, all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) in respect of Rockwell Collins Welfare Participants (and claims by or relating to Rockwell Collins Welfare Participants) with respect to retiree health and welfare benefits and retiree life insurance benefits, whether under the Rockwell Welfare Plans, the Rockwell Collins Welfare Plans or otherwise, whether incurred, or arising in connection with incidents occurring, before, at or after the Time of Distribution and whether any claim is made with respect thereto before, at or after the Time of Distribution. (ii) From and after the Time of Distribution, except as specifically set forth in this Agreement, Rockwell Science Center and the Rockwell Science Center Subsidiaries hereby assume or retain, as the case may be, and will be solely responsible for and will fully perform, pay and discharge, all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the 45 49 Rockwell Science Center Group) in respect of Rockwell Science Center Participants (and claims by or relating to Rockwell Science Center Participants) with respect to employee welfare and fringe benefits (including medical, dental, life, travel, accident, short- and long-term disability, hospitalization, workers' compensation and other insurance benefits), whether under the Rockwell Welfare Plans, the Rockwell Science Center Welfare Plans or otherwise, whether incurred, or arising in connection with incidents occurring, before, at or after the Time of Distribution and whether any claim is made with respect thereto before, at or after the Time of Distribution. Without limiting the generality of the foregoing, from and after the Time of Distribution, Rockwell Science Center and the Rockwell Science Center Subsidiaries (or where appropriate, the Rockwell Science Center Welfare Plans) hereby assume, and will be solely responsible for and will fully perform, pay and discharge, all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) in respect of Rockwell Science Center Participants (and claims by or relating to Rockwell Science Center Participants) with respect to retiree health and welfare benefits and retiree life insurance benefits, whether under the Rockwell Welfare Plans, the Rockwell Science Center Welfare Plans or otherwise, whether incurred, or arising in connection with incidents occurring, before, at or after the Time of Distribution and whether any claim is made with respect thereto before, at or after the Time of Distribution. (iii) From and after the Time of Distribution, except as specifically set forth in this Agreement, Rockwell and the Rockwell Subsidiaries hereby assume or retain, as the case may be, and will be solely responsible for and will fully perform, pay and discharge, all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) in respect of Rockwell Automation Participants (and claims by or relating to Rockwell Automation Participants) with respect to employee welfare and fringe benefits (including medical, dental, life, travel, accident, short- and long-term disability, hospitalization, workers' compensation and other insurance benefits), whether under the Rockwell Welfare Plans or otherwise, whether incurred, or arising in connection with incidents occurring, before, at or after the Time of Distribution and whether any claim is made with respect thereto before, at or after the Time of Distribution. Without limiting the generality of the foregoing, from and after the Time of Distribution, Rockwell and the Rockwell Subsidiaries (or where appropriate, the Rockwell Welfare Plans) hereby assume or retain, as the case may be, and will be solely responsible for and will fully perform, pay and discharge, all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) in respect of Rockwell Automation Participants (and claims by or relating to Rockwell Automation Participants) with respect to retiree health and welfare benefits and retiree life insurance benefits, whether under the Rockwell Welfare Plans or otherwise, whether incurred, or arising in connection with incidents occurring, before, at 46 50 or after the Time of Distribution and whether any claim is made with respect thereto before, at or after the Time of Distribution. Section 6.02 Incentive Compensation Plans. (a) Effective as of the Time of Distribution, Rockwell hereby assumes or retains, as the case may be, and will be solely responsible for and will fully perform, pay and discharge, all Liabilities (including liability for earned but unpaid incentive payments) of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) for, due to and/or attributable to Rockwell Automation Participants under the Rockwell International Business Unit Long-Term Incentive Plan (the "LTIP"), the Incentive Compensation Plan and all other long-term, annual and other incentive compensation plans and arrangements of Rockwell and its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) in effect at or prior to the Time of Distribution. (b) Effective as of the Time of Distribution, Rockwell Science Center hereby assumes or retains, as the case may be, and will be solely responsible for and will fully perform, pay and discharge, all Liabilities (including liability for earned but unpaid incentive payments) of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) for, due to and/or attributable to Rockwell Science Center Participants under the LTIP, the Incentive Compensation Plan and all other long-term, annual and other incentive compensation plans and arrangements of Rockwell and its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) in effect at or prior to the Time of Distribution. (c) Effective as of the Time of Distribution, Rockwell Collins hereby assumes or retains, as the case may be, and will be solely responsible for and will fully perform, pay and discharge, all Liabilities (including liability for earned but unpaid incentive payments) of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) for, due to and/or attributable to Pre-Distribution Group Employees (other than Rockwell Automation Participants and Rockwell Science Center Participants), including all Rockwell Collins Participants, under the LTIP, the Incentive Compensation Plan and all other long-term, annual and other incentive compensation plans and arrangements of Rockwell and its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) in effect at or prior to the Time of Distribution. Notwithstanding the fact that, pursuant to this Section 6.02(c), Rockwell Collins is responsible for the payment of amounts due to Former Rockwell Corporate Employees under the incentive compensation plans and arrangements described in the preceding sentence, Rockwell will determine in its sole discretion the amount of such 47 51 payments payable to Former Rockwell Corporate Employees in respect of the fiscal year ending September 30, 2001, provided that such amount shall not exceed the amount of such payments made to Former Rockwell Corporate Employees in respect of the fiscal year ended September 30, 2000. Section 6.03 Deferred Compensation Plan. (a) Establishment and Sponsorship of Deferred Compensation Plans. (i) Prior to the Time of Distribution, Rockwell will have established (A) a new deferred compensation plan (the "Rockwell Automation Deferred Compensation Plan"), the purpose of which will be to provide benefits to Rockwell Automation Participants and (B) a new deferred compensation plan (the "Rockwell Science Center Deferred Compensation Plan"), the purpose of which will be to provide benefits to Rockwell Science Center Participants. The Rockwell Automation Deferred Compensation Plan and the Rockwell Science Center Deferred Compensation Plan each will be substantially similar in all material respects to the Rockwell Deferred Compensation Plan, and will provide a benefit formula which will be substantially similar in all material respects to the benefit formula that the Rockwell Deferred Compensation Plan provided immediately prior to the Time of Distribution. The Rockwell Automation Deferred Compensation Plan and the Rockwell Science Center Deferred Compensation Plan each will credit each participant thereunder for purposes of eligibility to participate, vesting, benefit accruals and all other plan purposes with all service which had been credited to such participant for such purposes under the Rockwell Deferred Compensation Plan immediately prior to the Time of Distribution. (ii) Effective as of the Time of Distribution, Rockwell Collins hereby assumes sponsorship of the Rockwell Deferred Compensation Plan, and (if not already completed) will promptly change the name of the Rockwell Deferred Compensation Plan to the "Rockwell Collins Deferred Compensation Plan". Effective as of the Time of Distribution, Rockwell hereby retains sponsorship of the Rockwell Automation Deferred Compensation Plan. Effective as of the Time of Distribution, Rockwell Science Center hereby assumes sponsorship of the Rockwell Science Center Deferred Compensation Plan. (b) Assumption of Deferred Compensation Plan Liabilities. (i) Effective as of the Time of Distribution, Rockwell hereby assumes, and agrees to fully perform, pay and discharge, and agrees to cause the Rockwell Automation Deferred Compensation Plan to assume, and to fully perform, pay and discharge, all accrued benefit and other Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) and of the Rockwell Deferred Compensation Plan under and relating to the Rockwell Deferred Compensation Plan with respect to Rockwell 48 52 Automation Participants who were covered under the Rockwell Deferred Compensation Plan prior to the Time of Distribution. (ii) Effective as of the Time of Distribution, Rockwell Science Center hereby assumes, and agrees to fully perform, pay and discharge, and agrees to cause the Rockwell Science Center Deferred Compensation Plan to assume, and to fully perform, pay and discharge, all accrued benefit and other Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) and of the Rockwell Deferred Compensation Plan under and relating to the Rockwell Deferred Compensation Plan with respect to Rockwell Science Center Participants who were covered under the Rockwell Deferred Compensation Plan prior to the Time of Distribution. (iii) Effective as of the Time of Distribution, Rockwell Collins hereby assumes, and agrees to fully perform, pay and discharge, and agrees to cause the Rockwell Deferred Compensation Plan to retain, and to fully perform, pay and discharge, all accrued benefit and other Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) and of the Rockwell Deferred Compensation Plan under and relating to the Rockwell Deferred Compensation Plan with respect to all participants who were covered under the Rockwell Deferred Compensation Plan prior to the Time of Distribution (other than Rockwell Automation Participants and Rockwell Science Center Participants), including all Rockwell Collins Participants. Section 6.04 Severance Pay. (a) Rockwell, Rockwell Collins and Rockwell Science Center acknowledge and agree that the transactions contemplated by the Transaction Agreements will not constitute a severance of employment of any Active Rockwell Automation Employee, Active Rockwell Collins Employee or Active Rockwell Science Center Employee prior to or as a result of the transactions contemplated thereby, and that individuals who, in connection with the Distribution, become Active Rockwell Automation Employees, Active Rockwell Collins Employees or Active Rockwell Science Center Employees pursuant to this Agreement will not be deemed to have experienced a termination, layoff or severance of employment from Rockwell and its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group), in each case for purposes of any policy, plan, program or agreement of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) that provides for the payment of severance, salary continuation or similar benefits. (b) (i) Rockwell and the Rockwell Subsidiaries hereby assume or retain (as applicable), and will be solely responsible for, and will fully perform, pay and 49 53 discharge, all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) in connection with claims made by or on behalf of Rockwell Automation Participants in respect of severance pay, salary continuation and similar obligations relating to the termination or alleged termination (whether voluntary or involuntary) of any such person's employment, whether such termination or alleged termination occurred before, at or after the Time of Distribution and whether any claim is made with respect thereto before, at or after the Time of Distribution (whether or not such claim is based on any severance policy, agreement, arrangement or program which may exist or arise under any contract, employment agreement or collective bargaining agreement or under any Federal, state, local, provincial or foreign law). (ii) Rockwell Science Center and the Rockwell Science Center Subsidiaries hereby assume or retain (as applicable), and will be solely responsible for, and will fully perform, pay and discharge, all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) in connection with claims made by or on behalf of Rockwell Science Center Participants in respect of severance pay, salary continuation and similar obligations relating to the termination or alleged termination (whether voluntary or involuntary) of any such person's employment, whether such termination or alleged termination occurred before, at or after the Time of Distribution and whether any claim is made with respect thereto before, at or after the Time of Distribution (whether or not such claim is based on any severance policy, agreement, arrangement or program which may exist or arise under any contract, employment agreement or collective bargaining agreement or under any Federal, state, local, provincial or foreign law). (iii) Rockwell Collins and the Rockwell Collins Subsidiaries hereby assume or retain (as applicable), and will be solely responsible for, and will fully perform, pay and discharge, all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) in connection with claims made by or on behalf of all Pre-Distribution Group Employees (other than Rockwell Automation Participants and Rockwell Science Center Participants), including all Rockwell Collins Participants, in respect of severance pay, salary continuation and similar obligations relating to the termination or alleged termination (whether voluntary or involuntary) of any such person's employment, whether such termination or alleged termination occurred before, at or after the Time of Distribution and whether any claim is made with respect thereto before, at or after the Time of Distribution (whether or not such claim is based on any severance policy, agreement, arrangement or program which may exist or arise under any contract, employment agreement or collective bargaining agreement or under any Federal, state, local, provincial or foreign law). 50 54 Section 6.05 Employment, Consulting and Other Employee Related Agreements. (a) Effective as of the Time of Distribution, Rockwell and the Rockwell Subsidiaries hereby assume or retain (as applicable), and will be solely responsible for, and will fully perform, pay and discharge, all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) relating to Rockwell Automation Participants under their respective employment, consulting, separation, agreements to arbitrate, and other employee related agreements with any member of the Pre-Distribution Group, as the same are in effect immediately prior to the Time of Distribution. (b) Effective as of the Time of Distribution, Rockwell Science Center and the Rockwell Science Center Subsidiaries hereby assume or retain (as applicable), and will be solely responsible for, and will fully perform, pay and discharge, all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) relating to Rockwell Science Center Participants under their respective employment, consulting, separation, agreements to arbitrate, and other employee related agreements with any member of the Pre-Distribution Group, as the same are in effect immediately prior to the Time of Distribution. (c) Effective as of the Time of Distribution, Rockwell Collins and the Rockwell Collins Subsidiaries hereby assume or retain (as applicable), and will be solely responsible for, and will fully perform, pay and discharge, all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) relating to all Pre-Distribution Group Employees (other than Rockwell Automation Participants and Rockwell Science Center Participants), including all Rockwell Collins Participants, under their respective employment, consulting, separation, agreements to arbitrate, and other employee related agreements with any member of the Pre-Distribution Group, as the same are in effect immediately prior to the Time of Distribution (other than any such Liabilities described in paragraphs (d)(ii) and (d)(iii)(A) of the definition of Rockwell Automation Liabilities in the Distribution Agreement). Section 6.06 Other Liabilities. (a) (i) From and after the Time of Distribution, except as specifically set forth in this Agreement, Rockwell and the Rockwell Subsidiaries hereby assume or retain, as the case may be, and will be solely responsible for, and will fully perform, pay and discharge, all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) arising out of or relating to the employment of Rockwell Automation Participants by any 51 55 member of the Pre-Distribution Group, whether pursuant to benefit plans or otherwise and whether such Liabilities arose before, at or after the Time of Distribution or any claim is made with respect thereto before, at or after the Time of Distribution. (ii) From and after the Time of Distribution, except as specifically set forth in this Agreement, Rockwell Science Center and the Rockwell Science Center Subsidiaries hereby assume or retain, as the case may be, and will be solely responsible for, and will fully perform, pay and discharge, all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) arising out of or relating to the employment of Rockwell Science Center Participants by any member of the Pre-Distribution Group, whether pursuant to benefit plans or otherwise and whether such Liabilities arose before, at or after the Time of Distribution or any claim is made with respect thereto before, at or after the Time of Distribution. (iii) From and after the Time of Distribution, except as specifically set forth in this Agreement, Rockwell Collins and the Rockwell Collins Subsidiaries hereby assume or retain, as the case may be, and will be solely responsible for, and will fully perform, pay and discharge, all Liabilities of Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) arising out of or relating to the employment of Pre-Distribution Group Employees (other than Rockwell Automation Participants and Rockwell Science Participants), including all Rockwell Collins Participants, by any member of the Pre-Distribution Group, whether pursuant to benefit plans or otherwise and whether such Liabilities arose before, at or after the Time of Distribution or any claim is made with respect thereto before, at or after the Time of Distribution (other than any such Liabilities described in paragraphs (d)(ii) and (d)(iii)(A) of the definition of Rockwell Automation Liabilities in the Distribution Agreement). Section 6.07 Funding of Master Rabbi Trusts. Prior to the Time of Distribution, each of the Rockwell Master Rabbi Trust, the Rockwell Automation Master Rabbi Trust and the Rockwell Science Center Master Rabbi Trust will have been funded by Rockwell in an amount (if any) determined by the Rockwell Board (which amounts would be in respect of a portion of the compensation deferred on behalf of Rockwell Collins Participants, Rockwell Automation Participants and Rockwell Science Center Participants, respectively, under the Rockwell Deferred Compensation Plan, and earnings deemed credited thereon, from and after June 1, 2000). After the Time of Distribution, (i) Rockwell Collins will make all contributions required to be made after the Time of Distribution to the Rockwell Master Rabbi Trust pursuant to the terms thereof, (ii) Rockwell will make all contributions required to be made after the Time of Distribution to the Rockwell Automation Master Rabbi Trust pursuant to the terms thereof and (iii) Rockwell Science Center will make all contributions required to be made after the Time 52 56 of Distribution to the Rockwell Science Center Master Rabbi Trust pursuant to the terms thereof. ARTICLE VII MISCELLANEOUS Section 7.01 Indemnification. All Liabilities retained or assumed by or allocated to Rockwell Collins or any Rockwell Collins Subsidiary pursuant to this Agreement will be deemed to be Rockwell Collins Liabilities (as defined in the Distribution Agreement), all Liabilities retained or assumed by or allocated to Rockwell Science Center or any Rockwell Science Center Subsidiary pursuant to this Agreement will be deemed to be Rockwell Science Center Liabilities (as defined in the Distribution Agreement) and all Liabilities retained or assumed by or allocated to Rockwell or any Rockwell Subsidiary pursuant to this Agreement will be deemed to be Rockwell Automation Liabilities (as defined in the Distribution Agreement), and, in each case, will be subject to the indemnification provisions set forth in Article IV of the Distribution Agreement. Section 7.02 Cooperation. Rockwell, Rockwell Collins and Rockwell Science Center will cooperate in taking all such action as may be necessary or appropriate to implement the provisions of this Agreement, including making all appropriate filings as may be required under ERISA or the Code, the regulations thereunder and any other applicable laws, exchanging and sharing all appropriate records, amending plan, trust, record keeping and other related documents and implementing all appropriate communications with participants. Section 7.03 Sharing of Information. Each of Rockwell, Rockwell Collins and Rockwell Science Center will, and will cause each of their respective Subsidiaries to, provide to the other all such Information in its possession as the other may reasonably request to enable the requesting party to administer its employee benefit plans and programs, and to determine the scope of, and fulfill, its obligations under this Agreement. Such Information will, to the extent reasonably practicable, be provided in the format and at the times and places requested, but in no event will the party providing such Information be obligated to incur any out-of-pocket expense not reimbursed by the party making such request, nor to make such Information available outside its normal business hours and premises. Any Information shared or exchanged pursuant to this Agreement will be subject to the same confidentiality requirements set forth in the Distribution Agreement. Section 7.04 Entire Agreement; Construction. This Agreement, the Distribution Agreement and the other Ancillary Agreements, including any annexes, schedules and exhibits hereto or thereto, and other agreements and documents referred to 53 57 herein and therein, will together constitute the entire agreement between the parties with respect to the subject matter hereof and thereof and will supersede all prior negotiations, agreements and understandings of the parties of any nature, whether oral or written, with respect to such subject matter. Notwithstanding any other provisions in this Agreement to the contrary, in the event and to the extent that there is a conflict between the provisions of this Agreement and the provisions of the Distribution Agreement, the provisions of this Agreement will control. Section 7.05 Survival of Agreements. Except as otherwise contemplated by this Agreement, all covenants and agreements of the parties contained in this Agreement will remain in full force and effect and survive the Time of Distribution. Section 7.06 Governing Law. This Agreement will be governed by and construed in accordance with the internal laws of the State of New York applicable to contracts made and to be performed entirely within such State, without regard to the conflicts of law principles of such State, except that (i) the provisions of Sections 3.04 and 3.05 (and the definitions hereof and other provisions of this Article VII to the extent relating to such sections) will be governed by and construed in accordance with the laws of the United Kingdom and (ii) the provisions of Sections 3.06 and 4.05 (and the definitions hereof and other provisions of this Article VII to the extent relating to such sections) will be governed by and construed in accordance with the laws of Canada. Section 7.07 Notices. All notices, requests, claims, demands and other communications required or permitted to be given hereunder will be in writing and will be delivered by hand or telecopied, e-mailed or sent, postage prepaid, by registered, certified or express mail or reputable overnight courier service and will be deemed given when so delivered by hand or telecopied, when e-mail confirmation is received if delivered by e-mail, or three business days