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Exhibit 2.3
TAX ALLOCATION AGREEMENT
by and between
ROCKWELL INTERNATIONAL CORPORATION
and
ROCKWELL COLLINS, INC.
June 29, 2001
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TABLE OF CONTENTS
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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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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
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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):
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"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.
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"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
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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.
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"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.
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"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.
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"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).
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"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
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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
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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,
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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
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(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
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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.
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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
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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.
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(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
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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:
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(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,
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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:
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(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
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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
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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
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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".
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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
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