after being so mailed (one business day in the case of express mail or overnight courier service). All such notices, requests, claims, demands and other communications will be addressed as set forth in Section 6.05 of the Distribution Agreement, or pursuant to such other instructions as may be designated in writing by the party to receive such notice. Section 7.08 Amendments. This Agreement cannot be amended, modified or supplemented except by a written agreement executed by each party affected thereby. Section 7.09 Assignment. No party to this Agreement will convey, assign or otherwise transfer any of its rights or obligations under this Agreement without the prior written consent of the other parties in their sole and absolute discretion, except that any party may (without obtaining any consent) assign any of its rights hereunder to a successor to all or any part of its business. Any such conveyance, assignment or transfer requiring the prior written consent of the other parties which is made without such 54 58 consent will be void ab initio. No assignment of this Agreement will relieve any assigning party of its obligations hereunder. Section 7.10 Captions; Currency. The article, section and paragraph captions herein and the table of contents hereto are for convenience of reference only, do not constitute part of this Agreement and will not be deemed to limit or otherwise affect any of the provisions hereof. Unless otherwise specified, all references herein to numbered articles or sections are to articles and sections of this Agreement and all references herein to schedules are to schedules to this Agreement. Unless otherwise specified, all references contained in this Agreement, in any schedule referred to herein or in any instrument or document delivered pursuant hereto to dollars or "$" will mean United States Dollars. Section 7.11 Severability. If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances other than those as to which it has been held invalid or unenforceable, will remain in full force and effect and will in no way be affected, impaired or invalidated thereby. If the economic or legal substance of the transactions contemplated hereby is affected in any manner adverse to any party as a result thereof, the parties will negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the parties. Section 7.12 Parties in Interest. This Agreement is binding upon and is for the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement is not made for the benefit of any Person not a party hereto, and no Person other than the parties hereto or their respective successors and permitted assigns will acquire or have any benefit, right, remedy or claim under or by reason of this Agreement. No provision of this Agreement will be construed (a) to limit the right of Rockwell, any Rockwell Subsidiary, Rockwell Collins, any Rockwell Collins Subsidiary, Rockwell Science Center or any Rockwell Science Center Subsidiary to amend or terminate any of their plans; provided, however, that Rockwell Collins, the Rockwell Collins Subsidiaries, Rockwell Science Center and the Rockwell Science Center Subsidiaries will be obligated to maintain employee benefit plans and arrangements until at least January 1, 2003 which are substantially similar in all material respects to those which had been maintained or provided by Rockwell or any of its Subsidiaries (including members of the Rockwell Collins Group and members of the Rockwell Science Center Group) immediately prior to the Time of Distribution, or (b) to create any right or entitlement whatsoever in any employee, former employee or beneficiary including, without limitation, a right to continued employment or to any benefit under a plan or any other benefit or compensation. For purposes of Sections 3.04 and 3.05, a person who is not a party to this Agreement has no rights under the Contracts (Rights of Third Parties) 55 59 Act 1999 to enforce any term of this Agreement, provided that the foregoing does not affect any right or remedy of a third party which exists or is available apart from that Act. Section 7.13 Schedules. All schedules attached hereto are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Capitalized terms used in the schedules hereto but not otherwise defined therein will have the respective meanings assigned to such terms in this Agreement. Section 7.14 Termination. This Agreement may be terminated and the Distribution abandoned at any time prior to the Time of Distribution by and in the sole discretion of the Rockwell Board without the approval of Rockwell Collins, Rockwell Science Center or Rockwell's shareowners. In the event of such termination, no party will have any liability of any kind to any other party on account of such termination. Section 7.15 Waivers; Remedies. No failure or delay on the part of Rockwell, Rockwell Collins or Rockwell Science Center in exercising any right, power or privilege hereunder will operate as a waiver thereof, nor will any waiver on the part of Rockwell, Rockwell Collins or Rockwell Science Center of any right, power or privilege hereunder operate as a waiver of any other right, power or privilege hereunder, nor will any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. The rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies which the parties may otherwise have at law or in equity. Section 7.16 Counterparts. This Agreement may be executed in separate counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts will together constitute the same agreement. Section 7.17 Performance. Each party will cause to be performed and hereby guarantees the performance of all actions, agreements and obligations set forth herein to be performed by any Subsidiary or Affiliate of such party. 56 60 Section 7.18 Interpretation. Any reference herein to any Federal, state, local, provincial or foreign law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. For the purposes of this Agreement, (a) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires, (b) the terms "hereof", "herein", and "herewith" and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement, (c) the word "including" and words of similar import when used in this Agreement shall mean "including, without limitation" and (d) all references to any plan shall be deemed to include any amendments thereto. 57 61 IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officers of the parties as of the date first hereinabove written. ROCKWELL INTERNATIONAL CORPORATION By: /s/ William J. Calise, Jr. Name: William J. Calise, Jr. Title: Senior Vice President, General Counsel and Secretary ROCKWELL COLLINS, INC. By: /s/ Lawrence A. Erickson Name: Lawrence A. Erickson Title: Senior Vice President and Chief Financial Officer ROCKWELL SCIENTIFIC COMPANY LLC By: /s/ Wayne A. Davey Name: Wayne A. Davey Title: Vice President and Chief Financial Officer 58 EX-2.3 4 y51136ex2-3.txt TAX ALLOCATION AGREEMENT 1 Exhibit 2.3 TAX ALLOCATION AGREEMENT by and between ROCKWELL INTERNATIONAL CORPORATION and ROCKWELL COLLINS, INC. June 29, 2001 2 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS ........................................................................1 1.01 General ......................................................................1 1.02 Schedules, etc................................................................8 ARTICLE II FILING OF TAX RETURNS; PAYMENT OF TAXES; REFUNDS....................................8 2.01 Preparation of Tax Returns....................................................8 2.02 Payment of Taxes.............................................................11 2.03 Tax Refunds and Carrybacks...................................................14 2.04 Allocation of Straddle Period Taxes..........................................15 2.05 Schedule of Foreign Income Tax Returns and Payments..........................16 ARTICLE III TAX INDEMNIFICATION; TAX CONTESTS..................................................16 3.01 Indemnification..............................................................16 3.02 Rockwell Collins Tax Acts....................................................18 3.03 Notice of Indemnity..........................................................19 3.04 Payments ....................................................................19 3.05 Tax Contests.................................................................21 ARTICLE IV OPTIONS; RESTRICTED STOCK; COMPENSATION PAYMENTS; INTEREST CHARGE FOR LATE PAYMENTS; CURRENCY CALCULATIONS; EFFECTIVE TIME OF TRANSACTIONS...22 4.01 Stock Options................................................................22 4.02 Restricted Stock.............................................................24 4.03 Compensation Payments........................................................25 4.04 Change in Law................................................................26 4.05 Interest Charge for Late Payments............................................26 4.06 Currency Calculations........................................................27 4.07 Effective Time of Transactions...............................................27 ARTICLE V COOPERATION AND EXCHANGE OF INFORMATION............................................27 5.01 Inconsistent Actions.........................................................27 5.02 Ruling Request...............................................................27 5.03 Cooperation and Exchange of Information......................................27 5.04 Tax Records .................................................................28
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Page ---- ARTICLE VI MISCELLANEOUS .....................................................................28 6.01 Entire Agreement; Construction...............................................28 6.02 Effectiveness................................................................29 6.03 Survival of Agreements.......................................................29 6.04 Governing Law................................................................29 6.05 Notices .....................................................................29 6.06 Consent to Jurisdiction......................................................31 6.07 Amendments ..................................................................31 6.08 Successors and Assigns.......................................................31 6.09 Captions; Currency...........................................................32 6.10 Severability.................................................................32 6.11 No Third Party Beneficiaries.................................................32 6.12 Schedules ...................................................................32 6.13 Termination .................................................................32 6.14 Waivers; Remedies............................................................33 6.15 Counterparts.................................................................33 6.16 Performance .................................................................33 6.17 Interpretation...............................................................33
SCHEDULE 2.01(c) FOREIGN INCOME TAX RETURNS TO BE FILED BY ROCKWELL COLLINS SCHEDULE 2.01(g) TAX RETURNS TO BE FILED BY NON-RESPONSIBLE PARTY SCHEDULE 2.03(c) CLAIMS FOR REFUND OF TAXES SCHEDULE 3.01(a) PRE-DISTRIBUTION TAX-FREE TRANSACTIONS SCHEDULE 3.01(b)(v) FOREIGN INCOME TAXES IMPOSED IN CONNECTION WITH TRANSACTIONS FOR WHICH ROCKWELL COLLINS IS LIABLE SCHEDULE 3.02(a) ROCKWELL COLLINS TAX ACT SCHEDULE 3.02(b) ROCKWELL COLLINS TAX REPRESENTATION LETTER SCHEDULE 4.01 STOCK OPTIONS ii 4 TAX ALLOCATION AGREEMENT TAX ALLOCATION AGREEMENT (this "AGREEMENT") dated as of June 29, 2001, by and between ROCKWELL INTERNATIONAL CORPORATION, a Delaware corporation ("ROCKWELL"), and ROCKWELL COLLINS, INC., a Delaware corporation and, as of the date hereof, a wholly-owned subsidiary of Rockwell ("ROCKWELL COLLINS"). W I T N E S S E T H : WHEREAS, the Rockwell Board (as hereinafter defined) has determined that it is appropriate and desirable to distribute all outstanding shares of Rockwell Collins Common Stock (as hereinafter defined) on a pro rata basis to the holders of Rockwell Common Stock (as hereinafter defined); WHEREAS, the Rockwell Board has determined that it is appropriate and desirable to effectuate the Distribution (as hereinafter defined) in a transaction that will qualify under Section 368(a)(1)(D) of the Code (as hereinafter defined) as a tax-free reorganization; and WHEREAS, Rockwell and Rockwell Collins wish to provide for and agree upon the allocation between the Rockwell Tax Group (as hereinafter defined) and the Rockwell Collins Tax Group (as hereinafter defined) of all responsibilities, liabilities and benefits relating to or affecting Taxes (as hereinafter defined) paid or payable by either of them for all taxable periods, whether beginning before, on or after the Distribution Date (as hereinafter defined). NOW, THEREFORE, in consideration of the premises and of the respective agreements and covenants contained in this Agreement, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS 1.01 GENERAL. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): 5 "ACTUALLY REALIZED" shall mean, for purposes of determining the timing of any Taxes (or related Tax cost or benefit) relating to any payment, transaction, occurrence or event, the time at which the amount of Taxes (including estimated Taxes) payable by any person is increased above or reduced below, as the case may be, the amount of Taxes that such person would be required to pay but for the payment, transaction, occurrence or event. "AUTOMOTIVE DISTRIBUTION" shall mean the distribution of the Meritor Automotive, Inc. common stock on a pro rata basis to holders of Rockwell Common Stock on September 30, 1997 pursuant to the Distribution Agreement by and between Rockwell and Meritor Automotive, Inc. dated September 30, 1997. "AUTOMOTIVE RULING REQUEST" shall mean the private letter ruling request dated March 17, 1997 filed by Rockwell with the IRS (as modified or supplemented by any materials submitted to the IRS), seeking rulings that, inter alia, the Automotive Distribution qualified for U.S. federal Income Tax purposes as a tax-free reorganization under Section 368(a)(1)(D) of the Code. "AUTOMOTIVE TRANSACTION AGREEMENTS" shall have the meaning ascribed thereto in the Distribution Agreement by and between Rockwell and Meritor Automotive, Inc. dated September 30, 1997. "BOEING" shall mean The Boeing Company, a Delaware corporation. "BOEING TAX GROUP" shall mean Boeing and its affiliates. "CODE" shall mean the Internal Revenue Code of 1986, as amended, or any successor legislation. "COMPENSATION PAYMENTS" shall mean all non-qualified employee benefit plan and welfare benefit plan payments made under the Employee Matters Agreement dated as of June 29, 2001 by and between Rockwell and Rockwell Collins. "CONEXANT" shall mean Conexant Systems, Inc., a Delaware corporation. "DISTRIBUTION" shall mean the distribution of the Rockwell Collins Common Stock on a pro rata basis to holders of Rockwell Common Stock on the Distribution Date pursuant to the Distribution Agreement. 2 6 "DISTRIBUTION AGREEMENT" shall mean the Distribution Agreement dated as of June 29, 2001 by and among Rockwell, Rockwell Collins and Rockwell Scientific Company, LLC. "DISTRIBUTION DATE" shall mean the date on which the Distribution occurs (or, if different, the date on which the Distribution is deemed to occur for U.S. federal Income Tax purposes). For purposes of this Agreement, the Distribution shall be deemed effective as of the end of the day on the Distribution Date. "DISTRIBUTION TRANSACTION" shall mean any transaction undertaken in connection with the Distribution and described in the Ruling Request. "FOREIGN INCOME TAX" shall mean any Income Tax other than a U.S. federal, state or local Income Tax. "FOREIGN INCOME TAX RETURNS" shall mean any Income Tax Return which is not a U.S. federal, state or local Income Tax Return. "INCOME TAX" shall mean (a) any Tax based upon, measured by, or calculated with respect to (i) net income or profits (including, but not limited to, any capital gains, minimum Tax and any Tax on items of Tax preference, but not including sales, use, real or personal property, gross or net receipts, transfer or similar Taxes) or (ii) multiple bases (including, but not limited to, corporate franchise, doing business or occupation Taxes) if one or more of the bases upon which such Tax may be based, measured by, or calculated with respect to, is described in clause (i) above, or (b) any U.S. state or local franchise Tax; including in the case of each of (a) and (b) any related interest and any penalties, additions to such Tax or additional amounts imposed with respect thereto by any Tax Authority. "INCOME TAX BENEFIT" shall mean for any taxable period the excess of (i) the hypothetical Income Tax liability of the taxpayer for the taxable period calculated as if the Timing Difference or Reverse Timing Difference, as the case may be, had not occurred but with all other facts unchanged, over (ii) the actual Income Tax liability of the taxpayer for the taxable period, calculated taking into account the Timing Difference or Reverse Timing Difference, as the case may be (treating an Income Tax refund or credit as a negative Income Tax liability for purposes of such calculation). "INCOME TAX DETRIMENT" shall mean for any taxable period the excess of (i) the actual Income Tax liability of the taxpayer for the taxable period, calculated taking into account the Timing Difference or Reverse Timing Difference, as the case may be, over (ii) the hypothetical Income Tax liability of the taxpayer for the taxable period, calculated as if the Timing Difference or Reverse Timing Difference, as the 3 7 case may be, had not occurred but with all other facts unchanged (treating an Income Tax refund or credit as a negative Income Tax liability for purposes of such calculation). "INCOME TAX RETURN" shall mean any Tax Return that relates to Income Taxes. "INDEMNITEE" shall have the meaning set forth in Section 3.03. "INDEMNITOR" shall have the meaning set forth in Section 3.03. "INDEMNITY ISSUE" shall have the meaning set forth in Section 3.03. "INTRAGROUP TRANSACTION" shall mean any transfer of intellectual property between members of the Rockwell Tax Group, members of the Rockwell Collins Tax Group or between a member of the Rockwell Tax Group and a member of the Rockwell Collins Tax Group which occurs on or before the Distribution Date. "IRS" shall mean the Internal Revenue Service. "KAISER TAX GROUP" shall mean for any taxable period (or portion thereof) ending on or before December 1, 2000 (i) K Systems, Inc., a California corporation, and (ii) any corporation or legal entity which K Systems, Inc. directly or indirectly owned on or before December 1, 2000. "OLD ROCKWELL" shall mean the corporation, formerly named Rockwell International Corporation, which owned all of the Rockwell Common Stock prior to the distribution of the Rockwell Common Stock to the shareholders of such corporation on December 6, 1996. "PRE-DISTRIBUTION TAXABLE PERIOD" shall mean a taxable period ending on or before the Distribution Date. "POST-DISTRIBUTION TAX ACT" shall have the meaning set forth in Section 3.01(a). "POST-DISTRIBUTION TAXABLE PERIOD" shall mean a taxable period beginning after the Distribution Date. "POST-TAX INDEMNIFICATION PERIOD" shall mean any Post-Distribution Taxable Period and that portion of any Straddle Period that begins on the day after the Distribution Date. 4 8 "REVERSE TIMING DIFFERENCE" shall mean an increase in income, gain or recapture, or a decrease in deduction, loss or credit, as calculated for Income Tax purposes, of the taxpayer for the Tax Indemnification Period coupled with an increase in deduction, loss or credit, or a decrease in income, gain or recapture, of the taxpayer for any Post-Tax Indemnification Period. "RIGHTS" shall have the meaning ascribed thereto in the Distribution Agreement. "ROCKWELL" shall have the meaning ascribed thereto in the preamble. "ROCKWELL BOARD" shall mean the Board of Directors of Rockwell or a duly authorized committee thereof. "ROCKWELL COLLINS" shall have the meaning ascribed thereto in the preamble. "ROCKWELL COLLINS COMMON STOCK" shall mean, collectively, the Common Stock, par value $1 per share, of Rockwell Collins and the related Rights. "ROCKWELL COLLINS COMMON STOCK OPTIONS" shall mean options to acquire Rockwell Collins Common Stock. "ROCKWELL COLLINS GROUP EMPLOYEES AND FORMER EMPLOYEES" shall mean individuals (i) who are employees of any member of the Rockwell Collins Tax Group on the date of the event giving rise to a deduction in respect of any Compensation Payments made to such individuals or Stock Options held by such individuals, (ii) who were employees of any member of the Rockwell Collins Tax Group and were not thereafter employees of any member of the Rockwell Tax Group, or (iii) who were employees of Old Rockwell and its affiliates who were engaged in the Rockwell Collins business and who retired on or before December 6, 1996 and were not thereafter employees of any member of the Rockwell Tax Group. "ROCKWELL COLLINS TAX ACT" shall have the meaning set forth in Section 3.02(a). "ROCKWELL COLLINS TAX GROUP" shall mean (i) Rockwell Collins and (ii) any corporation or other legal entity which Rockwell Collins directly or indirectly owns immediately following the Distribution other than (A) any member of the Kaiser Tax Group or its business, assets or activities for any taxable period (or portion thereof) ending on or before December 1, 2000 or (B) Rockwell Scientific Company, LLC or any corporation or other legal entity which Rockwell Scientific Company, LLC directly or indirectly owns immediately following the Distribution. 5 9 "ROCKWELL COLLINS TAX REPRESENTATION LETTER" shall mean the letter delivered by Rockwell Collins to Rockwell on the Distribution Date, substantially in the form set forth in Schedule 3.02(b) attached hereto. "ROCKWELL COMMON STOCK" shall mean the Common Stock, par value $1.00 per share, of Rockwell. "ROCKWELL COMMON STOCK OPTIONS" shall mean options to acquire Rockwell Common Stock. "ROCKWELL TAX GROUP" shall mean (i) Rockwell, (ii) any corporation or other legal entity which Rockwell directly or indirectly owns immediately following the Distribution (but with respect to Rockwell Scientific Company, LLC, only for any taxable period (or portion thereof) ending on or before the Distribution Date), (iii) any other corporation or other legal entity which Rockwell or Old Rockwell directly or indirectly owned at any time prior to the Distribution (but only with respect to the period such corporation or other entity was so owned by Rockwell or Old Rockwell) other than a member of the Rockwell Collins Tax Group or the Kaiser Tax Group, and (iv) solely for purposes of this Agreement and not for purposes of any other Transaction Agreement, for any taxable period up to or including December 6, 1996, Old Rockwell and any other corporation or legal entity owned by Old Rockwell other than a member of the Rockwell Collins Tax Group. "RULING" shall mean the private letter ruling issued by the IRS in reply to the Ruling Request including any amendment or supplement thereto. "RULING REQUEST" shall mean the private letter ruling request dated January 12, 2001 filed by Rockwell with the IRS (as modified or supplemented by any materials submitted to the IRS), seeking rulings that, inter alia, the Distribution will qualify for U.S. federal Income Tax purposes as a tax-free reorganization under Section 368(a)(1)(D) of the Code. "SEMICONDUCTOR DISTRIBUTION" shall mean the distribution of the Conexant common stock on a pro rata basis to holders of Rockwell Common Stock on December 31, 1998 pursuant to the Distribution Agreement by and between Rockwell and Conexant dated December 31, 1998. "SEMICONDUCTOR RULING REQUEST" shall mean the private letter ruling request dated June 29, 1998 filed by Rockwell with the IRS (as modified or supplemented by any materials submitted to the IRS), seeking rulings that, inter alia, the Semiconductor Distribution qualified for U.S. federal Income Tax purposes as a tax-free reorganization under Section 368(a)(1)(D) of the Code. 6 10 "SEMICONDUCTOR TRANSACTION AGREEMENTS" shall have the meaning ascribed to the phrase "Transaction Agreements" in the Distribution Agreement by and between Rockwell and Conexant dated December 31, 1998. "STOCK OPTIONS" shall mean Rockwell Collins Common Stock Options or Rockwell Common Stock Options. "STRADDLE PERIOD" shall mean a taxable period that includes but does not end on the Distribution Date. "TAX" and "TAXES" shall mean all forms of taxation, whenever created or imposed, and whether of the United States or elsewhere, and whether imposed by a federal, state, municipal, governmental, territorial, local, foreign or other body, and without limiting the generality of the foregoing, shall include net income, gross income, gross receipts, sales, use, value added, ad valorem, transfer, recording, franchise, profits, license, lease, service, service use, payroll, wage, withholding, employment, unemployment insurance, workers compensation, social security, excise, severance, stamp, business license, business organization, occupation, premium, property, environmental, windfall profits, customs, duties, alternative minimum, estimated or other taxes, fees, premiums, assessments or charges of any kind whatever imposed or collected by any governmental entity or political subdivision thereof, together with any related interest and any penalties, additions to such tax or additional amounts imposed with respect thereto by any Tax Authority. "TAX AUTHORITY" shall mean, with respect to any Tax, any governmental entity, quasi-governmental body or political subdivision thereof that imposes such Tax and the agency (if any) charged with the determination or collection of such Tax for such entity, body or subdivision. "TAX GROUP" shall mean the Rockwell Tax Group or the Rockwell Collins Tax Group, as the case may be. "TAX INDEMNIFICATION PERIOD" shall mean any Pre-Distribution Taxable Period and that portion of any Straddle Period that ends on the Distribution Date. "TAX RETURN" shall mean any return, filing, questionnaire, information return, election or other document required or permitted to be filed, including requests for extensions of time, filings made with respect to estimated tax payments, claims for refund and amended returns that may be filed, for any period with any Tax Authority (whether domestic or foreign) in connection with any Tax (whether or not a payment is required to be made with respect to such filing). 7 11 "TIMING DIFFERENCE" means an increase in income, gain or recapture, or a decrease in deduction, loss or credit, as calculated for Income Tax purposes, of the taxpayer for any Post-Tax Indemnification Period coupled with an increase in deduction, loss or credit, or a decrease in income, gain or recapture, of the taxpayer for the Tax Indemnification Period. "TRANSACTION AGREEMENTS" shall have the meaning ascribed thereto in the Distribution Agreement. Any capitalized term not otherwise defined in this Agreement shall have the meaning ascribed to it in the Distribution Agreement. 1.02 SCHEDULES, ETC. References to a "SCHEDULE" are, unless otherwise specified, to the Schedule attached to this Agreement; references to "SECTION" or "ARTICLE" are, unless otherwise specified, to one of the Sections or Articles of this Agreement; references to "SUB-SECTION" are, unless the context otherwise requires, references to the section in which the reference appears; and references to this Agreement include the Schedules. ARTICLE II FILING OF TAX RETURNS; PAYMENT OF TAXES; REFUNDS 2.01 PREPARATION OF TAX RETURNS. (a) UNITED STATES FEDERAL INCOME TAX RETURNS. (i) Rockwell shall prepare and file or cause to be prepared and filed all U.S. federal Income Tax Returns (including amendments thereto) which include a member of the Rockwell Tax Group which are required to be filed for any Pre-Distribution Taxable Period or Straddle Period. Rockwell Collins hereby irrevocably designates, and agrees to cause each of its affiliates to so designate, Rockwell as its agent to take any and all actions necessary or incidental to the preparation and filing of such U.S. federal Income Tax Returns. (ii) Rockwell Collins shall prepare and file or cause to be prepared and filed all U.S. federal Income Tax Returns (including amendments thereto) which include a member of the Kaiser Tax Group but which do not include a member of the Rockwell Tax Group and which are required to be filed for any Pre-Distribution Taxable Period. (b) UNITED STATES STATE AND LOCAL INCOME TAX RETURNS. (i) Rockwell shall prepare and file or cause to be prepared and filed all U.S. state and 8 12 local Income Tax Returns (including amendments thereto) (A) which are required to be filed for any Pre-Distribution Taxable Period which include a member of the Rockwell Tax Group or a member of the Rockwell Collins Tax Group and (B) which are required to be filed for any Straddle Period which (I) relate to a member or members of the Rockwell Tax Group or their respective businesses, assets or activities, (II) relate to members of each of the Rockwell Tax Group and the Rockwell Collins Tax Group or their respective businesses, assets or activities, or (III) relate to a member of the Rockwell Collins Tax Group for a period in which such member conducts or has conducted both a Rockwell Collins business and a non-Rockwell Collins business. Rockwell Collins hereby irrevocably designates, and agrees to cause each of its affiliates to so designate, Rockwell as its agent to take any and all actions necessary or incidental to the preparation and filing of such U.S. state and local Income Tax Returns. (ii) All U.S. state and local Income Tax Returns (including amendments thereto) which relate to a member of the Rockwell Collins Tax Group or the Kaiser Tax Group or their respective businesses, assets or activities for all Pre-Distribution Taxable Periods or Straddle Periods which are not the responsibility of the Rockwell Tax Group shall be the responsibility of the Rockwell Collins Tax Group. (c) FOREIGN INCOME TAX RETURNS. (i) Rockwell Collins shall prepare and file or cause to be prepared and filed all Foreign Income Tax Returns which are required to be filed for any Pre-Distribution Taxable Period or any Straddle Period which relate to the entities set forth on Schedule 2.01(c) attached hereto. Rockwell hereby irrevocably designates, and agrees to cause each of its affiliates to so designate, Rockwell Collins as its agent to take any and all actions necessary or incidental to the preparation and filing of such Foreign Income Tax Returns. (ii) Rockwell shall prepare and file or cause to be prepared and filed all Foreign Income Tax Returns (including amendments thereto) which include a member of the Rockwell Tax Group or the Rockwell Collins Tax Group which are required to be filed for any Pre-Distribution Taxable Period or any Straddle Period other than those which relate to the entities set forth on Schedule 2.01(c) attached hereto. Rockwell Collins hereby irrevocably designates, and agrees to cause each of its affiliates to so designate, Rockwell as its agent to take any and all actions necessary or incidental to the preparation and filing of such Foreign Income Tax Returns. (d) NON-INCOME TAX RETURNS. (i) All Tax Returns (including amendments thereto) which are not Income Tax Returns for all Pre-Distribution Taxable Periods and all Straddle Periods shall be the responsibility of the Rockwell 9 13 Tax Group if such Tax Returns (A) relate to a member or members of the Rockwell Tax Group or their respective businesses, assets or activities, (B) relate to members of each of the Rockwell Tax Group and the Rockwell Collins Tax Group or their respective businesses, assets or activities, or (C) relate to a member of the Rockwell Collins Tax Group for a period in which such member conducts or has conducted both a Rockwell Collins business and a non-Rockwell Collins business. Rockwell Collins hereby irrevocably designates, and agrees to cause each of its affiliates to so designate, Rockwell as its agent to take any and all actions necessary or incidental to the preparation and filing of such Tax Returns. (ii) All Tax Returns (including amendments thereto) which are not Income Tax Returns which relate to a member of the Rockwell Collins Tax Group or the Kaiser Tax Group or their respective businesses, assets or activities for all Pre-Distribution Taxable Periods and Straddle Periods which are not the responsibility of the Rockwell Tax Group shall be the responsibility of the Rockwell Collins Tax Group. (e) POST-DISTRIBUTION DATE TAX RETURNS. All Tax Returns (including amendments thereto) for all Post-Distribution Taxable Periods shall be the responsibility of the Rockwell Tax Group if such Tax Returns relate to a member or members of the Rockwell Tax Group or their respective businesses, assets or activities, and shall be the responsibility of the Rockwell Collins Tax Group if such Tax Returns relate to a member or members of the Rockwell Collins Tax Group or their respective businesses, assets or activities. (f) CONSISTENT WITH PAST PRACTICE; REVIEW BY NON-RESPONSIBLE PARTY. Unless Rockwell and Rockwell Collins otherwise agree in writing, all Tax Returns (including amendments thereto) described in this Section 2.01 filed after the date of this Agreement for Pre-Distribution Taxable Periods or Straddle Periods, in the absence of a controlling change in law or circumstances, shall be prepared on a basis consistent with the elections, accounting methods, conventions and principles of taxation used for the most recent taxable periods for which Tax Returns involving similar matters have been filed. Upon the request of the non-responsible party, the party responsible under this Section 2.01 for preparation of a particular Tax Return for Pre-Distribution Taxable Periods or Straddle Periods shall make available a draft of such Tax Return (or relevant portions thereof) for review and comment by such non-responsible party. Subject to the provisions of this Agreement, all decisions relating to the preparation of Tax Returns shall be made in the sole discretion of the party responsible under this Agreement for such preparation. (g) RESPONSIBILITY FOR FILING. Although, pursuant to this Agreement, Rockwell or Rockwell Collins may be responsible for filing a particular Tax Return, 10 14 Rockwell and Rockwell Collins have agreed that the actual preparation and filing of certain Tax Returns will be done by the non-responsible party. Schedule 2.01(g) attached hereto sets forth a schedule specifying such Tax Returns. Rockwell and Rockwell Collins may agree from time to time to additions to or deletions from Schedule 2.01(g). 2.02 PAYMENT OF TAXES. (a) UNITED STATES FEDERAL INCOME TAXES. Except as otherwise provided in this Agreement: (i) Rockwell shall pay or cause to be paid, on a timely basis, all Taxes due with respect to the consolidated U.S. federal Income Tax liability (A) for all Pre-Distribution Taxable Periods of all members of the Rockwell Tax Group or the Rockwell Collins Tax Group and (B) for the Straddle Period Tax Return which includes members of the Rockwell Tax Group or the Rockwell Collins Tax Group; and (ii) Rockwell Collins shall pay or cause to be paid, on a timely basis, all Taxes due with respect to the U.S. federal Income Tax liability of all members of the Kaiser Tax Group for all taxable periods (or portions thereof) ending on or before December 1, 2000. (b) UNITED STATES STATE AND LOCAL INCOME TAXES. Except as otherwise provided in this Agreement: (i) Rockwell shall pay or cause to be paid, on a timely basis, all Taxes due with respect to the U.S. state and local Income Tax liability (A) for all Pre-Distribution Taxable Periods of all members of the Rockwell Tax Group or the Rockwell Collins Tax Group and (B) for all Straddle Periods which relate to (I) a member or members of the Rockwell Tax Group or their respective businesses, assets or activities, (II) members of each of the Rockwell Tax Group, on the one hand, and the Rockwell Collins Tax Group, on the other, or their respective businesses, assets or activities, or (III) a member of the Rockwell Collins Tax Group for a period in which such member conducts or has conducted both a Rockwell Collins business and a non-Rockwell Collins business, provided, however, that Rockwell Collins, on behalf of the Rockwell Collins Tax Group, hereby assumes and agrees to pay directly to or at the direction of Rockwell, at least two days prior to the date payment (including estimated payment) thereof is due, the portion of such U.S. state and local Income Taxes for that portion of any Straddle Period which begins on the day after the Distribution Date which relates to a member of the Rockwell Collins Tax Group or its business, assets or activities; and 11 15 (ii) Rockwell Collins shall pay or cause to be paid, on a timely basis, all U.S. state and local Income Taxes (A) for all Straddle Periods which relate to a member or members of the Rockwell Collins Tax Group, their businesses, assets or activities which are not the responsibility of the Rockwell Tax Group other than any U.S. state and local Income Taxes imposed in connection with the transactions contemplated by the Transaction Agreements or any other agreement entered into for the purpose of implementing the Distribution, and (B) for all taxable periods (or portions thereof) ending on or before December 1, 2000 which relate to a member or members of the Kaiser Tax Group . (c) FOREIGN INCOME TAXES. Except as otherwise provided in this Agreement: (i) Rockwell Collins shall pay or cause to be paid, on a timely basis, all Foreign Income Taxes due with respect to the Foreign Income Tax liability for all Pre-Distribution Taxable Periods and all Straddle Periods which relate to the entities set forth on Schedule 2.01(c) attached hereto; and (ii) Except as provided in Section 2.02(c)(i) above, Rockwell shall pay or cause to be paid, on a timely basis, all Foreign Income Taxes due with respect to the Foreign Income Tax liability of all members of the Rockwell Collins Tax Group or Rockwell Tax Group for all Pre-Distribution Taxable Periods and Straddle Periods, provided, however, that Rockwell Collins, on behalf of the Rockwell Collins Tax Group, hereby assumes and agrees to pay directly to or at the direction of Rockwell, at least two days prior to the date payment (including estimated payment) thereof is due the portion of such Foreign Income Taxes for that portion of any Straddle Period which begins on the day after the Distribution Date which relates to a member of the Rockwell Collins Tax Group or its business, assets or activities. (d) NON-INCOME TAXES. Except as otherwise provided in this Agreement: (i) Rockwell shall pay or cause to be paid, on a timely basis, all Taxes due with respect to the non-Income Tax liability for all Pre-Distribution Taxable Periods and Straddle Periods which relate to (A) a member or members of the Rockwell Tax Group or their respective businesses, assets or activities, (B) members of each of the Rockwell Tax Group, on the one hand, and the Rockwell Collins Tax Group, on the other, or their respective businesses, assets or activities, or (C) a member of the Rockwell Collins Tax Group for a period in which such member conducts or has conducted both a Rockwell Collins business and a non-Rockwell Collins business, provided, however, that Rockwell Collins, on behalf of the Rockwell Collins Tax Group, hereby assumes and agrees to pay directly to or at the 12 16 direction of Rockwell, at least two days prior to the date payment (including estimated payment) thereof is due the portion of such non-Income Taxes which relates to a member of the Rockwell Collins Tax Group or the Rockwell Collins business, assets or activities for such Pre-Distribution Taxable Periods and Straddle Periods other than any such non-Income Taxes resulting from any Distribution Transaction or Intragroup Transaction; and (ii) Rockwell Collins shall pay or cause to be paid, on a timely basis, all non-Income Taxes for all Pre-Distribution Taxable Periods and Straddle Periods which relate to the Rockwell Collins Tax Group or the Kaiser Tax Group business, assets or activities which are not the responsibility of the Rockwell Tax Group other than any non-Income Taxes imposed in connection with any Intragroup Transaction or the transactions contemplated by the Transaction Agreements or any other agreement entered into for the purpose of implementing the Distribution. (e) POST-DISTRIBUTION DATE TAXES. Except as otherwise provided in this Agreement, all Taxes for all Post-Distribution Taxable Periods shall be paid or caused to be paid by the party responsible under this Agreement for filing the Tax Return pursuant to which such Taxes are due or, if no such Tax Returns are due, by the party liable for such Taxes. (f) CREDIT FOR PRIOR TAX PAYMENTS. To the extent any member of a Tax Group has made a payment of Taxes (including estimated Taxes) on or before the Distribution Date, the party liable for paying such Taxes under this Agreement shall be entitled to treat the payment as having been paid or caused to have been paid by such party, and such party shall not be required to reimburse the party which actually paid such Taxes. (g) RESPONSIBILITY FOR PAYMENT; NOTICE OF PAYMENT DUE. Although Rockwell or Rockwell Collins may be responsible for paying a particular Tax liability, Rockwell and Rockwell Collins may agree that the actual payment to a Taxing Authority of certain Tax liabilities will be made by the non-responsible party. Rockwell and Rockwell Collins may agree to prepare a schedule setting forth such Tax liabilities and may agree from time to time to additions to or deletions from such schedule. In each case where Rockwell or Rockwell Collins, as the case may be, is required to make payment of Taxes to the other party, Rockwell or Rockwell Collins, as the case may be shall notify the other party as to the amount of Taxes due from the other party at least five days prior to the date payment (including estimated payment) is due. 13 17 2.03 TAX REFUNDS AND CARRYBACKS. (a) RETENTION AND PAYMENT OF TAX REFUNDS. Except as otherwise provided in this Agreement, Rockwell shall be entitled to retain, and to receive within ten days after Actually Realized by the Rockwell Collins Tax Group, the portion of all refunds or credits of Taxes for which the Rockwell Tax Group is liable pursuant to Section 2.02 or Section 3.01(a) or is treated as having paid or caused to have been paid pursuant to Section 2.02(f), and Rockwell Collins shall be entitled to retain, and to receive within ten days after Actually Realized by the Rockwell Tax Group, the portion of all refunds or credits of Taxes for which the Rockwell Collins Tax Group is liable pursuant to Section 2.02 or Section 3.01(b) (including all non-Income Taxes for which Rockwell Collins would have been liable pursuant to Section 2.02(d) had such non-Income Taxes been due and not paid) or is treated as having paid or caused to have been paid pursuant to Section 2.02(f). The amount of any refund or credit of Taxes to which Rockwell or Rockwell Collins is entitled to retain or receive pursuant to the foregoing sentence shall be reduced to take account of any Taxes incurred by the Rockwell Collins Tax Group, in the case of a refund or credit to which Rockwell is entitled, or the Rockwell Tax Group, in the case of a refund or credit to which Rockwell Collins is entitled, upon the receipt of such refund or credit. (b) CARRYBACKS. Unless the parties otherwise agree in writing, Rockwell Collins shall elect and shall cause each member of the Rockwell Collins Tax Group to elect, where permitted by law, to carry forward any net operating loss, net capital loss, charitable contribution or other item arising after the Distribution Date that could, in the absence of such election, be carried back to a Pre-Distribution Taxable Period. Except as otherwise provided in this Agreement, notwithstanding the provisions of Section 2.03(a), (i) any refund or credit of Taxes resulting from the carryback of any item of Taxes attributable to the Rockwell Collins Tax Group arising in a Post-Tax Indemnification Period to a Tax Indemnification Period shall be for the account and benefit of the Rockwell Collins Tax Group, and (ii) any refund or credit of Taxes resulting from the carryback of any item of Taxes attributable to the Rockwell Tax Group arising in a Post-Tax Indemnification Period to a Tax Indemnification Period shall be for the account and benefit of the Rockwell Tax Group. (c) REFUND CLAIMS. Rockwell shall be permitted to file at Rockwell's sole expense, and Rockwell Collins shall reasonably cooperate with Rockwell in connection with, any claims for refund of Taxes to which Rockwell is entitled pursuant to this Section 2.03 or any other provision of this Agreement, including those described on Schedule 2.03(c). Rockwell shall reimburse Rockwell Collins for any reasonable out-of-pocket costs and expenses incurred by any member of the Rockwell Collins Tax Group in connection with such cooperation. Rockwell Collins 14 18 shall be permitted to file at Rockwell Collins's sole expense, and Rockwell shall reasonably cooperate with Rockwell Collins in connection with, any claims for refunds of Taxes to which Rockwell Collins is entitled pursuant to this Section 2.03 or any other provision of this Agreement. Rockwell Collins shall reimburse Rockwell for any reasonable out-of-pocket costs and expenses incurred by any member of the Rockwell Tax Group in connection with such cooperation. 2.04 ALLOCATION OF STRADDLE PERIOD TAXES. In the case of any Straddle Period: (a) Periodic Taxes. (i) The periodic Taxes of a member of the Rockwell Tax Group or the Rockwell Collins Tax Group or its business, assets or activities that are not based on income or receipts (e.g., property Taxes) for the portion of any Straddle Period ending on the Distribution Date shall be computed based on the ratio of the number of days in such portion of the Straddle Period and the number of days in the entire taxable period; and (ii) the periodic taxes of a member of the Rockwell Tax Group or the Rockwell Collins Tax Group or its business, assets or activities that are not based on income or receipts for the portion of any Straddle Period beginning on the day after the Distribution Date shall be computed based on the ratio of the number of days in such portion of the Straddle Period and the number of days in the entire taxable period. (b) Non-Periodic Taxes. (i) The Taxes of a member of the Rockwell Tax Group or the Rockwell Collins Tax Group or its business, assets or activities for that portion of any Straddle Period ending on the Distribution Date (other than Taxes described in Section 2.04(a) above), shall be computed on a "closing-of-the-books" basis as if such taxable period ended as of the close of business on the Distribution Date, and, in the case of any Taxes of a member of the Rockwell Tax Group or the Rockwell Collins Tax Group or its business, assets or activities with respect to any equity interest in any partnership or other "flowthrough" entity, as if the taxable period of such partnership or other "flowthrough" entity ended on the Distribution Date; and (ii) the Taxes of a member of the Rockwell Tax Group or the Rockwell Collins Tax Group or its business, assets or activities for that portion of any Straddle Period beginning after the Distribution Date (other than Taxes described in Section 2.04(a) above), shall be computed on a "closing-of-the-books" basis as if such taxable period began on the day after the Distribution Date, and, in the case of any Taxes of a member of the Rockwell Tax Group or the Rockwell Collins Tax Group or its business, assets or activities with respect to any equity interest in any partnership or other "flowthrough" entity, as if the taxable period of such partnership or other "flowthrough" entity began as of the day after the Distribution Date. 15 19 (c) The Taxes of the Rockwell Tax Group and the Rockwell Collins Tax Group with respect to any Tax Return for a Straddle Period which includes a member of each of the Rockwell Tax Group and the Rockwell Collins Tax Group or their respective businesses, assets or activities shall be allocated between the Rockwell Tax Group, on the one hand, and the Rockwell Collins Tax Group, on the other hand, determined in a manner analogous to that set forth in Treasury Regulation Section 1.1552-1(a)(2). 2.05 SCHEDULE OF FOREIGN INCOME TAX RETURNS AND PAYMENTS. Following the Distribution Date, Rockwell and Rockwell Collins agree to use their best efforts to jointly prepare a schedule showing (a) each Foreign Income Tax Return required to be filed by a member of the Rockwell Tax Group and each Foreign Income Tax Return required to be filed by a member of the Rockwell Collins Tax Group for taxable periods ending after September 30, 2000 and (b) the party responsible for filing such Foreign Income Tax Returns. ARTICLE III TAX INDEMNIFICATION; TAX CONTESTS 3.01 INDEMNIFICATION. (a) ROCKWELL INDEMNIFICATION. Subject to Section 3.01(b) and Section 3.02, Rockwell shall indemnify, defend and hold harmless each member of the Rockwell Collins Tax Group and each of their respective shareowners, directors, officers, employees and agents and each of the heirs, executors, successors and assigns of any of the foregoing from and against: (i) all Taxes of the Rockwell Tax Group; (ii) all Taxes of the Rockwell Collins Tax Group for all Pre-Distribution Taxable Periods and all Straddle Periods for which Rockwell is liable pursuant to Section 2.02; (iii) all liability as a result of Treasury Regulation Section 1.1502-6(a) (which imposes several liability on members of an affiliated group that file a U.S. federal consolidated Income Tax return) or comparable U.S. state or local provision for Income Taxes of any person which is or has ever been affiliated with any member of the Rockwell Tax Group or with which any member of the Rockwell Tax Group joins or has ever joined (or is or has ever been required to join) in filing any consolidated, combined or unitary Income Tax Return for any Tax period ending on or before or including the Distribution Date, but only for such period during which 16 20 such person is or was affiliated with a member of the Rockwell Tax Group or with which a member of the Rockwell Tax Group joins or joined (or is or was required to join) in filing any consolidated, combined or unitary Income Tax Return; (iv) all Taxes for any Tax period (whether beginning before, on or after the Distribution Date) that would not have been payable but for the breach by any member of the Rockwell Tax Group of any representation, warranty, covenant or obligation under this Agreement; (v) all liability for a breach by any member of the Rockwell Tax Group of any representation, warranty, covenant or obligation under this Agreement; (vi) all Income Taxes and non-Income Taxes imposed in connection with the transactions contemplated by the Transaction Agreements or any other agreement entered into for the purpose of implementing the Distribution other than any Foreign Income Taxes imposed in connection with the transactions specified on Schedule 3.01(b)(v); (vii) all Taxes for which Rockwell is liable pursuant to Section 3.02; and (viii) all liability for any reasonable legal, accounting, appraisal, consulting or similar fees and expenses relating to the foregoing. Notwithstanding the foregoing and subject to Section 3.01(b) and Section 3.02, Rockwell shall not indemnify, defend or hold harmless any member of the Rockwell Collins Tax Group from any liability for Taxes (other than Taxes resulting from (I) the failure of the Distribution to qualify as a reorganization described in Section 368(a)(1)(D) of the Code, (II) the failure of the Distribution to qualify as tax-free to Rockwell or Rockwell shareowners or (III) the failure of any pre-Distribution transaction specified in Schedule 3.01(a) to be non-taxable) attributable to any action (including the making of an election under Section 338 of the Code) taken by any member of the Rockwell Collins Tax Group after the Distribution (other than any such action expressly required or otherwise expressly contemplated by the Transaction Agreements or any other agreement entered into for the purpose of implementing the Distribution or taken in the ordinary course of business) (a "POST-DISTRIBUTION TAX ACT"). (b) ROCKWELL COLLINS INDEMNIFICATION. Rockwell Collins shall be liable for, and shall indemnify, defend and hold harmless each member of the Rockwell Tax Group and each of the respective shareowners, directors, officers, employees and agents and each of the heirs, executors, successors and assigns of any of the foregoing from and against: 17 21 (i) all Taxes of any member of the Rockwell Collins Tax Group or the Kaiser Tax Group (other than Taxes for which Rockwell provides indemnification pursuant to Section 3.01(a)); (ii) all Taxes for any Tax period (whether beginning before, on or after the Distribution Date) that would not have been payable but for the breach by any member of the Rockwell Collins Tax Group of any representation, warranty, covenant or obligation under this Agreement; (iii) all liability for a breach by any member of the Rockwell Collins Tax Group of any representation, warranty, covenant or obligation under this Agreement; (iv) all Taxes for which Rockwell Collins is liable pursuant to Section 3.02; (v) all Foreign Income Taxes imposed in connection with the transactions specified on Schedule 3.01(b)(v); (vi) all Taxes attributable to a Post-Distribution Tax Act; and (vii) all liability for any reasonable legal, accounting, appraisal, consulting or similar fees and expenses relating to the foregoing. 3.02 ROCKWELL COLLINS TAX ACTS. (a) Notwithstanding Section 3.01, Rockwell Collins agrees to indemnify, defend and hold harmless each member of the Rockwell Tax Group and each of the respective shareowners, directors, officers, employees and agents and each of the heirs, executors, successors and assigns of any of the foregoing from and against any Taxes resulting from any Rockwell Collins Tax Act which causes (i) the Distribution to fail to qualify as a reorganization described in Section 368(a)(1)(D) of the Code, (ii) the Distribution to fail to qualify as tax-free to Rockwell or to Rockwell shareowners, or (iii) any pre-Distribution transaction specified in Schedule 3.01(a) undertaken in connection with the Distribution, the Automotive Distribution or the Semiconductor Distribution to become taxable. A Rockwell Collins Tax Act shall mean any action specified on Schedule 3.02(a) attached hereto. (b) Rockwell Collins shall, and shall cause each member of the Rockwell Collins Tax Group to, comply with and take no action inconsistent with the Rockwell Collins Tax Representation Letter, unless, pursuant to a favorable ruling letter obtained from the IRS which is satisfactory to Rockwell or the advice of Chadbourne & Parke LLP or other nationally recognized tax counsel to Rockwell, 18 22 which advice shall be satisfactory to Rockwell, such act or omission would not adversely affect the U.S. federal Income Tax consequences of the Distribution to Rockwell or the shareowners of Rockwell. Notwithstanding Sections 3.01(b)(iii), 3.01(b)(iv) and 3.01(b)(vi), the parties intend that the sole remedy for breach of the covenants contained in this Section 3.02(b) shall be as set forth in Section 3.02(a). (c) Notwithstanding the foregoing, a Rockwell Collins Tax Act shall not include any transaction or action specifically disclosed or specifically described in any of the Transaction Agreements or, except as set forth in Schedule 3.01(a) occurring on or prior to the Distribution Date, any action taken on or prior to the Distribution Date. Except as set forth in Schedule 3.01(a), a Rockwell Collins Tax Act shall not include any action on the part of any member of the Rockwell Tax Group. Rockwell agrees to indemnify and hold each member of the Rockwell Collins Tax Group harmless from and against any Taxes resulting from the failure of the Distribution to qualify (i) as a reorganization described in Section 368(a)(1)(D) of the Code or (ii) as tax-free to Rockwell or to Rockwell shareowners, except where such failure is attributable to a Rockwell Collins Tax Act. 3.03 NOTICE OF INDEMNITY. Whenever a party hereto (hereinafter an "INDEMNITEE") becomes aware of the existence of an issue raised by any Tax Authority which could reasonably be expected to result in a determination that would increase the liability for any Tax of the other party hereto or any member of its Tax Group for any Tax period or require a payment hereunder by the other party (hereinafter an "INDEMNITY ISSUE"), the Indemnitee shall in good faith promptly give notice to such other party (hereinafter the "INDEMNITOR") of such Indemnity Issue. The failure of the Indemnitee to give such notice shall not relieve the Indemnitor of its obligations under this Agreement, except to the extent such Indemnitor or a member of its Tax Group is actually prejudiced by such failure to give notice. 3.04 PAYMENTS. (a) TIMING ADJUSTMENTS. (i) Timing Differences. If a Tax audit proceeding or an amendment of a Tax Return results in a Timing Difference, and such Timing Difference results in a decrease in an indemnity obligation Rockwell has or would otherwise have under Section 3.01(a) and/or an increase in the amount of a Tax refund or credit to which Rockwell is entitled under Section 2.03, then in each Post-Tax Indemnification Period in which the Rockwell Collins Tax Group Actually Realizes an Income Tax Detriment, Rockwell shall pay to Rockwell Collins an amount equal to such Income Tax Detriment; provided, however, that the aggregate payments which Rockwell shall be required to make under this Section 3.04(a)(i) with respect to any Timing Difference shall not exceed the aggregate amount of the Income Tax Benefits realized by the Rockwell Tax Group for all taxable periods and 19 23 the Rockwell Collins Tax Group for all Tax Indemnification Periods as a result of such Timing Difference. Rockwell shall make all such payments within ten days after Rockwell Collins notifies Rockwell that the relevant Income Tax Detriment has been Actually Realized. (ii) Reverse Timing Differences. If a Tax audit proceeding or an amendment to a Tax Return results in a Reverse Timing Difference, and such Reverse Timing Difference results in an increase in an indemnity payment obligation of Rockwell under Section 3.01 and/or a decrease in the amount of a Tax refund or credit to which Rockwell is or would otherwise be entitled under Section 2.03, then in each Post-Tax Indemnification Period in which the Rockwell Collins Tax Group Actually Realizes an Income Tax Benefit, Rockwell Collins shall pay to Rockwell within ten days after Rockwell Collins has Actually Realized such Income Tax Benefit an amount equal to such Income Tax Benefit, provided, however, that the aggregate payments which Rockwell Collins shall be required to make under this Section 3.04(a)(ii) with respect to Reverse Timing Differences shall not exceed the aggregate amount of the Income Tax Detriments realized by the Rockwell Collins Tax Group and the Rockwell Tax Group for all Tax Indemnification Periods as a result of such Reverse Timing Difference. (b) TIME FOR PAYMENT. Except as otherwise provided in this Section 3.04(b), any indemnity payment required to be made pursuant to this Agreement shall be paid within thirty days after the indemnified party makes written demand upon the indemnifying party, provided that in no event shall such payment be required to be made earlier than five business days prior to the date on which the relevant Taxes (including estimated Taxes) are required to be paid (or would be required to be paid if no such Taxes are due) to the relevant Tax Authority. Notwithstanding any other provision in this Agreement, to simplify the administration of this Agreement, the payment of any amount less than $100,000 required to be made pursuant to this Agreement by one party hereto to another party hereto need not be made to such other party prior to thirty days following the later of (i) the close of the calendar quarter during which such payment obligation arose and (ii) the day during such calendar quarter when the aggregate amount of all such less than $100,000 payment obligations arising during such calendar quarter exceeds $500,000. Unless otherwise specified by the recipient for items exceeding $250,000, any such payment may be made on a net Tax basis (i.e., reduced to take account of any net Tax benefit to be realized by the recipient (computed at the effective Tax rate set forth in Section 3.04(c)) to the extent such recipient is entitled to a corresponding deduction. (c) PAYMENTS NET OF TAXES AND TAX BENEFITS. The amount of any payment under this Agreement shall be (i) reduced to take into account any net Tax benefit realized by the recipient's Tax Group arising from the incurrence or payment 20 24 by such recipient's Tax Group of any amount in respect of which such payment is made and (ii) increased to take into account any net Tax cost incurred by the recipient's Tax Group as a result of the receipt or accrual of payments hereunder (grossed-up for such increase), in each case determined by treating the recipient as recognizing all other items of income, gain, loss, deduction or credit before recognizing any item arising from the receipt of accrual of any payment hereunder. In determining the amount of any such Tax benefit or Tax cost, the recipient's Tax Group shall be deemed to be subject to (A) U.S. federal Income Taxes and foreign Income Taxes at the maximum statutory rate then in effect and (B) U.S. state and local Income Taxes at an assumed rate of five percent (tax effected at such maximum statutory U.S. federal Income Tax rate). Except as otherwise provided in this Agreement or unless the parties otherwise agree to an alternative method for determining the present value of any such anticipated Tax benefit or Tax cost, any payment hereunder shall initially be made without regard to this section and shall be increased or reduced to reflect any such net Tax cost (including gross-up) or net Tax benefit only after the recipient's Tax Group has Actually Realized such Tax cost or Tax benefit. (d) RIGHT TO OFFSET. Any party making a payment under this Agreement shall have the right to reduce any such payment by any undisputed amounts owed to it by the other party to this Agreement. (e) CHARACTERIZATION OF PAYMENTS. It is the intention of the parties to this Agreement that payments made pursuant to this Agreement are to be treated as relating back to the Distribution as an adjustment to capital (i.e., capital contribution or return of capital), and the parties shall not take any position inconsistent with such intention before any Tax Authority, except to the extent that a final determination (as defined in Section 1313 of the Code) with respect to the recipient party causes any such payment not to be so treated. 3.05 TAX CONTESTS. The Indemnitor and its representatives, at the Indemnitor's expense, shall be entitled to participate (a) in all conferences, meetings and proceedings with any Tax Authority, the subject matter of which is or includes an Indemnity Issue and (b) in all appearances before any court, the subject matter of which is or includes an Indemnity Issue. The party who has responsibility for filing the Tax Return under this Agreement (the "RESPONSIBLE PARTY") with respect to which there could be an increase in liability for any Tax or with respect to which a payment could be required hereunder shall have the right to decide as between the parties hereto how such matter is to be dealt with and finally resolved with the appropriate Tax Authority and shall control all audits and similar proceedings. If no Tax Return is or was required to be filed in respect of an Indemnity Issue, the Indemnitor shall be treated as the Responsible Party with respect thereto. The 21 25 Responsible Party agrees to cooperate in the settlement of any Indemnity Issue with the other party and to take such other party's interests into account. Notwithstanding any other provision of this Agreement, if Rockwell has materially satisfied its obligations under this Agreement and if Rockwell Collins fails to permit Rockwell to control any audit or proceeding regarding any Indemnity Issue relating to (i) the qualification of the Distribution as a "reorganization" within the meaning of Section 368(a)(1)(D) of the Code or as tax-free to Rockwell under Section 361(c) of the Code, (ii) the qualification of any transactions undertaken pursuant to the Transaction Agreements or described in the Ruling Request as transactions described in Section 355 of the Code, "reorganizations" within the meaning of Section 368(a)(1)(D) of the Code or as otherwise tax-free transactions, (iii) the qualification of any transactions undertaken pursuant to the Automotive Transaction Agreements or described in the Automotive Ruling Request as transactions described in Section 355 of the Code, "reorganizations" within the meaning of Section 368(a)(1)(D) of the Code or as otherwise tax-free transactions, or (iv) the qualification of any transactions undertaken pursuant to the Semiconductor Transaction Agreements or described in the Semiconductor Ruling Request as transactions described in Section 355 of the Code, "reorganizations" within the meaning of Section 368(a)(1)(D) of the Code or as otherwise tax-free transactions, then Rockwell shall not be liable for and shall not indemnify the Rockwell Collins Tax Group for any Tax deficiency resulting from an adverse determination of such Indemnity Issue. ARTICLE IV OPTIONS; RESTRICTED STOCK; COMPENSATION PAYMENTS; INTEREST CHARGE FOR LATE PAYMENTS; CURRENCY CALCULATIONS; EFFECTIVE TIME OF TRANSACTIONS 4.01 STOCK OPTIONS. (a) STOCK OPTION ADJUSTMENTS. Pursuant to the terms of the Employee Matters Agreement, Rockwell Common Stock Options outstanding at the time of the Distribution will be adjusted as follows: (i) Rockwell Common Stock Options held by employees of the Rockwell Collins Tax Group at the time of the Distribution (other than certain former Rockwell corporate employees who become employees of the Rockwell Collins Tax Group in connection with the Distribution) will be replaced with Rockwell Collins Common Stock Options; (ii) Rockwell Common Stock Options held by active employees of the Rockwell Tax Group at the time of the Distribution (other than certain former 22 26 Rockwell corporate employees who become employees of the Rockwell Tax Group in connection with the Distribution) will remain Rockwell Common Stock Options; and (iii) Rockwell Common Stock Options held by persons who, immediately after the Distribution are (A) active employees of Rockwell Scientific Company, LLC or active employees of any divested Rockwell business, (B) former Rockwell corporate employees (including those who become employees of the Rockwell Collins Tax Group or the Rockwell Tax Group in connection with the Distribution), (C) former employees of any business of Rockwell, including former employees of the Rockwell Tax Group, the Rockwell Tax Group, Rockwell Scientific Company, LLC or any divested Rockwell business, or (D) active or former outside directors of Rockwell, will be adjusted so that following the Distribution each such holder will hold Rockwell Common Stock Options and Rockwell Collins Common Stock Options. (b) TAX DEDUCTIONS. Notwithstanding anything to the contrary in this Agreement, unless the IRS issues a contrary private letter ruling to Rockwell or Rockwell Collins, or Rockwell and Rockwell Collins otherwise agree in writing, the parties agree that the Rockwell Tax Group and the Rockwell Collins Tax Group shall claim any Post-Distribution Date Tax deductions in respect of Rockwell Common Stock Options and Rockwell Collins Common Stock Options in accordance with the provisions of Schedule 4.01 and shall otherwise comply with the terms of Schedule 4.01. Any payment made by one party to the other pursuant to Schedule 4.01 shall be made on or before the due date for the U.S. federal income tax return on which such deduction is claimed in an amount equal to the product of (x) the amount of the deduction and (y) the maximum statutory U.S. federal income tax rate plus 5 percent (tax effected at the maximum statutory U.S. federal income tax rate). At the present maximum statutory U.S. federal income tax rate of 35%, the formula described above would be as follows: deduction x (35% + (5% x 65%)). (c) NOTICES, WITHHOLDING, REPORTING. (i) Rockwell shall promptly notify Rockwell Collins of any post-Distribution Date event giving rise to income to any Rockwell Collins Group Employees and Former Employees in connection with the Rockwell Common Stock Options and, if required by law, Rockwell Collins shall withhold applicable Taxes and satisfy applicable Tax reporting obligations in connection therewith. Rockwell shall within ten days of demand thereof reimburse Rockwell Collins for all reasonable out-of-pocket expenses incurred in connection with the Rockwell Common Stock Options, including with respect to incremental Tax reporting obligations and any incremental employment Tax obligations; provided that Rockwell Collins shall use reasonable efforts to collect any such amounts required to 23 27 be paid by Rockwell Collins Group Employees and Former Employees from such Rockwell Collins Group Employees and Former Employees. (ii) Rockwell Collins shall promptly notify Rockwell of any post-Distribution Date event giving rise to income to any non-Rockwell Collins Group Employees and Former Employees in connection with the Rockwell Collins Common Stock Options and, if required by law, Rockwell shall withhold applicable Taxes and satisfy applicable Tax reporting obligations in connection therewith. Rockwell Collins shall within ten days of demand thereof reimburse Rockwell for all reasonable out-of-pocket expenses incurred in connection with the Rockwell Collins Common Stock Options, including with respect to incremental Tax reporting obligations and any incremental employment Tax obligations; provided that Rockwell shall use reasonable efforts to collect any such amounts required to be paid by non-Rockwell Collins Group Employees and Former Employees from such non-Rockwell Collins Group Employees and Former Employees. (d) TAX AUDIT ADJUSTMENTS. Notwithstanding the provisions of Section 4.01(b), in the event a Tax audit proceeding shall determine (by settlement or otherwise), or the parties otherwise determine pursuant to Section 4.04, that all or a portion of the Tax deductions in respect of Rockwell Common Stock Options or Rockwell Collins Common Stock Options should have been claimed by the Rockwell Collins Tax Group or the Rockwell Tax Group, respectively, the Rockwell Collins Tax Group or the Rockwell Tax Group, respectively, shall claim such Tax deductions (by an amended Tax Return or otherwise) and shall pay to Rockwell or Rockwell Collins, as the case may be, the amount of any Tax refund or credit arising in respect of such Tax deduction within ten days after such Tax refund or credit is Actually Realized by the Rockwell Collins Tax Group or the Rockwell Tax Group, as the case may be. 4.02 RESTRICTED STOCK. (a) TAX DEDUCTIONS. Notwithstanding anything to the contrary in this Agreement, unless Rockwell and Rockwell Collins otherwise agree in writing, the Rockwell Tax Group (and not the Rockwell Collins Tax Group) shall claim the Post-Distribution Date Tax deductions in respect of shares of restricted Rockwell Common Stock and restricted Rockwell Collins Common Stock issued with respect to grants of restricted Rockwell Common Stock granted prior to the Distribution Date. (b) NOTICES, WITHHOLDING, REPORTING. (i) Rockwell shall withhold applicable Taxes in connection with Rockwell Common Stock issued after the Distribution Date with respect to grants of restricted Rockwell Common Stock granted prior to the Distribution Date and shall pay such withheld Taxes attributable 24 28 to Rockwell Collins Group Employees and Former Employees to Rockwell Collins within ten days after receipt. Rockwell Collins shall withhold applicable Taxes in connection with Rockwell Collins Common Stock issued after the Distribution Date with respect to grants of restricted Rockwell Common Stock granted prior to the Distribution Date and shall pay such withheld Taxes attributable to non-Rockwell Collins Group Employees and Former Employees to Rockwell within ten days after receipt. (ii) Rockwell shall satisfy all applicable Tax reporting obligations in connection with Rockwell Common Stock and Rockwell Collins Common Stock issued after the Distribution Date with respect to grants of restricted Rockwell Common Stock granted prior to the Distribution Date to non-Rockwell Collins Group Employees and Former Employees. Rockwell Collins shall satisfy all applicable Tax reporting obligations in connection with Rockwell Common Stock and Rockwell Collins Common Stock issued after the Distribution Date with respect to grants of restricted Rockwell Common Stock granted prior to the Distribution Date to Rockwell Collins Group Employees and Former Employees. (c) TAX AUDIT ADJUSTMENTS. Notwithstanding the provisions of Section 4.02(a), in the event a Tax audit proceeding shall determine (by settlement or otherwise), or the parties otherwise determine pursuant to Section 4.04, that all or a portion of the Tax deductions in respect of Rockwell Common Stock issued after the Distribution Date with respect to grants of restricted Rockwell Common Stock granted prior to the Distribution Date to Rockwell Collins Group Employees or Former Employees or Rockwell Collins Common Stock issued after the Distribution Date with respect to grants of restricted Rockwell Common Stock granted prior to the Distribution Date to non-Rockwell Collins Group Employees or Former Employees was not available to the Rockwell, then Rockwell Collins shall claim such Tax deductions (by an amended Tax Return or otherwise) and shall pay to Rockwell, within ten days after such Tax deduction has been Actually Realized by Rockwell Collins, the amount of the resulting Tax benefit to Rockwell Collins. 4.03 COMPENSATION PAYMENTS. (a) TAX DEDUCTIONS. Notwithstanding anything to the contrary in this Agreement, unless Rockwell and Rockwell Collins otherwise agree in writing, (i) the Boeing Tax Group (and not the Rockwell Collins Tax Group or the Rockwell Tax Group) shall claim the Post-Distribution Date Tax deductions in respect of Compensation Payments paid to Rockwell Collins Group Employees and Former Employees who ceased employment on or before December 6, 1996 and Rockwell shall pay to Rockwell Collins the amount received from Boeing as a result of any Tax benefit realized arising in respect of such Tax deductions within ten days after such 25 29 amount is received by Rockwell, (ii) the Rockwell Collins Tax Group (and not the Rockwell Tax Group) shall claim the Post-Distribution Date Tax deductions in respect of Compensation Payments paid by the Rockwell Collins Tax Group to all other Rockwell Collins Group Employees and Former Employees, and (iii) the Rockwell Tax Group (and not the Rockwell Collins Tax Group) shall claim the Post-Distribution Date Tax deductions in respect of Compensation Payments paid by the Rockwell Tax Group to all other Rockwell Collins Group Employees and Former Employees. (b) NOTICES, WITHHOLDING, REPORTING. The party responsible for making the Compensation Payments pursuant to the Employee Matters Agreement shall withhold applicable Taxes and satisfy applicable Tax reporting obligations in connection with the Compensation Payments made to all Rockwell Collins Group Employees and Former Employees. (c) TAX AUDIT ADJUSTMENTS. Notwithstanding the provisions of Section 4.03(a), in the event a Tax audit proceeding shall determine (by settlement or otherwise), or the parties otherwise determine pursuant to Section 4.04, that all or a portion of the Tax deductions in respect of Compensation Payments paid to Rockwell Collins Group Employees or Former Employees was not available to the party claiming the Tax deduction, then the appropriate party shall claim such Tax deductions (by an amended Tax Return or otherwise) and shall pay to the party which had previously claimed such Tax deduction, within ten days after such Tax deduction has been Actually Realized by the such appropriate party, the amount of the resulting Tax benefit to such appropriate party. 4.04 CHANGE IN LAW. Notwithstanding the agreement with respect to reporting of Tax items and the claiming of the deductions set forth in Article 4 of this Agreement, neither the Rockwell Collins Tax Group nor the Rockwell Tax Group shall have any obligation to report any such Tax items or claim such deductions as set forth in such Article in the event that either such party determines, based on an opinion of nationally recognized tax counsel, which opinion shall be satisfactory to the other party, that there is no substantial authority to support reporting such Tax items or claiming such deductions on a Tax Return filed by such party as a result of a change in or amendment to any law or regulation, or any change in the official interpretation thereof, effective or occurring after the date of this Agreement, and such Tax Group provides prompt notice to the other Tax Group of any such determination. 4.05 INTEREST CHARGE FOR LATE PAYMENTS. Any amount due and owing by one party to the other party pursuant to this Agreement that is not paid 26 30 when due shall bear interest from the due date thereof until paid at a rate equal to 1% per month. 4.06 CURRENCY CALCULATIONS. All currency calculations shall be made in accordance with Section 6.19 of the Distribution Agreement. 4.07 EFFECTIVE TIME OF TRANSACTION. Rockwell and Rockwell Collins agree that any transaction that, pursuant to the Distribution Agreement, is expressly effective immediately after the Time of Distribution shall be treated for federal Income Tax purposes as occurring at the beginning of the day following the Distribution Date. ARTICLE V COOPERATION AND EXCHANGE OF INFORMATION 5.01 INCONSISTENT ACTIONS. Each party to this Agreement agrees (i) to, and to cause each of the relevant members of its Tax Group to, report the Distribution as a transaction described in Section 368(a)(1)(D) of the Code on all Tax Returns and other filings, (ii) to use its best efforts to ensure that the Distribution receives such treatment for U.S. federal Tax purposes and (iii) that, unless it has obtained the prior written consent of the other party, it (and the members of its Tax Group) shall not take any action inconsistent with, or fail to take any action required by, the Transaction Agreements. 5.02 RULING REQUEST. Each party hereto represents that neither it (nor any of the members of its Tax Group) will take or has any plan or intention to take any action which is inconsistent with any factual statements, representations or other similar conditions contained in the Ruling Request or in the Ruling. 5.03 COOPERATION AND EXCHANGE OF INFORMATION. Each party hereto agrees to provide, and to cause each member of its Tax Group to provide, such cooperation and information as such other party shall request, on a timely basis, in connection with the preparation or filing of any Tax Return or claim for Tax refund not inconsistent with this Agreement or in conducting any Tax audit, Tax dispute, or otherwise in respect of Taxes or to carry out the provisions of this Agreement. To the extent necessary to carry out the purposes of this Agreement and subject to the other provisions of this Agreement, such cooperation and information shall include without limitation promptly forwarding copies of appropriate notices and forms or other communications received from or sent to any Tax Authority which relate to the Rockwell Collins Tax Group for the Tax Indemnification Period and providing copies of all relevant Tax Returns for the Tax Indemnification Period, together with 27 31 accompanying schedules and related workpapers, documents relating to rulings or other determinations by Tax Authorities, including without limitation, foreign Tax Authorities, and records concerning the ownership and Tax basis of property, which either party may possess. Each party to this Agreement shall make, or shall cause its affiliates to make, its employees and facilities available on a mutually convenient basis to provide an explanation of any documents or information provided hereunder. 5.04 TAX RECORDS. (a) Rockwell and Rockwell Collins agree to (and to cause each member of their respective Tax Group to) (i) retain all Tax Returns, related schedules and workpapers, and all material records and other documents as required under Section 6001 of the Code and the regulations promulgated thereunder relating thereto existing on the date hereof or created through the Distribution Date, for a period of at least ten years following the Distribution Date and (ii) allow the party to this Agreement, at times and dates reasonably acceptable to the retaining party, to inspect, review and make copies of such records, as Rockwell and Rockwell Collins may reasonably deem necessary or appropriate from time to time. In addition, after the expiration of such ten-year period, such Tax Returns, related schedules and workpapers, and material records shall not be destroyed or otherwise disposed of at any time, unless, prior to such destruction or disposal, (A) the party proposing to destroy or otherwise dispose of such records shall provide no less than 30 days' prior written notice to the other party, specifying in reasonable detail the records proposed to be destroyed or disposed of and (B) if a recipient of such notice shall request in writing prior to the scheduled date for such destruction or disposal that any of the records proposed to be destroyed or disposed of be delivered to such requesting party, the party proposing the destruction or disposal shall promptly arrange for the delivery of such requested records at the expense of the party requesting such records. (b) Notwithstanding anything in this Agreement to the contrary, if any party fails to comply with the requirements of Section 5.04(a) hereof, the party failing so to comply shall be liable for, and shall hold the other party, harmless from, any Taxes (including without limitation, penalties for failure to comply with the record retention requirements of the Code) and other costs resulting from such party's failure to comply. ARTICLE VI MISCELLANEOUS 6.01 ENTIRE AGREEMENT; CONSTRUCTION. This Agreement, the Distribution Agreement, all other Transaction Agreements, including, without 28 32 limitation, any annexes, schedules and exhibits hereto or thereto, and other agreements and documents referred to herein and therein, will together constitute the entire agreement between the parties with respect to the subject matter hereof and thereof and will supersede all prior negotiations, agreements and understandings of the parties of any nature, whether oral or written, with respect to such subject matter. Notwithstanding any other provisions in this Agreement to the contrary, in the event and to the extent that there shall be a conflict relating to Taxes between the provisions of this Agreement and the provisions of the Distribution Agreement or any other Transaction Agreement, the provisions of this Agreement shall control. 6.02 EFFECTIVENESS. All covenants and agreements of the parties contained in this Agreement shall be subject to and conditioned upon the Distribution becoming effective. 6.03 SURVIVAL OF AGREEMENTS. Except as otherwise contemplated by this Agreement, all covenants and agreements of the parties contained in this Agreement will remain in full force and effect and will survive the Time of Distribution. 6.04 GOVERNING LAW. This Agreement will be governed by and construed in accordance with the internal laws of the State of New York applicable to contracts made and to be performed entirely within such State, without regard to the conflicts of law principles of such State. 6.05 NOTICES. All notices, requests, claims, demands and other communications required or permitted to be given hereunder will be in writing and will be delivered by hand or telecopied, e-mailed or sent, postage prepaid, by registered, certified or express mail or reputable overnight courier service and will be deemed given when so delivered by hand or telecopied, when e-mail confirmation is received if delivered by e-mail, or three business days after being so mailed (one business day in the case of express mail or overnight courier service). All such notices, requests, claims, demands and other communications will be addressed as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice: 29 33 (a) If to Rockwell: Rockwell International Corporation Firstar Center 777 East Wisconsin Avenue Milwaukee, Wisconsin 53202 Attention: Mr. Michael A. Bless Senior Vice President, Finance and Planning and Chief Financial Officer Telecopy: (414) 212-5552 E-mail: mabless@corp.rockwell.com with a copy to: Rockwell International Corporation Firstar Center 777 East Wisconsin Avenue Milwaukee, Wisconsin 53202 Attention: William J. Calise, Jr., Esq. Senior Vice President, General Counsel and Secretary Telecopy: (414) 212-5357 E-mail: wjcalise@corp.rockwell.com (b) If to Rockwell Collins: Rockwell Collins, Inc. 400 Rockwell Collins Road NE Cedar Rapids, Iowa 52498 Attention: Lawrence A. Erickson Senior Vice President and Chief Financial Officer Telecopy: (319) 295-3400 E-mail: laericks@rockwellcollins.com 30 34 with a copy to: Rockwell Collins, Inc. 400 Rockwell Collins Road NE Cedar Rapids, Iowa 52498 Attention: Senior Vice President, General Counsel and Secretary Telecopy: (319) 295-3599 6.06 CONSENT TO JURISDICTION. Each of the parties hereto irrevocably submits to the exclusive jurisdiction of (a) the Court of Chancery in and for the State of Delaware and the Superior Court in and for the State of Delaware and (b) the U.S. District Court for the District of Delaware, for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby or the breach, performance, enforcement or validity or invalidity thereof (and agrees not to commence any action, suit or proceeding relating thereto except in such courts). Each of the parties further agrees that service of any process, summons, notice or document hand delivered or sent by U.S. registered mail to such party's respective address set forth in Section 6.05 will be effective service of process for any action, suit or proceeding in Delaware with respect to any matters to which it has submitted to jurisdiction as set forth in the immediately preceding sentence. Each of the parties irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby or the breach, performance, enforcement or validity or invalidity thereof herein in (i) the Court of Chancery in and for the State of Delaware and the Superior Court in and for the State of Delaware or (ii) the U.S. District Court for the District of Delaware, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. Notwithstanding the foregoing, each party agrees that a final judgment in any action, suit or proceeding so brought shall be conclusive and may be enforced by suit on the judgment in any jurisdiction or in any other manner provided in law or in equity. 6.07 AMENDMENTS. This Agreement may not be amended, modified or supplemented except by a written agreement executed by Rockwell and Rockwell Collins. 6.08 SUCCESSORS AND ASSIGNS. The rights and benefits under this Agreement may not be conveyed, assigned or otherwise transferred and the duties and 31 35 obligations may not be delegated by any party in whole or in part without the prior written consent of the other party, which consent shall not be unreasonably withheld or delayed. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns. 6.09 CAPTIONS; CURRENCY. The article, section and paragraph captions herein and the table of contents hereto are for convenience of reference only, do not constitute part of this Agreement and will not be deemed to limit or otherwise affect any of the provisions hereof. Unless otherwise specified, all references herein to numbered articles or sections are to articles and sections of this Agreement and all references herein to schedules are to schedules to this Agreement. Unless otherwise specified, all references contained in this Agreement or in any schedule referred to herein to dollars or "$" shall mean U.S. dollars. 6.10 SEVERABILITY. If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances other than those as to which it has been held invalid or unenforceable, will remain in full force and effect and will in no way be affected, impaired or invalidated thereby. If the economic or legal substance of the transactions contemplated hereby is affected in any manner adverse to any party as a result thereof, the parties will negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the parties. 6.11 NO THIRD PARTY BENEFICIARIES. Except for the provisions of Article III relating to Tax Indemnification, this Agreement is solely for the benefit of the parties hereto and the respective members of their Tax Group and should not be deemed to confer upon third parties (including any employee of Rockwell or Rockwell Collins or of any Rockwell or Rockwell Collins subsidiary) any remedy, claim, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement. 6.12 SCHEDULES. All schedules attached hereto are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Capitalized terms used in the schedules hereto but not otherwise defined therein will have the respective meanings assigned to such terms in this Agreement. 6.13 TERMINATION. This Agreement may be terminated and the Distribution abandoned at any time prior to the Time of Distribution by and in the sole discretion of the Rockwell Board without the approval of Rockwell Collins or of 32 36 Rockwell's shareowners. In the event of such termination, no party will have any liability of any kind to any other party on account of such termination. 6.14 WAIVERS; REMEDIES. No failure or delay by any party hereto in exercising any right, power or privilege hereunder will operate as a waiver thereof, nor will any waiver on the part of any party hereto of any right, power or privilege hereunder operate as a waiver of any other right, power or privilege hereunder, nor will any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. The rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies which the parties may otherwise have at law or in equity. 6.15 COUNTERPARTS. This Agreement may be executed in separate counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts will together constitute the same agreement. 6.16 PERFORMANCE. Each party hereto will cause to be performed, and hereby guarantees the performance of all actions, agreements and obligations set forth herein to be performed by any subsidiary or any member of such party's Tax Group. 6.17 INTERPRETATION. Any reference to any federal, state, local, or foreign law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. For the purposes of this Agreement, (i) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires, (ii) the terms "hereof", "herein", and "herewith" and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement and (iii) the word "including" and words of similar import when used in this Agreement shall mean "including, without limitation". 33 37 IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officers of the parties as of the date first hereinabove written. ROCKWELL INTERNATIONAL CORPORATION By: /s/ William J. Calise, Jr. Name: William J. Calise, Jr. Title: Senior Vice President, General Counsel and Secretary ROCKWELL COLLINS, INC. By: /s/ Lawrence A. Erickson Name: Lawrence A. Erickson Title: Senior Vice President and Chief Financial Officer 34 EX-4.1 5 y51136ex4-1.txt RIGHTS AGREEMENT 1 Exhibit 4.1 - -------------------------------------------------------------------------------- ROCKWELL COLLINS, INC. and MELLON INVESTOR SERVICES LLC, AS RIGHTS AGENT RIGHTS AGREEMENT Dated as of June 28, 2001 - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
Page ---- Section 1. Certain Definitions...................................... 2 Section 2. Appointment of Rights Agent.............................. 8 Section 3. Issue of Right Certificates.............................. 8 Section 4. Form of Right Certificates............................... 12 Section 5. Countersignature and Registration........................ 12 Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.......... 14 Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights........................................ 15 Section 8. Cancellation and Destruction of Right Certificates.......................................... 17 Section 9. Availability of Preferred Shares......................... 17 Section 10. Preferred Shares Record Date............................. 19 Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights................................... 20 Section 12. Certificate of Adjusted Purchase Price or Number of Shares...................................... 33 Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power............................... 33 Section 14. Fractional Rights and Fractional Shares.................. 35 Section 15. Rights of Action......................................... 37 Section 16. Agreement of Right Holders............................... 38 Section 17. Right Holder Not Deemed a Shareowner..................... 39 Section 18. Concerning the Rights Agent.............................. 39
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Page ---- Section 19. Merger or Consolidation or Change of Name of Rights Agent.......................................... 41 Section 20. Duties of Rights Agent................................... 42 Section 21. Change of Rights Agent................................... 46 Section 22. Issuance of New Right Certificates....................... 48 Section 23. Redemption............................................... 49 Section 24. Exchange................................................. 50 Section 25. Notice of Certain Events................................. 53 Section 26. Notices.................................................. 54 Section 27. Supplements and Amendments............................... 56 Section 28. Successors............................................... 57 Section 29. Benefits of this Agreement............................... 57 Section 30. Severability............................................. 57 Section 31. Governing Law............................................ 57 Section 32. Counterparts............................................. 58 Section 33. Descriptive Headings..................................... 58
Exhibit A - Form of Right Certificate ii 4 RIGHTS AGREEMENT Agreement, dated as of June 28, 2001, between Rockwell Collins, Inc., a Delaware corporation (the "Company"), and Mellon Investor Services LLC, a New Jersey limited liability company, as Rights Agent (the "Rights Agent"). The Board of Directors of the Company has authorized and declared a dividend of one preferred share purchase right (a "Right") for each share of Common Stock (as hereinafter defined) to be issued in the distribution of shares of Common Stock (the "Spin-Off") by Rockwell International Corporation, a Delaware corporation ("Rockwell") to Rockwell's shareowners, each Right representing the right to purchase one one-hundredth of a Preferred Share (as hereinafter defined), upon the terms and subject to the conditions herein set forth, and has further authorized and directed the issuance of one Right with respect to each Common Share of the Company that shall become outstanding between the effective date of the Spin-Off (the "Record Date") and the earliest of the Distribution Date, the Redemption Date and the Final Expiration Date (as such terms are hereinafter defined); provided, however, that Rights may be issued with respect to shares of Common Stock that shall become outstanding after the Distribution Date and prior to the earlier of the Redemption Date and the Final Expiration Date in accordance with the provisions of Section 22 hereof. Accordingly, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows: 5 Section 1. Certain Definitions. For purposes of this Agreement, the following terms have the meanings indicated: (a) "Acquiring Person" shall mean any Person (as such term is hereinafter defined) who or which on or after the Record Date, together with all Affiliates and Associates (as such terms are hereinafter defined) of such Person, shall be the Beneficial Owner (as such term is hereinafter defined) of 15% or more of the Common Stock then outstanding, but shall not include the Company, any Subsidiary (as such term is hereinafter defined) of the Company, any employee benefit plan of the Company, Rockwell, or any Subsidiary of the Company, or any entity holding Common Stock for or pursuant to the terms of any such plan. Notwithstanding the foregoing, no Person shall become an "Acquiring Person" as the result of an acquisition of shares of Common Stock by the Company, which, by reducing the number of shares of Common Stock outstanding, increases the proportionate number of the shares of Common Stock beneficially owned by such Person to 15% or more of the Common Stock then outstanding; provided, however, that if a Person shall become the Beneficial Owner of 15% or more of the Common Stock then outstanding by reason of share purchases by the Company and shall, after such share purchases by the Company, become the Beneficial Owner of any additional shares of Common Stock (other than an acquisition that does not directly or indirectly increase the proportionate share of the Common Stock then outstanding beneficially owned by such Person), then 2 6 such Person shall be deemed to be an "Acquiring Person". Notwithstanding the foregoing, if the Board of Directors of the Company determines in good faith that a Person who would otherwise be an "Acquiring Person", as defined pursuant to the foregoing provisions of this paragraph (a), has become such inadvertently, and such Person divests as promptly as practicable a sufficient number of shares of Common Stock so that such Person would no longer be an "Acquiring Person", as defined pursuant to the foregoing provisions of this paragraph (a), then such Person shall not be deemed to be an "Acquiring Person" for any purposes of this Agreement. Notwithstanding the foregoing provisions of this paragraph (a), Rockwell shall not be deemed to be an Acquiring Person as a result of its ownership of capital stock of the Company prior to the Spin-Off. (b) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect on the date of this Agreement. (c) A Person shall be deemed the "Beneficial Owner" of and shall be deemed to have "Beneficial Ownership" of and to "beneficially own" any securities: (i) which such Person or any of such Person's Affiliates or Associates beneficially owns, directly or indirectly; 3 7 (ii) which such Person or any of such Person's Affiliates or Associates has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities), or upon the exercise of conversion rights, exchange rights, rights (other than the Rights), warrants or options, or otherwise; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange; or (B) the right to vote pursuant to any agreement, arrangement or understanding; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security if the agreement, arrangement or understanding to vote such security (1) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations promulgated under the Exchange Act and (2) is not also then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report); or 4 8 (iii) which are beneficially owned, directly or indirectly, by any other Person with which such Person or any of such Person's Affiliates or Associates has any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities) for the purpose of acquiring, holding, voting (except to the extent contemplated by the proviso to Section l(c)(ii)(B)) or disposing of any securities of the Company. Notwithstanding anything in this definition of Beneficial Ownership to the contrary, the phrase "then outstanding", when used with reference to a Person's Beneficial Ownership of securities of the Company, shall mean the number of such securities then issued and outstanding together with the number of such securities not then actually issued and outstanding which such Person would be deemed to own beneficially hereunder. (d) "Business Day" shall mean any day other than a Saturday, a Sunday, or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. (e) "close of business" on any given date shall mean 5:00 P.M., New York City time, on such date; provided, however, that if such date is not a Business Day it shall mean 5:00 P.M., New York City time, on the next succeeding Business Day. 5 9 (f) "current per share market price" shall have the meaning set forth in Section 11(d)(i) hereof. (g) "Common Shares" when used with reference to any Person other than the Company shall mean the capital stock (or equity interest) with the greatest voting power of such other Person or, if such other Person is a Subsidiary of another Person, the Person or Persons which ultimately control such first-mentioned Person. (h) "Common Stock" shall mean the Common Stock, par value $.01 per share, of the Company. (i) "Designated Office" shall have the meaning set forth in Section 5 hereof. (j) "Distribution Date" shall have the meaning set forth in Section 3(a) hereof. (k) "equivalent preferred shares" shall have the meaning set forth in Section 11(b) hereof. (l) "Exchange Ratio" shall have the meaning set forth in Section 24(a) hereof. (m) "Final Expiration Date" shall have the meaning set forth in Section 7(b) hereof. (n) "Nasdaq" shall have the meaning set forth in Section 11(d)(i) hereof. 6 10 (o) "Person" shall mean any individual, firm, corporation or other entity, and shall include any successor (by merger or otherwise) of such entity. (p) "Preferred Shares" shall mean shares of Series A Junior Participating Preferred Stock, without par value, of the Company having the rights and preferences set forth in the Restated Certificate of Incorporation of the Company. (q) "Purchase Price" shall have the meaning set forth in Section 7(a) hereof. (r) "Record Date" shall have the meaning set forth in the second paragraph of the Preamble hereof. (s) "Redemption Date" shall have the meaning set forth in Section 7(b) hereof. (t) "Redemption Price" shall have the meaning set forth in Section 23(a) hereof. (u) "Right" shall have the meaning set forth in the second paragraph of the Preamble hereof. (v) "Right Certificate" shall have the meaning set forth in Section 3(a) hereof. (w) "Security" shall have the meaning set forth in Section 11(d)(i) hereof. (x) "Shares Acquisition Date" shall mean the first date of public announcement by the Company or an Acquiring Person that an Acquiring Person has become such. 7 11 (y) "Subsidiary" of any Person shall mean any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person. (z) "Trading Day" shall have the meaning set forth in Section 11(d)(i) hereof. Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such co-Rights Agents as it may deem necessary or desirable. The Rights Agent shall have no duty to supervise, and in no event shall be liable, for the acts or omissions of any co-Rights Agent. Section 3. Issue of Right Certificates. (a) Until the earlier of (i) the tenth day after the Shares Acquisition Date or (ii) the tenth Business Day (or such later date as may be determined by action of the Board of Directors of the Company prior to such time as any Person becomes an Acquiring Person) after the date of the commencement by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company or any entity holding shares of Common Stock for or pursuant to the terms of any such 8 12 plan) of, or of the first public announcement of the intention of any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company or any entity holding Common Shares for or pursuant to the terms of any such plan) to commence, a tender or exchange offer the consummation of which would result in any Person becoming an Acquiring Person, the earlier of such dates being herein referred to as the "Distribution Date"), (x) the Rights will be attached to (subject to the provisions of Section 3(b) hereof) the shares of Common Stock (whether in book-entry, uncertificated or certificated form) issued and outstanding and the Rights will be owned by the registered holders of the shares of Common Stock and will not be evidenced by separate Right Certificates, and (y) any transfer of shares of Common Stock (or any interest therein, including the creation of a security interest) will also effect a transfer of the associated Rights (or the equivalent interest therein) and neither the Rights nor any interest therein may be transferred otherwise than by transfer of the associated shares of Common Stock (or the equivalent interest therein). As soon as practicable after the Distribution Date, the Company will prepare and execute, the Rights Agent will countersign, and the Company will send or cause to be sent (and the Rights Agent will, if requested and provided with a list of the relevant holders of Common Stock by the Company, send) by first-class, insured, postage-prepaid mail, to each record holder of shares of Common Stock as of the close of business on the Distribution Date, at the address of such holder shown on the records of the Company, a Right Certificate, in substantially the form of Exhibit A hereto (a "Right Certificate"), evidencing one Right for each share of Common Stock so held, subject, in the case of shares of Common Stock held in uncertificated form on the Distribution Date, to the rights provided by law to a registered pledgee whose security interest has been duly registered with the Company. 9 13 As of the Distribution Date, the Rights will be evidenced solely by such Right Certificates. (b) Until the earliest of the Distribution Date, the Redemption Date or the Final Expiration Date, certificates for shares of Common Stock shall have impressed on, printed on, written on or otherwise affixed to them substantially the following legend: This certificate also evidences and entitles the holder hereof to certain Rights as set forth (and as defined) in a Rights Agreement between Rockwell Collins, Inc. and Mellon Investor Services LLC, as Rights Agent, dated as of June 28, 2001, as it may be amended from time to time (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of Rockwell Collins, Inc. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. Rockwell Collins, Inc. will mail to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request therefor. Under certain circumstances, as set forth in the Rights Agreement, Rights beneficially owned by any Person (as defined in the Rights Agreement) who becomes an Acquiring Person (as defined in the Rights Agreement) may become void. With respect to such certificates containing the foregoing legend, until the Distribution Date, the Rights associated with the shares of Common Stock represented by such certificates shall be evidenced by such certificates alone, and the surrender for transfer of any such certificate shall also constitute the transfer of the Rights associated with the shares of Common Stock represented thereby. (c) Until the earliest of the Distribution Date, the Redemption Date or the Final Expiration Date, confirmations and account statements sent to holders of shares of Common Stock in book-entry form and initial transaction statements relating to the 10 14 registration, pledge or release from pledge of shares of Common Stock in uncertificated form shall have impressed on, printed on, written on or otherwise affixed to them substantially the following legend: The shares of Common Stock, par value $.01 per share, of Rockwell Collins, Inc. to which this statement relates also evidence and entitle the holder thereof to certain Rights as set forth (and as defined) in a Rights Agreement between Rockwell Collins, Inc. and Mellon Investor Services LLC, as Rights Agent, dated as of June 28, 2001 (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of Rockwell Collins, Inc. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by the shares to which this statement relates. Rockwell Collins, Inc. will mail to the holder of the shares to which this statement relates and any registered pledgee of uncertificated shares a copy of the Rights Agreement without charge after receipt of a written request therefor. Under certain circumstances, as set forth in the Rights Agreement, Rights beneficially owned by any Person (as defined in the Rights Agreement) who becomes an Acquiring Person (as defined in the Rights Agreement) may become void. With respect to shares of Common Stock in book-entry form for which there has been sent a confirmation or account statement and shares of Common Stock in uncertificated form for which there has been sent an initial transaction statement containing the foregoing legend, until the earliest of the Distribution Date, the Redemption Date or the Final Expiration Date, the Rights associated with such Common Shares shall be evidenced by such Common Shares alone, and the registration of transfer or pledge, or the release from pledge, of any such Common Shares shall also constitute the registration of transfer or pledge, or the release from pledge, as the case may be, of the Rights associated with such Common Shares. 11 15 (d) In the event that the Company purchases or acquires any shares of Common Stock after the Record Date but prior to the Distribution Date, any Rights associated with such Common Shares shall be deemed canceled and retired so that the Company shall not be entitled to exercise any Rights associated with the shares of Common Stock which are no longer outstanding. Section 4. Form of Right Certificates. Subject to the provisions of Section 22 hereof, the Right Certificates (and the forms of election to purchase Preferred Shares and of assignment to be printed on the reverse thereof) shall be substantially the same as Exhibit A hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and which do not affect the rights, duties or responsibilities of the Rights Agent, and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed or the National Association of Securities Dealers, Inc., or to conform to usage. Section 5. Countersignature and Registration. The Right Certificates shall be executed on behalf of the Company by its Chief Executive Officer, any of its Vice Presidents, or its Treasurer, either manually or by facsimile signature, shall have affixed thereto the Company's seal or a facsimile thereof, and shall be attested by the Secretary or 12 16 an Assistant Secretary of the Company, either manually or by facsimile signature. The Right Certificates shall be countersigned by the Rights Agent, either manually or by facsimile signature, and shall not be valid for any purpose unless countersigned. In case any officer of the Company who shall have signed any of the Right Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Right Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the person who signed such Right Certificates had not ceased to be such officer of the Company; and any Right Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Right Certificate, shall be a proper officer of the Company to sign such Right Certificate, although at the date of the execution of this Agreement any such person was not such an officer. Following the Distribution Date and receipt by the Rights Agent of a list of the relevant holders of Common Stock as of the Distribution Date provided by the Company, the Rights Agent will keep or cause to be kept, at an office designated by the Rights Agent for such purpose (the "Designated Office"), books for registration and transfer of the Right Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Right Certificates, the number of Rights evidenced on its face by each of the Right Certificates and the date of each of the Right Certificates. 13 17 Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject to the provisions of Section 14 hereof, at any time after the close of business on the Distribution Date, and at or prior to the close of business on the earlier of the Redemption Date or the Final Expiration Date, any Right Certificate or Right Certificates (other than Right Certificates representing Rights that have become void pursuant to Section 11(a)(ii) hereof or that have been exchanged pursuant to Section 24 hereof) may be transferred, split up, combined or exchanged for another Right Certificate or Right Certificates, entitling the registered holder of the Rights evidenced thereby to purchase a like number of one one-hundredths of a Preferred Share as the Right Certificate or Right Certificates surrendered then entitled such holder to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Right Certificate or Right Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Right Certificate or Right Certificates to be transferred, split up, combined or exchanged at the Designated Office of the Rights Agent. Thereupon the Rights Agent shall countersign and deliver to the Person entitled thereto a Right Certificate or Right Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Right Certificates. The Rights Agent is not responsible or obligated to inquire as to whether the Company required that any such 14 18 taxes or charges be paid or whether the payment of any such taxes or charges has been made. Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Right Certificate, and, in case of loss, theft or destruction, of indemnity or security satisfactory to them, and, at the Company's request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Right Certificate if mutilated, the Company will make and deliver a new Right Certificate of like tenor to the Rights Agent for delivery to the registered holder in lieu of the Right Certificate so lost, stolen, destroyed or mutilated. Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights. (a) Each Right (other than Rights that have become void pursuant to Section 11(a)(ii) hereof or that have been exchanged pursuant to Section 24 hereof) shall initially entitle the registered holder thereof to purchase one one-hundredth of a Preferred Share, subject to adjustment from time to time as provided in Section 11 or 13 hereof. The purchase price (the "Purchase Price") for each one one-hundredth of a Preferred Share purchasable pursuant to the exercise of a Right shall be $125, and shall be subject to adjustment from time to time as provided in Section 11 or 13 hereof and shall be payable in lawful money of the United States of America in accordance with paragraph (c) below. (b) The registered holder of any Right Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein) in whole or in part at any time 15 19 after the Distribution Date upon surrender of the Right Certificate evidencing such Rights, with the form of election to purchase on the reverse side thereof duly and properly executed, to the Rights Agent at the Designated Office of the Rights Agent, together with payment of the Purchase Price for each one one-hundredth of a Preferred Share as to which the Rights are exercised, at or prior to the earliest of (i) the close of business on the tenth anniversary of the Record Date (the "Final Expiration Date"), (ii) the time at which the Rights are redeemed as provided in Section 23 hereof (the "Redemption Date"), or (iii) the time at which such Rights are exchanged as provided in Section 24 hereof. (c) Upon receipt of a Right Certificate representing exercisable Rights, with the form of election to purchase duly executed and properly completed, accompanied by payment of the Purchase Price for the shares to be purchased and an amount equal to any applicable tax or charge required to be paid by the holder of the Rights evidenced by such Right Certificate in accordance with Section 9 hereof by certified check, cashier's check or money order payable to the order of the Company, the Rights Agent shall thereupon promptly (i) (A) requisition from any transfer agent of the Preferred Shares certificates for the number of Preferred Shares to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests, or (B) requisition from the depositary agent depositary receipts representing such number of one one-hundredths of a Preferred Share as are to be purchased (in which case certificates for the Preferred Shares represented by such receipts shall be deposited 16 20 by the transfer agent for the Preferred Shares with the depositary agent) and the Company hereby directs the depositary agent to comply with such request, (ii) when appropriate, requisition from the Company the amount of cash to be paid in lieu of issuance of fractional shares in accordance with Section 14 hereof, (iii) after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of the Rights evidenced by such Right Certificate, registered in such name or names as may be designated by such holder and (iv) when appropriate, after receipt, deliver such cash to or upon the order of the registered holder of the Rights evidenced by such Right Certificate. (d) In case the registered holder of the Rights evidenced by any Right Certificate shall exercise less than all the Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent to the registered holder of such Rights or to his duly authorized assigns, subject to the provisions of Section 6 and Section 14 hereof. Section 8. Cancellation and Destruction of Right Certificates. All Right Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in canceled form, or, if surrendered to the Rights Agent, shall be canceled by it, and no Right Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so 17 21 cancel and retire, any other Right Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all canceled Right Certificates to the Company, or shall, at the written request of the Company, destroy such canceled Right Certificates, and in such case shall deliver a certificate of destruction thereof to the Company. Section 9. Availability of Preferred Shares. The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued Preferred Shares or any Preferred Shares held in its treasury, the number of Preferred Shares that will be sufficient to permit the exercise in full of all outstanding Rights in accordance with Section 7 hereof. The Company covenants and agrees that it will take all such action as may be necessary to ensure that all Preferred Shares delivered upon exercise of Rights shall, at the time of delivery of the certificates for such Preferred Shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable shares. The Company further covenants and agrees that it will pay when due and payable any and all taxes and charges which may be payable in respect of the issuance or delivery of the Rights or the Right Certificates or of any Preferred Shares upon the exercise of Rights. The Company shall not, however, be required to pay any such tax or charge which may be payable in respect of any transfer or delivery of Rights or Right Certificates to a person other than, or the issuance or delivery of certificates or depositary receipts for the Preferred Shares in a name other than that of, the registered holder of the 18 22 Rights evidenced by Right Certificates surrendered for exercise or to issue or to deliver any certificates or depositary receipts for Preferred Shares upon the exercise of any Rights until any such tax and charge shall have been paid (any such tax and charge being payable by the holder of such Rights at the time of surrender of the related Right Certificates) or until it has been established to the Company's reasonable satisfaction that no such tax or charge is due. Section 10. Preferred Shares Record Date. Each Person in whose name any Preferred Shares are issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of such Preferred Shares on, and the date of issuance of such Preferred Shares and the date of any certificate for such Preferred Shares shall be, the date upon which the Right Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any applicable taxes or charges pursuant to Section 9) was made; provided, however, that if the date of such surrender and payment is a date upon which the Preferred Shares transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares on, and the date of issuance of such Preferred Shares and the date of any such certificate shall be, the next succeeding Business Day on which the Preferred Shares transfer books of the Company are open. Prior to the exercise of any Rights, the holder thereof shall not be entitled to any rights of a holder of Preferred Shares for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other 19 23 distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein. Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights. The Purchase Price, the number of Preferred Shares covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11. (a) (i) In the event the Company shall at any time after the Record Date (A) declare a dividend on the Preferred Shares payable in Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine the outstanding Preferred Shares into a smaller number of Preferred Shares or (D) issue any shares of its capital stock in a reclassification of the Preferred Shares (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a), the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of capital stock issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive the aggregate number and kind of shares of capital stock which, if such Right had been exercised immediately prior to such date and at a time when the Preferred Shares transfer books of the Company were open, such holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification; provided, however, 20 24 that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right. (ii) (A) Subject to clause (B) of this subparagraph (ii) and Section 24 of this Agreement, in the event any Person becomes an Acquiring Person, each registered holder of a Right shall thereafter have a right to receive, upon exercise thereof at a price equal to the then current Purchase Price multiplied by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable, in accordance with the terms of this Agreement and in lieu of such number of Preferred Shares for which a Right is then exercisable, such number of shares of Common Stock as shall equal the result obtained by (x) multiplying the then current Purchase Price by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable and dividing that product by (y) 50% of the then current per share market price of the shares of Common Stock (determined pursuant to Section 11(d) hereof) on the date of the occurrence of such event. In the event that any Person shall become an Acquiring Person and the Rights shall then be outstanding, the Company shall not take any action which would eliminate or diminish the benefits intended to be afforded by the Rights. (B) From and after the occurrence of the event described in clause (A) of this subsection (ii), any Rights that are or were acquired or beneficially owned by any Acquiring Person (or any Associate or Affiliate of such Acquiring Person) shall be void and any holder of such Rights shall thereafter have no right to exercise such Rights under 21 25 any provision of this Agreement. No Right Certificate shall be issued pursuant to Section 3 hereof that evidences Rights beneficially owned by an Acquiring Person (or any Associate or Affiliate of such Acquiring Person) whose Rights would be void pursuant to the preceding sentence and any Right Certificate evidencing Rights beneficially owned by any such Acquiring Person (or any Associate or Affiliate of such Acquiring Person) shall be void. No Right Certificate shall be issued at any time upon the transfer of any Rights to an Acquiring Person (or any Associate or Affiliate of such Acquiring Person) whose Rights would be void pursuant to the second preceding sentence or to any nominee of such Acquiring Person, Associate or Affiliate; and any Right Certificate delivered to the Rights Agent for transfer to an Acquiring Person (or any Associate or Affiliate of such Acquiring Person) whose Rights would be void pursuant to the second preceding sentence shall be canceled. (iii) In the event that there shall not be sufficient shares of Common Stock issued but not outstanding or authorized but unissued to permit the exercise in full of the Rights in accordance with the foregoing subparagraph (ii), the Company shall take all such action as may be necessary to authorize additional shares of Common Stock for issuance upon exercise of the Rights. In the event the Company shall, after good faith effort, be unable to take all such action as may be necessary to authorize such additional shares of Common Stock, the Company shall substitute, for each share of Common Stock that would otherwise be issuable upon exercise of a Right, a number of Preferred Shares or fraction thereof such that the current per share market price of one Preferred Share 22 26 multiplied by such number or fraction is equal to the current per share market price of one share of Common Stock as of the date of issuance of such Preferred Shares or fraction thereof. (b) In case the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Preferred Shares entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase Preferred Shares (or shares having the same rights, privileges and preferences as the Preferred Shares ("equivalent preferred shares")) or securities convertible into Preferred Shares or equivalent preferred shares at a price per Preferred Share or equivalent preferred share (or having a conversion price per share, if a security convertible into Preferred Shares or equivalent preferred shares) less than the then current per share market price of the Preferred Shares on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of Preferred Shares outstanding on such record date plus the number of Preferred Shares which the aggregate offering price of the total number of Preferred Shares and/or equivalent preferred shares so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such current market price and the denominator of which shall be the number of Preferred Shares outstanding on such record date plus the number of additional Preferred Shares and/or equivalent preferred shares to be offered for subscription or purchase (or into which the convertible securities 23 27 so to be offered are initially convertible); provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right. In case such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holders of the Rights. Preferred Shares owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such rights, options or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. (c) In case the Company shall fix a record date for the making of a distribution to all holders of the Preferred Shares (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of evidences of indebtedness or assets (other than a regular quarterly cash dividend or a dividend payable in Preferred Shares) or subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall 24 28 be the then current per share market price of the Preferred Shares on such record date, less the fair market value (as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holders of the Rights) of the portion of the assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to one Preferred Share and the denominator of which shall be such current per share market price of the Preferred Shares; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. (d) (i) For the purpose of any computation hereunder, the "current per share market price" of any security (a "Security" for the purpose of this Section 11(d)(i)) on any date shall be deemed to be the average of the daily closing prices per share of such Security for the 30 consecutive Trading Days (as such term is hereinafter defined) immediately prior to but not including such date; provided, however, that in the event that the current per share market price of the Security is determined during a period following the announcement by the issuer of such Security of (A) a dividend or distribution on such Security payable in shares of such Security or securities convertible into such shares, or 25 29 (B) any subdivision, combination or reclassification of such Security and prior to the expiration of 30 Trading Days after but not including the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the current per share market price of the Security shall be appropriately adjusted to reflect the current market price per share equivalent of such Security; and provided, further, that in the event that the current per share market price of the shares of Common Stock is determined as of a date prior to the expiration of 30 Trading Days following the Record Date, the current per share market price of the shares of Common Stock shall be deemed to be the average of the daily closing prices per share of Common Stock for the period of Trading Days commencing with the Record Date and ending immediately prior to such date. The closing price of a Security for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Security is not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Security is listed or admitted to trading or, if the Security is not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the Nasdaq 26 30 Stock Market, Inc. National Market System ("Nasdaq") or such other system then in use, or, if on any such date the Security is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Security selected by the Board of Directors of the Company. The term "Trading Day" shall mean a day on which the principal national securities exchange on which the Security is listed or admitted to trading is open for the transaction of business or, if the Security is not listed or admitted to trading on any national securities exchange, a Business Day. (ii) For the purpose of any computation hereunder, the "current per share market price" of the Preferred Shares shall be determined in accordance with the method set forth in Section 11(d)(i). If the Preferred Shares are not publicly traded, the "current per share market price" of the Preferred Shares shall be conclusively deemed to be the current per share market price of the shares of Common Stock as determined pursuant to Section 11(d)(i) (appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof), multiplied by one hundred. If neither the shares of Common Stock nor the Preferred Shares are publicly held or so listed or traded, "current per share market price" shall mean the fair value per share as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holders of the Rights. 27 31 (e) No adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Purchase Price; provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest one one-millionth of a Preferred Share or one ten-thousandth of any other share or security as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction which requires such adjustment or (ii) the date of the expiration of the right to exercise any Rights. (f) If as a result of an adjustment made pursuant to Section 11(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock of the Company other than Preferred Shares, thereafter the number of such other shares so receivable upon exercise of any Right shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Shares contained in Section 11(a) through (c), inclusive, and the provisions of Sections 7, 9, 10 and 13 with respect to the Preferred Shares shall apply on like terms to any such other shares. (g) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one one-hundredths of a Preferred Share 28 32 purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein. (h) Unless the Company shall have exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price as a result of the calculations made in Sections 11(b) and (c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one one-hundredths of a Preferred Share (calculated to the nearest one one-millionth of a Preferred Share) obtained by (i) multiplying (x) the number of one one-hundredths of a share covered by a Right immediately prior to this adjustment by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price. (i) The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in substitution for any adjustment in the number of one one-hundredths of a Preferred Share purchasable upon the exercise of a Right. Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of one one-hundredths of a Preferred Share for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one ten-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in 29 33 effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement and give prompt notice to the Rights Agent of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Right Certificates have been issued, shall be at least 10 days later than the date of the public announcement. If Right Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to registered holders of Rights on such record date Right Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such registered holders in substitution and replacement for the Right Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Right Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Right Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein and shall be registered in the names of the registered holders of the Rights on the record date specified in the public announcement. (j) Irrespective of any adjustment or change in the Purchase Price or the number of one one-hundredths of a Preferred Share issuable upon the exercise of the Rights, the Right Certificates theretofore and thereafter issued may continue to express 30 34 the Purchase Price and the number of one one-hundredths of a Preferred Share which were expressed in the initial Right Certificates issued hereunder. (k) Before taking any action that would cause an adjustment reducing the Purchase Price below one one-hundredth of the then par value, if any, of the Preferred Shares issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable Preferred Shares at such adjusted Purchase Price. (l) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer (and shall promptly notify the Rights Agent of any such elections) until the occurrence of such event the issuing to the registered holder of any Right exercised after such record date of the Preferred Shares and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the Preferred Shares and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares upon the occurrence of the event requiring such adjustment. (m) Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to 31 35 those adjustments expressly required by this Section 11, as and to the extent that it in its sole discretion shall determine to be advisable in order that any consolidation or subdivision of the Preferred Shares, issuance wholly for cash of any Preferred Shares at less than the current market price, issuance wholly for cash of Preferred Shares or securities which by their terms are convertible into or exchangeable for Preferred Shares, dividends on Preferred Shares payable in Preferred Shares or issuance of rights, options or warrants referred to hereinabove in Section 11(b), hereafter made by the Company to holders of its Preferred Shares shall not be taxable to such shareowners. (n) In the event that at any time after the Record Date and prior to the Distribution Date, the Company shall (i) declare or pay any dividend on the Common Stock payable in shares of Common Stock or (ii) effect a subdivision, combination or consolidation of the Common Stock (by reclassification or otherwise than by payment of dividends in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in any such case (A) the number of one one-hundredths of a Preferred Share purchasable after such event upon proper exercise of each Right shall be determined by multiplying the number of one one-hundredths of a Preferred Share so purchasable immediately prior to such event by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately before such event and the denominator of which is the number of shares of Common Stock outstanding immediately after such event, and (B) each share of Common Stock outstanding immediately after such event shall have issued with respect to it that number of Rights 32 36 which each share of Common Stock outstanding immediately prior to such event had issued with respect to it. The adjustments provided for in this Section 11(n) shall be made successively whenever such a dividend is declared or paid or such a subdivision, combination or consolidation is effected. Section 12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever an adjustment is made as provided in Section 11 or 13 hereof, the Company shall promptly (a) prepare a certificate setting forth such adjustment, and a brief statement of the facts and computations accounting for such adjustment, (b) file with the Rights Agent and with each transfer agent for the Common Stock or the Preferred Shares a copy of such certificate and (c) mail a brief summary thereof to each registered holder of a Right in accordance with Section 25 hereof. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained and shall have no duty with respect to and shall not be deemed to have knowledge of any adjustment unless and until it shall have received such a certificate. Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power. In the event, directly or indirectly, at any time after a Person has become an Acquiring Person, (a) the Company shall consolidate with, or merge with and into, any other Person, (b) any Person shall consolidate with the Company, or merge with and into the Company and the Company shall be the continuing or surviving corporation of such merger and, in connection with such merger, all or part of the shares of Common Stock shall be changed into or exchanged for stock or other securities of any other Person (or 33 37 the Company) or cash or any other property, or (c) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one or more transactions, assets or earning power aggregating 50% or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person other than the Company or one or more of its wholly-owned Subsidiaries, then, and in each such case, proper provision shall be made so that (i) each registered holder of a Right (except as otherwise provided herein) shall thereafter have the right to receive, upon the exercise thereof at a price equal to the then current Purchase Price multiplied by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable, in accordance with the terms of this Agreement and in lieu of Preferred Shares, such number of Common Shares of such other Person (including the Company as successor thereto or as the surviving corporation) as shall equal the result obtained by (A) multiplying the then current Purchase Price by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable and dividing that product by (B) 50% of the then current per share market price of the Common Shares of such other Person (determined pursuant to Section 11(d) hereof) on the date of consummation of such consolidation, merger, sale or transfer; (ii) the issuer of such Common Shares shall thereafter be liable for, and shall assume, by virtue of such consolidation, merger, sale or transfer, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed to refer to such issuer; and (iv) such issuer shall take such steps (including, but not limited to, the reservation of a sufficient 34 38 number of its Common Shares in accordance with Section 9 hereof) in connection with such consummation as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to its Common Shares thereafter deliverable upon the exercise of the Rights. The Company shall not consummate any such consolidation, merger, sale or transfer unless prior thereto the Company and such issuer shall have executed and delivered to the Rights Agent a supplemental agreement so providing. The Company shall not enter into any transaction of the kind referred to in this Section 13 if at the time of such transaction there are any rights, warrants, instruments or securities outstanding or any agreements or arrangements which, as a result of the consummation of such transaction, would eliminate or substantially diminish the benefits intended to be afforded by the Rights. The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers. Section 14. Fractional Rights and Fractional Shares. (a) The Company shall not be required to issue fractions of Rights or to distribute Right Certificates which evidence fractional Rights. In lieu of such fractional Rights, there shall be paid to the registered holders of the Rights with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right. For the purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. 35 39 The closing price for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Rights are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading or, if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by Nasdaq or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board of Directors of the Company. If on any such date no such market maker is making a market in the Rights, the fair value of the Rights on such date as determined in good faith by the Board of Directors of the Company shall be used. (b) The Company shall not be required to issue fractions of Preferred Shares (other than fractions which are integral multiples of one one-hundredth of a Preferred Share) upon exercise of the Rights or to distribute certificates which evidence fractional Preferred Shares (other than fractions which are integral multiples of 36 40 one one-hundredth of a Preferred Share). Fractions of Preferred Shares in integral multiples of one one-hundredth of a Preferred Share may, at the election of the Company, be evidenced by depositary receipts, pursuant to an appropriate agreement between the Company and a depositary selected by it; provided, that such agreement shall provide that the holders of such depositary receipts shall have all the rights, privileges and preferences to which they are entitled as beneficial owners of the Preferred Shares represented by such depositary receipts. In lieu of fractional Preferred Shares that are not integral multiples of one one-hundredth of a Preferred Share, the Company shall pay to the registered holders of Rights at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one Preferred Share. For the purposes of this Section 14(b), the current market value of a Preferred Share shall be the closing price of a Preferred Share (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of such exercise. (c) The holder of a Right by the acceptance of the Right expressly waives such holder's right to receive any fractional Rights or any fractional shares upon exercise of a Right (except as provided above). Section 15. Rights of Action. All rights of action in respect of this Agreement, excepting the rights of action expressly given to the Rights Agent under this Agreement, are vested in the respective registered holders of the Rights and any registered holder of any Right, without the consent of the Rights Agent or of the holder of any other Right, may, in such holder's own behalf and for such holder's own benefit, 37 41 enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, such holder's right to exercise the Rights registered in such holder's name in the manner provided in the Right Certificates and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and will be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations of the obligations of any Person subject to, this Agreement. Section 16. Agreement of Right Holders. Every holder of a Right, by accepting the same, consents and agrees with the Company and the Rights Agent and with every other holder of a Right that: (a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of the shares of Common Stock; (b) after the Distribution Date, the Rights are transferable only on the registry books of the Rights Agent upon surrender of the Right Certificates evidencing such Rights at the Designated Office of the Rights Agent, duly endorsed or accompanied by a proper instrument of transfer; and (c) the Company and the Rights Agent shall deem and treat the Person in whose name the Right is registered as the absolute owner thereof (notwithstanding any notations of ownership or writing on the Right Certificates evidencing such Rights or any certificate for the associated Common Stock made 38 42 by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary, except as required by law. Section 17. Right Holder Not Deemed a Shareowner. No holder, as such, of any Right shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the Preferred Shares or any other securities of the Company which may at any time be issuable on the exercise of such Rights, nor shall anything contained herein or in any Right Certificate be construed to confer upon the holder of any Right, as such, any of the rights of a shareowner of the Company or any right to vote for the election of directors or upon any matter submitted to shareowners at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareowners (except as provided in Section 25 hereof), or to receive dividends or subscription rights, or otherwise, until such Right or Rights shall have been exercised in accordance with the provisions hereof. Section 18. Concerning the Rights Agent. The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the execution, delivery, administration and amendment of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, damage, judgment, fine, penalty, claim, demand, settlement, 39 43 cost or expense, incurred without gross negligence, bad faith or willful misconduct (as each is finally determined by a court of competent jurisdiction) on the part of the Rights Agent, for any action taken, suffered or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including, without limitation, the costs and expenses of defending against any claim of liability. Anything to the contrary notwithstanding, in no event shall the Rights Agent be liable for special, indirect, consequential or incidental loss or damage of any kind whatsoever (including, without limitation, lost profits), even if the Rights Agent has been advised of the likelihood of such loss or damage. The indemnity, exculpation and compensation provided for in this Agreement shall survive the termination of this Agreement, the termination and expiration of the Rights, and the resignation or removal of the Rights Agent. The Rights Agent shall be authorized to rely on, shall be protected and shall incur no liability for, or in respect of any action taken, suffered or omitted by it in connection with, its administration of this Agreement in reliance upon any Right Certificate or certificate for the Preferred Shares or Common Shares or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, instruction, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons, or otherwise upon the opinion of counsel as set forth in Section 20 hereof. 40 44 Exhibit 4.1 Section 19. Merger or Consolidation or Change of Name of Rights Agent. Any Person into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any Person resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any Person succeeding to the stock transfer or corporate trust powers of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided, that such Person would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Right Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases the Rights evidenced by such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement. In case at any time the name of the Rights Agent shall be changed and at such time any of the Right Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Right 41 45 Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or in its changed name; and in all such cases the Rights evidenced by such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement. Section 20. Duties of Rights Agent. The Rights Agent undertakes only the duties and obligations expressly imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Rights, by their acceptance thereof, shall be bound: (a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent, and the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted by it in good faith and in accordance with such opinion. (b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking, suffering or omitting any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chief Executive Officer, any Vice President, the Treasurer or the Secretary of the Company and delivered to 42 46 the Rights Agent; and such certificate shall be full authorization and protection to the Rights Agent, and the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted in good faith by it under the provisions of this Agreement in reliance upon such certificate. (c) The Rights Agent shall be liable hereunder to the Company and any other Person only for its own gross negligence, bad faith or willful misconduct (as each is finally determined by a court of competent jurisdiction). (d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Right Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only. (e) The Rights Agent shall not have any liability nor be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its countersignature thereof); nor shall it be responsible or liable for any breach by the Company of any covenant or condition contained in this Agreement or in any Right Certificate; nor shall it be responsible or liable for any change in the exercisability of the Rights (including the Rights becoming void pursuant to Section 11(a)(ii) hereof) or any adjustment in the terms of the Rights (including 43 47 the manner, method or amount thereof) provided for in Section 3, 11, 13, 23 or 24, or the ascertaining of the existence of facts that would require any such change or adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after actual notice that such change or adjustment is required); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Preferred Shares to be issued pursuant to this Agreement or any Right Certificate or as to whether any Preferred Shares will, when issued, be validly authorized and issued, fully paid and nonassessable. (f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement. (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any one of the Chief Executive Officer, any Vice President, the Secretary or the Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and such advice or instructions shall be full authorization and protection to the Rights Agent and the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted by it in good 44 48 faith in accordance with the advice or instructions of any such officer or for any delay in acting while waiting for those instructions. (h) The Rights Agent and any shareowner, Affiliate, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other Person. (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable, accountable or liable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company or any other Person resulting from any such act, default, neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof. (j) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds in the performance of any of its duties hereunder or in the exercise of its rights if it reasonably believes in good faith that repayment of such funds as required by this Agreement is not reasonably assured to it. 45 49 (k) If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, the certificate contained in the form of assignment or the form of election to purchase set forth on the reverse thereof, as the case may be, has not been completed to certify the holder is not an Acquiring Person (or an Affiliate or Associate thereof), the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting with the Company. Section 21. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon 30 days' notice in writing mailed to the Company and to each transfer agent of the shares of Common Stock or the Preferred Shares by registered or certified mail, and to the registered holders of the Rights by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon 30 days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the shares of Common Stock or the Preferred Shares by registered or certified mail, and to the registered holders of the Rights by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the registered holder of a Right (which holder shall, with such notice, submit 46 50 such holder's Right Certificate, if any, or such holder's certificate, if any, for the associated shares of Common Stock for inspection by the Company), then the registered holder of any Right Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be a Person, or an Affiliate of such a Person, organized and doing business under the laws of the United States or of the State of New York (or of any other state of the United States so long as such Person is authorized to do business as a banking institution in the State of New York), in good standing, having an office in the State of New York, which is authorized under such laws to exercise corporate trust or stock transfer powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50 million. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed. The predecessor Rights Agent shall deliver and transfer to the successor Rights Agent, or, if no successor Rights Agent is appointed within 30 days after the predecessor Rights Agent has given or received notice of resignation or removal to or from the Company, as the case may be, to the Company, any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose and thereafter the predecessor Rights Agent shall have no further duties or obligations as Rights Agent under this Agreement (it being understood that the foregoing is not 47 51 intended to release the Rights Agent from any liability resulting from the Rights Agent's gross negligence, bad faith or willful misconduct (as each is finally determined by a court of competent jurisdiction) while acting as Rights Agent hereunder). Not later than the effective date of any such appointment the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the shares of Common Stock or the Preferred Shares, and mail a notice thereof in writing to the registered holders of the Rights. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. Section 22. Issuance of New Right Certificates. Notwithstanding any of the provisions of this Agreement or of the Right Certificates to the contrary, the Company may, at its option, issue new Right Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable upon exercise of a Right made in accordance with the provisions of this Agreement. In addition, in connection with the issuance or sale of shares of Common Stock following the Distribution Date and prior to the earlier of the Redemption Date and the Final Expiration Date, the Company (a) shall with respect to shares of Common Stock so issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement in existence prior to the Distribution Date, or upon the exercise, conversion 48 52 or exchange of securities, notes or debentures (pursuant to the terms thereof) issued by the Company and in existence prior to the Distribution Date, and (b) may, in any other case, if deemed necessary or appropriate by the Board of Directors of the Company, issue Right Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) the Company shall not be obligated to issue any such Right Certificates if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the Person to whom such Right Certificate would be issued or would create a significant risk of such options or employee plans or arrangements failing to qualify for otherwise available special tax treatment, and (ii) no such Right Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof. Section 23. Redemption. (a) The Board of Directors of the Company may, at its option, at any time prior to such time as any Person becomes an Acquiring Person, redeem all but not less than all the then outstanding Rights at a redemption price of $.01 per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the "Redemption Price"). The redemption of the Rights by the Board of Directors of the Company may be made effective at such time, on such basis and with such conditions as the Board of Directors of the Company in its sole discretion may establish. 49 53 (b) Immediately upon the action of the Board of Directors of the Company ordering the redemption of the Rights pursuant to paragraph (a) of this Section 23, and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price. The Company shall promptly give public notice and notice to the Rights Agent of any such redemption; provided, however, that the failure to give, or any defect in, any such notice shall not affect the validity of such redemption. Within 10 days after such action of the Board of Directors of the Company ordering the redemption of the Rights, the Company shall mail a notice of redemption to all the registered holders of the then outstanding Rights at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the shares of Common Stock. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. Neither the Company nor any of its Affiliates or Associates may redeem, acquire or purchase for value any Rights at any time in any manner other than that specifically set forth in this Section 23 or in Section 24 hereof, and other than in connection with the purchase of shares of Common Stock prior to the Distribution Date. Section 24. Exchange. (a) The Board of Directors of the Company may, at its option, at any time after any Person becomes an Acquiring Person, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that 50 54 have become void pursuant to the provisions of Section 11(a)(ii) hereof) for shares of Common Stock at an exchange ratio of one share of Common Stock per Right, appropriately adjusted pursuant to Section 11(i) to reflect any stock split, stock dividend or similar transaction occurring after the Record Date (such exchange ratio being hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board of Directors of the Company shall not be empowered to effect such exchange at any time after the Record Date if any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of Rockwell, the Company or any such Subsidiary, or any entity holding shares of Common Stock for or pursuant to the terms of any such plan), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or more of the shares of Common Stock then outstanding. (b) Immediately upon the action of the Board of Directors of the Company ordering the exchange of any Rights pursuant to paragraph (a) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of shares of Common Stock equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give public notice and notice to the Rights Agent of any such exchange; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company shall promptly mail a notice of any such exchange to all of the registered holders of such Rights at their last addresses as they appear upon the registry 51 55 books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the shares of Common Stock for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to the provisions of Section 11(a)(ii) hereof) held by each holder of Rights. (c) In the event that there shall not be sufficient shares of Common Stock issued but not outstanding or authorized but unissued to permit any exchange of Rights as contemplated in accordance with this Section 24, the Company shall take all such action as may be necessary to authorize additional shares of Common Stock for issuance upon exchange of the Rights. In the event the Company shall, after good faith effort, be unable to take all such action as may be necessary to authorize such additional shares of Common Stock, the Company shall substitute, for each share of Common Stock that would otherwise be issuable upon exchange of a Right, a number of Preferred Shares or fraction thereof such that the current per share market price of one Preferred Share multiplied by such number or fraction is equal to the current per share market price of one share of Common Stock as of the date of issuance of such Preferred Shares or fraction thereof. (d) The Company shall not be required to issue fractions of shares of Common Stock or to distribute certificates which evidence fractional shares of Common 52 56 Stock. In lieu of such fractional shares of Common Stock, the Company shall pay to the registered holders of the Rights with regard to which such fractional shares of Common Stock would otherwise be issuable an amount in cash equal to the same fraction of the current market value of a whole share of Common Stock. For the purposes of this paragraph (d), the current market value of a whole share of Common Stock shall be the closing price of a share of Common Stock (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of exchange pursuant to this Section 24. Section 25. Notice of Certain Events. (a) In case at any time after the Record Date the Company shall propose (i) to pay any dividend payable in stock of any class to the holders of its Preferred Shares or to make any other distribution to the holders of its Preferred Shares (other than a regular quarterly cash dividend), (ii) to offer to the holders of its Preferred Shares rights or warrants to subscribe for or to purchase any additional Preferred Shares or shares of stock of any class or any other securities, rights or options, (iii) to effect any reclassification of its Preferred Shares (other than a reclassification involving only the subdivision of outstanding Preferred Shares), (iv) to effect any consolidation or merger into or with, or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one or more transactions, of 50% or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to, any other Person, (v) to effect the liquidation, dissolution or winding up of the Company, or (vi) to declare or pay any dividend on the 53 57 Common Shares payable in Common Shares or to effect a subdivision, combination or consolidation of the Common Shares (by reclassification or otherwise than by payment of dividends in Common Shares), then, in each such case, the Company shall give to each registered holder of a Right and the Rights Agent, in accordance with Section 26 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, or distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of the Common Shares and/or Preferred Shares, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least 10 days prior to the record date for determining holders of the Preferred Shares for purposes of such action, and in the case of any such other action, at least 10 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the Common Shares and/or Preferred Shares, whichever shall be the earlier. (b) In case the event set forth in Section 11(a)(ii) hereof shall occur, then the Company shall as soon as practicable thereafter give to each registered holder of a Right and the Rights Agent, in accordance with Section 26 hereof, a notice of the occurrence of such event, which notice shall describe such event and the consequences of such event to holders of Rights under Section 11(a)(ii) hereof. Section 26. Notices. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Right to or on the 54 58 Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows: Rockwell Collins, Inc. 400 Collins Road NE Cedar Rapids, Iowa 52498 Attention: Corporate Secretary Subject to the provisions of Section 21 hereof, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Right to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows: Mellon Investor Services LLC 150 North Wacker Suite 2120 Chicago, IL 60606 Attention: Susan Hogan Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Right shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company or the registry books of the holders of the Rights maintained by the Rights Agent after the Distribution Date as herein provided. Any notice or demand given prior to the Distribution Date by the Company or the Rights Agent to the holders of the Rights shall also be given to any registered pledgee of any 55 59 uncertificated Common Share by first-class mail, postage prepaid, addressed to such registered pledgee at the address of such registered pledgee as shown on the registry books of the Company. Section 27. Supplements and Amendments. The Company may from time to time supplement or amend this Agreement without the approval of any holders of Rights in order to cure any ambiguity, to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, or to make any other provisions with respect to the Rights or in regard to matters or questions arising hereunder which the Company may deem necessary or desirable, any such supplement or amendment to be evidenced by a writing signed by the Company and the Rights Agent; provided, however, that nothing herein shall obligate the Rights Agent to execute such a supplement or amendment if such supplement or amendment changes or increases the rights, duties or obligations of the Rights Agent; and further provided that from and after such time as any Person becomes an Acquiring Person, this Agreement shall not be amended in any manner which would adversely affect the interests of the holders of Rights. Without limiting the foregoing, the Company may at any time prior to such time as any Person becomes an Acquiring Person amend this Agreement to lower the thresholds set forth in Sections 1(a) and 3(a) to not less than the greater of (i) the sum of .001% and the largest percentage of the outstanding shares of Common Stock then known by the Company to be beneficially owned by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of Rockwell, the 56 60 Company or any Subsidiary of the Company, or any entity holding shares of Common Stock for or pursuant to the terms of any such plan) and (ii) 10%. Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 27, the Rights Agent shall execute such supplement or amendment. Section 28. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. Section 29. Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Rights any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Rights. Section 30. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Section 31. Governing Law. This Agreement and each Right Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the 57 61 laws of such State applicable to contracts to be made and performed entirely within such State. Section 32. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Section 33. Descriptive Headings. Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. 58 62 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. ROCKWELL COLLINS, INC. By /s/ Lawrence A. Erickson __________________________________________________ Lawrence A. Erickson Senior Vice President and Chief Financial Officer MELLON INVESTOR SERVICES LLC, as Rights Agent By /s/ Susan R. Hogan __________________________________________________ Susan R. Hogan Vice President 59 63 Exhibit A Form of Right Certificate Certificate No. R- _____ Rights NOT EXERCISABLE AFTER JUNE 30, 2011 OR EARLIER IF REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. Right Certificate ROCKWELL COLLINS, INC. This certifies that ________________, or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement, dated as of June 28, 2001 (the "Rights Agreement"), between Rockwell Collins, Inc., a Delaware corporation (the "Company"), and Mellon Investor Services LLC, a New Jersey limited liability company, as Rights Agent (the "Rights Agent"), to purchase from the Company at any time after the Distribution Date (as such term is defined in the Rights Agreement) and prior to 5:00 P.M., New York City time, on June 30, 2011 at the Designated Office (as such term is defined in the Rights Agreement of the Rights Agent, or at the office of its successor as Rights Agent, one one-hundredth of a fully paid non-assessable share of Series A Junior Participating Preferred Stock, without par value (the "Preferred Shares"), of the Company, at a purchase price of $125 per one one-hundredth of a Preferred Share (the "Purchase Price"), upon presentation and surrender of this Right Certificate with the Form of Election to Purchase duly executed. The number of Rights evidenced by this Right Certificate (and the number of one one-hundredths of a Preferred Share which may be purchased upon exercise thereof) set forth above, and the Purchase Price set forth above, are the number and Purchase Price as of __________, 2001, based on the Preferred Shares as constituted at such date. As provided in the Rights Agreement, the Purchase Price and the number of one one-hundredths of a Preferred Share which may be purchased upon the exercise of the Rights evidenced by this Right A-1 64 Certificate are subject to modification and adjustment upon the happening of certain events. This Right Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Rights. Copies of the Rights Agreement are on file at the principal executive offices of the Company and the above-mentioned offices of the Rights Agent. This Right Certificate, with or without other Right Certificates, upon surrender at the principal office of the Rights Agent, may be exchanged for another Right Certificate or Right Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of Preferred Shares as the Rights evidenced by the Right Certificate or Right Certificates surrendered shall have entitled such holder to purchase. If the Rights evidenced by this Right Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Right Certificate or Right Certificates for the number of whole Rights not exercised. Subject to the provisions of the Rights Agreement, the Rights evidenced by this Right Certificate (i) may be redeemed by the Company at a redemption price of $.01 per Right or (ii) may be exchanged in whole or in part for Preferred Shares or the Company's Common Stock, par value $.01 per share. No fractional Preferred Shares will be issued upon the exercise of any Right or Rights evidenced hereby (other than fractions which are integral multiples of one one-hundredth of a Preferred Share, which may, at the election of the Company, be evidenced by depositary receipts), but in lieu thereof a cash payment will be made, as provided in the Rights Agreement. No holder of Rights evidenced by this Right Certificate shall be entitled to vote or receive dividends or be deemed for any purpose the holder of the Preferred Shares or of any other securities of the Company which may at any time be issuable on the exercise thereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder of any Rights evidenced hereby, as such, any of the rights of a shareowner of the Company or any right to vote for the election of directors or upon any matter submitted to shareowners at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareowners (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Right Certificate shall have been exercised as provided in the Rights Agreement. A-2 65 This Right Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent. WITNESS the facsimile signature of the proper officers of the Company and its corporate seal. Dated as of ____________. ATTEST: ROCKWELL COLLINS, INC. ____________________ By:______________________ Countersigned: MELLON INVESTOR SERVICES LLC as Rights Agent By:__________________________ Authorized Signature A-3 66 Form of Reverse Side of Right Certificate FORM OF ASSIGNMENT (To be executed by the registered holder if such holder desires to transfer the Rights evidenced by this Right Certificate.) FOR VALUE RECEIVED _______________________________ hereby sells, assigns and transfers unto ___________________ ________________________________________________________________________________ (Please print name and address of transferee) _______________________________Rights evidenced by this Right Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint __________________ attorney, to transfer the said Rights on the books of the within-named Company, with full power of substitution. Dated:________________ ______________________ Signature Signature Guaranteed: Signatures must be guaranteed by a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States, in each case, participating in a Medallion program approved by the Securities Transfer Association, Inc. - -------------------------------------------------------------------------------- The undersigned hereby certifies that the Rights evidenced by this Right Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement). ___________________________ Signature - -------------------------------------------------------------------------------- A-4 67 Form of Reverse Side of Right Certificate -- continued FORM OF ELECTION TO PURCHASE (To be executed if holder desires to exercise Rights evidenced by the Right Certificate.) To: Rockwell Collins, Inc. The undersigned hereby irrevocably elects to exercise ___________________ Rights evidenced by this Right Certificate to purchase the Preferred Shares issuable upon the exercise of such Rights and requests that certificates for such Preferred Shares be issued in the name of: Please insert social security or other identifying number ___________________________________ ________________________________________________________________________________ (Please print name and address) ________________________________________________________________________________ If such number of Rights shall not be all the Rights evidenced by this Right Certificate, a new Right Certificate for the balance remaining of such Rights shall be registered in the name of and delivered to: Please insert social security or other identifying number ____________________________________ ________________________________________________________________________________ (Please print name and address) ________________________________________________________________________________ Dated: ____________ ______________________ Signature Signature Guaranteed: A-5 68 Form of Reverse Side of Right Certificate -- continued - -------------------------------------------------------------------------------- Signatures must be guaranteed by a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States, in each case, participating in a Medallion program approved by the Securities Transfer Association, Inc. The undersigned hereby certifies that the Rights evidenced by this Right Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement). ______________________ Signature - -------------------------------------------------------------------------------- NOTICE The signature in the Form of Assignment or Form of Election to Purchase, as the case may be, must conform to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever. In the event the certification set forth above in the Form of Assignment or the Form of Election to Purchase, as the case may be, is not completed, the Company and the Rights Agent will deem the beneficial owner of the Rights evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement) and such Assignment or Election to Purchase will not be honored. A-6 -----END PRIVACY-ENHANCED MESSAGE-----